3APR201420591154
2015 Annual Financial Report and
Stockholder Letter
Dear Fellow Stockholders,
During 2015, we continued to build upon the durability of our business and improved the trajectory of our performance,
both on the top and bottom lines. We had an active year; we announced a planned acquisition that will strengthen our
global platform and enhance our financial results. And, we introduced a transformation plan that aligns our talent to better
capitalize on opportunities and drives increased cash flow, which supports sustainable dividend growth that can be counted
on even in these volatile times.
Our strong financial and operating results met or exceeded our expectations in constant dollars this year. Like many
multinational companies, the strength of the U.S. dollar continued to impact our reported revenue. However, when looking
through to fundamental performance, we have achieved a significant turnaround in the business in the last two years. We’ve
gone from negative internal revenue growth in both 2012 and 2013 to 1% positive internal growth in 2014, and in 2015, we
achieved further improvement with 1.5% growth.
This is testament to the hard work our organization has undertaken to achieve net positive records volume growth in all
major markets, enhance customer service and retention, attract new customers, stabilize service revenue declines, further
penetrate emerging markets and advance adjacent business opportunities.
Constant Dollar Growth Consistent with Long-term Objectives
On a constant dollar basis, we grew total revenue in 2015 by 2%, reflecting continued storage rental gains of 4%. This was
driven primarily by storage rental internal growth of 3% from continued strong performance in our North American Data
Management, Other International and Western European segments. As we look forward to 2016, these underlying trends
remain consistent, and we expect internal storage rental revenue growth to remain in the mid-2% range.
Storage volume growth is an important indicator in our business. During the year, we added 43 million cubic feet of new
records from new and existing customers, or net volume growth of 8 million cubic feet after destructions and customer
terminations. Our unwavering focus on delighting our customers resulted in continued strong customer retention of 98% in
records management, underscoring the durability of our storage rental revenue.
As we have noted in recent years, service revenue has declined as physical records and data backup tapes become more
archival. We were able to offset this by growing service revenue in other lines of business such as scanning and shredding. As
a result for the year, internal service revenue growth was flat. We made good progress on service gross margins, ending 2015
in line with our exit rate goal. There will be variability in our service business as the mix shifts to more project revenue and
away from activity-based services such as transportation and handling; however, we expect to maintain similar average gross
margins for 2016. Going forward, we will focus on growing overall service gross profits, as some new offerings have lower
margins than core services. However, these services are less capital intensive, so they deliver similar, attractive returns.
Excellent Progress on Pillars of Five-year Growth Plan
In October 2015, we updated and extended our strategic plan to 2020. Our five-year plan continues to revolve around the
three pillars we’ve previously outlined: driving continued profitable growth in our developed markets, extending our reach
into higher-growth emerging markets, and scaling adjacent business opportunities. In addition to our strong financial
performance in 2015, we made good progress against our objectives in each of these three pillars as well as in the
foundational elements – the Talent and Transformation initiative and Real Estate – that support our strategy and dividend
growth. We are achieving this by better using our people, capital and real estate assets to support both near- and long-term
growth in the business.
Improved Performance in Developed Markets
During the last couple of years, our records management volume in developed markets had been relatively flat and slightly
declining in North America; however, our recent focus on getting more growth from these markets has driven improved
performance. In 2015, we achieved positive internal storage growth, stabilized records management service revenues and
added roughly 3 million cubic feet of net new records prior to acquisitions.
Our goal is to increase revenue growth from around 1% today to roughly 3%, in developed markets whilst maintaining the
exceptional profitability that is typical of these markets. We aim to do this through ongoing optimization and leveraging our
deep customer loyalty to add new services and product lines. Our typical storage-based customer relationship lasts on
average an extraordinary 50 years, and the average life of records stored with us is more than 15 years.
Emerging Markets Offer High-growth Potential
In emerging markets, our business has grown from 10% of total revenue in 2013 to nearly 15% at the end of 2015 on a
constant dollar basis. We are driving strong internal growth in these markets and have a sizable acquisition pipeline,
supporting our confidence in reaching our goal of 16% of total revenue from these markets by the end of 2016, and 20% by
2020.
Despite the impact of the strong U.S. dollar on reported revenue, we manage foreign currency impact at the income level
because our expenses are denominated in the same local currencies as our revenues, and we are increasingly moving more of
our debt outside the United States. Additionally, using strong dollars to invest in high-growth emerging markets gives us a
lower cost basis and sets us up to realize significant value creation, as economic growth in these markets typically outpaces
that of the United States over the longer term.
Significant Progress in Adjacent Businesses
We also have a goal to generate 5% of our total revenue from adjacent businesses by the end of 2020, up from just 2% at
the end of 2015. Today, our adjacent businesses consist of our data center operations and recently acquired art storage
business. We closed on Crozier Fine Arts Storage in December and are pleased with the integration whilst retaining the key
management talent that made it the leading art storage business in the United States. We believe the estimated billion-dollar
global market is poised for a similar consolidation opportunity as we saw in records management years ago, and we have a
plan to grow this business to $100 million within three years.
We had a fairly aggressive goal to finish 2015 with an adjacent business revenue run rate of $50 million from a starting point
below $20 million. We achieved that goal, which supports our planned shift in mix to have 25% of our revenue coming from
both higher growth emerging markets and adjacent businesses by 2020.
Strategy Pillars Rest on Solid Foundation
In addition, we have made significant progress on the foundational elements of our strategy, including our Transformation
and Talent initiative. We believe these two go hand in hand to ensure we have the right structure, hence transformation, and
the right talent to execute our strategy. Transformation primarily refers to streamlining processes and systems to enable us to
be faster to market and capable of scaling for new businesses and supporting growth in new markets. Our Transformation
initiative resulted in $50 million of run-rate net savings at the end of 2015, which will be fully realized in 2016. We are
currently implementing the next set of initiatives that will deliver an additional $50 million of savings by year end 2016. And
the full amount of the $125 million program will be reflected in our 2018 results. Importantly, the cost to achieve these
savings in each year is offset by the savings.
We also view real estate as a key part of our foundation, where we invested roughly $170 million during 2015. We remain
keenly focused on how we allocate capital in this area and are focused on four major areas, all of which generate attractive
returns. Our first priority is to invest in racking to accommodate net new volume growth we achieve annually. Our second
priority is real estate consolidation, which may include both building and racking investment to improve operating
efficiencies and enhance facility utilization. Third, we plan to continue to invest in our data center business in a deliberate
manner driven by customer commitments. And fourth, we look to complete select opportunistic lease buy-ins where we can
acquire buildings at attractive valuations relative to market pricing or where it is strategically important to own.
Recall Acquisition Enhances Core Growth Strategy
In June 2015, we announced an agreement to acquire Recall Holdings Limited, another global player in the information
management business, in a stock transaction. We believe this transaction will accelerate our already successful strategy and
create a company with a broader footprint and enhanced growth profile. The combined company will be better positioned to
capitalize on the significant global opportunities across developed and emerging markets.
As this is primarily a stock deal, both companies’ shareholders stand to benefit from the meaningful cost synergies and
accretion in earnings and cash flow that ultimately support dividend growth. We have just completed the regulatory review
process in the United States, Canada and Australia and expect to close the transaction on May 2, 2016. Teams from both
companies have been engaged in integration planning for several months, and we now look forward to executing on these
plans to bring the two global platforms together and facilitate a smooth transition.
Last, and most importantly, cash generation is an important metric as it supports growth in dividends and investment. On a
standalone basis, our durable cash flow coupled with the Transformation initiative allows us to markedly increase our
dividend per share between now and 2018 and grow it at approximately 4% annually, thereafter. And with Recall, our
minimum dividend per share is expected to deliver 23% growth between 2015 and 2018 – all without issuing equity beyond
shares issued to buy Recall and whilst continuing to invest in the business for durable long-term growth.
Looking ahead to 2016, despite continued headwinds from the strong U.S. dollar, our growth expectations on a constant
dollar basis remain consistent with our long-term plans. Importantly, these plans are underpinned by nearly $1.5 billion of
storage-related net operating income, which is distinguished by its inherent durability and consistent operating performance.
As we execute our strategy to extend that durability and capture opportunities in adjacent businesses and emerging markets,
we are truly appreciative of the continued support of our customers, stockholders and more than 20,000 Mountaineers
around the globe.
Yours sincerely,
9OCT201511395301
William L. Meaney, President and Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
____________________________________________________________________________
FORM 10-K
____________________________________________________________________________
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2015
or
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
Common Stock, $.01 par value per share
Name of Exchange on Which Registered
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
No
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
No
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
No
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
No
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
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
Non-accelerated filer
(Do not check if a smaller reporting company)
Accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
As of June 30, 2015, the aggregate market value of the Common Stock of the registrant held by non-affiliates of the registrant was
approximately $6.5 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 19, 2016: 211,508,202
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 2016 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,
2015.
IRON MOUNTAIN INCORPORATED
2015 FORM 10-K ANNUAL REPORT
Table of Contents
PART I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Market For Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
Item 10.
Directors, Executive Officers and Corporate Governance
PART III
Item 11.
Item 12.
Item 13.
Item 14.
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
PART IV
Item 15.
Exhibits and Financial Statement Schedules
ii
Page
1
12
28
29
31
31
32
34
37
74
75
75
76
78
79
79
79
79
79
79
References in this Annual Report 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 2016 consolidated revenue internal growth rate and capital expenditures,
(4) expected target leverage ratio, (5) proposed acquisition of Recall Holdings Limited ("Recall") pursuant to the Scheme
Implementation Deed, as amended (the "Recall Agreement"), with Recall (the "Recall Transaction"), including our expected
consideration to be paid to Recall shareholders and expected total cost to close the Recall Transaction and to integrate the
combined companies, and (6) expected cost savings associated with the Transformation Initiative (as defined herein). 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:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
our ability to remain qualified for taxation as a real estate investment trust for United States federal income tax
purposes ("REIT");
the adoption of alternative technologies and shifts by our customers to storage of data through non-paper based
technologies;
changes in customer preferences and demand for our storage and information management services;
the cost to comply with current and future laws, regulations and customer demands relating to privacy issues, as
well as fire and safety standards;
the impact of litigation or disputes that may arise in connection with incidents in which we fail to protect our
customers' information;
changes in the price for our storage and information management services relative to the cost of providing such
storage and information management services;
changes in the political and economic environments in the countries in which our international subsidiaries operate;
our ability or inability to complete acquisitions on satisfactory terms and to integrate acquired companies
efficiently;
changes in the amount of our capital expenditures;
changes in the cost of our debt;
the impact of alternative, more attractive investments on dividends;
the cost or potential liabilities associated with real estate necessary for our business;
the performance of business partners upon whom we depend for technical assistance or management expertise
outside the United States; and
other trends in competitive or economic conditions affecting our financial condition or results of operations not
presently contemplated.
In addition, with respect to the Recall Transaction, our ability to close the proposed transaction in accordance with the
terms of the Recall Agreement, or at all, is dependent upon our and Recall's ability to satisfy the closing conditions set forth in
the Recall Agreement, including the receipt of governmental and shareholder approvals.
Other risks may adversely impact us, as described more fully under "Item 1A. Risk Factors" of this Annual Report.
You should not rely upon forward-looking statements except as statements of our present intentions and of our present
expectations, which may or may not occur. You should read these cautionary statements as being applicable to all forward-
looking statements wherever they appear. Except as required by law, we undertake no obligation to release publicly the result of
any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events. Readers are also urged to carefully review and consider the various disclosures
we have made in this document, as well as our other periodic reports filed with the SEC.
iii
(This page has been left blank intentionally.)
Item 1. Business.
Business Overview
We store records, primarily physical records 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 life
cycle 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, has more than 170,000 customers in a
variety of industries in 37 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
approximately 94% of the Fortune 1000. As of December 31, 2015, we employed more than 20,000 people.
Now in our 65th year, we have experienced tremendous growth, particularly since successfully completing the initial
public offering of our common stock in February 1996, at which time we operated fewer than 85 facilities (6 million square
feet) with limited storage and information management service offerings and annual revenues of approximately $104.0 million.
We are now 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 (69.9 million square feet) and total revenues of more
than $3.0 billion for the year ended December 31, 2015. We are listed on the New York Stock Exchange (the "NYSE"). We are
a constituent of the Standard & Poor's 500 Index and the MSCI REIT index and, as of December 31, 2015, we were
number 726 on the Fortune 1000.
REIT Conversion
Consistent with our commitment to delivering stockholder value, 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 June 2012, we announced our intention to pursue REIT conversion. The conversion
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. We have been organized and operating as a REIT
effective for our taxable year beginning January 1, 2014. Since May 2012, we have returned $2.5 billion of capital to
stockholders including $1.4 billion in cash and $1.1 billion in our common stock.
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 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.
Proposed Recall Acquisition
On June 8, 2015, we entered into the Recall Agreement with Recall to acquire Recall by way of recommended court
approved Scheme of Arrangement (the "Scheme"). The Recall Transaction, if consummated, would accelerate our already
successful growth strategy. The combined company’s broader footprint, stronger infrastructure, exposure to high growth
emerging markets and small to mid-size enterprise customers and increased economies of scale will be well suited to address
unmet document storage and information management needs around the globe. Completion of the Scheme is subject to
customary closing conditions, as described more fully in "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 6 to Notes to Consolidated Financial Statements included in this Annual
Report.
The Durability of Our Business
A significant amount of activity generated in the information management industry is the result of legislative
requirements. To varying degrees across the world, organizations are required by law to create certain records and to retain
them for a specified period of time. These laws may also impose more stringent requirements on personal information regarded
as being sensitive, such as financial and medical information. As a third party provider, we assist customers to improve data
security and establish programs to ensure compliance with their regulatory obligations. Storage of information can be
performed in-house by businesses (unvended) or outsourced, in whole or in part, to a third party provider (vended). We believe
the in-house portion still represents a majority of the total global information management market, offering a substantial
unvended opportunity even in developed geographic markets with lower rates of economic growth.
1
We believe that the creation of document-based information will be sustained, as "paperless" technologies have prompted
the creation of hard copies and have also led to increased demand for electronic records services, such as the storage and off-
site rotation of computer backup 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. Ultimately, we expect 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,
primarily through acquisitions; and (3) continuing to identify, incubate and scale adjacent business opportunities ("ABOs") 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. 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 profit margins will be limited as we continue 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 ABOs.
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. 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 enhancing 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 adjacent businesses and real estate. We continue to expand our portfolio
of products and services, based on our customers' evolving requirements. 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 absolute number of new document storage cartons from our
existing customers has been consistent in the past four years, and we anticipate that this level will be sustained, although the
rate of growth is slightly declining, given the continued growth in our total records volume. In order to maximize growth
opportunities from existing customers, we seek to maintain high levels of customer retention by providing premium customer
service.
2
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 have developed 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 good returns and good opportunities to create
value for our stockholders. Lastly, we have a successful record of acquiring and integrating these businesses.
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 in our emerging markets 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 such that, as of December 31, 2015, we operated in 37 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.
3
Business Characteristics.
We generate our revenues by renting storage space to a large and diverse customer base around the globe and providing
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 complementary part of a
comprehensive records management program and consist primarily of the handling and transportation of stored records and
information, shredding, the scanning, imaging and document conversion services of active and inactive records, or Document
Management Solutions ("DMS"), data restoration projects, fulfillment services, consulting services, technology escrow
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.
Secure Storage
Our storage operations, our largest source of revenue, 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
1% of our consolidated revenues as of the year ended December 31, 2015, we assess the performance of our storage rental
business predominantly by analyzing trends in segment-level storage rental volume and storage rental revenue. Additionally,
our storage operations include technology escrow services.
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. Storage rental charges are generally billed monthly on a per
storage unit basis and include the provision of space, racking systems, computerized inventory and activity tracking, and
physical security.
Physical Records Storage
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. Inactive physical records are typically stored in cartons packed by the customer for long periods of time with
limited activity. For some customers we store individual files on an open shelf basis, and these files are typically more active.
Physical records may also include critical or irreplaceable data such as master audio and video recordings, film, fine art
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.
Electronic Records Storage
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. 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 storage consists of (i) storage of backup computer media as part of corporate disaster recovery, including
digital content repository systems to house, distribute, and archive key media assets, and (ii) storage, safeguarding and
electronic or physical delivery of physical media of all types, primarily for entertainment and media industry clients.
4
We believe the issues encountered by customers trying to manage their electronic records are similar to the ones they face
in their physical records management programs and consist primarily of: (1) storage capacity and the preservation of data;
(2) access to and control over the data in a secure environment; and (3) the need to retain electronic records due to regulatory
requirements or for litigation support. Customer needs for data backup and recovery and archiving are distinctively different.
Backup data exists because of the need of many businesses to be able to recover their 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. We expect continued increase in
demand for computer media backup, as it provides off-line storage or storage that is not connected to the Internet and provides
superior protection against data breaches and hacks. 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
Complementary 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, 2015, our courier fleet consisted of approximately 3,700
owned or leased vehicles. Our other services include information destruction services (primarily 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.
Information Destruction 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.
Document Management Solutions (DMS)
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.
Industry Tailored Services
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.
5
Other Ancillary Services
Other services we provide include recurring project work, which 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
and professional consulting services.
Business Segments
Our North American Records and Information Management Business, North American Data Management Business,
Western European Business and our Other 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, Western European Business, Other
International Business and Corporate and Other Business segments and other relevant data, including financial information
about geographic areas and product and service lines, for fiscal years 2013, 2014 and 2015 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 provides storage and information
management services, including the storage of physical records, including 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”); and DMS throughout the United States and
Canada; as well as fulfillment services and intellectual property management in the United States.
North American Data Management Business
Our North American Data Management Business segment provides storage and rotation of backup computer media as
part of corporate disaster recovery plans, 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 throughout the United States and Canada.
Western European Business
Our Western European Business segment provides storage and information management services, including Records
Management, Data Protection & Recovery and DMS throughout the United Kingdom, Ireland, Austria, Belgium, France,
Germany, Netherlands, Spain and Switzerland. Until December 2014, our Western European Business segment offered
Destruction in the United Kingdom and Ireland.
Other International Business
Our Other International Business segment provides storage and information management services throughout the
remaining European countries in which we operate, Latin America and Asia Pacific, including Records Management, Data
Protection & Recovery and DMS. Our European operations included within the Other International Business segment provide
Records Management, Data Protection & Recovery and DMS. Our Latin America operations provide Records Management,
Data Protection & Recovery, Destruction 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
Until December 2014, our Other International Business segment offered Destruction in Australia.
and China.
6
Corporate and Other Business
Our Corporate and Other Business segment primarily consists of our data center and fine art storage businesses in the
United States, the primary product offerings of our Adjacent Business operating segment (which was formerly referred to as
our Emerging Business operating 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 Business 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.
ABOs, such as our data center and fine art storage businesses, 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. A dedicated team is focused on identifying and
evaluating these opportunities. We have developed an innovation process that enables us to cautiously and effectively develop
these ABOs to leverage our capabilities. If we are able to demonstrate success and meet return thresholds, we may potentially
acquire businesses to further accelerate our growth in the relevant ABO. Importantly, the ABO 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.
With respect to our data center business, we believe that 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.
A more recent example of an ABO is our fine art storage business. On December 1, 2015 we completed the acquisition of
Crozier Fine Arts ("Crozier"), a storage, logistics and transportation business for high-value paintings, photographs and other
types of art belonging to individual collectors, galleries and art museums. Crozier is a leader in art storage and an industry
advocate for worldwide standards. This acquisition will build on our expertise in storing, protecting and managing high-value
items and supports our strategy to leverage our real estate network to accelerate growth. The fine art storage industry is a
growing, but fragmented, industry marked by increasing international interest and changes in acquisition and purchasing habits
by collectors and museums. The increase in contemporary art as a focus for collectors has caused a spike in storage needs,
while the increase in auction “turnover” – the rate at which catalogs, collections and individual pieces are made available for
auction – has heightened the need for transportation, shipping, and related services. Taken together, we believe these factors
have the fine art storage industry poised for significant growth.
7
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:
• 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. 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 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, 2015, our Total Building Utilization
and Total Racking Utilization were approximately 84% and 92%, respectively, for our records management business
and our Total Building Utilization and Total Racking Utilization were approximately 69% and 81%, respectively, for
our data management business.
We occasionally offer inducements to our customers in order to generate new business opportunities. Such
inducements 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 (collectively, "Customer
Inducements") as customer acquisition costs.
• 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, as well as customer satisfaction with our services and contractual net price increases. The absolute number of
new document storage cartons from our existing customers has been consistent in the past four years, and we
anticipate this level will be sustained, although the rate of growth is slightly declining, given the continued growth in
the total records volume. Total net volume growth, including acquisitions, was approximately 6%, 4% and 2% on a
global basis for 2013, 2014 and 2015, respectively.
• Diversified and Stable Customer Base. As of December 31, 2015, we had more than 170,000 customers in a variety of
industries in 37 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 approximately 94% of the Fortune 1000. No single customer accounted for as much as 1% of our
consolidated revenues in any of the years ended December 31, 2013, 2014 and 2015. For each of the three years 2013
through 2015, the average annual volume reduction due to customers terminating their relationship with us was
approximately 2%.
8
• 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, ABO investments and real estate investments
primarily through incremental borrowing at a targeted leverage ratio and/or proceeds from the issuance of equity,
dependent on market conditions. 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 2016:
Real Estate:
•
•
Assets that support core business growth 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, or Real
Estate Investment.
Real estate assets necessary to maintain ongoing business operations primarily related to the repair or
replacement of real estate assets such as buildings, building improvements, leasehold improvements and
racking structures, or Real Estate Maintenance.
Non-Real Estate:
•
•
Non-real estate assets that either (i) support the growth of our business, and/or increase our profitability,
such as customer-inventory technology systems, and technology service storage and processing capacity, or
(ii) are directly related to the development of new products or services in support of our integrated value
proposition and enhance our leadership position in the industry, including items such as increased feature
functionality, security upgrades or system enhancements, or Non-Real Estate Investment.
Assets necessary to maintain ongoing business operations 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, or Non-Real Estate Maintenance.
The following table presents our capital spend for 2013, 2014 and 2015 organized by the type of the spending as
described above:
Nature of Capital Spend (in thousands)
Real Estate:
Investment
Maintenance
Total Real Estate Capital Spend
Non-Real Estate:
Investment
Maintenance
Total Non-Real Estate Capital Spend
Total Capital Spend (on accrual basis)
Net increase/(decrease) in prepaid capital expenditures
Net (increase)/decrease accrued capital expenditures
Total Capital Spend (on cash basis)
Competition
$
$
Year Ended December 31,
2013
2014
2015
$
$
199,663
57,574
257,237
170,742
52,826
223,568
135,708
61,863
197,571
91,792
22,644
114,436
55,991
19,527
75,518
312,007
3,327
(28,039)
287,295
$
332,755
(2,455)
31,624
361,924
$
47,964
23,396
71,360
294,928
(362)
(4,317)
290,249
We are a global leader in the physical storage and information management services industry with operations in 37
countries as of December 31, 2015. We compete with our current and potential customers' internal storage and information
management services capabilities.
9
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.
Alternative Technologies
We derive most of our revenues from rental fees for the storage of physical records and computer backup tapes and from
storage related services. Alternative storage technologies exist, many of which require significantly less space than physical
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 physical
documents as the primary means for storing information. 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, 2015, we employed more than 8,000 employees in the United States and more than 12,000
employees outside of the United States. At December 31, 2015, fewer than 650 employees were represented by unions in
California, Illinois, 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 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.
10
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 approximately
94% of the Fortune 1000 companies. Iron Mountain is a member of the FTSE4 Good Index, Dow Jones Sustainability Index,
MSCI World ESG Index, MSCI ACWI ESG Index and MSCI USA IMI ESG Index, each of 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."
11
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 the Recall Transaction
The integration of Recall will subject us to liabilities that may exist at Recall or may arise in connection with the consummation
of the Recall Transaction.
Our integration with Recall may pose special risks, including one-time write-offs or restructuring charges, unanticipated
costs, and the loss of key employees. There can be no assurance that our integration with Recall will be accomplished
effectively or in a timely manner. In addition, our integration with Recall will subject us to liabilities (including tax liabilities)
that may exist at Recall or may arise in connection with the consummation of the Recall Transaction, some of which may be
unknown. Although we and our advisors have conducted due diligence on the operations of Recall, there can be no guarantee
that we are aware of all liabilities of Recall. These liabilities, and any additional risks and uncertainties related to the Recall
Transaction not currently known to us or that we may currently deem immaterial or unlikely to occur, could negatively impact
our future business, financial condition and results of operations.
The price of our common stock and our results of operations after the Recall Transaction may be affected by factors different
from those currently affecting the price of our common stock and our results of operations.
Recall's business is different in certain ways from ours, and our results of operations, as well as the price of our common
stock after the Recall Transaction, may be affected by factors different from those currently affecting the results of our
operations and the price of our common stock. The price of our common stock may fluctuate significantly following the Recall
Transaction, including as a result of factors over which we and Recall have no control. Current stockholders may not wish to
continue to invest in us if the Recall Transaction is consummated or for other reasons may wish to dispose of some or all of
their shares of our common stock. If, following the consummation of the Recall Transaction, there is selling pressure on our
common stock that exceeds demand at the market price, the price of our common stock could decline. In addition, if the Recall
Transaction is completed, the Recall shareholders will own a significant percentage of the issued and outstanding shares of
common stock of the combined company, and they may determine not to hold their shares of our common stock following the
Recall Transaction, which may result in additional pressure on the price of our common stock.
We will incur significant transaction and combination-related costs in connection with the Recall Transaction.
We and Recall expect to incur significant costs associated with the Recall Transaction and combining the operations of
the two companies, some of which will be paid regardless of whether we are able to complete the Recall Transaction. In this
regard, we expect to incur approximately $80.0 million of costs, including advisory and professional fees, to complete the
Recall Transaction (“Recall Deal Close Costs”) and approximately $300.0 million of costs to integrate Recall with our existing
operations, including moving, severance, facility upgrade, REIT conversion and system upgrade costs ("Recall Integration
Costs"). Despite our current estimates, it is difficult to predict the amount of these costs, and we may incur additional
unanticipated costs as a consequence of difficulties arising from efforts to integrate the companies.
We will need additional debt financing, which may not be available on favorable terms, if at all, in order to consummate the
Recall Transaction.
We currently anticipate that we will need to raise additional debt financing to consummate the Recall Transaction. Such
additional financing may not be available on favorable terms, if at all. If we are unable to obtain sufficient financing and
consummate the Recall Transaction, we may be subject to significant monetary or other damages under the Recall Agreement.
The Recall Agreement limits our ability to pursue alternatives to the Recall Transaction, and in certain instances requires
payment of a reimbursement fee, which could deter a third party from proposing an alternative transaction to the Recall
Transaction.
While the Recall Agreement is in effect, subject to certain limited exceptions, we are prohibited from soliciting, initiating,
encouraging or entering into certain transactions, such as a merger, sale of assets or other business combination, with any third
party. As a result of these limitations, we may lose opportunities to enter into a more favorable transaction than the Recall
Transaction.
Moreover, under specified circumstances, we could be required to pay Recall a reimbursement fee of A$25.5 million in
connection with the termination of the Recall Agreement. The reimbursement fee could deter a third party from proposing an
alternative to the Recall Transaction.
12
The Recall Transaction is subject to conditions to closing that could result in the Recall Transaction being delayed or not
completed and the Recall Agreement can be terminated in certain circumstances, each of which could negatively impact the
price of our common stock and our future business and operations.
Consummation of the Recall Transaction is subject to conditions, including, among others:
•
•
•
•
•
•
•
the approval by the Recall shareholders of the Recall Transaction;
the approval of the Scheme by the Federal Court of Australia, Sydney Registry (the “Sydney Federal Court”) (or such
other competent court agreed by us and Recall);
the absence of any law, order or injunction that would prohibit, restrain or make illegal the Recall Transaction;
the receipt of regulatory approvals;
the approval for listing on the NYSE of our common stock to be issued in the Recall Transaction and the
establishment of a secondary listing on the Australian Securities Exchange (the "ASX") to allow shareholders of
Recall to trade our common stock via CHESS Depository Interests on the ASX;
the accuracy of the representations and warranties and compliance with the respective covenants of the parties, subject
to specified materiality qualifiers; and
no events having occurred that would have a material adverse effect on Recall or us.
In addition, we and Recall each has the right, in certain circumstances, to terminate the Recall Agreement. If the Recall
Agreement is terminated or any of the conditions to closing are not satisfied and, where permissible, not waived, the Recall
Transaction will not be completed.
Failure to complete the Recall Transaction or any delay in the completion of the Recall Transaction or any uncertainty
about the completion of the Recall Transaction may adversely affect the price of our common stock or have an adverse impact
on our future business and operations.
If the Recall Transaction is not completed, our ongoing business may be adversely affected and, without realizing any of
the benefits of having completed the Recall Transaction, we would be subject to a number of risks, including the following:
•
•
•
•
negative reactions from the financial markets;
incurring and paying significant expenses in connection with the Recall Transaction, such as Recall Deal Costs and
Recall Integration Costs;
paying a reimbursement fee of A$25.5 million if the Recall Agreement is terminated in certain circumstances; and
paying a reimbursement fee of A$76.5 million if the Recall Agreement is terminated due to our inability to obtain the
necessary antitrust/competition approvals required to consummate the Recall Transaction.
In addition, we could be subject to litigation related to any failure to complete the Recall Transaction or seeking to require
us to perform our obligations under the Recall Agreement.
The exchange ratio is fixed and will not be adjusted in the event of any change in either Recall's share price or our stock price.
Subject to the terms and conditions set forth in the Recall Agreement, after the effective date of the Scheme and upon the
completion of the Recall Transaction, each outstanding ordinary share of Recall will be transferred to us in exchange for the
Australian dollar equivalent of US$0.50 in cash for each outstanding share of Recall common stock (the "Cash Supplement") as
well as either (1) 0.1722 of a newly issued share of our common stock or (2) 8.50 Australian dollars less the Australian dollar
equivalent of US$0.50 in cash for each Recall share (the "Cash Election"). The Cash Election is subject to a proration
mechanism that will cap the total amount of cash paid to Recall shareholders electing the Cash Election at 225.0 million
Australian dollars (the "Cash Election Cap"). The exchange ratio is fixed and will not be adjusted for changes in the market
price of either Recall shares or our shares. Changes in the price of our shares prior to completion of the Scheme may affect the
market value that holders of Recall shares will receive on the date of the effective time for the Scheme. Share price changes
may result from a variety of factors (many of which are beyond our or Recall's control).
If the share price of our common stock increases before the closing of the Recall Transaction, Recall shareholders will
receive shares of our common stock that have a market value that is greater than the current market value of such shares.
Alternatively, if the share price of our common stock decreases before the closing of the Recall Transaction, Recall
shareholders will receive shares of our common stock that have a market value that is less than the current market value of such
shares. Therefore, because the exchange ratio is fixed, prior to the closing of the Recall Transaction, our stockholders and
Recall shareholders cannot be sure of the market value of the share consideration that will be paid to Recall shareholders upon
completion of the Recall Transaction.
13
Obtaining required governmental and court approvals necessary to satisfy closing conditions may delay or prevent completion
of the Recall Transaction or may impose material terms and conditions, including asset divestitures, which could negatively
impact our ability to realize the anticipated benefits of the Recall Transaction.
Completion of the Recall Transaction is conditioned upon the receipt of certain governmental authorizations, consents,
orders or other approvals, including (i) approvals, clearances, filings or expiration or termination of waiting periods required in
relation to the Recall Transaction under antitrust laws of Australia, Canada, the United States, and the United Kingdom and (ii)
approval by the Sydney Federal Court (or such other competent court agreed to by us and Recall). In the Recall Agreement, we
agreed to offer, negotiate and agree to divestitures and/or similar restraints with respect to our or Recall’s businesses, services
or assets, except that we are not required to agree to divestitures or similar restraints with respect to our assets or Recall’s
records management businesses in the United States and Canada that, in the aggregate, generated more than US$30.0 million in
revenues during the twelve-month period prior to the date of the Recall Agreement (the “Divestiture Threshold”). No
assurance can be given that the antitrust/competition approvals will be obtained. In the event that the Recall Agreement is
terminated as a result of the failure to obtain the antitrust/competition approvals, subject to certain limited exceptions, we will
be obligated to pay Recall a reimbursement fee of A$76.5 million.
Antitrust/competition approval, if obtained, is likely to be conditioned on the divestiture of certain assets in Australia,
Canada, the United States and/or the United Kingdom, including the divestiture of assets in the United States and Canada that,
in the aggregate, may exceed the Divestiture Threshold. If we divest more assets than we anticipated when we entered into the
Recall Agreement, the benefits that we originally expected to realize from the Recall Transaction could be reduced. Moreover,
to the extent that the current price of our common stock reflects an assumption that asset divestitures will be less than what may
ultimately be required by antitrust/competition agencies in Australia, Canada, the United States and/or the United Kingdom in
order to consummate the Recall Transaction, the price per share for our common stock could be negatively impacted.
Following the Recall Transaction, our exposure to foreign exchange translation risk will be increased.
We are currently subject to foreign exchange translation risk because we conduct business operations in several foreign
countries through our foreign subsidiaries or affiliates, which conduct business in their respective local currencies. Recall
conducts a significant portion of its operations outside of the United States through its foreign subsidiaries or affiliates, which
also operate in their respective local currencies. Therefore, following the completion of the Recall Transaction, our
international operations will account for a more significant portion of our overall operations than they do presently. Because
our financial statements will continue to be presented in United States dollars subsequent to the Recall Transaction, the local
currencies will be 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 will continue to be exposed to foreign exchange rate fluctuations, and
due to the Recall Transaction, our exposure to exchange rate fluctuations will increase. 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 certain circumstances, if the Recall Agreement is terminated without any payment of a termination payment by Recall, we
may not be fully reimbursed for our out of pocket expenses.
Under the Recall Agreement, Recall would be required to reimburse us for our reasonable, documented out of pocket
expenses actually incurred in connection with the Recall Transaction up to a maximum of $5.0 million if (i) the Recall board of
directors withdraws or adversely modifies its recommendation that Recall shareholders vote in favor of the resolution to
approve the Recall Transaction as a result of the report of the independent expert opining that the Recall Transaction is not in
the best interests of Recall's shareholders (other than where the reason for such opinion is a Recall competing transaction) and
(ii) the Recall Agreement is terminated by Recall or us prior to the Recall shareholders meeting. Given that such reimbursed
expenses cannot exceed $5.0 million, we may not be fully reimbursed for our out of pocket expenses in the event of such a
termination.
Our due diligence of Recall may have failed to identify key issues that could have an adverse effect on our performance and
financial condition.
Before executing the Recall Agreement, we and Recall undertook a period of mutual due diligence for the purpose of
negotiating the terms of the Recall Transaction. Although we and Recall decided to proceed with the Recall Transaction
following that due diligence exercise, there is a risk that the due diligence undertaken was insufficient or failed to identify key
issues. Furthermore, after implementation of the Recall Transaction, we will be subject to any unknown liabilities of Recall
which could have an adverse effect on our performance and financial condition.
14
We will guarantee certain obligations of Recall to Brambles relating to Brambles' prior demerger transaction.
On December 18, 2013, Brambles Limited, an Australian corporation ("Brambles"), implemented a demerger transaction
by way of a distribution of shares of Recall to Brambles’ shareholders (the “Demerger”). Prior to and in connection with the
Demerger, Brambles spun off certain of its United States and Canadian subsidiaries, directly or indirectly, to Recall. Such spin-
offs were intended to be tax-free or tax-deferred under United States and Canadian tax laws, respectively, and Brambles
obtained rulings from the IRS (with respect to the United States spin-off) and the Canada Revenue Agency (with respect to the
Canadian spin-off), as well as opinions of its tax advisors, to such effect. However, the tax-free status of the spin-off of such
United States subsidiaries could be adversely affected under certain circumstances if a 50% or greater interest in such United
States subsidiaries were acquired as part of a plan or series of related transactions that included such spin-off. Similarly, the tax-
deferred status of the spin-off of the Canadian subsidiaries could be adversely affected under certain circumstances if control of
such subsidiaries were acquired as part of a series of transactions or events that included such spin-off.
In connection with the Demerger, Recall agreed to indemnify Brambles and certain of its affiliates for taxes to the extent
that actions by Recall (e.g., an acquisition of Recall shares) resulted in the United States spin-off or the Canadian spin-off
described above failing to qualify as tax-free or tax-deferred for United States or Canadian tax purposes, respectively. In
addition, Recall agreed, among other things, that it would not, within two years of the 2013 spin-offs, enter into a proposed
acquisition transaction, merger or consolidation (with respect to the United States spin-off) or take any action that could
reasonably be expected to jeopardize, directly or indirectly, any of the conclusions reached in the Canadian tax ruling or
opinion, without obtaining either a supplemental tax ruling from the relevant taxing authority, the consent of Brambles or an
opinion of a tax advisor, acceptable to Brambles in its reasonable discretion, that such transaction should not result in the spin-
offs failing to be tax-free under United States federal income tax law or Canadian tax law, respectively. Recall has obtained or
intends to obtain such tax opinions, based on, among other things, representations and warranties made by Recall and us. Such
opinions, once accepted by Brambles, do not affect Recall’s obligation to indemnify Brambles for an adverse impact on the tax-
free status of such prior spin-offs. The delivery of those opinions is a condition to our obligation to consummate the Recall
Transaction.
We have agreed, contingent on the consummation of the Recall Transaction, to guarantee the foregoing indemnification
obligations of Recall. Consistent with the foregoing tax opinions, we believe that the Recall Transaction is not part of a plan or
series of related transactions, or part of a series of transactions or events, that included the United States spin-off or the
Canadian spin-off, respectively. However, if the IRS or the Canadian Revenue Agency were to prevail in asserting a contrary
view, we and Recall would be liable for the resulting taxes, which could be material.
Risks Related to Us and Recall
The failure to integrate successfully Recall’s business with our business in the expected time frame would adversely affect our
future results.
The success of the Recall Transaction will depend, in large part, on our ability to realize the anticipated benefits,
including cost savings from combining Recall’s businesses with ours. To realize these anticipated benefits, our business and
Recall’s must be successfully integrated. This integration will be complex and time-consuming. The failure to integrate
successfully and to manage successfully the challenges presented by the integration process may result in us not fully achieving
the anticipated benefits of the Recall Transaction.
Potential difficulties that may be encountered in the integration process include the following:
•
•
•
•
•
•
•
•
challenges and difficulties associated with managing the larger, more complex, combined company;
conforming standards, controls, procedures and policies, business cultures and compensation structures between the
entities;
integrating personnel from the two entities while maintaining focus on developing, producing and delivering
consistent, high quality services;
consolidating corporate and administrative infrastructures;
coordinating geographically dispersed organizations;
potential unknown liabilities and unforeseen expenses, delays or regulatory conditions associated with the Recall
Transaction;
performance shortfalls at one or both of the entities as a result of the diversion of management's attention caused by
completing the Recall Transaction and integrating the entities' operations; and
our ability to deliver on our strategy going forward.
15
We will incur adverse tax consequences if the combined company following the Recall Transaction fails to qualify as a REIT for
United States federal income tax purposes.
We believe that, following the Recall Transaction, we will integrate Recall's assets and operations in a manner that will
allow us to timely satisfy the REIT income, asset, and distribution tests applicable to us. However, if we fail to do so, we could
jeopardize or lose our qualification for taxation as a REIT, particularly if we were ineligible to utilize relief provisions set forth
in the Code. For any taxable year that we fail to qualify for taxation as a REIT, we would not be allowed a deduction for
distributions to our stockholders in computing our taxable income, and thus would be subject to United States federal and state
income tax at the regular corporate rates on all of our United States federal and state taxable income in the manner of a regular
corporation. Those corporate level taxes would reduce the amount of cash available for distribution to our stockholders or for
reinvestment or other purposes, and would adversely affect our earnings. As a result, our failure to qualify for taxation as a
REIT during any taxable year could have a material adverse effect upon us and our stockholders. Furthermore, unless
prescribed relief provisions apply, we would not be eligible to elect REIT status again until the fifth taxable year that begins
after the first year for which we failed to qualify as a REIT. Finally, even if we are able to utilize relief provisions and thereby
avoid disqualification for taxation as a REIT, relief provisions typically involve paying a penalty tax in proportion to the
severity and duration of the noncompliance with REIT requirements, and thus these penalty taxes could be significant in the
context of noncompliance stemming from a transaction as large as the Recall Transaction.
The Recall Transaction, if completed, will dilute the ownership position of our current stockholders.
If the Recall Transaction is completed, the Recall shareholders are expected to beneficially own a significant percentage
of our issued and outstanding shares of common stock. Consequently, our current stockholders will own a smaller proportion of
our common stock than the proportion of common stock they owned before the Recall Transaction and, as a result, they will
have less influence on our management and policies following the Recall Transaction than they now have on our management
and policies.
Our and Recall's business relationships may be subject to disruption due to uncertainty associated with the Recall Transaction,
which could have an adverse effect on our and Recall's results of operations, cash flows and financial position and, following
the completion of the Recall Transaction, the combined company.
Parties with which we and Recall do business may experience uncertainty associated with the Recall Transaction,
including with respect to current or future business relationships with us, Recall or the combined company following the
completion of the Recall Transaction. Our and Recall's relationships may be subject to disruption as customers, suppliers and
other persons with whom we and Recall have a business relationship may delay or defer certain business decisions or might
decide to seek to terminate, change or renegotiate their relationships with us or Recall, as applicable, or consider entering into
business relationships with parties other than us or Recall. These disruptions could have an adverse effect on the results of
operations, cash flows and financial position of us, Recall or the combined company following the completion of the Recall
Transaction, including an adverse effect on our ability to realize the expected synergies and other benefits of the Recall
Transaction. The risk, and adverse effect, of any disruption could be exacerbated by a delay in the completion of the Recall
Transaction or the termination of the Recall Agreement.
Risks Related to Our Taxation as a REIT
If we fail to remain qualified for taxation 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 have elected to be taxed as a REIT commencing with our 2014 taxable year; however, we can provide no assurance
that we will remain qualified for taxation 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.
Qualification for taxation as a REIT 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:
• we will not be allowed a deduction for distributions to stockholders in computing our taxable income;
• 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
• we would not be eligible to elect REIT status again until the fifth taxable year that begins after the first year for which
we failed to qualify as a REIT.
Any such corporate tax liability could be substantial and would reduce the amount of cash available for other purposes.
16
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 for
taxation 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 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 qualification for taxation as a REIT. 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.
17
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 United
States Internal Revenue Service (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 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 for taxation 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. Beginning
in our 2018 taxable year, no more than 20% of the value of the assets of a REIT may be represented by securities of one more
more TRSs within the overall 25% nonqualifying assets limitation. These limitations 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
qualification for taxation 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 for
taxation 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, then we will fail to remain qualified for taxation as a
REIT. Beginning with our 2018 taxable year, if the accumulation of cash in our TRSs causes (1) the fair market value of our
securities in our TRSs to exceed 20% of the fair market value of our assets or (2) 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, then we will fail to remain qualified
for taxation as a REIT.
18
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 for taxation as a REIT, some of our business activities are subject to corporate level income tax
and foreign taxes, which will continue to 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, we and our subsidiaries continue to be subject to
foreign income taxes in jurisdictions in which we have business operations or a taxable presence, regardless of whether assets
are held or operations are conducted through subsidiaries disregarded for federal income tax purposes or TRSs. 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 a REIT asset where our basis in the asset is determined by reference to the basis of the asset in the
hands of a C corporation (such as (i) an asset that we held as of the effective date of our REIT election, that is, January 1, 2014,
or (ii) an asset that we hold in a QRS following the liquidation or other conversion of a former TRS). This 35% tax is generally
applicable to any disposition of such an asset during the five-year period after the date we first owned the asset as a REIT asset
(e.g., January 1, 2014 in the case of REIT assets we held at the time of our REIT conversion), to the extent of the built-in-gain
based on the fair market value of such asset on the date we first held the asset as a REIT asset. In addition, depreciation
recapture income that we expect to recognize in connection with the Recall Transaction as a result of accounting method
changes that we will make 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 assets, liabilities, revenues and expenses. 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-United
States operations, as well as income from qualifying counteracting hedges 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 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.
19
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 remain qualified for taxation as a REIT, 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 qualification for
taxation 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 for taxation 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 qualification for taxation
as a REIT from being jeopardized, including under the affiliated tenant rule. Furthermore, there can be no assurance that we
will be able 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 for taxation 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.
20
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 physical records and computer backup tapes and from
storage related services. Alternative storage technologies exist, many of which require significantly less space than physical
records 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.
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.
21
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, and, in 2015, many states expanded the scope of their data
breach notifications laws and shortened notification timelines. 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. In addition, certain United States 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.
Continued governmental focus on data security may lead to additional legislative action in the United States. For example, the
114th Congress has considered and will likely consider legislation that would expand the federal data breach notification
requirement beyond the financial and medical fields.
Also, an increasing number of countries have introduced and/or increased enforcement of comprehensive privacy laws, or
are expected to do so. In Europe, a new data protection regulation will likely come into effect in 2018 and will supersede
Directive 95/46/EC, which has governed the processing of personal data since 1995. The new regulation will enhance the
security and privacy obligations of entities, such as Iron Mountain, that process data of residents of members of the European
Economic Area and substantially increase penalties for violations. In addition, the European Court of Justice has invalidated a
decision of the European Commission that permitted our European affiliates and our European customers to transfer personal
data to entities in the United States that are certified under the EU-US safe harbor framework. This decision, a failure of the
European Union and the United States to agree on a new safe-harbor framework, the new regulation and laws in other countries
that restrict the export of personal data may result in more customers demanding local solutions, which would increase our IT
infrastructure, maintenance and support costs.
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. 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 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, 2015, we operated 1,046 records management, off-site data protection and fine art storage facilities
worldwide, including 575 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.
22
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 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, 2015, we provided services in 36 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:
•
•
•
•
•
•
•
•
•
the impact of foreign government regulations and United States regulations that apply to us wherever we operate; in
particular, we are 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;
the volatility of certain foreign economies in which we operate;
political uncertainties;
unforeseen liabilities, particularly within acquired businesses;
costs and difficulties associated with managing international operations of varying sizes and scale;
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;
difficulties attracting and retaining local management and key employees to operate our business in certain countries;
cultural differences and differences in business practices and operating standards; and
foreign currency fluctuations.
In particular, our net income, debt balances or leverage can be significantly affected by fluctuations in currencies.
23
We have operations in numerous 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 numerous 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 debt
balances (including intercompany debt 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 (including the
classification of our distributions as nonqualified ordinary dividends, qualified ordinary dividends or return of capital, as
described more fully in "Item 5. Market Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities" included in this Annual Report) may fluctuate as a result of exchange rate fluctuations.
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:
•
•
•
•
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;
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;
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; and
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.
24
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 systems or security breaches involving us 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.
25
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, 2015, our total long-term debt was approximately
$4.90 billion. Our substantial indebtedness could have important consequences to our current and potential investors. These
risks include:
•
•
•
•
•
•
•
•
inability to satisfy our obligations with respect to our various debt instruments;
inability to adjust to adverse economic conditions;
inability to fund future working capital, capital expenditures, acquisitions and other general corporate requirements,
including possible required repurchases of our various indebtedness;
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;
limits on our flexibility in planning for, or reacting to, changes in our business and the information management
services industry;
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;
inability to generate sufficient funds to cover required interest payments; and
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 Agreement (as defined below) and our indentures contain covenants restricting or limiting our ability to,
among other things:
incur additional indebtedness;
pay dividends or make other restricted payments;
•
•
• make asset dispositions;
•
• make acquisitions and other investments.
create or permit liens; and
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 funds at the time of the change of control to make
the required repurchase of the notes or that restrictions in our Credit Agreement 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 our direct and
indirect wholly owned United States subsidiaries, that represent the substantial majority of our United States operations.
26
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, including ABOs, 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 businesses 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 business 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 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:
•
•
•
•
•
•
identify suitable companies to acquire or invest in;
complete acquisitions on satisfactory terms;
successfully expand our infrastructure and sales force to support growth;
achieve satisfactory returns on acquired companies, particularly in countries where we do not currently operate;
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
enter into successful business arrangements for technical assistance or management expertise outside of the United
States.
27
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.
28
Item 2. Properties.
As of December 31, 2015, we conducted operations through 860 leased facilities and 277 owned facilities. Our facilities
are divided among our reportable segments as follows: North American Records and Information Management Business (605),
North American Data Management Business (58), Western European Business (152), Other International Business (306) and
Corporate and Other Business (16). These facilities contain a total of 69.9 million square feet of space. 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
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts (including Corporate
Headquarters)
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
1
4
—
15
5
6
1
4
4
7
1
1
—
4
2
1
3
8
6
—
—
1
3
1
1
11
2
13
2
7
3
1
8
1
1
—
5
32
1
—
7
6
—
1
180
15
195
12,621
239,110
—
1,964,572
338,009
665,013
120,921
194,090
229,719
1,309,975
131,506
14,200
—
418,760
214,625
95,000
327,258
1,171,438
345,736
—
—
25,120
316,970
107,041
146,467
2,143,945
109,473
1,186,266
53,624
660,778
145,000
55,621
2,577,883
54,352
12,748
—
153,659
2,679,532
90,553
—
605,566
472,896
—
10,655
19,400,702
1,749,664
21,150,366
4
15
1
65
16
10
6
37
15
18
4
3
1
7
5
1
15
14
21
11
2
12
4
7
1
41
3
36
23
19
6
12
26
4
2
9
10
76
3
2
22
12
3
8
612
67
679
325,094
724,071
40,000
5,242,203
843,884
874,196
431,157
2,521,387
1,140,539
2,305,775
285,586
159,338
131,764
502,760
424,975
95,000
1,497,286
1,700,954
1,203,299
841,567
157,386
1,207,444
351,530
327,317
146,467
4,545,396
131,973
2,169,030
1,151,617
1,424,183
283,047
416,096
4,239,901
232,801
82,907
521,005
340,652
4,787,761
168,701
55,200
1,196,956
785,659
234,902
438,723
46,687,489
4,802,062
51,489,551
3
11
1
50
11
4
5
33
11
11
3
2
1
3
3
—
12
6
15
11
2
11
1
6
—
30
1
23
21
12
3
11
18
3
1
9
5
44
2
2
15
6
3
7
432
52
484
312,473
484,961
40,000
3,277,631
505,875
209,183
310,236
2,327,297
910,820
995,800
154,080
145,138
131,764
84,000
210,350
—
1,170,028
529,516
857,563
841,567
157,386
1,182,324
34,560
220,276
—
2,401,451
22,500
982,764
1,097,993
763,405
138,047
360,475
1,662,018
178,449
70,159
521,005
186,993
2,108,229
78,148
55,200
591,390
312,763
234,902
428,068
27,286,787
3,052,398
30,339,185
29
Country/State
International
Argentina
Australia
Austria
Belgium
Brazil
Chile
China
Columbia
Czech Republic
Denmark
Finland
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
Total
Leased
Owned
Total
Number
Square Feet
Number
Square Feet
Number
Square Feet
4
22
2
3
29
11
15
19
9
1
1
17
14
2
3
7
67
8
4
3
2
2
20
6
7
23
6
1
2
5
7
4
10
3
37
376
860
367,912
1,341,533
28,300
133,357
1,880,300
420,084
164,936
525,335
283,435
69,094
600
721,491
659,975
73,947
159,198
350,898
1,300,258
235,113
331,186
87,310
107,284
41,878
722,427
56,525
303,101
609,408
184,298
32,401
63,909
153,548
165,935
85,357
601,353
68,887
1,624,491
13,955,064
44,294,249
5
3
1
1
4
6
1
—
—
—
—
4
1
—
—
—
—
6
3
—
—
8
—
3
—
—
4
—
—
—
6
—
—
—
26
82
277
469,748
64,460
30,000
104,391
202,008
232,314
20,518
—
—
—
—
217,919
58,329
—
—
—
—
419,188
102,199
—
—
259,903
—
158,558
—
—
375,294
—
—
—
203,000
—
—
—
1,525,848
4,443,677
25,594,043
9
25
3
4
33
17
16
19
9
1
1
21
15
2
3
7
67
14
7
3
2
10
20
9
7
23
10
1
2
5
13
4
10
3
63
458
1,137
837,660
1,405,993
58,300
237,748
2,082,308
652,398
185,454
525,335
283,435
69,094
600
939,410
718,304
73,947
159,198
350,898
1,300,258
654,301
433,385
87,310
107,284
301,781
722,427
215,083
303,101
609,408
559,592
32,401
63,909
153,548
368,935
85,357
601,353
68,887
3,150,339
18,398,741
69,888,292
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.
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.
30
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.
31
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 NYSE under the symbol "IRM." The following table sets forth the high and low sale
prices on the NYSE, for the years 2014 and 2015:
2014
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2015
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Sale Prices
High
Low
$
$
$
$
30.48
31.15
37.10
40.41
41.53
38.49
32.25
32.35
25.74
25.95
31.17
31.11
35.60
30.95
26.49
25.99
The closing price of our common stock on the NYSE on February 19, 2016 was $28.95. As of February 19, 2016, there
were 407 holders of record of our common stock.
Our board of directors has adopted a dividend policy under which we have paid, and in the future intend to pay, quarterly
cash dividends on our common stock. The amount and timing of future dividends will continue to be subject to the approval of
our board of directors, in its sole discretion, and to applicable legal requirements.
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 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.
32
In 2014 and 2015, our board of directors declared the following dividends:
Declaration Date
March 14, 2014
May 28, 2014
September 15, 2014
September 15, 2014(1)
November 17, 2014(2)
November 17, 2014
February 19, 2015
May 28, 2015
August 27, 2015
October 29, 2015
$
Dividend
Per Share
0.2700
0.2700
0.4750
3.6144
0.2550
0.4750
0.4750
0.4750
0.4750
0.4850
Record Date
March 25, 2014
June 25, 2014
September 25, 2014
September 30, 2014
November 28, 2014
December 5, 2014
March 6, 2015
June 12, 2015
September 11, 2015
December 1, 2015
Total
Amount
(in thousands)
51,812
$
52,033
91,993
700,000
53,450
99,617
99,795
100,119
100,213
102,438
_______________________________________________________________________________
(1) Represents Special Distribution.
(2) Represents Catch-Up Distribution.
Payment Date
April 15, 2014
July 15, 2014
October 15, 2014
November 4, 2014
December 15, 2014
December 22, 2014
March 20, 2015
June 26, 2015
September 30, 2015
December 15, 2015
During the years ended December 31, 2013, 2014 and 2015, we declared distributions to our stockholders of
$206.4 million, $1,048.9 million and $402.6 million, respectively. These distributions represent approximately $1.08 per share,
$5.37 per share and $1.91 per share for the years ended December 31, 2013, 2014 and 2015, respectively, based on the
weighted average number of common shares outstanding during each respective year. For 2014, total amounts distributed
included the Special Distribution of $700.0 million, or $3.61 per share, associated with our 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, 2013, 2014 and 2015, the dividends we paid on our common shares were classified as follows:
Nonqualified ordinary dividends
Qualified ordinary dividends
Return of capital
Year Ended December 31,
2013
0.0%
2014
26.4%
2015
49.3%
100.0%
0.0%
39.1%
56.4%
11.6%
17.2%
100.0% 100.0% 100.0%
Unregistered Sales of Equity Securities and Use of Proceeds
We did not sell any unregistered securities during the three months ended December 31, 2015, nor did we repurchase any
shares of our common stock during the three months ended December 31, 2015.
33
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.
Consolidated Statements of Operations Data:
Revenues:
Storage rental
Service
Total Revenues
Operating Expenses:
Year Ended December 31,
2011
2012
2013
2014
2015
(In thousands)
$1,682,990
$1,733,138
$1,784,721
$1,860,243
$1,837,897
1,330,613
1,270,817
1,239,902
1,257,450
1,170,079
3,013,603
3,003,955
3,024,623
3,117,693
3,007,976
Cost of sales (excluding depreciation and amortization)
1,245,200
1,277,113
1,288,878
1,344,636
1,290,025
Selling, general and administrative
Depreciation and amortization
Intangible impairments(1)
Loss on disposal/write-down of property, plant and
equipment (excluding real estate), net
834,591
319,499
46,500
850,371
316,344
—
995
4,661
924,031
322,037
—
430
869,572
353,143
—
844,960
345,464
—
1,065
3,000
Total Operating Expenses
2,446,785
2,448,489
2,535,376
2,568,416
2,483,449
Operating Income
Interest Expense, Net
Other Expense, Net
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 Tax
Income from Continuing Operations
(Loss) Income from Discontinued Operations, Net of Tax
Gain (Loss) on Sale of Discontinued Operations, Net of
Tax
Net Income
Less: Net Income Attributable to Noncontrolling
Interests
566,818
205,256
13,043
555,466
242,599
16,062
489,247
254,174
75,202
549,277
260,717
65,187
524,527
263,871
98,590
348,519
105,139
(2,361)
245,741
(47,439)
200,619
398,921
296,805
114,304
(206)
182,707
(6,774)
(1,885)
174,048
159,871
62,127
(1,417)
99,161
831
—
223,373
(97,275)
(8,307)
328,955
(209)
—
162,066
37,713
(850)
125,203
—
—
99,992
328,746
125,203
4,054
3,126
3,530
2,627
1,962
Net Income Attributable to Iron Mountain Incorporated
$ 394,867
$ 170,922
$
96,462
$ 326,119
$ 123,241
(footnotes follow)
34
Earnings (Losses) per Share—Basic:
Income from Continuing Operations
Total Income (Loss) from Discontinued Operations
Net Income Attributable to Iron Mountain Incorporated
Earnings (Losses) per Share—Diluted:
Income from Continuing Operations
Total Income (Loss) from Discontinued Operations
Net Income Attributable to Iron Mountain Incorporated
Year Ended December 31,
2011
2012
2013
2014
2015
(In thousands, except per share data)
$
$
$
$
$
$
1.26
0.79
2.03
1.25
0.78
2.02
$
$
1.05
$ (0.05) $
$
0.98
$
$
1.04
$
$ (0.05) $
$
0.98
$
0.52
$
1.68
$
0.59
— $
— $
0.51
0.52
$
$
1.67
1.67
$
$
— $
— $
—
0.58
0.59
—
0.50
$
1.66
$
0.58
Weighted Average Common Shares Outstanding—Basic
194,777
173,604
190,994
195,278
210,764
Weighted Average Common Shares Outstanding—Diluted
195,938
174,867
192,412
196,749
212,118
Dividends Declared per Common Share
$ 0.9375
$ 5.1200
$ 1.0800
$ 5.3713
$ 1.9100
(footnotes follow)
Other Data:
Adjusted OIBDA(2)
2011
2012
2013
2014
2015
Year Ended December 31,
(In thousands)
$
949,339
$
910,917
$
894,581
$
925,797
$
920,005
Adjusted OIBDA Margin(2)
Ratio of Earnings to Fixed Charges
31.5%
2.2x
30.3%
1.9x
29.6%
1.5x
29.7%
1.7x
30.6%
1.5x
(footnotes follow)
Consolidated Balance Sheet
Data:
2011(3)
2012(3)
2013(3)
2014(3)
2015
As of December 31,
(in thousands)
Cash and Cash Equivalents
$
179,845
$
243,415
$
120,526
$
125,933
$
128,381
Total Assets
6,005,460
6,314,489
6,607,398
6,523,265
6,350,587
Total Long-Term Debt (including
Current Portion of Long-Term
Debt)
Total Equity
(footnotes follow)
3,317,790
1,249,742
3,781,153
1,157,148
4,126,115
1,051,734
4,616,454
869,955
4,845,678
528,607
_______________________________________________________________________________
(1) 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 Western European Business segment.
35
(2) 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), Recall Costs (as defined below) 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.
(3) We have adopted the provisions of Accounting Standards Update No. 2015-03, Interest - Imputation of Interest
(Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”) as of December 31, 2015.
ASU 2015-03 requires debt issuance costs to be presented in the balance sheet as a reduction of the related debt
liability rather than an asset. The adoption of ASU 2015-03 did not materially impact our consolidated financial
position or results of operations. Prior period amounts for all years presented above were reclassified to conform to the
current period presentation. Total assets and total long-term debt (including current portion of long-term debt) at
December 31, 2011, 2012, 2013 and 2014 have been reduced by $35.8 million, $43.9 million, $45.6 million and $47.1
million, respectively, to reflect the adoption of ASU 2015-03.
36
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 12 of this Annual Report.
Overview
Proposed Recall Acquisition
On June 8, 2015, we entered into the Recall Agreement with Recall to acquire Recall by way of the Scheme. Under the
terms of the Recall Agreement, Recall shareholders are entitled to receive the Cash Supplement as well as either (1) 0.1722
shares of our common stock for each Recall share or (2) the Cash Election. The Cash Election is subject to the Cash Election
Cap. Amounts paid to Recall shareholders that represent the Cash Supplement are excluded from the calculation of the Cash
Election Cap. Assuming a sufficient number of Recall shareholders elect the Cash Election such that we pay the Cash Election
Cap, we expect to issue approximately 50.7 million shares of our common stock and, based on the exchange rate between the
United States dollar and the Australian dollar as of February 19, 2016, pay approximately US$323.0 million to Recall
shareholders in connection with the Recall Transaction which, based on the closing price of our common stock as of February
19, 2016, would result in a total purchase price to Recall shareholders of approximately $1,791.0 million. Completion of the
Scheme is subject to customary closing conditions, including among others, (i) approval by Recall shareholders of the Scheme
by the requisite majority under the Australian Corporations Act, (ii) expiration or earlier termination of any applicable waiting
period and receipt of regulatory consents, approvals and clearances, in each case, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and under relevant antitrust/competition and foreign investment legislation in other
relevant jurisdictions, (iii) the absence of any final, non-appealable order, decree or law preventing, making illegal or
prohibiting the completion of the Recall Transaction, (iv) approval from the NYSE to the listing of additional shares of our
common stock to be issued in the Recall Transaction, (v) the establishment of a secondary listing on the ASX to allow Recall
shareholders to trade our common stock via CHESS Depository Interests on the ASX, (vi) Recall’s delivery of tax opinions in
accordance and in compliance with certain tax matter agreements to which Recall is a party and (vii) no events having occurred
that would have a material adverse effect on Recall or us. We continue to work toward closing of the Recall Transaction and
related integration planning.
We currently estimate total operating and capital expenditures associated with the Recall Transaction to be
approximately $380.0 million, the majority of which is expected to be incurred by the end of 2018. This amount consists of
approximately $80.0 million of Recall Deal Close Costs and approximately $300.0 million of Recall Integration Costs. Of these
amounts, approximately $47.1 million was incurred through December 31, 2015 ($24.7 million of Recall Deal Close Costs and
$22.4 million of Recall Integration Costs), including approximately $47.0 million of operating expenditures and approximately
$0.1 million of capital expenditures.
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 $26.2 million of cash at closing. The assets sold
primarily consisted of customer contracts and certain long-lived assets. We have concluded that this divestiture did not meet the
requirements to be presented as 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 represented
less than 1% of our consolidated revenues. The International Shredding Operations in Australia were previously included in the
Other International Business segment and the International Shredding Operations in Ireland and the United Kingdom were
previously included in the Western European Business segment.
37
Cost Optimization Plans
During the third quarter of 2013, we implemented a plan that called for certain organizational realignments to advance
our growth strategy and reduce operating costs (the “Organizational Restructuring”), which was completed in 2014. As a result
of the Organizational Restructuring, we recorded charges of $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. Costs included in our results
from operations associated with the Organizational Restructuring are as follows (in thousands):
Cost of sales (excluding depreciation and amortization)
Selling, general and administrative expenses
Total
Year Ended December 31,
2013
2014
$
$
3,400
20,000
23,400
$
$
1,228
2,247
3,475
Costs recorded by segment associated with the Organizational Restructuring are as follows (in thousands):
North American Records and Information Management Business
North American Data Management Business
Western European Business
Other International Business
Corporate and Other Business
Total
Year Ended December 31,
2013
12,600
$
$
2,100
2,300
1,400
5,000
$
23,400
$
2014
1,560
340
33
—
1,542
3,475
During the third quarter of 2015, we implemented a plan that calls for certain organizational realignments to reduce our
overhead costs, particularly in our developed markets, in order to optimize our selling, general and administrative cost structure
and to support investments to advance our growth strategy (the “Transformation Initiative”), which is expected to be completed
by the end of 2017. As a result of the Transformation Initiative, we recorded charges of $10.2 million for the year ended
December 31, 2015, primarily related to employee severance and associated benefits. Costs included in our results from
operations associated with the Transformation Initiative are as follows (in thousands):
Cost of sales (excluding depreciation and amortization)
Selling, general and administrative expenses
Total
Year Ended
December 31, 2015
—
$
$
10,167
10,167
Costs recorded by segment associated with the Transformation Initiative are as follows (in thousands):
North American Records and Information Management Business
North American Data Management Business
Western European Business
Other International Business
Corporate and Other Business
Total
Year Ended
December 31, 2015
5,403
$
241
1,537
—
2,986
10,167
$
38
In the first quarter of 2016, we implemented additional actions associated with our Transformation Initiative. As a result
of these actions, we expect to record a charge of approximately $7.0 million, primarily related to employee severance and
associated benefits, and included as a component of selling, general and administrative expenses. Of this charge, approximately
$4.4 million, $0.7 million, $0.1 million and $1.8 million was associated with our North American Records and Information
Management Business, North American Data Management Business, Western European Business and Corporate and Other
Business segments, respectively.
As we quantify incremental costs associated with future Transformation Initiative actions to achieve our $125.0 million
cost reduction goal, we will disclose the relevant cost estimates and charges in the period that such actions are approved.
General
As a result of a realignment in our senior management reporting structure during the first quarter of 2015, we modified
our internal financial reporting to better align internal reporting with how we manage our business. These modifications
resulted in the separation of our former International Business segment into two unique reportable operating segments, which
we refer to as (1) Western European Business segment and (2) Other International Business segment. Also, during the first
quarter of 2015, we reassessed the nature of certain costs which were previously being allocated to the North American
Records and Information Management Business and North American Data Management Business segments. As a result of this
reassessment, we determined that certain product management functions, which were previously being performed to solely
benefit our North American operating segments, are now being performed in a manner that benefits the enterprise as a whole.
Accordingly, the costs associated with these product management functions are now included within the Corporate and Other
Business segment. Additionally, during the fourth quarter of 2015, as a result of changes in the senior management of our
business in Norway, we determined that our Norway operations are now being managed as a component of our Other
International Business segment rather than as a component of our Western European Business segment.
As a result of these changes noted above, previously reported segment information has been restated to conform to the
current presentation.
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 and technology escrow services that
protect and manage source code ("Intellectual Property Management"). 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 removal 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) 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.
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 international segment revenue. In addition, the overhead structure of our
39
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 Statement of Operations. As a result
of the relative size of our international operations, these fluctuations may be material on individual balances. Our revenues and
expenses from our international operations are generally denominated in the local currency of the country in which they are
derived or incurred. Therefore, 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 2013 results at the
2014 average exchange rates and the 2014 results at the 2015 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,
2014
2015
0.902
0.426
1.648
0.906
1.329
$
$
$
$
$
0.753
0.305
1.529
0.784
1.110
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
$
$
$
$
$
$
$
$
$
$
Percentage
Strengthening /
(Weakening) of
Foreign Currency
(16.5)%
(28.4)%
(7.2)%
(13.5)%
(16.5)%
Percentage
Strengthening /
(Weakening) of
Foreign Currency
(6.8)%
(8.4)%
5.3 %
(6.7)%
0.1 %
40
Non-GAAP Measures
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, Recall Costs (as defined below) 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
estimated 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 on sale of real estate, net of tax; (3) intangible impairments; (4) Recall Costs (as defined
below); (5) REIT Costs (as defined below); (6) other expense (income), net; (7) income (loss) from discontinued operations, net
of tax; (8) gain (loss) on sale of discontinued operations, net of tax; and (9) 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
Loss on Disposal/Write-Down of Property, Plant and Equipment
(Excluding Real Estate), Net
Recall Costs(1)
REIT Costs(2)
Adjusted OIBDA
Year Ended December 31,
2011
$ 566,818
2012
$ 555,466
2013
$ 489,247
2014
$ 549,277
2015
$ 524,527
319,499
316,344
322,037
353,143
345,464
46,500
—
995
—
4,661
—
—
430
—
—
—
1,065
—
3,000
47,014
—
15,527
34,446
82,867
22,312
$ 949,339
$ 910,917
$ 894,581
$ 925,797
$ 920,005
_______________________________________________________________________________
(1) Includes operating expenditures associated with our proposed acquisition of Recall, including costs to complete the
Recall Transaction, including advisory and professional fees, as well as costs incurred to integrate Recall with our
existing operations, including moving, severance, facility upgrade, REIT conversion and system upgrade costs
("Recall Costs").
(2) Includes costs associated with our 2011 proxy contest, 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").
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 on sale of real estate, net of tax;
(3) intangible impairments; (4) Recall Costs; (5) REIT Costs; (6) other expense (income), net; and (7) 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.
41
Reconciliation of Reported EPS—Fully Diluted from Continuing Operations to Adjusted EPS—Fully Diluted from Continuing
Operations:
Reported EPS—Fully Diluted from Continuing Operations
$
1.25
$
1.04
$
0.52
$
1.67
$
0.59
Year Ended December 31,
2011
2012
2013
2014
2015
Add: Loss on Disposal/Write-down of Property, Plant and
Equipment (Excluding Real Estate), Net
Gain on Sale of Real Estate, Net of Tax
Intangible Impairments
Recall Costs
REIT Costs
Other Expense, Net
Tax Impact of Reconciling Items and Discrete Tax Items(1)
Adjusted EPS—Fully Diluted from Continuing Operations
$
0.01
(0.01)
0.24
—
0.08
0.07
0.21
1.85
$
0.03
—
—
—
0.20
0.09
0.35
1.71
$
—
(0.01)
—
—
0.43
0.39
0.07
1.40
$
0.01
(0.04)
—
—
0.11
0.33
(0.72)
1.36
$
0.01
—
—
0.22
—
0.46
(0.07)
1.21
_______________________________________________________________________________
(1) Adjusted EPS for the years ended December 31, 2011, 2012 and 2013 have been restated to reflect a structural tax rate
of approximately 15.0%. Adjusted EPS for the year ended December 31, 2014 reflects a structural tax rate of
approximately 14.4%. Adjusted EPS for the year ended December 31, 2015 reflects a structural tax rate of
approximately 16.8%. The structural tax rates reflect the tax impact of the reconciling items above as well as discrete
tax items.
42
FFO (NAREIT) and FFO (Normalized)
Funds from operations (“FFO”) is defined by the National Association of Real Estate Investment Trusts ("NAREIT") and
us as net income excluding (i) depreciation on real estate assets and (ii) gain on sale of real estate, net of tax (“FFO
(NAREIT)”). FFO (NAREIT) does not give effect to real estate depreciation because these amounts are computed, under
GAAP, to allocate the cost of a property over its useful life. Because values for well-maintained real estate assets have
historically increased or decreased based upon prevailing market conditions, we believe that FFO (NAREIT) provides investors
with a clearer view of our operating performance. Our most directly comparable GAAP measure to FFO (NAREIT) is net
income. Although NAREIT has published a definition of FFO, modifications to FFO (NAREIT) are common among REITs as
companies seek to provide financial measures that most meaningfully reflect their particular business. Our definition of FFO
(Normalized) excludes certain items included in FFO (NAREIT) 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) intangible
impairments; (3) Recall Costs; (4) REIT Costs; (5) other expense (income), net; (6) deferred income taxes and REIT tax
adjustments; (7) income (loss) from discontinued operations, net of tax; and (8) gain (loss) on sale of discontinued operations,
net of tax.
Reconciliation of Net Income to FFO (NAREIT) and FFO (Normalized) (in thousands):
Net Income
Add: Real Estate Depreciation(1)
Gain on Sale of Real Estate, Net of Tax
FFO (NAREIT)
Add: Loss on Disposal/Write-Down of Property, Plant
and Equipment (Excluding Real Estate), Net
Recall Costs
REIT Costs
Other Expense, Net(2)
Deferred Income Taxes and REIT Tax Adjustments(3)
Loss from Discontinued Operations, Net of Tax
Year Ended December 31,
2014
$ 328,746
2015
$ 125,203
184,170
(8,307)
504,609
1,065
—
22,312
65,187
(144,154)
209
178,800
(850)
303,153
3,000
47,014
—
98,590
(5,513)
—
FFO (Normalized)
$ 449,228
$ 446,244
_______________________________________________________________________________
(1) Includes depreciation expense related to real estate assets (land improvements, buildings, building improvements and
racking).
(2) Includes foreign currency transaction gains and losses, net of $58.3 million and $70.9 million in the years ended
December 31, 2014 and 2015, respectively.
(3) REIT tax adjustments primarily include the impact of the repatriation of foreign earnings and accounting method
changes related to our REIT conversion (including the impact of amended tax returns).
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:
43
Revenue Recognition
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 the estimated 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, as we acquire additional information
impacting our estimates as of the acquisition date. 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 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. 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 acquisition in fiscal year 2015 (Crozier), a hypothetical increase of 10% in the expected annual future
cash flows attributable to this acquisition, with all other assumptions unchanged, would have increased the calculated fair value
of the acquired customer relationship intangible assets for this acquisition by $1.6 million (or 10.0%), 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 asset for this acquisition by $0.8 million
(or 5.1%), 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.
44
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:
• A significant decrease in the market price of an asset;
• A significant change in the extent or manner in which a long-lived asset is being used or in its physical condition;
• A significant adverse change in legal factors or in the business climate that could affect the value of the asset;
• An accumulation of costs significantly greater than the amount originally expected for the acquisition or construction
of an asset;
• A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection
or forecast that demonstrates continuing losses associated with the use of a long-lived asset; and
• 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.
If events indicate the carrying value 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.
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 analysis date. We performed our annual goodwill
impairment analysis as of October 1, 2013, 2014 and 2015 and concluded that goodwill was not impaired as of those dates. Our
reporting units, at which level we performed our goodwill impairment analysis as of October 1, 2015, were as follows: (1)
North American Records and Information Management (which includes Intellectual Property Management and Fulfillment
Services); (2) North American Secure Shredding; (3) North American Data Management; (4) Adjacent Businesses - Data
Centers (which consists primarily of our data center business in the United States); (5) Adjacent Businesses - Consumer
Storage (which consists of a consumer storage business with operations in the United States acquired in April 2015); (6) the
United Kingdom, Ireland and Norway (the “UKI and Norway” reporting unit); (7) Austria, Belgium, France, Germany,
Netherlands, Spain and Switzerland (the “Continental Western Europe” reporting unit); (8) the remaining countries in Europe in
which we operate, excluding Russia, Ukraine and Denmark (the “Emerging Markets - Eastern Europe” reporting unit); (9)
Latin America; (10) Australia and Singapore; (11) China and Hong Kong (the “Greater China” reporting unit); (12) India; and
(13) Russia, Ukraine and Denmark. See Note 2.g. to Notes to Consolidated Financial Statements included in our Annual Report
for a description of our reporting units.
Based on our goodwill impairment analysis as of October 1, 2015, all of our reporting units with goodwill had estimated
fair values that exceeded their carrying values by greater than 25%. As of December 31, 2015, no factors were identified that
would alter our October 1, 2015 goodwill impairment analysis. 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.
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/or 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.
45
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. We have assessed the sensitivity of these assumptions on each of our reporting units as of October 1, 2015. With respect
to all of our reporting units as of October 1, 2015, we noted that, based on the fair value of these reporting units determined as
of October 1, 2015, (i) a hypothetical decrease of 10% in the expected annual future cash flows of these reporting units, with all
other assumptions unchanged, would have decreased the fair value of these reporting units as of October 1, 2015 by a range of
approximately 8.3% to 10.5% but would not, however, have resulted in the carrying value of any of these reporting units with
goodwill exceeding their fair value; and (ii) a hypothetical increase of 100 basis points in the discount rate, with all other
assumptions unchanged, would have decreased the fair value of these reporting units as of October 1, 2015 by a range of
approximately 5.1% to 21.8% but would not, however, have resulted in the carrying value of any of these 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, 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 we have business operations or
a taxable presence, regardless of whether assets are held or operations are 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 five-
year period 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 has been imposed on our depreciation recapture recognized into income 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. 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. We measure deferred tax assets and liabilities using enacted tax rates expected to be applied to taxable
income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect
on deferred tax assets and liabilities as a result of a change in tax rates is recognized in income in the period that the change is
enacted. Valuation allowances are provided when recovery of deferred tax assets does not meet the more likely than not
standard as defined in GAAP. Valuation allowances would be reversed as a reduction to the provision for income taxes if
related deferred tax assets are deemed realizable based on changes in facts and circumstances relevant to the recoverability of
the asset.
We have federal net operating loss carryforwards, which expire in 2021 through 2033, of $70.8 million at
December 31, 2015 to reduce future federal taxable income, on which $3.0 million of federal tax benefit is expected to be
realized. We can carry forward these net operating losses to the extent we do not utilize them in any given available
year. We have state net operating loss carryforwards, which expire from 2016 through 2034, on which an insignificant state tax
benefit is expected to be realized. We have assets for foreign net operating losses of $66.2 million, with various expiration dates
(and in some cases no expiration date), subject to a valuation allowance of approximately 91%. 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.
46
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, 2014
and 2015, we had approximately $56.0 million and $47.7 million, respectively, of reserves related to uncertain tax positions.
The reversal of these reserves will be recorded as a reduction of our income tax provision if sustained. Although we believe our
tax estimates are appropriate, the final determination of tax audits and any related litigation could result in changes in our
estimates.
We 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. We continue to provide incremental federal and state income taxes on net book over outside
basis differences related to the earnings of our foreign subsidiaries. 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
See Note 2.w. in Notes to Consolidated Financial Statements for a description of recently issued accounting
pronouncements.
47
Results of Operations
Comparison of Year Ended December 31, 2015 to Year Ended December 31, 2014 and Comparison of Year Ended
December 31, 2014 to Year Ended December 31, 2013 (in thousands):
Revenues
Operating Expenses
Operating Income
Other Expenses, Net
Income from Continuing Operations
Loss from Discontinued Operations, Net of Tax
Net Income
Net Income Attributable to Noncontrolling Interests
Net Income Attributable to Iron Mountain Incorporated $
$
Adjusted OIBDA(1)
Year Ended December 31,
$
2014
3,117,693
2,568,416
2015
3,007,976
2,483,449
524,527
399,324
125,203
—
125,203
1,962
123,241
920,005
$
$
$
Dollar
Change
$ (109,717)
(84,967)
(24,750)
179,002
(203,752)
209
(203,543)
(665)
$ (202,878)
(5,792)
$
Percentage
Change
(3.5)%
(3.3)%
(4.5)%
81.2 %
(61.9)%
(100.0)%
(61.9)%
(25.3)%
(62.2)%
(0.6)%
549,277
220,322
328,955
(209)
328,746
2,627
326,119
925,797
Adjusted OIBDA Margin(1)
29.7%
30.6%
Year Ended December 31,
Revenues
Operating Expenses
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 Incorporated $
$
Adjusted OIBDA(1)
Adjusted OIBDA Margin(1)
_______________________________________________________________________________
29.6%
$
$
$
2013
3,024,623
2,535,376
489,247
390,086
99,161
831
99,992
3,530
96,462
894,581
2014
3,117,693
2,568,416
549,277
220,322
328,955
(209)
328,746
2,627
326,119
925,797
29.7%
$
$
$
Dollar
Change
Percentage
Change
93,070
33,040
60,030
(169,764)
229,794
(1,040)
228,754
(903)
229,657
31,216
3.1 %
1.3 %
12.3 %
(43.5)%
231.7 %
(125.2)%
228.8 %
(25.6)%
238.1 %
3.5 %
(1) See "Non-GAAP Measures—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.
48
REVENUES
Storage Rental
Service
Total Revenues
Storage Rental
Service
Total Revenues
Percentage Change
Year Ended December 31,
2014
1,860,243
1,257,450
3,117,693
$
$
2015
1,837,897
1,170,079
3,007,976
Dollar
Change
Actual
Constant
Currency(1)
Internal
Growth(2)
$
(22,346)
(87,371)
$ (109,717)
(1.2)%
(6.9)%
(3.5)%
4.0 %
(0.9)%
2.1 %
2.7 %
(0.4)%
1.5 %
Percentage Change
Year Ended December 31,
2013
1,784,721
1,239,902
3,024,623
$
$
2014
1,860,243
1,257,450
3,117,693
$
$
Dollar
Change
Actual
Constant
Currency(1)
Internal
Growth(2)
75,522
17,548
93,070
4.2%
1.4%
3.1%
5.4%
2.8%
4.3%
2.2 %
(0.7)%
1.0 %
$
$
$
$
_______________________________________________________________________________
(1) Constant currency growth rates are calculated by translating the 2014 results at the 2015 average exchange rates and
the 2013 results at the 2014 average exchange rates.
(2) Our revenue internal 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
revenue internal growth in local currency for our international operations.
Consolidated storage rental revenues decreased $22.3 million, or 1.2%, to $1,837.9 million for the year ended
December 31, 2015 from $1,860.2 million for the year ended December 31, 2014. In the year ended December 31, 2015,
consolidated storage rental internal growth and the net impact of acquisitions/divestitures were offset by unfavorable
fluctuations in foreign exchange rates compared to the year ended December 31, 2014. Foreign currency exchange rate
fluctuations decreased our reported storage rental revenue growth rate for the year ended December 31, 2015 by 5.2%,
compared to the same prior year period. This decrease was partially offset by storage rental revenue internal growth of 2.7% in
the year ended December 31, 2015, as well as the net impact of acquisitions/divestitures of 1.3% in the year ended December
31, 2015 compared to the year ended December 31, 2014. Our consolidated storage rental revenue growth in 2015 was driven
by sustained storage rental internal growth of 0.1%, 4.2%, 2.7% and 10.8% in our North American Records and Information
Management Business, North American Data Management Business, Western European Business and Other International
Business segments, respectively. Global records management net volumes at December 31, 2015 increased by 2.3% over the
ending volume at December 31, 2014, supported by 6.1% volume increases in our Other International Business segment.
Consolidated storage rental revenues increased $75.5 million, or 4.2%, to $1,860.2 million for the year ended December 31,
2014 from $1,784.7 million for the year ended December 31, 2013. The reported revenue growth rate for the year ended
December 31, 2014 consists primarily of revenue internal 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 internal growth in 2014 was driven by sustained storage rental internal growth of 0.3%, 2.3%, 1.9% and
11.6% in our North American Records and Information Management Business, North American Data Management Business,
Western European Business and Other International Business segments, respectively.
49
Consolidated service revenues decreased $87.4 million, or 6.9%, to $1,170.1 million for the year ended December 31,
2015 from $1,257.5 million for the year ended December 31, 2014. Service revenue internal growth was negative 0.4% for the
year ended December 31, 2015, compared to the same prior year period. The negative service revenue internal growth for the
year ended December 31, 2015 reflects 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. In the North American Records and Information Management Business segment, the decline in service activities has
begun to stabilize in recent periods, while service revenue declines in the North American Data Management Business segment
are reflecting more recent reductions in service activity levels. Foreign currency exchange rate fluctuations decreased our
reported total service revenues by 6.0% in 2015 over 2014. Net acquisitions/divestitures decreased reported service revenues by
0.5% for the year ended December 31, 2015 compared to the year ended December 31, 2014, primarily due to a $23.7 million
reduction in consolidated service revenue associated with the disposition of our International Shredding Operations.
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. In the year ended December 31, 2014, the net impact of
acquisitions/divestitures was offset by negative service revenue internal growth and unfavorable fluctuations in foreign
currency exchange rates. Net acquisitions/divestitures contributed 3.5% of the increase in reported service revenues in 2014.
Service revenue internal growth was negative 0.7% for the year ended December 31, 2014. The negative service revenue
internal growth for 2014 reflects 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 1.4% in 2014 over 2013.
For the reasons stated above, our consolidated revenues decreased $109.7 million, or 3.5%, to $3,008.0 million for the
year ended December 31, 2015 from $3,117.7 million for the year ended December 31, 2014. For the year ended December 31,
2015, foreign currency exchange rate fluctuations decreased our reported consolidated revenues by 5.6%, compared to the same
prior year period, primarily due to the weakening of the Australian dollar, Brazilian real, British pound sterling, Canadian dollar
and the Euro against the United States dollar, based on an analysis of weighted average rates for the comparable periods. This
decrease was partially offset by consolidated revenue internal growth of 1.5% in the year ended December 31, 2015 as well as
the net impact of acquisitions/divestitures of 0.6% in the year ended December 31, 2015 compared to the year ended December
31, 2014. 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. Revenue internal 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, 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.
50
Internal Growth—Eight-Quarter Trend
Storage Rental
Revenue
Service Revenue
Total Revenue
2014
2015
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
1.4 %
(0.7)%
0.5 %
1.6 %
(1.9)%
0.1 %
2.2 %
(2.7)%
0.2 %
3.5%
2.3%
3.0%
3.0 %
(1.0)%
1.4 %
2.7%
—%
1.6%
2.8 %
(0.9)%
1.3 %
2.2%
0.3%
1.4%
We expect our consolidated revenue internal growth rate for 2016 to be approximately 1.5% to 2.5%. During the past
eight quarters our storage rental revenue internal growth rate has ranged between 1.4% and 3.5%. Storage rental revenue
internal growth rates have been relatively stable over the past two fiscal years, averaging between 2.2% and 2.7% for full-year
2014 and 2015. At various points in the economic cycle, storage rental revenue internal growth may be influenced by changes
in pricing and volume. In 2014, we initiated sales force programs focused on increasing volume through new sales and
improved customer retention. In addition, we continue to enhance our pricing strategy through implementing a statistical-based
approach, which enables customized pricing based on customer profiles and needs. Within our international portfolio, the
Western European Business segment is generating consistent low-to-mid single-digit storage rental revenue internal growth,
while the Other International Business segment is producing strong double-digit storage rental revenue internal growth by
capturing the first-time outsourcing trends for physical records storage and management in those markets. The internal 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 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 service declines in service revenue activity levels in our North American Data Management Business
segment as the storage business becomes more archival in nature.
51
OPERATING EXPENSES
Cost of Sales
Consolidated cost of sales (excluding depreciation and amortization) consists of the following expenses (in thousands):
Year Ended December 31,
$
$
2014
674,658
440,408
118,027
$
2015
647,082
425,882
101,240
111,543
115,821
$
1,344,636
$
1,290,025
$
Dollar
Change
(27,576)
(14,526)
(16,787)
4,278
(54,611)
Year Ended December 31,
$
$
2013
638,403
413,675
123,179
2014
674,658
440,408
118,027
113,621
111,543
$
1,288,878
$
1,344,636
$
Dollar
Change
$
36,255
26,733
(5,152)
(2,078)
55,758
Percentage
Change
% of
Consolidated
Revenues
Actual
(4.1)%
(3.3)%
Constant
Currency
2014
2.8 % 21.6% 21.5%
2015
2.7 % 14.1% 14.2%
(14.2)%
(9.5)% 3.8%
3.4%
3.8 %
(4.1)%
12.9 % 3.6%
3.9%
2.5 % 43.1% 42.9%
Percentage
Change
% of
Consolidated
Revenues
Actual
5.7 %
6.5 %
Constant
Currency
2013
7.7 % 21.1% 21.6%
2014
7.5 % 13.7% 14.1%
(4.2)%
(2.6)% 4.1% 3.8%
(1.8)%
4.3 %
— % 3.8% 3.6%
6.0 % 42.6% 43.1%
Percentage
Change
(Favorable)/
Unfavorable
(0.1)%
0.1 %
(0.4)%
0.3 %
(0.2)%
Percentage
Change
(Favorable)/
Unfavorable
0.5 %
0.4 %
(0.3)%
(0.2)%
0.5 %
Labor
Facilities
Transportation
Product Cost of
Sales and Other
Labor
Facilities
Transportation
Product Cost of
Sales and Other
Labor
Labor expense decreased to 21.5% of consolidated revenues for the year ended December 31, 2015 compared to 21.6%
for the year ended December 31, 2014. Labor costs were favorably impacted by 6.9 percentage points due to currency rate
changes during the year ended December 31, 2015 compared to the same prior year period. Labor expense for the year ended
December 31, 2015 increased by 2.8% on a constant dollar basis compared to the year ended December 31, 2014. This increase
was primarily due to a $14.6 million increase in labor costs in our Other International Business segment, primarily associated
with the impact of recent acquisitions, and a $7.0 million increase in labor costs in our North American Records and
Information Management Business segment, primarily associated with an increase in medical expenses. These increases were
partially offset by a $1.2 million reduction in restructuring costs associated with the Organizational Restructuring (primarily
related to our North American Records and Information Management Business segment) in the year ended December 31, 2015
compared to the year ended December 31, 2014.
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.
52
Facilities
Facilities costs increased to 14.2% of consolidated revenues for the year ended December 31, 2015, compared to 14.1%
for the year ended December 31, 2014. Facilities costs were favorably impacted by 6.0 percentage points due to currency rate
changes during the year ended December 31, 2015. Rent expense increased by $6.7 million on a constant dollar basis for the
year ended December 31, 2015 compared to the year ended December 31, 2014, primarily driven by increased costs in our
Other International Business segment. Other facilities costs increased by $4.6 million on a constant dollar basis for the year
ended December 31, 2015 compared to the year ended December 31, 2014, primarily due to higher property taxes and common
area charges of $3.4 million and building maintenance and security costs of $4.4 million, partially offset by a decrease in
insurance costs of $3.6 million primarily associated with insurance deductibles related to a fire at one of our facilities in Buenos
Aires, Argentina in February 2014.
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
primarily associated with insurance deductibles related to the fire at one of our facilities in Buenos Aires, Argentina noted
above. Facilities costs were favorably impacted by 1.0 percentage points due to currency rate changes during the year ended
December 31, 2014.
Transportation
Transportation expenses decreased by $10.6 million on a constant dollar basis during the year ended December 31, 2015
compared to the year ended December 31, 2014 primarily as a result of decreased fuel and insurance costs of $7.9 million and
$3.2 million, respectively. Transportation expenses were favorably impacted by 4.7 percentage points due to currency rate
changes during the year ended December 31, 2015.
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.
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, 2015, product cost of
sales and other increased by $4.3 million compared to the year ended December 31, 2014 on an actual basis, primarily due to
an increase in costs associated with special projects. These costs were favorably impacted by 9.1 percentage points due to
currency rate changes during the year ended December 31, 2015.
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 special projects. These costs
were favorably impacted by 1.8 percentage points due to currency rate changes during the year ended December 31, 2014.
53
Selling, General and Administrative Expenses
Selling, general and administrative expenses consists of the following expenses (in thousands):
General and
Administrative
Sales, Marketing &
Account
Management
Information
Technology
Bad Debt Expense
General and
Administrative
Sales, Marketing &
Account
Management
Information
Technology
Bad Debt Expense
Year Ended December 31,
2014
2015
Dollar
Change
Actual
Constant
Currency
Percentage
Change
% of
Consolidated
Revenues
2014
2015
Percentage
Change
(Favorable)/
Unfavorable
$
538,657
$
515,973
$ (22,684)
(4.2)%
0.5% 17.3% 17.2%
(0.1)%
213,532
214,029
497
0.2 %
5.0% 6.8% 7.1%
103,174
14,209
99,632
15,326
$
869,572
$
844,960
(3,542)
1,117
$ (24,612)
(3.4)%
7.9 %
(2.8)%
1.1% 3.3% 3.3%
10.6% 0.5% 0.5%
1.9% 27.9% 28.1%
0.3 %
— %
— %
0.2 %
Year Ended December 31,
2013
2014
Dollar
Change
Actual
Constant
Currency
Percentage
Change
% of
Consolidated
Revenues
2013
2014
Percentage
Change
(Favorable)/
Unfavorable
$
595,699
$
538,657
$ (57,042)
(9.6)%
(8.8)% 19.7% 17.3%
(2.4)%
219,143
213,532
(5,611)
(2.6)%
(1.8)% 7.2% 6.8%
(0.4)%
97,868
11,321
103,174
14,209
5,306
2,888
5.4 %
25.5 %
6.1 % 3.2% 3.3%
27.4 % 0.4% 0.5%
0.1 %
0.1 %
$
924,031
$
869,572
$ (54,459)
(5.9)%
(5.1)% 30.6% 27.9%
(2.7)%
General and Administrative
General and administrative expenses decreased to 17.2% of consolidated revenues during the year ended December 31,
2015 compared to 17.3% in the year ended December 31, 2014. General and administrative expenses were favorably impacted
by 4.7 percentage points due to currency rate changes during the year ended December 31, 2015. On a constant dollar basis,
general and administrative expenses increased by $2.8 million during the year ended December 31, 2015 compared to the year
ended December 31, 2014, primarily as a result of a $47.0 million increase in Recall Costs and a $6.1 million increase in costs
associated with the Transformation Initiative, partially offset by a $22.3 million decrease in REIT Costs, a $10.4 million
decrease in general and administrative expenses, primarily related to professional fees, associated with our Corporate and Other
Business segment, a $9.9 million decrease in professional fees associated with our North American Records and Information
Management Business segment, a $3.0 million decrease in general and administrative expenses associated with our Other
International Business segment and a $1.8 million decrease in restructuring costs associated with the Organization
Restructuring.
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.
54
Sales, Marketing & Account Management
Sales, marketing and account management expenses increased to 7.1% of consolidated revenues during the year ended
December 31, 2015 compared to 6.8% in 2014. Sales, marketing and account management expenses were favorably impacted
by 4.8 percentage points due to currency rate changes during the year ended December 31, 2015. On a constant dollar basis,
sales, marketing and account management expenses during the year ended December 31, 2015 increased by $10.2 million
compared to the year ended December 31, 2014, primarily due to an increase in compensation expenses of $7.6 million,
primarily associated with higher sales commissions in our North American Data Management Business segment, as well as an
increase in marketing expenses of $2.1 million.
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.
Information Technology
On a constant dollar basis, information technology expenses increased $1.1 million during the year ended December 31,
2015 compared to the year ended December 31, 2014 primarily due to increased compensation expenses of $1.7 million.
Information technology expenses were favorably impacted by 4.5 percentage points due to currency rate changes during the
year ended December 31, 2015.
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.
Bad Debt Expense
Consolidated bad debt expense for the year ended December 31, 2015 increased $1.1 million to $15.3 million (0.5% of
consolidated revenues) from $14.2 million (0.5% of consolidated revenues) for the year ended December 31, 2014. We
maintain an allowance for doubtful accounts that is calculated based on our past loss experience, current and prior trends in our
aged receivables, current economic conditions, and specific circumstances of individual receivable balances. We continue to
monitor our customers' payment activity and make adjustments based on their financial condition and in light of historical and
expected trends.
Consolidated bad debt expense for the year ended December 31, 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.
Depreciation, Amortization, and Loss (Gain) on Disposal/Write-down of Property, Plant and Equipment (Excluding
Real Estate), Net
Depreciation expense increased $12.5 million and $24.5 million, on a constant dollar basis, for the years ended
December 31, 2015 and 2014, respectively, compared to the years ended December 31, 2014 and 2013, respectively, primarily
due to the increased depreciation of property, plant and equipment acquired through business combinations.
Amortization expense increased $0.5 million and $10.1 million, on a constant dollar basis, for the years ended
December 31, 2015 and 2014, respectively, compared to the years ended December 31, 2014 and 2013, respectively, primarily
due to the increased amortization of customer relationship intangible assets acquired through business combinations.
55
Consolidated loss on disposal/write-down of property, plant and equipment (excluding real estate), net was $3.0 million
for the year ended December 31, 2015 and consisted primarily of $1.8 million of losses associated with the write-off of certain
property in our Western European Business segment, as well as $1.5 million of losses associated with the write-off of certain
property in our North American Records and Information Management Business segment, partially offset by gains 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 $1.1 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
Business segment, approximately $0.6 million of asset write-offs associated with our Western European Business segment and
approximately $0.3 million of asset write-offs associated with our Other International Business segment, 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.
OPERATING INCOME and ADJUSTED OIBDA (in thousands)
The following table reflects the effect of the foregoing factors on our consolidated operating income and Adjusted
OIBDA:
Operating Income
Operating Income as a
Percentage of
Consolidated Revenue
Adjusted OIBDA
Adjusted OIBDA
Margin
Operating Income
Operating Income as a
Percentage of
Consolidated Revenue
Adjusted OIBDA
Adjusted OIBDA
Margin
Year Ended December 31,
2014
$ 549,277
2015
$ 524,527
Dollar
Change
$ (24,750)
Percentage
Change
(4.5)%
17.6%
17.4%
925,797
920,005
(5,792)
(0.6)%
29.7%
30.6%
Year Ended December 31,
2013
$ 489,247
2014
$ 549,277
Dollar
Change
Percentage
Change
$
60,030
12.3%
16.2%
17.6%
894,581
925,797
31,216
3.5%
29.6%
29.7%
56
OTHER EXPENSES, NET
Interest Expense, Net
Consolidated interest expense, net increased $3.2 million to $263.9 million (8.8% of consolidated revenues) for the year
ended December 31, 2015 from $260.7 million (8.4% of consolidated revenues) for the year ended December 31, 2014
primarily due to (1) the issuance in September 2014 of 400.0 million British pounds sterling in aggregate principal amount of
the 61/8% Senior Notes due 2022 (the "GBP Notes") by Iron Mountain Europe PLC ("IME"), (2) the issuance in September
2015 of $1,000.0 million in aggregate principal amount of 6% Senior Notes due 2020 (the "6% Notes due 2020") by IMI and
(3) higher borrowings (on a weighted average basis) under the Credit Agreement, the Former Credit Agreement and the
Accounts Receivable Securitization Program (each as discussed and defined below) during 2015 compared to 2014. This
increase was partially offset by (1) the redemption in December 2014 of $306.0 million aggregate principal outstanding of our
83/8% Senior Subordinated Notes due 2021 (the "83/8% Notes") and (2) the redemption in October 2015 of (i) 255.0 million
Euro in aggregate principal outstanding of the 6 3/4% Euro Senior Subordinated Notes due 2018 (the "6 3/4% Notes"), (ii)
$400.0 million aggregate principal outstanding of the 7 3/4% Senior Subordinated Notes due 2019 (the "7 3/4% Notes) and (iii)
the remaining $106.0 million aggregate principal outstanding of the 8 3/8% Notes. Our weighted average interest rate was 5.3%
at December 31, 2015 and 5.6% at December 31, 2014.
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 (1) the issuance in August 2013 of (i) $600.0 million in aggregate principal of 6% Senior Notes due 2023 (the
"6% Notes due 2023") by IMI and (ii) the issuance of 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") and (2) the issuance of the GBP
Notes. This increase was partially offset by (1) the redemption 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 due 2018"), (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% Notes and (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").
Other Expense (Income), Net (in thousands)
Foreign currency transaction losses, net
Debt extinguishment expense, net
Other, net
Foreign currency transaction losses, net
Debt extinguishment expense, net
Other, net
Year Ended
December 31,
2014
$ 58,316
2015
$ 70,851
16,495
(9,624)
$ 65,187
27,305
434
Dollar
Change
$ 12,535
10,810
10,058
$ 98,590
$ 33,403
Year Ended
December 31,
2013
$ 36,201
2014
$ 58,316
43,724
(4,723)
$ 75,202
16,495
(9,624)
$ 65,187
Dollar
Change
$ 22,115
(27,229)
(4,901)
$ (10,015)
We recorded net foreign currency transaction losses of $70.9 million in the year ended December 31, 2015, based on
period-end exchange rates. These losses resulted primarily from changes in the exchange rate of each of the Argentine peso,
Brazilian real, Euro, Russian ruble and Ukrainian hryvnia against the United States dollar compared to December 31, 2014, 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 changes in the exchange rate of the British
pound sterling as it relates to our intercompany balances with and between our European subsidiaries and Euro denominated
bonds issued by IMI.
57
We recorded net foreign currency transaction losses of $58.3 million in the year ended December 31, 2014, based on
period-end exchange rates. These 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.
We recorded net foreign currency transaction losses of $36.2 million in the year ended December 31, 2013, based on
period-end exchange rates. These 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.
During the year ended December 31, 2015, we recorded a debt extinguishment charge of $27.3 million related to (i) the
refinancing of the Credit Agreement in the third quarter of 2015 and (ii) the early extinguishment of the 63/4% Notes, 73/4%
Notes and the remaining portion outstanding of the 83/8% Notes in the fourth quarter of 2015. This charge consists of call
premiums, original issue discounts and unamortized deferred financing costs. During the year ended December 31, 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 unamortized
deferred financing costs. During the year ended December 31, 2013, we recorded a debt extinguishment charge of $43.7
million related to (i) the amendment of our Former Credit Agreement (as defined below) in the third quarter of 2013,
representing a write-off of deferred financing costs, and (ii) the early extinguishment of the 71/2% Notes, the 8% Notes due
2018, the 8% Notes due 2020 and a portion of the 83/8% Notes. This charge consists of call premiums, original issue discounts
and unamortized deferred financing costs.
Other, net in the year ended December 31, 2015 consisted primarily of $0.6 million related to the write-down of certain
investments. 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.
Provision for Income Taxes
Our effective tax rates for the years ended December 31, 2013, 2014 and 2015 were 38.9%, (43.5)% and 23.3%,
respectively. 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.
58
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 other primary 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 associated with incremental federal and state income taxes and foreign withholding taxes on
earnings of our foreign subsidiaries no longer considered permanently invested 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.
The primary reconciling items between the federal statutory rate of 35% and our overall effective tax rate for the year
ended December 31, 2015 were the benefit derived from the dividends paid deduction of $51.6 million and an out-of-period tax
adjustment (approximately $9.0 million tax benefit) recorded during the third quarter to correct the valuation of certain deferred
tax assets associated with the REIT conversion that occurred in 2014, partially offset by valuation allowances on certain of our
foreign net operating losses of $33.5 million, primarily related to our foreign subsidiaries in Argentina, Brazil, France and
Russia.
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.
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, as well as between the jurisdictions in which we operate; (2) tax law
changes; (3) volatility in foreign exchange gains and losses; (4) the timing of the establishment and reversal of tax reserves; and
(5) our ability to utilize 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, 2015 was $0.9 million, net of tax of $0.2 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, 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.
59
INCOME FROM CONTINUING OPERATIONS (in thousands)
The following table reflects the effect of the foregoing factors on our consolidated income from continuing operations:
Year Ended December 31,
2014
2015
Dollar
Change
Percentage
Change
Income from
Continuing Operations $ 328,955
$ 125,203
$(203,752)
(61.9)%
Income from
Continuing Operations
as a Percentage of
Consolidated Revenue
10.6%
4.2%
Year Ended December 31,
2013
2014
Dollar
Change
Percentage
Change
Income from
Continuing Operations $ 99,161
$ 328,955
$ 229,794
231.7%
Income from
Continuing Operations
as a Percentage of
Consolidated Revenue
3.3%
10.6%
INCOME (LOSS) FROM DISCONTINUED OPERATIONS
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.
NONCONTROLLING INTERESTS
Net income attributable to noncontrolling interests resulted in a decrease in net income attributable to Iron Mountain
Incorporated of $2.0 million, $2.6 million and $3.5 million for the years ended December 31, 2015, 2014 and 2013,
respectively. These amounts represent our noncontrolling partners' share of earnings/losses in our majority-owned international
subsidiaries that are consolidated in our operating results.
60
Segment Analysis (in thousands)
As a result of a realignment in our senior management reporting structure during the first quarter of 2015, we modified
our internal financial reporting to better align internal reporting with how we manage our business. These modifications
resulted in the separation of our former International Business segment into two unique reportable operating segments, which
we refer to as (1) Western European Business segment and (2) Other International Business segment. Also, during the first
quarter of 2015, we reassessed the nature of certain costs which were previously being allocated to the North American
Records and Information Management Business and North American Data Management Business segments. As a result of this
reassessment, we determined that certain product management functions, which were previously being performed to solely
benefit our North American operating segments, are now being performed in a manner that benefits the enterprise as a whole.
Accordingly, the costs associated with these product management functions are now included within the Corporate and Other
Business segment. Additionally, during the fourth quarter of 2015, as a result of changes in the senior management of our
business in Norway, we determined that our Norway operations are now being managed as a component of our Other
International Business segment rather than as a component of our Western European Business segment.
As a result of these changes noted above, previously reported segment information has been restated to conform to the current
presentation.
Our five reportable operating segments are described as follows:
• North American Records and Information Management Business—storage and information management services,
including Records Management, Destruction and DMS throughout the United States and Canada; as well as
Fulfillment Services and Intellectual Property Management in the United States.
• North American Data Management Business—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,
throughout the United States and Canada.
• Western European Business—storage and information management services, including Records Management, Data
Protection & Recovery and DMS throughout the United Kingdom, Ireland, Austria, Belgium, France, Germany,
Netherlands, Spain and Switzerland. Until December 2014, our Western European Business segment offered
Destruction in the United Kingdom and Ireland.
• Other International Business—storage and information management services throughout the remaining European
countries in which we operate, Latin America and Asia Pacific, including Records Management, Data Protection &
Recovery and DMS. Our European operations included within the Other International Business segment provide
Records Management, Data Protection & Recovery and DMS. Our Latin America operations provide Records
Management, Data Protection & Recovery, Destruction 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
offered Destruction in Australia.
and China. Until December 2014, our Other International Business segment
• Corporate and Other Business—primarily consists of our data center and fine art storage businesses in the United
States, the primary product offerings of our Adjacent Businesses operating segment (which was formerly referred to as
our Emerging Businesses operating 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 Business 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.
61
North American Records and Information Management Business
Storage Rental
Service
Segment Revenue
Year Ended December 31,
2014
$ 1,080,013
2015
$ 1,077,305
715,348
698,060
$ 1,795,361
$ 1,775,365
Segment Adjusted OIBDA(1)
$
698,719
$
714,639
Segment Adjusted OIBDA(1) as a
Percentage of Segment Revenue
38.9%
40.3%
Storage Rental
Service
Segment Revenue
Year Ended December 31,
2013
$ 1,057,126
712,107
2014
$ 1,080,013
715,348
$ 1,769,233
$ 1,795,361
Segment Adjusted OIBDA(1)
$
652,575
$
698,719
Segment Adjusted OIBDA(1) as a
Percentage of Segment Revenue
36.9%
38.9%
Percentage
Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
(2,708)
(17,288)
(19,996)
15,920
(0.3)%
(2.4)%
(1.1)%
1.1 %
(0.6)%
0.4 %
0.1 %
(1.6)%
(0.6)%
Percentage
Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
22,887
3,241
26,128
46,144
2.2%
0.5%
1.5%
2.9%
1.4%
2.3%
0.3 %
(0.5)%
— %
$
$
$
$
$
$
_______________________________________________________________________________
(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 on sale of real estate.
For the year ended December 31, 2015, reported revenue in our North American Records and Information Management
Business segment decreased 1.1% compared to the year ended December 31, 2014, primarily due to negative internal growth
and foreign currency exchange rate fluctuations. For the year ended December 31, 2015, foreign currency exchange rate
fluctuations decreased our reported revenues for the North American Records and Information Management Business segment
by 1.5% compared to the same prior year period due to the weakening of the Canadian dollar against the United States dollar.
Negative internal growth of 0.6% in the year ended December 31, 2015 was primarily the result of negative service revenue
internal growth of 1.6% in the year ended December 31, 2015, resulting from reduced retrieval/re-file activity and a related
decrease in transportation revenues. Net acquisitions/divestitures increased reported revenue in our North American Records
and Information Management Business segment by 1.0% in the year ended December 31, 2015, compared to the year ended
December 31, 2014. Adjusted OIBDA as a percentage of segment revenue increased 140 basis points during the year ended
December 31, 2015 compared to the year ended December 31, 2014, primarily driven by a $11.7 million decrease in
professional fees, a $7.5 million decrease in fuel and insurance costs, a $5.7 million decrease in incentive compensation and a
$1.6 million decrease in costs due to the Organizational Restructuring, as well as a decrease in sales, marketing and account
management costs. These decreases were partially offset by $5.4 million of employee severance costs recorded during the year
ended December 31, 2015 associated with the Transformation Initiative.
For 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.
62
North American Data Management Business
Storage Rental
Service
Segment Revenue
Segment Adjusted OIBDA(1)
Segment Adjusted OIBDA(1) as a
Percentage of Segment Revenue
Storage Rental
Service
Segment Revenue
Segment Adjusted OIBDA(1)
Segment Adjusted OIBDA(1) as a
Percentage of Segment Revenue
Percentage
Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
8,584
(8,305)
279
(22,593)
3.5 %
(5.8)%
0.1 %
4.4 %
(4.9)%
1.0 %
4.2 %
(5.1)%
0.8 %
Percentage
Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
5,245
(11,557)
(6,312)
(10,984)
2.2 %
(7.5)%
(1.6)%
2.6 %
(7.0)%
(1.1)%
2.3 %
(7.5)%
(1.5)%
Year Ended December 31,
2014
$ 247,017
2015
$ 255,601
143,190
134,885
$ 390,207
$ 390,486
$ 226,396
$ 203,803
58.0%
52.2%
Year Ended December 31,
2013
$ 241,772
2014
$ 247,017
154,747
143,190
$ 396,519
$ 390,207
$ 237,380
$ 226,396
59.9%
58.0%
$
$
$
$
$
$
_______________________________________________________________________________
(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 on sale of real estate.
For the year ended December 31, 2015, reported revenue in our North American Data Management Business segment
increased 0.1% compared to the year ended December 31, 2014, primarily due to internal growth of 0.8%. The internal growth
was primarily attributable to storage rental revenue internal growth of 4.2%, partially offset by negative service revenue
internal growth of 5.1% in the year ended December 31, 2015, which was due to declines in service revenue activity levels as
the storage business becomes more archival in nature. For the year ended December 31, 2015, foreign currency exchange rate
fluctuations decreased our reported revenues for the North American Data Management Business segment by 0.9% compared
to the prior year due to the weakening of the Canadian dollar against the United States dollar. Adjusted OIBDA as a percentage
of segment revenue decreased 580 basis points in the year ended December 31, 2015 compared to the year ended December 31,
2014, primarily due to increased overhead expenses of $15.9 million, primarily associated with higher sales, marketing and
account management expenses and, to a lesser extent, reduced gross profit related to a decline in service revenues without a
corresponding decrease in costs.
For 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 190 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.
63
Western European Business
Storage Rental
Service
Segment Revenue
Segment Adjusted OIBDA(1)
Segment Adjusted OIBDA(1) as a
Percentage of Segment Revenue
Storage Rental
Service
Segment Revenue
Segment Adjusted OIBDA(1)
Segment Adjusted OIBDA(1) as a
Percentage of Segment Revenue
$
$
$
$
$
$
Year Ended December 31,
2014
257,390
191,841
449,231
130,423
2015
239,257
158,256
397,513
120,649
$
$
$
29.0%
30.4%
Year Ended December 31,
2013
242,563
192,783
435,346
118,823
2014
257,390
191,841
449,231
130,423
$
$
$
27.3%
29.0%
$
$
$
$
$
$
Percentage Change
Actual
(7.0)%
(17.5)%
(11.5)%
Constant
Currency
Internal
Growth
3.9 %
(7.8)%
(1.1)%
2.7 %
(0.6)%
1.4 %
Dollar
Change
(18,133)
(33,585)
(51,718)
(9,774)
Percentage Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
14,827
(942)
13,885
11,600
6.1 %
(0.5)%
3.2 %
2.7 %
(3.8)%
(0.2)%
1.9 %
(4.0)%
(0.6)%
_______________________________________________________________________________
(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 on sale of real estate.
For the year ended December 31, 2015, reported revenue in our Western European Business segment decreased 11.5%
compared to the year ended December 31, 2014, primarily as a result of fluctuations in foreign currency exchange rates.
Foreign currency fluctuations resulted in decreased revenue in the year ended December 31, 2015, as measured in United States
dollars, of approximately 10.4% as compared to the same prior year period, due to the weakening of the British pound sterling
and the Euro against the United States dollar. Revenue internal growth for the year ended December 31, 2015 was 1.4%,
supported by 2.7% storage rental revenue internal growth for the year ended December 31, 2015. Net acquisitions/divestitures
decreased reported revenue in our Western European Business segment by 2.5% in the year ended December 31, 2015,
compared to the year ended December 31, 2014, primarily due to a $15.3 million reduction in reported service revenues
associated with the disposition of our shredding operations in the United Kingdom and Ireland in December 2014. Adjusted
OIBDA as a percentage of segment revenue increased 140 basis points during the year ended December 31, 2015 compared to
the year ended December 31, 2014, primarily due to improved profitability associated with lower transportation and facility
costs.
For the year ended December 31, 2014, reported revenues in our Western European Business segment increased 3.2%
compared to the year ended December 31, 2013. Internal growth for the year ended December 31, 2014 was negative 0.6%,
driven by negative 4.0% service revenue internal growth, partially offset by storage rental revenue internal growth of 1.9%.
Foreign currency fluctuations in 2014 resulted in increased revenue for the year ended December 31, 2014, as measured in
United States dollars, of approximately 3.4% as compared to the year ended December 31, 2013, due to the strengthening of
the British pound sterling and the Euro against the United States dollar. Net acquisitions/divestitures increased total reported
revenue growth in the year ended December 31, 2014 by 0.4%. Adjusted OIBDA as a percentage of segment revenue increased
by 170 basis points in the year ended December 31, 2014 compared to the year ended December 31, 2013, primarily due to
improved profitability as a result of real estate optimization in the United Kingdom during 2013 and early 2014.
64
Other International Business
Storage Rental
Service
Segment Revenue
Segment Adjusted OIBDA(1)
Segment Adjusted OIBDA(1) as a
Percentage of Segment Revenue
Storage Rental
Service
Segment Revenue
Segment Adjusted OIBDA(1)
Segment Adjusted OIBDA(1) as a
Percentage of Segment Revenue
$
$
$
$
$
$
Year Ended December 31,
2014
263,737
205,577
469,314
84,468
2015
245,154
176,206
421,360
87,341
$
$
$
18.0%
20.7%
Year Ended December 31,
2013
231,160
179,093
410,253
87,180
2014
263,737
205,577
469,314
84,468
$
$
$
21.3%
18.0%
$
$
$
$
$
$
Percentage Change
Actual
(7.0)%
(14.3)%
(10.2)%
Constant
Currency
Internal
Growth
14.4%
7.6%
11.5%
10.8%
9.0%
10.0%
Dollar
Change
(18,583)
(29,371)
(47,954)
2,873
Percentage Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
32,577
26,484
59,061
(2,712)
14.1%
14.8%
14.4%
24.6%
25.7%
25.0%
11.6%
9.4%
10.7%
_______________________________________________________________________________
(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 on sale of real estate.
For the year ended December 31, 2015, reported revenues in our Other International Business segment decreased 10.2%
compared to the year ended December 31, 2014, primarily as a result of fluctuations in foreign currency exchange rates.
Foreign currency fluctuations in the year ended December 31, 2015 resulted in decreased revenue, as measured in United States
dollars, of approximately 21.7% as compared to the same prior year period, primarily due to the weakening of the Australian
dollar, Brazilian real and Euro against the United States dollar. Revenue internal growth for the year ended December 31, 2015
was 10.0% supported by 10.8% storage rental revenue internal growth for the year ended December 31, 2015. Net acquisitions/
divestitures increased reported revenue in our Other International Business segment by 1.5% in the year ended December 31,
2015 compared to the year ended December 31, 2014, as the impact of our recent acquisitions in Brazil, Turkey and Poland
were partially offset by a $8.4 million decrease in reported service revenues for the year ended December 31, 2015 associated
with the disposition of our Australian shredding operations in December 2014. Adjusted OIBDA as a percentage of segment
revenue increased 270 basis points during the year ended December 31, 2015 compared to the year ended December 31, 2014.
The increase in Adjusted OIBDA as a percentage of segment revenue during the year ended December 31, 2015 was primarily
a result of a constant dollar increase in gross profit of 11.0% in the year ended December 31, 2015 compared to the same prior
year period. The constant dollar increase in gross profit for the year ended December 31, 2015 was partially offset by the
impact of changes in foreign currency exchange rates.
For the year ended December 31, 2014, reported revenues in our Other International Business segment increased 14.4%
compared to the year ended December 31, 2013. Internal growth for the year ended December 31, 2014 was 10.7%, supported
by 11.6% storage rental internal growth and 9.4% total service revenue internal growth. Net acquisitions/divestitures
contributed 14.3% 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 10.6% 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. Adjusted OIBDA as a percentage of segment revenue decreased by
330 basis points 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 in February 2014, as well as integration costs
associated with recent international acquisitions.
65
Corporate and Other Business
Storage Rental
Service
Segment Revenue
Year Ended December 31,
2014
12,086
1,494
13,580
$
$
2015
20,580
2,672
23,252
$
$
Segment Adjusted OIBDA(1)
$ (214,209)
$ (206,427)
Segment Adjusted OIBDA(1) as a
Percentage of Consolidated
Revenue
(6.9)%
(6.9)%
Storage Rental
Service
Segment Revenue
Year Ended December 31,
2013
12,100
1,172
13,272
$
$
2014
12,086
1,494
13,580
$
$
Segment Adjusted OIBDA(1)
$ (201,377)
$ (214,209)
Segment Adjusted OIBDA(1) as a
Percentage of Consolidated
Revenue
(6.7)%
(6.9)%
$
$
$
$
$
$
Percentage
Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
8,494
1,178
9,672
7,782
70.3%
78.8%
71.2%
70.3%
78.8%
71.2%
49.9%
33.4%
48.5%
Percentage
Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
(14)
322
308
(12,832)
(0.1)%
27.5 %
2.3 %
(0.1)%
27.5 %
2.3 %
(0.1)%
27.5 %
2.3 %
_______________________________________________________________________________
(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 on sale of real estate.
For the year ended December 31, 2015, Adjusted OIBDA in the Corporate and Other Business segment as a percentage of
consolidated revenue was flat compared to the year ended December 31, 2014. Adjusted OIBDA for the Corporate and Other
Business segment increased by $7.8 million in the year ended December 31, 2015 compared to the prior year primarily due to
decreased insurance costs of $3.5 million associated with a fire at one of our facilities in Buenos Aires, Argentina in February
2014, as well as a decrease in general and administrative expenses, primarily related to professional fees.
For the year ended December 31, 2014, Adjusted OIBDA in the Corporate and Other Business segment as a percentage of
consolidated revenue decreased by 20 basis points compared to the year ended December 31, 2013, primarily due to increased
insurance costs of $3.5 million associated with the fire at one of our facilities in Buenos Aires, Argentina noted above, higher
professional fees of $2.6 million, restructuring costs of $1.5 million and REIT compliance costs.
66
Liquidity and Capital Resources
The following is a summary of our cash balances and cash flows (in thousands) as of and for the years ended
December 31,
Cash flows from operating activities—continuing operations
$
Cash flows from investing activities—continuing operations
Cash flows from financing activities—continuing operations
Cash and cash equivalents at the end of year
$
2013
506,593
(632,750)
18,564
120,526
$
2014
472,948
(479,978)
19,857
125,933
2015
541,760
(422,786)
(108,511)
128,381
Net cash provided by operating activities from continuing operations was $541.8 million for the year ended
December 31, 2015 compared to $472.9 million for the year ended December 31, 2014. The 14.5% year-over-year increase
resulted primarily from an increase in net income (including non-cash charges and realized foreign exchange losses) of
$79.2 million, partially offset by an increase in cash used in working capital of $10.4 million primarily related to the payments
and timing of certain accrued expenses and deferred revenue liabilities.
Our business requires capital expenditures to maintain our ongoing operations, support our expected revenue growth and
new products and services, and increase our profitability. These expenditures are included in the cash flows from investing
activities. The nature of our capital expenditures has evolved over time along with the nature of our business. 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
discretionary in nature. Cash paid for our capital expenditures, cash paid for acquisitions (net of cash acquired), acquisition of
customer relationships and Customer Inducements during the year ended December 31, 2015 amounted to $290.2 million,
$113.6 million, $32.6 million and $22.5 million, respectively. For the year ended December 31, 2015, these expenditures were
primarily funded with cash flows from operations. Excluding capital expenditures associated with potential future acquisitions
and opportunistic real estate investments, we expect our capital expenditures to be approximately $300.0 million to $330.0
million in the year ending December 31, 2016. We expect to spend up to $100.0 million of additional capital expenditures on
opportunistic real estate investments in the year ending December 31, 2016.
Net cash used in financing activities from continuing operations was $108.5 million for the year ended December 31,
2015. During the year ended December 31, 2015, we received net proceeds of $985.0 million associated with the issuance of
the 6% Notes due 2020 in September 2015, $128.8 million associated with our revolving credit and term loan facilities
(including the Accounts Receivable Securitization Program) and $7.1 million from the exercise of stock options and our
employee stock purchase plan. We used the proceeds from these transactions, as well as cash flows provided by operating
activities, for the redemption of the 63/4% Notes, the 73/4% Notes and the 83/8% Notes for approximately $814.7 million
(inclusive of call premiums) and payment of dividends in the amount of $406.5 million on our common stock.
67
Capital Expenditures
The following table presents our capital spend for 2013, 2014 and 2015 organized by the type of the spending as
described in the "Our Business Fundamentals" section of "Item 1. Business" included in this Annual Report:
Nature of Capital Spend (in thousands)
Real Estate:
Investment
Maintenance
Total Real Estate Capital Spend
Non-Real Estate:
Investment
Maintenance
Total Non-Real Estate Capital Spend
Total Capital Spend (on accrual basis)
Net increase/(decrease) in prepaid capital expenditures
Net (increase)/decrease accrued capital expenditures
Total Capital Spend (on cash basis)
Dividends
$
$
Year Ended December 31,
2013
2014
2015
$
$
199,663
57,574
257,237
170,742
52,826
223,568
135,708
61,863
197,571
91,792
22,644
114,436
55,991
19,527
75,518
312,007
3,327
(28,039)
287,295
$
332,755
(2,455)
31,624
361,924
$
47,964
23,396
71,360
294,928
(362)
(4,317)
290,249
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.
68
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) and accounts receivable. The only significant concentrations of liquid investments as of
December 31, 2015 related to cash and cash equivalents held in time deposits with four global banks, 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, 2015, our cash and cash equivalents balance was
$128.4 million, which included time deposits amounting to $18.6 million.
Our consolidated debt as of December 31, 2015 comprised the following (in thousands):
December 31, 2015
Debt
(inclusive of
discount and
premium)
Unamortized
Deferred
Financing
Costs
Carrying
Amount
Revolving Credit Facility(1)
Term Loan(1)
6% Notes due 2020(2)(3)
CAD Notes(4)
GBP Notes(3)(5)
6% Notes due 2023(2)
53/4% Senior Subordinated Notes due 2024 (2)
Real Estate Mortgages, Capital Leases and Other(6)
Accounts Receivable Securitization Program(7)
Total Long-term Debt
Less Current Portion
Long-term Debt, Net of Current Portion
$
784,438
$
243,750
1,000,000
144,190
592,140
600,000
1,000,000
333,559
205,900
4,903,977
(88,068)
$ 4,815,909
$
_______________________________________________________________________________
775,028
243,750
983,876
142,266
583,383
591,580
988,098
332,489
205,208
(9,410) $
—
(16,124)
(1,924)
(8,757)
(8,420)
(11,902)
(1,070)
(692)
(58,299)
—
4,845,678
(88,068)
(58,299) $ 4,757,610
(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 obligations (including promissory notes) owed to or held by it, to secure the Canadian dollar
subfacility under the Revolving Credit Facility (as defined below).
(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 its direct and indirect 100% owned United
States subsidiaries that represent the substantial majority of our United States operations (the "Guarantors"). These
guarantees are joint and several obligations of the Guarantors. Canada Company, IME, the Special Purpose
Subsidiaries (as defined below) and the remainder of our subsidiaries do not guarantee the Parent Notes. See Note 5 to
Notes to Consolidated Financial Statements included in this Annual Report.
(3) The 6% Notes due 2020 and the GBP Notes have not been registered under the Securities Act of 1933, as amended
(the “Securities Act”), or under the securities laws of any other jurisdiction. Unless they are registered, the 6% Notes
due 2020 and the GBP Notes may be offered only in transactions that are exempt from registration under the Securities
Act or the securities laws of any other jurisdiction.
(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 included in this Annual Report.
69
(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 included in this Annual Report.
(6) Includes (a) real estate mortgages of $2.7 million, (b) capital lease obligations of $235.4 million, and (c) other various
notes and other obligations, which were assumed by us as a result of certain acquisitions, of $95.5 million.
(7) The Special Purpose Subsidiaries are the obligors under this program.
On July 2, 2015, we entered into a new credit agreement (the "Credit Agreement") to refinance our then existing
credit agreement (the "Former Credit Agreement") which consisted of a revolving credit facility (the "Former Revolving Credit
Facility") and a term loan (the "Former Term Loan") and was scheduled to terminate on June 27, 2016. The Credit Agreement
consists of a revolving credit facility (the "Revolving Credit Facility") and a term loan (the "Term Loan").
The Revolving Credit Facility is supported by a group of 25 banks and enables 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 and Australian dollars, among other currencies) in an aggregate outstanding
amount not to exceed $1,500.0 million. The Term Loan is to be paid in quarterly installments in an amount equal to $3.1
million per quarter, with the remaining balance due on July 3, 2019. The Credit Agreement includes 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, subject to the conditions as defined in the Credit Agreement. The Credit Agreement terminates on
July 6, 2019, at which point all obligations become due, but may be extended by one year at our option, subject to the
conditions set forth in the Credit Agreement. Borrowings under the Credit Agreement may be prepaid without penalty or
premium, in whole or in part, at any time.
IMI and the Guarantors guarantee all obligations under the Credit Agreement. 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 0.25% to 0.4% based on our consolidated
leverage ratio and fees associated with outstanding letters of credit. As of December 31, 2015, we had $784.4 million and
$243.8 million of outstanding borrowings under the Revolving Credit Facility and the Term Loan, respectively. Of the $784.4
million of outstanding borrowings under the Revolving Credit Facility, $480.4 million was denominated in United States
dollars, 190.0 million was denominated in Canadian dollars, 105.3 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 $36.6 million. The
remaining amount available for borrowing under the Revolving Credit Facility as of December 31, 2015, 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 $678.9 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, 2015. The average interest rate in effect under the Revolving Credit Facility was 2.8% and
ranged from 2.3% to 4.8% as of December 31, 2015 and the interest rate in effect under the Term Loan as of December 31,
2015 was 2.5%.
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.
70
Our leverage and fixed charge coverage ratios under both the Former Credit Agreement and the Credit Agreement as of
December 31, 2014 and 2015, respectively, and our leverage ratio under our indentures as of December 31, 2014 and 2015 are
as follows:
Net total lease adjusted leverage ratio
Net secured debt lease adjusted leverage ratio
Bond leverage ratio (not lease adjusted)
Fixed charge coverage ratio
December 31, 2014
5.4
2.6
5.7
2.5
December 31, 2015 Maximum//Minimum Allowable(1)
5.6 Maximum allowable of 6.5
2.6 Maximum allowable of 4.0
5.5 Maximum allowable of 6.5
2.4 Minimum allowable of 1.5
______________________________________________________________________________
(1) The maximum and minimum allowable ratios under the Credit Agreement are substantially similar to the Former
Credit Agreement.
As noted in the table above, our maximum allowable net total lease adjusted leverage ratio under the Credit Agreement
is 6.5. The Credit Agreement also contains a provision which limits, in certain circumstances, our dividends in any four
consecutive fiscal quarters to 95% of Funds From Operations (as defined in the Credit Agreement) for such four fiscal quarters
or, if greater, the amount that we would be required to pay in order to continue to be qualified for taxation as a REIT or to avoid
the imposition of income or excise taxes on IMI. This limitation only is applicable when our net total lease adjusted leverage
ratio exceeds 6.0.
Noncompliance with these leverage and fixed charge coverage ratios would have a material adverse effect on our
financial condition and liquidity.
In September 2015, IMI completed a private offering of $1,000.0 million in aggregate principal amount of the 6% Notes
due 2020. The net proceeds to IMI of $985.0 million, after paying the initial purchasers' commissions and expenses, were used
to redeem all of the 63/4% Notes, 73/4% Notes and 83/8% Notes in October 2015. The remaining net proceeds were used for
general corporate purposes, including acquisitions. We recorded a charge to other expense (income), net of $25.1 million in the
fourth quarter of 2015 related to the early extinguishment of this debt. This charge consists of call premiums, original issue
discounts and unamortized deferred financing costs.
In March 2015, we entered into a $250.0 million accounts receivable securitization program (the "Accounts Receivable
Securitization Program") involving several of our wholly owned subsidiaries and certain financial institutions. Under the
Accounts Receivable Securitization Program, certain of our subsidiaries sell substantially all of their United States accounts
receivable balances to our wholly owned special purpose entities, Iron Mountain Receivables QRS, LLC and Iron Mountain
Receivables TRS, LLC (the "Special Purpose Subsidiaries"). The Special Purpose Subsidiaries use the accounts receivable
balances to collateralize loans obtained from certain financial institutions. The Special Purpose Subsidiaries are consolidated
subsidiaries of IMI. The Accounts Receivable Securitization Program is accounted for as a collateralized financing activity,
rather than a sale of assets, and therefore: (i) accounts receivable balances pledged as collateral are presented as assets and
borrowings are presented as liabilities on our Consolidated Balance Sheet, (ii) our Consolidated Statement of Operations
reflects the associated charges for bad debt expense related to pledged accounts receivable (a component of selling, general and
administrative expenses) and reductions to revenue due to billing and service related credit memos issued to customers and
related reserves, as well as, interest expense associated with the collateralized borrowings and (iii) receipts from customers
related to the underlying accounts receivable are reflected as operating cash flows and borrowings and repayments under the
collateralized loans are reflected as financing cash flows within our Consolidated Statement of Cash Flows. Iron Mountain
Information Management, LLC ("IMIM") retains the responsibility of servicing the accounts receivable balances pledged as
collateral in this transaction and IMI provides a performance guaranty. The Accounts Receivable Securitization Program
terminates on March 6, 2018, at which point all obligations become due. The maximum availability allowed is limited by
eligible accounts receivable, as defined under the terms of the Accounts Receivable Securitization Program. As of
December 31, 2015, the maximum availability allowed and amount outstanding under the Accounts Receivable Securitization
Program was $205.9 million. The interest rate in effect under the Accounts Receivable Securitization Program was 1.3% as of
December 31, 2015. Commitment fees at a rate of 40 basis points are charged on amounts made available but not borrowed
under the Accounts Receivable Securitization Program.
71
Commitment fees and letters of credit fees, which are based on the unused balances under the Former Revolving Credit
Facility, the Revolving Credit Facility and the Accounts Receivable Securitization Program for the years ended December 31,
2013, 2014 and 2015, are as follows (in thousands):
Commitment fees and letters of credit fees
$
3,167
$
3,322
$
3,743
Year Ended December 31,
2013
2014
2015
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 December 2015, in order to expand our offerings in our Adjacent Businesses operating segment, we acquired Crozier,
a storage, logistics and transportation business for high value paintings, photographs and other types of art belonging to
individual collectors, galleries and art museums for approximately $74.2 million.
In December 2015, in order to enhance our existing operations in India, we acquired the stock of Navbharat Archive
XPress Private Limited ("NAX"), a storage and records management company with operations in India, for approximately
$16.1 million. Of the total consideration, approximately $8.9 million was funded by us, while the remaining $7.2 million was
contributed by the noncontrolling interest shareholder of our business in India. The amount contributed by our noncontrolling
interest shareholder is presented as a source of cash within debt (repayment to) financing from and equity (distribution to)
contribution from noncontrolling interests, net in our Consolidated Statement of Cash Flows.
In addition to the acquisitions of Crozier and NAX noted above, during 2015, in order to enhance our existing operations
in Australia, Austria, Canada, Chile, Hungary, India, Serbia, the United Kingdom and the United States, we completed 12
acquisitions for total consideration of approximately $27.6 million. These acquisitions included nine storage and records
management companies, two storage and data management companies and one personal storage company. The individual
purchase prices of these acquisitions ranged from approximately $1.0 million to $5.4 million.
Proposed Recall Acquisition
On June 8, 2015, we entered into the Recall Agreement with Recall to acquire Recall by way of the Scheme. Under the
terms of the Recall Agreement, Recall shareholders are entitled to receive the Cash Supplement as well as either (1) 0.1722
shares of our common stock for each Recall share or (2) the Cash Election. The Cash Election is subject to the Cash Election
Cap. Amounts paid to Recall shareholders that represent the Cash Supplement are excluded from the calculation of the Cash
Election Cap. Assuming a sufficient number of Recall shareholders elect the Cash Election such that we pay the Cash Election
Cap, we expect to issue approximately 50.7 million shares of our common stock and, based on the exchange rate between the
United States dollar and the Australian dollar as of February 19, 2016, pay approximately US$323.0 million to Recall
shareholders in connection with the Recall Transaction which, based on the closing price of our common stock as of
February 19, 2016, would result in a total purchase price to Recall shareholders of approximately $1,791.0 million.
Completion of the Scheme is subject to customary closing conditions, including among others, (i) approval by Recall
shareholders of the Scheme by the requisite majority under the Australian Corporations Act, (ii) expiration or earlier
termination of any applicable waiting period and receipt of regulatory consents, approvals and clearances, in each case, under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and under relevant antitrust/competition and foreign
investment legislation in other relevant jurisdictions, (iii) the absence of any final, non-appealable order, decree or law
preventing, making illegal or prohibiting the completion of the Recall Transaction, (iv) approval from the NYSE to the listing
of additional shares of our common stock to be issued in the Recall Transaction, (v) the establishment of a secondary listing on
the ASX to allow Recall shareholders to trade our common stock via CHESS Depository Interests on the ASX, (vi) Recall’s
delivery of tax opinions in accordance and in compliance with certain tax matter agreements to which Recall is a party and (vii)
no events having occurred that would have a material adverse effect on Recall or us. We continue to work toward closing of the
Recall Transaction and related integration planning.
72
There are significant costs associated with the Recall Transaction. We currently estimate total operating and capital
expenditures associated with the Recall Transaction to be approximately $380.0 million, the majority of which is expected to be
incurred by the end of 2018. This amount consists of approximately $80.0 million of Recall Deal Close Costs and
approximately $300.0 million of Recall Integration Costs. Of these amounts, approximately $47.1 million was incurred through
December 31, 2015 ($24.7 million of Recall Deal Close Costs and $22.4 million of Recall Integration Costs), including
approximately $47.0 million of operating expenditures and approximately $0.1 million of capital expenditures.
Additionally, upon closing of the Recall Transaction we will incur costs associated with (i) the cash components of the
purchase price noted above and (ii) the payoff of outstanding borrowings under Recall’s existing revolving credit facility.
We expect the total cost to close the Recall Transaction (including Recall Deal Close Costs, the cash components of the
purchase price and the payoff of Recall’s revolving credit facility, but excluding Recall Integration Costs) to be approximately
$1,100.0 million. We intend to fund these costs through a combination of cash on hand, borrowings under our Revolving Credit
Facility and, as necessary, public or private debt financing.
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2015 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 Obligations
Payments Due by Period
Less than
1 Year
1–3 Years
3–5 Years
More than
5 Years
$
43,705
$
68,086
$
40,502
$
83,055
44,363
254,626
215,530
54,424
290,854
460,373
397,937
36,339
1,992,898
2,340,514
424,060
350,165
3,762
422,118
1,036,378
15,365
Total
235,348
$
4,668,629
1,561,177
2,000,010
109,890
Total(3)
$ 8,575,054
$
612,648
$ 1,253,589
$ 2,811,387
$ 3,897,430
_______________________________________________________________________________
(1) Amounts include variable rate interest payments, which are calculated utilizing the applicable interest rates as of
December 31, 2015; see Note 4 to Notes to Consolidated Financial Statements included in this Annual Report.
Amounts also include interest on capital leases.
(2) These amounts are net of sublease income of $28.6 million in total (including $4.8 million, $7.7 million, $5.8 million
and $10.3 million, in less than 1 year, 1-3 years, 3-5 years and more than 5 years, respectively).
(3) The table above excludes $47.7 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 and
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 towards lower leverage, though our leverage has increased over the last several fiscal years to fund
the costs of the REIT conversion and the Recall Transaction.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4)(ii).
73
Net Operating Losses
We have federal net operating loss carryforwards, which expire in 2021 through 2033, of $70.8 million at December 31,
2015 to reduce future federal taxable income, on which $3.0 million of federal tax benefit is expected to be realized. We can
carry forward these net operating losses to the extent we do not utilize them in any given taxable year. We have state net
operating loss carryforwards, which expire from 2016 through 2034, on which an insignificant state tax benefit is expected to
be realized. We have assets for foreign net operating losses of $66.2 million, with various expiration dates (and in some cases
no expiration date), subject to a valuation allowance of approximately 91%.
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) and accounts receivable. The only significant concentrations of liquid investments as of
December 31, 2015 related to cash and cash equivalents held in time deposits with four global banks, 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, 2015, our cash and cash equivalents balance was
$128.4 million, including money market funds and time deposits amounting to $18.6 million.
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, 2015, we had $1,238.1 million of variable rate debt outstanding with a weighted average variable
interest rate of approximately 2.3%, and $3,665.9 million of fixed rate debt outstanding. As of December 31, 2015,
approximately 75% 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, 2015 would have been reduced by approximately
$10.5 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, 2015.
Currency Risk
Our 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.
The impact of currency fluctuations on our earnings is mitigated 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.
74
We have adopted and implemented a number of strategies to mitigate the risks associated with fluctuations in currency
valuations. One strategy is to finance certain of our international subsidiaries with debt that is denominated in local currencies,
thereby providing a natural hedge. In determining the amount of any such financing, we take into account local tax
considerations, among other factors. Another strategy we utilize is for IMI or IMIM, 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. We utilized a portion of our previously
outstanding 63/4% Notes and, subsequent to their redemption in October 2015, continue to utilize a portion of Euro
denominated borrowings by IMI under the Revolving Credit Facility, to effectively hedge our outstanding intercompany loans
denominated in Euros. We designated a portion of our 63/4% Notes issued by IMI and continue to designate a portion of our
Euro denominated borrowings by IMI under the Revolving Credit Facility, as a hedge of net investment of certain of our Euro
denominated subsidiaries. As a result, we recorded $3.3 million ($3.3 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, 2015. As of December 31, 2015,
cumulative net gains of $17.1 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, 2015, however, we had no forward contracts outstanding. In the future, we
may enter into new forward contracts to hedge movements in the underlying currencies. At the maturity of any forward
contract, we may enter into a new forward contract to hedge movements in the underlying currencies. At the time of settlement,
we either pay or receive the net settlement amount from any 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, 2015,
there was $22.7 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
$20.3 million in the accompanying statement of operations as of December 31, 2015. As of December 31, 2015, 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 2015 functional
currencies, relative to the United States dollar, would result in a reduction in our equity of approximately $49.8 million.
Item 8. Financial Statements and Supplementary Data.
The information required by this item is included in Item 15(a) of this Annual Report.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
75
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, 2015 (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, 2015.
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.
76
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, 2015, 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, 2015, 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, 2015
of the Company and our report dated February 26, 2016 expressed an unqualified opinion on those financial statements and
financial statement schedule.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 26, 2016
77
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, 2015 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
78
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, 2014 and 2015
Consolidated Statements of Operations, Years Ended December 31, 2013, 2014 and 2015
Consolidated Statements of Comprehensive Income (Loss), Years Ended December 31, 2013, 2014 and 2015
Consolidated Statements of Equity, Years Ended December 31, 2013, 2014 and 2015
Consolidated Statements of Cash Flows, Years Ended December 31, 2013, 2014 and 2015
Notes to Consolidated Financial Statements
Financial Statement Schedule III—Schedule of Real Estate and Accumulated Depreciation
(b) Exhibits filed as part of this report: As listed in the Exhibit Index following the signature page hereof.
Page
80
81
82
83
84
85
86
149
79
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, 2015 and 2014, 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, 2015. 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, 2015 and 2014, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2015, 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, presents 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, 2015, 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 26, 2016 expressed an unqualified opinion on the Company's internal control over
financial reporting.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 26, 2016
80
IRON MOUNTAIN INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
ASSETS
Current Assets:
Cash and cash equivalents
Restricted cash
Accounts receivable (less allowances of $32,141 and $31,447 as of
December 31, 2014 and 2015, respectively)
Deferred income taxes
Prepaid expenses and other
Total Current Assets
Property, Plant and Equipment:
Property, plant and equipment
Less—Accumulated depreciation
Property, Plant and Equipment, net
Other Assets, net:
Goodwill
Customer relationships and customer inducements
Other
Total Other Assets, net
Total Assets
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
outstanding)
Common stock (par value $0.01; authorized 400,000,000 shares; issued and
outstanding 209,818,812 shares and 211,340,296 shares as of December 31, 2014 and
2015, respectively)
Additional paid-in capital
(Distributions in excess of earnings) Earnings in excess of distributions
Accumulated other comprehensive items, net
Total Iron Mountain Incorporated Stockholders' Equity
Noncontrolling Interests
Total Equity
Total Liabilities and Equity
December 31,
2014
2015
$
125,933
33,860
$
604,265
14,192
139,469
917,719
128,381
—
564,401
22,179
142,951
857,912
4,668,705
(2,117,978)
2,550,727
4,744,236
(2,247,078)
2,497,158
$
$
2,423,783
607,837
23,199
3,054,819
6,523,265
52,095
203,014
404,485
197,142
856,736
4,564,359
73,506
104,051
54,658
2,360,978
603,314
31,225
2,995,517
6,350,587
88,068
219,590
351,061
183,112
841,831
4,757,610
71,844
95,693
55,002
—
—
2,098
1,588,841
(659,553)
(75,031)
856,355
13,600
869,955
6,523,265
$
2,113
1,623,863
(942,218)
(174,917)
508,841
19,766
528,607
6,350,587
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
81
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended December 31,
2013
2014
2015
Revenues:
Storage rental
Service
Total Revenues
Operating Expenses:
$
$
1,784,721
1,239,902
3,024,623
$
1,860,243
1,257,450
3,117,693
Cost of sales (excluding depreciation and amortization)
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
Operating Income (Loss)
Interest Expense, Net (includes Interest Income of $4,208, $2,443 and
$3,984 in 2013, 2014 and 2015, respectively)
Other Expense (Income), Net
Income (Loss) 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 Tax
Income (Loss) from Continuing Operations
Income (Loss) from Discontinued Operations, Net of Tax
Net Income (Loss)
Less: Net Income (Loss) Attributable to Noncontrolling Interests
Net Income (Loss) Attributable to Iron Mountain Incorporated
Earnings (Losses) per Share—Basic:
Income (Loss) from Continuing Operations
Total Income (Loss) from Discontinued Operations
Net Income (Loss) Attributable to Iron Mountain Incorporated
Earnings (Losses) per Share—Diluted:
Income (Loss) from Continuing Operations
Total Income (Loss) from Discontinued Operations
Net Income (Loss) Attributable to Iron Mountain Incorporated
Weighted Average Common Shares Outstanding—Basic
Weighted Average Common Shares Outstanding—Diluted
Dividends Declared per Common Share
$
$
$
$
$
$
$
$
1,288,878
924,031
322,037
430
2,535,376
489,247
1,344,636
869,572
353,143
1,065
2,568,416
549,277
254,174
75,202
159,871
62,127
(1,417)
99,161
831
99,992
3,530
96,462
$
260,717
65,187
223,373
(97,275)
(8,307)
328,955
(209)
328,746
2,627
326,119
$
0.52
$
— $
$
0.51
1.68
$
— $
$
1.67
0.52
$
— $
$
0.50
190,994
192,412
1.0800
$
1.67
$
— $
$
1.66
195,278
196,749
5.3713
$
1,837,897
1,170,079
3,007,976
1,290,025
844,960
345,464
3,000
2,483,449
524,527
263,871
98,590
162,066
37,713
(850)
125,203
—
125,203
1,962
123,241
0.59
—
0.58
0.59
—
0.58
210,764
212,118
1.9100
The accompanying notes are an integral part of these consolidated financial statements.
82
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Net Income (Loss)
Other Comprehensive (Loss) Income:
Foreign Currency Translation Adjustments
Market Value Adjustments for Securities
Total Other Comprehensive (Loss) Income
Comprehensive Income (Loss)
Comprehensive Income (Loss) Attributable to Noncontrolling Interests
Year Ended December 31,
2013
$ 99,992
2014
$ 328,746
2015
$ 125,203
(31,532)
926
(30,606)
69,386
(66,867)
53
(66,814)
261,932
(100,970)
(245)
(101,215)
23,988
1,898
2,184
633
Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated
$ 67,488
$ 259,748
$ 23,355
The accompanying notes are an integral part of these consolidated financial statements.
83
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except share data)
Iron Mountain Incorporated Stockholders' Equity
Common Stock
Total
Shares
Amounts
Additional
Paid-in
Capital
Earnings in
Excess of
Distributions
(Distributions in
Excess of Earnings)
Accumulated
Other
Comprehensive
Items, Net
Noncontrolling
Interests
Balance, December 31, 2012
$ 1,157,148
190,005,788
$
1,900
$
942,199
$
180,258
$
20,314
$
12,477
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 income (loss)
Noncontrolling interests equity
contributions
Noncontrolling interests dividends
Purchase of noncontrolling interests
50,479
1,421,132
(208,900)
(31,532)
926
99,992
743
(2,270)
(14,852)
—
—
—
—
—
—
—
14
—
—
—
—
—
—
—
Balance, December 31, 2013
1,051,734
191,426,920
1,914
Issuance of shares under employee stock
purchase plan and option plans and stock-
based compensation, including tax
deficiency of $60
64,473
2,638,554
Parent cash dividends declared
(493,513)
—
Special distribution in connection with
conversion to REIT (see Note 13)
Currency translation adjustment
Market value adjustments for securities
Net income (loss)
Noncontrolling interests equity
contributions
Noncontrolling interests dividends
Purchase of noncontrolling interests
Divestiture of noncontrolling interests
—
15,753,338
(66,867)
53
328,746
1,800
(1,613)
(20,416)
5,558
—
—
—
—
—
—
—
26
—
158
—
—
—
—
—
—
—
50,465
—
—
—
—
—
—
(12,500)
980,164
64,447
—
559,821
—
—
—
—
—
(17,693)
2,102
—
(208,900)
—
—
96,462
—
—
—
—
—
(29,900)
926
—
—
—
—
67,820
(8,660)
—
(493,513)
(559,979)
—
—
326,119
—
—
—
—
—
—
—
(66,424)
53
—
—
—
—
—
Balance, December 31, 2014
869,955
209,818,812
2,098
1,588,841
(659,553)
(75,031)
Issuance of shares under employee stock
purchase plan and option plans and stock-
based compensation, including tax benefit
of $327
Parent cash dividends declared
Currency translation adjustment
Market value adjustments for securities
Net income (loss)
Noncontrolling interests equity
contributions
Noncontrolling interests dividends
35,037
1,521,484
(405,906)
(100,970)
(245)
125,203
7,590
(2,057)
—
—
—
—
—
—
15
—
—
—
—
—
—
35,022
—
—
—
—
—
—
—
(405,906)
—
—
123,241
—
—
—
—
(99,641)
(245)
—
—
—
Balance, December 31, 2015
$
528,607
211,340,296
$
2,113
$
1,623,863
$
(942,218)
$
(174,917)
$
The accompanying notes are an integral part of these consolidated financial statements.
—
—
(1,632)
—
3,530
743
(2,270)
(2,352)
10,496
—
—
—
(443)
—
2,627
1,800
(1,613)
(2,723)
3,456
13,600
—
—
(1,329)
—
1,962
7,590
(2,057)
19,766
84
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash Flows from Operating Activities:
Net income (loss)
(Income) loss from discontinued operations
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Depreciation
Amortization (includes deferred financing costs and bond discount of $7,258, $8,009 and $9,249 in 2013, 2014
and 2015, respectively)
Stock-based compensation expense
(Benefit) provision for deferred income taxes
Loss on early extinguishment of debt, net
(Gain) Loss 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
(Increase) decrease in restricted cash
Acquisition of customer relationships
Customer inducements
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 notes
Debt (repayment to) financing from and equity (distribution to) contribution from noncontrolling interests, net
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
(Decrease) Increase 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
Year Ended December 31,
2013
2014
2015
$
99,992
(831)
$
328,746
209
$
282,856
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)
(11,043)
(19,148)
2,084
(632,750)
(4,937)
(637,687)
(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
120,526
243,380
125,624
48,488
79,153
55,142
$
$
$
$
$
$
304,557
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)
—
(15,074)
(19,373)
44,486
(479,978)
—
(479,978)
(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)
5,407
120,526
125,933
257,599
167,448
24,106
47,529
6,182
$
$
$
$
$
$
$
$
$
$
$
$
125,203
—
301,219
53,494
27,585
(7,473)
27,305
1,941
55,891
17,984
5,171
18,017
(77,469)
(7,108)
541,760
—
541,760
(290,249)
(113,558)
33,860
(32,611)
(22,500)
2,272
(422,786)
—
(422,786)
(10,796,873)
10,925,709
(814,728)
985,000
5,574
(406,508)
7,149
327
(14,161)
(108,511)
—
(108,511)
(8,015)
2,448
125,933
128,381
259,815
42,440
50,083
51,846
5,950
The accompanying notes are an integral part of these consolidated financial statements.
85
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015
(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 physical records 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 have been organized and operating as a real estate investment trust for federal income tax purposes ("REIT") effective
for our taxable year beginning January 1, 2014.
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 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.
At December 31, 2014, we had $33,860 of restricted cash associated with a collateral trust agreement with our insurance
carrier related to our workers' compensation self-insurance program included in current assets on our Consolidated Balance
Sheet. The restricted cash consisted primarily of United States Treasuries. We had no restricted cash at December 31, 2015.
86
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
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 "7 1/4% Notes"), (2) our previously outstanding 63/4% Euro Senior Subordinated Notes due 2018 (the "63/4%
Notes"), (3) borrowings in certain foreign currencies under our Revolving Credit Facility and our Former Revolving Credit
Facility (each as defined in Note 4) 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 for the years ended December 31, 2013, 2014 and 2015 is as follows:
Total loss on foreign currency transactions
e. Derivative Instruments and Hedging Activities
Year Ended December 31,
2013
36,201
$
2014
58,316
$
2015
70,851
$
Every derivative instrument is required to be recorded in the balance sheet as either an asset or a liability measured at its
fair value. Periodically, we acquire derivative instruments that are intended to hedge either cash flows or values that are subject
to foreign exchange or other market price risk and not for trading purposes. We have formally documented our hedging
relationships, including identification of the hedging instruments and the hedged items, as well as our risk management
objectives and strategies for undertaking each hedge transaction. Given the recurring nature of our revenues and the long-term
nature of our asset base, we have the ability and the preference to use long-term, fixed interest rate debt to finance our business,
thereby preserving our long-term returns on invested capital. We target approximately 75% of our debt portfolio to be fixed
with respect to interest rates. Occasionally, we may use interest rate swaps as a tool to maintain our targeted level of fixed rate
debt. In addition, we may use borrowings in foreign currencies, either obtained in the 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, 2014 and 2015, none of our derivative instruments contained credit-risk related
contingent features.
87
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
f. Property, Plant and Equipment
Property, plant and equipment are stated at cost and depreciated using the straight-line method with the following useful
lives (in years):
Buildings and building improvements
5 to 40
Range
Leasehold improvements
Racking
Warehouse equipment/vehicles
Furniture and fixtures
Computer hardware and software
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:
Land
Buildings and building improvements
Leasehold improvements
Racking
Warehouse equipment/vehicles
Furniture and fixtures
Computer hardware and software
Construction in progress
December 31,
2014
2015
$
205,463
$
218,174
1,409,330
467,176
1,559,383
341,393
53,189
501,882
130,889
1,507,224
447,449
1,556,749
335,728
50,307
515,688
112,917
$
4,668,705
$
4,744,236
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, 2013, 2014 and 2015, we capitalized $39,487, $19,419 and
$26,201 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.
88
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
During the years ended December 31, 2013 and 2014, 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:
North American Records and Information Management Business
$
800
$
1,000
$
Year Ended December 31,
2013
2014
2015
North American Data Management Business
Western European Business
Other International Business
Corporate and Other Business
—
—
—
300
—
300
—
—
$
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.
A reconciliation of liabilities for asset retirement obligations (included in other long-term liabilities) is as follows:
Asset Retirement Obligations, beginning of the year
Liabilities Incurred
Liabilities Settled
Accretion Expense
Foreign Currency Exchange Movement
Asset Retirement Obligations, end of the year
December 31,
2014
11,809
1,366
(1,199)
1,121
(200)
12,897
$
$
2015
12,897
1,030
(966)
1,241
(205)
13,997
$
$
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.
89
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
We have selected October 1 as our annual goodwill impairment analysis date. We performed our annual goodwill
impairment analysis as of October 1, 2013, 2014 and 2015 and concluded that goodwill was not impaired as of those dates. As
of December 31, 2015, no factors were identified that would alter our October 1, 2015 goodwill analysis. 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, 2014 were as follows:
(1) North American Records and Information Management; (2) technology escrow services that protect and manage source
code (the “Intellectual Property Management” reporting unit); (3) 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 (the “Fulfillment Services” reporting unit); (4) North American Data Management; (5) Adjacent Businesses
(which was formerly referred to as the "Emerging Businesses" reporting unit and, at the time of our October 1, 2014 goodwill
impairment analysis, primarily related to our data center business in the United States and which is a component of our
Corporate and Other Business segment); (6) the United Kingdom, Ireland, Norway, Austria, Belgium, France, Germany,
Netherlands, Spain and Switzerland (the “New Western Europe” reporting unit); (7) the remaining countries in Europe in which
we operate, excluding Russia, Ukraine and Denmark (the “Emerging Markets - Eastern Europe” reporting unit); (8) Latin
America; (9) Australia and Singapore; (10) China and Hong Kong (the "Greater China" reporting unit); (11) India; and (12)
Russia, Ukraine and Denmark.
The carrying value of goodwill, net for each of our reporting units as of December 31, 2014 was as follows:
$
North American Records and Information Management(1)
Intellectual Property Management(1)
Fulfillment Services(1)
North American Data Management(2)
Adjacent Businesses(3)
New Western Europe(4)(6)
Emerging Markets - Eastern Europe(5)
Latin America(5)
Australia and Singapore(5)
Greater China(5)
India(5)
Russia, Ukraine and Denmark(5)
Total
$
_______________________________________________________________________________
Carrying Value
as of
December 31, 2014
1,397,484
38,491
3,247
375,957
—
354,049
87,408
107,240
55,779
3,500
—
628
2,423,783
(1) This reporting unit is included in the North American Records and Information Management Business segment.
(2) This reporting unit is included in the North American Data Management Business segment.
(3) This reporting unit is included in the Corporate and Other Business segment.
(4) This reporting unit is included in the Western European Business segment.
(5) This reporting unit is included in the Other International Business segment.
90
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
(6) As of December 31, 2014, the goodwill associated with our operations in Norway was included in the New Western
Europe reporting unit. As of December 31, 2015, as a result of changes in the senior management of our business in
Norway, which impacted both our reportable operating segments (see Note 9 for a description of our reportable
operating segments) as well as our reporting units (described more fully below), the goodwill associated with our
operations in Norway is included in the Emerging Markets - Europe reporting unit (defined below).
Beginning January 1, 2015, as a result of the changes in our reportable operating segments associated with our
reorganization (described more fully in Note 9), we reassessed the composition of our reporting units. As part of this
reassessment, we determined that our North American Records and Information Management Business segment now consists of
two reporting units: (1) North American Records and Information Management (which includes Intellectual Property
Management and Fulfillment Services) and (2) North American Secure Shredding. Also as part of this reassessment, we
determined that our Western European Business segment consisted of two reporting units: (1) the United Kingdom, Ireland and
Norway (the “UKI and Norway” reporting unit) and (2) Austria, Belgium, France, Germany, Netherlands, Spain and
Switzerland (the “Continental Western Europe” reporting unit). 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 noted above 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, during the first quarter of 2015, we performed an interim goodwill impairment test, as of
January 1, 2015, for the North American Records and Information Management, North American Secure Shredding, UKI and
Norway and Continental Western Europe reporting units. We concluded that the goodwill for each of our new reporting units
was not impaired as of such date.
Our reporting units at which level we performed our goodwill impairment analysis as of October 1, 2015 were as follows:
(1) North American Records and Information Management; (2) North American Secure Shredding; (3) North American Data
Management; (4) Adjacent Businesses - Data Centers (which consists primarily of our data center business in the United
States); (5) Adjacent Businesses - Consumer Storage (which consists of a consumer storage business with operations in the
United States acquired in April 2015); (6) UKI and Norway; (7) Continental Western Europe; (8) Emerging Markets - Eastern
Europe; (9) Latin America; (10) Australia and Singapore; (11) Greater China; (12) India; and (13) Russia, Ukraine and
Denmark. We concluded that the goodwill for each of our reporting units was not impaired as of such date.
During the fourth quarter of 2015, as a result of changes in the management of certain of our businesses in Europe and
Asia Pacific, we reassessed the composition of our reporting units as well as our reportable operating segments (see Note 9 for
a description of our reportable operating segments). As part of this reassessment, we determined that our former Russia,
Ukraine and Denmark reporting unit, as well as our business in Norway (which was previously managed along with our
operations in the United Kingdom and Ireland within our UKI and Norway reporting unit) are being managed in conjunction
with the businesses included in our Emerging Markets - Eastern Europe reporting unit. This newly formed reporting unit, which
consists of (i) our former Emerging Markets - Eastern Europe reporting unit, (ii) our former Russia, Ukraine and Denmark
reporting unit, and (iii) our business in Norway is referred to herein as the “Emerging Markets - Europe” reporting unit. Our
businesses in the United Kingdom and Ireland will continue to be managed as a separate reporting unit (the “UKI” reporting
unit). Additionally, we determined that our business in Singapore, which was previously managed along with our operations in
Australia, is now being managed along with our businesses in our Greater China reporting unit. This newly formed reporting
unit, which includes (i) our former Greater China reporting unit and (ii) our business in Singapore is referred to herein as the
"Southeast Asia" reporting unit. Australia will be managed on a standalone basis (the “Australia” reporting unit).
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, during the fourth quarter of 2015, we performed an interim goodwill impairment test, for the
UKI, Emerging Markets-Europe, Australia and Southeast Asia reporting units. We concluded that the goodwill for each of our
new reporting units was not impaired as of such date.
91
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Additionally, in December 2015, we acquired Crozier Fine Arts ("Crozier"), a storage, logistics and transportation business
for high value paintings, photographs and other types of art. We determined that Crozier will be managed as a separate
component within our Adjacent Businesses operating segment and, therefore, constitutes a separate reporting unit (the
"Adjacent Businesses - Fine Arts" reporting unit).
The carrying value of goodwill, net for each of our reporting units as of December 31, 2015 was as follows:
North American Records and Information Management(1)
North American Secure Shredding(1)
North American Data Management(2)
Adjacent Businesses - Data Centers(3)
Adjacent Businesses - Consumer Storage(3)
Adjacent Businesses - Fine Arts(3)
UKI(4)
Continental Western Europe(4)
Emerging Markets - Europe(5)
Latin America(5)
Australia(5)
Southeast Asia(5)
India(5)
Total
$
$
Carrying Value
as of
December 31, 2015
1,342,723
73,021
369,907
—
4,636
21,550
260,202
63,442
87,378
78,537
47,786
5,683
6,113
2,360,978
_______________________________________________________________________________
(1) This reporting unit is included in the North American Records and Information Management Business segment.
(2) This reporting unit is included in the North American Data Management Business segment.
(3) This reporting unit is included in the Corporate and Other Business segment.
(4) This reporting unit is included in the Western European Business segment.
(5) This reporting unit is included in the Other International Business segment.
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.
92
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(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, 2014 and 2015 is as follows:
North
American
Records and
Information
Management
Business
North
American
Data
Management
Business
Western
European
Business
Other
International
Business
Corporate
and Other
Business
Total
Consolidated
$ 1,671,927
$
438,423
$
440,454
$
232,881
$
— $ 2,783,685
7,745
7,045
—
1,936
—
30,117
—
—
3,405
33,869
(4,032)
(3,718)
(26,898)
(14,610)
(6,724)
(3,653)
—
(34,257)
(386)
(31,305)
—
—
—
—
—
39,798
44,319
(7,750)
(34,008)
(83,825)
1,645,209
429,982
405,570
261,458
— 2,742,219
29
2,730
104
7
567
(25)
(27,647)
(6,925)
$ 1,620,425
$
206,706
(719)
205,987
(1,306)
$
204,681
$ 1,439,222
$ 1,415,744
$
$
$
$
$
423,606
54,204
(179)
54,025
(326)
53,699
375,957
369,907
$
$
$
$
$
—
—
26,186
26,222
1,936
9,064
(448)
(25,909)
381,149
59,253
(980)
58,273
(768)
57,505
347,297
323,644
$
$
$
$
$
(353)
(44,543)
225,626
170
(19)
151
(22)
129
261,307
225,497
$
$
$
$
$
—
—
—
14,297
(722)
(105,024)
26,186
$ 2,676,992
— $
—
—
—
320,333
(1,897)
318,436
(2,422)
— $
316,014
— $ 2,423,783
26,186
$ 2,360,978
$
$
85,909
$
— $
46,500
$
— $
— $
132,409
85,909
$
— $
46,500
$
— $
— $
132,409
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(1)
Currency effects
Gross Balance as of
December 31, 2014
Deductible goodwill acquired
during the year
Non-deductible goodwill
acquired during the year
Fair value and other
adjustments(2)
Currency effects
Gross Balance as of
December 31, 2015
Accumulated Amortization
Balance as of December 31,
2013
Currency effects
Accumulated Amortization
Balance as of December 31,
2014
Currency effects
Accumulated Amortization
Balance as of December 31,
2015
Net Balance as of December
31, 2014
Net Balance as of December
31, 2015
Accumulated Goodwill
Impairment Balance as of
December 31, 2014
Accumulated Goodwill
Impairment Balance as of
December 31, 2015
_______________________________________________________________________________
93
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
(1) 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.
(2) Total fair value and other adjustments primarily include $622 in net adjustments to deferred income taxes and
$(5,036) related to customer relationships and acquisition costs and other assumed liabilities (which represent
adjustments within the applicable measurement period, to provisional amounts recognized in purchase accounting), as
well as $3,692 of cash paid related to certain 2014 acquisitions.
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.
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 Business segment,
approximately $600 of asset write-offs associated with our Western European Business segment and approximately $300 of
asset write-offs associated with our Other International Business segment, partially 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.
Consolidated loss on disposal/write-down of property, plant and equipment (excluding real estate), net was $3,000 for the year
ended December 31, 2015 and consisted primarily of approximately $1,800 of losses associated with the write-off of certain
property in our Western European Business segment, as well as $1,500 of losses associated with the write-off of certain
property in our North American Records and Information Management Business segment, partially offset by gains on the
retirement of leased vehicles accounted for as capital lease assets primarily 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 and Canada,
for the years ended December 31, 2013, 2014 and 2015 is as follows:
Gain on sale of real estate
Tax effect on gain on sale of real estate
Gain on sale of real estate, net of tax
Year Ended December 31,
2013
$ 1,847
(430)
$ 1,417
$
$
2014
10,512
(2,205)
8,307
$
$
2015
1,059
(209)
850
94
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
i. Customer Relationship Intangible Assets, Customer Inducements and Other Intangible Assets
Customer relationship intangible assets, which are acquired through either business combinations or acquisitions of
customer relationships, are amortized over periods ranging from 10 to 30 years (weighted average of 20 years at December 31,
2015). The value of customer relationship intangible assets is calculated based upon estimates of their fair value utilizing an
income approach based on the present value of expected future cash flows.
Costs related to the acquisition of large volume accounts are capitalized. Free intake costs to transport boxes to one of our
facilities, which include labor and transportation charges ("Move Costs"), are amortized over periods ranging from one to
30 years (weighted average of 25 years at December 31, 2015), and are included in depreciation and amortization in the
accompanying Consolidated Statements of Operations. Payments that are made to a customer's current records management
vendor in order to terminate the customer's existing contract with that vendor, or direct payments to a customer ("Permanent
Withdrawal Fees"), are amortized over periods ranging from one to 15 years (weighted average of six years at December 31,
2015) to the storage and service revenue line items in the accompanying Consolidated Statements of Operations. Move Costs
and Permanent Withdrawal Fees are collectively referred to as "Customer Inducements". If the customer terminates its
relationship with us, the unamortized carrying value of the Customer Inducement intangible asset 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 Customer Inducement intangible asset.
Other intangible assets, including noncompetition agreements and trademarks, are capitalized and amortized over periods
ranging from five to 10 years (weighted average of seven years at December 31, 2015).
The gross carrying amount and accumulated amortization are as follows:
Gross Carrying Amount
Customer relationship intangible assets and Customer Inducements
Other intangible assets (included in other assets, net)
Accumulated Amortization
December 31,
$
2014
904,866
10,630
$
2015
937,174
11,111
Customer relationship intangible assets and Customer Inducements
$
297,029
$
333,860
Other intangible assets (included in other assets, net)
8,608
8,325
The amortization expense for the years ended December 31, 2013, 2014 and 2015 is as follows:
Customer relationship intangible assets and Customer Inducements:
Amortization expense included in depreciation and amortization
$
37,725
$
46,733
$
Amortization expense offsetting revenues
11,788
11,715
43,614
11,670
Other intangible assets:
Amortization expense included in depreciation and amortization
1,456
1,853
631
Year Ended December 31,
2013
2014
2015
95
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(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:
2016
2017
2018
2019
2020
Estimated Amortization
Included in Depreciation
and Amortization
Charged to Revenues
$
$
45,763
45,012
44,139
42,666
40,831
7,445
5,526
4,296
2,491
1,704
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.
In the fourth quarter of 2015, we adopted Accounting Standards Update No. 2015-03 (“ASU 2015-03”, which is
discussed in greater detail in Note 2.w). ASU 2015-03 required retrospective application. Therefore, our financial statements
and notes to those financial statements contained herein have been adjusted to reflect the impact of adopting ASU 2015-03. The
net carrying value of deferred financing costs (including deferred financing costs associated with the Credit Agreement and the
Former Credit Agreement, each as discussed and defined in Note 4) which were formerly presented within Other Assets, net are
now presented within Long-term Debt, net of current portion on our Consolidated Balance Sheets.
As of December 31, 2014 and 2015, gross carrying amount of deferred financing costs was $63,033 and $70,549,
respectively, and accumulated amortization of those costs was $15,956 and $12,250, respectively.
Estimated amortization expense for deferred financing costs, which are amortized as a component of interest expense, is
as follows:
2016
2017
2018
2019
2020
$
Estimated Amortization of
Deferred Financing Costs
10,525
10,525
10,289
9,066
6,685
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
Prepaid expenses
96
December 31,
2014
2015
$
$
41,559
97,910
139,469
$
$
33,173
109,778
142,951
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Interest
Payroll and vacation
Incentive compensation
Self-insured liabilities (Note 10.b.)
Other
Accrued expenses
l. Revenues
December 31,
2014
2015
$
69,525
$
75,050
66,552
33,381
159,977
$
404,485
$
68,316
50,143
61,422
33,508
137,672
351,061
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) and technology escrow services that protect and manage source code. 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 removal
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; (9) consulting services; and (10) other technology services and product sales (including specially designed
storage containers and related supplies).
We recognize revenue when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) services
have been rendered; (3) the sales price is fixed or determinable; and (4) 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, which represented less than 2% of
consolidated revenue for the year ended December 31, 2015, have historically not been significant.
m. Rent Normalization
We have entered into various leases for buildings that expire over various terms. Certain leases have fixed escalation
clauses (excluding those tied to the consumer price index or other inflation-based indices) or other features (including return to
original condition, primarily in the United Kingdom) which require normalization of the rental expense over the life of the
lease, resulting in deferred rent being reflected as a liability in the accompanying Consolidated Balance Sheets. In addition, we
have assumed various above and below market leases in connection with certain of our acquisitions. The difference between the
present value of these lease obligations and the market rate at the date of the acquisition was recorded as either a deferred rent
liability or deferred rent asset (which is a component of Other within Other Assets, net in our Consolidated Balance Sheets) 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").
97
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Stock-based compensation expense for Employee Stock-Based Awards included in the accompanying Consolidated
Statements of Operations for the years ended December 31, 2013, 2014 and 2015 was $30,354 ($22,085 after tax or $0.12 per
basic and $0.11 per diluted share), $29,624 ($21,886 after tax or $0.11 per basic and diluted share) and $27,585 ($19,679 after
tax or $0.09 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:
Cost of sales (excluding depreciation and amortization)
Selling, general and administrative expenses
Total stock-based compensation
Year Ended December 31,
2013
2014
2015
$
$
293
30,061
30,354
$
$
680
28,944
29,624
$
$
220
27,365
27,585
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 impacts reported operating
cash flows and reported financing cash flows. As a result, net financing cash flows from continuing operations included $2,389,
$(60) and $327 for the years ended December 31, 2013, 2014 and 2015, 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.
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 instances, options are granted at prices greater than the market price of the stock
on the date of grant. 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, 2015, ten-year vesting options represented 7.4% of total outstanding options. Certain of the options we issue
become exercisable ratably over a period of five 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, 2015, five-year vesting options
represented 41.0% of total outstanding options. The remainder of 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, 2015, three-year vesting options represented 51.6% 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 become exercisable immediately upon grant.
Our equity compensation plans generally provide that any unvested options and other awards granted thereunder shall
vest immediately if an employee is terminated, 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 us 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 or the ESPP, at December 31, 2015 was 455,811.
98
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
The weighted average fair value of options granted in 2013, 2014 and 2015 was $7.69, $5.70 and $4.84 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
Expected volatility
Risk-free interest rate
Expected dividend yield
Expected life
2013
2014
2015
33.8%
1.13%
3%
34.0%
2.04%
4%
28.4%
1.70%
5%
6.3 years
6.7 years
5.4 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 (estimated period of time outstanding) of the stock options. Expected dividend yield is considered in the option
pricing model and represents our current annualized expected per share dividends over the current trade price of our common
stock. The expected life 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, 2015 is as follows:
Outstanding at December 31, 2014
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2015
Options exercisable at December 31, 2015
Options expected to vest
Options
3,678,246
787,224
(719,300)
(34,144)
(23,212)
3,688,814
2,386,622
1,241,658
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
$
$
$
$
23.37
42.21
21.23
25.64
22.19
27.79
22.96
36.56
5.56
3.96
8.48
$
$
$
12,086
11,472
595
The aggregate intrinsic value of stock options exercised for the years ended December 31, 2013, 2014 and 2015 is as
follows:
Aggregate intrinsic value of stock options exercised
Restricted Stock and Restricted Stock Units
Year Ended December 31,
2013
11,024
$
2014
23,178
$
2015
$
9,056
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. However, beginning in 2015, RSUs
granted to our non-employee directors now vest immediately upon 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. 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).
99
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Cash dividends accrued and paid on RSUs for the years ended December 31, 2013, 2014 and 2015, is as follows:
Cash dividends accrued on RSUs
Cash dividends paid on RSUs
Year Ended December 31,
2013
2014
2015
$
1,854
$
3,698
$
820
1,377
2,508
2,927
The fair value of restricted stock and RSUs vested during the years ended December 31, 2013, 2014 and 2015, are as
follows:
Fair value of restricted stock vested
Fair value of RSUs vested
Year Ended December 31,
2013
2014
$
1
$
1
$
16,638
22,535
2015
—
24,345
A summary of restricted stock and RSU activity for the year ended December 31, 2015 is as follows:
Non-vested at December 31, 2014
Granted
Vested
Forfeited
Non-vested at December 31, 2015
Restricted
Stock and
RSUs
1,405,569
623,936
(696,871)
(115,037)
1,217,597
$
$
Weighted-
Average
Grant-Date
Fair Value
28.78
37.42
31.26
32.86
33.68
100
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
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 and thereafter) 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 and thereafter). Certain PUs granted in 2013, 2014 and
2015 will be earned based on a market condition associated with the total return on our common stock in relation to a subset of
the Standard & Poor's 500 Index 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 ten 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. For those PUs subject to a three-year
performance period, employees who terminate their employment during the performance period and on or after meeting the
Retirement Criteria are eligible for pro-rated vesting, subject to the actual achievement against the predefined targets as
discussed above, based on the number of full years of service completed following the grant date (but delivery of the shares
remains deferred). As a result, PUs subject to a three-year performance period are generally expensed over the three-year
performance period. All 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.
Cash dividends accrued and paid on PUs for the years ended December 31, 2013, 2014 and 2015, are as follows:
Cash dividends accrued on PUs
Cash dividends paid on PUs
Year Ended December 31,
2013
2014
2015
$
681
$
1,341
$
—
312
874
1,015
During the years ended December 31, 2013, 2014 and 2015, we issued 198,869, 225,429 and 159,334 PUs, respectively.
The majority of 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 and thereafter) over the
vesting period for each of the awards. For PUs earned based on a market condition, we utilize a Monte Carlo simulation to
determine the fair value of these awards at the date of grant, and such fair value is expensed over the three-year performance
period. As of December 31, 2015, we expected 0% and 100% achievement of the predefined revenue, revenue growth and
ROIC targets associated with the awards of PUs made in 2014 and 2015, respectively.
The fair value of PUs that vested during the years ended December 31, 2013, 2014 and 2015, is as follows:
Fair value of earned PUs that vested
Year Ended December 31,
2013
2014
2015
$
2,962
$
1,216
$
2,107
101
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
A summary of PU activity for the year ended December 31, 2015 is as follows:
Non-vested at December 31, 2014
Granted
Vested
Forfeited
Non-vested at December 31, 2015
Original
PU Awards
461,666
159,334
(80,035)
(20,201)
520,764
PU
Adjustment(1)
(82,609)
—
(4,350)
—
(86,959)
Total
PU Awards
379,057
159,334
(84,385)
(20,201)
433,805
Weighted-
Average
Grant-Date
Fair Value
30.80
$
39.24
29.62
31.27
34.11
$
_______________________________________________________________________________
(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 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, 2013,
2014 and 2015, there were 144,432 shares, 115,046 shares and 122,209 shares, respectively, purchased under the ESPP. As of
December 31, 2015, we have 838,429 shares available under the ESPP.
_______________________________________________________________________________
As of December 31, 2015, unrecognized compensation cost related to the unvested portion of our Employee Stock-Based
Awards was $35,303 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.
102
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (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. We continue to provide incremental federal and state income taxes on net book over outside basis
differences related to the earnings of our foreign subsidiaries. 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.
p. Income (Loss) Per Share—Basic and Diluted
Basic income (loss) per common share is calculated by dividing income (loss) by the weighted average number of
common shares outstanding. The calculation of diluted income (loss) per share is consistent with that of basic income (loss) per
share but gives effect to all potential common shares (that is, securities such as options, warrants or convertible securities) that
were outstanding during the period, unless the effect is antidilutive.
The following table presents the calculation of basic and diluted income (loss) per share:
Year Ended December 31,
2013
2014
2015
Income (loss) from continuing operations
$
Total income (loss) from discontinued operations (see Note 14) $
Net income (loss) attributable to Iron Mountain Incorporated
$
99,161
831
96,462
$
$
$
328,955
$
(209) $
$
326,119
125,203
—
123,241
Weighted-average shares—basic
Effect of dilutive potential stock options
Effect of dilutive potential restricted stock, RSUs and PUs
Weighted-average shares—diluted
Earnings (losses) per share—basic:
Income (loss) from continuing operations
$
Total income (loss) from discontinued operations (see Note 14) $
Net income (loss) attributable to Iron Mountain Incorporated—
basic
Earnings (losses) per share—diluted:
Income (loss) from continuing operations
$
$
Total income (loss) from discontinued operations (see Note 14) $
Net income (loss) attributable to Iron Mountain Incorporated—
diluted
$
Antidilutive stock options, RSUs and PUs, excluded from the
calculation
190,994,000
195,278,000
210,764,000
995,836
422,045
913,926
557,269
834,659
519,426
192,411,881
196,749,195
212,118,085
0.52
$
— $
0.51
0.52
$
$
— $
0.50
$
1.68
$
— $
1.67
1.67
$
$
— $
1.66
$
0.59
—
0.58
0.59
—
0.58
903,416
872,039
1,435,297
103
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
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 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,
2013
2014
2015
Balance at
Beginning of
the Year
Credit Memos
Charged to
Revenue
Allowance for
Bad Debts
Charged to
Expense
$
$
25,209
34,645
32,141
$
49,483
47,137
42,497
11,321
14,209
15,326
Other(1)
$ 3,612
(572)
(4,511)
_______________________________________________________________________________
Balance at
End of
the Year
Deductions(2)
$
(54,980) $
(63,278)
(54,006)
34,645
32,141
31,447
(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 December 31, 2014 related to cash and cash equivalents and restricted
cash held on deposit and as of December 31, 2015 related to cash and cash equivalents. At December 31, 2014, we had money
market funds with two "Triple A" rated money market funds and time deposits with three global banks. At December 31, 2015,
we had time deposits with four global banks. 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, 2014 and 2015, our cash and cash equivalents and restricted cash
balance was $159,793 and $128,381, respectively. At December 31, 2014, our cash and cash equivalents included money
market funds of $36,828, which were invested substantially in United States Treasuries and time deposits of $16,204. At
December 31, 2015, our cash and cash equivalents included time deposits of $18,645.
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 have elected the cost 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.
104
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(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 assets and liabilities carried at fair value and measured on a recurring basis as of December 31, 2014 and 2015,
respectively, are as follows:
Description
Money Market Funds(1)
Time Deposits(1)
Trading Securities
Available-for-Sale Securities
Derivative Liabilities(3)
Description
Time Deposits(1)
Trading Securities
Available-for-Sale Securities
Fair Value Measurements at
December 31, 2014 Using
Total Carrying
Value at
December 31,
2014
Quoted prices
in active
markets
(Level 1)
Significant other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
$
36,828
$
16,204
13,172
1,457
2,411
—
—
12,428 (2)
1,457 (2)
—
$
36,828
$
16,204
744 (1)
—
2,411
—
—
—
—
—
Fair Value Measurements at
December 31, 2015 Using
Total Carrying
Value at
December 31,
2015
Quoted prices
in active
markets
(Level 1)
Significant other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
$
18,645
$
10,371
624
—
9,514
624
$
(2)
(2)
18,645
$
857 (1)
—
—
—
—
_______________________________________________________________________________
(1) Money market funds, time deposits and certain trading securities are measured based on quoted prices for similar
assets and/or subsequent transactions.
(2) Available-for-sale securities and certain trading securities are measured at fair value using quoted market prices.
(3) Our derivative 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 non-recurring basis for the years ended December 31, 2013, 2014
and 2015, except goodwill calculated based on Level 3 inputs, as more fully disclosed in Note 2.g and the assets and liabilities
associated with acquisitions, as more fully disclosed in Note 6.
The fair value of our long-term debt, which was determined based on either Level 1 inputs or Level 3 inputs, is disclosed
in Note 4. Long-term debt is measured at cost in our Consolidated Balance Sheets as of December 31, 2014 and 2015.
105
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
t.
Trading and Available-for-Sale Securities
As of December 31, 2014 and 2015, we have one trust that holds marketable securities. As of December 31, 2014 and
2015, the fair value of the money market and mutual funds included in this trust amounted to $13,172 and $10,371,
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 $2,283, $1,112 and $56 for the years
ended December 31, 2013, 2014 and 2015, respectively, related to these marketable securities.
As of December 31, 2014 and 2015, we had an investment in Crossroads Systems, Inc. ("Crossroads"). Our investment in
Crossroads represented approximately 4% and 2% of the total shares outstanding of Crossroads as of December 31, 2014 and
2015, respectively. The carrying value of our investment in Crossroads as of December 31, 2014 and 2015 was $1,457 and
$624, respectively, and is included in other assets in the accompanying Consolidated Balance Sheets. This investment, which is
publicly traded, is classified as available-for-sale and is carried at fair value with corresponding changes to fair value recorded
in accumulated other comprehensive items, net.
u. Accumulated Other Comprehensive Items, Net
The changes in accumulated other comprehensive items, net for the years ended December 31, 2013, 2014 and 2015 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
Balance as of December 31, 2014
Other comprehensive (loss) income:
Foreign currency translation adjustments
Market value adjustments for securities
Total other comprehensive (loss) income
Balance as of December 31, 2015
Foreign
Currency
Translation
Adjustments
20,314
$
Market Value
Adjustments
for Securities
$
— $
(29,900)
—
(29,900)
(9,586) $
(66,424)
—
(66,424)
(76,010) $
$
$
$
—
926
926
926
—
53
53
979
$
Total
20,314
(29,900)
926
(28,974)
(8,660)
(66,424)
53
(66,371)
(75,031)
(99,641)
—
(99,641)
$ (175,651) $
—
(245)
(245)
734
(99,641)
(245)
(99,886)
$ (174,917)
106
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
v. Other Expense (Income), Net
Other expense (income), net consists of the following:
Year Ended December 31,
Foreign currency transaction losses (gains), net
Debt extinguishment expense, net
Other, net
w. New Accounting Pronouncements
2013
36,201
43,724
(4,723)
75,202
$
$
$
$
2014
58,316
$
16,495
(9,624)
65,187
2015
70,851
27,305
434
$
98,590
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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, (4) licenses, (5) time value of money and
(6) 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. In August 2015, the FASB issued ASU No.
2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date ("ASU 2015-14"). ASU 2015-14
defers the effective date of ASU 2014-09 for one year, making it effective for us on January 1, 2018, with early adoption
permitted as of January 1, 2017. 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 the adoption of ASU 2014-15 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. We do not believe that the adoption of
ASU 2015-02 will have an impact on our consolidated financial statements.
107
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the
Presentation of Debt Issuance Costs. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be
presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt
discounts. The recognition and measurement guidance for debt issuance costs are not affected by ASU 2015-03. We adopted
ASU 2015-03 during the fourth quarter of 2015. The adoption of ASU 2015-03 did not materially impact our consolidated
financial statements.
In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting
for Measurement-Period Adjustments (“ASU 2015-16”). ASU 2015-16 requires that the cumulative impact of a measurement
period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is
identified, with the prior period impact of the adjustment being disclosed within the consolidated financial statements. We
adopted ASU 2015-16 during the third quarter of 2015. The adoption of ASU 2015-16 did not materially impact our
consolidated financial statements.
In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of
Deferred Taxes ("ASU 2015-17"). ASU No. 2015-17 eliminates the requirement for reporting entities to present deferred tax
liabilities and assets as current and noncurrent in a classified balance sheet. Instead, reporting entities will be required to
classify all deferred tax assets and liabilities as noncurrent. ASU
is effective for us on January 1, 2017, with early
adoption permitted. The amendments in ASU 2015-17 may be applied either prospectively to all deferred tax liabilities and
assets or retrospectively to all periods presented. The adoption of ASU 2015-17 will require the reclassification of certain
deferred tax assets to noncurrent in our consolidated financial statements.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and
Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). ASU 2016-01 requires that most equity
investments be measured at fair value, with subsequent changes in fair value recognized in net income. The pronouncement also
impacts financial liabilities under the fair value option and the presentation and disclosure requirements for financial
instruments. ASU 2016-01 is effective for us on January 1, 2018. We do not believe that the adoption of ASU 2016-01 will have
a material impact on our consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 will be
effective for us on January 1, 2019, with early adoption permitted. We are currently in the process of assessing the impact of
ASU 2016-02 on our consolidated financial statements.
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. As of December 31, 2015,
we had no forward contracts outstanding. We may in the future enter into forward contracts, and at the maturity of any forward
contract, we may enter into a new forward contract 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 any of the forward contracts we have entered into as hedges.
Net cash (receipts) payments included in cash from operating activities related to settlements associated with foreign
currency forward contracts for the years ended December 31, 2013, 2014 and 2015, are as follows:
Net (receipts) payments
Year Ended December 31,
2013
$
(6,954) $
2014
21,125
$
2015
22,705
108
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
3. Derivative Instruments and Hedging Activities (Continued)
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, 2014 and 2015 and their gains and losses for the years ended
December 31, 2013, 2014 and 2015:
Derivatives Not Designated as Hedging
Instruments
Foreign exchange contracts
Total
2014
Balance Sheet
Location
Accrued expenses
Liability Derivatives
December 31,
2015
Balance Sheet
Location
Fair
Value
$ 2,411 Accrued expenses
$ 2,411
Fair
Value
$ —
$ —
Amount of (Gain) Loss
Recognized in Income
on Derivatives
December 31,
Derivatives Not Designated as Hedging
Instruments
Foreign exchange contracts
Total
Location of (Gain) Loss
Recognized in Income on
Derivative
Other expense (income), net
2013
2014
2015
$
$
(2,955) $
(2,955) $
18,016
18,016
$
$
20,294
20,294
We have designated a portion of our previously outstanding 63/4% Notes and Euro denominated borrowings by IMI under
our Revolving Credit Facility (discussed more fully in Note 4) as a hedge of net investment of certain of our Euro denominated
subsidiaries. For the years ended December 31, 2013, 2014 and 2015, we designated on average 106,525, 47,730 and
34,331 Euros, respectively, of the previously outstanding 63/4% Notes and Euro denominated borrowings by IMI under our
Revolving Credit Facility 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:
Foreign exchange (losses) gains
Less: Tax benefit (expense) on foreign exchange (losses) gains
Foreign exchange (losses) gains, net of tax
Year Ended December 31,
2013
2014
2015
$
$
(5,311) $
2,073
(3,238) $
6,385
(57)
6,328
$
$
3,284
—
3,284
As of December 31, 2015, cumulative net gains of $17,096, net of tax are recorded in accumulated other comprehensive
items, net associated with this net investment hedge.
109
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
4. Debt
Long-term debt is as follows:
Former Revolving Credit Facility(1)
Former Term Loan(1)
63/4% Euro Senior Subordinated Notes due 2018 (the "63/4% Notes")(2)(3)(4)
73/4% Senior Subordinated Notes due 2019 (the "73/4% Notes")(2)(3)
83/8% Senior Subordinated Notes due 2021 (the "83/8% Notes")(2)(3)(4)
61/8% CAD Senior Notes due 2021 (the "CAD Notes")(2)(5)
61/8% GBP Senior Notes due 2022 (the "GBP Notes")(2)(6)(7)
6% Senior Notes due 2023 (the "6% Notes due 2023")(2)(3)
53/4% Senior Subordinated Notes due 2024 (the "53/4% Notes")(2)(3)
Real Estate Mortgages, Capital Leases and Other(8)
Total Long-term Debt
Less Current Portion
Long-term Debt, Net of Current Portion
Revolving Credit Facility(1)
Term Loan(1)
6% Senior Notes due 2020 (the "6% Notes due 2020")(2)(3)(6)
CAD Notes(2)(5)
GBP Notes(2)(6)(7)
6% Notes due 2023(2)(3)
53/4% Notes(2)(3)
Real Estate Mortgages, Capital Leases and Other(8)
Accounts Receivable Securitization Program(9)
Total Long-term Debt
Less Current Portion
Long-term Debt, Net of Current Portion
Debt
(inclusive of
discount and
premium)
$ 883,428
249,375
308,616
400,000
106,030
172,420
622,960
600,000
1,000,000
320,702
4,663,531
(52,095)
$ 4,611,436
$
Debt
(inclusive of
discount and
premium)
$ 784,438
243,750
1,000,000
144,190
592,140
600,000
1,000,000
333,559
205,900
December 31, 2014
Unamortized
Deferred
Financing
Costs
Carrying
Amount
$
(3,170) $
—
880,258
249,375
306,799
396,018
104,975
169,713
612,522
590,481
986,725
319,588
(1,817)
(3,982)
(1,055)
(2,707)
(10,438)
(9,519)
(13,275)
(1,114)
(47,077)
—
4,616,454
(52,095)
(47,077) $ 4,564,359
December 31, 2015
Unamortized
Deferred
Financing
Costs
Carrying
Amount
$
775,028
243,750
983,876
142,266
583,383
591,580
988,098
332,489
205,208
(9,410) $
—
(16,124)
(1,924)
(8,757)
(8,420)
(11,902)
(1,070)
(692)
(58,299)
—
4,903,977
(88,068)
$ 4,815,909
$
4,845,678
(88,068)
(58,299) $ 4,757,610
Fair
Value
$ 883,428
249,375
309,634
429,000
110,500
175,437
639,282
625,500
1,005,000
320,702
Fair
Value
$ 784,438
243,750
1,052,500
147,074
606,944
618,000
961,200
333,559
205,900
_______________________________________________________________________________
110
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
4. Debt (Continued)
(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 both the Former Revolving Credit Facility and the Revolving
Credit Facility (each of which is 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 both December 31, 2014 and 2015.
(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, 2014 and 2015, respectively.
(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 its direct and indirect 100% owned United
States subsidiaries that represent the substantial majority of our United States operations (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. See Note 5 to Notes to Consolidated Financial
Statements.
(4) As of December 31, 2014, the amount of debt for the 63/4% Notes and the 83/8% Notes reflect an unamortized original
issue discount of $1,018 and $220, respectively.
(5) 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.
(6) The 6% Notes due 2020 and the GBP Notes have not been registered under the Securities Act of 1933, as amended
(the “Securities Act”), or under the securities laws of any other jurisdiction. Unless they are registered, the 6% Notes
due 2020 and the GBP Notes may be offered only in transactions that are exempt from registration under the Securities
Act or the securities laws of any other jurisdiction.
(7) 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.
(8) Includes (a) real estate mortgages of $5,107 and $2,713 as of December 31, 2014 and 2015, respectively, which bear
interest at approximately 4.9% and are payable in various installments through 2021, (b) capital lease obligations of
$241,866 and $235,348 as of December 31, 2014 and 2015, respectively, which bear a weighted average interest rate
of 5.8% at December 31, 2014 and 7.2% at December 31, 2015, and (c) other notes and other obligations, which were
assumed by us as a result of certain acquisitions, of $73,729 and $95,498 as of December 31, 2014 and 2015,
respectively, and bear a weighted average interest rate of 11.5% and 12.6% as of December 31, 2014 and 2015,
respectively. We believe the fair value (Level 3 of fair value hierarchy described at Note 2.s.) of this debt approximates
its carrying value.
(9) The Special Purpose Subsidiaries are the obligors under this program. We believe the fair value (Level 3 of fair value
hierarchy described at Note 2.s.) of this debt approximates its carrying value.
111
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
4. Debt (Continued)
a. Credit Agreement
On July 2, 2015, we entered into a new credit agreement (the "Credit Agreement") to refinance our then existing credit
agreement (the "Former Credit Agreement") which consisted of a revolving credit facility (the "Former Revolving Credit
Facility") and a term loan (the "Former Term Loan") and was scheduled to terminate on June 27, 2016. The Credit Agreement
consists of a revolving credit facility (the "Revolving Credit Facility") and a term loan (the "Term Loan").
The Revolving Credit Facility is supported by a group of 25 banks and enables 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 and Australian dollars, among other currencies) in an aggregate outstanding
amount not to exceed $1,500,000. The Term Loan is to be paid in quarterly installments in an amount equal to $3,125 per
quarter, with the remaining balance due on July 3, 2019. The Credit Agreement includes 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, subject to the conditions as defined in the Credit Agreement. The Credit Agreement terminates on July 6, 2019,
at which point all obligations become due, but may be extended by one year at our option, subject to the conditions set forth in
the Credit Agreement. Borrowings under the Credit Agreement may be prepaid without penalty or premium, in whole or in part,
at any time.
IMI and the Guarantors guarantee all obligations under the Credit Agreement. 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 0.25% to 0.4% based on our consolidated
leverage ratio and fees associated with outstanding letters of credit. As of December 31, 2015, we had $784,438 and $243,750
of outstanding borrowings under the Revolving Credit Facility and the Term Loan, respectively. Of the $784,438 of outstanding
borrowings under the Revolving Credit Facility, $480,400 was denominated in United States dollars, 190,000 was denominated
in Canadian dollars, 105,250 was denominated in Euros and 71,600 was denominated in Australian dollars. In addition, we also
had various outstanding letters of credit totaling $36,624. The remaining amount available for borrowing under the Revolving
Credit Facility as of December 31, 2015, 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 $678,938 (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, 2015. The average interest rate in effect under the
Revolving Credit Facility was 2.8% and ranged from 2.3% to 4.8% as of December 31, 2015 and the interest rate in effect
under the Term Loan as of December 31, 2015 was 2.5%.
We recorded a charge of $2,156 to other expense (income), net in the third quarter of 2015 related to the refinancing of the
Former Credit Agreement, representing a write-off of unamortized deferred financing costs. We recorded a charge of $5,544 to
other expense (income), net in the third quarter of 2013 related to the Former Credit Agreement, 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.
112
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
4. Debt (Continued)
Our leverage and fixed charge coverage ratios under both the Former Credit Agreement and the Credit Agreement as of
December 31, 2014 and 2015, respectively, and our leverage ratio under our indentures as of December 31, 2014 and 2015 are
as follows:
Net total lease adjusted leverage ratio
Net secured debt lease adjusted leverage ratio
Bond leverage ratio (not lease adjusted)
Fixed charge coverage ratio
December 31, 2014
5.4
2.6
5.7
2.5
December 31, 2015
Maximum/Minimum Allowable(1)
5.6 Maximum allowable of 6.5
2.6 Maximum allowable of 4.0
5.5 Maximum allowable of 6.5
2.4 Minimum allowable of 1.5
______________________________________________________________________________
(1) The maximum and minimum allowable ratios under the Credit Agreement are substantially similar to the Former
Credit Agreement.
As noted in the table above, our maximum allowable net total lease adjusted leverage ratio under the Credit Agreement is
6.5. The Credit Agreement also contains a provision which limits, in certain circumstances, our dividends in any four
consecutive fiscal quarters to 95% of Funds From Operations (as defined in the Credit Agreement) for such four fiscal quarters
or, if greater, the amount that we would be required to pay in order to continue to be qualified for taxation as a REIT or to avoid
the imposition of income or excise taxes on IMI. This limitation only is applicable when our net total lease adjusted leverage
ratio exceeds 6.0.
Noncompliance with these leverage and fixed charge coverage ratios would have a material adverse effect on our
financial condition and liquidity.
Commitment fees and letters of credit fees, which are based on the unused balances under the Former Revolving Credit
Facility, the Revolving Credit Facility and the Accounts Receivable Securitization Program (as defined below) for the years
ended December 31, 2013, 2014 and 2015, are as follows:
Commitment fees and letters of credit fees
b. Notes Issued under Indentures
Year Ended December 31,
2013
2014
2015
$
3,167
$
3,322
$
3,743
As of December 31, 2015, we had five series of senior subordinated or senior notes issued under various indentures, three
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 pari passu with debt outstanding under the Credit Agreement,
except the 53/4% Notes which are subordinated to the Credit Agreement:
•
•
•
•
•
$1,000,000 principal amount of senior notes maturing on October 1, 2020 and bearing interest at a rate of 6% per
annum, payable semi-annually in arrears on April 1 and October 1;
200,000 CAD principal amount of senior 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;
400,000 British pounds sterling principal amount of senior 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;
$600,000 principal amount of senior 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
$1,000,000 principal amount of senior subordinated 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.
113
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
4. Debt (Continued)
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 2013, IMI completed an underwritten public offering of $600,000 in aggregate principal amount of the 6%
Notes due 2023, 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, 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 the Former 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 unamortized deferred financing costs.
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 the Former 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 the Former 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 the Former 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 unamortized deferred
financing costs.
In September 2015, IMI completed a private offering of $1,000,000 in aggregate principal amount of the 6% Notes due
2020. The net proceeds to IMI of $985,000, after paying the initial purchasers’ commissions and expenses, were used to redeem
all of the 63/4% Notes, 73/4% Notes and 83/8% Notes in October 2015. The remaining net proceeds were used for general
corporate purposes, including acquisitions. We recorded a charge to other expense (income), net of $25,112 in the fourth quarter
of 2015 related to the early extinguishment of this debt. This charge consists of call premiums, original issue discounts and
unamortized deferred financing costs.
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.
114
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
4. Debt (Continued)
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 redeemed at our option at a premium redemption price.
After these dates, the notes may be redeemed at 100% of face value:
Redemption Date
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
6% Notes due
2020
October 1,
—
—
CAD Notes
August 15,
GBP Notes
September 15,
—
—
—
—
103.000% (1)
103.063% (1)
104.594% (1)
101.500%
100.000%
100.000
—
—
—
—
101.531%
100.000%
100.000%
100.000%
—
—
—
103.063%
101.531%
100.000%
100.000%
100.000%
—
—
6% Notes due
2023
August 15,
—
—
—
103.000% (1)
102.000%
101.000%
100.000%
100.000%
100.000%
—
53/4% Notes
August 15,
—
—
102.875% (1)
101.917%
100.958%
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.
115
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
4. Debt (Continued)
c. Accounts Receivable Securitization Program
In March 2015, we entered into a $250,000 accounts receivable securitization program (the "Accounts Receivable
Securitization Program") involving several of our wholly owned subsidiaries and certain financial institutions. Under the
Accounts Receivable Securitization Program, certain of our subsidiaries sell substantially all of their United States accounts
receivable balances to our wholly owned special purpose entities, Iron Mountain Receivables QRS, LLC and Iron Mountain
Receivables TRS, LLC (the "Special Purpose Subsidiaries"). The Special Purpose Subsidiaries use the accounts receivable
balances to collateralize loans obtained from certain financial institutions. The Special Purpose Subsidiaries are consolidated
subsidiaries of IMI. The Accounts Receivable Securitization Program is accounted for as a collateralized financing activity,
rather than a sale of assets, and therefore: (i) accounts receivable balances pledged as collateral are presented as assets and
borrowings are presented as liabilities on our Consolidated Balance Sheet, (ii) our Consolidated Statement of Operations
reflects the associated charges for bad debt expense related to pledged accounts receivable (a component of selling, general and
administrative expenses) and reductions to revenue due to billing and service related credit memos issued to customers and
related reserves, as well as interest expense associated with the collateralized borrowings and (iii) receipts from customers
related to the underlying accounts receivable are reflected as operating cash flows and borrowings and repayments under the
collateralized loans are reflected as financing cash flows within our Consolidated Statement of Cash Flows. Iron Mountain
Information Management, LLC retains the responsibility of servicing the accounts receivable balances pledged as collateral in
this transaction and IMI provides a performance guaranty. The Accounts Receivable Securitization Program terminates on
March 6, 2018, at which point all obligations become due. The maximum availability allowed is limited by eligible accounts
receivable, as defined under the terms of the Accounts Receivable Securitization Program. As of December 31, 2015, the
maximum availability allowed and amount outstanding under the Accounts Receivable Securitization Program was $205,900.
The interest rate in effect under the Accounts Receivable Securitization Program was 1.3% as of December 31, 2015.
Commitment fees at a rate of 40 basis points are charged on amounts made available but not borrowed under the Accounts
Receivable Securitization Program.
_______________________________________________________________________________
Maturities of long-term debt are as follows:
Year
2016
2017
2018
2019
2020
Thereafter
Net Deferred Financing Costs
Total Long-term Debt (including current portion)
$
$
Amount
88,068
98,093
260,847
1,015,626
1,017,774
2,423,569
4,903,977
(58,299)
4,845,678
116
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(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,
2014 and 2015 and for the years ended December 31, 2013, 2014 and 2015 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 guarantees 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 and the Special Purpose Subsidiaries 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 Consolidated Balance Sheets and equity in the earnings (losses) of subsidiaries, net of
tax in the below Consolidated Statements of Operations with respect to the relevant Parent, Guarantors, Canada Company, Non-
Guarantors and Eliminations columns also would change.
In March 2015, we entered into the Accounts Receivable Securitization Program, which is described more fully in Note 4.
The Special Purpose Subsidiaries, which were established in conjunction with the Accounts Receivable Securitization Program,
are included in the Non-Guarantors column in the below Consolidated Balance Sheet, Consolidated Statement of Operations
and Consolidated Statement of Cash Flows from that date forward. As a result of the Accounts Receivable Securitization
Program, certain of our Guarantors sold substantially all of their United States accounts receivable balances to the Special
Purpose Subsidiaries. As of December 31, 2015, this resulted in a decrease in accounts receivable, an increase in intercompany
receivable and a decrease in long-term debt related to our Guarantors and a corresponding increase in accounts receivable, an
increase in intercompany payable and an increase in long-term debt related to our Non-Guarantors. There was no material
impact to the Guarantors and Non-Guarantors columns of the below Consolidated Statements of Operations for the year ended
December 31, 2015 as a result of the Accounts Receivable Securitization Program. Additionally, the Accounts Receivable
Securitization Program resulted in increased financing cash flow activity for the Non-Guarantors for the year ended December
31, 2015, as the proceeds from borrowings under the Accounts Receivable Securitization Program were used to repay
intercompany loans with certain of the Guarantors, which resulted in increased cash flows from investing activities for the
Guarantors for the year ended December 31, 2015.
117
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(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
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
Total Other Assets, Net
Total Assets
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)
Parent
Guarantors
December 31, 2014
Canada
Company
Non-
Guarantors
Eliminations
Consolidated
$
2,399
$
4,713
$
4,979
$
113,842
$
— $
125,933
—
—
37,137
205,798
—
—
—
(586,725)
(34)
(586,759)
33,860
604,265
—
153,661
917,719
—
2,550,727
33,860
—
—
153
—
361,330
586,725
88,709
36,412
840
1,041,477
1,580,337
2,851,651
917,170
245
656,877
—
1,611,957
1,459
371,912
3,770,280
2,640,991
—
2,925
45,041
160,977
2,448
30,751
180,342
23,965
237,506
61,908
381,548
808,573
93,355
631,484
233,700
958,539
—
(2,854,344)
(1,698,153)
—
—
—
—
2,423,783
631,036
(4,552,497)
3,054,819
$ 3,807,532
$ 5,262,805
$ 443,524
$ 2,148,660
$
(5,139,256) $
6,523,265
$ 505,083
$
— $
3,564
$
78,078
$
(586,725) $
—
60,097
2,384,997
24,955
470,122
905,261
—
35,142
243,154
27,174
239,280
1,030,947
(34)
—
—
—
52,095
804,641
4,564,359
1,000
2,851,384
—
—
115,789
37,558
1,960
78,868
678,753
13,600
692,353
(2,854,344)
—
—
232,215
(1,698,153)
—
(1,698,153)
856,355
13,600
869,955
Total Iron Mountain Incorporated Stockholders' Equity
856,355
895,294
124,106
Noncontrolling Interests
Total Equity
—
—
—
856,355
895,294
124,106
Total Liabilities and Equity
$ 3,807,532
$ 5,262,805
$ 443,524
$ 2,148,660
$
(5,139,256) $
6,523,265
118
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(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, 2015
Canada
Company
Non-
Guarantors
Eliminations
Consolidated
$
151
$
6,472
$
13,182
$
108,576
$
14,069
30,428
519,904
— $
—
Assets
Current Assets:
Cash and Cash Equivalents
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
Total Assets
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)
—
—
898
1,049
661
3,255,049
797,666
—
623
1,038,141
106,670
1,165,352
1,600,886
1,869
459,429
1,618,593
392,987
—
2,305
45,915
137,100
—
27,731
152,975
22,637
203,343
—
56,740
2,608,818
41,159
454,924
674,190
1,000
3,255,049
—
115,950
—
26,804
284,798
869
37,402
—
(1,038,141)
(29)
(1,038,170)
128,381
564,401
—
165,130
857,912
—
2,497,158
(3,256,918)
(1,287,688)
—
—
—
—
2,360,978
634,539
(4,544,606)
2,995,517
55,286
683,766
758,511
—
2,862
589,410
218,292
810,564
46,938
215,295
1,189,804
(29)
—
—
—
88,068
753,763
4,757,610
—
(3,256,918)
—
69,187
—
222,539
559,251
19,766
579,017
(1,287,688)
—
(1,287,688)
508,841
19,766
528,607
Total Other Assets, Net
4,053,338
2,472,878
$4,055,048
$ 5,239,116
$ 386,358
$ 2,252,841
$
(5,582,776) $
6,350,587
$ 879,649
$
— $
5,892
$
152,600
$
(1,038,141) $
Total Iron Mountain Incorporated Stockholders' Equity
508,841
697,844
30,593
Noncontrolling Interests
Total Equity
—
—
—
508,841
697,844
30,593
Total Liabilities and Equity
$4,055,048
$ 5,239,116
$ 386,358
$ 2,252,841
$
(5,582,776) $
6,350,587
119
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(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, 2013
Parent
Guarantors
Canada
Company
Non-
Guarantors
Eliminations
Consolidated
$
— $ 1,174,978
$ 129,987
$
479,756
$
— $
1,784,721
754,090
35,119
—
—
1,929,068
165,106
450,693
32,810
963,259
—
1,239,902
(32,810)
(32,810)
—
3,024,623
Revenues:
Storage Rental
Service
Intercompany service
Total Revenues
Operating Expenses:
Cost of sales (excluding depreciation and amortization)
Intercompany service charges
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
Operating (Loss) Income
Interest Expense (Income), Net
Other Expense (Income), Net
—
—
—
—
—
227
319
5
551
(551)
206,682
54,144
(Loss) Income from Continuing Operations Before Provision
(Benefit) for Income Taxes and Gain on Sale of Real Estate
(261,377)
(Benefit) Provision for Income Taxes
Gain on Sale of Real Estate, Net of Tax
(16)
—
Equity in the (Earnings) Losses of Subsidiaries, Net of Tax
(357,823)
Income (Loss) from Continuing Operations
(Loss) Income from Discontinued Operations, Net of Tax
96,462
—
771,271
—
655,052
195,794
(100)
1,622,017
307,051
(19,731)
1,283
325,499
33,767
—
(63,775)
355,507
(529)
27,354
32,810
15,792
12,383
21
88,360
76,746
40,537
5,410
30,799
12,361
—
(5,681)
24,119
—
Net Income (Loss)
96,462
354,978
24,119
Less: Net Income (Loss) Attributable to Noncontrolling
Interests
—
—
—
Net Income (Loss) Attributable to Iron Mountain Incorporated $ 96,462
Net Income (Loss)
$ 96,462
$
$
354,978
354,978
$
$
24,119
24,119
$
$
490,253
—
1,288,878
—
(32,810)
(32,810)
2,535,376
252,960
113,541
504
857,258
106,001
26,686
14,365
64,950
16,015
(1,417)
(18,438)
68,790
1,360
70,150
3,530
66,620
70,150
—
—
—
—
—
—
—
—
—
445,717
(445,717)
—
(445,717)
—
$
$
(445,717) $
(445,717) $
—
924,031
322,037
430
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
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustments
Market Value Adjustments for Securities
Equity in Other Comprehensive (Loss) Income of
Subsidiaries
Total Other Comprehensive (Loss) Income
Comprehensive Income (Loss)
Comprehensive Income (Loss) Attributable to
Noncontrolling Interests
(3,237)
—
(25,737)
(28,974)
67,488
1,177
926
(26,862)
(24,759)
330,219
(11,096)
(18,376)
—
—
—
—
(4,037)
(15,133)
8,986
(11,096)
(29,472)
40,678
67,732
67,732
(377,985)
—
—
—
1,898
—
1,898
Comprehensive Income (Loss) Attributable to Iron Mountain
Incorporated
$ 67,488
$
330,219
$
8,986
$
38,780
$
(377,985) $
67,488
120
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(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
$
— $ 1,208,380
$ 124,551
$
527,312
$
— $
1,860,243
749,711
68,669
—
—
439,070
64,794
1,958,091
193,220
1,031,176
—
1,257,450
(64,794)
(64,794)
—
3,117,693
Revenues:
Storage Rental
Service
Intercompany service
Total Revenues
Operating Expenses:
Cost of sales (excluding depreciation and amortization)
Intercompany service charges
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
Operating (Loss) Income
Interest Expense (Income), Net
Other Expense (Income), Net
—
—
—
—
—
1,182
225
—
1,407
(1,407)
187,650
793,274
—
580,568
214,341
23,040
64,794
13,304
11,797
829
173
1,589,012
113,108
369,079
(23,295)
80,112
36,946
78
(203,380)
(91)
(Loss) Income from Continuing Operations Before Provision
(Benefit) for Income Taxes and Gain on Sale of Real Estate
(189,135)
595,754
(Benefit) Provision for Income Taxes
Gain on Sale of Real Estate, Net of Tax
—
—
Equity in the (Earnings) Losses of Subsidiaries, Net of Tax
(515,254)
Income (Loss) from Continuing Operations
(Loss) Income from Discontinued Operations, Net of Tax
326,119
—
(114,947)
(196)
196,310
514,587
(937)
43,257
12,876
(832)
(992)
32,205
—
528,322
—
1,344,636
—
(64,794)
274,518
126,780
63
929,683
101,493
59,416
268,580
(226,503)
4,796
(7,279)
(31,215)
(192,805)
728
—
—
—
—
869,572
353,143
1,065
(64,794)
2,568,416
—
—
—
—
—
—
351,151
(351,151)
—
549,277
260,717
65,187
223,373
(97,275)
(8,307)
—
328,955
(209)
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
—
Net Income (Loss) Attributable to Iron Mountain Incorporated $ 326,119
$ 326,119
6,328
—
(72,662)
(66,334)
259,785
$
$
513,650
513,650
$
$
32,205
32,205
$
$
(194,704) $
(351,151) $
(192,077) $
(351,151) $
(10,306)
(62,936)
47
53
(73,696)
(73,596)
440,054
—
288
(10,018)
22,187
—
(10,306)
(73,242)
—
—
156,376
156,376
(265,319)
(194,775)
2,627
326,119
328,746
(66,867)
53
—
(66,814)
261,932
Net Income (Loss)
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustments
Market Value Adjustments for Securities
Equity in Other Comprehensive (Loss) Income of
Subsidiaries
Total Other Comprehensive (Loss) Income
Comprehensive Income (Loss)
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
121
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(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, 2015
Parent
Guarantors
Canada
Company
Non-
Guarantors
Eliminations
Consolidated
$
— $ 1,226,299
$ 118,908
$
492,690
$
— $
1,837,897
Revenues:
Storage Rental
Service
Intercompany service
Total Revenues
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
Operating (Loss) Income
Interest Expense (Income), Net
Other Expense (Income), Net
(Loss) Income from Continuing Operations Before Provision
(Benefit) for Income Taxes and Gain on Sale of Real Estate
(183,821)
Provision (Benefit) for Income Taxes
Gain on Sale of Real Estate
—
—
Equity in the (Earnings) Losses of Subsidiaries, Net of Tax
(307,062)
Net Income (Loss)
123,241
—
—
—
—
—
117
181
—
298
734,883
3,476
61,717
—
1,964,658
180,625
788,278
13,384
594,994
224,214
25,213
58,132
14,734
12,427
962
41
1,621,832
110,547
(298)
342,826
(30,559)
(82,820)
456,205
13,632
—
135,720
306,853
70,078
36,521
55,230
(21,673)
12,787
—
(2,552)
(31,908)
159,848
23,675
373,479
71,516
937,685
476,534
3,476
235,115
108,642
1,997
825,764
111,921
98,061
102,505
(88,645)
11,294
(850)
34,462
(133,551)
Less: Net Income (Loss) Attributable to Noncontrolling
Interests
—
—
—
1,962
—
Net Income (Loss) Attributable to Iron Mountain Incorporated $ 123,241
Net Income (Loss)
Other Comprehensive (Loss) Income:
Foreign Currency Translation Adjustments
Market Value Adjustments for Securities
Equity in Other Comprehensive (Loss) Income of
Subsidiaries
Total Other Comprehensive (Loss) Income
Comprehensive Income (Loss)
Comprehensive Income (Loss) Attributable to
Noncontrolling Interests
$ 123,241
3,284
—
(103,170)
(99,886)
23,355
$
$
306,853
306,853
$
$
(31,908) $
(135,513) $
(139,432) $
(31,908) $
(133,551) $
(139,432) $
—
(245)
(19,003)
(85,251)
—
—
(103,521)
(103,766)
203,087
(3,176)
(22,179)
(54,087)
(19,003)
(104,254)
(237,805)
—
—
228,870
228,870
89,438
—
—
—
633
—
633
Comprehensive Income (Loss) Attributable to Iron Mountain
Incorporated
$ 23,355
$
203,087
$
(54,087) $
(238,438) $
89,438
$
23,355
122
—
1,170,079
(74,992)
(74,992)
—
3,007,976
—
1,290,025
(74,992)
—
—
—
—
844,960
345,464
3,000
(74,992)
2,483,449
—
—
—
—
—
—
139,432
(139,432)
524,527
263,871
98,590
162,066
37,713
(850)
—
125,203
1,962
123,241
125,203
(100,970)
(245)
—
(101,215)
23,988
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(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
(195,786)
527,882
28,580
—
(129)
—
Cash Flows from Operating Activities:
Cash Flows from Operating Activities-Continuing
Operations
Cash Flows from Operating Activities-Discontinued
Operations
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
Acquisitions of customer relationships and customer
inducements
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 notes
Debt financing (repayment to) and equity contribution
from (distribution to) noncontrolling interests, net
Intercompany loans from parent
Equity contribution from parent
Parent cash dividends
Proceeds from exercise of stock options and employee
stock purchase plan
Excess tax benefits from stock-based compensation
Payment of debt financing and stock issuance costs
Cash Flows from Financing Activities-Continuing
Operations
Cash Flows from Financing Activities-Discontinued
Operations
Year Ended December 31, 2013
Parent
Guarantors
Canada
Company
Non-
Guarantors
Eliminations
Consolidated
$(195,786) $
528,011
$
28,580
$
145,788
$
— $
506,593
1,082
146,870
(100,714)
(105,058)
—
—
—
(180,047)
(212,042)
398,299
(63,149)
—
(6,534)
—
—
—
—
(18,083)
(498)
(11,610)
54
(3,175)
5,205
—
—
—
—
(785,598)
126,298
—
—
—
953
507,546
(287,295)
(317,100)
—
—
(248)
(30,191)
2,084
—
—
387,299
(63,149)
(248)
—
—
323,902
(74,968)
(10,207)
(212,177)
(659,300)
(632,750)
—
323,902
(4,937)
(79,905)
—
—
—
(10,207)
(212,177)
(659,300)
(4,937)
(637,687)
—
—
(514,239)
591,000
(14,852)
—
—
(206,798)
17,664
2,389
(2,037)
(5,077,356)
(341,336)
(107,980)
4,948,691
438,188
274,871
—
—
—
(170,895)
191,307
—
—
—
(3,384)
(379,910)
(232,436)
(173,252)
63,149
—
—
—
—
—
—
—
63,149
—
—
—
(5,657)
(750)
(262)
—
—
—
—
—
785,598
(126,298)
—
—
—
—
(126,873)
(451,083)
(115,922)
53,142
659,300
—
—
—
—
—
Cash Flows from Financing Activities
(126,873)
(451,083)
(115,922)
Effect of exchange rates on cash and cash equivalents
Increase (Decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
—
1,243
—
—
(4,703)
(3,106)
(102,252)
13,472
103,346
53,142
(6,609)
(18,774)
126,597
659,300
—
—
—
Cash and cash equivalents, end of year
$
1,243
$
10,366
$
1,094
$
107,823
$
— $
123
(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
120,526
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(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
(192,058)
452,577
55,538
156,891
—
—
—
—
Cash Flows from Operating Activities:
Cash Flows from Operating Activities-Continuing
Operations
Cash Flows from Operating Activities-Discontinued
Operations
Cash Flows from Investing Activities:
Capital expenditures
Cash paid for acquisitions, net of cash acquired
Intercompany loans to subsidiaries
Investment in subsidiaries
Acquisitions of customer relationships and customer
inducements
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
Year Ended December 31, 2014
Parent
Guarantors
Canada
Company
Non-
Guarantors
Eliminations
Consolidated
$
(192,058) $
452,577
$
55,538
$
156,891
$
— $
472,948
—
—
(217,924)
(6,877)
(137,123)
(3,371)
(29,016)
(95,706)
1,307,133
(48,203)
112,845
(48,203)
—
—
—
—
(1,419,978)
96,406
—
—
(26,788)
(2,140)
(5,519)
2,641
1,871
39,974
—
—
1,258,930
(180,800)
(36,162)
(198,374)
(1,323,572)
(479,978)
—
—
—
—
—
—
Cash Flows from Investing Activities
1,258,930
(180,800)
(36,162)
(198,374)
(1,323,572)
(479,978)
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
(566,352)
Net proceeds from sales of senior notes
Debt financing (repayment to) and equity contribution
from (distribution to) noncontrolling interests, net
Intercompany loans from parent
Equity contribution from parent
Parent cash dividends
Proceeds from exercise of stock options and employee
stock purchase plan
Excess tax 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
(7,949,523)
(667,505)
(207,683)
8,327,608
645,848
311,731
—
—
5,716
—
—
—
—
642,417
(20,486)
—
—
—
—
—
(708,935)
5,866
(716,909)
1,419,978
48,203
(96,406)
48,203
—
—
—
—
—
—
—
—
—
—
(499)
(12)
(2,039)
—
—
—
—
(542,298)
44,290
(60)
(1,296)
Cash Flows from Financing Activities
(1,065,716)
(277,430)
(15,803)
Effect of exchange rates on cash and cash equivalents
Increase (Decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
—
1,156
1,243
—
(5,653)
10,366
312
3,885
1,094
—
—
—
—
55,234
(7,732)
6,019
107,823
—
1,323,572
—
—
—
Cash and cash equivalents, end of year
$
2,399
$
4,713
$
4,979
$
113,842
$
— $
124
(1,065,716)
(277,430)
(15,803)
55,234
1,323,572
19,857
—
—
—
—
—
—
—
—
—
472,948
(361,924)
(128,093)
—
—
(34,447)
44,486
(8,824,711)
9,285,187
(566,352)
642,417
(14,770)
—
—
(542,298)
44,290
(60)
(3,846)
—
19,857
(7,420)
5,407
120,526
125,933
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(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)
Year Ended December 31, 2015
Parent
Guarantors
Canada
Company
Non-
Guarantors
Eliminations
Consolidated
Cash Flows from Operating Activities:
Cash Flows from Operating Activities
$ (161,287) $
568,360
$
39,181
$
95,506
$
— $
541,760
Cash Flows from Investing Activities:
Capital expenditures
Cash paid for acquisitions, net of cash acquired
Intercompany loans to subsidiaries
Investment in subsidiaries
Decrease in restricted cash
Acquisitions of customer relationships and customer
inducements
Proceeds from sales of property and equipment and other,
net (including real estate)
—
—
334,019
(25,276)
33,860
—
—
(189,213)
(15,128)
(9,902)
320,932
(25,276)
—
(5,260)
—
—
—
(85,908)
(98,396)
—
—
—
(44,024)
(576)
(10,511)
586
49
1,637
—
—
(654,951)
50,552
—
—
—
(290,249)
(113,558)
—
—
33,860
(55,111)
2,272
Cash Flows from Investing Activities
342,603
53,103
(20,915)
(193,178)
(604,399)
(422,786)
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 notes
Debt financing (repayment to) and equity contribution
from (distribution to) noncontrolling interests, net
Intercompany loans from parent
Equity contribution from parent
Parent cash dividends
Proceeds from exercise of stock options and employee
stock purchase plan
Excess tax benefit from stock-based compensation
—
(8,456,062)
(754,703)
(1,586,108)
47,198
8,220,200
835,101
1,823,210
(814,728)
985,000
—
—
—
(406,508)
7,149
327
—
—
—
—
—
—
—
—
5,574
(398,514)
(94,038)
(162,399)
25,276
—
—
—
—
—
—
—
—
25,276
—
—
—
(1,555)
—
—
—
—
—
654,951
(50,552)
—
—
—
—
Payment of debt financing costs and stock issuance costs
(2,002)
(10,604)
Cash Flows from Financing Activities
(183,564)
(619,704)
(13,640)
103,998
604,399
Effect of exchange rates on cash and cash equivalents
(Decrease) Increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
—
(2,248)
2,399
—
1,759
4,713
3,577
8,203
4,979
(11,592)
(5,266)
113,842
—
—
—
Cash and cash equivalents, end of year
$
151
$
6,472
$
13,182
$
108,576
$
— $
125
(10,796,873)
10,925,709
(814,728)
985,000
5,574
—
—
(406,508)
7,149
327
(14,161)
(108,511)
(8,015)
2,448
125,933
128,381
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(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 2013, 2014 and 2015 acquisitions on our consolidated results of operations. Noteworthy acquisitions are as follows:
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.
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.
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
Yönetim
Hizmetleri Ticaret Anonim
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.
a storage rental and records management business with operations in Turkey, for
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.
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.
In December 2015, in order to expand our offerings in our Adjacent Businesses operating segment, we acquired Crozier, a
storage, logistics and transportation business for high value paintings, photographs and other types of art belonging to
individual collectors, galleries and art museums for approximately $74,200.
In December 2015, in order to enhance our existing operations in India, we acquired the stock of Navbharat Archive
XPress Private Limited ("NAX"), a storage and records management company with operations in India, for approximately
$16,100. Of the total consideration, approximately $8,900 was funded by us, while the remaining $7,200 was contributed by
the noncontrolling interest shareholder of our business in India. The amount contributed by our noncontrolling interest
shareholder is presented as source of cash within debt (repayment to) financing from and equity (distribution to) contribution
from noncontrolling interests, net in our Consolidated Statement of Cash Flows.
126
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
6. Acquisitions (Continued)
In addition to the acquisitions of Crozier and NAX noted above, during 2015, in order to enhance our existing operations
in Australia, Austria, Canada, Chile, Hungary, India, Serbia, the United Kingdom and the United States, we completed 12
acquisitions for total consideration of approximately $27,600. These acquisitions included nine storage and records
management companies, two storage and data management companies and one personal storage company. The individual
purchase prices of these acquisitions ranged from approximately $1,000 to $5,400.
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)(1)
Fair Value of Previously Held Equity Interest
Total Consideration
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)
Total Fair Value of Identifiable Net Assets Acquired
$
2013
321,121
—
321,121
2014
134,301
$
2015
111,907
$
794
135,095
—
111,907
28,532
44,681
173,733
68
(67,645)
179,369
15,098
23,269
60,172
3,342
(50,903)
50,978
12,670
43,505
34,988
7,032
(26,807)
71,388
Goodwill Initially Recorded
$
141,752
$
84,117 $
40,519
_______________________________________________________________________________
(1) Included in cash paid for acquisitions in the Consolidated Statements of Cash Flows for the year ended December 31,
2013 is net of cash acquired of $(3,945) and 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. Included in
cash paid for acquisitions in the Consolidated Statements of Cash Flows for the year ended December 31, 2015 is net
cash acquired of $(2,041) and contingent and other payments of $3,692 related to acquisitions made in previous years.
(2) Consists primarily of buildings, racking structures, leasehold improvements and computer hardware and software.
(3) The weighted average lives of customer relationship intangible assets associated with acquisitions in 2013, 2014 and
2015 was 22 years, 17 years and 16 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 2015 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 2015 acquisitions will differ meaningfully
from preliminary estimates. The purchase price allocations of these 2015 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 buildings and racking structures), operating leases, contingencies and income taxes (primarily deferred
income taxes).
127
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
6. Acquisitions (Continued)
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 $24,500 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.
On June 8, 2015, we entered into a binding Scheme Implementation Deed (the “Recall Agreement”) with Recall Holdings
Limited (“Recall”) to acquire Recall (the “Recall Transaction”) by way of a recommended court approved Scheme of
Arrangement (the “Scheme”). Under the terms of the Recall Agreement, Recall shareholders are entitled to receive the
Australian dollar equivalent of US$0.50 in cash for each outstanding share of Recall common stock (the “Cash Supplement”) as
well as either (1) 0.1722 shares of our common stock for each Recall share or (2) 8.50 Australian dollars less the Australian
dollar equivalent of US$0.50 in cash for each Recall share (the “Cash Election”). The Cash Election is subject to a proration
mechanism that will cap the total amount of cash paid to Recall shareholders electing the Cash Election at 225,000 Australian
dollars (the “Cash Election Cap”). Amounts paid to Recall shareholders that represent the Cash Supplement are excluded from
the calculation of the Cash Election Cap. Assuming a sufficient number of Recall shareholders elect the Cash Election such that
we pay the Cash Election Cap, we expect to issue approximately 50,700,000 shares of our common stock and, based on the
exchange rate between the United States dollar and the Australian dollar as of February 19, 2016, pay approximately US
$323,000 to Recall shareholders in connection with the Recall Transaction which, based on the closing price of our common
stock as of February 19, 2016, would result in a total purchase price to Recall shareholders of approximately $1,791,000.
Completion of the Scheme is subject to customary closing conditions, including among others, (i) approval by Recall
shareholders of the Scheme by the requisite majority under the Australian Corporations Act, (ii) expiration or earlier
termination of any applicable waiting period and receipt of regulatory consents, approvals and clearances, in each case, under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and under relevant antitrust/competition and foreign
investment legislation in other relevant jurisdictions, (iii) the absence of any final, non-appealable order, decree or law
preventing, making illegal or prohibiting the completion of the Recall Transaction, (iv) approval from the New York Stock
Exchange to the listing of additional shares of our common stock to be issued in the Recall Transaction, (v) the establishment of
a secondary listing on the Australian Securities Exchange (the “ASX”) to allow Recall shareholders to trade our common stock
via CHESS Depository Interests on the ASX, (vi) Recall’s delivery of tax opinions in accordance and in compliance with
certain tax matter agreements to which Recall is a party and (vii) no events having occurred that would have a material adverse
effect on Recall or us. We continue to work toward closing of the Recall Transaction and related integration planning.
128
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
7. Income Taxes
We have been organized and operating as a REIT effective since our taxable year that began on 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 we have business
operations or a taxable presence, regardless of whether assets are held or operations are 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 five-year period 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 has been imposed on our depreciation recapture recognized
into income 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.
The significant components of the deferred tax assets and deferred tax liabilities are presented below:
December 31,
2014
2015
Deferred Tax Assets:
Accrued liabilities
Deferred rent
Net operating loss carryforwards
Federal benefit of unrecognized tax benefits
Foreign deferred tax assets and other adjustments
Valuation allowance
Deferred Tax Liabilities:
Other assets, principally due to differences in amortization
Plant and equipment, principally due to differences in depreciation
Net deferred tax liability
The current and noncurrent deferred tax assets (liabilities) are presented below:
Deferred tax assets
Deferred tax liabilities
Current deferred tax assets, net
Deferred tax assets
Deferred tax liabilities
Noncurrent deferred tax liabilities, net
129
$
$
$
$
$
$
22,236
$
3,144
64,718
14,859
8,620
(40,182)
73,395
(74,782)
(39,079)
(113,861)
(40,466) $
22,107
4,426
69,290
12,327
8,698
(60,009)
56,839
(66,254)
(23,408)
(89,662)
(32,823)
December 31,
2014
2015
16,655
$
26,668
(2,463)
14,192
56,740
$
$
(4,489)
22,179
30,171
(111,398)
(85,173)
(54,658) $
(55,002)
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
7. Income Taxes (Continued)
We have federal net operating loss carryforwards, which expire in 2021 through 2033, of $70,820 at December 31, 2015
to reduce future federal taxable income, on which $3,022 of federal tax benefit is expected to be realized. We can carry forward
these net operating losses to the extent we do not utilize them in any given available year. We have state net operating loss
carryforwards, which expire from 2016 through 2034, on which an insignificant state tax benefit is expected to be realized. We
have assets for foreign net operating losses of $66,155, with various expiration dates (and in some cases no expiration date),
subject to a valuation allowance of approximately 91%.
Rollforward of the valuation allowance is as follows:
Year Ended December 31,
2013
2014
2015
Balance at
Beginning of
the Year
Charged
(Credited) to
Expense
Other
Additions
Other
Deductions(1)
Balance at
End of
the Year
$
$
76,050
40,278
40,182
(27,186) $
9,404
33,509
— $
—
—
(8,586) $
(9,500)
(13,682)
40,278
40,182
60,009
_______________________________________________________________________________
(1) Primarily due to fluctuations in currency exchange
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 $2,389, $(60) and $327 for the years ended December 31,
2013, 2014 and 2015, respectively.
130
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
7. Income Taxes (Continued)
The components of income (loss) from continuing operations before provision (benefit) for income taxes and gain on sale
of real estate are:
United States
Canada
Other Foreign
Year Ended December 31,
$
2013
63,930
39,038
56,903
$ 159,871
2014
$ 202,067
2015
$ 179,928
46,191
(24,885)
$ 223,373
37,131
(54,993)
$ 162,066
The provision (benefit) for income taxes consists of the following components:
Federal—current
Federal—deferred
State—current
State—deferred
Foreign—current
Foreign—deferred
Year Ended December 31,
2013
92,237
(64,441)
10,152
(8,056)
59,170
(26,935)
62,127
$
2014
$ 118,314
(214,132)
28,034
(47,814)
27,167
(8,844)
$ (97,275) $
$
$
2015
13,083
(9,579)
522
158
31,581
1,948
37,713
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 on sale of real estate for the years
ended December 31, 2013, 2014 and 2015, 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 taxes
Year Ended December 31,
2013
55,955
$
2014
78,181
2015
56,723
$
$
(63,333)
—
— (182,853)
2,207
4,384
2,832
(30,018)
44,751
17,691
6,576
(16,322)
(33,852)
9,708
9,404
—
46,356
—
2,869
3,175
(9,496)
12,502
(51,625)
(9,067)
2,017
33,509
—
4,030
—
—
(2,874)
(8,915)
18,022
(4,107)
37,713
Other, net
Provision (Benefit) for Income Taxes
422
62,127
3,713
$ (97,275) $
$
131
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
7. Income Taxes (Continued)
Our effective tax rates for the years ended December 31, 2013, 2014 and 2015 were 38.9%, (43.5)% and 23.3%,
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, as well as between the jurisdictions in which we operate; (2) tax
law changes; (3) volatility in foreign exchange gains and losses; (4) the timing of the establishment and reversal of tax reserves;
and (5) our ability to utilize net operating losses that we generate.
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.
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 other primary 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 associated with incremental federal and state income taxes and foreign withholding taxes on earnings of our foreign
subsidiaries no longer considered permanently invested and other net tax adjustments related to the REIT conversion, including
a tax benefit of $63,333 primarily related to the dividends paid deduction.
The primary reconciling items between the federal statutory rate of 35% and our overall effective tax rate for the year
ended December 31, 2015 were the benefit derived from the dividends paid deduction of $51,625 and an out-of-period tax
adjustment ($9,067 tax benefit) recorded during the third quarter to correct the valuation of certain deferred tax assets
associated with the REIT conversion that occurred in 2014, partially offset by valuation allowances on certain of our foreign net
operating losses of $33,509, primarily related to our foreign subsidiaries in Argentina, Brazil, France and Russia.
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 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
$1,459, $1,462 and $2,173 for gross interest and penalties for the years ended December 31, 2013, 2014 and 2015, respectively.
We had $5,884 and $7,120 accrued for the payment of interest and penalties as of December 31, 2014 and 2015, respectively.
132
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
7. Income Taxes (Continued)
A summary of tax years that remain subject to examination by major tax jurisdictions is as follows:
Tax Years
See Below
2006 to present
2010 to present
Tax Jurisdiction
United States—Federal and State
Canada
United Kingdom
The normal statute of limitations for United States federal tax purposes is three years from the date the tax return is filed;
however, the statute of limitations may remain open for periods longer than three years in instances where a federal tax
examination is in progress. The 2012, 2013 and 2014 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,
2008 and 2009 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 and provide for these matters as appropriate. 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. As of December 31, 2015,
we had $47,685 of reserves related to uncertain tax positions, of which $45,256 and $2,429 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.
133
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
7. Income Taxes (Continued)
A reconciliation of unrecognized tax benefits is as follows:
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
Gross tax contingencies—December 31, 2014
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, 2015
$
$
$
$
37,563
5,985
20,275
(1,370)
(1,312)
(9,995)
51,146
3,984
13,717
(2,699)
(5,350)
(4,847)
55,951
3,484
979
(3,588)
(9,141)
—
47,685
The reversal of these reserves of $47,685 ($36,062 net of federal tax benefit) as of December 31, 2015 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 $2,730 of our unrecognized tax positions may be recognized by the end of 2016 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, 2015
(In thousands, except share and per share data)
8. Quarterly Results of Operations (Unaudited)
Quarter Ended
2014
Total revenues
Operating income (loss)
Income (loss) from continuing operations
Total (loss) income from discontinued operations
Net income (loss)
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 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
2015
Total revenues
Operating income (loss)
Income (loss) from continuing operations
Total (loss) income from discontinued operations
Net income (loss)
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 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
March 31
June 30
September 30 December 31
$ 770,126
$ 786,892
$ 782,697
$ 777,978
132,616
42,721
(612)
42,109
147,290
272,702
(326)
272,376
41,667
271,637
0.22
—
0.22
0.22
—
0.22
1.42
—
1.41
1.41
—
1.40
141,476
858
—
858
66
—
—
—
—
—
—
127,895
12,674
729
13,403
12,749 (1)
0.06
—
0.06
0.06
—
0.06
$ 749,286
$ 759,734
$ 746,529
$ 752,427
144,934
41,739
—
129,502
54,007
—
126,822
23,517
—
41,739
54,007
23,517
123,269
5,940
—
5,940
41,096
53,330
23,110
5,705 (2)
0.20
—
0.20
0.20
—
0.19
0.26
—
0.25
0.25
—
0.25
0.11
—
0.11
0.11
—
0.11
0.03
—
0.03
0.03
—
0.03
_______________________________________________________________________________
135
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
8. Quarterly Results of Operations (Unaudited) (Continued)
(1) 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.
(2) The change in net income (loss) attributable to Iron Mountain Incorporated in the fourth quarter of 2015 compared to
the third quarter of 2015 is primarily attributable to a debt extinguishment charge recorded in the fourth quarter of
2015 of approximately $25,100, an increase in the provision for income taxes recorded in the fourth quarter of 2015
compared to the third quarter of 2015 of approximately $6,800, as well as a decrease in operating income of
approximately $3,600, primarily associated with a $1,800 write-off of certain property in our Western European
Business segment. The debt extinguishment charge, the increase in the provision for income taxes and the decrease in
operating income during the fourth quarter of 2015 was offset by a decrease in loss on foreign currency transaction
losses recorded in the fourth quarter of 2015 compared to the third quarter of 2015 of approximately $18,100.
9. Segment Information
As a result of a realignment in our senior management reporting structure during the first quarter of 2015, we modified
our internal financial reporting to better align internal reporting with how we manage our business. These modifications
resulted in the separation of our former International Business segment into two unique reportable operating segments, which
we refer to as (1) Western European Business segment and (2) Other International Business segment. Also, during the first
quarter of 2015, we reassessed the nature of certain costs which were previously being allocated to the North American Records
and Information Management Business and North American Data Management Business segments. As a result of this
reassessment, we determined that certain product management functions, which were previously being performed to solely
benefit our North American operating segments, are now being performed in a manner that benefits the enterprise as a whole.
Accordingly, the costs associated with these product management functions are now included within the Corporate and Other
Business segment. Additionally, during the fourth quarter of 2015, as a result of changes in the senior management of our
business in Norway, we determined that our Norway operations are now being managed as a component of our Other
International Business segment rather than as a component of our Western European Business segment.
As a result of these changes noted above, previously reported segment information has been restated to conform to the
current presentation.
Our five reportable operating segments are described as follows:
• North American Records and Information Management Business—storage and information management services,
including the storage of physical records, including other media such as microfilm and microfiche, master audio and
videotapes, film,
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”); and DMS throughout the United States and Canada;
as well as Fulfillment Services and Intellectual Property Management in the United States.
• North American Data Management Business—storage and rotation of backup computer media as part of corporate
disaster recovery plans 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, throughout the United States and Canada.
136
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
9. Segment Information (Continued)
• Western European Business—storage and information management services, including Records Management, Data
Protection & Recovery and DMS throughout the United Kingdom, Ireland, Austria, Belgium, France, Germany,
Netherlands, Spain and Switzerland. Until December 2014, our Western European Business segment offered
Destruction in the United Kingdom and Ireland.
• Other International Business—storage and information management services throughout the remaining European
countries in which we operate, Latin America and Asia Pacific, including Records Management, Data Protection &
Recovery and DMS. Our European operations included within the Other International Business segment provide
Records Management, Data Protection & Recovery and DMS. Our Latin America operations provide Records
Management, Data Protection & Recovery, Destruction 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
offered Destruction in Australia.
and China. Until December 2014, our Other International Business segment
• Corporate and Other Business—primarily consists of our data center and fine art storage businesses in the United
States, the primary product offerings of our Adjacent Businesses operating segment (which was formerly referred to as
our Emerging Business operating 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 Business segment also includes
expense associated with all Employee
employee compensation
Awards.
137
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
9. Segment Information (Continued)
North
American
Records &
Information
Management
Business
North
American
Data
Management
Business
Western
European
Business
Other
International
Business
Corporate and
Other Business
Total
Consolidated
$
1,769,233
$
396,519
$
435,346
$
410,253
$
13,272
$
3,024,623
165,097
150,557
14,540
652,575
3,687,865
319,419
96,545
19,956
19,652
304
237,380
690,507
20,678
12,929
54,756
45,368
9,388
118,823
1,068,853
41,869
32,156
50,729
35,911
14,818
87,180
946,249
177,034
70,079
205,251
6,791
3,028
102,030
17,623
958
6,685
4,925
1,795,361
177,097
158,122
18,975
698,719
3,657,366
198,651
145,199
390,207
21,770
21,458
312
226,396
653,275
24,387
18,076
449,231
54,582
45,895
8,687
130,423
952,924
47,236
38,587
469,314
65,103
44,509
20,594
84,468
1,025,167
186,531
93,881
31,499
31,368
131
(201,377)
213,924
75,586
75,586
—
—
13,580
34,591
34,573
18
(214,209)
234,533
67,659
66,181
322,037
282,856
39,181
894,581
6,607,398
634,586
287,295
317,100
30,191
3,117,693
353,143
304,557
48,586
925,797
6,523,265
524,464
361,924
26,450
5,863
4,864
90,916
—
128,093
27,002
448
3,785
1,734
1,478
34,447
1,775,365
183,507
163,647
19,860
714,639
3,627,843
192,935
141,964
390,486
21,591
20,838
753
203,803
641,845
23,826
16,784
397,513
44,691
38,710
5,981
120,649
871,571
27,278
17,378
421,360
57,025
39,439
17,586
87,341
893,530
94,483
64,227
23,252
38,650
38,585
65
(206,427)
315,798
120,396
49,896
3,007,976
345,464
301,219
44,245
920,005
6,350,587
458,918
290,249
12,795
(21)
2,596
27,688
70,500
113,558
38,176
7,063
7,304
2,568
—
55,111
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 Acquired
Acquisitions of Customer
Relationships and Customer
Inducements
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
Acquisitions of Customer
Relationships and Customer
Inducements
2015
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
Acquisitions of Customer
Relationships and Customer
Inducements
_______________________________________________________________________________
(1) Excludes all intercompany receivables or payables and investment in subsidiary balances.
138
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
9. Segment Information (Continued)
The accounting policies of the reportable segments are the same as those described in Note 2. Adjusted OIBDA for each
segment is defined as operating income before depreciation, amortization, intangible impairments, (gain) loss on disposal/write-
down of property, plant and equipment, net (excluding real estate), Recall Costs (as defined below) and REIT Costs (as defined
below) directly attributable to the segment. Internally, we use Adjusted OIBDA as the basis for evaluating the performance of,
and allocating resources to, our operating segments.
A reconciliation of Adjusted OIBDA to income (loss) from continuing operations before provision (benefit) for income
taxes and gain on sale of real estate on a consolidated basis is as follows:
Adjusted OIBDA
Less: Depreciation and Amortization
Loss on Disposal/Write-down of Property, Plant and Equipment (Excluding Real
Estate), Net
Recall Costs(1)
REIT Costs(2)
Interest Expense, Net
Other Expense, Net
Income (Loss) from Continuing Operations before Provision (Benefit) for Income
Taxes and Gain on Sale of Real Estate
_______________________________________________________________________________
Year Ended December 31,
2013
$ 894,581
322,037
2014
$ 925,797
353,143
2015
$ 920,005
345,464
430
—
82,867
254,174
75,202
1,065
—
22,312
260,717
65,187
3,000
47,014
—
263,871
98,590
$ 159,871
$ 223,373
$ 162,066
(1) Includes operating expenditures associated with our proposed acquisition of Recall, including costs to complete the
Recall Transaction, including advisory and professional fees, as well as costs to integrate Recall with our existing
operations, including moving, severance, facility upgrade, REIT conversion and system upgrade costs ("Recall
Costs").
(2) Includes 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").
139
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
9. Segment Information (Continued)
Information as to our operations in different geographical areas is as follows:
Revenues:
United States
United Kingdom
Canada
Other International
Total Revenues
Long-lived Assets:
United States
United Kingdom
Canada
Other International
Total Long-lived Assets
Year Ended December 31,
2013
2014
2015
$
$
$
$
1,938,307
275,343
240,716
570,257
3,024,623
3,603,320
520,255
410,415
1,139,801
5,673,791
$
$
$
$
1,967,169
280,020
231,979
638,525
3,117,693
3,586,577
464,311
406,571
1,148,087
5,605,546
$
$
$
$
1,973,872
250,123
215,232
568,749
3,007,976
3,710,301
434,461
345,783
1,002,130
5,492,675
Information as to our revenues by product and service lines is as follows:
Revenues:
Records Management(1)(2)
Data Management(1)(3)
Information Destruction(1)(4)
Total Revenues
Year Ended December 31,
2013
2014
2015
$
$
2,244,494
$
2,329,546
$
2,255,206
527,091
253,038
531,516
256,631
509,261
243,509
3,024,623
$
3,117,693
$
3,007,976
_______________________________________________________________________________
(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.
140
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
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 $244,390, $255,193 and $242,205 for the years ended
December 31, 2013, 2014 and 2015, 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 reasonably assured that we will renew the lease. Such payments in effect at
December 31, are as follows:
Year
2016
2017
2018
2019
2020
Thereafter
Total minimum lease payments
Less amounts representing interest
Present value of capital lease obligations
Operating Lease
Payment
Sublease
Income
Capital
Leases
$
220,357
$
208,975
196,632
184,157
171,794
1,046,705
$
2,028,620
$
(4,827) $
(4,354)
(3,316)
(2,864)
(2,922)
(10,327)
(28,610)
$
56,543
49,217
39,696
31,909
24,418
134,532
336,315
(100,967)
235,348
In addition, we have certain contractual obligations related to purchase commitments which require minimum payments
as follows:
Year
2016
2017
2018
2019
2020
Thereafter
Purchase
Commitments
53,494
25,114
8,172
2,505
1,258
1,368
91,911
$
$
141
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
10. Commitments and Contingencies (Continued)
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, 2014 and 2015 there were $33,381 and $33,508, respectively, of self-insurance accruals reflected in accrued
expenses of our Consolidated Balance Sheets. The measurement of these costs requires the consideration of historical cost
experience and judgments about the present and expected levels of cost per claim. We account for these costs primarily through
actuarial methods, which develop estimates of the undiscounted liability for claims incurred, including those claims incurred
but not reported. These methods provide estimates of future ultimate claim costs based on claims incurred as of the balance
sheet date.
c. Litigation—General
We are involved in litigation from time to time in the ordinary course of business. A portion of the defense and/or
settlement costs associated with such litigation is covered by various commercial liability insurance policies purchased by us
and, in limited cases, indemnification from third parties. Our policy is to establish reserves for loss contingencies when the
losses are both probable and reasonably estimable. We record legal costs associated with loss contingencies as expenses in the
period in which they are incurred. The matters described below represent our significant loss contingencies. We have evaluated
each matter and, if both probable and estimable, accrued an amount that represents our estimate of any probable loss associated
with such matter. In addition, we have estimated a reasonably possible range for all loss contingencies including those
described below. We believe it is reasonably possible that we could incur aggregate losses in addition to amounts currently
accrued for all matters up to an additional $6,000 over the next several years, of which certain amounts would be covered by
insurance or indemnity arrangements.
d. Italy Fire
On November 4, 2011, we experienced a fire at a facility we leased in Aprilia, Italy. The facility primarily stored archival
and inactive business records for local area businesses. Despite quick response by local fire authorities, damage to the building
was extensive, and the building and its contents were a total loss. We have been sued by five customers. Three of those lawsuits
have been settled and two remain pending, including a claim asserted by Azienda per i Transporti Autoferrotranviari del
Comune di Roma, S.p.A, seeking 42,600 Euro for the loss of its current and historical archives. We have also received
correspondence from other affected customers, including certain customers demanding payment under various theories of
liability. 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 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.
142
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
10. Commitments and Contingencies (Continued)
e. 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 incurred fees associated with the
Evercore Engagement, including fees associated with the amendment of our Former 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. We did not incur any fees with Evercore during the year
ended December 31, 2015.
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 Internal Revenue Code of 1986, as amended. 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 $19,999, $18,306 and $16,355 for the years ended December 31, 2013,
2014 and 2015, respectively.
13. Stockholders' Equity Matters
Our board of directors has adopted a dividend policy under which we have paid, and in the future intend to pay, quarterly
cash dividends on our common stock. The amount and timing of future dividends will continue to be subject to the approval of
our board of directors, in its sole discretion, and to applicable legal requirements.
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 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.
143
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
13. Stockholders' Equity Matters (Continued)
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 2014 and 2015, our board of directors declared the following dividends:
Declaration Date
March 14, 2014
May 28, 2014
September 15, 2014
September 15, 2014(1)
November 17, 2014(2)
November 17, 2014
February 19, 2015
May 28, 2015
August 27, 2015
October 29, 2015
$
Dividend
Per Share
0.2700
0.2700
0.4750
3.6144
0.2550
0.4750
0.4750
0.4750
0.4750
0.4850
Record Date
March 25, 2014
June 25, 2014
September 25, 2014
September 30, 2014
November 28, 2014
December 5, 2014
March 6, 2015
June 12, 2015
September 11, 2015
December 1, 2015
$
Total
Amount
51,812
52,033
91,993
700,000
53,450
99,617
99,795
100,119
100,213
102,438
_______________________________________________________________________________
Payment
Date
April 15, 2014
July 15, 2014
October 15, 2014
November 4, 2014
December 15, 2014
December 22, 2014
March 20, 2015
June 26, 2015
September 30, 2015
December 15, 2015
(1) Represents Special Distribution.
(2) Represents Catch-Up Distribution.
During the years ended December 31, 2013, 2014 and 2015, we declared distributions to our stockholders of $206,365,
$1,048,905 and $402,565, respectively. These distributions represent approximately $1.08 per share, $5.37 per share and $1.91
per share for the years ended December 31, 2013, 2014 and 2015, respectively, based on the weighted average number of
common shares outstanding during each respective year. For 2014, total amounts distributed included the Special Distribution
of $700,000, or $3.61 per share, associated with our conversion to a REIT.
144
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
13. Stockholders' Equity Matters (Continued)
For federal income tax purposes, distributions to our stockholders are generally treated as nonqualified ordinary
dividends, qualified ordinary dividends or return of capital. The United States Internal Revenue Service 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, 2013, 2014 and 2015, the dividends we paid on our common
shares were classified as follows:
Nonqualified ordinary dividends
Qualified ordinary dividends
Return of capital
14. Discontinued Operations
Digital Operations
Year Ended December 31,
2013
2014
2015
0.0%
100.0%
0.0%
100.0%
26.4%
56.4%
17.2%
49.3%
39.1%
11.6%
100.0%
100.0%
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. 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.
The table below summarizes certain results of operations of the Digital Business:
(Loss) Income Before (Benefit) Provision for Income Taxes of Discontinued Operations
(Benefit) Provision for Income Taxes
(Loss) Income from Discontinued Operations, Net of Tax
Year Ended December 31,
2013
2014
2015
$
$
(958) $
(429)
(529) $
(960) $
—
(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.
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.d. Our Italian
operations were previously included within the Western European 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.
145
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
14. Discontinued Operations (Continued)
The table below summarizes certain results of our Italian operations:
Income (Loss) Before Provision (Benefit) for Income Taxes of Discontinued Operations
Provision (Benefit) for Income Taxes
Income (Loss) from Discontinued Operations, Net of Tax
_______________________________________________________________________________
Year Ended December 31,
2013(1)
2014(1)
2015
$
$
2,290
930
1,360
$
$
751
—
751
$
$
—
—
—
(1) 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. Cost Optimization Plans
Organizational Restructuring
During the third quarter of 2013, we implemented a plan that called for certain organizational realignments to advance
our growth strategy and reduce operating costs (the “Organizational Restructuring”), which was completed in 2014. As a result
of the Organizational Restructuring, we recorded charges of $23,400 and $3,475 for the years ended December 31, 2013 and
2014, respectively, primarily related to employee severance and associated benefits. Costs included in the accompanying
Consolidated Statements of Operations associated with the Organizational Restructuring are as follows:
Cost of sales (excluding depreciation and amortization)
Selling, general and administrative expenses
Total
Year Ended December 31,
2013
2014
2015
$
$
3,400
20,000
23,400
$
$
1,228
2,247
3,475
$
$
—
—
—
Costs recorded by segment associated with the Organizational Restructuring are as follows:
North American Records and Information Management Business
North American Data Management Business
Western European Business
Other International Business
Corporate and Other Business
Total
Year Ended December 31,
2013
12,600
$
2014
2015
$
1,560
$
2,100
2,300
1,400
5,000
340
33
—
1,542
$
23,400
$
3,475
$
—
—
—
—
—
—
146
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
15. Cost Optimization Plans (Continued)
Transformation Initiative
During the third quarter of 2015, we implemented a plan that calls for certain organizational realignments to reduce our
overhead costs, particularly in our developed markets, in order to optimize our selling, general and administrative cost structure
and to support investments to advance our growth strategy (the “Transformation Initiative”), which is expected to be completed
by the end of 2017. As a result of the Transformation Initiative, we recorded charges of $10,167 for the year ended December
31, 2015, primarily related to employee severance and associated benefits. Costs included in the accompanying Consolidated
Statements of Operations associated with the Transformation Initiative are as follows:
Cost of sales (excluding depreciation and amortization)
Selling, general and administrative expenses
Total
Year Ended December 31,
2014
2015
2013
$
$
— $
—
— $
— $
—
— $
—
10,167
10,167
Costs recorded by segment associated with the Transformation Initiative are as follows:
North American Records and Information Management Business
North American Data Management Business
Western European Business
Other International Business
Corporate and Other Business
Total
Year Ended December 31,
2013
2014
2015
$
$
— $
— $
—
—
—
—
—
—
—
—
5,403
241
1,537
—
2,986
— $
— $
10,167
We had accrued $2,291 as of December 31, 2015 related to the Transformation Initiative. We expect that this liability
will be paid throughout the first half of 2016.
In the first quarter of 2016, we implemented additional actions associated with our Transformation Initiative. As a result
of these actions, we expect to record a charge of approximately $7,000, primarily related to employee severance and associated
benefits, and included as a component of selling, general and administrative expenses. Of this charge, approximately $4,400,
$700, $100 and $1,800 was associated with our North American Records and Information Management Business, North
American Data Management Business, Western European Business and Corporate and Other Business segments, respectively.
147
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2015
(In thousands, except share and per share data)
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 did not meet the requirements to be presented as a discontinued operation, 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 represented 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 in
Australia were previously included in the Other International Business segment and the International Shredding Operations in
the United Kingdom and Ireland were previously included in the Western European Business segment.
148
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2015
(Dollars in thousands)
(A)
(B)
(C)
(D)
(E)
(F)
Facilities(1)
Encumbrances
Initial cost
to Company
Cost
capitalized
subsequent to
acquisition
Gross amount
carried at
close
of current
period(1)(2)
Accumulated
depreciation at
close of current
period(1)(2)
Date of
construction or
acquired(3)
Life on which
depreciation in
latest income
statement is
computed
$
— $
1,322
$
823
$
2,145
$
Region/Country/State/Campus
Address
North America
United States (Including Puerto
Rico)
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,
Colorado
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
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,637
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
2,583
2,578
812
3,639
633
7,423
1,564
2,110
4,220
14,756
8,117
5,261
1,393
17,895
6,326
8,910
12,536
27,121
—
18,906
5,776
15
124
6,703
1,110
2,108
4,957
1,617
1,827
2,671
9,827
17
1,454
719
749
29,074
20,948
4,591
28,081
17,215
4,530
8,437
14,602
4,666
3,410
3,432
17,230
6,329
8,871
2,487
10,447
29,145
39,592
14,271
4,021
7,226
1,853
3,293
1,927
4,201
1,786
1,185
2,808
1,295
864
308
2,451
245
5,316
8,090
2,161
5,744
2,172
12,973
17,174
625
293
3,149
2,411
1,478
5,957
149
2,300
4,331
677
2,373
681
4,544
844
713
1,966
809
1,247
3,202
3,975
2,097
515
7,227
2,416
2,686
6,448
34
9,989
12,912
1,343
6,577
5,263
1,613
3,525
3,398
1,494
1,160
1,284
6,812
756
5,262
1,050
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
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
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2015
(Dollars in thousands)
(A)
(B)
(C)
(D)
(E)
(F)
Region/Country/State/Campus
Address
Facilities(1)
Encumbrances
Initial cost
to Company
Cost
capitalized
subsequent to
acquisition
Gross amount
carried at
close
of current
period(1)(2)
Accumulated
depreciation at
close of current
period(1)(2)
Date of
construction or
acquired(3)
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
2600 Beverly Drive, Lincoln,
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
26 Parkway Drive (fka 133
Pleasant), Scarborough, Maine
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
38300 Plymouth Road, Livonia,
Michigan
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
51-69 & 77-81 Court St, Newark,
New Jersey
1
1
1
1
1
1
1
1
1
1
4
1
1
1
1
1
1
1
1
1
1
1
1
2
1
1
1
2
1
1
3
1
1
3
1
3
1
$
— $
463
$
635
$
1,098
$
26,675
17,123
8,602
3,075
5,665
22,099
1,821
12,650
938
9,331
8,545
6,392
8,338
7,814
4,655
17,333
7,001
632
7,093
2,486
5,461
2,273
74,911
10,330
2,343
2,184
5,692
5,145
5,981
15,072
12,079
10,232
27,237
3,380
88,930
11,734
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
7,947
4,264
7,470
404
1,989
22,048
1,378
4,827
622
709
7,607
2,680
8,337
2,198
3,782
10,105
3,221
164
1,820
1,911
5,413
1,298
55,923
10,285
1,294
1,802
3,426
4,000
3,072
2,924
3,430
6,179
22,105
1,278
38,697
11,734
18,728
12,859
1,132
2,671
3,676
51
443
7,823
316
8,622
938
3,712
1
5,616
873
7,228
3,780
468
5,273
575
48
975
18,988
45
1,049
382
2,266
1,145
2,909
12,148
8,649
4,053
5,132
2,102
50,233
—
150
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
1990
1999
2001
2006
2001
2000
2014
2015
2002
2003
Various
Up to 40 years
2002
2003
2015
1999
2000
2001
1998
2002
1991
1999
2014
2001
Up to 40 years
Up to 40 years
(4) 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
597
12,362
6,221
3,335
2,355
887
6,566
18
4,478
276
3,169
5,027
2,073
2,223
2,408
1,977
7,594
2,898
430
4,510
1,802
174
973
31,382
Various
Up to 40 years
2,485
1,032
844
3,035
2,051
1,592
4,451
4,176
5,090
2015
2002
2000
(4) Up to 40 years
Up to 40 years
Up to 40 years
Various
Up to 40 years
2001
2004
Up to 40 years
Up to 40 years
Various
Up to 40 years
2002
2001
Up to 40 years
Up to 40 years
10,996
Various
Up to 40 years
1,434
2000
Up to 40 years
38,166
Various
Up to 40 years
—
2015
Up to 40 years
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2015
(Dollars in thousands)
(A)
(B)
(C)
(D)
(E)
(F)
Region/Country/State/Campus
Address
Facilities(1)
Encumbrances
Initial cost
to Company
Cost
capitalized
subsequent to
acquisition
Gross amount
carried at
close
of current
period(1)(2)
Accumulated
depreciation at
close of current
period(1)(2)
Date of
construction or
acquired(3)
$
— $
9,522
$
— $
9,522
$
560 Irvine Turner Blvd, Newark,
New Jersey
231 Johnson Ave, Newark, New
Jersey
650 Howard Avenue, Somerset,
New Jersey
555 Gallatin Place, Albuquerque,
New Mexico
7500 Los Volcanes Rd NW,
Albuquerque, New Mexico
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
2235 Cessna Drive, Burlington,
North Carolina
14500 Weston Pkwy, Cary, North
Carolina
11350 Deerfield Rd, Cincinnati,
Ohio
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
Partnership Drive, Oklahoma
City, Oklahoma
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
Capital Parkway, Carrollton,
Texas
1
1
1
1
1
1
1
1
2
1
1
3
2
1
1
1
1
1
1
1
1
1
1
3
1
2
1
1
1
3
1
1
2
1
2
1
1
3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8,945
3,585
4,083
2,801
1,324
5,086
2,611
102
5,719
4,323
23,137
5,142
2,929
1,602
1,880
4,259
786
3,129
3,336
1,030
4,317
602
11,437
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
8,299
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
2015
2015
2006
2001
1999
1998
2000
1998
2001
2006
2005
2001
Various
Up to 40 years
1997
2015
1999
2015
2000
1999
2001
1999
2003
2001
2015
2002
Up to 40 years
Up to 40 years
Up to 40 years
(4) 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
(4) Up to 40 years
Up to 40 years
—
—
3,833
1,935
2,105
4,673
2,966
3,533
1,067
1,868
1,542
18,470
4,433
2,294
16
1,331
2,468
696
1,592
2,197
1,204
5,180
488
1,823
3,414
—
11,363
654
1,871
8,945
14,948
4,737
4,672
10,205
11,529
1,110
4,413
2,903
1,401
510
7,370
9,539
1,983
—
1,657
55
794
440
2,634
1,544
13,326
918
14
1,827
6,196
7,024
3,005
7,120
4,833
30,507
14,681
4,912
1,602
3,537
4,314
1,580
3,569
5,970
2,574
17,643
1,520
11,451
7,014
148,748
169,914
31,659
Various
Up to 40 years
12,253
13,310
889
6,466
9,797
3,240
1,997
4,404
3,681
2,270
1,909
251
10
3,346
8,863
33,950
7,425
4,656
5,122
5,993
4,097
7,398
4,770
8,309
151
5,160
1,621
2,983
2001
2000
1999
Up to 40 years
Up to 40 years
Up to 40 years
13,849
Various
Up to 40 years
3,270
2,143
1,228
2,912
1,256
3,287
692
2,141
2001
2001
Up to 40 years
Up to 40 years
Various
Up to 40 years
2000
2000
2002
2011
2015
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
(4) Up to 40 years
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2015
(Dollars in thousands)
(A)
(B)
(C)
(D)
(E)
(F)
Region/Country/State/Campus
Address
Facilities(1)
Encumbrances
Initial cost
to Company
Cost
capitalized
subsequent to
acquisition
Gross amount
carried at
close
of current
period(1)(2)
Accumulated
depreciation at
close of current
period(1)(2)
Date of
construction or
acquired(3)
Life on which
depreciation in
latest income
statement is
computed
$
— $
19,673
$
99
$
19,772
$
1800 Columbian Club Dr,
Carrolton, 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
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
7800 Westpark, 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
2301 International Parkway,
Fredericksburg, Virginia
4555 Progress Road, Norfolk,
Virginia
3725 Thirlane Rd. N.W.,
Roanoke, 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
4330 South Grove Road,
Spokane, Washington
12021 West Bluemound Rd,
Wauwatosa, Wisconsin
1
1
2
1
2
1
1
1
3
1
1
1
1
1
1
1
1
1
2
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
180
2,174
3,431
3,518
3,950
3,215
5,328
8,354
6,327
2,840
7,687
3,467
1,032
1,795
3,188
6,323
1,680
1,574
3,811
3,883
393
3,526
6,239
1,709
20,980
6,527
2,577
14,167
5,230
7,598
2,078
510
5,399
14,793
4,496
3,906
1,307
570
978
3,290
1,930
617
478
1,666
35,026
1,356
242
1,887
1,024
952
2,744
4,409
6,808
5,880
3,832
5,806
10,020
41,353
4,196
7,929
5,354
2,056
2,747
10,856
14,044
—
1,953
988
7,495
1,137
227
846
2,379
1,818
—
266
9
2,332
2,401
3,661
2,079
3,924
3,190
8,427
1,125
—
2,078
6,323
3,633
2,562
11,306
5,020
620
4,372
8,618
3,527
20,980
6,793
2,586
16,499
7,631
11,259
4,157
4,434
8,589
23,220
5,621
3,906
3,385
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6,679
1,033
2,063
3,449
3,083
1,987
2,228
4,569
6,806
2,005
5,093
1,973
840
961
7,000
1,158
851
1,032
3,326
2,062
172
2,284
3,817
1,326
3,297
2,178
539
8,156
2,360
4,674
1,784
1,345
2,648
7,939
2,743
11
1,039
2013
2000
2000
2001
2000
2000
2002
2003
2004
2000
2002
2000
2002
2000
2001
2015
2001
2001
2001
2002
1998
1999
2002
1999
2015
2011
2015
2002
2002
2005
1999
1999
2002
2002
2001
2015
1999
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
(4)
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
(4) Up to 40 years
Up to 40 years
(4) 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
876,614
719,176
1,595,790
550,720
152
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2015
(Dollars in thousands)
(A)
(B)
(C)
(D)
(E)
(F)
Region/Country/State/Campus
Address
Facilities(1)
Encumbrances
Initial cost
to Company
Canada
Cost
capitalized
subsequent to
acquisition
Gross amount
carried at
close
of current
period(1)(2)
Accumulated
depreciation at
close of current
period(1)(2)
Date of
construction or
acquired(3)
Life on which
depreciation in
latest income
statement is
computed
$
— $
3,847
$
3,684
$
7,531
$
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
195
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
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
3,982
14,452
435
6,134
6,377
363
(69)
9,385
19,459
8,526
10,460
21,035
2,383
2,682
12,638
20,834
940
5,515
1,189
1,210
618
255
2,740
6,574
8,880
2,039
2,471
1,498
2,724
3,513
4,207
3,227
2,984
7,684
1,115
994
8,363
1,092
2,652
2,033
522
878
397
2000
2000
2000
2001
2005
2000
2000
2000
2000
2000
2000
2003
2008
2000
2007
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
68,774
57,723
126,497
945,388
776,899
1,722,287
42,385
593,105
153
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2015
(Dollars in thousands)
(A)
(B)
(C)
(D)
(E)
(F)
Region/Country/State/Campus
Address
Facilities(1)
Encumbrances
Initial cost to
Company
Europe
Cost
capitalized
subsequent to
acquisition
Gross amount
carried at
close
of current
period(1)(2)
Accumulated
depreciation at
close of current
period(1)(2)
Date of
construction or
acquired(3)
$
— $
6,542
$
1,634
$
8,176
$
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
(4)
Up to 40 years
(4)
Up to 40 years
(4)
Up to 40 years
2010
2003
2003
2004
2006
2014
2001
2012
2015
2015
2015
Various
Up to 40 years
2004
2001
2014
2010
2001
2002
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Various
Up to 40 years
2003
2003
2003
2004
2004
2003
2003
2003
2015
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
(4)
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
1,399
2,935
1,624
13,716
2,431
2,828
947
4,458
1,380
1,368
1,825
3,443
848
15,127
24
1,738
4,605
1,231
369
765
4,454
4,788
6,372
8,144
2,778
2,496
9,571
3,085
1,170
3,330
2,105
1,267
922
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
Portsmuiden 46, Amsterdam, The
Netherlands
Schepenbergweg 1, Amsterdam,
The Netherlands
Vareseweg 130, Rotterdam, The
Netherlands
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
Deanston Wharf, 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
1
1
1
2
1
1
1
1
1
1
2
1
1
9
1
2
3
1
2
1
1
1
1
1
1
—
—
2,541
1,750
1,739
12,407
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,220
9,040
2,818
16,034
1,852
1,258
1,357
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
15,824
3,598
4,639
4,039
681
2,636
186,773
4,715
2,157
3,262
1,724
1,391
620
3,745
1,732
491
1,284
6,881
2,429
27,595
(14)
1,454
5,047
2,228
(107)
(19)
2,463
4,300
6,585
8,235
1,630
2,636
7,904
—
887
2,569
838
1,670
860
7,256
3,907
15,669
4,944
10,431
3,438
19,779
3,584
1,749
2,641
13,851
2,542
39,112
172
12,465
9,028
3,250
946
2,051
9,443
11,718
17,432
13,512
4,749
7,302
28,211
15,824
4,485
7,208
4,877
2,351
3,496
49
1,739
108,826
295,599
113,543
154
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2015
(Dollars in thousands)
(A)
(B)
(C)
(D)
(E)
(F)
Region/Country/State/Campus
Address
Facilities(1)
Encumbrances
Initial cost
to Company
Cost
capitalized
subsequent to
acquisition
Gross amount
carried at close
of current
period(1)(2)
Accumulated
depreciation at
close
of current
period(1)(2)
Date of
construction or
acquired(3)
Life on which
depreciation in
latest income
statement is
computed
$
— $
655
$
5,533
$
6,188
$
1,339
Various
Up to 40 years
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
8-12 Whitestone Drive, Austins
Ferry, Australia
6 Norwich Street, South
Launceston, Australia
Warehouse No 4, Shanghai, China
2
1
1
1
3
1
2
4
1
1
2
1
1
5
2
1
502
901
13,657
9,431
20,583
35,375
18,875
1,408
1,812
6,754
6,110
—
—
—
—
—
—
—
—
—
—
—
—
1,502
—
—
166
144
12,773
1,868
336
757
884
7,563
24,078
(3,495)
32,746
14,874
1,034
907
3,217
3,906
2,629
4,001
374
905
3,537
2,204
7,544
1,549
4,112
8,179
11,825
19,369
3,641
5,814
5,190
9,926
202
302
516
1998
1995
2012
Up to 40 years
Up to 40 years
Up to 40 years
1,308
Various
Up to 40 years
601
6,738
5,161
807
756
1,692
4,099
4,940
1,080
2014
2006
2004
2002
2004
2004
2002
2007
2013
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
4,148
Various
Up to 40 years
15,747
23,926
4,132
2010
Up to 40 years
29
1,502
74,718
105,289
180,007
37,821
2
1
1
4
—
—
—
—
681
1,090
1,530
3,301
3,001
77
716
3,794
3,682
1,167
2,246
7,095
Various
Up to 40 years
2015
2013
Up to 40 years
Up to 40 years
579
20
118
717
Total
277
$
3,241
$
1,210,180
$
994,808
$
2,204,988
$
745,186
__________________________________________________________
(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 860 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, acquired the facility through purchase or acquisition.
(4) This date represents the date the categorization of the property was changed from a leased facility to an owned facility.
155
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2015
(Dollars in thousands)
The change in gross carrying amount of real estate owned for the years ended December 31, 2014 and 2015 is as follows:
Year Ended December 31,
2014
2015
Gross amount at beginning of period
$ 1,949,073
$ 2,019,585
Additions during period:
Acquisitions(1)
Discretionary capital projects
Other adjustments(2)
Foreign currency translation fluctuations
Deductions during period:
Cost of real estate sold or disposed
Gross amount at end of period
—
119,654
—
(36,324)
83,330
33,180
136,398
101,386
(85,092)
185,872
(12,818)
$ 2,019,585
(469)
$ 2,204,988
_______________________________________________________________________________
(1) Includes acquisition of sites through business combinations and purchase accounting adjustments.
(2) Includes costs associated with real estate we acquired which primarily includes building improvements and racking,
which were previously subject to leases.
The change in accumulated depreciation amount of real estate owned for the years ended December 31, 2014 and 2015 is
as follows:
Year Ended December 31,
2014
2015
Gross amount of accumulated depreciation at beginning of
period
Additions during period:
$
592,329
$
648,734
Depreciation
Other adjustments(1)
Foreign currency translation fluctuations
Deductions during period:
66,617
—
(6,547)
60,070
77,976
39,937
(21,310)
96,603
Amount of accumulated depreciation for real estate assets
sold or disposed
Gross amount of end of period
(3,665)
648,734
$
(151)
745,186
$
_______________________________________________________________________________
(1) Includes accumulated depreciation associated with building improvements and racking, which were previously subject
to leases.
156
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 26, 2016
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
/s/ WILLIAM L. MEANEY
William L. Meaney
/s/ RODERICK DAY
Roderick Day
Title
President and Chief Executive Officer and
Director (Principal Executive Officer)
Date
February 26, 2016
Executive Vice President and Chief
Financial Officer (Principal Financial and
Accounting Officer)
February 26, 2016
/s/ JENNIFER M. ALLERTON
Director
February 26, 2016
Jennifer M. Allerton
/s/ TED R. ANTENUCCI
Director
February 26, 2016
Ted R. Antenucci
/s/ PAMELA M. ARWAY
Director
February 26, 2016
Pamela M. Arway
/s/ CLARKE H. BAILEY
Director
February 26, 2016
Clarke H. Bailey
/s/ KENT P. DAUTEN
Director
February 26, 2016
Kent P. Dauten
/s/ PAUL F. DENINGER
Director
February 26, 2016
Paul F. Deninger
157
Name
Title
Date
/s/ PER-KRISTIAN HALVORSEN Director
February 26, 2016
Per-Kristian Halvorsen
/s/ WALTER C. RAKOWICH
Director
February 26, 2016
Walter. C. Rakowich
/s/ ALFRED J. VERRECCHIA
Director
February 26, 2016
Alfred J. Verrecchia
158
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
Item
Scheme Implementation Deed, dated as of June 8, 2015, between the Company and Recall Holdings Limited.
(Incorporated by reference to the Company’s Current Report on
dated June 8, 2015.)
2.2
3.1
3.2
3.3
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
Amendment to Scheme Implementation Deed, dated as of October 13, 2015, between the Company and Recall
Holdings Limited. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2015.)
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
dated January 21, 2015.)
Bylaws of the Company. (Incorporated by reference to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2014.)
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
dated September 29, 2011.)
Company’s Current Report on
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
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 Company’s predecessor immediately prior to its conversion to a
REIT (the “Predecessor Registrant”), the Guarantors named therein and The Bank of New York Trust
Company, N.A., as trustee. (Incorporated by reference to the Company’s Current Report on
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
dated
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
Second Supplemental Indenture, dated as of January 20, 2015, to Senior Indenture, dated as of August 13,
2013, among the Company, the Predecessor Registrant, the Guarantors named therein and Wells Fargo Bank,
National Association, as trustee. (Incorporated by reference to the Company’s Current Report on
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
dated August 13, 2013.)
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
August 13, 2013.)
dated
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, the
Guarantors named therein and Wells Fargo Bank, National Association, as trustee. (Incorporated by reference
to the Company’s Current Report on
dated January 21, 2015.)
159
Exhibit
4.10
4.11
4.12
4.13
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
Item
Senior Indenture, dated as of September 18, 2014, among Iron Mountain Europe PLC, the Company, the
Guarantors named therein, Wells Fargo Bank, National Association, as trustee, and Société Générale Bank &
Trust, as paying agent, registrar and transfer agent. (Incorporated by reference to the Company’s Current
Report on
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, the Guarantors named
therein, Wells Fargo Bank, National Association, as trustee, and Société Générale Bank & Trust, as Paying
Agent, Registrar and Transfer Agent. (Incorporated by reference to the Company’s Current Report on
dated September 22, 2014.)
dated January 21, 2015.)
dated January 21, 2015.)
dated September 29, 2015.)
Senior Indenture, dated as of September 29, 2015, 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 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
2008 Restatement of the Iron Mountain Incorporated Executive Deferred Compensation Plan. (#)
(Incorporated by reference to the Company’s Annual Report on
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
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
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
December 31, 2012.)
Iron Mountain Incorporated 1997 Stock Option Plan, as amended. (#) (Incorporated by reference to the
Company’s Annual Report on
for the year ended December 31, 2000, File Number 001-13045.)
for the year ended December 31,
for the year ended
for the year ended
Amendment to Iron Mountain Incorporated 1997 Stock Option Plan, as amended. (#) (Incorporated by
reference to the Company’s Current Report on
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
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
for the year ended December 31, 2002, File Number 001-13045.)
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
Fifth Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#) (Incorporated by
reference to the Company’s Current Report on
dated December 10, 2008, File Number 001-13045.)
dated June 4, 2010, File Number 001-13045.)
for the quarter ended June 30, 2011.)
Sixth Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#) (Incorporated by
reference to the Company’s Quarterly Report on
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
(Incorporated by reference to the Company’s Annual Report on
2004, File Number 001-13045.)
Form of Iron Mountain Incorporated Incentive Stock Option Agreement. (#) (Incorporated by reference to the
Company’s Annual Report on
Stock Option Agreement. (#)
for the year ended December 31,
for the year ended December 31, 2004, File Number 001-13045.)
160
Exhibit
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
Item
Form of Iron Mountain Incorporated 1995 Stock Incentive Plan
(Incorporated by reference to the Company’s Annual Report on
2004, File Number 001-13045.)
Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Amended and Restated Iron Mountain
Stock Option Agreement. (#)
for the year ended December 31,
Stock Option Agreement. (#) (Incorporated by reference to the Company’s Annual Report on
for the year ended December 31, 2004, File Number 001-13045.)
for the year ended December 31,
for the year ended December 31,
for the year ended December 31,
for the year ended December 31,
Stock Option Agreement. (#)
for the year ended December 31,
Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Incentive Stock Option Agreement. (#)
(Incorporated by reference to the Company’s Annual Report on
2004, File Number 001-13045.)
Form of Iron Mountain Incorporated 1995 Stock Incentive Plan
(Incorporated by reference to the Company’s Annual Report on
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
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
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
2013.)
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
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
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
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
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). (#) (Incorporated by reference to the Company’s Annual Report on
the year ended December 31, 2014.)
Form of Stock Option Agreement pursuant to the Iron Mountain Incorporated 2014 Stock and Cash Incentive
for the year
Plan (version 1). (#) (Incorporated by reference to the Company’s Annual Report on
ended December 31, 2014.)
Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2014 Stock and Cash
Incentive Plan (version 1). (#) (Incorporated by reference to the Company’s Annual Report on
the year ended December 31, 2014.)
Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2014 Stock and Cash
Incentive Plan (version 2). (#) (Incorporated by reference to the Company’s Annual Report on
the year ended December 31, 2014.)
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
March 31, 2014.)
Iron Mountain Incorporated 2003 Senior Executive Incentive Program. (#) (Incorporated by reference to the
Company’s Current Report on
Amendment to the Iron Mountain Incorporated 2003 Senior Executive Incentive Program. (#) (Incorporated
by reference to the Company’s Current Report on
Iron Mountain Incorporated 2006 Senior Executive Incentive Program. (#) (Incorporated by reference to the
Company’s Current Report on
dated April 5, 2005, File Number 001-13045.)
dated June 1, 2006, File Number 001-13045.)
dated June 4, 2010, File Number 001-13045.)
for the quarter ended
for the
for
for
for
for the quarter
Amendment to the Iron Mountain Incorporated 2006 Senior Executive Incentive Program. (#) (Incorporated
by reference to the Company’s Current Report on
dated June 4, 2010, File Number 001-13045.)
Contract of Employment with Iron Mountain, between Iron Mountain Belgium NV and Marc Duale. (#)
(Incorporated by reference to the Company’s Current Report on
Number 001-13045.)
dated December 30, 2009, File
161
Exhibit
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
10.47
10.48
10.49
10.50
10.51
12
Item
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
March 31, 2012.)
Addendum, dated February 27, 2015, to the Contract of Employment between Iron Mountain BPM
International Sarl and Marc Duale, dated September 29, 2011, as amended March 19, 2012, 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
for the quarter ended
for the quarter ended March 31, 2015.)
Third Amended and Restated Employment Contract between Iron Mountain BPM International Sarl and Marc
Duale, dated February 24, 2016. (#) (Filed herewith.)
Employment Offer Letter, dated November 30, 2012, from the Company to William L. Meaney. (#)
(Incorporated by reference to the Company’s Current Report on
Employment Offer Letter, dated April 10, 2014, from the Company to Roderick Day. (#) (Incorporated by
reference to the Company’s Quarterly Report on
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.)
Contract of Employment with Iron Mountain, between Patrick Keddy and Iron Mountain (UK) Ltd., effective
as of April 2, 2015. (#) (Filed herewith.)
for the quarter ended March 31, 2014.)
dated December 3, 2012.)
Restated Compensation Plan for Non-Employee Directors. (#) (Filed herewith.)
Iron Mountain Incorporated Director Deferred Compensation Plan. (#) (Incorporated by reference to the
Company’s Annual Report on
for the year ended December 31, 2007, File Number 001-13045.)
The Iron Mountain Companies Severance Plan. (#) (Incorporated by reference to the Company’s Current
Report on
dated March 13, 2012.)
Amended and Restated Severance Plan Severance Program No. 1. (#) (Incorporated by reference to the
Company’s Quarterly Report on
for the quarter ended March 31, 2012.)
First Amendment to Amended and Restated Severance Plan Severance Program No. 1. (#) (Incorporated by
reference to the Company’s Annual Report on
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
dated December 19, 2014.)
Severance Program No. 2. (#) (Incorporated by reference to the Company’s Current Report on
dated December 3, 2012.)
Credit Agreement, dated as of June 27, 2011, as amended and restated as of July 2, 2015, among the Company,
Iron Mountain Information Management, LLC, certain other subsidiaries of the Company party thereto, the
lenders and other financial institutions party thereto, JPMorgan Chase Bank, N.A., 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
Statement re: Computation of Ratios. (Filed herewith.)
dated July 2, 2015.)
21.1
Subsidiaries of the Company. (Filed herewith.)
23.1
Consent of Deloitte & Touche LLP (Iron Mountain Incorporated, Delaware). (Filed herewith.)
162
Exhibit
31.1
31.2
Certification of Chief Executive Officer. (Filed herewith.)
Item
Certification of Chief Financial Officer. (Filed herewith.)
32.1
Section 1350 Certification of Chief Executive Officer. (Furnished herewith.)
32.2
Section 1350 Certification of Chief Financial Officer. (Furnished herewith.)
101.1
The following materials from Iron Mountain Incorporated’s Annual Report on
December 31, 2015 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.)
for the year ended
163
(This page has been left blank intentionally.)
CORPORATE DIRECTORS AND OFFICERS
(As of 04/01/16)
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
SENIOR OFFICERS
William L. Meaney
President and Chief Executive Officer
Edward Bicks
Senior Vice President,
Chief Strategy Officer
Ernest W. Cloutier
Executive Vice President,
General Counsel and Secretary
Marc A. Duale
President, International
Deirdre Evens
Executive Vice President,
Chief People Officer
Paul F. Deninger 4, 5
Senior Advisor
Evercore Partners, Inc.
Waltham, MA and San Francisco, CA
Per-Kristian Halvorsen 2, 5
Senior Vice President
and Chief Innovation Officer
Intuit Inc.
Mountain View, CA
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
Roderick Day
Executive Vice President
and Chief Financial Officer
Theodore MacLean
Executive Vice President,
Chief Marketing Officer
Eileen Sweeney
Senior Vice President and General Manager,
Data Management
John Tomovcsik
Executive Vice President
and General Manager, Records
and Information Management
Patrick Keddy
Executive Vice President and General Manager,
North America and Western Europe
Tasos Tsolakis
Executive Vice President, Global Services
and Chief Information 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:
64,058 as of March 24, 2016
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
Friday June 17, 2016, 10:00 AM E.T.
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 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) our ability to remain qualified for taxation
as a real estate investment trust for U.S. federal income tax
purposes; (ii) the adoption of alternative technologies and shifts by
our customers to storage of data through nonpaper based
technologies; (iii) changes in customer preferences and demand for
our storage and information management services; (iv) the cost to
comply with current and future laws, regulations and customer
demands relating to privacy issues; (v) the impact of litigation or
disputes that may arise in connection with incidents in which we fail
to protect our customers’ information; (vi) changes in the price for
our storage and information management services relative to the cost
of providing such storage and information management services;
(vii) changes in the political and economic environments in the
countries in which our international subsidiaries operate; (viii) our
ability or inability to complete acquisitions on satisfactory terms and
to integrate acquired companies efficiently; (ix) changes in the
amount of our capital expenditures; (x) changes in the cost of our
debt; (xi) the impact of alternative, more attractive investments on
dividends; (xii) the cost or potential liabilities associated with real
estate necessary for our business; (xiii) the performance of business
partners upon whom we depend for technical assistance or
management expertise outside the United States; (xiv) other trends
in competitive or economic conditions affecting our financial
condition or results of operations not presently contemplated; and
(xv) other risks described more fully in our Annual Report on
Form 10-K filed with the Securities and Exchange Commission, or
SEC, on February 26, 2016 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 12/31/15)
Asia Pacific
Australia
China
Hong Kong-SAR
India
Singapore
Europe
Austria
Belgium
Czech Republic
Denmark
England
Finland
France
Germany
IRM Stock Performance
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
Comparison of 60 Month Cumulative Total Return
Among Iron Mountain, the MSCI REIT Index, the S&P 500 and the Russell 1000
Iron
Mountain
Russell 1000
Index
S&P 500
MSCI REIT
Index
275
250
225
200
175
150
125
100
s
r
a
l
l
o
D
75
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
6APR201609372748
Note: Fiscal year end December 31, 2015
Source: FactSet
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, 2010, through December 31, 2015. This comparison assumes an investment of $100
on December 31, 2010, and the reinvestments of any dividends.
3APR201420591154