3APR201420591154
2016 Annual Financial Report and
Stockholder Letter
Dear Fellow Stockholders,
2016 was an exciting year marked by significant achievements. We continued to build upon the durability of our business and
improved top and bottom line performance. We completed our acquisition of Recall Holdings and are ahead of integration
plans. This acquisition strengthens our global platform and enhances our strategic plan, whilst delivering overall improved
profitability as we realize synergies. In addition, we achieved strong internal volume and storage revenue growth, before
acquisitions, in all markets, including our mature developed markets. Moreover, we further extended our expansion in
high-growth emerging markets. And we continued building on our brand and reputation, serving approximately 950 of the
Fortune 1000 companies, through our growth and expansion in Adjacent Businesses.
Our strong financial and operating results for 2016 were in line with our expectations in both reported and constant dollars.
Notably, our profit margins expanded, reflecting the benefit of Recall synergies and our Transformation Initiative, whilst
integrating the historically lower margin Recall business. We steadily maintained our focus even in the midst of integrating
Recall, which is testament to the hard work our organization has undertaken to achieve strong results. I continue to be
impressed with the focus of our Mountaineers and appreciate their passion to serve our customers.
Strong Financial Performance Consistent with Expectations
On a constant dollar basis, year-over-year, we grew total revenue in 2016 by 19%, reflecting the benefit of the Recall
acquisition and consistent internal storage rental gains of 2%. Internal storage rental growth was primarily driven by storage
volume growth, which remains an important indicator in our business. During the year, we added more than 45 million cubic
feet of new records from new and existing customers, or net volume growth of 9 million cubic feet after destructions and
customer terminations. Our unwavering focus on customer satisfaction resulted in continued retention of 98% in records
management, highlighting the durability of not only our storage rental revenue but our customer relationships as well.
As we have noted in recent years, service revenue associated with transportation and retrieval activity has declined as
physical records and data backup tapes become more archival. We continue to partially offset this decline by growing other
lines of business such as scanning, shredding, projects and other new offerings. Importantly, service business growth rates can
fluctuate on a relatively small base and our mix is shifting towards project-based revenues. As a result, for the year, internal
service revenue declined by roughly half a percentage point. However, we continue to focus on sustaining and gradually
improving service gross profits, as services remain complementary to our core storage business. Importantly, some new
service offerings have lower margins compared with our core services; however, these services are less capital intensive, so
they deliver similar, attractive returns.
Adjusted EBITDA growth for the year exceeded revenue growth, demonstrating margin improvement, despite the lower
profitability of the legacy Recall business. Going forward, we continue to believe that we can optimize the legacy Recall
business and bring it in line with our profitability levels. Last, and most importantly, our strong cash generation supports
growth in dividends and investment. We believe, AFFO is the most representative metric of the cash generation
characteristics of our operating business and provides a good measure for dividend coverage. AFFO for 2016 was at the high
end of our expectations as we optimized our capital expenditures.
Looking ahead to 2017, our growth expectations on a constant dollar basis remain consistent with our long-term plans.
Importantly, these plans remain underpinned by nearly $1.9 billion of storage-related net operating income, which is
distinguished by its inherent durability and consistent operating performance. Business fundamentals remain consistent, and
we expect internal storage rental revenue growth of 2% to 2.5% for 2017. Lastly, we expect our cash available for
distributions and investments to cover our anticipated 2017 dividend, required capital expenditures, core growth investments,
and a portion of our discretionary investments and acquisitions.
Recall Acquisition Enhances Core Growth Strategy
In May 2016, we completed the acquisition of Recall Holdings. We believe this acquisition accelerates our already successful
growth strategy. With our broader footprint, stronger infrastructure, increased exposure to high-growth emerging markets as
well as small to mid-size enterprise customers, and increased economies of scale, we believe we will be well suited to address
unmet document storage and information management needs around the globe. The integration of the Recall business went
well in 2016. Our cultures were similar, thus enabling us to quickly combine teams and advance a number of objectives that
were key to achieving synergies. The financial impact is flowing through strongly, and we are early in seeing some of the
potential for further benefit from having the leading global platform.
Integration and Transformation Enhancing Profitability
We have gotten off to a great start with integrating Recall’s business and implementing actions that enabled us to achieve
synergies faster than our original expectations. For 2017, we expect to realize $80 million of net synergies, roughly
$65 million of which was included in our 2016 exit rate. Overall, when combined with the expected $100 million of
cumulative benefits from our total $125 million Transformation Initiative, we expect to generate $180 million of combined
savings in 2017, with roughly $20 million of that to be reinvested into innovation and shared service efficiency programs.
When we started our Transformation Initiative in mid-2015, our three decades of acquisitions had left us with overly complex
reporting structures, overlapping teams and processes and overhead costs that expanded to more than 28% of sales. That
was four to five percentage points higher than most companies of our size and breadth. As a result, we committed to further
reduce our overhead by 2018 and to transform our teams and processes to enable us to work faster and more efficiently. We
have made good progress, entering 2017 with our overhead as a percentage of sales at just under 25%. The pace of our
progress in Integration and Transformation can be seen in the year-over-year comparisons of financial performance. Whilst
the weighted average increase in our shares outstanding for 2016 relative to 2015 was roughly 17%, our growth in revenue,
Adjusted EBITDA, and AFFO exceed the growth in share count. Additionally, we increased our quarterly dividend per
share by 13% in the fourth quarter of 2016. Therefore, the majority of this improvement is going directly to shareholders,
without compromising future growth.
Excellent Progress on Pillars of Strategic Plan
Our strategic plan continues to revolve around the three pillars we have previously outlined: driving continued profitable
growth in our developed markets, extending our reach into high-growth emerging markets, and scaling adjacent business
opportunities. Combining our expansion in Emerging Markets as well as Adjacent Businesses, we made good progress in
2016 with shifting our revenue mix in line with 2020 plan goals. As noted in the past, we have an objective to reach 25% of
total revenues from our higher growth portfolio. Supported by the acquisition of Recall, we are now close to 20% of our mix
coming from these businesses. As this shift progresses, we expect to see faster Adjusted EBITDA growth and expansion in
Return on Invested Capital (ROIC).
Improved Performance in Developed Markets
In developed markets, which includes North American Records and Information Management as well as North American
Data Management and our Western European segment, we continued to drive positive internal storage rental growth for the
year with 1.9 million cubic feet of net new records prior to acquisitions. Our goal remains to increase revenue growth 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. In other words, every new box brought in effectively yields an annuity, which lasts an average of
15 years.
Emerging Markets Offer High-growth Potential
In terms of our progress of expanding our business model into faster growing emerging markets, we are just shy of 18% of
total revenue coming from these markets, a major improvement from over 10%, just three years ago. Year-over-year
progress was also supported by acquisitions in four additional new countries. We are driving strong internal growth in these
markets and have a sizable acquisition pipeline, supporting our confidence in reaching our goal of 20% of total revenue
from these markets by the end 2020. Despite the impact of the strong U.S. dollar on reported revenue, foreign currency
impact at the income level is mitigated 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.
Significant Progress in Adjacent Businesses
Today, our adjacent businesses consist primarily of our data center operations and art storage business. In 2016, we achieved
strong topline growth in our data center business where we continued to see attractive complementary opportunities. In
October, we broke ground on our 80-acre site in Northern Virginia, which remains one of the strongest data center markets
in the country. We expect to bring the first of four buildings online in the third quarter of 2017, and once fully built out, this
site should more than quintuple our existing data center capacity. While the construction is under way, we continue to see
good momentum and are managing the development of new space in our underground data center near Pittsburgh to
address new customer demand as well as growth from existing customers. Between our Boston facility and the underground
data centers in Pennsylvania and Kansas City, we continue to see internal growth in excess of 20% in this business area,
albeit off a relatively small base. We also solidified our leadership position in art storage with two tuck-in acquisitions during
the year, Fairfield and Cirkers. We continue to see opportunities for consolidation in this storage market segment.
In conclusion, 2016 was a great year with solid execution on all three pillars of our strategic plan as well as closing and
successfully integrating Recall, making Iron Mountain the most global of information management companies. All of these
accomplishments in the near term support increased sustainable cash flow and our ability to grow the dividend consistently,
whilst continuing to de-lever, and even more importantly, longer term, they provide us with an enhanced strategic position.
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, 2016
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, 2016, the aggregate market value of the Common Stock of the registrant held by non-affiliates of the registrant was
approximately $10.4 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 17, 2017: 263,724,213
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 2017 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,
2016.
IRON MOUNTAIN INCORPORATED
2016 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.
Item 15.
Item 16.
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
Exhibits and Financial Statement Schedules
Form 10-K Summary
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168
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 of retention of records
stored with us from existing customers, (3) expected 2017 consolidated internal storage rental revenue growth rate and capital
expenditures, (4) expected target leverage ratio, (5) statements made in relation to our acquisition of Recall Holdings Limited
("Recall") pursuant to the Scheme Implementation Deed, as amended, with Recall (the "Recall Transaction") including the total
cost 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:
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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.
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
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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 230,000 customers in a
variety of industries in 45 countries around the world as of December 31, 2016. We currently provide storage and information
management services to commercial, legal, financial, healthcare, insurance, life sciences, energy, businesses services,
entertainment and government organizations, including approximately 95% of the Fortune 1000. As of December 31, 2016, we
employed more than 24,000 people.
Now in our 66th 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 over 1,400 facilities (86.2 million square feet) and total revenues of more than
$3.5 billion for the year ended December 31, 2016. We are listed on the New York Stock Exchange (the "NYSE") and on the
Australian Stock Exchange ("ASX"). We are a constituent of the Standard & Poor's 500 Index and the MSCI REIT index and,
as of December 31, 2016, we were number 730 on the Fortune 1000.
We have been organized and operating as a REIT effective for our taxable year beginning January 1, 2014.
Our financial model is based on the recurring nature of our storage rental revenues and resulting storage net operating
income. Supported by consistent and predictable storage rental revenues, we generate durable, low-volatility growth. This
fundamental financial characteristic provides stability throughout economic cycles. Since May 2012, we have returned
$3.0 billion of capital to stockholders including $1.9 billion in cash and $1.1 billion in our common stock.
Recall Acquisition
On May 2, 2016 (Sydney, Australia time), we completed the Recall Transaction. At the closing of the Recall Transaction,
we paid approximately $331.8 million in cash and issued approximately 50.2 million shares of our common stock which, based
on the closing price of our common stock as of April 29, 2016 (the last day of trading on the NYSE prior to the closing of the
Recall Transaction) of $36.53 per share, resulted in a total purchase price to Recall shareholders of approximately $2,166.9
million.
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 growth in data as a result of enhanced data processing technologies; (4) inexpensive document producing
technologies; (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 Asia, 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.
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, 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 maintaining our strong 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, developing adjacent businesses (organically and through acquisitions) and optimizing our
real estate portfolio. 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 five years, and we anticipate that this level will be sustained, although the
rate of growth from existing customers 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 consolidation in the industry. Acquisitions were a
fast and efficient way to achieve scale, expand geographically and broaden service offerings. After 2004, our 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, 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.
On May 2, 2016, we completed the acquisition of Recall for approximately $2,166.9 million. In connection with the
Recall Transaction, we acquired the entirety of Recall's global operations, including all facilities, vehicles, employees and
customer assets (excluding certain operations of Recall that we were required to divest subsequent to the closing of the Recall
Transaction in accordance with agreements with regulatory authorities in the United States, Canada, Australia and the United
Kingdom). We believe the acquisition of Recall accelerates our already successful growth strategy. After the Recall
Transaction, with our broader footprint, stronger infrastructure, increased exposure to high growth emerging markets and small
to mid-size enterprise customers, and increased economies of scale, we believe we will be well suited to address unmet
document storage and information management needs around the globe.
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 Asia.
The experience, depth and strength of local management are particularly important to 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, 2016, we operated in 45 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. Our 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 generally 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 emerging market 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
Growth through ABOs
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 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 discontinue investments in 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.
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 builds
upon our expertise in storing, protecting and managing high-value items and supports our strategy to leverage our real estate
network to accelerate growth. In addition, in June 2016, we acquired the assets of Fairfield Fine Arts (“Fairfield”), an art
storage and handling company. In connection with the Fairfield acquisition, we acquired all of Fairfield’s customer
relationships and its state-of-the-art 10,000 square foot storage facility in Ridgefield, Connecticut.
The fine art storage industry is a growing, but fragmented, industry marked by increasing international interest and
changes in 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.
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 the majority of 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 ("Information
Governance and Digital Solutions ") (formerly referred to as Document Management Solutions), data restoration projects, the
storage, assembly, reporting and delivery of customer marketing literature, or fulfillment services, consulting services, product
sales (including specially designed storage containers and related supplies), technology escrow services, and recurring project
revenues.
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 for the year ended December 31, 2016, 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.
4
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 as 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 and rotation of backup computer media as part of corporate disaster
recovery plans; (ii) server and computer backup services; (iii) digital content repository systems to house, distribute, and
archive key media assets; and (iv) storage, safeguarding and electronic or physical delivery of physical media of all types,
primarily for entertainment and media industry clients.
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
from the storage of physical records. 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 complementary 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, 2016, our courier fleet consisted of approximately
4,500 owned or leased vehicles. Our other services include information destruction services (primarily secure shredding)
("Destruction"), Information Governance and Digital Solutions, Compliant Records Management and Consulting Services, and
other ancillary services.
5
Information Destruction Services
Our Destruction services consist primarily of (1) secure shredding operations which typically include the scheduled pick-
up of loose office records that customers accumulate in specially designed secure containers we provide and (2) secure
information technology asset destruction. 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, Australia, and Latin America.
Information Governance and Digital Solutions
The focus of our Information Governance and Digital Solutions 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 Information Governance and Digital Solutions 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 Information Governance and Digital Solutions 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. Our industry tailored services include Health
Information Management Solutions, Entertainment Services and Energy Data Services.
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
services and Compliant Records Management and Consulting Services.
6
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 the years ended December 31, 2014, 2015 and 2016, 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 records and information
management services, including the storage of physical records, including 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”); Destruction; and Information Governance and Digital Solutions throughout the United States and Canada; as
well as fulfillment services and technology escrow services 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 records and information management services, including Records
Management, Data Protection & Recovery and Information Governance and Digital Solutions throughout Austria, Belgium,
France, Germany, Ireland, the Netherlands, Spain, Switzerland and the United Kingdom (consisting of our operations in
England, Northern Ireland and Scotland), as well as Information Governance and Digital Solutions in Sweden (the remainder of
our business in Sweden is included in the Other International Business segment described below).
Other International Business
Our Other International Business segment provides records and information management services throughout the
remaining European countries in which we operate, Latin America, Asia Pacific and Africa. Our European operations included
in this segment provide records and information management services, including Records Management, Data Protection &
Recovery and Information Governance and Digital Solutions throughout the Czech Republic, Denmark, Finland, Greece,
Hungary, Norway, Poland, Romania, Russia, Serbia, Slovakia, Turkey and Ukraine; Records Management and Information
Governance and Digital Solutions in Estonia, Latvia and Lithuania; and Records Management in Sweden. Our Latin America
operations provide records and information management services, including Records Management, Data Protection &
Recovery, Destruction and Information Governance and Digital Solutions throughout Argentina, Brazil, Chile, Colombia,
Mexico and Peru. Our Asia Pacific operations provide records and information management services, including Records
Management, Data Protection & Recovery, Destruction and Information Governance and Digital Solutions throughout
Australia and New Zealand, with Records Management and Data Protection & Recovery also provided in certain markets in
China (including Taiwan), Hong Kong-SAR, India, Malaysia, Singapore and Thailand. Our African operations provide Records
Management, Data Protection & Recovery and Information Governance and Digital Solutions in South Africa.
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 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 units, performance units and shares of stock issued
under our employee stock purchase plan.
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, 2016, our Total Building Utilization
and Total Racking Utilization were approximately 92% and 85%, respectively, for our records management business
and our Total Building Utilization and Total Racking Utilization, excluding the impact of the Recall Transaction, were
approximately 82% and 71%, respectively, for our data management business. The Total Building Utilization and
Total Racking Utilization for our data management business as of December 31, 2016 excludes the impact of the
Recall Transaction, as Recall's unit of measurement for computer media is not consistent with ours. As part of the
integration of Recall, we are in the process of converting Recall's unit of measurement for computer media to be
consistent with ours to enable us to report both Total Building Utilization and Total Racking Utilization, including
Recall, 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, or direct
payments to a customer ("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 five 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 4%, 2% and 26% on a
global basis for 2014, 2015 and 2016, respectively. The total net volume growth in 2016 was primarily driven by the
impact of the Recall Transaction.
• Diversified and Stable Customer Base. As of December 31, 2016, we had more than 230,000 customers in a variety of
industries in 45 countries around the world. We currently provide storage and information management services to
commercial, legal, financial, healthcare, insurance, life sciences, energy, businesses services, entertainment and
government organizations, including approximately 95% of the Fortune 1000. No single customer accounted for more
than 1% of our consolidated revenues in any of the years ended December 31, 2014, 2015 and 2016. For each of the
three years 2014 through 2016, 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 typically 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 borrowings, proceeds from real estate sales and/or proceeds from the issuance of debt
or equity securities, 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 2017:
Real Estate:
•
•
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 core 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.
Non-real estate 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 2014, 2015 and 2016 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 (decrease)/increase in prepaid capital expenditures
Net decrease/(increase) accrued capital expenditures
Total Capital Spend (on cash basis)
Competition
Year Ended December 31,
2014
2015
2016
$
$
$
199,663
57,574
257,237
$
170,742
52,826
223,568
203,778
63,543
267,321
55,991
19,527
75,518
47,964
23,396
71,360
332,755
(2,455)
31,624
361,924
$
294,928
(362)
(4,317)
290,249
$
50,954
20,799
71,753
339,074
374
(10,845)
328,603
We are a global leader in the physical storage and information management services industry with operations in 45
countries as of December 31, 2016. 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, 2016, we employed more than 8,500 employees in the United States and more than 15,500
employees outside of the United States. At December 31, 2016, approximately 700 employees were represented by unions in
North America (in California, Illinois, Georgia, New Jersey and Pennsylvania and three provinces in Canada) and
approximately 3,800 employees were represented by unions in Latin America (in Argentina, Brazil and Chile).
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, a significant portion of full-time employees participate in
some form of incentive-based compensation program that provides payments based on revenues, profits 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 and Contractual Limitations on Liability
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 typically contain provisions limiting our liability for damages regarding the loss or destruction of,
or damage to, records or information stored with us. Our liability for physical storage is often limited to a nominal fixed
amount per item or unit of storage, such as per cubic foot, and our liability for Information Governance and Digital Solutions,
Destruction and other services unrelated to records stored with us 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 higher limits. We can provide no assurance that our limitation of liability provisions 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 customer contracts generally 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 regarding 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. Moreover, as a larger percentage of our growth is driven by acquisitions and customer
contracts assumed in acquisitions (including the customer contracts assumed in the Recall Transaction) make up a
commensurately larger percentage of our customer contracts, our exposure to contracts with higher or no limitations of liability
and disputes with customers over the interpretation of their contracts may increase. 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.
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, including those acquired in
the Recall Transaction and other acquisitions we have completed. We therefore may be potentially liable for environmental cost
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
95% of the Fortune 1000. 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 "About Us"
section of our website, www.ironmountain.com, under the heading "Corporate Social Responsibility."
Internet Website
Our Internet address is www.ironmountain.com. Under the "About Us" section on our Internet website, under the heading
"Investors", 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, finance, nominating and governance, and risk and safety committees are
available on the "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 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 since 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.
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.
12
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, which would increase our indebtedness. An increase in our outstanding debt could lead to a
downgrade of our credit rating, which 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 upon the market price of our
common stock at the time of any potential issuances of equity securities, 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
or to forego our pursuit of otherwise attractive investments. These actions may reduce our income and amounts available for
distribution to our stockholders.
Legislative or other actions affecting REITs could have a negative effect on us or our stockholders.
At any time, the federal income tax laws governing REITs, or the administrative interpretations of those laws, may be
amended. Federal and state tax laws are constantly under review by persons involved in the legislative process, the 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, 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 or
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.
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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.
Our operations include an extensive use of TRSs, which has increased since our acquisition of Recall. 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.
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 and several of our international operations 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.
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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 one of our qualified REIT subsidiaries ("QRSs") 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 taxable periods prior to January 1, 2014 (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 during our pre-REIT period 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.
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 preferential federal income tax rates. Distributions payable by REITs, in contrast, generally do not qualify
for these 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.
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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.
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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 paper documents or
tapes we store become less active and more archival. We can provide no assurance that our customers will continue to store
most or a portion of their records as paper documents or as tapes, or that the paper documents or tapes they do store with us
will require our storage related services at the same levels as they have in the past. 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 and tapes become less active our service revenue growth and profitability may decline.
Our records management and data protection service revenue growth is being negatively impacted by declining activity
rates as stored records and tapes 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, and we believe this trend has been
accelerating. 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 and rotate tapes, thereby reducing their service activity levels. At the same time many of our
costs related to records and tape 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 activity, 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.
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, over the past few years, 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 comply 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,
Congress has considered, and will likely consider again, legislation that would expand the federal data breach notification
requirement beyond the financial and medical fields.
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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 May 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 us, 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 European Union - United States safe harbor framework. This decision, a
failure of the European Union and the United States to agree on a new safe-harbor framework and 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 information technology 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.
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 or other disruptions. Moreover, our ability to integrate Recall’s business and other businesses
we acquire may challenge our ability to prevent such security breaches. From time to time, we may also outsource certain
information technology and back office support services to third parties, which may subject our information technology and
other sensitive information to additional risk. 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.
Changing fire and safety standards may result in significant expense in certain jurisdictions.
As of December 31, 2016, we operated 1,290 records management, off-site data protection and fine art storage facilities
worldwide, including 615 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. A
significant aspect of the integration of Recall with our business is the process of making certain investments in the acquired
Recall facilities to conform such facilities to our standards of operations. This process is complex and time-consuming. 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.
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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 regarding the loss or destruction of, or damage
to, records or information stored with us. Our liability for physical storage is often limited to a nominal fixed amount per item
or unit of storage (such as per cubic foot) and our liability for Information Governance and Digital Solutions, Destruction and
other services unrelated to records stored with us 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 can provide no assurance that our limitation of liability provisions 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 customer contracts generally 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 regarding 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. Moreover, as a large percentage of our growth is driven by acquisitions and customer contracts
assumed in acquisitions (including the customer contracts assumed in the Recall Transaction) make up a commensurately larger
percentage of our customer contracts, our exposure to contracts with higher or no limitations of liability and disputes with
customers over the interpretation of their contracts may increase. 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.
International operations may pose unique risks.
As of December 31, 2016, we provided services in 44 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:
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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 and changes in the global political climate which may impose restrictions on global operations;
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.
Our exposure to the risk from international operations was increased by the Recall acquisition, as Recall’s foreign
operations made up a more significant portion of its worldwide revenue than our foreign operations did prior to the Recall
Transaction. Consequently, our international operations now account for a more significant portion of our overall operations
than they did before the Recall acquisition.
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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 For 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.
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.
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:
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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, including those acquired in
the Recall Transaction and other acquisitions we have completed. 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.
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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 weather events and our key facilities worldwide are subject to
this inherent risk.
Damage to our reputation could adversely affect our business, financial condition and results of operations.
Our reputation for providing highly secure information storage to customers is critical to the success of our business. Our
reputation or brand, and specifically, the trust our customers place in us, could be negatively impacted in the event of perceived
or actual failures by us to store information securely. For example, events such as fires, natural disasters, attacks on our
information technology 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. As a result, significant declines
in the cost of paper may negatively impact our revenues and results of operations, and increases in other commodity prices,
including steel, may negatively impact our 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 and
their cloud-based alternatives. These organizations may not begin or continue to use us for their future storage and information
management service needs.
21
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, 2016, our total long-term debt was approximately
$6.3 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, and other general corporate requirements, including
possible required repurchases of our various indebtedness;
inability to pursue strategic opportunities, including acquisitions and expansion into adjacent businesses;
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 in Note 4 to Notes to Consolidated Financial Statements included in this Annual
Report) 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 100% 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 100% owned United States subsidiaries, that represent the substantial majority of our United States operations.
22
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 recent years, we have expanded our
entry into the data center and fine art storage businesses. Our data center expansion in particular requires significant capital
commitments and includes other costs associated with the development of real estate to support this business. 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. We also face competition from other companies in our efforts to grow our
adjacent businesses, some of which possess substantial financial and other resources. As a result, we may be unable to acquire,
or may pay a significant purchase price for, adjacent businesses that support our strategic growth plan.
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.
For example, the success of our acquisition of Recall 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, we must be
able to successfully integrate our business and Recall’s and this integration is complex and time-consuming. While we are
progressing with the integration, we still may encounter challenges in the integration process including the following:
•
•
•
•
•
challenges and difficulties associated with managing our larger, more complex, company;
conforming standards, controls, procedures and policies, business cultures and compensation structures between the
two businesses;
consolidating corporate and administrative infrastructures;
coordinating geographically dispersed organizations; and
performance shortfalls as a result of the diversion of management's attention caused by integrating the entities'
operations.
In addition, our integration with Recall may pose special risks, including asset write-offs or restructuring charges and
unanticipated costs. Further, 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 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.
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, including Recall. 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.
23
Our net proceeds from the Divestments may be lower than expected and we may be subject to liabilities as a result of provisions
in the sale agreements governing the Divestments.
The terms of the sale agreements governing the Divestments (as defined in Note 6 to Notes to Consolidated Financial
Statements included in this Annual Report) in the United States, Canada and Australia provide for post-closing adjustments to
the purchase prices. In addition, we have agreed to provide certain transition services to the buyers following the completion of
the Divestments. As a result, the purchase prices for the Divestments may be adjusted in accordance with the terms of the sale
agreements and the costs we will incur providing post-closing transition services as required under our sale agreements may
exceed the amounts we have estimated. As such, the expected net proceeds of the Divestments are uncertain and the actual net
proceeds we receive from the Divestments may be less than the net proceeds expected by us and the transition services costs
may exceed our estimates. Furthermore, in the sale agreements governing the Divestments, we have made certain
representations and warranties and are bound by certain covenants following the closings. Any breach of such terms may
subject us to liabilities in accordance with the terms of the sale agreements.
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, Africa and the
Middle East 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. A
changing global political climate may impose restrictions on our ability to expand internationally.
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.
We also compete with other storage and information management services providers as well as other entities 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.
24
We have guaranteed 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
such tax opinions, based on, among other things, representations and warranties made by Recall and us. Such opinions do not
affect Recall’s obligation to indemnify Brambles for an adverse impact on the tax-free status of such prior spin-offs.
We have guaranteed 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 would be liable for the resulting taxes, which could be
material.
Item 1B. Unresolved Staff Comments.
None.
25
Item 2. Properties.
As of December 31, 2016, we conducted operations through 1,146 leased facilities and 297 owned facilities. Our
facilities are divided among our reportable operating segments as follows: North American Records and Information
Management Business (668), North American Data Management Business (69), Western European Business (218), Other
International Business (473) and Corporate and Other Business (15). These facilities contain a total of 86.2 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
District of Columbia
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
North Dakota
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
4
12
2
61
12
6
5
1
35
17
19
5
2
2
2
3
—
17
8
16
15
2
11
1
7
—
35
1
20
22
1
12
5
11
24
3
1
8
4
49
2
2
14
8
3
6
496
60
556
323,473
555,701
63,604
4,234,220
544,731
252,474
310,236
40,812
2,460,808
1,259,276
1,457,324
213,010
145,138
141,600
64,000
210,350
—
1,670,431
598,281
864,883
1,055,935
157,386
1,036,323
34,560
276,520
—
2,875,561
22,500
1,001,046
1,124,393
5,361
763,405
255,753
396,984
1,854,685
178,449
70,159
508,035
166,993
2,423,861
78,148
55,200
581,390
342,275
234,902
306,395
31,216,571
3,524,875
34,741,446
26
1
4
—
15
5
6
1
—
4
4
7
1
1
—
4
2
1
3
8
6
—
—
4
3
1
1
10
2
13
2
—
7
3
1
8
1
1
2
5
29
1
—
7
6
—
1
181
15
196
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
1,173,503
345,736
—
—
373,120
316,970
107,041
146,467
2,099,003
109,473
1,186,266
53,624
—
660,778
145,000
55,621
2,577,883
54,352
12,748
214,238
153,659
2,395,607
90,553
—
605,566
472,896
—
10,655
19,636,138
1,722,991
21,359,129
5
16
2
76
17
12
6
1
39
21
26
6
3
2
6
5
1
20
16
22
15
2
15
4
8
1
45
3
33
24
1
19
8
12
32
4
2
10
9
78
3
2
21
14
3
7
677
75
752
336,094
794,811
63,604
6,198,792
882,740
917,487
431,157
40,812
2,654,898
1,488,995
2,767,299
344,516
159,338
141,600
482,760
424,975
95,000
1,997,689
1,771,784
1,210,619
1,055,935
157,386
1,409,443
351,530
383,561
146,467
4,974,564
131,973
2,187,312
1,178,017
5,361
1,424,183
400,753
452,605
4,432,568
232,801
82,907
722,273
320,652
4,819,468
168,701
55,200
1,186,956
815,171
234,902
317,050
50,852,709
5,247,866
56,100,575
Country/State
International
Argentina
Australia
Austria
Belgium
Brazil
Chile
China (including Taiwan)
Columbia
Czech Republic
Denmark
England
Estonia
Finland
France
Germany
Greece
Hong Kong
Hungary
India
Ireland
Latvia
Lithuania
Malaysia
Mexico
The Netherlands
New Zealand
Northern Ireland
Norway
Peru
Poland
Romania
Russia
Scotland
Serbia
Singapore
Slovakia
South Africa
Spain
Sweden
Switzerland
Thailand
Turkey
Ukraine
Total
Leased
Owned
Total
Number
Square Feet
Number
Square Feet
Number
Square Feet
2
55
1
4
47
11
27
20
10
4
48
1
3
31
17
3
8
7
89
6
1
3
8
12
4
6
2
5
—
23
10
22
7
1
6
5
10
37
7
14
1
8
4
590
1,146
90,581
3,271,565
3,300
145,929
3,072,026
420,084
363,649
602,678
230,422
179,865
2,245,985
38,861
85,280
2,083,140
757,328
79,327
805,839
350,898
1,859,151
50,908
15,145
67,487
365,740
502,010
331,186
413,959
55,310
199,219
—
802,462
394,462
611,610
191,298
32,401
304,588
124,816
333,778
837,625
828,176
310,560
91,191
552,560
115,624
24,218,023
58,959,469
5
2
1
1
7
6
1
—
—
—
26
—
—
12
2
—
—
—
—
3
—
—
—
8
3
—
—
—
10
—
—
—
4
—
2
—
—
6
—
—
2
—
—
101
297
469,748
33,845
30,000
104,391
324,655
232,314
20,518
—
—
—
1,525,848
—
—
936,486
93,226
—
—
—
—
158,558
—
—
—
585,931
102,199
—
—
—
301,781
—
—
—
375,294
—
274,100
—
—
203,000
—
—
105,487
—
—
5,877,381
27,236,510
7
57
2
5
54
17
28
20
10
4
74
1
3
43
19
3
8
7
89
9
1
3
8
20
7
6
2
5
10
23
10
22
11
1
8
5
10
43
7
14
3
8
4
691
1,443
560,329
3,305,410
33,300
250,320
3,396,681
652,398
384,167
602,678
230,422
179,865
3,771,833
38,861
85,280
3,019,626
850,554
79,327
805,839
350,898
1,859,151
209,466
15,145
67,487
365,740
1,087,941
433,385
413,959
55,310
199,219
301,781
802,462
394,462
611,610
566,592
32,401
578,688
124,816
333,778
1,040,625
828,176
310,560
196,678
552,560
115,624
30,095,404
86,195,979
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 Notes to 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.
27
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.
28
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". Our shares of common stock also trade on the ASX
in the form of CHESS Depository Interests ("CDIs") representing a beneficial interest in one share of our common stock. The
following table sets forth the high and low sale prices on the NYSE, for the years 2015 and 2016:
2015
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2016
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Sale Prices
High
Low
$
$
$
$
41.53
38.49
32.25
32.35
34.15
39.84
41.50
37.51
35.60
30.95
26.49
25.99
23.64
32.12
35.42
30.75
The closing price of our common stock on the NYSE on February 17, 2017 was $37.15. As of February 17, 2017, there
were 1,580 holders of record of our common stock, including CHESS Depository Nominees Pty Limited, which held shares of
our common stock on behalf of our CDI holders.
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.
In 2015 and 2016, our board of directors declared the following dividends:
Declaration Date
Dividend
Per Share
February 19, 2015
May 28, 2015
August 27, 2015
October 29, 2015
February 17, 2016
May 25, 2016
July 27, 2016
October 31, 2016
$
0.4750
0.4750
0.4750
0.4850
0.4850
0.4850
0.4850
0.5500
Record Date
March 6, 2015
June 12, 2015
September 11, 2015
December 1, 2015
March 7, 2016
June 6, 2016
September 12, 2016
December 15, 2016
Total
Amount
(in thousands)
99,795
$
100,119
100,213
102,438
102,651
127,469
127,737
145,006
Payment Date
March 20, 2015
June 26, 2015
September 30, 2015
December 15, 2015
March 21, 2016
June 24, 2016
September 30, 2016
December 30, 2016
During the years ended December 31, 2014, 2015 and 2016, we declared distributions to our stockholders of
$1,048.9 million, $402.6 million, and $502.9 million, respectively. These distributions represent approximately $5.37 per share,
$1.91 per share and $2.04 per share for the years ended December 31, 2014, 2015 and 2016, respectively, based on the
weighted average number of common shares outstanding during each respective year. For 2014, total amounts distributed
included a special distribution declared by our board of directors of $700.0 million, or $3.61 per share, associated with our
conversion to a REIT, of which $560.0 million was paid in the form of our common stock and $140.0 million was paid in cash.
On February 15, 2017, we declared a dividend to our stockholders of record as of March 15, 2017 of $0.55 per share,
payable on April 3, 2017.
29
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, 2014, 2015 and 2016, 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,
2014
26.4%
2015
49.3%
2016
45.5%
56.4%
39.1%
21.0%
33.5%
11.6%
17.2%
100.0% 100.0% 100.0%
Dividends paid during the years ended December 31, 2014, 2015 and 2016 which were classified as qualified ordinary
dividends for federal income tax purposes primarily related to (i) the distribution of certain of our historical C corporation
earnings and profits following our conversion to a REIT (with respect to dividends paid during the year ended December 31,
2014) and (ii) the distribution of historical C corporation earnings and profits related to certain acquisitions completed during
the years ended December 31, 2015 and 2016 (with respect to dividends paid during the years ended December 31, 2015 and
2016).
Unregistered Sales of Equity Securities and Use of Proceeds
We did not sell any unregistered equity securities during the three months ended December 31, 2016, nor did we
repurchase any shares of our common stock during the three months ended December 31, 2016.
30
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,
2012
2013
2014
2015
2016(1)
(In thousands)
$1,733,138
$1,784,721
$1,860,243
$1,837,897
$2,142,905
1,270,817
1,239,902
1,257,450
1,170,079
1,368,548
3,003,955
3,024,623
3,117,693
3,007,976
3,511,453
Cost of sales (excluding depreciation and amortization)
1,277,113
1,288,878
1,344,636
1,290,025
1,567,777
Selling, general and administrative
Depreciation and amortization
850,371
316,344
924,031
322,037
869,572
353,143
844,960
345,464
988,332
452,326
Loss on disposal/write-down of property, plant and
equipment (excluding real estate), net
4,661
430
1,065
3,000
1,412
Total Operating Expenses
2,448,489
2,535,376
2,568,416
2,483,449
3,009,847
Operating Income
Interest Expense, Net
Other Expense, Net
555,466
242,599
16,062
489,247
254,174
75,202
549,277
260,717
65,187
524,527
263,871
98,590
501,606
310,662
44,300
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
(Loss) Gain on Sale of Discontinued Operations, Net of
Tax
Net Income
Less: Net Income Attributable to Noncontrolling
Interests
Net Income Attributable to Iron Mountain Incorporated
(footnotes follow)
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
—
—
146,644
44,944
(2,180)
103,880
3,353
—
99,992
328,746
125,203
107,233
3,126
3,530
2,627
1,962
2,409
$ 170,922
$
96,462
$ 326,119
$ 123,241
$ 104,824
31
Earnings (Losses) per Share—Basic:
Income from Continuing Operations
Total (Loss) Income from Discontinued Operations
Net Income Attributable to Iron Mountain Incorporated
Earnings (Losses) per Share—Diluted:
Income from Continuing Operations
Total (Loss) Income from Discontinued Operations
Net Income Attributable to Iron Mountain Incorporated
Year Ended December 31,
2012
2013
2014
2015
2016(1)
(In thousands, except per share data)
$
$
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
$
0.41
0.01
0.43
0.41
0.01
0.42
Weighted Average Common Shares Outstanding—Basic
173,604
190,994
195,278
210,764
246,178
Weighted Average Common Shares Outstanding—Diluted
174,867
192,412
196,749
212,118
247,267
Dividends Declared per Common Share
(footnotes follow)
$ 5.1200
$ 1.0800
$ 5.3713
$ 1.9100
$ 2.0427
2012
2013
2014
2015
2016(1)
Year Ended December 31,
(In thousands)
$
910,917
$
894,581
$
925,797
$
920,005
$ 1,087,288
30.3%
1.9x
29.6%
1.5x
29.7%
1.7x
30.6%
1.5x
31.0%
1.4x
2012
2013
2014
2015
2016(1)
As of December 31,
(in thousands)
Other Data:
Adjusted EBITDA(2)
Adjusted EBITDA Margin(2)
Ratio of Earnings to Fixed Charges
(footnotes follow)
Consolidated Balance Sheet
Data:
Cash and Cash Equivalents
$
243,415
$
120,526
$
125,933
$
128,381
$
236,484
Total Assets
6,314,489
6,607,398
6,523,265
6,350,587
9,486,800
Total Long-Term Debt (including
Current Portion of Long-Term
Debt)
Redeemable Noncontrolling
Interests
Total Equity
(footnotes follow)
3,781,153
4,126,115
4,616,454
4,845,678
6,251,181
—
—
1,157,148
1,051,734
—
869,955
—
528,607
54,697
1,936,671
_______________________________________________________________________________
(1) Our financial results as of and for the year ended December 31, 2016 include the results of Recall from May 2, 2016.
(2) For definitions of Adjusted EBITDA and Adjusted EBIDTA Margin, a reconciliation of Adjusted EBITDA 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.
32
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
Recall Acquisition
On May 2, 2016 (Sydney, Australia time), we completed the Recall Transaction. At the closing of the Recall Transaction,
we paid approximately $331.8 million in cash and issued approximately 50.2 million shares of our common stock which, based
on the closing price of our common stock as of April 29, 2016 (the last day of trading on the NYSE prior to the closing of the
Recall Transaction) of $36.53 per share, resulted in a total purchase price to Recall shareholders of approximately $2,166.9
million.
We account for acquisitions using the acquisition method of accounting, and, accordingly, the assets and liabilities
acquired are 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. With respect to the acquisition of Recall, the results of operations of
Recall have been included in our consolidated results from May 2, 2016. See Note 6 to Notes to Consolidated Financial
Statements included in this Annual Report for unaudited pro forma results of operations for us and Recall, as if the Recall
Transaction was completed on January 1, 2015, for the years ended December 31, 2015 and 2016, respectively.
We currently estimate total acquisition and integration 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 (i)
approximately $80.0 million of operating expenditures to complete the Recall Transaction, including advisory and professional
fees and costs to complete the Divestments (as defined in Note 6 to Notes to Consolidated Financial Statements included in this
Annual Report) required in connection with receipt of regulatory approval and to provide transitional services required to
support the divested businesses during a transition period (“Recall Deal Close & Divestment Costs”) and (ii) approximately
$300.0 million of integration expenditures, including operating expenditures associated with moving, severance, facility
upgrade, REIT conversion and system upgrade costs (“Recall Integration Costs” and, collectively with Recall Deal Close &
Divestment Costs, “Recall Costs”) and capital expenditures to integrate Recall with our existing operations. From January 1,
2015 through December 31, 2016, we have incurred cumulative operating and capital expenditures associated with the Recall
Transaction of $197.4 million, including $179.0 million of Recall Costs and $18.4 million of capital expenditures.
See Note 16 to Notes to Consolidated Financial Statements included in this Annual Report for more information on Recall
Costs, including costs recorded by segment as well as recorded between cost of sales and selling, general and administrative
expenses.
Divestitures
i. Divestments Associated with the Recall Transaction
As disclosed in Note 6 to Notes to Consolidated Financial Statements included in this Annual Report, we sought
regulatory approval of the Recall Transaction and, as part of the regulatory approval process, we agreed to make the
Divestments.
The Initial United States Divestments, the Seattle/Atlanta Divestments, the Recall Canadian Divestments and the UK
Divestments (each as defined in Note 6 to Notes to Consolidated Financial Statements included in this Annual Report)
(collectively, the "Recall Divestments") meet the criteria to be reported as discontinued operations as the Recall Divestments
met the criteria to be reported as assets and liabilities held for sale at, or within a short period of time following, the closing of
the Recall Transaction. Accordingly, the results of operations for the Recall Divestments are presented as a component of
discontinued operations in our Consolidated Statement of Operations and the cash flows associated with the Recall
Divestments are presented as a component of cash flows from discontinued operations in our Consolidated Statement of Cash
Flows for the year ended December 31, 2016.
33
The Australia Divestment Business and the Iron Mountain Canadian Divestments (each as defined in Note 6 to Notes to
Consolidated Financial Statements included in this Annual Report) (collectively, the "Iron Mountain Divestments") do not meet
the criteria to be reported as discontinued operations as our decision to divest the Iron Mountain Divestments does not represent
a strategic shift that will have a major effect on our operations and financial results. Accordingly, the results of operations for
the Iron Mountain Divestments are presented as a component of income (loss) from continuing operations in our Consolidated
Statements of Operations for the years ended December 31, 2014, 2015 and 2016 and the cash flows associated with the Iron
Mountain Divestments are presented as a component of cash flows from continuing operations in our Consolidated Statements
of Cash Flows for the years ended December 31, 2014, 2015 and 2016.
The Australia Divestment Business represents approximately $65.0 million and $44.0 million of total revenues and
approximately $5.8 million and $1.1 million of total income from continuing operations for the years ended December 31, 2015
and 2016, respectively. The Iron Mountain Canadian Divestments represent approximately $2.7 million of total revenues and
approximately $1.5 million of total income from continuing operations for each of the years ended December 31, 2015 and
2016, respectively. The Australia Divestment Business was previously included in our Other International Business segment
and the Iron Mountain Canadian Divestments were previously included in our North American Records and Information
Management Business segment.
See Note 14 to Notes to Consolidated Financial Statements included in this Annual Report for additional information
regarding the presentation of the Divestments in our Consolidated Statements of Operations and Consolidated Statements of
Cash Flows for the years ended December 31, 2014, 2015 and 2016.
ii. International Shredding Operations
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 concluded that this divestiture did not meet the
requirements to be presented as a discontinued operation and, therefore, 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 represented less than
1% of our consolidated revenues for the year ended December 31, 2014. 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.
Cost Optimization Plans
i. 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 a charge of $3.5 million for the year ended December 31, 2014, 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,
2014
2015
2016
$
$
1,228
2,247
3,475
$
$
— $
—
— $
—
—
—
34
Costs recorded by segment associated with the Organizational Restructuring are as follows (in thousands):
North American Records and Information Management Business
$
1,560
$
— $
Year Ended December 31,
2014
2015
2016
North American Data Management Business
Western European Business
Other International Business
Corporate and Other Business
Total
ii. Transformation Initiative
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 and $6.0 million for the
years ended December 31, 2015 and 2016, respectively, 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 (in thousands):
Year Ended December 31,
2015
2016
2014
Cost of sales (excluding depreciation and amortization)
Selling, general and administrative expenses
Total
$
$
— $
—
10,167
— $
—
— $
10,167
$
6,007
6,007
Costs recorded by segment associated with the Transformation Initiative are as follows (in thousands):
Year Ended December 31,
2014
2015
2016
North American Records and Information Management Business
$
— $
5,403
$
2,329
North American Data Management Business
Western European Business
Other International Business
Corporate and Other Business
Total
—
—
—
—
— $
241
1,537
—
2,986
10,167
$
395
204
—
3,079
6,007
$
Through December 31, 2016, we have recorded cumulative charges to our Consolidated Statements of Operations
associated with the Transformation Initiative of $16.2 million. As of December 31, 2016, we had $0.5 million accrued related
to the Transformation Initiative. We expect the majority of this liability will be paid in the first half of 2017.
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.
35
General
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. 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 Information Governance and Digital Solutions, 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) 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
and tapes with us, they are less likely than they have been in the past to retrieve records for research and other 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
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, buildings, building and leasehold
improvements and computer systems hardware and software. Amortization relates primarily to customer relationship intangible
assets. Both depreciation and amortization are impacted by the timing of acquisitions.
36
Our consolidated revenues and expenses are subject to variations caused by the net effect of foreign currency translation
incurred by our entities outside the United States. It is difficult to predict the future fluctuations of foreign currency exchange
rates and how those fluctuations will impact our Consolidated Statements of Operations. 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 2014 results at the 2015 average
exchange rates and the 2015 results at the 2016 average exchange rates. Constant currency growth rates are a non-GAAP
measure.
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,
2015
2016
0.753
0.305
1.529
0.784
1.110
$
$
$
$
$
0.744
0.288
1.356
0.755
1.107
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
$
$
$
$
$
$
$
$
$
$
Percentage
Strengthening /
(Weakening) of
Foreign Currency
(1.2)%
(5.6)%
(11.3)%
(3.7)%
(0.3)%
Percentage
Strengthening /
(Weakening) of
Foreign Currency
(16.5)%
(28.4)%
(7.2)%
(13.5)%
(16.5)%
37
Non-GAAP Measures
Adjusted EBITDA
Adjusted EBITDA is defined as income (loss) from continuing operations before interest expense, net, provision (benefit)
for income taxes, depreciation and amortization, and also excludes certain items that we believe are not indicative of our core
operating results, specifically: (i) loss (gain) on disposal/write-down of property, plant and equipment (excluding real estate),
net; (ii) intangible impairments; (iii) other expense (income), net; (iv) gain on sale of real estate, net of tax; (v) Recall Costs;
and (vi) REIT Costs (as defined below). Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by total
revenues. We use multiples of current or projected Adjusted EBITDA in conjunction with our discounted cash flow models to
determine our estimated overall enterprise valuation and to evaluate acquisition targets. We believe Adjusted EBITDA and
Adjusted EBITDA 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 EBITDA excludes both 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 EBITDA 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 EBITDA and Adjusted EBITDA 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 income, income (loss) from continuing operations, net
income (loss) or cash flows from operating activities from continuing operations (as determined in accordance with GAAP).
Reconciliation of Income (Loss) from Continuing Operations to Adjusted EBITDA (in thousands):
Income (Loss) from Continuing Operations
Add/(Deduct):
Gain on Sale of Real Estate, Net of Tax
Provision (Benefit) for Income Taxes
Other Expense, Net
Interest Expense, Net
Loss (Gain) on Disposal/Write-Down of Property, Plant
and Equipment (Excluding Real Estate), Net
Depreciation and Amortization
Recall Costs
REIT Costs(1)
Adjusted EBITDA
Year Ended December 31,
2012
$ 182,707
2013
99,161
2014
$ 328,955
2015
$ 125,203
2016
$ 103,880
$
(206)
114,304
16,062
242,599
(1,417)
62,127
75,202
(8,307)
(97,275)
65,187
(850)
37,713
98,590
(2,180)
44,944
44,300
254,174
260,717
263,871
310,662
4,661
430
1,065
316,344
322,037
353,143
—
—
—
34,446
82,867
22,312
3,000
345,464
47,014
—
1,412
452,326
131,944
—
$ 910,917
$ 894,581
$ 925,797
$ 920,005
$1,087,288
_______________________________________________________________________________
(1) Includes costs associated with our conversion to a REIT, excluding REIT compliance costs beginning January 1, 2014
("REIT Costs").
38
Adjusted EPS
Adjusted EPS is defined as reported earnings per share fully diluted 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) other expense (income), net; (5) Recall Costs; (6) REIT Costs; and (7) the tax impact of
reconciling items and discrete tax items. Adjusted EPS includes income (loss) attributable to noncontrolling interests. We do
not believe these excluded items to be indicative of our ongoing operating results, and they are not considered when we are
forecasting our future results. We believe Adjusted EPS is of value to our current and potential investors when comparing our
results from past, present and future periods.
Reconciliation of Reported EPS—Fully Diluted from Continuing Operations to Adjusted EPS—Fully Diluted from Continuing
Operations:
Year Ended December 31,
2012
2013
2014
2015
2016
Reported EPS—Fully Diluted from Continuing Operations
$
1.04
$
0.52
$
1.67
$
0.59
$
0.41
Add/(Deduct):
Income (Loss) Attributable to Noncontrolling Interests
Gain on Sale of Real Estate, Net of Tax
Other Expense, Net
Loss (Gain) on Disposal/Write-down of Property, Plant and
Equipment (Excluding Real Estate), Net
Recall Costs
REIT Costs
Tax Impact of Reconciling Items and Discrete Tax Items(1)
Adjusted EPS—Fully Diluted from Continuing Operations(2)
$
—
—
0.09
0.03
—
0.20
0.35
1.71
$
—
(0.01)
0.39
—
—
0.43
0.07
1.40
$
—
(0.04)
0.33
0.01
—
0.11
(0.72)
1.36
—
—
0.46
0.01
0.22
—
(0.07)
1.21
$
$
0.01
(0.01)
0.18
0.01
0.53
—
(0.06)
1.07
_______________________________________________________________________________
(1) The difference between our effective tax rate and our structural tax rate (or adjusted effective tax rate) for the years
ended December 31, 2012, 2013, 2014, 2015 and 2016 is primarily due to (i) the reconciling items above, which
impact our reported income (loss) from continuing operations before (benefit) provision for income taxes but have an
insignificant impact on our reported (benefit) provision for income taxes and (ii) other discrete tax items. Our
structural tax rate for purposes of the calculation of Adjusted EPS for the years ended December 31, 2012, 2013, 2014,
2015 and 2016 was 15.0%, 15.0%, 14.4%, 16.8% and 18.5%, respectively.
(2) Columns may not foot due to rounding.
39
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 depreciation on real estate assets and 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) loss
(gain) on disposal/write-down of property, plant and equipment (excluding real estate), net; (2) intangible impairments; (3)
other expense (income), net; (4) deferred income taxes and REIT tax adjustments; (5) Recall Costs; (6) REIT Costs; (7) loss
(income) from discontinued operations, net of tax; and (8) loss (gain) on sale of discontinued operations, net of tax.
Reconciliation of Net Income (Loss) to FFO (NAREIT) and FFO (Normalized) (in thousands):
Net Income (Loss)
Add/(Deduct):
Real Estate Depreciation(1)
Gain on Sale of Real Estate, Net of Tax(2)
FFO (NAREIT)
Add/(Deduct):
Year Ended December 31,
2014
$ 328,746
2015
$ 125,203
2016
$ 107,233
184,170
(8,307)
504,609
178,800
(850)
303,153
226,258
(2,180)
331,311
Loss on Disposal/Write-Down of Property, Plant and
Equipment (Excluding Real Estate), Net
Other Expense, Net(3)
Deferred Income Taxes and REIT Tax Adjustments(4)
Recall Costs
REIT Costs
Loss (Income) from Discontinued Operations, Net of
Tax(5)
1,065
65,187
(144,154)
—
22,312
209
3,000
98,590
(5,513)
47,014
—
—
FFO (Normalized)
$ 449,228
$ 446,244
_______________________________________________________________________________
1,412
44,300
(31,944)
131,944
—
(3,353)
$ 473,670
(1) Includes depreciation expense related to real estate assets (land improvements, buildings, building improvements,
leasehold improvements and racking).
(2) Net of tax provision of $2.2 million, $0.2 million and $0.1 million for the years ended December 31, 2014, 2015 and
2016, respectively.
(3) Includes foreign currency transaction losses, net of $58.3 million, $70.9 million and $20.4 million in the years ended
December 31, 2014, 2015 and 2016, respectively.
(4) 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).
(5) Net of tax provision of $0.0 million, $0.0 million and $0.8 million for the years ended December 31, 2014, 2015 and
2016, respectively.
40
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our Consolidated
Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements
requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements and for the period then
ended. On an ongoing basis, we evaluate the estimates used. We base our estimates on historical experience, actuarial estimates,
current conditions and various other assumptions that we believe to be reasonable under the circumstances. These estimates
form the basis for making judgments about the carrying values of assets and liabilities and are not readily apparent from other
sources. Actual results may differ from these estimates. Our critical accounting policies include the following, which are listed
in no particular order:
Revenue Recognition
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 estimate 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 building and 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 parties to assist us in estimating 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 parties to assist us in estimating
the fair value of 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 estimated 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.
41
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 the Recall Transaction (our most significant acquisition in fiscal year 2016), a hypothetical increase of 10% in the expected
annual future cash flows attributable to the Recall Transaction, with all other assumptions unchanged, would have increased the
calculated fair value of the acquired customer relationship intangible assets for the Recall Transaction by $70.9 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 the
Recall Transaction by $96.6 million (or 13.6%), with an offsetting decrease to goodwill.
Our estimates of fair value are based upon assumptions believed to be reasonable at that time but which are inherently
uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may
occur, which may affect the accuracy of such assumptions.
Impairment of Tangible and Intangible Assets
Assets subject to depreciation or amortization: We review long-lived assets and all finite-lived 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 it is determined
that we are unable to recover the carrying amount of the 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 other indefinite-lived intangible assets not subject to amortization: Goodwill and intangible assets with
indefinite lives are not amortized but are reviewed annually for impairment or more frequently if impairment indicators arise.
Other than goodwill, we currently have no intangible assets that have indefinite lives and which are not amortized.
We have selected October 1 as our annual goodwill impairment review date. We performed our annual goodwill
impairment review as of October 1, 2014, 2015 and 2016, and concluded that goodwill was not impaired as of such dates. Our
reporting units at which level we performed our goodwill impairment analysis as of October 1, 2016 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; (5) Adjacent Businesses - Consumer Storage; (6) Adjacent Businesses -
Fine Arts; (7) Western Europe; (8) Northern and Eastern Europe; (9) Latin America; (10) Australia and New Zealand; (11)
Southeast Asia; and (12) Africa and India. See Note 2.h. to Notes to Consolidated Financial Statements included in this Annual
Report for a description of our reporting units.
42
Based on our goodwill impairment analysis as of October 1, 2016, our North American Records and Information
Management, North American Secure Shredding, North American Data Management, Adjacent Businesses - Data Centers,
Western Europe and Northern and Eastern Europe reporting units had estimated fair values that exceeded their carrying values
by greater than 25%. These reporting units represent approximately $3,272.5 million, or 83.8%, of our consolidated goodwill
balance at December 31, 2016. Our Adjacent Businesses - Consumer Storage, Adjacent Businesses - Fine Arts, Latin America,
Australia and New Zealand, Southeast Asia and Africa and India reporting units had estimated fair values that exceeded their
carrying values by less than 25%. These reporting units represent approximately $632.5 million, or 16.2%, of our consolidated
goodwill balance at December 31, 2016. The estimated fair values and carrying values of each of these reporting units were
significantly impacted by recent acquisitions, specifically the Recall Transaction (in the case of the Latin America, Australia
and New Zealand and Southeast Asia reporting units) and certain other acquisitions completed during 2015 and 2016 (in the
case of the Adjacent Businesses - Consumer Storage, Adjacent Businesses - Fine Arts and Africa and India reporting units). As
of December 31, 2016, no factors were identified that would alter our October 1, 2016 goodwill impairment analysis. In
making this assessment, we considered 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 earnings. The income approach incorporates many assumptions including future
growth rates and operating margins, discount rate factors, expected capital expenditures and income tax cash flows. Changes in
economic and operating conditions impacting these assumptions could result in goodwill impairments in future periods. In
conjunction with our annual goodwill impairment reviews, we reconcile the sum of the valuations of all of our reporting units
to our market capitalization as of such dates.
Although we believe we have sufficient historical and projected information available to us to test for goodwill
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, 2016. With respect to the North American Records and Information Management, North American Secure
Shredding, North American Data Management, Adjacent Businesses - Data Centers, Western Europe and Northern and Eastern
Europe reporting units as of October 1, 2016, we noted that, based on the estimated fair value of these reporting units
determined as of October 1, 2016, (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 estimated fair value of these reporting units as
of October 1, 2016 by a range of approximately 9.9% to 10.4% but would not, however, have resulted in the carrying value of
any of these reporting units with goodwill exceeding their estimated fair value; and (ii) a hypothetical increase of 100 basis
points in the discount rate, with all other assumptions unchanged, would have decreased the estimated fair value of these
reporting units as of October 1, 2016 by a range of approximately 5.8% to 14.1% but would not, however, have resulted in the
carrying value of any of these reporting units with goodwill exceeding their estimated fair value. With respect to the Adjacent
Businesses - Consumer Storage, Adjacent Businesses - Fine Arts, Latin America, Australia and New Zealand, Southeast Asia
and Africa and India reporting units as of October 1, 2016, we noted that the estimated fair value of these reporting units as of
October 1, 2016 closely approximates their carrying value, as each of these reporting units has been significantly impacted by
recent acquisitions. Accordingly, any significant negative change in either the expected annual future cash flows of these
reporting units or the discount rate may result in the carrying value of these reporting units exceeding their estimated fair value.
43
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 and in connection with the Recall Transaction. 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 from 2023 through 2033, of $67.1 million at December
31, 2016 to reduce future federal taxable income, of which $1.2 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 2017 through 2035, of which an insignificant state tax benefit is expected to be
realized. We have assets for foreign net operating losses of $97.5 million, with various expiration dates (and in some cases no
expiration date), subject to a valuation allowance of approximately 73%. 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 as the largest amount of benefit that is greater than
50% likely of being realized upon ultimate settlement.
We are subject to income taxes in the United States and numerous foreign jurisdictions. We are subject to examination by
various tax authorities in jurisdictions in which we have business operations or a taxable presence. We regularly assess the
likelihood of additional assessments by tax authorities and provide for these matters as appropriate. As of December 31, 2015
and 2016, we had approximately $47.7 million and $59.5 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.
44
Prior to our conversion to a REIT, 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 our foreign subsidiaries indefinitely
outside the United States. During 2014, as a result of our conversion to a REIT, we reassessed our intentions regarding the
indefinite reinvestment of such undistributed earnings of our foreign subsidiaries outside the United States (the "2014 Indefinite
Reinvestment Assessment"). As a result of the 2014 Indefinite Reinvestment Assessment, we concluded, at that time, that it was
no longer our intent to indefinitely reinvest our current and future undistributed earnings of our foreign subsidiaries outside the
United States, and, therefore, during 2014, we recognized an increase in our provision for income taxes 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.
During 2016, as a result of the closing of the Recall Transaction and the subsequent integration of Recall’s operations into
our operations, we again reassessed our intentions regarding the indefinite reinvestment of such undistributed earnings of our
foreign subsidiaries outside the United States (the “2016 Indefinite Reinvestment Assessment”). As a result of the 2016
Indefinite Reinvestment Assessment, we concluded that it is our intent to indefinitely reinvest our current and future
undistributed earnings of certain of our unconverted foreign TRSs outside the United States, and, therefore, during 2016, we
recognized a decrease in our provision for income taxes from continuing operations in the amount of $3.3 million, representing
the reversal of previously recognized incremental foreign withholding taxes on the earnings of such unconverted foreign TRSs.
As a result of the 2016 Indefinite Reinvestment Assessment, we no longer provide incremental foreign withholding taxes on the
retained book earnings of these unconverted foreign TRSs, which was approximately $195.7 million as of December 31, 2016.
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. We continue, however, to provide for incremental foreign withholding taxes on net book over outside
basis differences related to the earnings of our foreign QRSs and certain other foreign TRSs (excluding unconverted foreign
TRSs).
Recent Accounting Pronouncements
See Note 2.w. to Notes to Consolidated Financial Statements included in this Annual Report for a description of recently
issued accounting pronouncements, including those recently adopted.
45
Results of Operations
Comparison of Year Ended December 31, 2016 to Year Ended December 31, 2015 and Comparison of Year Ended
December 31, 2015 to Year Ended December 31, 2014 (in thousands):
Revenues
Operating Expenses
Operating Income
Other Expenses, Net
Income from Continuing Operations
Income from Discontinued Operations, Net of Tax
Net Income
Net Income Attributable to Noncontrolling Interests
Net Income Attributable to Iron Mountain Incorporated $
$
$
Adjusted EBITDA(1)
Adjusted EBITDA Margin(1)
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
Year Ended December 31,
$
2015
3,007,976
2,483,449
2016
3,511,453
3,009,847
501,606
397,726
103,880
3,353
107,233
2,409
104,824
1,087,288
$
$
$
Dollar
Change
503,477
$
526,398
(22,921)
(1,598)
(21,323)
3,353
(17,970)
447
(18,417)
167,283
Percentage
Change
16.7 %
21.2 %
(4.4)%
(0.4)%
(17.0)%
100.0 %
(14.4)%
22.8 %
(14.9)%
18.2 %
524,527
399,324
125,203
—
125,203
1,962
123,241
920,005
30.6%
31.0%
Year Ended December 31,
$
2014
3,117,693
2,568,416
549,277
220,322
328,955
(209)
328,746
2,627
326,119
925,797
2015
3,007,976
2,483,449
524,527
399,324
125,203
—
125,203
1,962
123,241
920,005
30.6%
$
$
$
$
$
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)%
Net Income Attributable to Iron Mountain Incorporated $
$
Adjusted EBITDA(1)
Adjusted EBITDA Margin(1)
_______________________________________________________________________________
29.7%
$
$
(1) See "Non-GAAP Measures—Adjusted EBITDA" 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.
46
REVENUES
Storage Rental
Service
Total Revenues
Storage Rental
Service
Total Revenues
Year Ended December 31,
2015
1,837,897
1,170,079
3,007,976
$
$
2016
2,142,905
1,368,548
3,511,453
Dollar
Change
305,008
198,469
503,477
$
$
Percentage Change
Actual
Constant
Currency(1)
Internal
Growth(2)
16.6%
17.0%
16.7%
19.1%
19.9%
19.4%
2.3 %
(0.6)%
1.2 %
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 %
$
$
$
$
_______________________________________________________________________________
(1) Constant currency growth rates are calculated by translating the 2015 results at the 2016 average exchange rates and
the 2014 results at the 2015 average exchange rates.
(2) Our internal revenue growth rate, which is a non-GAAP measure, represents the weighted average year-over-year
growth rate of our revenues excluding the impact of business acquisitions, divestitures and foreign currency exchange
rate fluctuations. The revenues generated by Recall have been integrated with our existing revenues and it is
impracticable for us to determine actual Recall revenue contribution for the applicable periods. Therefore, our internal
revenue growth rates exclude the impact of revenues associated with the Recall Transaction based upon forecasted or
budgeted Recall revenues beginning in the third quarter of 2016. Our internal revenue growth rate includes the impact
of acquisitions of customer relationships.
Storage Rental Revenues
Consolidated storage rental revenues increased $305.0 million, or 16.6%, to $2,142.9 million for the year ended
December 31, 2016 from $1,837.9 million for the year ended December 31, 2015. In the year ended December 31, 2016, the
net impact of acquisitions/divestitures and consolidated internal storage rental revenue growth were partially offset by
unfavorable fluctuations in foreign currency exchange rates compared to the year ended December 31, 2015. The net impact of
acquisitions/divestitures contributed 16.8% to the reported storage rental revenue growth rate for the year ended December 31,
2016 compared to the comparable prior year period, primarily driven by our acquisition of Recall. Internal storage rental
revenue growth of 2.3% in the year ended December 31, 2016 compared to the year ended December 31, 2015 was driven by
internal storage rental revenue growth of 1.0%, 2.0%, 0.8% and 8.5% in our North American Records and Information
Management Business, North American Data Management Business, Western European Business and Other International
Business segments, respectively, primarily driven by volume increases. Excluding the impact of acquisitions, global records
management net volumes as of December 31, 2016 increased by 1.7% over the ending volume as of December 31, 2015. These
increases were partially offset by the impact of foreign currency exchange rate fluctuations, which decreased our reported
storage rental revenue growth rate for the year ended December 31, 2016 by 2.5%, compared to the comparable prior year
period. Global records management reported net volumes, including the impact of acquisitions, as of December 31, 2016
increased by 26.3% over the ending volume at December 31, 2015, supported by volume increases across each of our
reportable operating segments, primarily associated with the acquisition of Recall. 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 internal storage rental revenue growth and the
net impact of acquisitions/divestitures were offset by unfavorable fluctuations in foreign currency exchange rates compared to
the comparable prior year period. 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 comparable prior year period. This decrease was
partially offset by internal storage rental revenue 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 comparable prior year period.
Our consolidated storage rental revenue growth in 2015 was driven by internal storage rental revenue 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.
47
Service Revenues
Consolidated service revenues increased $198.5 million, or 17.0%, to $1,368.5 million for the year ended December 31,
2016 from $1,170.1 million for the year ended December 31, 2015. In the year ended December 31, 2016, the net impact of
acquisitions/divestitures was partially offset by negative consolidated internal service revenue growth and unfavorable
fluctuations in foreign currency exchange rates compared to the year ended December 31, 2015. The net impact of acquisitions/
divestitures contributed 20.5% to the reported service revenue growth rate for the year ended December 31, 2016 compared to
the year ended December 31, 2015, primarily driven by our acquisition of Recall. Internal service revenue growth was negative
0.6% for the year ended December 31, 2016, compared to the comparable prior year period. The negative internal service
revenue growth for the year ended December 31, 2016 reflects reduced retrieval/re-file activity and a related decrease in
transportation revenues within our North American Records and Information Management Business and Western European
Business segments, 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, our internal service revenue growth rate of 1.0% for the year ended December 31, 2016 was
driven by special project revenue recognized in the first quarter of 2016 and growth in secure shredding revenues, as well as the
stabilization in recent periods of the decline in retrieval/re-file activity and the related decrease in transportation revenues. Our
internal service revenue growth rates of negative 9.8% and negative 5.6% for the year ended December 31, 2016 in our North
American Data Management and Western European Business segments, respectively, are reflecting more recent reductions in
retrieval/re-file activity and the related decrease in transportation revenues. Foreign currency exchange rate fluctuations
decreased our reported total service revenues by 2.9% in 2016 over 2015. 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. Internal service revenue growth was negative 0.4% for the year ended December 31, 2015, compared to
the comparable prior year period. The negative internal service revenue 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. 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.
Total Revenues
For the reasons stated above, our consolidated revenues increased $503.5 million, or 16.7%, to $3,511.5 million for the
year ended December 31, 2016 from $3,008.0 million for the year ended December 31, 2015. The net impact of acquisitions/
divestitures contributed 18.2% to the reported consolidated revenue growth rates for the year ended December 31, 2016
compared to the comparable prior year period, primarily driven by our acquisition of Recall. Consolidated internal revenue
growth was 1.2% in the year ended December 31, 2016 compared to the comparable prior year period. These increases were
partially offset by the impact of foreign currency exchange rate fluctuations, which decreased our reported consolidated
revenue by 2.7% in the year ended December 31, 2016 compared to the comparable 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. 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 comparable 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 internal revenue
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.
48
Internal Growth—Eight-Quarter Trend
2015
2016
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Storage Rental Revenue
Service Revenue
Total Revenue
3.0 %
(1.0)%
1.4 %
2.7%
—%
1.6%
2.8 %
(0.9)%
1.3 %
2.2%
0.3%
1.4%
2.2%
1.6%
2.0%
2.1 %
(2.1)%
0.4 %
_______________________________________________________________________________
Third
Quarter(1)
2.1 %
(1.3)%
0.8 %
Fourth
Quarter
2.9 %
(0.9)%
1.4 %
(1) During the fourth quarter of 2016, we determined that our internal revenue growth rates for the three and nine months
ended September 30, 2016 were incorrectly calculated in our Other International Business segment. Approximately
$4.4 million of revenue associated with the Recall Transaction was attributed to our business as it existed prior to the
Recall Transaction. This incorrect calculation impacted our previously reported internal revenue growth rates for our
Other International Business segment as well as our consolidated internal revenue growth rates. The corrected internal
storage rental revenue, internal service revenue and internal total revenue growth rates for our Other International
Business segment were 7.5%, 1.6% and 5.0%, respectively, for the three months ended September 30, 2016 and 8.5%,
5.9% and 7.4%, respectively, for the nine months ended September 30, 2016. Our corrected consolidated internal
storage rental revenue, internal service revenue and internal total revenue growth rates were 2.1%, (1.3)% and 0.8%,
respectively, for the three months ended September 30, 2016 and 2.1%, (0.5)% and 1.1%, respectively, for the nine
months ended September 30, 2016. Management has assessed, both quantitatively and qualitatively, the impact of this
incorrect calculation of our internal revenue growth rates for the three and nine months ended September 30, 2016 and
concluded that such changes were not material to our Quarterly Report on Form 10-Q for the quarter ended September
30, 2016.
We expect our consolidated internal storage rental revenue growth rate for 2017 to be approximately 2.0% to 2.5%.
During the past eight quarters, our internal storage rental revenue growth rate has ranged between 2.1% and 3.0%. Our internal
storage rental revenue growth rates have been relatively stable over the past two fiscal years, as internal storage rental revenue
growth for full year 2015 and 2016 were 2.7% and 2.3%, respectively. At various points in the economic cycle, internal storage
rental revenue growth may be influenced by changes in pricing and volume. Within our international portfolio, the Western
European Business segment is generating consistent low single-digit internal storage rental revenue growth, while the Other
International Business segment is producing high single-digit internal storage rental revenue 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 internal growth rate for storage rental revenues 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 over the past eight quarters reflects reduced retrieval/re-file activity and a related
decrease in transportation revenues within our North American Records and Information Management Business and Western
European Business segments, 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.
49
OPERATING EXPENSES
Cost of Sales
Consolidated cost of sales (excluding depreciation and amortization) consists of the following expenses (in thousands):
Year Ended December 31,
$
$
2015
647,082
425,882
101,240
115,821
—
2016
756,525
522,696
132,183
144,410
11,963
Dollar
Change
109,443
$
96,814
30,943
28,589
11,963
Percentage
Change
% of
Consolidated
Revenues
Actual
16.9%
22.7%
30.6%
Constant
Currency
2015
20.1% 21.5% 21.5%
2016
25.9% 14.2% 14.9%
33.6% 3.4%
3.8%
24.7%
28.5% 3.9%
100.0%
100.0% —%
4.1%
0.3%
$
1,290,025
$
1,567,777
$
277,752
21.5%
24.8% 42.9% 44.6%
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)
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
(Favorable)/
Unfavorable
—%
0.7%
0.4%
0.2%
0.3%
1.7%
Percentage
Change
(Favorable)/
Unfavorable
(0.1)%
0.1 %
(0.4)%
0.3 %
(0.2)%
Labor
Facilities
Transportation
Product Cost of
Sales and Other
Recall Costs
Labor
Facilities
Transportation
Product Cost of
Sales and Other
Labor
Labor expenses as a percentage of consolidated revenues were flat during the year ended December 31, 2016 compared to
the year ended December 31, 2015, as decreases in labor expenses as a percentage of consolidated revenue in our North
American Records and Information Management Business segment were offset by an increase in labor expenses as a
percentage of consolidated revenue in our Other International Business segment. The 75 basis point decrease in labor expenses
as a percentage of consolidated revenue associated with our North American Records and Information Management Business
segment (11.92% in the year ended December 31, 2016 compared to 12.67% in the comparable prior year period) was
primarily associated with wages and benefits growing at a lower rate than revenue, partially attributable to synergies associated
with our acquisition of Recall. The 52 basis point increase in labor expenses as a percentage of consolidated revenue associated
with our Other International Business segment (4.58% in the year ended December 31, 2016 compared to 4.06% in the
comparable prior year period) was primarily associated with increased wages and benefits. Labor expenses for the year ended
December 31, 2016 increased by $126.4 million, or 20.1%, on a constant dollar basis compared to the comparable prior year
period, primarily driven by our acquisition of Recall.
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 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.
50
Facilities
Facilities expenses increased to 14.9% of consolidated revenues for the year ended December 31, 2016 compared to
14.2% for the year ended December 31, 2015. The 70 basis point increase in facilities expenses as a percentage of consolidated
revenues was driven primarily by an increase in rent expense as a result of the acquisition of Recall, as Recall's real estate
portfolio contains a more significant proportion of leased facilities than our real estate portfolio as it existed prior to the closing
of the Recall Transaction, partially offset by a decrease in other facilities costs. We expect this trend in rent expense to continue
through the first quarter of 2017 and stabilize thereafter. The decrease in other facilities costs was primarily driven by lower
utilities and building maintenance costs associated with our North American Records and Information Management Business
segment, as well as lower property taxes associated with our Western European Business segment. Facilities expenses for the
year ended December 31, 2016 increased by $107.6 million, or 25.9%, on a constant dollar basis compared to the comparable
prior year period, primarily driven by our acquisition of Recall.
Facilities expenses 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. 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.
Transportation
Transportation expenses increased to 3.8% of consolidated revenues for the year ended December 31, 2016 compared to
3.4% for the year ended December 31, 2015. The increase in transportation expenses as a percentage of consolidated revenues
was driven by a 40 basis point increase in third party carrier costs as a percentage of consolidated revenues, primarily
associated with our Other International Business segment. Transportation expenses for the year ended December 31, 2016
increased by $33.3 million, or 33.6%, on a constant dollar basis compared to the comparable prior year period, primarily driven
by our acquisition of Recall.
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.
Product Cost of Sales and Other
Product cost of sales and other, which includes cartons, media and other service, storage and supply costs and is highly
correlated to service revenue streams, particularly project revenues, was driven mainly by special project costs. Product cost of
sales and other increased by $32.1 million, or 28.5%, on a constant dollar basis compared to the comparable prior year period,
primarily driven by our acquisition of Recall.
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.
Recall Costs
Recall Costs included in cost of sales were $12.0 million for the year ended December 31, 2016, and primarily consisted
of employee severance costs.
51
Selling, General and Administrative Expenses
Selling, general and administrative expenses consists of the following expenses (in thousands):
Year Ended December 31,
2015
2016
Dollar
Change
Actual
Constant
Currency
Percentage
Change
% of
Consolidated
Revenues
2015
2016
Percentage
Change
(Favorable)/
Unfavorable
General and
Administrative
Sales, Marketing &
Account Management
Information Technology
Bad Debt Expense
Recall Costs
$
468,959
$
504,545
$
35,586
7.6 %
10.2 % 15.6% 14.4%
(1.2)%
214,029
99,632
15,326
47,014
238,178
116,923
8,705
119,981
24,149
17,291
(6,621)
72,967
11.3 %
17.4 %
13.8 % 7.1% 6.8%
20.3 % 3.3% 3.3%
(43.2)% (43.1)% 0.5% 0.2%
155.2 % 155.2 % 1.6% 3.4%
$
844,960
$
988,332
$ 143,372
17.0 %
19.6 % 28.1% 28.1%
(0.3)%
— %
(0.3)%
1.8 %
— %
Year Ended December 31,
2014
2015
Dollar
Change
Actual
Constant
Currency
Percentage
Change
% of
Consolidated
Revenues
2014
2015
Percentage
Change
(Favorable)/
Unfavorable
General and
Administrative
Sales, Marketing &
Account Management
Information Technology
Bad Debt Expense
Recall Costs
$
538,657
$
468,959
$ (69,698)
(12.9)%
(8.6)% 17.3% 15.6%
(1.7)%
213,532
103,174
14,209
—
214,029
99,632
15,326
47,014
$
869,572
$
844,960
497
(3,542)
1,117
0.2 %
(3.4)%
7.9 %
5.0 % 6.8% 7.1%
1.1 % 3.3% 3.3%
10.6 % 0.5% 0.5%
47,014
$ (24,612)
100.0 % 100.0 % —% 1.6%
(2.8)%
1.9 % 27.9% 28.1%
0.3 %
— %
— %
1.6 %
0.2 %
General and Administrative
General and administrative expenses decreased to 14.4% of consolidated revenues for the year ended December 31, 2016
compared to 15.6% for the year ended December 31, 2015. The decrease in general and administrative expenses as a
percentage of consolidated revenues was driven mainly by a decrease in compensation expense, primarily associated with
wages and benefits growing at a lower rate than revenue, partially attributable to the Transformation Initiative and synergies
associated with our acquisition of Recall, a decrease in professional fees and decreased travel and entertainment expenses.
General and administrative expenses for the year ended December 31, 2016 increased by $46.7 million, or 10.2%, on a constant
dollar basis compared to the comparable prior year period, primarily driven by our acquisition of Recall.
General and administrative expenses decreased to 15.6% of consolidated revenues during the year ended December 31,
2015 compared to 17.3% in the year ended December 31, 2014. On a constant dollar basis, general and administrative expenses
decreased by $44.2 million during the year ended December 31, 2015 compared to the year ended December 31, 2014. This
decrease is primarily due to 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, partially offset by a $6.1 million
increase in costs associated with the Transformation Initiative.
52
Sales, Marketing & Account Management
Sales, marketing and account management expenses decreased to 6.8% of consolidated revenues during the year ended
December 31, 2016 compared to 7.1% in 2015. The decrease was driven by a decrease in sales, marketing and account
management expenses in our North American Records and Information Management Business segment, primarily associated
with compensation growing at a lower rate than revenue, partially attributable to the Transformation Initiative and synergies
associated with our acquisition of Recall. Sales, marketing and account management expenses for the year ended December 31,
2016 increased by $28.9 million, or 13.8%, on a constant dollar basis compared to the comparable prior year period, primarily
driven by our acquisition of Recall.
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. 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.
Information Technology
Information technology expenses as a percentage of consolidated revenue were flat during the year ended December 31,
2016 compared to the year ended December 31, 2015, as increases in information technology expenses as a percentage of
consolidated revenues in our Corporate and Other Business segment were offset by decreases in information technology
expenses as a percentage of consolidated revenue in our North American Records and Information Management Business and
Western European Business segments. Information technology expenses in our Corporate and Other Business segment
increased due mainly to higher software maintenance and license fees while decreases in information technology expenses
across our North American Records and Information Management and Western European Business segments were primarily
due to decreased compensation expense. Information technology expenses for the year ended December 31, 2016 increased by
$19.7 million, or 20.3%, on a constant dollar basis compared to the comparable prior year period, primarily driven by our
acquisition of Recall.
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.
Bad Debt Expense
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, 2016 decreased to 0.2% of
consolidated revenues for the year ended December 31, 2016 compared to 0.5% for the year ended December 31, 2015. Bad
debt expenses for the year ended December 31, 2016 decreased by $6.6 million, or 43.1%, on a constant dollar basis compared
to the comparable prior year period. This decrease in bad debt expense was primarily driven by lower bad debt expense
associated with our North American Records and Information Management Business segment.
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.
Recall Costs
Recall Costs included in selling, general and administrative expenses were $120.0 million for the year ended
December 31, 2016, primarily consisting of advisory and professional fees, as well as severance costs. Recall Costs included in
selling, general and administrative expenses were $47.0 million for the year ended December 31, 2015, primarily consisting of
advisory and professional fees.
53
Depreciation and Amortization
Depreciation expense increased $64.3 million, or 21.3%, on a reported dollar basis ($70.0 million, or 23.7%, on a
constant dollar basis) for the year ended December 31, 2016 compared to the year ended December 31, 2015, primarily due to
the increased depreciation of property, plant and equipment acquired in the Recall Transaction. In particular, the increase in
depreciation expense was driven by (1) the depreciation of leasehold improvements acquired in the Recall Transaction, which
are depreciated using the straight-line method over a period of the shorter of (i) the useful life of the leasehold improvements,
(ii) 10 years or (iii) the life of the lease and (2) the depreciation of racking structures included in leased facilities acquired in the
Recall Transaction, which are depreciated using the straight-line method over a period of the shorter of (i) the useful life of the
racking structures, (ii) 20 years or (iii) the life of the lease. See Note 2.f. to Notes to Consolidated Financial Statements
included in this Annual Report for additional information regarding the useful lives over which our property, plant and
equipment is depreciated. Depreciation expense increased $12.5 million, on a constant dollar basis, for the year ended
December 31, 2015 compared to the year ended December 31, 2014, primarily due to the increased depreciation of property,
plant and equipment acquired through business combinations.
Amortization expense increased $42.5 million, or 96.2%, on a reported dollar basis ($44.0 million, or 102.8%, on a
constant dollar basis) for the year ended December 31, 2016 compared to the year ended December 31, 2015, primarily due to
the increased amortization of customer relationship intangible assets acquired in the Recall Transaction, which are amortized
over a weighted average useful life of 13 years. Amortization expense increased $0.5 million, on a constant dollar basis, for the
year ended December 31, 2015 compared to the year ended December 31, 2014, primarily due to the increased amortization of
customer relationship intangible assets acquired through business combinations.
OTHER EXPENSES, NET
Interest Expense, Net
Consolidated interest expense, net increased $46.8 million to $310.7 million for the year ended December 31, 2016 from
$263.9 million for the year ended December 31, 2015 primarily due to (i) the issuance of $1,000.0 million in aggregate
principal amount of 6% Senior Notes due 2020 (the "6% Notes due 2020") by IMI in September 2015, (ii) $850.0 million of
borrowings under the Bridge Facility (as defined below) during the second quarter of 2016, (iii) the issuance of $500.0 million
in aggregate principal amount of 43/8% Senior Notes due 2021 (the "43/8% Notes") by IMI in May 2016, (iv) the issuance of
$250.0 million in aggregate principal amount of 53/8% Senior Notes due 2026 (the "53/8% Notes") by Iron Mountain US
Holdings, Inc. ("IM US Holdings") in May 2016, (v) the issuance of 250.0 million Canadian dollars in aggregate principal
amount of 53/8% CAD Senior Notes due 2023 (the "CAD Notes due 2023") by Iron Mountain Canada Operations, ULC
("Canada Company") in September 2016, (vi) $185.8 million of borrowings from the AUD Term Loan (as defined below)
during the third quarter of 2016 and (vii) higher borrowings (on a weighted average basis) under the Credit Agreement (as
defined below) during the year ended December 31, 2016 compared to the year ended December 31, 2015. This increase was
partially offset by the redemption in October 2015 of (i) 255.0 million Euro aggregate principal outstanding of the 63/4% Euro
Senior Subordinated Notes due 2018 (the "63/4% Notes"), (ii) $400.0 million aggregate principal outstanding of the 73/4%
Senior Subordinated Notes due 2019 (the "73/4% Notes") and (iii) the remaining $106.0 million aggregate principal outstanding
of 83/8% Senior Subordinated Notes due 2021 (the "83/8% Notes"). Our weighted average interest rate was 5.2% and 5.3% at
December 31, 2016 and 2015, respectively.
Consolidated interest expense, net increased $3.2 million to $263.9 million for the year ended December 31, 2015 from
$260.7 million for the year ended December 31, 2014 primarily due to (1) the issuance in September 2014 of 400.0 million
British pounds sterling aggregate principal amount of 61/8% Senior Notes due 2022 (the "GBP Notes") by Iron Mountain
Europe PLC ("IME"), (2) the issuance of the 6% Notes due 2020 by IMI in September 2015, 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 the 83/8% Notes and (2) the redemption in
October 2015 of (i) 255.0 million Euro in aggregate principal outstanding of the 63/4% Notes, (ii) $400.0 million aggregate
principal outstanding of the 73/4% Notes and (iii) the remaining $106.0 million aggregate principal outstanding of the 83/8%
Notes. Our weighted average interest rate was 5.3% at December 31, 2015 and 5.6% at December 31, 2014.
54
Other Expense (Income), Net (in thousands)
Foreign currency transaction losses, net
Debt extinguishment expense
Other, net
Foreign currency transaction losses, net
Debt extinguishment expense
Other, net
Foreign Currency Transaction Losses
Year Ended
December 31,
2015
$ 70,851
2016
$ 20,413
27,305
434
9,283
14,604
$ 98,590
$ 44,300
Year Ended
December 31,
2014
$ 58,316
16,495
(9,624)
$ 65,187
2015
$ 70,851
27,305
434
$ 98,590
Dollar
Change
$ (50,438)
(18,022)
14,170
$ (54,290)
Dollar
Change
$ 12,535
10,810
10,058
$ 33,403
We recorded net foreign currency transaction losses of $20.4 million in the year ended December 31, 2016, based on
period-end exchange rates. These losses resulted primarily from the impact of changes in the exchange rate of each of the
Argentine peso, British pound sterling and Mexican peso against the United States dollar compared to December 31, 2015 on
our intercompany balances with and between certain of our subsidiaries. These losses were partially offset by gains resulting
primarily from the impact of changes in the exchange rate of each of the Brazilian real, Euro and Russian ruble against the
United States dollar compared to December 31, 2015 on our intercompany balances with and between certain of our
subsidiaries.
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 the impact of 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 on our intercompany balances with and between certain of our subsidiaries, as well as Euro forward
contracts. These losses were partially offset by gains resulting primarily from the impact of a change in the exchange rate of the
British pound sterling against the United States dollar compared to December 31, 2014 on our intercompany balances with and
between certain of our subsidiaries, as well as a change in the exchange rate of the Euro against the United States dollar
compared to December 31, 2014 on Euro denominated bonds issued by IMI.
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 the impact of 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 on our intercompany balances with and between certain of our subsidiaries, as well as
Euro forward contracts. These losses were partially offset by gains resulting 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.
Debt Extinguishment Expense
During the year ended December 31, 2016, we recorded a debt extinguishment charge of $9.3 million in the second
quarter of 2016 related to the termination of the Bridge Facility, which primarily consists of the write-off of unamortized
deferred financing costs. 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.
55
Other, Net
Other, net in the year ended December 31, 2016 includes a charge of $15.4 million associated with the loss on disposal of
the Australia Divestment Business and a charge of $1.4 million associated with the loss on disposal of the Iron Mountain
Canadian Divestments, partially offset by $0.8 million of gains associated with a deferred compensation plan we sponsor.
Other, net in the year ended December 31, 2015 consisted primarily of $0.6 million of losses related to the write-down of
certain investments. Other, net in the year ended December 31, 2014 consisted primarily of income of $6.9 million associated
with the divestment of our International Shredding Operations in December 2014, as well as approximately $0.9 million of
royalty income and $1.1 million of gains associated with a deferred compensation plan we sponsor.
(Benefit) Provision for Income Taxes
Our effective tax rates for the years ended December 31, 2014, 2015 and 2016 were (43.5)%, 23.3% and 30.6%,
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 QRSs and our TRSs, as well as among 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.
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 35.0% 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 the 2014 Indefinite Reinvestment Assessment 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 35.0% 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 ($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.
The primary reconciling items between the federal statutory tax rate of 35.0% and our overall effective tax rate for the
year ended December 31, 2016 were the benefit derived from the dividends paid deduction of $18.5 million and the impact of
differences in the tax rates at which our foreign earnings are subject resulting in a tax benefit of $13.3 million, partially offset
by valuation allowances on certain of our foreign net operating losses of $7.7 million.
As a REIT, we are entitled to a deduction for dividends paid, resulting in a substantial reduction of federal income tax
expense. As a REIT, substantially all of our income tax expense will be incurred based on the earnings generated by our foreign
subsidiaries and our domestic TRSs.
We 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, 2016 was $2.2 million, net of tax of $0.1 million
associated with the sale of certain land and buildings in North America. 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.
56
INCOME FROM CONTINUING OPERATIONS and ADJUSTED EBITDA (in thousands)
The following table reflects the effect of the foregoing factors on our consolidated income from continuing operations and
Adjusted EBITDA:
Year Ended December 31,
2015
2016
Dollar
Change
Percentage
Change
Income from
Continuing Operations $ 125,203
$ 103,880
$ (21,323)
(17.0)%
Income from
Continuing Operations
as a percentage of
Consolidated Revenue
4.2%
3.0%
Adjusted EBITDA
920,005
1,087,288
167,283
18.2 %
Adjusted EBITDA
Margin
30.6%
31.0%
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%
Adjusted EBITDA
925,797
920,005
(5,792)
(0.6)%
Adjusted EBITDA
Margin
29.7%
30.6%
INCOME (LOSS) FROM DISCONTINUED OPERATIONS
Income from discontinued operations, net of tax was $3.4 million for the year ended December 31, 2016, primarily
related to the operations of the Recall Divestments (as defined in Note 6 to Notes to Consolidated Financial Statements
included in this Annual Report). 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.
NONCONTROLLING INTERESTS
Net income attributable to noncontrolling interests resulted in a decrease in net income attributable to Iron Mountain
Incorporated of $2.4 million, $2.0 million and $2.6 million for the years ended December 31, 2016, 2015 and 2014,
respectively. These amounts represent our noncontrolling partners' share of earnings/losses in our majority-owned international
subsidiaries that are consolidated in our operating results.
57
Segment Analysis (in thousands)
See Note 9 to Notes to Consolidated Financial Statements included in this Annual Report for a description of our
reportable operating segments.
North American Records and Information Management Business
Storage Rental
Service
Segment Revenue
Year Ended December 31,
2015
$ 1,077,305
2016
$ 1,150,646
698,060
780,053
$ 1,775,365
$ 1,930,699
Segment Adjusted EBITDA(1)
$
714,639
$
775,717
Segment Adjusted EBITDA(1) as
a Percentage of Segment Revenue
40.3%
40.2%
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 EBITDA(1)
$
698,719
$
714,639
Segment Adjusted EBITDA(1) as
a Percentage of Segment Revenue
38.9%
40.3%
$
$
$
$
$
$
Percentage Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
73,341
81,993
155,334
61,078
6.8%
11.7%
8.7%
7.2%
12.3%
9.2%
1.0%
1.0%
1.0%
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)%
_______________________________________________________________________________
(1) See Note 9 to Notes to Consolidated Financial Statements included in this Annual Report for the definition of
Adjusted EBITDA and a reconciliation of Adjusted EBITDA to income (loss) from continuing operations.
For the year ended December 31, 2016, reported revenue in our North American Records and Information Management
Business segment increased 8.7% compared to the year ended December 31, 2015. In the year ended December 31, 2016, the
net impact of acquisitions/divestitures and internal revenue growth were partially offset by unfavorable fluctuations in foreign
currency exchange rates compared to the year ended December 31, 2015. The net impact of acquisitions/divestitures
contributed 8.2% to the reported revenue growth rate in our North American Records and Information Management Business
segment for the year ended December 31, 2016 compared to the comparable prior year period, primarily driven by our
acquisition of Recall. The internal revenue growth in the year ended December 31, 2016 was primarily the result of internal
storage rental revenue growth of 1.0% in the year ended December 31, 2016 compared to the year ended December 31, 2015,
as well as internal service revenue growth of 1.0% in the year ended December 31, 2016 compared to the year ended
December 31, 2015, which was driven by special project revenue recognized in the first quarter of 2016 and growth in secure
shredding revenues, as well as the stabilization in recent periods of the decline in retrieval/re-file activity and the related
decrease in transportation revenues. For the year ended December 31, 2016, foreign currency exchange rate fluctuations
decreased our reported revenues for the North American Records and Information Management Business segment by 0.5%
compared to the comparable prior year period due to the weakening of the Canadian dollar against the United States dollar.
Adjusted EBITDA as a percentage of segment revenue decreased 10 basis points during the year ended December 31, 2016
compared to the year ended December 31, 2015, primarily driven by increased wages and benefits, rent expense, building
maintenance and transportation costs, partially offset by a decrease in selling, general and administrative expenses as a
percentage of segment revenues, primarily associated with wages and benefits growing at a lower rate than revenue, partially
attributable to the Transformation Initiative and synergies associated with our acquisition of Recall, as well as a decrease in bad
debt expense and professional fees.
58
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 revenue
growth and unfavorable 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 comparable prior year period due to the weakening of the Canadian dollar against
the United States dollar. Negative internal revenue growth of 0.6% in the year ended December 31, 2015 was primarily the
result of negative internal service revenue 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 EBITDA 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.
59
North American Data Management Business
Storage Rental
Service
Segment Revenue
Segment Adjusted EBITDA(1)
Segment Adjusted EBITDA(1) as
a Percentage of Segment Revenue
Storage Rental
Service
Segment Revenue
Segment Adjusted EBITDA(1)
Segment Adjusted EBITDA(1) as
a Percentage of Segment Revenue
$
$
$
$
$
$
Year Ended December 31,
2015
255,601
134,885
390,486
203,803
2016
280,114
134,060
414,174
228,486
$
$
$
52.2%
55.2%
Year Ended December 31,
2014
247,017
143,190
390,207
226,396
2015
255,601
134,885
390,486
203,803
$
$
$
58.0%
52.2%
$
$
$
$
$
$
Percentage Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
24,513
(825)
23,688
24,683
9.6 %
(0.6)%
6.1 %
9.8 %
(0.4)%
6.3 %
2.0 %
(9.8)%
(2.0)%
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 %
_______________________________________________________________________________
(1) See Note 9 to Notes to Consolidated Financial Statements included in this Annual Report for the definition of
Adjusted EBITDA and a reconciliation of Adjusted EBITDA to income (loss) from continuing operations.
For the year ended December 31, 2016, reported revenue in our North American Data Management Business segment
increased 6.1% compared to the year ended December 31, 2015. In the year ended December 31, 2016, the net impact of
acquisitions/divestitures was partially offset by negative internal revenue growth and unfavorable fluctuations in foreign
currency exchange rates compared to the year ended December 31, 2015. The net impact of acquisitions/divestitures
contributed 8.3% to the reported revenue growth rates in our North American Data Management Business segment for the year
ended December 31, 2016, compared to the comparable prior year period, primarily driven by our acquisition of Recall. The
negative internal revenue growth for the year ended December 31, 2016 was primarily attributable to negative internal service
revenue growth of 9.8% for the year ended December 31, 2016, which was due to continued declines in service revenue
activity levels as the storage business becomes more archival in nature, partially offset by internal storage rental revenue
growth of 2.0% in the year ended December 31, 2016, primarily attributable to volume increases. For the year ended
December 31, 2016, foreign currency exchange rate fluctuations decreased our reported revenues for the North American Data
Management Business segment by 0.2% compared to the comparable prior year period due to the weakening of the Canadian
dollar against the United States dollar. Adjusted EBITDA as a percentage of segment revenue increased 300 basis points during
the year ended December 31, 2016 compared to the year ended December 31, 2015, primarily driven by lower selling, general
and administrative expenses, partially attributable to the Transformation Initiative and synergies associated with our acquisition
of Recall.
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 revenue growth of 0.8%. The internal
revenue growth was primarily attributable to internal storage rental revenue growth of 4.2%, partially offset by negative
internal service revenue 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 comparable prior year period due to the weakening of the Canadian dollar against the United
States dollar. Adjusted EBITDA 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.
60
Western European Business
Storage Rental
Service
Segment Revenue
Segment Adjusted EBITDA(1)
Segment Adjusted EBITDA(1) as
a Percentage of Segment Revenue
Storage Rental
Service
Segment Revenue
Segment Adjusted EBITDA(1)
Segment Adjusted EBITDA(1) as
a Percentage of Segment Revenue
$
$
$
$
$
$
Year Ended December 31,
2015
239,257
158,256
397,513
120,649
2016
275,659
178,552
454,211
137,506
$
$
$
30.4%
30.3%
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%
Percentage Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
$
$
$
$
$
$
36,402
20,296
56,698
16,857
Dollar
Change
(18,133)
(33,585)
(51,718)
(9,774)
15.2%
12.8%
14.3%
24.5%
21.4%
23.2%
0.8 %
(5.6)%
(1.7)%
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 %
_______________________________________________________________________________
(1) See Note 9 to Notes to Consolidated Financial Statements included in this Annual Report for the definition of
Adjusted EBITDA and a reconciliation of Adjusted EBITDA to income (loss) from continuing operations.
For the year ended December 31, 2016, reported revenue in our Western European Business segment increased 14.3%
compared to the year ended December 31, 2015. In the year ended December 31, 2016, the net impact of acquisitions/
divestitures was partially offset by negative internal revenue growth and unfavorable fluctuations in foreign currency exchange
rates compared to the year ended December 31, 2015. The net impact of acquisitions/divestitures contributed 24.9% to the
reported revenue growth rates in our Western European Business segment for the year ended December 31, 2016 compared to
the comparable prior year period, primarily driven by our acquisition of Recall. Internal revenue growth for the year ended
December 31, 2016 was negative 1.7%, primarily attributable to negative internal service revenue growth of 5.6% for the year
ended December 31, 2016, which was due to reduced retrieval/refile activity and a related decrease in transportation revenues.
For the year ended December 31, 2016, foreign currency exchange rate fluctuations decreased our reported revenues for the
Western European Business segment by 8.9% compared to the comparable prior year period due to the weakening of the British
pound sterling and Euro against the United States dollar. Adjusted EBITDA as a percentage of segment revenue decreased 10
basis points during the year ended December 31, 2016 compared to the year ended December 31, 2015, primarily driven by an
increase in cost of sales as a percentage of segment revenue, primarily associated with increased wages and benefits and rent
expense, partially offset by a decrease in selling, general and administrative expenses as a percentage of segment revenue,
primarily associated with wages and benefits growing at a lower rate than revenues, partially attributable to the Transformation
Initiative and synergies associated with our acquisition of Recall, and lower professional fees.
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 unfavorable 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 comparable prior year period, due to the weakening of the British
pound sterling and the Euro against the United States dollar. Internal revenue growth for the year ended December 31, 2015
was 1.4%, supported by 2.7% internal storage rental revenue 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
EBITDA 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.
61
Other International Business
Storage Rental
Service
Segment Revenue
Segment Adjusted EBITDA(1)
Segment Adjusted EBITDA(1) as
a Percentage of Segment Revenue
Storage Rental
Service
Segment Revenue
Segment Adjusted EBITDA(1)
Segment Adjusted EBITDA(1) as
a Percentage of Segment Revenue
$
$
$
$
$
$
Year Ended December 31,
2015
245,154
176,206
421,360
87,341
2016
393,005
259,511
652,516
169,042
$
$
$
20.7%
25.9%
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%
Dollar
Change
147,851
83,305
231,156
81,701
Dollar
Change
(18,583)
(29,371)
(47,954)
2,873
$
$
$
$
$
$
_______________________________________________________________________________
Percentage Change
Actual
Constant
Currency
Internal
Growth
60.3%
47.3%
54.9%
71.9%
59.0%
66.5%
8.5%
4.9%
7.0%
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%
(1) See Note 9 to Notes to Consolidated Financial Statements included in this Annual Report for the definition of
Adjusted EBITDA and a reconciliation of Adjusted EBITDA to income (loss) from continuing operations.
For the year ended December 31, 2016, reported revenue in our Other International Business segment increased 54.9%
compared to the year ended December 31, 2015. In the year ended December 31, 2016, the net impact of acquisitions/
divestitures and internal revenue growth were partially offset by unfavorable fluctuations in foreign currency exchange rates
compared to the year ended December 31, 2015. The net impact of acquisitions/divestitures contributed 59.5% to the reported
revenue growth rates in our Other International Business segment for the year ended December 31, 2016 compared to the
comparable prior year period, primarily driven by our acquisition of Recall. Internal revenue growth for the year ended
December 31, 2016 was 7.0%, supported by 8.5% internal storage rental revenue growth. Foreign currency fluctuations in the
year ended December 31, 2016 resulted in decreased revenue, as measured in United States dollars, of approximately 11.6% as
compared to the comparable prior year period, primarily due to the weakening of the Australian dollar and Brazilian real
against the United States dollar. Adjusted EBITDA as a percentage of segment revenue increased 520 basis points during the
year ended December 31, 2016 compared to the year ended December 31, 2015, primarily a result of a decrease in selling,
general and administrative expenses as a percentage of segment revenue and a decrease in cost of sales as a percentage of
segment revenue, primarily associated with compensation growing at a lower rate than revenue, as well as lower professional
fees.
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 comparable prior year period, primarily due to the weakening of the
Australian dollar, Brazilian real and Euro against the United States dollar. Internal revenue growth for the year ended December
31, 2015 was 10.0%, supported by 10.8% internal storage rental revenue 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 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 EBITDA 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 EBITDA 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 comparable
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.
62
Corporate and Other Business
Storage Rental
Service
Segment Revenue
Year Ended December 31,
2015
20,580
2,672
23,252
$
$
2016
43,481
16,372
59,853
$
$
Segment Adjusted EBITDA(1)
$ (206,427)
$ (223,463)
Segment Adjusted EBITDA(1) as a
Percentage of Consolidated Revenue
(6.9)%
(6.4)%
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 EBITDA(1)
$ (214,209)
$ (206,427)
Segment Adjusted EBITDA(1) as a
Percentage of Consolidated Revenue
(6.9)%
(6.9)%
Percentage Change
Actual
111.3%
512.7%
157.4%
Constant
Currency
Internal
Growth
111.3%
512.7%
157.4%
26.9%
55.6%
29.6%
Dollar
Change
22,901
13,700
36,601
(17,036)
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%
$
$
$
$
$
$
_______________________________________________________________________________
(1) See Note 9 to Notes to Consolidated Financial Statements included in this Annual Report for the definition of
Adjusted EBITDA and a reconciliation of Adjusted EBITDA to income (loss) from continuing operations.
For the year ended December 31, 2016, Adjusted EBITDA in the Corporate and Other Business segment as a percentage
of consolidated revenue improved 50 basis points compared to the year ended December 31, 2015. Adjusted EBITDA in the
Corporate and Other Business segment decreased $17.0 million in the year ended December 31, 2016 compared to the year
ended December 31, 2015, primarily driven by the impact of the Recall Transaction, partially offset by profitability associated
with recent acquisitions in our Adjacent Businesses operating segment. Adjusted EBITDA in our Corporate and Other Business
segment includes approximately $23.3 million of incremental expenses associated with Recall for the year ended December 31,
2016.
For the year ended December 31, 2015, Adjusted EBITDA in the Corporate and Other Business segment as a percentage
of consolidated revenue was flat compared to the year ended December 31, 2014. Adjusted EBITDA 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.
63
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
$
2014
472,948
(479,978)
19,857
125,933
$
2015
541,760
(422,786)
(108,511)
128,381
2016
541,216
(632,703)
125,373
236,484
Net cash provided by operating activities from continuing operations was $541.2 million for the year ended
December 31, 2016 compared to $541.8 million for the year ended December 31, 2015. The $0.5 million year-over-year
decrease in cash flows from operating activities resulted from an increase in cash used in working capital of $17.4 million,
primarily related to the change in accounts receivable and timing of accrued expenses and deferred revenue and accounts
payable payments year-over-year, offset by an increase in net income (including non-cash charges and realized foreign
exchange losses) of $16.9 million.
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, acquisitions of customer relationships and customer
inducements during the year ended December 31, 2016 amounted to $328.6 million, $31.6 million and $19.2 million,
respectively. Cash paid for acquisitions (net of cash acquired) during the year ended December 31, 2016 of $292.0 million
consisted primarily of the cash portion of the purchase price associated with the Recall Transaction. For the year ended
December 31, 2016, these expenditures were primarily funded with cash flows from operations, as well as the financing
activities described below. Net proceeds from the Iron Mountain Divestments received during the year ended December 31,
2016 of $30.7 million consisted of the net cash proceeds from the Australia Sale and the sale of the Iron Mountain Canadian
Divestments as part of the ARKIVE Sale (each as defined in Note 6 to Notes to Consolidated Financial Statements included in
this Annual Report). Excluding capital expenditures associated with potential future acquisitions, opportunistic real estate
investments and capital expenditures associated with the integration of Recall, we expect our capital expenditures to be
approximately $320.0 million to $370.0 million in the year ending December 31, 2017.
Net cash provided by financing activities from continuing operations was $125.4 million for the year ended December 31,
2016. During the year ended December 31, 2016, we received net proceeds of $925.4 million associated with the issuance of
the 43/8% Notes, the 53/8% Notes and the CAD Notes due 2023, $185.8 million of proceeds from the AUD Term Loan (as
defined below), $50.0 million of proceeds from the Mortgage Securitization Program (as defined below) and $31.9 million of
proceeds associated with employee stock-based awards. We used the proceeds from these transactions, as well as cash flows
provided by operating activities, for the net repayment of $542.9 million associated with net payments under the Revolving
Credit Facility and the Bridge Facility, the payment of dividends in the amount of $505.9 million on our common stock and the
payment of $18.6 million associated with debt financing costs.
64
Capital Expenditures
The following table presents our capital spend for 2014, 2015 and 2016 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 (decrease)/increase in prepaid capital expenditures
Net decrease/(increase) accrued capital expenditures
Total Capital Spend (on cash basis)
Dividends
Year Ended December 31,
2014
2015
2016
$
$
$
199,663
57,574
257,237
$
170,742
52,826
223,568
203,778
63,543
267,321
55,991
19,527
75,518
47,964
23,396
71,360
332,755
(2,455)
31,624
361,924
$
294,928
(362)
(4,317)
290,249
$
50,954
20,799
71,753
339,074
374
(10,845)
328,603
See "Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities" of this Annual Report for information on dividends.
Financial Instruments and Debt
Financial instruments that potentially subject us to credit risk consist principally of cash and cash equivalents (including
time deposits) and accounts receivable. The only significant concentrations of liquid investments as of December 31, 2016
relate to cash and cash equivalents held in time deposits with six 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, 2016, our cash and cash equivalents balance was $236.5 million, which
included time deposits amounting to $22.2 million.
65
Our consolidated debt as of December 31, 2016 comprised the following (in thousands):
December 31, 2016
Debt
(inclusive of
discount)
Unamortized
Deferred
Financing
Costs
Carrying
Amount
Revolving Credit Facility(1)
Term Loan(1)
Australian Dollar Term Loan (the "AUD Term Loan")(2)
6% Notes due 2020(3)(4)
43/8% Notes(3)(4)
61/8% CAD Senior Notes due 2021 (the "CAD Notes due 2021")(5)
GBP Notes(4)(6)
6% Senior Notes due 2023(3)
CAD Notes due 2023(4)(5)
53/4% Senior Subordinated Notes due 2024(3)
53/8% Notes(4)(7)
Real Estate Mortgages, Capital Leases and Other(8)
Accounts Receivable Securitization Program(9)
Mortgage Securitization Program(10)
Total Long-term Debt
Less Current Portion
Long-term Debt, Net of Current Portion
$
953,548
$
234,375
177,198
1,000,000
500,000
148,792
493,648
600,000
185,990
1,000,000
250,000
478,565
247,000
50,000
6,319,116
(172,975)
$ 6,146,141
$
(7,530) $
—
(3,774)
(12,730)
(7,593)
(1,635)
(6,214)
(7,322)
(3,498)
(10,529)
(4,044)
(1,277)
(384)
(1,405)
(67,935)
—
946,018
234,375
173,424
987,270
492,407
147,157
487,434
592,678
182,492
989,471
245,956
477,288
246,616
48,595
6,251,181
(172,975)
(67,935) $ 6,078,206
_______________________________________________________________________________
(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 most 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.
(2) The amount of debt for the AUD Term Loan reflects an unamortized original issue discount of $1.7 million as of
December 31, 2016.
(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, IME, the Accounts Receivable
Securitization Special Purpose Subsidiaries (as defined below), the Mortgage Securitization Special Purpose
Subsidiary (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.
(4) The 6% Notes due 2020, the 43/8% Notes, the GBP Notes, the CAD Notes due 2023 and the 53/8% Notes (collectively,
the "Unregistered 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 Unregistered Notes may be
offered only in transactions that are exempt from registration under the Securities Act or the securities laws of any
other jurisdiction.
66
(5) Canada Company is the direct obligor on the CAD Notes due 2021 and the CAD Notes due 2023 (collectively, 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.
(6) 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.
(7) IM US Holdings, a 100% owned subsidiary of IMI and one of the Guarantors, is the direct obligor on the 53/8% Notes,
which are fully and unconditionally guaranteed, on a senior basis, by IMI and the other Guarantors. These guarantees
are joint and several obligations of IMI and such Guarantors. See Note 5 to Notes to Consolidated Financial
Statements included in this Annual Report.
(8) Includes (i) real estate mortgages of $20.9 million, (ii) capital lease obligations of $309.9 million, and (iii) other
various notes and other obligations, which were assumed by us as a result of certain acquisitions, of $147.8 million.
(9) The Accounts Receivable Securitization Special Purpose Subsidiaries are the obligors under this program.
(10) The Mortgage Securitization Special Purpose Subsidiary is the obligor under this program.
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 and a 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 initial maximum amount of the Revolving Credit Facility was $1,500.0 million. The original
amount of the Term Loan was $250.0 million.
On June 24, 2016, Iron Mountain Information Management, LLC (“IMIM”) entered into a commitment increase
supplement, pursuant to which we increased the maximum amount permitted to be borrowed under the Revolving Credit
Facility from $1,500.0 million to $1,750.0 million. We continue to have the option to request additional term loans and/or
increases in commitments under the Revolving Credit Facility up to $250.0 million, subject to the conditions specified in the
Credit Agreement.
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 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.
As of December 31, 2016, we had $953.5 million and $234.4 million of outstanding borrowings under the Revolving
Credit Facility and the Term Loan, respectively. Of the $953.5 million of outstanding borrowings under the Revolving Credit
Facility, $787.4 million was denominated in United States dollars and 157.9 million was denominated in Euros. In addition, we
also had various outstanding letters of credit totaling $55.0 million. The remaining amount available for borrowing under the
Revolving Credit Facility as of December 31, 2016, 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 $741.5 million (which amount represents the maximum availability as of such date). The average
interest rate in effect under the Credit Agreement was 2.9% as of December 31, 2016. The average interest rate in effect under
the Revolving Credit Facility was 2.9% and ranged from 2.3% to 5.0% as of December 31, 2016 and the interest rate in effect
under the Term Loan as of December 31, 2016 was 2.8%.
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.
67
Our leverage and fixed charge coverage ratios under the Credit Agreement as of December 31, 2015 and 2016 and our
leverage ratio under our indentures as of December 31, 2015 and 2016 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, 2015
5.6
2.6
5.5
2.4
December 31, 2016
Maximum//Minimum Allowable
5.7 Maximum allowable of 6.5
2.7 Maximum allowable of 4.0
5.2 Maximum allowable of 6.5
2.4 Minimum allowable of 1.5
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 as measured as of the end of the most recently completed fiscal quarter.
Noncompliance with these leverage and fixed charge coverage ratios would have a material adverse effect on our
financial condition and liquidity.
b. Bridge Facility
On April 29, 2016, in order to provide a portion of the financing necessary to close the Recall Transaction, we entered
into a bridge credit agreement (the “Bridge Credit Agreement”) with JPMorgan Chase Bank, N.A., as a lender and
administrative agent, and the other lenders party thereto (the "Lenders"), pursuant to which we borrowed an unsecured bridge
term loan of $850.0 million (the "Bridge Facility"). We used the proceeds from the Bridge Facility, together with borrowings
under the Revolving Credit Facility, to finance a portion of the cost of the Recall Transaction, including refinancing Recall’s
existing indebtedness and to pay costs we incurred in connection with the Recall Transaction.
On May 31, 2016, we used the proceeds from the issuance of the 43/8% Notes and the 53/8% Notes, together with cash on
hand and borrowings under the Revolving Credit Facility, to repay the Bridge Facility, and effective May 31, 2016, we
terminated the commitments of the Lenders under the Bridge Credit Agreement. We recorded a charge to other expense
(income), net of $9.3 million during the second quarter of 2016 related to the early extinguishment of the Bridge Credit
Agreement. This charge primarily consisted of the write-off of unamortized deferred financing costs.
c. Issuance of 43/8% Notes, 53/8% Notes and CAD Notes due 2023
In May 2016, IMI completed a private offering of $500.0 million in aggregate principal amount of the 43/8% Notes and
IM US Holdings completed a private offering of $250.0 million in aggregate principal amount of the 53/8% Notes. The 43/8%
Notes and 53/8% Notes were issued at par. The aggregate net proceeds of $738.8 million from the 43/8% Notes and 53/8% Notes,
after paying the initial purchasers' commissions, were used, together with cash on hand and borrowings under the Revolving
Credit Facility, for the repayment of all outstanding borrowings under the Bridge Credit Agreement.
On September 15, 2016, Canada Company completed a private offering of 250.0 million Canadian dollars in aggregate
principal amount of the CAD Notes due 2023. The CAD Notes due 2023 were issued at par. The aggregate net proceeds from
the CAD Notes due 2023 of 246.3 million Canadian dollars (or $186.7 million, based upon the exchange rate between the
Canadian dollar and the United States dollar on September 15, 2016 (the settlement date for the CAD Notes due 2023)), after
paying the initial purchasers’ commissions, were used to repay outstanding borrowings under the Revolving Credit Facility.
d. Australian Dollar Term Loan
On September 28, 2016, Iron Mountain Australia Group Pty, Ltd., a wholly owned subsidiary of IMI, entered into a 250.0
million Australian dollar Syndicated Term Loan B Facility, the AUD Term Loan, which matures in September 2022. The AUD
Term Loan was issued at 99% of par. The net proceeds of approximately 243.8 million Australian dollars (or approximately
$185.8 million, based upon the exchange rate between the Australian dollar and the United States dollar on September 28, 2016
(the settlement date for the AUD Term Loan)), after paying commissions to the joint lead arrangers and net of the original
discount, were used to repay outstanding borrowings under the Revolving Credit Facility and for general corporate purposes.
68
Principal payments on the AUD Term Loan are to be paid in quarterly installments in an amount equivalent to an
aggregate of 6.3 million Australian dollars per year, with the remaining balance due on September 28, 2022. The AUD Term
Loan is secured by substantially all assets of Iron Mountain Australia Group Pty. Ltd. IMI and the Guarantors guarantee all
obligations under the AUD Term Loan. The interest rate on borrowings under the AUD Term Loan is based upon BBSY (an
Australian benchmark variable interest rate) plus 4.3%. As of December 31, 2016, we had 248.4 million Australian dollars
($178.9 million based upon the exchange rate between the United States dollar and the Australian dollar as of December 31,
2016) outstanding on the AUD Term Loan and the interest rate in effect under the AUD Term Loan was 6.1%.
e. Accounts Receivable Securitization Program
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 "Accounts Receivable Securitization Special Purpose Subsidiaries"). The Accounts Receivable
Securitization Special Purpose Subsidiaries use the accounts receivable balances to collateralize loans obtained from certain
financial institutions. The Accounts Receivable Securitization 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 Sheets, (ii) our Consolidated Statements of Operations reflect 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 Statements of Cash Flows. 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 and 2016, the maximum availability
allowed and amount outstanding under the Accounts Receivable Securitization Program was $205.9 million and $247.0
million, respectively. The interest rate in effect under the Accounts Receivable Securitization Program was 1.3% and 1.7% as of
December 31, 2015 and 2016, respectively. Commitment fees at a rate of 40 basis points are charged on amounts made
available but not borrowed under the Accounts Receivable Securitization Program.
f. Mortgage Securitization Program
In October 2016, we entered into a $50.0 million mortgage securitization program (the "Mortgage Securitization
Program") involving certain of our wholly owned subsidiaries with Goldman Sachs Mortgage Company (“Goldman Sachs”).
Under the Mortgage Securitization Program, IMIM contributed certain real estate assets to its wholly owned special purpose
entity, Iron Mountain Mortgage Finance I, LLC (the "Mortgage Securitization Special Purpose Subsidiary"). The Mortgage
Securitization Special Purpose Subsidiary then used the real estate to secure a collateralized loan obtained from Goldman
Sachs. The Mortgage Securitization Special Purpose Subsidiary is a consolidated subsidiary of IMI. The Mortgage
Securitization Program is accounted for as a collateralized financing activity, rather than a sale of assets, and therefore: (i) real
estate assets pledged as collateral remain as assets and borrowings are presented as liabilities on our Consolidated Balance
Sheet, (ii) our Consolidated Statement of Operations reflects the associated charges for depreciation expense related to the
pledged real estate and interest expense associated with the collateralized borrowings and (iii) borrowings and repayments
under the collateralized loans are reflected as financing cash flows within our Consolidated Statement of Cash Flows. The
Mortgage Securitization Program is scheduled to terminate on November 6, 2026, at which point all obligations become due.
As of December 31, 2016, the outstanding amount under the Mortgage Securitization Program was $50.0 million. The interest
rate in effect under the Mortgage Securitization Program was 3.5% as of December 31, 2016.
69
g. Cash Pooling
Subsequent to the closing of the Recall Transaction, certain of our international subsidiaries began participating in a cash
pooling arrangement (the “Cash Pool”) with Bank Mendes Gans (“BMG”) in order to help manage global liquidity
requirements. The Cash Pool allows participating subsidiaries to receive credit for cash balances deposited by participating
subsidiaries in BMG accounts. Under the Cash Pool, cash deposited by participating subsidiaries with BMG is pledged as
security against the drawings of other participating subsidiaries, and legal rights of offset are provided and, therefore, amounts
are presented in our Consolidated Balance Sheet on a net basis. Each subsidiary receives interest on the cash balances held on
deposit or pays interest on the amounts owed based on an applicable rate as defined in the Cash Pool agreement. At December
31, 2016, we had a net cash position of approximately $1.7 million (consisting of a gross cash position of approximately $69.5
million less outstanding borrowings of approximately $67.8 million by participating subsidiaries), which is reflected as cash
and cash equivalents in the Consolidated Balance Sheet.
_______________________________________________________________________________
For more information on our Credit Agreement and our other debt agreements, see Note 4 to Notes to Consolidated
Financial Statements included in this Annual Report.
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
a. Acquisition of Recall
On May 2, 2016 (Sydney, Australia time), we completed the Recall Transaction. At the closing of the Recall Transaction,
we paid approximately $331.8 million in cash and issued approximately 50.2 million shares of our common stock which, based
upon the closing price of our common stock as of April 29, 2016 (the last day of trading on the NYSE prior to the closing of the
Recall Transaction) of $36.53 per share, resulted in a total purchase price to Recall shareholders of approximately $2,166.9
million.
We currently estimate total acquisition and integration 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 (i)
approximately $80.0 million of Recall Deal Close & Divestment Costs and (ii) approximately $300.0 million of integration
expenditures, including Recall Integration Costs and capital expenditures to integrate Recall with our existing operations.
The following table presents the operating and capital expenditures associated with the Recall Transaction incurred for the
years ended December 31, 2015 and 2016 and the cumulative amount incurred through December 31, 2016 (in thousands):
Year Ended
December 31, 2015
Year Ended
December 31, 2016
Cumulative
Total
Recall Deal Close & Divestment Costs
$
24,671
$
38,947
$
Recall Integration Costs
Recall Costs
Capital Expenditures
Total
b. Other Noteworthy 2016 Acquisitions
22,343
47,014
65
92,997
131,944
18,391
63,618
115,340
178,958
18,456
$
47,079
$
150,335
$
197,414
In March 2016, we acquired a controlling interest in Docufile Holdings Proprietary Limited ("Docufile"), a storage and
records management company with operations in South Africa, for approximately $15.0 million. The acquisition of Docufile
represents our entrance into Africa.
In March 2016, in order to expand our presence in the Baltic region, we acquired the stock of Archyvu Sistemos, a storage
and records management company with operations in Lithuania, Latvia and Estonia, for approximately $5.1 million.
70
In August 2016, we reached an agreement in principle under a non-binding memorandum of understanding to acquire the
information management operations of Santa Fe Group A/S (“Santa Fe”) in ten regions within Europe and Asia (the “Santa Fe
Transaction”). In November 2016, we entered into a binding agreement for the Santa Fe Transaction (the "Santa Fe
Agreement"). In December 2016, in order to expand our presence in southeast Asia and western Europe, we acquired the
information management assets and operations of Santa Fe in Hong Kong, Malaysia, Singapore, Spain and Taiwan (the “2016
Santa Fe Transaction”) for approximately 15.2 million Euros (approximately $16.0 million, based upon the exchange rate
between the United States dollar and the Euro as of December 30, 2016, the closing date of the 2016 Santa Fe Transaction). Of
the total purchase price, 13.5 million Euros (or approximately $14.2 million, based upon the exchange rate between the United
States dollar and the Euro on the closing date of the 2016 Santa Fe Transaction) was paid during the year ended December 31,
2016, and the remaining balance is due on the 18-month anniversary of the closing of the 2016 Santa Fe Transaction. We expect
to acquire the remainder of Santa Fe’s information management operations located in India, Indonesia, Macau, the Philippines
and South Korea (the "Pending Santa Fe Transaction") during the first half of 2017. The Pending Santa Fe Transaction has an
aggregate purchase price of approximately 11.8 million Euros (or approximately $12.4 million, based upon the exchange rate
between the United States dollar and the Euro as of December 31, 2016). However, under the Santa Fe Agreement, the
completion of the Pending Santa Fe Transaction is subject to closing conditions; accordingly, we can provide no assurance that
we will complete the Pending Santa Fe Transaction, that the Pending Santa Fe Transaction will not be delayed or that the terms
of the Pending Santa Fe Transaction will not change.
Divestments
As discussed in Note 6 to Notes to Consolidated Financial Statements included in this Annual Report, we were required to
make the Divestments in connection with the Recall Transaction. All of the Divestments were completed during the year ended
December 31, 2016. The net proceeds received in 2016 in connection with the Divestments were used to repay outstanding
borrowings under our Revolving Credit Facility and ultimately will be reinvested in our business.
The Access Sale (as defined in Note 6 to Notes to Consolidated Financial Statements included in this Annual Report)
resulted in total consideration of $80.0 million, including cash proceeds of $55.0 million received at the closing of the
transaction and an additional amount of contingent consideration of up to $25.0 million payable upon the 27-month anniversary
of the closing of the Access Sale. See Note 6 to Notes to Consolidated Financial Statements included in this Annual Report for
information regarding our estimate of the fair value of this contingent consideration.
The Australia Sale (as defined in Note 6 to Notes to Consolidated Financial Statements included in this Annual Report)
resulted in total consideration of approximately 70.0 million Australian dollars (or approximately $53.2 million, based upon the
exchange rate between the United States dollar and the Australian dollar as of October 31, 2016 (the closing date of the
Australia Sale)), subject to adjustments. The total consideration for the Australia Sale consists of (i) 35.0 million Australian
dollars in cash received upon the closing of the Australia Sale and (ii) 35.0 million Australian dollars in the form of a note from
the buyers to us (the"Bridging Loan Note"). The Bridging Loan Note bears interest at 3.3% per annum and matures of
December 29, 2017, at which point all outstanding obligations become due. The purchase price for the Australia Sale is subject
to certain adjustments, including adjustments associated with customer attrition subsequent to the closing of the Australia Sale.
The UK Sale (as defined in Note 6 to Notes to Consolidated Financial Statements included in this Annual Report) resulted
in total consideration of approximately 1.8 million British pounds sterling (or approximately $2.2 million, based upon the
exchange rate between the United States dollar and the British pound sterling as of December 9, 2016 (the closing date of the
UK Sale)), subject to adjustments.
The ARKIVE Sale (as defined in Note 6 to Notes to Consolidated Financial Statements included in this Annual Report),
resulted in total consideration of approximately $50.0 million, subject to adjustments. Of the total consideration for the
ARKIVE Sale, we received approximately $45.0 million in cash proceeds upon the closing of the ARKIVE Sale and the
remaining consideration is held in escrow. ARKIVE may be entitled to receive from us, on the 24-month anniversary of the
closing of the ARKIVE Sale, cash payments, up to the total consideration paid by ARKIVE, based on lost revenues attributable
to the acquired customer base.
71
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2016 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
$
52,640
$
85,519
$
70,405
$
More than
5 Years
101,296
120,335
325,079
294,103
58,378
1,471,901
1,679,396
2,739,349
590,170
511,789
29,975
432,312
433,715
2,960
387,045
1,175,015
26,955
Total
309,860
$
6,010,981
1,734,606
2,414,622
118,268
Total(3)(4)
$ 10,588,337
$
850,535
$ 2,689,354
$ 2,618,788
$ 4,429,660
_______________________________________________________________________________
(1) Amounts include variable rate interest payments, which are calculated utilizing the applicable interest rates as of
December 31, 2016; 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 $28.0 million in total (including $6.4 million, $8.3 million, $6.1 million
and $7.2 million, in less than 1 year, 1-3 years, 3-5 years and more than 5 years, respectively).
(3) The table above excludes $59.5 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.
(4) The table above excludes $54.7 million of redeemable noncontrolling interests, which represents the estimated
redemption value of the redeemable noncontrolling interests in our consolidated subsidiaries in Chile, India and South
Africa.
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, or the issuance of equity.
We expect to meet our long-term cash flow requirements using the same means described above. We are currently operating
above our long-term targeted leverage ratio and expect to do so 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).
Net Operating Losses
We have federal net operating loss carryforwards, which expire from 2023 through 2033, of $67.1 million at December
31, 2016 to reduce future federal taxable income, of which $1.2 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 2017 through 2035, of which an insignificant state tax benefit is expected to be
realized. We have assets for foreign net operating losses of $97.5 million, with various expiration dates (and in some cases no
expiration date), subject to a valuation allowance of approximately 73%.
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 with
increased operating efficiencies, the negotiation of favorable long-term real estate leases and an ability to increase prices in our
customer contracts (many of 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.
72
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
time deposits) and accounts receivable. The only significant concentrations of liquid investments as of December 31, 2016
related to cash and cash equivalents held in time deposits with six 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, 2016, our cash and cash equivalents balance was $236.5 million, including
time deposits amounting to $22.2 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, 2016, we had $1,694.6 million of variable rate debt outstanding with a weighted average variable
interest rate of approximately 3.6%, and $4,624.5 million of fixed rate debt outstanding. As of December 31, 2016,
approximately 73% 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, 2016 would have been reduced by approximately
$13.7 million. See Note 4 to Notes to Consolidated Financial Statements included in this Annual Report for a discussion of our
long-term indebtedness, including the fair values of such indebtedness as of December 31, 2016.
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 and the
Australian dollar. 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 Europe, our foreign subsidiaries and IME
also have intercompany obligations between them. These intercompany obligations are primarily denominated in the local
currency of the foreign subsidiary.
We have adopted and implemented a number of strategies to mitigate the risks associated with fluctuations in foreign
currency exchange rates. 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,
Australia, and continental Europe. IME has financed a portion of its capital needs through the issuance in British pounds
sterling of the GBP Notes. Our Australian business has financed a portion of its capital needs through direct borrowings in
Australian dollars under the AUD Term Loan. Similarly, Canada Company has financed a portion of its capital needs through
direct borrowings in Canadian dollars under the Credit Agreement and through the issuance of the CAD Notes. This creates a
tax efficient natural currency hedge. We 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 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 $1.1 million ($1.1 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, 2016. As of December 31, 2016,
cumulative net gains of $18.2 million, net of tax are recorded in accumulated other comprehensive items, net associated with
this net investment hedge.
73
Historically, we have entered into forward contracts to hedge our exposures in Euros, British pounds sterling and
Australian dollars. During 2016, 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. As of December 31, 2016, 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 currency 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 2016 functional
currencies, relative to the United States dollar, would result in a reduction in our equity of approximately $196.6 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.
74
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, accumulated, summarized, communicated and reported 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, 2016 (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. The scope of management’s assessment of
the effectiveness of our internal control over financial reporting included all of our consolidated operations except for the
operations of Recall Holdings Limited, which was acquired on May 2, 2016. This exclusion is in accordance with the SEC’s
general guidance that an assessment of a recently acquired business may be omitted from the scope of our evaluation in the
year of acquisition. Revenues and assets excluded from management’s assessment constitute approximately 13% of total
consolidated revenues and approximately 7% of total consolidated assets for the year ended December 31, 2016. Based on this
evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2016.
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.
75
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Iron Mountain Incorporated
Boston, Massachusetts
We have audited the internal control over financial reporting of Iron Mountain Incorporated and subsidiaries (the
“Company”) as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission. As described in Management’s Report on
Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial
reporting at Recall Holdings Limited, which was acquired on May 2, 2016. Revenues and assets excluded from management’s
assessment constitute approximately 13% of total consolidated revenues and approximately 7% of total consolidated assets for
the year ended December 31, 2016. Accordingly, our audit did not include the internal control over financial reporting at Recall
Holdings Limited. 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, 2016, 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, 2016
of the Company and our report dated February 23, 2017 expressed an unqualified opinion on those financial statements and
financial statement schedule.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 23, 2017
76
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, 2016 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
77
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, 2015 and 2016
Consolidated Statements of Operations, Years Ended December 31, 2014, 2015 and 2016
Consolidated Statements of Comprehensive Income (Loss), Years Ended December 31, 2014, 2015 and 2016
Consolidated Statements of Equity, Years Ended December 31, 2014, 2015 and 2016
Consolidated Statements of Cash Flows, Years Ended December 31, 2014, 2015 and 2016
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
79
80
81
82
83
84
85
159
78
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, 2016 and 2015, 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, 2016. 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, 2016 and 2015, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2016, 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, 2016, 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 23, 2017 expressed an unqualified opinion on the Company's internal control over
financial reporting.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 23, 2017
79
IRON MOUNTAIN INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
ASSETS
Current Assets:
Cash and cash equivalents
Accounts receivable (less allowances of $31,447 and $44,290 as of
December 31, 2015 and 2016, 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 (see Note 2.w.)
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 (see Note 2.w.)
Commitments and Contingencies (see Note 10)
Redeemable Noncontrolling Interests (see Note 2.x.)
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 211,340,296 shares and 263,682,670 shares as of December 31, 2015 and
2016, 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,
2015
2016
$
128,381
$
236,484
564,401
22,179
142,951
857,912
691,249
—
184,374
1,112,107
4,744,236
(2,247,078)
2,497,158
5,535,783
(2,452,457)
3,083,326
$
$
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
—
—
3,905,021
1,252,523
133,823
5,291,367
9,486,800
172,975
222,197
450,257
201,128
1,046,557
6,078,206
99,540
119,834
151,295
54,697
—
2,113
1,623,863
(942,218)
(174,917)
508,841
19,766
528,607
6,350,587
$
2,636
3,489,795
(1,343,311)
(212,573)
1,936,547
124
1,936,671
9,486,800
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
80
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended December 31,
2014
2015
2016
Revenues:
Storage rental
Service
Total Revenues
Operating Expenses:
$
$
1,860,243
1,257,450
3,117,693
$
1,837,897
1,170,079
3,007,976
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 $2,443, $3,984 and
$7,558 in 2014, 2015 and 2016, respectively)
Other Expense (Income), Net
Income (Loss) from Continuing Operations Before (Benefit)
Provision for Income Taxes and Gain on Sale of Real Estate
(Benefit) Provision for Income Taxes
Gain on Sale of Real Estate, Net of Tax
Income (Loss) from Continuing Operations
(Loss) Income 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 of Tax
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 of Tax
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
$
$
$
$
$
$
$
$
1,344,636
869,572
353,143
1,065
2,568,416
549,277
1,290,025
844,960
345,464
3,000
2,483,449
524,527
260,717
65,187
223,373
(97,275)
(8,307)
328,955
(209)
328,746
2,627
326,119
$
263,871
98,590
162,066
37,713
(850)
125,203
—
125,203
1,962
123,241
$
1.68
$
— $
$
1.67
0.59
$
— $
$
0.58
1.67
$
— $
$
1.66
195,278
196,749
5.3713
$
0.59
$
— $
$
0.58
210,764
212,118
1.9100
$
2,142,905
1,368,548
3,511,453
1,567,777
988,332
452,326
1,412
3,009,847
501,606
310,662
44,300
146,644
44,944
(2,180)
103,880
3,353
107,233
2,409
104,824
0.41
0.01
0.43
0.41
0.01
0.42
246,178
247,267
2.0427
The accompanying notes are an integral part of these consolidated financial statements.
81
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,
2014
$ 328,746
2015
$ 125,203
2016
$ 107,233
(66,867)
53
(66,814)
261,932
2,184
(100,970)
(245)
(101,215)
23,988
(35,641)
(734)
(36,375)
70,858
633
3,690
Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated
$ 259,748
$ 23,355
$ 67,168
The accompanying notes are an integral part of these consolidated financial statements.
82
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except share data)
Iron Mountain Incorporated Stockholders' Equity
Earnings in
Excess of
Distributions
(Distributions
in
Excess of
Earnings)
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Items, Net
Noncontrolling
Interests
Redeemable
Noncontrolling
Interests
Common Stock
Total
Shares
Amounts
Balance, December 31, 2013
$
1,051,734
191,426,920
$
1,914
$
980,164
$
67,820
$
(8,660)
$
10,496
$
Issuance of shares under
employee stock purchase plan
and option plans and stock-
based compensation, including
tax deficiency of $60
Parent cash dividends declared
Special distribution in
connection with conversion to
REIT (see Note 13)
Foreign 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
64,473
2,638,554
(493,513)
—
26
—
64,447
—
—
(493,513)
—
15,753,338
158
559,821
(559,979)
(66,867)
53
328,746
1,800
(1,613)
(20,416)
5,558
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(17,693)
2,102
—
—
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
Foreign 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
—
—
—
—
(245)
—
—
—
Balance, December 31, 2015
528,607
211,340,296
2,113
1,623,863
(942,218)
(174,917)
Reclassification to redeemable
noncontrolling interests
Change in value of redeemable
noncontrolling interests (see
Note 2.x.)
Issuance of shares under
employee stock purchase plan
and option plans and stock-
based compensation
Issuance of shares in
connection with the acquisition
of Recall Holdings Limited (see
Note 6)
(25,437)
(28,831)
—
—
60,260
2,108,962
—
—
21
—
(28,831)
60,239
1,835,026
50,233,412
502
1,834,524
Parent cash dividends declared
(505,917)
Foreign currency translation
adjustment
Market value adjustments for
securities
Net income (loss)
Noncontrolling interests equity
contributions
Noncontrolling interests
dividends
Purchase of noncontrolling
interests
(36,056)
(734)
106,646
1,299
(1,698)
3,506
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(505,917)
—
—
104,824
—
—
—
—
—
—
—
—
(36,922)
(734)
—
—
—
—
—
—
—
(443)
—
2,627
1,800
(1,613)
(2,723)
3,456
13,600
—
—
—
1,962
7,590
(2,057)
19,766
(25,437)
—
—
—
—
866
—
1,822
1,299
(1,698)
3,506
(99,641)
(1,329)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
25,437
28,831
—
—
—
415
—
587
—
(573)
—
Balance, December 31, 2016
$
1,936,671
263,682,670
$
2,636
$ 3,489,795
$
(1,343,311)
$
(212,573)
$
124
$
54,697
The accompanying notes are an integral part of these consolidated financial statements.
83
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash Flows from Operating Activities:
Net income (loss)
Loss (income) from discontinued operations
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Depreciation
Amortization (includes amortization of deferred financing costs and discount of $8,009, $9,249 and $13,151 in
2014, 2015 and 2016, respectively)
Revenue reduction associated with amortization of permanent withdrawal fees (see Note 2.i.)
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)
Loss on disposal of Iron Mountain Divestments (see Note 6)
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
Decrease (increase) in restricted cash
Acquisition of customer relationships
Customer inducements
Net proceeds from Iron Mountain Divestments (see Note 6)
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, term loan facilities, bridge facilities and other debt
Proceeds from revolving credit, term loan facilities, bridge facilities and other debt
Early retirement of senior subordinated notes
Net proceeds from sales of senior notes
Debt financing and equity contribution from noncontrolling interests
Debt repayment and equity distribution to noncontrolling interests
Parent cash dividends
Net proceeds (payments) associated with employee stock-based awards
Excess tax (deficiency) benefits from employee stock-based awards
Payment of debt financing and stock issuance costs
Cash Flows from Financing Activities-Continuing Operations
Cash Flows from Financing Activities-Discontinued Operations
Cash Flows from Financing Activities
Effect of Exchange Rates on Cash and Cash Equivalents
Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
Supplemental Information:
Cash Paid for Interest
Cash Paid for Income Taxes, Net
Non-Cash Investing and Financing Activities:
Capital Leases
Accrued Capital Expenditures
Dividends Payable
Fair Value of Stock Issued for Recall Transaction (see Note 6)
Year Ended December 31,
2014
2015
2016
$
328,746
209
$
125,203
—
$
107,233
(3,353)
304,557
56,595
11,715
29,624
(270,790)
16,495
(9,447)
—
38,296
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)
301,219
365,526
53,494
11,670
27,585
(7,473)
27,305
1,941
—
44,221
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)
99,951
12,217
28,976
(50,368)
9,283
(898)
16,838
16,624
(23,206)
(34,274)
(50,712)
51,617
(4,238)
541,216
2,679
543,895
(328,603)
(291,965)
—
(31,561)
(19,205)
30,654
7,977
(632,703)
96,712
(535,991)
(8,824,711)
9,285,187
(566,352)
642,417
1,800
(16,570)
(542,298)
44,290
(60)
(3,846)
19,857
—
19,857
(7,420)
5,407
120,526
125,933
257,599
167,448
$
$
$
(10,796,873)
10,925,709
(814,728)
985,000
(14,851,440)
14,544,388
—
925,443
7,590
(2,016)
(406,508)
7,149
327
(14,161)
(108,511)
—
(108,511)
(8,015)
2,448
125,933
128,381
259,815
42,440
$
$
$
1,299
(1,765)
(505,871)
31,922
—
(18,603)
125,373
—
125,373
(25,174)
108,103
128,381
236,484
297,122
69,866
24,106
47,529
6,182
$
$
$
— $
50,083
51,846
5,950
$
$
$
— $
74,881
62,691
5,625
1,835,026
$
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
84
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016
(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, Asia
Pacific and Africa. We have a diversified customer base consisting of commercial, legal, financial, healthcare, insurance, life
sciences, energy, business services, entertainment and government organizations.
We have been organized and operating as a real estate investment trust for United States federal income tax purposes
("REIT") effective for our taxable year beginning January 1, 2014.
On May 2, 2016 (Sydney, Australia time), we completed the acquisition of Recall Holdings Limited ("Recall") pursuant
to the Scheme Implementation Deed, as amended, with Recall (the "Recall Transaction"). At the closing of the Recall
Transaction, we paid approximately $331,800 in cash and issued 50,233,412 shares of our common stock which, based on the
closing price of our common stock as of April 29, 2016 (the last day of trading on the New York Stock Exchange ("NYSE")
prior to the closing of the Recall Transaction) of $36.53 per share, resulted in a total purchase price to Recall shareholders of
approximately $2,166,900. See Note 6.
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.
85
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(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 Europe, 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 (i) our previously outstanding 71/4% GBP Senior Subordinated Notes due 2014
(the "71/4% Notes"), (ii) our previously outstanding 63/4% Euro Senior Subordinated Notes due 2018 (the "63/4% Notes"), (iii)
borrowings in certain foreign currencies under our Revolving Credit Facility and our Former Revolving Credit Facility (each as
defined in Note 4) and (iv) 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, 2014, 2015 and 2016 is as follows:
Total loss on foreign currency transactions
e. Derivative Instruments and Hedging Activities
Year Ended December 31,
2014
58,316
$
2015
70,851
$
2016
20,413
$
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, 2015 and 2016, we had no forward contracts outstanding.
f. Property, Plant and Equipment
Property, plant and equipment are stated at cost and depreciated using the straight-line method with the following useful
lives (in years):
Buildings and building improvements
Leasehold improvements
Racking
Warehouse equipment/vehicles
Furniture and fixtures
Computer hardware and software
Range
5 to 40
5 to 10 or life of the lease (whichever is shorter)
1 to 20 or life of the lease (whichever is shorter)
1 to 10
1 to 10
2 to 5
86
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Property, plant and equipment (including capital leases in the respective category), at cost, consist of the following:
Land
Buildings and building improvements
Leasehold improvements
Racking
Warehouse equipment/vehicles
Furniture and fixtures
Computer hardware and software
Construction in progress
December 31,
2015
2016
$
218,174
$
260,059
1,507,224
447,449
1,556,749
335,728
50,307
515,688
112,917
1,702,448
538,368
1,875,771
395,595
52,836
588,980
121,726
$
4,744,236
$
5,535,783
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, 2014, 2015 and 2016, we capitalized $19,419, $26,201 and
$16,438 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.
During the years ended December 31, 2014 and 2016, 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
$
1,000
$
— $
1,833
Year Ended December 31,
2014
2015
2016
North American Data Management Business
Western European Business
Other International Business
Corporate and Other Business
—
300
—
—
—
—
—
—
—
—
—
—
$
1,300
$
— $
1,833
87
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
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 asset retirement obligations are primarily the
result of requirements under our facility lease agreements which generally have "return to original condition" clauses which
would require us to remove or restore items such as shred pits, vaults, demising walls and office build-outs, among others. The
significant assumptions used in estimating our aggregate asset retirement obligation are the timing of removals, the probability
of a requirement to perform, estimated cost and associated expected inflation rates that are consistent with historical rates and
credit-adjusted risk-free rates that approximate our incremental borrowing rate.
A reconciliation of liabilities for asset retirement obligations (included in other long-term liabilities) is as follows:
December 31,
Asset Retirement Obligations, beginning of the year
2015
12,897
$
$
Liabilities Assumed
Liabilities Incurred
Liabilities Settled
Accretion Expense
Foreign Currency Translation Adjustments
Asset Retirement Obligations, end of the year
$
g. Long-Lived Assets
—
1,030
(966)
1,241
(205)
13,997
$
2016
13,997
10,678
687
(1,106)
1,587
(355)
25,488
We review long-lived assets, including all finite-lived 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 it is
determined that we are unable to recover the carrying amount of the 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. Long-lived assets, including finite-lived intangible assets, 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 long-lived assets, including
finite-lived intangible assets, are amortized is necessary.
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.
Consolidated loss on disposal/write-down of property, plant and equipment (excluding real estate), net was $1,412 for the year
ended December 31, 2016 and consisted primarily of losses associated with the write-off of certain software assets associated
with 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.
88
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Gain on sale of real estate, net of tax, which consists primarily of the sale of land and buildings in the United Kingdom,
United States and Canada, for the years ended December 31, 2014, 2015 and 2016 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
h. Goodwill and Other Indefinite-Lived Intangible Assets
Year Ended December 31,
2014
$ 10,512
(2,205)
$ 8,307
$
$
2015
2016
1,059
(209)
850
$
$
2,310
(130)
2,180
Goodwill and intangible assets with indefinite lives are not amortized but are reviewed annually for impairment or more
frequently if impairment indicators arise. Other than goodwill, we currently have no intangible assets that have indefinite lives
and which are not amortized.
We have selected October 1 as our annual goodwill impairment review date. As described in more detail below, we
performed our annual goodwill impairment review as of October 1, 2014, 2015 and 2016, and concluded that goodwill was not
impaired as of such dates. As of December 31, 2016, no factors were identified that would alter our October 1, 2016 goodwill
impairment analysis. In making this assessment, we considered 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.
Goodwill Impairment Analysis - 2015
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) the United Kingdom (including our operations in England, Northern Ireland and
Scotland), Ireland and Norway (the "UKI and Norway" reporting unit); (7) Austria, Belgium, France, Germany, the
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 (including Taiwan) and Hong Kong (the "Greater China" reporting unit);
(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 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 are being 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 being
managed with our businesses in our Greater China reporting unit. This reporting unit, which consists of (i) our former Greater
China reporting unit and (ii) our business in Singapore, is referred to herein as the "Southeast Asia" reporting unit. Our business
in Australia was being managed on a standalone basis (the “Australia” reporting unit).
89
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
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
these reporting units was not impaired as of such date.
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).
Goodwill by Reporting Unit as of December 31, 2015
The carrying value of goodwill, net for each of our reporting units described above 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.
90
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Goodwill Impairment Analysis - 2016
In the third quarter of 2016, as a result of changes in the management of our businesses included in our Western European
Business segment, we reassessed the composition of our reporting units. As a result of this reassessment, we determined that the
businesses included in our former UKI reporting unit were now being managed in conjunction with the businesses included in
our former Continental Western Europe reporting unit. As a result, we concluded that our Western European Business segment
consists of one reporting unit, which is referred to herein as the Western Europe reporting unit.
The acquisitions we completed during the first nine months of 2016, which are more fully disclosed in Note 6, impacted
our reporting units as of October 1, 2016 as follows:
• North American Records and Information Management - includes the goodwill associated with the records and
information management businesses of Recall in the United States and Canada.
• North American Secure Shredding - includes the goodwill associated with the secure shredding businesses of
Recall in the United States and Canada.
• North American Data Management - includes the goodwill associated with the data management businesses of
Recall in the United States and Canada.
• Western Europe - includes the goodwill associated with the operations of Recall in Belgium, France, Germany,
Spain, Switzerland and the United Kingdom as well as the goodwill associated with the Information Governance
and Digital Solutions (formerly referred to as document management solutions, or DMS) operations of Recall in
Sweden.
• Northern and Eastern Europe - this reporting unit consists of our former Emerging Markets - Europe reporting unit
and includes the goodwill associated with the operations of Recall in Denmark, Finland and Norway, as well as the
goodwill associated with the records and information management operations of Recall in Sweden. This reporting
unit also includes goodwill associated with our March 2016 acquisition of Archyvu Sistemos with operations in
Lithuania, Latvia and Estonia.
• Latin America - includes the goodwill associated with the operations of Recall in Brazil and Mexico.
• Australia and New Zealand - this reporting unit consists of the goodwill associated with the Australia Retained
Business (as defined in Note 6), which was a component of our former Australia reporting unit, as well as the
operations of Recall in Australia and New Zealand.
Southeast Asia - includes the goodwill associated with the operations of Recall in China, Hong Kong, Malaysia,
Singapore, Taiwan and Thailand.
•
• Africa and India - includes the goodwill associated with the operations of Recall in India, as well as the goodwill
associated with our March 2016 acquisition of Docufile Holdings Proprietary Limited with operations in South
Africa.
As a result of the changes described above, our reporting units at which level we performed our goodwill impairment
analysis as of October 1, 2016 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; (5) Adjacent Businesses -
Consumer Storage; (6) Adjacent Businesses - Fine Arts; (7) Western Europe; (8) Northern and Eastern Europe; (9) Latin
America; (10) Australia and New Zealand; (11) Southeast Asia; and (12) Africa and India. We concluded that the goodwill for
each of these reporting units was not impaired as of such date.
91
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Goodwill by Reporting Unit as of December 31, 2016
The carrying value of goodwill, net for each of our reporting units described above as of December 31, 2016 is 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)
Western Europe(4)(5)
Northern and Eastern Europe(6)
Latin America(6)
Australia and New Zealand(6)
Southeast Asia(5)(6)
Africa and India(6)
Total
$
$
Carrying Value
as of
December 31, 2016
2,122,891
158,020
505,690
—
3,011
22,911
349,421
136,431
147,782
274,981
162,351
21,532
3,905,021
_______________________________________________________________________________
(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) Included in this reporting unit at December 31, 2016 is the goodwill associated with our December 2016 acquisition of
certain of the information management operations of Santa Fe Group A/S ("Santa Fe"), as more fully disclosed in Note
6. Our Western Europe reporting unit includes the goodwill associated with Santa Fe's information management
operations in Spain, while our Southeast Asia reporting unit includes the goodwill associated with Santa Fe's
information management operations in Hong Kong, Malaysia, Singapore and Taiwan.
(6) 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 and operating margins, discount rate 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, 2016
(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, 2015 and 2016 is as follows:
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(1)
Currency effects
Gross Balance as of December 31,
2015
Deductible goodwill acquired during
the year
Non-deductible goodwill acquired
during the year
Goodwill allocated to Iron Mountain
Divestments(2)
Fair value and other adjustments(3)
Currency effects
Gross Balance as of December 31,
2016
Accumulated Amortization Balance
as of December 31, 2014
Currency effects
Accumulated Amortization Balance
as of December 31, 2015
Currency effects
Accumulated Amortization Balance
as of December 31, 2016
North
American
Records and
Information
Management
Business
North
American
Data
Management
Business
Western
European
Business
Other
International
Business
Corporate
and Other
Business
Total
Consolidated
$ 1,645,209
$
429,982
$
405,570
$
261,458
$
— $ 2,742,219
29
2,730
104
(27,647)
7
—
—
26,186
26,222
567
(25)
(6,925)
1,936
(448)
(25,909)
9,064
(353)
(44,543)
—
—
—
14,297
(722)
(105,024)
1,620,425
423,606
381,149
225,626
26,186
2,676,992
—
—
—
—
—
—
867,756
135,836
73,760
578,596
215
1,656,163
(3,332)
(157)
1,114
$ 2,485,806
$
205,987
(1,306)
204,681
214
$
204,895
—
—
1
559,443
54,025
(326)
53,699
54
53,753
369,907
505,690
$
$
$
$
$
—
—
(49,338)
405,571
58,273
(768)
57,505
(1,355)
56,150
323,644
349,421
— $
46,500
— $
46,500
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(40,089)
(971)
(20,036)
—
(479)
—
(43,421)
(1,607)
(68,259)
743,126
$ 25,922
$ 4,219,868
151
(22)
129
(80)
$
— $
—
—
—
318,436
(2,422)
316,014
(1,167)
49
$
— $
314,847
225,497
$ 26,186
$ 2,360,978
743,077
$ 25,922
$ 3,905,021
— $
— $
132,409
— $
— $
132,409
Net Balance as of December 31, 2015 $ 1,415,744
Net Balance as of December 31, 2016 $ 2,280,911
Accumulated Goodwill Impairment
Balance as of December 31, 2015
Accumulated Goodwill Impairment
Balance as of December 31, 2016
$
$
85,909
85,909
___________________________________________________________________
93
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
(1) 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 acquisitions completed in 2014.
(2) Goodwill allocated to Iron Mountain Divestments includes $40,089 and $3,332 of goodwill allocated to the Australia
Divestment Business and the Iron Mountain Canadian Divestments (each as defined in Note 6), respectively.
(3) Total fair value and other adjustments primarily include net adjustments of $(1,425) related to property, plant and
equipment, customer relationship intangible assets (which represent adjustments within the applicable measurement
period to provisional amounts recognized in purchase accounting) and other liabilities, and $182 of cash received
related to certain acquisitions completed in 2015.
i. Customer Relationship Intangible Assets, Customer Inducements and Other Finite-Lived Intangible Assets
Customer relationship intangible assets, which are acquired through either business combinations or acquisitions of
customer relationships, are amortized over periods ranging from eight to 30 years (weighted average of 18 years at
December 31, 2016). 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 costs ("Move Costs"), are amortized over periods ranging from eight to
30 years (weighted average of 26 years at December 31, 2016), 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 three to 15 years (weighted average of eight years at December 31,
2016), and are included in storage and service revenue 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 finite-lived intangible assets, including trade names, noncompetition agreements and trademarks, are capitalized and
amortized over periods ranging from three to 10 years (weighted average of eight years at December 31, 2016).
The gross carrying amount and accumulated amortization of our finite-lived intangible assets as of December 31, 2015 and
2016, respectively, are as follows:
Gross Carrying Amount
Customer relationship intangible assets and Customer Inducements
2015
937,174
2016
$ 1,604,020
$
Other finite-lived intangible assets (included in other assets, net)
11,111
24,788
December 31,
Accumulated Amortization
Customer relationship intangible assets and Customer Inducements
$
333,860
$
351,497
Other finite-lived intangible assets (included in other assets, net)
8,325
7,989
94
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Amortization expense associated with finite-lived intangible assets for the years ended December 31, 2014, 2015 and 2016
is as follows:
Year Ended December 31,
2014
2015
2016
Customer relationship intangible assets and Customer Inducements:
Amortization expense included in depreciation and amortization
$
46,733
$
43,614
$
84,349
Revenue reduction associated with amortization of Permanent
Withdrawal Fees
Other finite-lived intangible assets:
11,715
11,670
12,217
Amortization expense included in depreciation and amortization
1,853
631
2,451
Estimated amortization expense for existing finite-lived intangible assets (excluding deferred financing costs, as disclosed
in Note 2.j.) is as follows:
2017
2018
2019
2020
2021
j. Deferred Financing Costs
Estimated Amortization
Included in Depreciation
and Amortization
Charged to Revenues
$
$
93,956
93,040
91,389
90,970
90,283
7,907
6,520
4,776
3,501
2,424
Deferred financing costs are amortized over the life of the related debt using the effective interest rate method. If debt is
retired early, the related unamortized deferred financing costs are written off in the period the debt is retired to other expense
(income), net. As of December 31, 2015 and 2016, gross carrying amount of deferred financing costs was $70,549 and $92,982,
respectively, and accumulated amortization of those costs was $12,250 and $25,047, respectively. Unamortized deferred
financing costs are included as a component of long-term debt in our Consolidated Balance Sheets.
Estimated amortization expense for deferred financing costs, which are amortized as a component of interest expense, is
as follows:
2017
2018
2019
2020
2021
Thereafter
Estimated Amortization of
Deferred Financing Costs
15,138
14,393
12,870
10,274
6,434
8,826
$
95
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
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
Interest
Payroll and vacation
Incentive compensation
Other
Accrued expenses
l. Revenues
$
$
$
December 31,
2015
2016
33,173
109,778
142,951
$
$
22,811
161,563
184,374
December 31,
2015
2016
68,316
$
50,143
61,422
171,180
$
351,061
$
76,615
68,067
70,117
235,458
450,257
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 ("Information Governance and Digital
Solutions") 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, reporting and delivery of customer
marketing literature, or fulfillment services; (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, 2016, have historically not been significant.
96
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
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 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. 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 deferred 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 will adopt ASU 2014-09 as of January 1, 2018.
See Note 2.w. for additional information on ASU 2014-09.
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.
n. Stock-Based Compensation
We record stock-based compensation expense, utilizing the straight-line method, for the cost of stock options, restricted
stock units ("RSUs"), performance units ("PUs") and shares of stock issued under our employee stock purchase plan ("ESPP")
(together, "Employee Stock-Based Awards").
Stock-based compensation expense for Employee Stock-Based Awards included in the accompanying Consolidated
Statements of Operations for the years ended December 31, 2014, 2015 and 2016 was $29,624 ($21,886 after tax or $0.11 per
basic and diluted share), $27,585 ($19,679 after tax or $0.09 per basic and diluted share) and $28,976 ($22,364 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 is as follows:
Cost of sales (excluding depreciation and amortization)
Selling, general and administrative expenses
Total stock-based compensation
Year Ended December 31,
2014
2015
2016
$
$
680
28,944
29,624
$
$
220
27,365
27,585
$
$
110
28,866
28,976
For the years ended December 31, 2014 and 2015, the benefits and deficiencies associated with tax deductions in excess
of recognized compensation cost for Employee Stock-Based Awards were required to be reported as financing activities in the
accompanying Consolidated Statements of Cash Flows. This requirement impacted reported operating cash flows and reported
financing cash flows. As a result, net financing cash flows from continuing operations included $(60) and $327 for the years
ended December 31, 2014 and 2015, respectively, from the (deficiency) benefit of tax deductions compared to recognized
compensation cost. The tax benefit of any resulting excess tax deduction increased the Additional Paid-in Capital ("APIC")
pool. Any resulting tax deficiency was deducted from the APIC pool.
97
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to
Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 involves several aspects of the accounting for
share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities,
accounting for forfeitures of Employee Stock-Based Awards, and classification on the statement of cash flows. Under ASU
2016-09, income tax benefits or deficiencies in excess of recognized compensation cost for Employee Stock-Based Awards are
recognized as a component of provision (benefit) for income taxes in the statement of operations and are treated as discrete
items in the reporting period in which they occur. Additionally, these excess tax benefits or deficiencies are classified along
with all other income tax cash flows as a component of cash flows from operating activities in the statement of cash flows. In
the fourth quarter of 2016, we adopted ASU 2016-09 effective as of January 1, 2016. As a result of the adoption of ASU
2016-09, $265 of tax benefits in excess of recognized compensation costs for Employee Stock-Based Awards are (i) included as
a component of (benefit) provision for income taxes in our Consolidated Statement of Operations for the year ended December
31, 2016 and (ii) included as a component of cash flow from operating activities in our Consolidated Statement of Cash Flows
for the year ended December 31, 2016.
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. The options we issue become exercisable ratably over a period of either (i) 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, (ii)
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, or (iii) 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. 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.
A summary of our stock options outstanding as of December 31, 2016 by vesting terms is as follows:
Three-year vesting period (10 year contractual life)
Five-year vesting period (10 year contractual life)
Ten-year vesting period (12 year contractual life)
December 31, 2016
Stock Options
Outstanding
% of
Stock Options
Outstanding
2,645,339
573,793
232,566
3,451,698
76.6%
16.7%
6.7%
100.0%
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 their 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, 2016 was 529,350.
98
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
The weighted average fair value of stock options granted in 2014, 2015 and 2016 was $5.70, $4.84 and $2.56 per share,
respectively. These values were estimated on the date of grant using the Black-Scholes option pricing model. 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
2014
2015
2016
34.0%
2.04%
4%
28.4%
1.70%
5%
27.2%
1.32%
7%
6.7 years
5.4 years
5.6 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 stock option activity for the year ended December 31, 2016 is as follows:
Outstanding at December 31, 2015
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2016
Options exercisable at December 31, 2016
Options expected to vest
Options
3,688,814
1,445,582
(1,521,377)
(117,078)
(44,243)
3,451,698
1,450,997
1,906,425
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
$
$
$
$
27.79
34.02
24.05
31.92
36.67
31.79
26.38
35.73
6.90
4.42
8.68
$
$
$
13,484
11,422
1,987
The aggregate intrinsic value of stock options exercised for the years ended December 31, 2014, 2015 and 2016 is as
follows:
Aggregate intrinsic value of stock options exercised
Restricted Stock Units
Year Ended December 31,
2014
23,178
$
2015
$
9,056
$
2016
18,298
Under our various equity compensation plans, we may also grant RSUs. Our RSUs generally have a vesting period of
between three and five years from the date of grant. However, RSUs granted to our non-employee directors in 2015 and
thereafter 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 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, 2016
(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, 2014, 2015 and 2016, are as follows:
Cash dividends accrued on RSUs
Cash dividends paid on RSUs
Year Ended December 31,
2014
2015
2016
$
3,698
$
2,508
$
1,377
2,927
2,525
2,363
The fair value of RSUs vested during the years ended December 31, 2014, 2015 and 2016, are as follows:
Fair value of RSUs vested
Year Ended December 31,
2014
22,535
$
2015
24,345
$
2016
22,236
$
A summary of RSU activity for the year ended December 31, 2016 is as follows:
Non-vested at December 31, 2015
Granted
Vested
Forfeited
Non-vested at December 31, 2016
Weighted-
Average
Grant-Date
Fair Value
33.68
32.46
33.22
33.62
33.21
RSUs
1,217,597
705,160
(669,407)
(89,957)
1,163,393
$
$
Performance Units
Under our various equity compensation plans, we may also make awards of PUs. For the majority of outstanding PUs, the
number of PUs earned is determined based on our performance against predefined targets of revenue and return on invested
capital ("ROIC"). The number of PUs earned may range from 0% to 200% 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 a three-year performance period. Certain
PUs that we grant 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 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. PUs awarded to employees who terminate their employment during the three-year performance period
and on or after attaining age 55 and completing 10 years of qualifying service are eligible for pro-rated vesting, subject to the
actual achievement against the predefined targets or a market condition 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 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.
100
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Cash dividends accrued and paid on PUs for the years ended December 31, 2014, 2015 and 2016, are as follows:
Cash dividends accrued on PUs
Cash dividends paid on PUs
Year Ended December 31,
2014
2015
2016
$
1,341
$
874
$
312
1,015
1,078
645
During the years ended December 31, 2014, 2015 and 2016, we issued 225,429, 159,334 and 231,672 PUs, respectively.
The majority of our PUs are earned based on our performance against revenue and ROIC targets during their applicable
performance period, therefore, we forecast the likelihood of achieving the predefined revenue 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 performance period) or the actual PUs earned (at the three-year anniversary date of the grant date) over the vesting
period for each of the awards. The fair value of PUs based on our performance against revenue and ROIC targets is the excess
of the market price of our common stock at the date of grant over the purchase price (which is typically zero). For PUs earned
based on a market condition, we utilize a Monte Carlo simulation to fair value these awards at the date of grant, and such fair
value is expensed over the three-year performance period. As of December 31, 2016, we expected 0%, 25% and 100%
achievement of the predefined revenue and ROIC targets associated with the awards of PUs made in 2014, 2015 and 2016,
respectively.
The fair value of earned PUs that vested during the years ended December 31, 2014, 2015 and 2016, is as follows:
Fair value of earned PUs that vested
Year Ended December 31,
2014
2015
2016
$
1,216
$
2,107
$
5,748
A summary of PU activity for the year ended December 31, 2016 is as follows:
Non-vested at December 31, 2015
Granted
Vested
Forfeited/Performance or Market Conditions Not
Achieved
Non-vested at December 31, 2016
Original
PU Awards
520,764
231,672
(163,176)
PU
Adjustment(1)
(86,959)
—
—
Total
PU Awards
433,805
231,672
(163,176)
(29,920)
559,340
(34,079)
(121,038)
(63,999)
438,302
$
Weighted-
Average
Grant-Date
Fair Value
34.11
$
35.95
35.23
40.98
33.67
_______________________________________________________________________________
(1) Represents an increase or decrease in the number of original PUs awarded based on either the final performance
criteria or market condition achievement at the end of the performance period of such PUs or a change in estimated
awards based on the forecasted performance against the predefined targets.
101
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
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, 2014,
2015 and 2016, there were 115,046 shares, 122,209 shares and 110,835 shares, respectively, purchased under the ESPP. As of
December 31, 2016, we have 727,594 shares available under the ESPP.
_______________________________________________________________________________
As of December 31, 2016, unrecognized compensation cost related to the unvested portion of our Employee Stock-Based
Awards was $36,146 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, and the vesting of 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 (benefit) provision for income taxes in the accompanying Consolidated Statements of
Operations.
Prior to our conversion to a REIT, 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 our foreign subsidiaries indefinitely
outside the United States. During 2014, as a result of our conversion to a REIT, we reassessed our intentions regarding the
indefinite reinvestment of such undistributed earnings of our foreign subsidiaries outside the United States (the "2014 Indefinite
Reinvestment Assessment"). As a result of the 2014 Indefinite Reinvestment Assessment, we concluded, at that time, that it was
no longer our intent to indefinitely reinvest our current and future undistributed earnings of our foreign subsidiaries outside the
United States, and, therefore, during 2014, we recognized an increase in our provision for income taxes from continuing
operations in the amount of $46,356, representing incremental federal and state income taxes and foreign withholding taxes on
such foreign earnings.
102
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
During 2016, as a result of the closing of the Recall Transaction and the subsequent integration of Recall’s operations into
our operations, we again reassessed our intentions regarding the indefinite reinvestment of such undistributed earnings of our
foreign subsidiaries outside the United States (the “2016 Indefinite Reinvestment Assessment”). As a result of the 2016
Indefinite Reinvestment Assessment, we concluded that it is our intent to indefinitely reinvest our current and future
undistributed earnings of certain of our unconverted foreign taxable REIT subsidiaries (“TRSs”) outside the United States, and,
therefore, during 2016, we recognized a decrease in our provision for income taxes from continuing operations in the amount of
$3,260, representing the reversal of previously recognized incremental foreign withholding taxes on the earnings of such
unconverted foreign TRSs. As a result of the 2016 Indefinite Reinvestment Assessment, we no longer provide incremental
foreign withholding taxes on the retained book earnings of these unconverted foreign TRSs, which was $195,692 as of
December 31, 2016. 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. We continue, however, to provide for incremental foreign withholding taxes on net book
over outside basis differences related to the earnings of our foreign qualified REIT subsidiaries ("QRSs") and certain other
foreign TRSs (excluding unconverted foreign TRSs).
103
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
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 stock options, RSUs, PUs, warrants or
convertible securities) that were outstanding during the period, unless the effect is antidilutive.
The calculation of basic and diluted income (loss) per share for the years ended December 31, 2014, 2015 and 2016 is as
follows:
Year Ended December 31,
2014
2015
2016
Income (loss) from continuing operations
Less: Net income (loss) attributed to noncontrolling interests
Income (loss) from continuing operations (utilized in numerator
of Earnings Per Share calculation)
(Loss) income from discontinued operations, net of tax
Net income (loss) attributable to Iron Mountain Incorporated
Weighted-average shares—basic
Effect of dilutive potential stock options
Effect of dilutive potential RSUs and PUs
Weighted-average shares—diluted
Earnings (losses) per share—basic:
Income (loss) from continuing operations
$
$
$
$
$
(Loss) income from discontinued operations, net of tax
Net income (loss) attributable to Iron Mountain Incorporated(1) $
Earnings (losses) per share—diluted:
Income (loss) from continuing operations
$
(Loss) income from discontinued operations, net of tax
Net income (loss) attributable to Iron Mountain Incorporated(1) $
$
328,955
2,627
326,328
$
(209) $
$
326,119
$
125,203
1,962
123,241
$
— $
123,241
$
103,880
2,409
101,471
3,353
104,824
195,278,000
210,764,000
246,178,000
913,926
557,269
834,659
519,426
574,954
514,044
196,749,195
212,118,085
247,266,998
1.68
—
1.67
1.67
—
1.66
$
$
$
$
0.59
—
0.58
0.59
—
0.58
$
$
$
$
0.41
0.01
0.43
0.41
0.01
0.42
Antidilutive stock options, RSUs and PUs, excluded from the
calculation
872,039
1,435,297
1,790,362
___________________________________________________________________
(1) Columns may not foot due to rounding.
104
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(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,
2014
2015
2016
Balance at
Beginning of
the Year
Credit Memos
Charged to
Revenue
Allowance for
Bad Debts
Charged to
Expense
$
$
34,645
32,141
31,447
$
47,137
42,497
37,616
14,209
15,326
8,705
_______________________________________________________________________________
Other(1)
$
(572) $
(4,511)
16,528
Deductions(2)
Balance at
End of
the Year
(63,278) $
(54,006)
(50,006)
32,141
31,447
44,290
(1) Primarily consists of recoveries of previously written-off accounts receivable, allowances of businesses acquired
(primarily Recall in 2016) 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
time deposits) and accounts receivable. The only significant concentrations of liquid investments as of December 31, 2015 and
2016, respectively, related to cash and cash equivalents. At December 31, 2015 and 2016, we had time deposits with four global
banks and six global banks, respectively. 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, 2015 and 2016, our cash and cash equivalents balance was $128,381 and
$236,484, respectively. At December 31, 2015 and 2016, our cash and cash equivalents included time deposits of $18,645 and
$22,240, respectively.
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.
105
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(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, 2015 and 2016,
respectively, are as follows:
Description
Time Deposits(1)
Trading Securities
Available-for-Sale Securities
Description
Time Deposits(1)
Trading Securities
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
$
—
$
18,645
$
10,371
624
9,514 (2)
624 (2)
857 (1)
—
—
—
—
Fair Value Measurements at
December 31, 2016 Using
Total Carrying
Value at
December 31,
2016
Quoted prices
in active
markets
(Level 1)
Significant other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
$
22,240
$
10,659
—
$
22,240
$
10,181
(2)
478 (1)
—
—
_______________________________________________________________________________
(1) Time deposits and certain trading securities (included in Prepaid expenses and other in our Consolidated Balance
Sheets) 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.
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, 2014, 2015
and 2016, with the exception of: (i) goodwill (as disclosed in Note 2.h.); (ii) the assets and liabilities acquired through
acquisitions (as disclosed in Note 6); (iii) the Access Contingent Consideration (as defined and disclosed in Note 6); and (iv)
the redemption value of certain redeemable noncontrolling interests (as disclosed in Note 2.x.), all of which are based on Level
3 inputs.
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, 2015 and 2016.
106
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
t.
Trading Securities
As of December 31, 2015 and 2016, we have one trust that holds marketable securities. As of December 31, 2015 and
2016, the fair value of the money market and mutual funds included in this trust amounted to $10,371 and $10,659,
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 of $1,112, $56 and $472 for the years ended
December 31, 2014, 2015 and 2016, respectively, related to these marketable securities.
u. Accumulated Other Comprehensive Items, Net
The changes in accumulated other comprehensive items, net for the years ended December 31, 2014, 2015 and 2016 are
as follows:
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
Other comprehensive (loss) income:
Foreign currency translation adjustments
Market value adjustments for securities
Total other comprehensive (loss) income
Balance as of December 31, 2016
Foreign
Currency
Translation
Adjustments
$
(9,586) $
Market Value
Adjustments
for Securities
926
Total
$
(8,660)
(66,424)
—
(66,424)
(76,010) $
$
(99,641)
—
(99,641)
$ (175,651) $
(36,922)
—
(36,922)
$ (212,573) $
—
53
53
979
$
(66,424)
53
(66,371)
(75,031)
—
(245)
(245)
734
(99,641)
(245)
(99,886)
$ (174,917)
—
(734)
(734)
(36,922)
(734)
(37,656)
— $ (212,573)
107
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(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, net
Debt extinguishment expense, net
Other, net
$
$
2014
58,316
$
16,495
(9,624)
65,187
2015
70,851
27,305
434
2016
20,413
$
9,283
14,604
44,300
$
98,590
$
Other, net for the year ended December 31, 2016 includes a charge of $15,417 associated with the loss on disposal of the
Australia Divestment Business (as described and defined in Note 6) and a charge of $1,421 associated with the loss on disposal
of the Iron Mountain Canadian Divestments (as described and defined in Note 6), partially offset by $837 of gains associated
with the deferred compensation plan we sponsor.
w. New Accounting Pronouncements
Recently Adopted Accounting Pronouncements
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, ASU 2014-15
(1) provides a definition of the term “substantial doubt”, (2) requires an evaluation every reporting period, including interim
periods, (3) provides principles for considering the mitigating effect of management’s plans, (4) requires certain disclosures
when substantial doubt is alleviated as a result of consideration of management’s plans, (5) requires an express statement and
other disclosures when substantial doubt is still present, and (6) requires 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 fiscal years ending after
December 15, 2016. We adopted ASU 2014-15 during the fourth quarter of 2016. The adoption of ASU 2014-15 did not 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. We adopted ASU 2015-02 effective as of January 1, 2016. The adoption of ASU 2015-02 did
not have an impact on 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 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 liabilities and assets as noncurrent. We adopted ASU 2015-17 during the fourth quarter of 2016 and
have applied the provisions of ASU 2015-17 on a prospective basis. Therefore, our Consolidated Balance Sheet as of December
31, 2016 reflects the adoption of ASU 2015-17. Our consolidated balance sheet as of December 31, 2015 does not reflect the
adoption of ASU 2015-17. Had we adopted the provisions of ASU 2015-17 on a retrospective basis, the impact on our
consolidated balance sheet as of December 31, 2015 would have been (i) a decrease in deferred income taxes (a component of
Total Current Assets) of $22,179, (ii) an increase in other (a component of Other Assets, net) of $18,394 and (iii) a decrease in
deferred income taxes (a component of Long-term Liabilities) of $3,785.
108
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
In March 2016, the FASB issued ASU No. 2016-07, Simplifying the Transition to the Equity Method of Accounting ("ASU
2016-07"). ASU 2016-07 eliminates the requirement for a reporting entity to apply the equity method of accounting
retrospectively when they obtain significant influence over a previously held investment. Furthermore, under ASU 2016-07, for
any available-for-sale securities that become eligible for the equity method of accounting, the unrealized gain or loss recorded
within other comprehensive income (loss) associated with the securities should be recognized in earnings at the date the
investment initially qualifies for the use of the equity method. We adopted ASU 2016-07 on April 1, 2016. The adoption of
ASU 2016-07 did not have a material impact on our consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to
Employee Share-Based Payment Accounting ("ASU 2016-09"). As noted in Note 2.n., we adopted ASU 2016-09 effective as of
January 1, 2016. The adoption of ASU 2016-09 did not have a material impact on our consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash
Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 addresses eight specific cash flow changes with the objective of
reducing existing diversity in the practice of how certain cash receipts and cash payments are presented and classified in the
statement of cash flows. We adopted ASU 2016-15 during the third quarter of 2016. ASU 2016-15 did not have an impact on
our consolidated financial statements.
As Yet Adopted Accounting Pronouncements
a. ASU 2014-09
As disclosed in Note 2.l., in May 2014, the FASB issued ASU 2014-09. ASU 2014-09 will replace the current revenue
recognition criteria under GAAP, including industry-specific requirements, and provide companies with a single revenue
recognition model for recognizing revenue from contracts with customers. The core principle of ASU 2014-09 is that a
company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the company expects to be entitled in exchange for such goods or services. The two permitted
transition methods under ASU 2014-09 are: (i) the full retrospective method, whereby ASU 2014-09 would be applied to each
prior reporting period presented and the cumulative effect of adoption would be recognized at the earliest period shown, or (ii)
the modified retrospective method, whereby the cumulative effect of applying ASU 2014-09 would be recognized at the date of
initial application. In August 2015, the FASB issued ASU No 2015-14 which deferred the effective date of ASU 2014-09 for
one year, making ASU 2014-09 effective for us on January 1, 2018, with early adoption permitted as of January 1, 2017. We
will adopt ASU 2014-09 on January 1, 2018 using the modified retrospective method.
During 2015, we established a project team responsible for the assessment and implementation of ASU 2014-09. We
utilized a bottoms-up approach to analyze the impact of ASU 2014-09 on our contracts with customers by reviewing our current
accounting policies and practices to identify potential differences that would result from applying the requirements of ASU
2014-09 to our contracts with customers. We are currently in the process of designing and implementing appropriate changes to
our business processes, systems and controls to support the accounting and the financial disclosure requirements under ASU
2014-09. We have been closely monitoring the FASB activity related to specific interpretative issues pertaining to ASU
2014-09. During the second half of 2016, we substantially completed our evaluation of the potential changes resulting from the
adoption of ASU 2014-09 on our accounting and the financial disclosure requirements and are now moving into the more
detailed quantification of the impacts of adopting ASU 2014-09, the more significant of which are discussed below. Based on
our analysis to date, we expect that the most significant impacts associated with adopting ASU 2014-09 compared to current
GAAP will relate to (i) the deferral of certain commissions on our long-term storage contracts (“Accounting for Commissions”)
and (ii) certain policy changes related to initial moves of physical storage, which will be subject to new cost guidance
(“Accounting for Initial Moves”).
109
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
i.
Accounting for Commissions
Under current GAAP, commissions that we pay related to our long-term storage contracts are expensed as incurred. Under
ASU 2014-09, however, certain commissions will be capitalized and amortized over the period of expected earned revenue. In
the year of adoption, this will result in increased intangible contract assets on our Consolidated Balance Sheet, a reduction in
selling, general and administrative expenses and a corresponding increase in amortization expense (assuming consistent levels
of spending up through the adoption date) on our Consolidated Statement of Operations and an increase in cash flows from
operating activities and a corresponding increase in cash used for investing activities on our Consolidated Statement of Cash
Flows.
ii. Accounting for Initial Moves
Under current GAAP, free intake costs to transport boxes to one of our facilities, which include labor and transportation
costs, are capitalized and amortized as a component of depreciation and amortization in our Consolidated Statements of
Operations. Under ASU 2014-09, however, the revenue and costs associated with all initial moves of physical storage,
regardless of whether or not the services associated with such initial moves are provided to the customer at no charge, will be
deferred and recognized over the period consistent with the transfer of the service to the customer to which the asset relates. In
the year of adoption, this will result in decreased intangible assets and increased deferred revenue on our Consolidated Balance
Sheet, a reduction in cost of sales and a corresponding increase in amortization expense (assuming consistent levels of spending
up through the adoption date) on our Consolidated Statement of Operations and an increase in cash flows from operating
activities and a corresponding increase in cash used for investing activities on our Consolidated Statement of Cash Flows.
b. Other As Yet Adopted Accounting Pronouncements
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 requires
lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of
more than 12 months. ASU 2016-02 also will require certain qualitative and quantitative disclosures designed to give financial
statement users information on the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 will be
effective for us on January 1, 2019, with early adoption permitted. We will adopt ASU 2016-02 on January 1, 2019 and are
currently evaluating the impact ASU 2016-02 will have on our consolidated financial statements.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash ("ASU
2016-18"). ASU 2016-18 provides guidance on the classification of restricted cash in the statement of cash flows. ASU 2016-18
is effective for us on January 1, 2018, with early adoption permitted and is required to be adopted on a retrospective basis. We
do not believe that the adoption of ASU 2016-18 will have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a
Business ("ASU 2017-01"). ASU 2017-01 provides greater clarity on the definition of a business to assist entities in evaluating
whether transactions should be accounted for as an acquisition or disposal of assets or businesses. ASU 2017-01 is effective for
us on January 1, 2018, with early adoption permitted. We do not believe that the adoption of ASU 2017-01 will have a material
impact on our consolidated financial statements.
110
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test
for Goodwill Impairment ("ASU 2017-04"). ASU 2017-04 modifies the process by which entities will test goodwill for
impairment. Under existing GAAP, when the carrying value of a reporting unit exceeds the reporting unit’s fair value, an entity
would then proceed to a “Step 2” goodwill impairment analysis, which requires calculating the implied fair value of goodwill
by assigning the fair value of a reporting unit to all of its assets and liabilities, as if that reporting unit had been acquired in a
business combination. Under ASU 2017-04, a goodwill impairment will be the amount by which a reporting unit’s carrying
value exceeds its fair value, not to exceed the carrying value of the reporting unit’s goodwill. ASU 2017-04 is effective for us
on January 1, 2020, with early adoption permitted. We do not believe ASU 2017-04 will have a material impact on our
consolidated financial statements.
x. Redeemable Noncontrolling Interests
Certain unaffiliated third parties own noncontrolling interests in our consolidated subsidiaries in Chile, India and South
Africa. The underlying shareholder agreements between us and our noncontrolling interest shareholders for these subsidiaries
contain provisions under which the noncontrolling interest shareholders can require us to purchase their respective interests in
such subsidiaries at certain times and at a purchase price as stipulated in the underlying shareholder agreements (generally at
fair value). These put options make these noncontrolling interests redeemable and, therefore, these noncontrolling interests are
classified as temporary equity outside of stockholders' equity. Redeemable noncontrolling interests are reported at the higher of
their redemption value or the noncontrolling interest holders' proportionate share of the underlying subsidiaries net carrying
value. Increases or decreases in the redemption value of the noncontrolling interest are offset against APIC.
111
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
3. Derivative Instruments and Hedging Activities
Historically, we have entered into forward contracts to hedge our exposures in Euros, British pounds sterling and
Australian dollars. As of December 31, 2015 and 2016, however, we had no forward contracts outstanding.
Net cash payments (receipts) included in cash from operating activities related to settlements associated with foreign
currency forward contracts for the years ended December 31, 2014, 2015 and 2016, are as follows:
Net payments
Year Ended December 31,
2014
21,125
$
2015
22,705
$
$
2016
—
Losses (gains) for our derivative instruments for the years ended December 31, 2014, 2015 and 2016 are as follows:
Amount of Loss (Gain)
Recognized in Income
on Derivatives
December 31,
Derivatives Not Designated as Hedging
Instruments
Foreign exchange contracts
Location of Loss (Gain)
Recognized in Income on
Derivative
Other expense (income), net
2014
18,016
2015
20,294
$
$
2016
$
—
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, 2014, 2015 and 2016, we designated on average 47,730, 34,331 and
29,649 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 gains (losses), 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 gains (losses)
Less: Tax (expense) benefit on foreign exchange gains (losses)
Foreign exchange gains (losses), net of tax
Year Ended December 31,
2014
2015
2016
$
$
6,385
(57)
6,328
$
$
3,284
—
3,284
$
$
1,107
—
1,107
As of December 31, 2016, cumulative net gains of $18,203, net of tax, are recorded in accumulated other comprehensive
items, net associated with this net investment hedge.
112
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
4. Debt
Long-term debt is as follows:
Revolving Credit Facility(1)
Term Loan(1)
6% Senior Notes due 2020 (the "6% Notes due 2020")(2)(3)(4)
61/8% CAD Senior Notes due 2021 (the "CAD Notes due 2021")(2)(5)
61/8% GBP Senior Notes due 2022 (the "GBP Notes")(2)(4)(6)
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(7)
Accounts Receivable Securitization Program(8)
Total Long-term Debt
Less Current Portion
Long-term Debt, Net of Current Portion
Revolving Credit Facility(1)
Term Loan(1)
Australian Dollar Term Loan (the "AUD Term Loan")(9)
6% Notes due 2020(2)(3)(4)
43/8% Senior Notes due 2021 ("the 43/8% Notes")(2)(3)(4)
CAD Notes due 2021(2)(5)
GBP Notes(2)(4)(6)
6% Notes due 2023(2)(3)
53/8% CAD Senior Notes due 2023 (the "CAD Notes due 2023")(2)(4)(5)
53/4% Notes(2)(3)
53/8% Senior Notes due 2026 (the "53/8% Notes")(2)(4)(10)
Real Estate Mortgages, Capital Leases and Other(7)
Accounts Receivable Securitization Program(8)
Mortgage Securitization Program(11)
Total Long-term Debt
Less Current Portion
Long-term Debt, Net of Current Portion
4,903,977
(88,068)
$ 4,815,909
$
4,845,678
(88,068)
(58,299) $ 4,757,610
Debt
(inclusive of
discount)
$ 784,438
243,750
1,000,000
144,190
592,140
600,000
1,000,000
333,559
205,900
Debt
(inclusive of
discount)
$ 953,548
234,375
177,198
1,000,000
500,000
148,792
493,648
600,000
185,990
1,000,000
250,000
478,565
247,000
50,000
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)
—
December 31, 2016
Unamortized
Deferred
Financing
Costs
Carrying
Amount
$
946,018
234,375
173,424
987,270
492,407
147,157
487,434
592,678
182,492
989,471
245,956
477,288
246,616
48,595
(7,530) $
—
(3,774)
(12,730)
(7,593)
(1,635)
(6,214)
(7,322)
(3,498)
(10,529)
(4,044)
(1,277)
(384)
(1,405)
(67,935)
—
6,319,116
(172,975)
$ 6,146,141
$
6,251,181
(172,975)
(67,935) $ 6,078,206
Fair
Value
$ 784,438
243,750
1,052,500
147,074
606,944
618,000
961,200
333,559
205,900
Fair
Value
$ 953,548
234,375
178,923
1,052,500
511,250
155,860
527,562
637,500
188,780
1,027,500
242,500
478,565
247,000
50,000
_______________________________________________________________________________
113
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(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 most 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 December 31, 2015 and 2016, respectively.
(2) The fair values (Level 1 of fair value hierarchy described at Note 2.s.) of these debt instruments are based on quoted
market prices for these notes on December 31, 2015 and 2016, 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"),
the Accounts Receivable Securitization Special Purpose Subsidiaries (as defined below), the Mortgage Securitization
Special Purpose Subsidiary (as defined below) and the remainder of our subsidiaries do not guarantee the Parent
Notes. See Note 5.
(4) The 6% Notes due 2020, the 43/8% Notes, the GBP Notes, the CAD Notes due 2023 and the 53/8% Notes (collectively,
the "Unregistered 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 Unregistered Notes may be
offered only in transactions that are exempt from registration under the Securities Act or the securities laws of any
other jurisdiction.
(5) Canada Company is the direct obligor on the CAD Notes due 2021 and the CAD Notes due 2023 (collectively, 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.
(6) 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.
(7) Includes (i) real estate mortgages of $2,713 and $20,884 as of December 31, 2015 and 2016, respectively, which bear
interest at approximately 4.9% as of December 31, 2015 and 4.4% as of December 31, 2016 and are payable in various
installments through 2021, (ii) capital lease obligations of $235,348 and $309,860 as of December 31, 2015 and 2016,
respectively, which bear a weighted average interest rate of 7.2% at December 31, 2015 and 4.6% at December 31,
2016, and (iii) other notes and other obligations, which were assumed by us as a result of certain acquisitions, of
$95,498 and $147,821 as of December 31, 2015 and 2016, respectively, and bear a weighted average interest rate of
12.6% as of both December 31, 2015 and 2016, respectively. We believe the fair value (Level 3 of fair value hierarchy
described at Note 2.s.) of this debt approximates its carrying value.
(8) The Accounts Receivable Securitization 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.
(9) The fair value (Level 3 of fair value hierarchy described at Note 2.s.) of this debt instrument approximates the carrying
value as borrowings under this debt instrument are based on a current variable market interest rate. The amount of debt
for the AUD Term Loan reflects an unamortized original issue discount of $1,725 as of December 31, 2016.
(10) Iron Mountain US Holdings, Inc. ("IM US Holdings"), a 100% owned subsidiary of IMI and one of the Guarantors, is
the direct obligor on the 53/8% Notes, which are fully and unconditionally guaranteed, on a senior basis, by IMI and
the other Guarantors. These guarantees are joint and several obligations of IMI and such Guarantors. See Note 5.
114
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
4. Debt (Continued)
(11) The Mortgage Securitization Special Purpose Subsidiary is the obligor 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.
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 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 initial maximum amount of the
Revolving Credit Facility was $1,500,000. The original amount of the Term Loan was $250,000. 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.
On June 24, 2016, Iron Mountain Information Management, LLC (“IMIM”) entered into a commitment increase
supplement, pursuant to which we increased the maximum amount permitted to be borrowed under the Revolving Credit
Facility from $1,500,000 to $1,750,000. We continue to have the option to request additional term loans and/or increases in
commitments under the Revolving Credit Facility up to $250,000, subject to the conditions specified in the Credit Agreement.
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 $1,750,000. 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 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, 2016, we had $953,548 and $234,375
of outstanding borrowings under the Revolving Credit Facility and the Term Loan, respectively. Of the $953,548 of outstanding
borrowings under the Revolving Credit Facility, $787,400 was denominated in United States dollars and 157,930 was
denominated in Euros. In addition, we also had various outstanding letters of credit totaling $54,957. The remaining amount
available for borrowing under the Revolving Credit Facility as of December 31, 2016, 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 $741,495 (which amount represents the maximum availability
as of such date). The average interest rate in effect under the Credit Agreement was 2.9% as of December 31, 2016. The
average interest rate in effect under the Revolving Credit Facility was 2.9% and ranged from 2.3% to 5.0% as of December 31,
2016 and the interest rate in effect under the Term Loan as of December 31, 2016 was 2.8%.
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.
115
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
4. Debt (Continued)
Our leverage and fixed charge coverage ratios under the Credit Agreement as of December 31, 2015 and 2016 and our
leverage ratio under our indentures as of December 31, 2015 and 2016 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, 2015
5.6
2.6
5.5
2.4
December 31, 2016
Maximum/Minimum Allowable
5.7 Maximum allowable of 6.5
2.7 Maximum allowable of 4.0
5.2 Maximum allowable of 6.5
2.4 Minimum allowable of 1.5
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 as measured as of the end of the most recently completed fiscal quarter.
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, 2014, 2015 and 2016, are as follows:
Commitment fees and letters of credit fees
b. Bridge Facility
Year Ended December 31,
2014
2015
2016
$
3,322
$
3,743
$
3,533
On April 29, 2016, in order to provide a portion of the financing necessary to close the Recall Transaction, we entered into
a bridge credit agreement (the “Bridge Credit Agreement”) with JPMorgan Chase Bank, N.A., as a lender and administrative
agent, and the other lenders party thereto (the "Lenders"), pursuant to which we borrowed an unsecured bridge term loan of
$850,000 (the "Bridge Facility"). We used the proceeds from the Bridge Facility, together with borrowings under the Revolving
Credit Facility, to finance a portion of the cost of the Recall Transaction, including refinancing Recall’s existing indebtedness
and to pay costs we incurred in connection with the Recall Transaction.
On May 31, 2016, we used the proceeds from the issuance of the
Notes and the
Notes, together with cash on
hand and borrowings under the Revolving Credit Facility, to repay the Bridge Facility, and effective May 31, 2016, we
terminated the commitments of the Lenders under the Bridge Credit Agreement. We recorded a charge to other expense
(income), net of $9,283 during the second quarter of 2016 related to the early extinguishment of the Bridge Credit Agreement.
This charge primarily consisted of the write-off of unamortized deferred financing costs.
116
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
4. Debt (Continued)
c. Notes Issued under Indentures
As of December 31, 2016, we had eight series of senior subordinated or senior notes issued under various indentures, four
of which are direct obligations of the parent company, IMI; one of which (the 53/8% Notes) is a direct obligation of IM US
Holdings; two of which (the CAD Notes) are a direct obligation of Canada Company; and one of which (the GBP Notes) is a
direct obligation of IME. All notes shown below 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;
$500,000 principal amount of senior notes maturing on June 1, 2021 and bearing interest at a rate of 43/8% per annum,
payable semi-annually in arrears on December 1 and June 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;
250,000 CAD principal amount of senior notes maturing on September 15, 2023 and bearing interest at a rate of 53/8%
per annum, payable semi-annually in arrears on March 15 and September 15;
$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; and
$250,000 principal amount of senior notes maturing on June 1, 2026 and bearing interest at a rate of 53/8% per annum,
payable semi-annually in arrears on December 1 and June 1.
In January 2014, we redeemed the 150,000 British pounds sterling (approximately $248,000) in aggregate principal
amount of our 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 previously outstanding 83/8% Senior
Subordinated Notes due 2021 (the "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 and the 73/4% Senior Subordinated Notes due 2019, as well as the remainder of the 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.
117
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
4. Debt (Continued)
In May 2016, IMI completed a private offering of $500,000 in aggregate principal amount of the 43/8% Notes and IM US
Holdings completed a private offering of $250,000 in aggregate principal amount of the 53/8% Notes. The 43/8% Notes and
53/8% Notes were issued at par. The aggregate net proceeds of $738,750 from the 43/8% Notes and 53/8% Notes, after paying the
initial purchasers' commissions, were used, together with cash on hand and borrowings under the Revolving Credit Facility, for
the repayment of all outstanding borrowings under the Bridge Credit Agreement.
On September 15, 2016, Canada Company completed a private offering of 250,000 Canadian dollars in aggregate
principal amount of the CAD Notes due 2023. The CAD Notes due 2023 were issued at par. The aggregate net proceeds from
the CAD Notes due 2023 of 246,250 Canadian dollars (or $186,693, based upon the exchange rate between the Canadian dollar
and the United States dollar on September 15, 2016 (the settlement date for the CAD Notes due 2023)), after paying the initial
purchasers’ commissions, were used to repay outstanding borrowings under the Revolving Credit Facility.
Each of the indentures for the notes provides that we may redeem the outstanding notes, in whole or in part, upon
satisfaction of certain terms and conditions. In any redemption, we are also required to pay all accrued but unpaid interest on
the outstanding notes.
The following table presents the various redemption dates and prices of the senior or senior subordinated notes. The
redemption dates reflect the date at or after which the notes may be redeemed at our option at a premium redemption price.
After these dates, the notes may be redeemed at 100% of face value:
Redemption
Date
6% Notes due
2020
October 1,
43/8% Notes
June 1,
CAD Notes
due 2021
August 15,
GBP Notes
September 15,
6% Notes due
2023
August 15,
CAD Notes
due 2023
September 15,
53/4% Notes
August 15,
53/8% Notes
June 1,
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
103.000% (1)
—
103.063% (1)
104.594% (1)
—
101.500%
102.188% (1)
101.531%
103.063%
103.000% (1)
—
—
102.875% (1)
101.917%
100.000%
101.094%
100.000%
101.531%
102.000%
104.031% (1)
100.958%
100.000%
100.000%
100.000%
100.000%
101.000%
102.688%
100.000%
—
—
—
—
—
—
—
—
—
—
100.000%
100.000%
100.000%
100.000%
101.344%
100.000%
102.688% (1)
—
—
—
—
—
—
—
—
—
—
100.000%
100.000%
100.000%
100.000%
101.792%
—
—
—
—
100.000%
100.000%
100.000%
100.896%
—
—
—
—
—
—
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.
118
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
4. Debt (Continued)
d. Australian Dollar Term Loan
On September 28, 2016, Iron Mountain Australia Group Pty, Ltd., a wholly owned subsidiary of IMI, entered into a
250,000 Australian dollar Syndicated Term Loan B Facility, the AUD Term Loan, which matures in September 2022. The AUD
Term Loan was issued at 99% of par. The net proceeds of approximately 243,750 Australian dollars (or approximately
$185,800, based upon the exchange rate between the Australian dollar and the United States dollar on September 28, 2016 (the
settlement date for the AUD Term Loan)), after paying commissions to the joint lead arrangers and net of the original discount,
were used to repay outstanding borrowings under the Revolving Credit Facility and for general corporate purposes.
Principal payments on the AUD Term Loan are to be paid in quarterly installments in an amount equivalent to an
aggregate of 6,250 Australian dollars per year, with the remaining balance due on September 28, 2022. The AUD Term Loan is
secured by substantially all assets of Iron Mountain Australia Group Pty. Ltd. IMI and the Guarantors guarantee all obligations
under the AUD Term Loan. The interest rate on borrowings under the AUD Term Loan is based upon BBSY (an Australian
benchmark variable interest rate) plus 4.3%. As of December 31, 2016, we had 248,437 Australian dollars ($178,923 based
upon the exchange rate between the United States dollar and the Australian dollar as of December 31, 2016) outstanding on the
AUD Term Loan and the interest rate in effect under the AUD Term Loan was 6.1%.
e. 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 "Accounts Receivable Securitization Special Purpose Subsidiaries"). The Accounts Receivable
Securitization Special Purpose Subsidiaries use the accounts receivable balances to collateralize loans obtained from certain
financial institutions. The Accounts Receivable Securitization 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 Sheets, (ii) our Consolidated Statements of Operations reflect 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 Statements of Cash Flows. 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 and 2016, the maximum availability
allowed and amount outstanding under the Accounts Receivable Securitization Program was $205,900 and $247,000,
respectively. The interest rate in effect under the Accounts Receivable Securitization Program was 1.3% and 1.7% as of
December 31, 2015 and 2016, respectively. Commitment fees at a rate of 40 basis points are charged on amounts made
available but not borrowed under the Accounts Receivable Securitization Program.
119
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
4. Debt (Continued)
f. Mortgage Securitization Program
In October 2016, we entered into a $50,000 mortgage securitization program (the "Mortgage Securitization Program")
involving certain of our wholly owned subsidiaries with Goldman Sachs Mortgage Company (“Goldman Sachs”). Under the
Mortgage Securitization Program, IMIM contributed certain real estate assets to its wholly owned special purpose entity, Iron
Mountain Mortgage Finance I, LLC (the "Mortgage Securitization Special Purpose Subsidiary"). The Mortgage Securitization
Special Purpose Subsidiary then used the real estate to secure a collateralized loan obtained from Goldman Sachs. The
Mortgage Securitization Special Purpose Subsidiary is a consolidated subsidiary of IMI. The Mortgage Securitization Program
is accounted for as a collateralized financing activity, rather than a sale of assets, and therefore: (i) real estate assets pledged as
collateral remain as assets and borrowings are presented as liabilities on our Consolidated Balance Sheet, (ii) our Consolidated
Statement of Operations reflects the associated charges for depreciation expense related to the pledged real estate and interest
expense associated with the collateralized borrowings and (iii) borrowings and repayments under the collateralized loans are
reflected as financing cash flows within our Consolidated Statement of Cash Flows. The Mortgage Securitization Program is
scheduled to terminate on November 6, 2026, at which point all obligations become due. As of December 31, 2016, the
outstanding amount under the Mortgage Securitization Program was $50,000. The interest rate in effect under the Mortgage
Securitization Program was 3.5% as of December 31, 2016.
g. Cash Pooling
Subsequent to the closing of the Recall Transaction, certain of our international subsidiaries began participating in a cash
pooling arrangement (the “Cash Pool”) with Bank Mendes Gans (“BMG”) in order to help manage global liquidity
requirements. The Cash Pool allows participating subsidiaries to receive credit for cash balances deposited by participating
subsidiaries in BMG accounts. Under the Cash Pool, cash deposited by participating subsidiaries with BMG is pledged as
security against the drawings of other participating subsidiaries, and legal rights of offset are provided and, therefore, amounts
are presented in our Consolidated Balance Sheet on a net basis. Each subsidiary receives interest on the cash balances held on
deposit or pays interest on the amounts owed based on an applicable rate as defined in the Cash Pool agreement. At December
31, 2016, we had a net cash position of approximately $1,700 (consisting of a gross cash position of approximately $69,500 less
outstanding borrowings of approximately $67,800 by participating subsidiaries), which is reflected as cash and cash equivalents
in the Consolidated Balance Sheet.
_______________________________________________________________________________
Maturities of long-term debt are as follows:
Year
2017
2018
2019
2020
2021
Thereafter
Net Discounts
Net Deferred Financing Costs
Total Long-term Debt (including current portion)
120
$
$
Amount
172,975
338,540
1,218,880
1,071,088
678,713
2,840,645
6,320,841
(1,725)
(67,935)
6,251,181
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(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,
2015 and 2016 and for the years ended December 31, 2014, 2015 and 2016 and are prepared on the same basis as the
consolidated financial statements.
The Parent Notes, CAD Notes, GBP Notes and the 53/8% 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, the GBP Notes, which were issued
by IME, and the 53/8% Notes, which were issued by IM US Holdings. Canada Company and IME do not guarantee the Parent
Notes. The subsidiaries that do not guarantee the Parent Notes, the CAD Notes, the GBP Notes, and the 53/8% Notes, including
IME, the Accounts Receivable Securitization Special Purpose Subsidiaries and the Mortgage Securitization Special Purpose
Subsidiary, 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 and Comprehensive Income (Loss) with respect to the relevant Parent,
Guarantors, Canada Company, Non-Guarantors and Eliminations columns also would change.
In July 2016, certain Non-Guarantor subsidiaries which were originally established at the time of our acquisition of
Crozier in December 2015 (the “Crozier Entities”), were merged into IMIM, a Guarantor and a substantive operating entity (the
“Crozier Merger”). As a result of the Crozier Merger, we have recast the accompanying Consolidated Balance Sheet as of
December 31, 2015, Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December
31, 2015, and the accompanying Consolidated Statement of Cash Flows for the year ended December 31, 2015 to conform to
the current period presentation of the Crozier Entities. Therefore, (i) the assets, liabilities and equity of the Crozier Entities are
now reported in the Guarantor column of the accompanying Consolidated Balance Sheets as of December 31, 2015 and 2016,
respectively; (ii) the revenues and expenses of the Crozier Entities are now reported in the Guarantor column in the
accompanying Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31,
2015 and 2016, respectively; and (iii) the cash flows of the Crozier Entities are now reported in the Guarantor column in the
accompanying Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2016, respectively.
As noted in Note 4, in October 2016 we entered into the Mortgage Securitization Program. Under the Mortgage
Securitization Program, IMIM, a Guarantor, contributed certain real estate assets to the Mortgage Securitization Special
Purpose Subsidiary, a Non-Guarantor (recorded at historical cost). Following the contribution of such real estate assets, IMIM
entered into a lease agreement with the Mortgage Securitization Special Purpose Subsidiary for the right to use the real estate
under which IMIM pays the Mortgage Securitization Special Purpose Subsidiary rent on a monthly basis. Intercompany rental
revenues and expenses associated with the Mortgage Securitization Program are reflected as a component of Intercompany
revenues in the Non-Guarantor column and as a component of Intercompany cost of sales in the Guarantor column of the
accompanying Consolidated Statement of Operations and Comprehensive Income (Loss) and are eliminated in consolidation.
121
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors
(Continued)
CONSOLIDATED BALANCE SHEETS
Parent
Guarantors
December 31, 2015
Canada
Company
Non-
Guarantors
Eliminations
Consolidated
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)
Noncontrolling Interests
Total Equity
Total Liabilities and Equity
Total Other Assets, Net
4,053,338
2,515,835
Total Iron Mountain Incorporated Stockholders' Equity
508,841
697,844
30,593
$
151
$
7,803
$
13,182
$
107,245
$
18,917
30,428
515,056
— $
—
—
—
898
1,049
661
3,325,005
727,710
—
623
1,038,141
107,235
1,172,096
1,633,885
1,869
459,429
1,640,130
414,407
—
2,305
45,915
137,100
—
27,731
152,975
22,637
203,343
—
(1,038,141)
(29)
(1,038,170)
128,381
564,401
—
165,130
857,912
—
2,497,158
(3,326,874)
(1,217,732)
—
—
—
—
2,360,978
634,539
(4,544,606)
2,995,517
54,721
677,022
725,512
—
2,862
567,873
196,872
767,607
$ 4,055,048
$ 5,321,816
$ 386,358
$ 2,170,141
$
(5,582,776) $
6,350,587
$ 879,649
$
— $
5,892
$
152,600
$
(1,038,141) $
—
56,740
2,608,818
41,159
463,556
674,798
1,000
3,325,005
—
119,454
—
26,804
284,798
869
37,402
—
—
—
508,841
697,844
30,593
46,938
206,663
1,189,196
(29)
—
—
—
88,068
753,763
4,757,610
—
(3,326,874)
—
65,683
—
222,539
489,295
19,766
509,061
(1,217,732)
—
(1,217,732)
508,841
19,766
528,607
$ 4,055,048
$ 5,321,816
$ 386,358
$ 2,170,141
$
(5,582,776) $
6,350,587
122
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(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, 2016
Canada
Company
Non-
Guarantors
Eliminations
Consolidated
Total Other Assets, Net
5,673,848
4,068,893
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
$
2,405
$
23,380
$
17,110
$
193,589
$
—
—
—
2,405
483
53,364
653,008
70,660
800,412
37,781
21,114
4,967
80,972
600,104
108,776
902,469
1,804,991
159,391
1,118,461
—
(674,122)
— $
—
(29)
(674,151)
—
4,014,330
1,659,518
—
—
1,000
699,411
2,602,784
765,698
—
35,504
217,422
49,570
302,496
—
(4,015,330)
77,449
(2,471,882)
1,084,815
571,078
—
—
1,733,342
(6,487,212)
$ 5,676,736
$ 6,674,296
$ 542,859
$ 3,754,272
$
(7,161,363) $
9,486,800
$ 558,492
$
— $
— $
115,630
$
(674,122) $
—
58,478
51,456
488,194
3,093,388
1,055,642
—
40,442
335,410
121,548
286,468
1,593,766
(29)
—
—
236,484
691,249
—
184,374
1,112,107
3,083,326
—
—
3,905,021
1,386,346
5,291,367
—
172,975
873,582
6,078,206
—
370,669
54,697
Long-term Notes Payable to Affiliates and Intercompany
Payable
1,000
4,014,330
—
—
(4,015,330)
Other Long-term Liabilities
—
127,715
54,054
188,900
Commitments and Contingencies (see Note 10)
Redeemable Noncontrolling Interests (see Note 2.x.)
28,831
—
—
25,866
—
—
Total Iron Mountain Incorporated Stockholders' Equity
1,936,547
936,959
112,953
1,421,970
(2,471,882)
1,936,547
Noncontrolling Interests
Total Equity
Total Liabilities and Equity
—
—
—
124
—
124
1,936,547
936,959
112,953
1,422,094
(2,471,882)
1,936,671
$ 5,676,736
$ 6,674,296
$ 542,859
$ 3,754,272
$
(7,161,363) $
9,486,800
123
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(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 AND COMPREHENSIVE INCOME (LOSS)
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 revenues
Total Revenues
Operating Expenses:
Cost of sales (excluding depreciation and amortization)
Intercompany 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
—
—
—
—
—
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 (Benefit)
Provision 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
124
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(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 AND COMPREHENSIVE INCOME (LOSS) (Continued)
Year Ended December 31, 2015
Parent
Guarantors
Canada
Company
Non-
Guarantors
Eliminations
Consolidated
$
— $ 1,227,876
$ 118,908
$
491,113
$
— $
1,837,897
Revenues:
Storage rental
Service
Intercompany revenues
Total Revenues
Operating Expenses:
Cost of sales (excluding depreciation and amortization)
Intercompany 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, Net of Tax
—
—
Equity in the (Earnings) Losses of Subsidiaries, Net of Tax
(307,062)
Net Income (Loss)
123,241
—
—
—
—
—
117
181
—
298
736,101
3,476
61,717
—
1,967,453
180,625
790,426
13,384
595,491
224,443
25,213
58,132
14,734
12,427
962
41
1,624,706
110,547
(298)
342,747
(30,559)
(82,820)
456,126
13,632
—
135,722
306,772
70,078
36,521
55,230
(21,673)
12,787
—
(2,552)
(31,908)
159,848
23,675
372,261
71,516
934,890
474,386
3,476
234,618
108,413
1,997
822,890
112,000
98,061
102,505
(88,566)
11,294
(850)
34,460
(133,470)
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 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
$ 123,241
3,284
—
(103,170)
(99,886)
23,355
$
$
306,772
306,772
$
$
(31,908) $
(135,432) $
(139,432) $
(31,908) $
(133,470) $
(139,432) $
—
(245)
(19,003)
(85,251)
—
—
(103,521)
(103,766)
203,006
(3,176)
(22,179)
(54,087)
(19,003)
(104,254)
(237,724)
—
—
228,870
228,870
89,438
—
—
—
633
—
633
Comprehensive Income (Loss) Attributable to Iron Mountain
Incorporated
$ 23,355
$
203,006
$
(54,087) $
(238,357) $
89,438
$
23,355
125
—
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, 2016
(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 AND COMPREHENSIVE INCOME (LOSS) (Continued)
Year Ended December 31, 2016
Parent
Guarantors
Canada
Company
Non-
Guarantors
Eliminations
Consolidated
$
— $ 1,341,840
$ 125,335
$
675,730
$
— $
2,142,905
—
—
—
—
—
668
179
—
847
822,515
3,994
64,147
—
481,886
80,788
2,168,349
189,482
1,238,404
—
1,368,548
(84,782)
(84,782)
—
3,511,453
895,595
17,496
668,975
272,831
29,418
63,292
17,786
15,480
642,764
3,994
300,903
163,836
1,328
310
(226)
—
1,567,777
(84,782)
—
—
—
—
988,332
452,326
1,412
1,856,225
126,286
1,111,271
(84,782)
3,009,847
Revenues:
Storage rental
Service
Intercompany revenues
Total Revenues
Operating Expenses:
Cost of sales (excluding depreciation and amortization)
Intercompany 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
(847)
312,124
110,659
71,335
(7,741)
(13,247)
(Loss) Income from Continuing Operations Before Provision
(Benefit) for Income Taxes and Gain on Sale of Real Estate
(182,841)
333,112
Provision (Benefit) for Income Taxes
Gain on Sale of Real Estate, Net of Tax
—
—
Equity in the (Earnings) Losses of Subsidiaries, Net of Tax
(287,665)
Income (Loss) from Continuing Operations
Income (Loss) from Discontinued Operations, Net of Tax
Net Income (Loss)
104,824
—
104,824
30,860
(2,121)
(22,662)
327,035
1,642
328,677
63,196
40,546
10,341
12,309
7,354
(59)
(5,040)
10,054
1,818
11,872
127,133
167,198
(24,129)
(15,936)
6,730
—
(6,832)
(15,834)
(107)
—
—
—
—
—
—
322,199
(322,199)
—
(15,941)
(322,199)
Less: Net Income (Loss) Attributable to Noncontrolling
Interests
—
—
—
2,409
—
Net Income (Loss) Attributable to Iron Mountain Incorporated $ 104,824
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
$ 104,824
1,107
—
(38,763)
(37,656)
67,168
$
$
328,677
328,677
$
$
11,872
11,872
$
$
(18,350) $
(322,199) $
(15,941) $
(322,199) $
—
(734)
(6,123)
(30,625)
—
—
—
—
(3,164)
(3,898)
324,779
(679)
(6,802)
5,070
(6,123)
(36,748)
(52,689)
48,729
48,729
(273,470)
501,606
310,662
44,300
146,644
44,944
(2,180)
—
103,880
3,353
107,233
2,409
104,824
107,233
(35,641)
(734)
—
(36,375)
70,858
—
—
—
3,690
—
3,690
Comprehensive Income (Loss) Attributable to Iron Mountain
Incorporated
$ 67,168
$
324,779
$
5,070
$
(56,379) $
(273,470) $
67,168
126
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(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:
Cash Flows from Operating Activities-Continuing
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 Financing Activities:
Year Ended December 31, 2014
Parent
Guarantors
Canada
Company
Non-
Guarantors
Eliminations
Consolidated
$ (192,058) $
452,577
$
55,538
$
156,891
$
— $
472,948
—
—
1,307,133
(48,203)
(217,924)
(3,371)
112,845
(48,203)
(6,877)
(29,016)
(137,123)
(95,706)
—
—
(361,924)
(128,093)
—
—
—
—
(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)
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 from (repayment to) and equity
contribution from (distribution to) noncontrolling
interests, net
Intercompany loans from parent
Equity contribution from parent
Parent cash dividends
Net proceeds (payments) associated with employee stock-
based awards
Excess tax deficiency from stock-based compensation
Payment of debt financing and stock issuance costs
Cash Flows from Financing Activities-Continuing
Operations
Effect of exchange rates on cash and cash equivalents
Increase (Decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
$
—
—
—
—
(542,298)
44,290
(60)
(1,296)
(7,949,523)
(667,505)
(207,683)
8,327,608
645,848
311,731
—
—
5,716
(708,935)
48,203
—
—
—
—
—
—
—
642,417
(20,486)
—
—
—
—
—
—
—
5,866
(716,909)
1,419,978
48,203
(96,406)
—
—
—
—
—
—
—
—
—
(499)
(12)
(2,039)
(1,065,716)
(277,430)
(15,803)
55,234
(7,732)
6,019
107,823
1,323,572
—
—
—
$
113,842
$
— $
—
1,156
1,243
2,399
—
(5,653)
10,366
$
4,713
$
312
3,885
1,094
4,979
127
—
—
(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, 2016
(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) $
568,491
$
39,181
$
95,375
$
— $
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 stock
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
—
—
(189,693)
(15,128)
(78,004)
320,932
(25,276)
—
(5,260)
—
—
—
(85,428)
(30,294)
—
—
—
(44,578)
(576)
(9,957)
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
(16,033)
(20,915)
(124,042)
(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 from (repayment to) and equity
contribution from (distribution to) noncontrolling
interests, net
Intercompany loans from parent
Equity contribution from parent
Parent cash dividends
Net proceeds (payments) associated with employee
stock-based awards
Excess tax benefit from employee stock-based awards
(814,728)
985,000
—
—
—
(406,508)
7,149
327
—
(8,456,352)
(754,703)
(1,585,818)
47,198
8,220,200
835,101
1,823,210
—
—
—
—
—
—
—
—
5,574
(327,888)
(94,038)
(233,025)
25,276
—
—
—
—
—
—
—
—
25,276
—
—
—
(1,555)
33,662
(11,592)
(6,597)
113,842
—
—
—
—
—
654,951
(50,552)
—
—
—
—
604,399
—
—
—
(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
Payment of debt financing and stock issuance costs
(2,002)
(10,604)
Cash Flows from Financing Activities
(183,564)
(549,368)
(13,640)
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
—
3,090
4,713
3,577
8,203
4,979
Cash and cash equivalents, end of year
$
151
$
7,803
$
13,182
$
107,245
$
— $
128
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(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:
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
Intercompany loans to subsidiaries
Investment in subsidiaries
Acquisitions of customer relationships and customer
inducements
Net proceeds from Iron Mountain Divestments (see Note
6)
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, 2016
Parent
Guarantors
Canada
Company
Non-
Guarantors
Eliminations
Consolidated
$ (168,389) $
633,808
$
41,885
$
33,912
$
— $
541,216
—
1,076
(168,389)
634,884
1,710
43,595
(107)
33,805
—
—
(192,736)
(10,284)
4,007
(2,405)
(125,583)
(293,567)
—
—
—
—
175,092
(166,400)
(20,185)
(1,585)
(1,585)
—
—
—
11,493
3,170
—
—
—
(40,217)
(366)
(10,183)
—
4,032
26,622
5,235
30
2,712
—
—
—
2,679
543,895
(328,603)
(291,965)
—
—
(50,766)
30,654
7,977
173,507
(391,696)
(29,178)
(399,999)
14,663
(632,703)
—
14,663
96,712
(535,991)
—
—
—
—
(11,493)
(3,170)
—
—
—
(14,851,440)
14,544,388
925,443
(466)
—
—
(505,871)
31,922
(18,603)
—
78,564
16,153
1,995
Cash Flows from Investing Activities
173,507
(313,132)
(13,025)
(398,004)
Cash Flows from Financing Activities:
Repayment of revolving credit, term loan facilities, bridge
facilities and other debt
Proceeds from revolving credit, term loan facilities, bridge
facilities and other debt
(1,163,654)
(7,511,941)
(1,273,228)
(4,902,617)
1,150,628
7,144,874
1,130,193
5,118,693
Net proceeds from sales of senior notes
492,500
246,250
186,693
—
Debt financing from (repayment to) and equity
contribution from (distribution to) noncontrolling
interests, net
Intercompany loans from parent
Equity contribution from parent
Parent cash dividends
Net proceeds (payments) associated with employee stock-
based awards
Payment of debt financing and stock issuance costs
Cash Flows from Financing Activities-Continuing
Operations
Cash Flows from Financing Activities-Discontinued
Operations
—
—
—
(505,871)
31,922
(8,389)
—
—
(466)
(183,454)
(67,514)
262,461
1,585
—
—
—
—
—
1,585
—
—
(3,489)
(895)
(5,830)
(2,864)
(306,175)
(24,751)
473,826
(14,663)
125,373
Cash Flows from Financing Activities
(2,864)
(306,175)
(24,751)
Effect of exchange rates on cash and cash equivalents
Increase (Decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
—
2,254
151
—
15,577
7,803
(1,891)
3,928
13,182
—
—
—
—
473,826
(23,283)
86,344
107,245
—
(14,663)
—
—
—
—
125,373
(25,174)
108,103
128,381
236,484
Cash and cash equivalents, end of year
$
2,405
$
23,380
$
17,110
$
193,589
$
— $
129
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(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 are 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 in 2016 was
primarily provided through cash flows from operating activities and borrowings, as well as cash and cash equivalents on hand.
a. Acquisition of Recall
On May 2, 2016 (Sydney, Australia time), we completed the Recall Transaction. At the closing of the Recall Transaction,
we paid approximately $331,800 in cash and issued 50,233,412 shares of our common stock which, based on the closing price
of our common stock as of April 29, 2016 (the last day of trading on the NYSE prior to the closing of the Recall Transaction) of
$36.53 per share, resulted in a total purchase price to Recall shareholders of approximately $2,166,900.
Regulatory Approvals
In connection with the acquisition of Recall, we sought regulatory approval of the Recall Transaction from the United
States Department of Justice (the “DOJ”), the Australian Competition, Consumer Commission (the “ACCC”), the Canada
Competition Bureau (the “CCB”) and the United Kingdom Competition and Markets Authority (the “CMA”).
As part of the regulatory approval process, we agreed to make certain divestments, which are described below in greater
detail, in order to address competition concerns raised by the DOJ, the ACCC, the CCB and the CMA in respect of the Recall
Transaction (the “Divestments”).
See Note 14 for additional information regarding the presentation of the Divestments in our Consolidated Statements of
Operations and our Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2015 and 2016,
respectively.
Divestments
i. United States
The DOJ’s approval of the Recall Transaction was subject to the following divestments being made by us following the
closing of the Recall Transaction:
• Recall’s records and information management facilities, including all associated tangible and intangible assets, in
the following 13 United States cities: Buffalo, New York; Charlotte, North Carolina; Detroit, Michigan; Durham,
North Carolina; Greenville/Spartanburg, South Carolina; Kansas City, Kansas/Missouri; Nashville, Tennessee;
Pittsburgh, Pennsylvania; Raleigh, North Carolina; Richmond, Virginia; San Antonio, Texas; Tulsa, Oklahoma; and
San Diego, California (the “Initial United States Divestments”); and
• Recall’s records and information management facility in Seattle, Washington and certain of Recall’s records and
information management facilities in Atlanta, Georgia, including in each case associated tangible and intangible
assets (the “Seattle/Atlanta Divestments”).
130
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
6. Acquisitions (Continued)
On May 4, 2016, we completed the sale of the Initial United States Divestments to Access CIG, LLC, a privately held
provider of information management services throughout the United States (“Access CIG”), for total consideration of
approximately $80,000, subject to adjustments (the “Access Sale”). Of the total consideration, we received $55,000 in cash
proceeds upon closing of the Access Sale, and we are entitled to receive up to $25,000 of additional cash proceeds on the 27-
month anniversary of the closing of the Access Sale (the "Access Contingent Consideration"). Our estimate of the fair value of
the Access Contingent Consideration is approximately $21,400 (which reflects a fair value adjustment of approximately $2,200
and a present value adjustment of approximately $1,400). We have a non-trade receivable amounting to $21,800 included in
Other, a component of Other Assets, Net in our Consolidated Balance Sheet as of December 31, 2016 related to the Access
Contingent Consideration.
The assets subject to the Access Sale were acquired in the Recall Transaction and, therefore, the estimated fair value of the
Initial United States Divestments (including the estimated fair value of the Access Contingent Consideration) has been reflected
in the allocation of the purchase price for Recall as a component of “Fair Value of Recall Divestments”. Our policy related to
the recognition of contingent consideration (from a seller’s perspective) is to recognize contingent consideration at its estimated
fair value upon closing of the transaction. Our policy related to the subsequent measurement of contingent consideration (from
a seller’s perspective) is (i) to recognize contingent consideration in excess of our original estimate of fair value upon cash
receipt of such consideration and (ii) to recognize any impairment of the contingent consideration compared to our original
estimate in the period in which we determine such an impairment exists.
On December 29, 2016, we completed the sale of the Seattle/Atlanta Divestments and the Canadian Divestments (as
defined below) to ARKIVE, Inc., an information management company (“ARKIVE”), for total consideration of approximately
$50,000, subject to adjustments (the “ARKIVE Sale”). Of the total consideration, we received approximately $45,000 in cash
proceeds upon the closing of the ARKIVE Sale and the remaining consideration is held in escrow. ARKIVE may be entitled to
receive from us, on the 24-month anniversary of the closing of the ARKIVE Sale, cash payments, up to the total consideration
paid by ARKIVE, based on lost revenues attributable to the acquired customer base. The assets included in the Seattle/Atlanta
Divestments and the Recall Canadian Divestments were acquired in the Recall Transaction and, therefore, the estimated fair
value of the Seattle/Atlanta Divestments and the Recall Canadian Divestments (as determined based upon the total
consideration for the ARKIVE Sale) has been reflected in the allocation of the purchase price for Recall as a component of
"Fair Value of Recall Divestments".
ii. Australia
The ACCC approved the Recall Transaction after accepting an undertaking from us pursuant to section 87B of the
Australian Competition and Consumer Act 2010 (Cth) (the “ACCC Undertaking”). Pursuant to the ACCC Undertaking, we
agreed to divest the majority of our Australian operations as they existed prior to the closing of the Recall Transaction by way
of a share sale, which effectively involved the sale of our Australian business (as it existed prior to the closing of the Recall
Transaction) other than our data management business throughout Australia and our records and information management
business in the Northern Territory of Australia, except in relation to customers who have holdings in other Australian states or
territories (the “Australia Divestment Business” and, with respect to the portion of our Australia business that was not subject to
divestment, the “Australia Retained Business”).
131
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
6. Acquisitions (Continued)
On October 31, 2016, after receiving approval of the proposed transaction from the ACCC, we completed the sale of the
Australia Divestment Business (the “Australia Sale”) to a consortium led by Housatonic Partners (the “Australia Divestment
Business Purchasers”) for total consideration of approximately 70,000 Australian dollars (or approximately $53,200, based
upon the exchange rate between the United States dollar and the Australian dollar as of October 31, 2016), subject to
adjustments. The total consideration consists of (i) 35,000 Australian dollars in cash received upon the closing of the Australia
Sale and (ii) 35,000 Australian dollars in the form of a note due from the Australia Divestment Business Purchasers to us (the
“Bridging Loan Note”). The Bridging Loan Note bears interest at 3.3% per annum and matures on December 29, 2017, at
which point all outstanding obligations become due. The total consideration for the Australia Sale is subject to certain
adjustments associated with customer attrition subsequent to the closing of the Australia Sale. We recorded a charge of $15,417
to other expense, net associated with the loss on disposal of the Australia Divestment Business during the year ended December
31, 2016, representing the excess of the carrying value of the Australia Divestment Business compared to its fair value (less
costs to sell). Approximately $7,099 of cumulative translation adjustment associated with the Australian Divestment Business
was reclassified from accumulated other comprehensive items, net and reduced the loss recorded on the sale of the Australia
Divestment Business by the same amount.
iii. Canada
The CCB approved the Recall Transaction on the basis of us divesting the following assets:
• Recall’s record and information management facilities, including associated tangible and intangible assets and
employees, in Edmonton, Alberta and Montreal (Laval), Quebec and certain of Recall’s record and information
management facilities, including all associated tangible and intangible assets and employees, in Calgary, Alberta
and Toronto, Ontario, (the “Recall Canadian Divestments”); and
• One of our records and information management facilities in Vancouver (Burnaby), British Columbia and one of
our records and information management facilities in Ottawa, Ontario, including associated tangible and intangible
assets and employees (the “Iron Mountain Canadian Divestments” and together with the Recall Canadian
Divestments, the "Canadian Divestments").
On December 29, 2016, we completed the sale of the Canadian Divestments (along with the Seattle/Atlanta Divestments)
in the ARKIVE Sale, as discussed above. We recorded a charge of $1,421 to other expense, net associated with the loss on
disposal of the Iron Mountain Canadian Divestments during the year ended December 31, 2016, representing the excess of the
carrying value of the Iron Mountain Canadian Divestments compared to its fair value (as determined based upon the total
consideration received in the ARKIVE Sale), less costs to sell.
iv. United Kingdom
On June 16, 2016, the CMA published its findings, pursuant to which we agreed to divest Recall’s record and information
management facilities, including associated tangible and intangible assets and employees, in the Aberdeen and Dundee areas of
Scotland (the “UK Divestments”).
On December 9, 2016, we completed the sale of the UK Divestments (the "UK Sale") to the Oasis Group for total
consideration of approximately 1,800 British pounds sterling (or approximately $2,200, based upon the exchange rate between
the United States dollar and the British pound sterling as of December 9, 2016), subject to adjustments. The assets included in
the UK Sale were acquired in the Recall Transaction and, therefore, the estimated fair value of the UK Divestments (as
determined based upon the total consideration received in the UK Sale) has been reflected in the allocation of the purchase
price for Recall as a component of “Fair Value of Recall Divestments”.
_______________________________________________________________________________
132
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
6. Acquisitions (Continued)
The unaudited consolidated pro forma financial information (the "Pro Forma Financial Information") below summarizes
the combined results of us and Recall on a pro forma basis as if the Recall Transaction had occurred on January 1, 2015. The
Pro Forma Financial Information is presented for informational purposes and is not necessarily indicative of the results of
operations that would have been achieved if the acquisition had taken place on January 1, 2015. The Pro Forma Financial
Information, for all periods presented, includes adjustments to convert Recall's historical results from International Financial
Reporting Standards to GAAP, our current estimates of purchase accounting adjustments (including amortization of acquired
intangible assets, depreciation of acquired property, plant and equipment and amortization of favorable and unfavorable leases),
stock-based compensation and related tax effects. Through December 31, 2016, we and Recall have collectively incurred
$140,661 of operating expenditures to complete the Recall Transaction (including advisory and professional fees and costs to
complete the Divestments and to provide transitional services required to support the divested businesses during a transition
period). These operating expenditures have been reflected within the results of operations in the Pro Forma Financial
Information as if they were incurred on January 1, 2015. The costs we have incurred to integrate Recall with our existing
operations, including moving, severance, facility upgrade, REIT conversion and system upgrade costs are reflected in the Pro
Forma Financial Information in the period in which they were incurred.
The Pro Forma Financial Information, for all periods presented, excludes from income (loss) from continuing operations
the results of operations of the Initial United States Divestments, the Seattle/Atlanta Divestments, the Recall Canadian
Divestments and the UK Divestments, as these businesses are presented as discontinued operations. See Note 14 for
information regarding our conclusion with respect to the presentation of these divestments as discontinued operations. The
results of the Australia Divestment Business and the Iron Mountain Canadian Divestments are included within the results from
continuing operations in the Pro Forma Financial Information through the closing date of the Australia Sale, in the case of the
Australia Divestment Business, and through the closing date of the ARKIVE Sale, in the case of the Iron Mountain Canadian
Divestments, as these businesses do not qualify for discontinued operations. See Note 14 for information regarding our
conclusion that these divestments do not meet the criteria to be reported as discontinued operations. The Australia Divestment
Business and the Iron Mountain Canadian Divestments, collectively, represent $67,696 of total revenues and $7,336 of total
income from continuing operations for the year ended December 31, 2015, respectively, and $46,655 of total revenues and
$2,603 of total income from continuing operations for the year ended December 31, 2016, respectively.
(Unaudited)
Year Ended December 31,
Total Revenues
2015
$ 3,752,697
Income (Loss) from Continuing Operations
Per Share Income (Loss) from Continuing Operations - Basic
Per Share Income (Loss) from Continuing Operations - Diluted
$
$
$
12,416
0.05
0.05
$
0.56
2016
$3,762,226
$ 148,422
0.57
$
The amount of revenue and earnings in our Consolidated Statement of Operations for the year ended December 31, 2016
related to Recall is impracticable for us to determine. Subsequent to the closing of the Recall Transaction, we began integrating
Recall and our existing operations in order to achieve operational synergies. As a result, the revenue generated by Recall, as
well as the underlying costs of sales and selling, general and administrative expenses to support Recall's business, are now
integrated with the revenue we generate, as well as the costs of sales and selling, general and administrative expenses that
supported our business, prior to the acquisition of Recall.
In addition to our acquisition of Recall, we completed certain other acquisitions during 2014, 2015 and 2016. The Pro
Forma Financial Information does not reflect these acquisitions due to the insignificant impact of these acquisitions on our
consolidated results of operations.
133
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
6. Acquisitions (Continued)
b. Other Noteworthy Acquisitions
Acquisitions Completed During the Year Ended December 31, 2014
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.
Acquisitions Completed During the Year Ended December 31, 2015
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 financing and equity contribution from noncontrolling interests 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 $27,600. 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.
Acquisitions Completed During the Year Ended December 31, 2016
In March 2016, we acquired a controlling interest in Docufile Holdings Proprietary Limited ("Docufile"), a storage and
records management company with operations in South Africa, for approximately $15,000. The acquisition of Docufile
represents our entrance into Africa.
In March 2016, in order to expand our presence in the Baltic region, we acquired the stock of Archyvu Sistemos, a
storage and records management company with operations in Lithuania, Latvia and Estonia, for approximately $5,100.
134
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
6. Acquisitions (Continued)
In August 2016, we reached an agreement in principle under a non-binding memorandum of understanding to acquire the
information management operations of Santa Fe in ten regions within Europe and Asia (the “Santa Fe Transaction”). In
November 2016, we entered into a binding agreement for the Santa Fe Transaction. In December 2016, in order to expand our
presence in southeast Asia and western Europe, we acquired the information management assets and operations of Santa Fe in
Hong Kong, Malaysia, Singapore, Spain and Taiwan (the “2016 Santa Fe Transaction”) for approximately 15,200 Euros
(approximately $16,000, based upon the exchange rate between the United States dollar and the Euro as of December 30, 2016,
the closing date of the 2016 Santa Fe Transaction). Of the total purchase price, 13,500 Euros (or approximately $14,200, based
upon the exchange rate between the United States dollar and the Euro on the closing date of the 2016 Santa Fe Transaction) was
paid during the year ended December 31, 2016, and the remaining balance is due on the 18-month anniversary of the closing of
the 2016 Santa Fe Transaction.
_______________________________________________________________________________
135
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
6. Acquisitions (Continued)
A summary of the cumulative consideration paid and the allocation of the purchase price paid of all of the acquisitions in
each respective year is as follows:
Cash Paid (gross of cash acquired)(1)
Fair Value of Common Stock Issued
Fair Value of Noncontrolling Interests
Fair Value of Previously Held Equity Interest
2014
$ 134,301
2015
$ 111,907
Recall
331,834
$
2016
Other Fiscal
Year 2016
Acquisitions
$
37,350
$
Total
369,184
—
—
794
—
—
—
1,835,026
— 1,835,026
—
—
3,506
—
3,506
—
Total Consideration
135,095
111,907
2,166,860
40,856
2,207,716
Fair Value of Identifiable Assets Acquired:
Cash
Accounts Receivable and Prepaid Expenses
Fair Value of Recall Divestments(2)
Other Assets
Property, Plant and Equipment(3)
Customer Relationship Intangible Assets(4)
Debt Assumed
Accounts Payable, Accrued Expenses and Other
Liabilities
Deferred Income Taxes
Total Fair Value of Identifiable Net Assets
Acquired
4,704
10,394
—
3,342
23,269
60,172
—
2,041
10,629
—
7,032
43,505
34,988
—
76,461
176,775
121,689
57,563
622,063
709,139
(792,385)
576
2,703
—
541
10,963
20,842
—
77,037
179,478
121,689
58,104
633,026
729,981
(792,385)
(49,663)
(1,240)
(20,729)
(6,078)
(276,814)
(164,074)
(11,504)
(2,985)
(288,318)
(167,059)
50,978
71,388
530,417
21,136
551,553
Goodwill Initially Recorded(5)
$ 84,117
$ 40,519 $ 1,636,443
$
19,720
$ 1,656,163
_______________________________________________________________________________
(1) Included in cash paid for acquisitions in the Consolidated Statement 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
years prior to 2014. Included in cash paid for acquisitions in the Consolidated Statement 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 years prior to 2015. Included in cash paid for acquisitions in the Consolidated Statement of Cash
Flows for the year ended December 31, 2016 is net cash acquired of $77,037 and cash received of $182 related to
acquisitions made in years prior to 2016.
(2) Represents the fair value, less costs to sell, of the Initial United States Divestments, the Seattle/Atlanta Divestments,
the Recall Canadian Divestments and the UK Divestments.
(3) Consists primarily of buildings, racking structures, leasehold improvements and computer hardware and software.
(4) The weighted average lives of customer relationship intangible assets associated with acquisitions in 2014, 2015 and
2016 was 17 years, 16 years and 13 years, respectively.
(5) The goodwill associated with acquisitions, including Recall, is primarily attributable to the assembled workforce,
expanded market opportunities and costs and other operating synergies anticipated upon the integration of the
operations of us and the acquired businesses.
136
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
6. Acquisitions (Continued)
Allocations of the purchase price for acquisitions made in 2016 were based on estimates of the fair value of the net assets
acquired and are subject to adjustment upon the finalization of the purchase price allocations. The accounting for business
combinations requires estimates and judgments regarding expectations for future cash flows of the acquired business, and the
allocations of those cash flows to identifiable tangible and intangible assets, in determining the assets acquired and liabilities
assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed, including contingent
consideration, are based on management's best estimates and assumptions, as well as other information compiled by
management, including valuations that utilize customary valuation procedures and techniques. The estimates and assumptions
underlying the initial valuations are subject to the collection of information necessary to complete the valuations within the
measurement periods, which are up to one year from the respective acquisition dates. Assets and liabilities that were acquired
and classified as held for sale immediately following the Recall Transaction were valued based on the estimated fair value of
the divestment, less costs to sell. The preliminary purchase price allocations that are not finalized as of December 31, 2016
primarily relate to the final assessment of the fair values of intangible assets (primarily customer relationship intangible assets),
property, plant and equipment (primarily building and racking structures), operating leases, contingencies and income taxes
(primarily deferred income taxes), primarily associated with the Recall Transaction and the 2016 Santa Fe Transaction. We are
not aware of any information that would indicate that the final purchase price allocations for the 2016 acquisitions will differ
meaningfully from preliminary estimates.
As the valuation of certain assets and liabilities for purposes of purchase price allocations are preliminary in nature, they
are subject to adjustment as additional information is obtained about the facts and circumstances regarding these assets and
liabilities that existed at the acquisition date. Any adjustments to our estimates of purchase price allocation will be made in the
periods in which the adjustments are determined and the cumulative effect of such adjustments will be calculated as if the
adjustments had been completed as of the acquisition dates. Adjustments recorded during the fourth quarter of 2016 were not
material to our results from operations.
_______________________________________________________________________________
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.
137
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(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 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 and in connection with the Recall Transaction. 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 our deferred tax assets and deferred tax liabilities are presented below:
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
December 31,
2015
2016
$
22,107
$
4,426
69,290
12,327
8,698
(60,009)
56,839
30,901
2,930
98,879
12,036
20,131
(71,359)
93,518
(66,254)
(23,408)
(89,662)
(32,823) $
(179,977)
(52,572)
(232,549)
(139,031)
$
138
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
7. Income Taxes (Continued)
The current and noncurrent deferred tax assets and liabilities are presented below. As noted in Note 2.w., the December
31, 2016 amounts presented in the table below reflect the adoption of ASU 2015-17.
Deferred tax assets
Deferred tax liabilities
Current deferred tax assets, net
Noncurrent deferred tax assets (Included in Other, a component of Other
Assets, Net)
Deferred tax assets
Deferred tax liabilities
Noncurrent deferred tax liabilities, net
December 31,
2015
2016
26,668
(4,489)
22,179
$
$
—
—
—
— $
12,264
$
30,171
(85,173)
(55,002) $
—
(151,295)
(151,295)
$
$
$
$
$
We have federal net operating loss carryforwards, which expire from 2023 through 2033, of $67,113 at December 31,
2016 to reduce future federal taxable income, of which $1,233 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 2017 through 2035, of which an insignificant state tax benefit is expected to be realized.
We have assets for foreign net operating losses of $97,534, with various expiration dates (and in some cases no expiration date),
subject to a valuation allowance of approximately 73%.
Rollforward of the valuation allowance is as follows:
Year Ended December 31,
2014
2015
2016
Balance at
Beginning of
the Year
Charged
(Credited) to
Expense
$
$
40,278
40,182
60,009
9,404
33,509
7,660
Other
Increases/
(Decreases)(1)
$
(9,500) $
(13,682)
3,690
Balance at
End of
the Year
40,182
60,009
71,359
_______________________________________________________________________________
(1) Other increases and decreases in valuation allowances are primarily related to changes in foreign currency exchange
rates.
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 recorded in the consolidated financial statements in the period in which
compensation expense is recorded, while the tax benefit for incentive stock options associated with our TRSs is recorded in the
consolidated financial statements in the period the disqualifying disposition occurs. For the years ended December 31, 2014 and
2015, the incremental tax benefits (deficiencies) in excess of compensation expense recorded in the consolidated financial
statements were (charged) credited directly to equity and amounted to $(60) and $327, respectively. As discussed in Note 2.n.,
during the fourth quarter of 2016, we adopted ASU 2016-09 effective as of January 1, 2016. As a result of the adoption of ASU
2016-09, $265 of excess tax benefits are included as a component of (benefit) provision for income taxes in our Consolidated
Statement of Operations for the year ended December 31, 2016.
139
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
7. Income Taxes (Continued)
The components of income (loss) from continuing operations before (benefit) provision for income taxes and gain on sale
of real estate are:
United States
Canada
Other Foreign
Year Ended December 31,
2014
$ 202,067
2015
$ 179,928
2016
$ 106,223
46,191
(24,885)
$ 223,373
37,131
(54,993)
$ 162,066
28,157
12,264
$ 146,644
The (benefit) provision for income taxes consists of the following components:
Federal—current
Federal—deferred
State—current
State—deferred
Foreign—current
Foreign—deferred
Year Ended December 31,
$
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
$
2016
52,944
(28,127)
6,096
(1,479)
36,272
(20,762)
44,944
A reconciliation of total income tax expense and the amount computed by applying the federal income tax rate of 35.0%
to income from continuing operations before (benefit) provision for income taxes and gain on sale of real estate for the years
ended December 31, 2014, 2015 and 2016, 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)
Foreign repatriation
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
Other, net
(Benefit) Provision for Income Taxes
Year Ended December 31,
2014
78,181
$
2015
56,723
2016
51,325
$
$
(63,333)
(182,853)
2,207
9,404
46,356
2,869
3,175
(9,496)
12,502
3,713
$ (97,275) $
(51,625)
(9,067)
2,017
33,509
4,030
—
(2,874)
(8,915)
18,022
(4,107)
37,713
(18,526)
247
3,796
7,660
510
—
1,898
(13,328)
7,773
3,589
$
44,944
140
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
7. Income Taxes (Continued)
Our effective tax rates for the years ended December 31, 2014, 2015 and 2016 were (43.5)%, 23.3% and 30.6%,
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 among 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.
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 35.0% 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 the 2014 Indefinite Reinvestment Assessment 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 tax rate of 35.0% 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.
The primary reconciling items between the federal statutory tax rate of 35.0% and our overall effective tax rate for the
year ended December 31, 2016 were the benefit derived from the dividends paid deduction of $18,526 and the impact of
differences in the tax rates at which our foreign earnings are subject resulting in a tax benefit of $13,328, partially offset by
valuation allowances on certain of our foreign net operating losses of $7,660.
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 as 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
(benefit) provision for income taxes in the accompanying Consolidated Statements of Operations. We recorded an increase of
$1,462, $2,173 and $1,805 for gross interest and penalties for the years ended December 31, 2014, 2015 and 2016, respectively.
We had $7,120 and $8,646 accrued for the payment of interest and penalties as of December 31, 2015 and 2016, respectively.
A summary of tax years that remain subject to examination by major tax jurisdictions is as follows:
Tax Years
See Below
2007 to present
2011 to present
Tax Jurisdiction
United States—Federal and State
Canada
United Kingdom
141
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
7. Income Taxes (Continued)
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, 2014 and 2015 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, 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. As of December 31, 2016,
we had $59,466 of reserves related to uncertain tax positions, of which $56,303 and $3,163 is included in other long-term
liabilities and deferred income taxes, respectively, in the accompanying Consolidated Balance Sheet. Although we believe our
tax estimates are appropriate, the final determination of tax audits and any related litigation could result in changes in our
estimates.
A rollforward of unrecognized tax benefits is as follows:
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
Gross additions based on tax positions related to the current year
Gross additions for tax positions of prior years(1)
Gross reductions for tax positions of prior years
Lapses of statutes
Settlements
Gross tax contingencies—December 31, 2016
$
$
$
$
51,146
3,984
13,717
(2,699)
(5,350)
(4,847)
55,951
3,484
979
(3,588)
(9,141)
—
47,685
3,704
12,207
(1,740)
(2,390)
—
59,466
_______________________________________________________________________________
(1) This amount includes gross additions related to the Recall Transaction.
The reversal of these reserves of $59,466 ($47,474 net of federal tax benefit) as of December 31, 2016 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 $18,387 ($9,085 net of federal tax benefit) of our unrecognized tax positions may be recognized by the end of
2017 as a result of a lapse of statute of limitations or upon closing and settling significant audits in various worldwide
jurisdictions.
142
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
8. Quarterly Results of Operations (Unaudited)
Quarter Ended
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
2016
Total revenues
Operating income (loss)
Income (loss) from continuing operations
Total income (loss) 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 income (loss) 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 income (loss) per share from discontinued
operations
Net income (loss) per share attributable to Iron
Mountain Incorporated
March 31
June 30
September 30 December 31
$ 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 (1)
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
$ 750,690
$ 883,748
$ 942,822
$ 934,193
130,066
63,041
—
63,041
96,626
(14,720)
1,587
(13,133)
62,774
(13,968)
0.30
—
0.30
0.30
—
0.30
(0.06)
0.01
(0.06)
(0.06)
0.01
(0.06)
135,454
139,460
5,759
2,041
7,800
7,080
0.02
0.01
0.03
0.02
0.01
0.03
49,800
(275)
49,525
48,938 (2)
0.19
—
0.19
0.19
—
0.19
_______________________________________________________________________________
143
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(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 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 transactions
recorded in the fourth quarter of 2015 compared to the third quarter of 2015 of approximately $18,100.
(2) The change in net income (loss) attributable to Iron Mountain Incorporated in the fourth quarter of 2016 compared to
the third quarter of 2016 is primarily attributable to a decrease in the provision for income taxes recorded in the fourth
quarter of 2016 compared to the third quarter of 2016 of approximately $24,600, a charge of $14,000 recorded in the
third quarter of 2016 associated with the anticipated loss on disposal of the Australia Divestment Business, which
occurred on October 31, 2016 (see Note 6) and a decrease in loss on foreign currency transaction losses recorded in the
fourth quarter of 2016 compared to the third quarter of 2016 of approximately $5,600.
144
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
9. Segment Information
As of December 31, 2016, our five reportable operating segments are described as follows:
• North American Records and Information Management Business—provides records and information management
services, including the storage of physical records, including 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 Information Governance and Digital
Solutions throughout the United States and Canada; as well as fulfillment services and technology escrow services in
the United States.
• North American Data Management Business—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—provides records and information management services, including Records
Management, Data Protection & Recovery and Information Governance and Digital Solutions throughout Austria,
Belgium, France, Germany, Ireland, the Netherlands, Spain, Switzerland and the United Kingdom (consisting of our
operations in England, Northern Ireland and Scotland), as well as Information Governance and Digital Solutions in
Sweden (the remainder of our business in Sweden is included in the Other International Business segment described
below).
• Other International Business—provides records and information management services throughout the remaining
European countries in which we operate, Latin America, Asia Pacific and Africa, including Records Management,
Data Protection & Recovery and Information Governance and Digital Solutions. Our European operations included in
this segment provide records and information management services, including Records Management, Data
Protection & Recovery and Information Governance and Digital Solutions throughout the Czech Republic, Denmark,
Finland, Greece, Hungary, Norway, Poland, Romania, Russia, Serbia, Slovakia, Turkey and Ukraine; Records
Management and Information Governance and Digital Solutions in Estonia, Latvia and Lithuania; and Records
Management in Sweden. Our Latin America operations provide records and information management services,
including Records Management, Data Protection & Recovery, Destruction and Information Governance and Digital
Solutions throughout Argentina, Brazil, Chile, Colombia, Mexico and Peru. Our Asia Pacific operations provide
records and information management services, including Records Management, Data Protection & Recovery,
Destruction and Information Governance and Digital Solutions throughout Australia and New Zealand, with Records
Management and Data Protection & Recovery also provided in certain markets in China (including Taiwan), Hong
Kong-SAR, India, Malaysia, Singapore and Thailand. Our African operations provide Records Management, Data
Protection & Recovery, and Information Governance and Digital Solutions in South Africa.
• 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, 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 Employee Stock-Based Awards.
145
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
9. Segment Information (Continued)
An analysis of our business segment information and reconciliation to the accompanying Consolidated Financial
Statements is as follows:
North
American
Records and
Information
Management
Business
North
American
Data
Management
Business
Western
European
Business
Other
International
Business
Corporate and
Other Business
Total
Consolidated
As of and for the Year Ended
December 31, 2014
Total Revenues
$
1,795,361
$
390,207
$
449,231
$
469,314
$
13,580
$
3,117,693
Depreciation and Amortization
Depreciation
Amortization
Adjusted EBITDA
Total Assets(1)
Expenditures for Segment Assets
Capital Expenditures
Cash Paid for Acquisitions, Net of
Cash Acquired
Acquisitions of Customer
Relationships and Customer
Inducements
As of and for the Year Ended
December 31, 2015
Total Revenues
Depreciation and Amortization
Depreciation
Amortization
Adjusted EBITDA
Total Assets(1)
Expenditures for Segment Assets
Capital Expenditures
Cash Paid for Acquisitions, Net of
Cash Acquired
Acquisitions of Customer
Relationships and Customer
Inducements
As of and for the Year Ended
December 31, 2016
Total Revenues
Depreciation and Amortization
Depreciation
Amortization
Adjusted EBITDA
Total Assets(1)
Expenditures for Segment Assets
Capital Expenditures
Cash Paid for Acquisitions, Net of
Cash Acquired(2)
Acquisitions of Customer
Relationships and Customer
Inducements
177,097
158,122
18,975
698,719
3,657,366
198,651
145,199
21,770
21,458
312
226,396
653,275
24,387
18,076
54,582
45,895
8,687
130,423
952,924
47,236
38,587
65,103
44,509
20,594
84,468
1,025,167
186,531
93,881
34,591
34,573
18
(214,209)
234,533
67,659
66,181
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
1,930,699
215,330
186,467
28,863
775,717
4,996,216
145,636
111,062
414,174
29,037
22,784
6,253
228,486
870,490
27,748
24,425
454,211
55,582
42,613
12,969
137,506
1,031,313
31,530
31,014
652,516
100,490
67,310
33,180
169,042
2,103,725
365,566
62,315
59,853
51,887
46,352
5,535
(223,463)
485,056
100,854
99,787
3,511,453
452,326
365,526
86,800
1,087,288
9,486,800
671,334
328,603
(2,591)
(59)
(6,878)
300,451
1,042
291,965
37,165
3,382
7,394
2,800
25
50,766
_______________________________________________________________________________
146
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
9. Segment Information (Continued)
(1) Excludes all intercompany receivables or payables and investment in subsidiary balances.
(2) Cash paid for acquisitions, net of cash acquired for the Other International Business segment for the year ended
December 31, 2016 primarily consists of the cash component of the purchase price for the Recall Transaction, as the
IMI entity that made the cash payment was an Australian subsidiary. However, the Recall Transaction also benefited
the North American Records and Information Management Business, North American Data Management Business and
Western European Business segments.
The accounting policies of the reportable segments are the same as those described in Note 2. Adjusted EBITDA for each
segment is defined as income (loss) from continuing operations before interest expense, net, provision (benefit) for income
taxes, depreciation and amortization, and also excludes certain items that we believe are not indicative of our core operating
results, specifically: (i) loss (gain) on disposal/write-down of property, plant and equipment (excluding real estate), net; (ii)
intangible impairments; (iii) other expense (income), net; (iv) gain on sale of real estate, net of tax; (v) Recall Costs (as defined
below); and (vi) 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"). Internally, we use Adjusted EBITDA as the basis for evaluating the
performance of, and allocated resources to, our operating segments.
A reconciliation of Adjusted EBITDA to income (loss) from continuing operations on a consolidated basis is as follows:
Adjusted EBITDA
(Add)/Deduct:
Gain on Sale of Real Estate, Net of Tax
(Benefit) Provision for Income Taxes
Other Expense, Net
Interest Expense, Net
Loss (Gain) on Disposal/Write-down of Property, Plant and Equipment
(Excluding Real Estate), Net
Depreciation and Amortization
Recall Costs(1)
REIT Costs
Income (Loss) from Continuing Operations
_______________________________________________________________________________
Year Ended December 31,
2014
$ 925,797
2015
$ 920,005
2016
$1,087,288
(8,307)
(97,275)
65,187
(850)
37,713
98,590
(2,180)
44,944
44,300
260,717
263,871
310,662
1,065
353,143
—
3,000
345,464
47,014
1,412
452,326
131,944
22,312
$ 328,955
—
$ 125,203
—
$ 103,880
(1) Includes operating expenditures associated with our acquisition of Recall, including operating expenditures to
complete the Recall Transaction, including advisory and professional fees and costs to complete the Divestments
required in connection with receipt of regulatory approval and to provide transitional services required to support the
divested businesses during a transition period ("Recall Deal Close & Divestment Costs"), as well as operating
expenditures to integrate Recall with our existing operations, including moving, severance, facility upgrade, REIT
conversion and system upgrade costs ("Recall Integration Costs" and, collectively with Recall Deal Close &
Divestment Costs, "Recall Costs").
147
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(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
Australia
Other International
Total Revenues
Long-lived Assets:
United States
United Kingdom
Canada
Australia
Other International
Total Long-lived Assets
Year Ended December 31,
2014
2015
2016
$
$
$
$
1,967,169
280,020
231,979
80,521
558,004
3,117,693
3,586,577
464,311
406,571
116,589
1,031,498
5,605,546
$
$
$
$
1,973,872
250,123
215,232
64,969
503,780
3,007,976
3,710,301
434,461
345,783
102,247
899,883
5,492,675
$
$
$
$
2,173,782
237,032
230,944
148,175
721,520
3,511,453
5,238,807
400,937
463,396
542,055
1,729,498
8,374,693
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,
2014
2015
2016
$
$
2,329,546
$
2,255,206
$
2,631,895
531,516
256,631
509,261
243,509
549,335
330,223
3,117,693
$
3,007,976
$
3,511,453
_______________________________________________________________________________
(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 rental
component.
(2) Includes Business Records Management, Compliant Records Management and Consulting Services, Information
Governance and Digital Solutions, Fulfillment Services, Health Information Management Solutions, Energy Data
Services and Technology Escrow Services.
(3) Includes Data Protection & Recovery and Entertainment Services.
(4) Includes Secure Shredding and Compliant Information Destruction.
148
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(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 $255,193, $242,205 and $321,337 for the years ended
December 31, 2014, 2015 and 2016, 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
2017
2018
2019
2020
2021
Thereafter
Total minimum lease payments
Less amounts representing interest
Present value of capital lease obligations
Operating Lease
Payments
Sublease
Income
Capital
Leases
$
300,524
$
269,867
250,251
229,312
210,458
1,182,243
$
2,442,655
$
(6,421) $
(4,617)
(3,712)
(3,032)
(3,023)
(7,228)
(28,033)
$
68,998
62,564
49,553
60,698
29,353
158,937
430,103
(120,243)
309,860
In addition, we have certain contractual obligations related to purchase commitments which require minimum payments
as follows:
Year
2017
2018
2019
2020
2021
Thereafter
Purchase
Commitments
56,335
21,321
8,615
1,808
1,152
1,467
90,698
$
$
149
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(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, 2015 and 2016 there were $33,508 and $37,368, respectively, of self-insurance accruals reflected in accrued
expenses on 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 $20,000 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. Four of those lawsuits
have been settled and one, 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, remains pending. 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. We sold our Italian operations on April 27, 2012, and we
indemnified the buyers related to certain obligations and contingencies associated with this fire. As a result of the sale of the
Italian operations, any future statement of operations and cash flow impacts related to the fire will be reflected as discontinued
operations.
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.
150
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(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.
f. Brooklyn Fire (Recall)
On January 31, 2015, a former Recall leased facility located in Brooklyn, New York was completely destroyed by a
fire. Approximately 900,000 cartons of customer records were lost impacting approximately 1,200 customers. No one was
injured as a result of the fire. We believe we carry adequate insurance to cover any losses resulting from the fire. There are three
pending customer-related lawsuits stemming from the fire, which are being defended by our warehouse legal liability
insurer. We have also received correspondence from other customers, under various theories of liability. We deny any liability
with respect to the fire and we have referred these claims to our 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.
g. Roye Fire (Recall)
On January 28, 2002, a former leased Recall records management facility located in Roye, France was destroyed by a fire.
Local French authorities conducted an investigation relating to the fire and issued a charge of criminal negligence for non-
compliance with security regulations against the Recall entity that leased the facility. We intend to defend this matter
vigorously. We are currently corresponding with various customers impacted by the fire who are seeking payment under various
theories of liability. There is also pending civil litigation with the owner of the destroyed facility, who is demanding payment
for lost rental income and other items. Based on known and expected claims and our expectation of the ultimate outcome of
those claims, we believe we carry adequate insurance coverage. We do not expect that this event will have a material impact on
our consolidated financial condition, results of operations or cash flows.
11. Related Party Transactions
Paul F. Deninger, one of our directors, was a senior managing director at Evercore Group L.L.C. ("Evercore") until June
2016. 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 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 year ended December 31, 2014, we incurred monthly retention fees which aggregated to $250
associated with the Evercore Engagement. We did not incur any fees under the Evercore Engagement during the years ended
December 31, 2015 and 2016.
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 incurred expenses of $18,306, $16,355 and $24,407 for the years ended
December 31, 2014, 2015 and 2016, respectively, associated with these plans.
151
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
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.
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 2015 and 2016, our board of directors declared the following dividends:
Declaration Date
Dividend
Per Share
February 19, 2015
May 28, 2015
August 27, 2015
October 29, 2015
February 17, 2016
May 25, 2016
July 27, 2016
October 31, 2016
$
0.4750
0.4750
0.4750
0.4850
0.4850
0.4850
0.4850
0.5500
Record Date
March 6, 2015
June 12, 2015
September 11, 2015
December 1, 2015
March 7, 2016
June 6, 2016
September 12, 2016
December 15, 2016
$
Total
Amount
99,795
100,119
100,213
102,438
102,651
127,469
127,737
145,006
Payment Date
March 20, 2015
June 26, 2015
September 30, 2015
December 15, 2015
March 21, 2016
June 24, 2016
September 30, 2016
December 30, 2016
_______________________________________________________________________________
During the years ended December 31, 2014, 2015 and 2016, we declared distributions to our stockholders of $1,048,905,
$402,565 and $502,863, respectively. These distributions represent approximately $5.37 per share, $1.91 per share and $2.04
per share for the years ended December 31, 2014, 2015 and 2016, 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, of which $560,000 was paid in the form of our
common stock and $140,000 was paid in cash.
152
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(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, 2014, 2015 and 2016, 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,
2014
2015
2016
26.4%
56.4%
17.2%
49.3%
39.1%
11.6%
45.5%
21.0%
33.5%
100.0%
100.0%
100.0%
Dividends paid during the years ended December 31, 2014, 2015 and 2016 which were classified as qualified ordinary
dividends for federal income tax purposes primarily related to (i) the distribution of certain of our historical C corporation
earnings and profits following our conversion to a REIT (with respect to dividends paid during the year ended December 31,
2014) and (ii) the distribution of historical C corporation earnings and profits related to certain acquisitions completed during
the years ended December 31, 2015 and 2016 (with respect to dividends paid during the years ended December 31, 2015 and
2016).
14. Divestitures
Divestments Associated with the Recall Transaction
As disclosed in Note 6, in connection with the acquisition of Recall, we sought regulatory approval of the Recall
Transaction from the DOJ, the ACCC, the CCB and the CMA and, as part of the regulatory approval process, we agreed to
make the Divestments.
The assets and liabilities related to the Initial United States Divestments were sold to Access CIG in the Access Sale on
May 4, 2016; the assets and liabilities related to the Australia Divestment Business were sold to Housatonic in the Australia
Sale on October 31, 2016; the assets and liabilities related to the UK Divestments were sold to Oasis Group in the UK Sale on
December 9, 2016; and the assets and liabilities associated with the Seattle/Atlanta Divestments and the Canadian Divestments
were sold to ARKIVE in the ARKIVE Sale on December 29, 2016.
We have concluded that the Australian Divestment Business and the Iron Mountain Canadian Divestments (collectively,
the “Iron Mountain Divestments”) do not meet the criteria to be reported as discontinued operations in our Consolidated
Statements of Operations and Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2015 and 2016,
respectively, as our decision to divest these businesses does not represent a strategic shift that will have a major effect on our
operations and financial results. Accordingly, the revenues and expenses associated with the Iron Mountain Divestments are
presented as a component of income (loss) from continuing operations in our Consolidated Statements of Operations for the
years ended December 31, 2014, 2015 and 2016 and the cash flows associated with these businesses are presented as a
component of cash flows from continuing operations in our Consolidated Statements of Cash Flows for the years ended
December 31, 2014, 2015 and 2016 through the closing date of the Australia Sale, in the case of the Australia Divestment
Business, and through the closing date of the ARKIVE Sale, in the case of the Iron Mountain Canadian Divestments.
During the year ended December 31, 2016, we recorded charges of $15,417 and $1,421 to other expense, net associated
with the loss on disposal of the Australia Divestment Business and the Iron Mountain Canadian Divestments, respectively,
representing the excess of the carrying value of these businesses compared to their fair value (less costs to sell).
153
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
14. Divestitures (Continued)
We have concluded that the Initial United States Divestments, the Seattle/Atlanta Divestments, the Recall Canadian
Divestments and the UK Divestments (collectively, the “Recall Divestments”) meet the criteria to be reported as discontinued
operations in our Consolidated Statement of Operations and Consolidated Statement of Cash Flows for the year ended
December 31, 2016, as the Recall Divestments met the criteria to be reported as assets and liabilities held for sale at, or within a
short period of time following, the closing of the Recall Transaction.
The table below summarizes certain results of operations of the Recall Divestments included in discontinued operations:
Description
Total Revenues
Income (Loss) from Discontinued
Operations Before Provision (Benefit)
for Income Taxes
Provision (Benefit) for Income Taxes
Income (Loss) from Discontinued
Operations, Net of Tax
Initial
United States
Divestments(1)
$
Year Ended December 31, 2016
Seattle/Atlanta
Divestments
Recall
Canadian
Divestments
UK
Divestments
Total
— $
6,077
$
5,951
$
1,019
$
13,047
—
—
1,726
84
2,472
654
(93)
14
4,105
752
$
— $
1,642
$
1,818
$
(107) $
3,353
______________________________________________________________________________
(1) The Access Sale occurred nearly simultaneously with the closing of the Recall Transaction. Accordingly, the revenue
and expenses associated with the Initial United States Divestments are not included in our Consolidated Statement of
Operations for the year ended December 31, 2016 and the cash flows associated with the Initial United States
Divestments are not included in our Consolidated Statement of Cash Flows for the year ended December 31, 2016, due
to the immaterial nature of the revenues, expenses and cash flows related to the Initial United States Divestments for
the period of time we owned these businesses (May 2, 2016 through May 4, 2016).
The assets subject to the Recall Divestments were acquired in the Recall Transaction and, therefore, the fair value of the
Recall Divestments has been reflected in the allocation of the purchase price for Recall as a component of "Fair Value of Recall
Divestments".
International Shredding Operations
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. 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, 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 represented less than 1% of our
consolidated revenues for the year ended December 31, 2014. 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.
154
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
14. Divestitures (Continued)
Digital Operations
On June 2, 2011, we sold our online backup and recovery, digital archiving and eDiscovery solutions businesses of our
digital business (the “Digital Business”) to Autonomy Corporation plc, a corporation formed under the laws of England and
Wales (“Autonomy”), pursuant to a purchase and sale agreement dated as of May 15, 2011 among IMI, certain subsidiaries of
IMI and Autonomy (the "Digital Sale"). 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 for presentation as a discontinued operation 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,
2014(1)
2015
2016
$
$
(960) $
—
(960) $
— $
—
— $
—
—
—
(1) During the year ended December 31, 2014, we recognized a loss before (benefit) provision of income taxes of
discontinued operations 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.
The table below summarizes certain results of our Italian operations:
Income (Loss) Before (Benefit) Provision for Income Taxes of Discontinued Operations
(Benefit) Provision for Income Taxes
Income (Loss) from Discontinued Operations, Net of Tax
_______________________________________________________________________________
Year Ended December 31,
2014(1)
2015
2016
$
$
751
—
751
$
$
— $
—
— $
—
—
—
(1) During the year ended December 31, 2014, we recognized income before (benefit) provision of income taxes of
discontinued operations primarily related to the recovery of insurance proceeds in excess of carrying value.
155
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
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 a charge of $3,475 for the year ended December 31, 2014, 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,
2014
2015
2016
$
$
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
$
1,560
$
— $
Year Ended December 31,
2014
2015
2016
North American Data Management Business
Western European Business
Other International Business
Corporate and Other Business
Total
Transformation Initiative
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 $10,167 and $6,007 for the years ended
December 31, 2015 and 2016, respectively, 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:
Year Ended December 31,
2015
2016
2014
— $
—
10,167
— $
—
— $
10,167
$
6,007
6,007
Cost of sales (excluding depreciation and amortization)
Selling, general and administrative expenses
Total
$
$
156
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
15. Cost Optimization Plans (Continued)
Costs recorded by segment associated with the Transformation Initiative are as follows:
Year Ended December 31,
2014
2015
2016
North American Records and Information Management Business
$
— $
5,403
$
2,329
North American Data Management Business
Western European Business
Other International Business
Corporate and Other Business
Total
—
—
—
—
241
1,537
—
2,986
$
— $
10,167
$
395
204
—
3,079
6,007
Through December 31, 2016, we have recorded cumulative charges to our Consolidated Statements of Operations
associated with the Transformation Initiative of $16,174. As of December 31, 2016, we had $452 accrued related to the
Transformation Initiative. We expect the majority of this liability will be paid in the first half of 2017.
16. Recall Costs
We currently estimate total acquisition and integration expenditures associated with the Recall Transaction to be
approximately $380,000, including approximately $80,000 of Recall Deal Close & Divestment Costs and approximately
$300,000 of integration expenditures, including Recall Integration Costs and capital expenditures to integrate Recall with our
existing operations.
Recall Costs included in the accompanying Consolidated Statements of Operations are as follows:
Cost of sales (excluding depreciation and amortization)
Selling, general and administrative expenses
Total Recall Deal Close & Divestment Costs
Cost of sales (excluding depreciation and amortization)
Selling, general and administrative expenses
Total Recall Integration Costs
Total Recall Costs
Recall Deal Close & Divestment Costs
Year Ended December 31,
2014
2015
2016
$
$
$
$
$
— $
— $
—
—
24,671
— $ 24,671
38,947
$ 38,947
Recall Integration Costs
Year Ended December 31,
2014
2015
2016
— $
— $ 11,963
—
22,343
81,034
— $ 22,343
$ 92,997
— $ 47,014
$131,944
157
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2016
(In thousands, except share and per share data)
16. Recall Costs (Continued)
Recall Costs included in the accompanying Consolidated Statements of Operations by segment are as follows:
Recall Deal Close & Divestment Costs
Year Ended December 31,
2014
2015
2016
North American Records and Information Management Business
$
— $
— $
North American Data Management Business
Western European Business
Other International Business
Corporate and Other Business
—
—
—
—
—
—
—
24,671
Total Recall Deal Close & Divestment Costs
$
— $
24,671
$
Recall Integration Costs
Year Ended December 31,
2014
2015
North American Records and Information Management Business
$
— $
North American Data Management Business
Western European Business
Other International Business
Corporate and Other Business
Total Recall Integration Costs
Total Recall Costs
$
$
—
—
—
—
— $
52
—
104
31
22,156
22,343
— $
47,014
$
$
$
—
—
—
—
38,947
38,947
2016
14,394
3,351
16,654
18,361
40,237
92,997
131,944
A rollforward of accrued liabilities related to Recall Costs on our Consolidated Balance Sheets as of December 31, 2015
and 2016 is as follows:
Balance at
December
31, 2015
Amounts
Accrued
Changes in
Estimates(1)
Payments
Currency
Translation
Adjustments
Balance at
December 31,
2016(2)
Recall Deal Close & Divestment
Costs
Recall Integration Costs
Total Recall Costs
$
$
— $
—
— $
36,770
7,125
43,895
$
$
(8) $
—
(8) $
(31,906) $
(6,794)
(38,700) $
(399) $
126
(273) $
4,457
457
4,914
_______________________________________________________________________________
(1) Includes adjustments made to amounts accrued in a prior period.
(2) Accrued liabilities related to Recall Costs as of December 31, 2016 presented in the table above generally related to
employee severance costs. We expect that the majority of these liabilities will be paid throughout 2017. Additional
Recall Costs recorded in our Consolidated Statement of Operations during the year ended December 31, 2016 have
either been settled in cash during the year ended December 31, 2016 or are included in our Consolidated Balance
Sheet as of December 31, 2016 as a component of accounts payable.
158
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2016
(Dollars in thousands)
(A)
(B)
(C)
(D)
(E)
(F)
Facilities(1)
Encumbrances
Initial cost
to Company
Cost
capitalized
subsequent to
acquisition(2)
Gross amount
carried at
close
of current
period(1)(3)
Accumulated
depreciation at
close of current
period(1)(3)
Date of
construction or
acquired(4)
Life on which
depreciation in
latest income
statement is
computed
$
— $
1,322
$
845
$
2,167
$
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
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
883
1,415
3,644
4,197
2,234
559
7,874
2,650
2,902
7,203
53
10,845
13,360
1,410
7,335
5,783
1,767
3,829
3,702
1,634
1,255
1,393
7,438
944
5,474
1,124
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
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
2,605
2,642
875
3,947
633
8,372
1,583
2,121
4,242
14,820
8,180
5,569
1,393
18,844
6,345
8,921
12,718
27,303
—
19,101
5,942
310
128
6,754
1,110
2,125
5,019
1,654
1,860
2,685
9,885
72
1,599
830
749
29,269
21,114
4,886
28,085
17,266
4,530
8,454
14,664
4,703
3,443
3,446
17,288
6,384
9,016
2,598
10,447
29,195
39,642
15,754
4,021
7,226
1,853
3,293
1,927
4,201
1,786
1,185
2,808
1,354
864
337
2,792
278
5,375
8,090
2,190
6,085
2,205
13,146
17,347
633
293
3,149
2,419
1,478
5,957
159
2,437
4,507
738
2,562
731
5,125
910
750
2,086
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2016
(Dollars in thousands)
(A)
(B)
(C)
(D)
(E)
(F)
Region/Country/State/Campus
Address
United States (Including Puerto
Rico) (continued)
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
Missouri Bottom Road,
Hazelwood, 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
811 Route 33, Freehold, New
Jersey
51-69 & 77-81 Court St, Newark,
New Jersey
Facilities(1)
Encumbrances
Initial cost
to Company
Cost
capitalized
subsequent to
acquisition(2)
Gross amount
carried at
close
of current
period(1)(3)
Accumulated
depreciation at
close of current
period(1)(3)
Date of
construction or
acquired(4)
Life on which
depreciation in
latest income
statement is
computed
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
3
1
1
3
3
1
$
— $
463
$
635
$
1,098
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
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
28,282
2,924
3,430
6,179
22,105
38,697
11,734
18,743
12,930
1,286
2,680
3,676
139
869
7,856
345
26,690
17,194
8,756
3,084
5,665
22,187
2,247
12,683
967
10,241
10,950
8,677
6,432
8,366
7,837
4,691
17,402
7,027
683
7,187
2,634
5,461
2,340
75,681
11,008
2,350
2,194
5,710
5,145
6,060
28,282
17,570
12,235
10,310
27,474
92,173
12,349
1,070
3,752
29
5,639
909
7,297
3,806
519
5,367
723
48
1,042
19,758
723
1,056
392
2,284
1,145
2,988
—
14,646
8,805
4,131
5,369
53,476
615
160
645
13,228
6,761
3,581
2,600
1,034
7,293
62
4,948
307
3,607
5,266
2,300
2,451
2,686
2,131
8,187
3,093
477
4,544
1,881
306
1,045
1990
1999
2001
2006
2001
2000
2014
2015
2002
2003
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
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
(6) 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
34,491
Various
Up to 40 years
2,811
1,138
906
3,193
2,196
1,772
5,064
5,097
4,585
5,445
2015
2002
2000
(6) Up to 40 years
Up to 40 years
Up to 40 years
Various
Up to 40 years
2001
2004
2016
Up to 40 years
Up to 40 years
(6) Up to 40 years
Various
Up to 40 years
2002
2001
Up to 40 years
Up to 40 years
11,815
Various
Up to 40 years
41,722
Various
Up to 40 years
178
2015
Up to 40 years
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2016
(Dollars in thousands)
(A)
(B)
(C)
(D)
(E)
(F)
Facilities(1)
Encumbrances
Initial cost
to Company
Cost
capitalized
subsequent to
acquisition(2)
Gross amount
carried at
close
of current
period(1)(3)
Accumulated
depreciation at
close of current
period(1)(3)
Date of
construction or
acquired(4)
Life on which
depreciation in
latest income
statement is
computed
$
— $
9,522
$
570
$
10,092
$
Region/Country/State/Campus
Address
United States (Including Puerto
Rico) (continued)
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
1061 Carolina Pines Road,
Columbia, South Carolina
2301 Prosperity Way, Florence,
South Carolina
Mitchell Street, Knoxville,
Tennessee
415 Brick Church Park Dr,
Nashville, Tennessee
6005 Dana Way, Nashville,
Tennessee
11406 Metric Blvd, Austin, 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
1
1
2
1
2
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
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
11,776
2,846
718
2,312
1,827
5,489
943
11,395
668
1,928
10,778
1,124
4,461
2,906
1,411
601
7,682
9,643
1,984
251
1,709
246
802
445
2,699
1,607
13,887
1,004
33
1,840
9,888
14,980
4,751
4,729
12,102
6,210
7,072
3,008
7,130
4,924
30,819
14,785
4,913
1,853
3,589
4,505
1,588
3,574
6,035
2,637
18,204
1,606
11,470
7,027
199
210
4,377
2,099
2,285
5,135
3,099
3,827
1,237
2,102
1,703
19,383
5,018
2,436
59
1,458
2,506
733
1,701
2,403
1,267
5,870
551
2,224
3,614
2015
2015
2006
2001
1999
1998
2000
1998
2001
2006
2005
2001
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
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
(6) 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
(6) Up to 40 years
Up to 40 years
198,855
220,021
37,903
Various
Up to 40 years
12,409
13,466
935
6,475
9,935
3,289
2,151
—
—
4,427
3,917
2,723
1,915
3,392
8,872
34,088
7,474
4,810
11,776
2,846
5,145
6,229
4,550
7,404
5,650
1,733
3,327
2001
2000
1999
Up to 40 years
Up to 40 years
Up to 40 years
14,939
Various
Up to 40 years
3,555
2,334
1,918
718
1,424
3,140
1,400
3,564
2001
2001
2016
2016
Up to 40 years
Up to 40 years
(6) Up to 40 years
(6) Up to 40 years
Various
Up to 40 years
2000
2000
2002
Up to 40 years
Up to 40 years
Up to 40 years
161
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2016
(Dollars in thousands)
(A)
(B)
(C)
(D)
(E)
(F)
Region/Country/State/Campus
Address
United States (Including Puerto
Rico) (continued)
6600 Metropolis Drive, Austin,
Texas
Capital Parkway, Carrollton,
Texas
1800 Columbian Club Dr,
Carrolton, Texas
1905 John Connally Dr,
Carrolton, 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
Facilities(1)
Encumbrances
Initial cost
to Company
Cost
capitalized
subsequent to
acquisition(2)
Gross amount
carried at
close
of current
period(1)(3)
Accumulated
depreciation at
close of current
period(1)(3)
Date of
construction or
acquired(4)
Life on which
depreciation in
latest income
statement is
computed
859
2,265
7,349
1,115
3,800
1,857
2,128
2,407
4,896
8,035
2,141
5,103
2,166
941
1,058
7,411
1,314
963
1,124
3,688
2,224
193
2,433
4,114
1,454
3,917
2,445
684
8,495
2,609
5,026
1,911
1,517
2011
2015
2013
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
Up to 40 years
(6) 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
(6) 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
(6) Up to 40 years
Up to 40 years
(6) 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
3
1
1
1
1
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
$
— $
4,519
$
281
$
4,800
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8,299
19,673
2,174
3,518
1,277
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
70
398
595
3,317
1,542
699
561
1,813
34,950
1,356
253
1,896
1,033
989
8,369
20,071
2,769
6,835
2,819
3,914
5,889
10,167
41,277
4,196
7,940
5,363
2,065
2,784
11,167
14,355
607
1,958
1,136
7,851
1,137
227
945
3,582
1,848
21
597
84
2,538
2,562
3,687
2,079
4,106
6,930
3,638
2,710
11,662
5,020
620
4,471
9,821
3,557
21,001
7,124
2,661
16,705
7,792
11,285
4,157
4,616
162
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2016
(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(2)
Gross amount
carried at
close
of current
period(1)(3)
Accumulated
depreciation at
close of current
period(1)(3)
Date of
construction or
acquired(4)
Life on which
depreciation in
latest income
statement is
computed
United States (Including Puerto
Rico) (continued)
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 Road,
Wauwatosa, Wisconsin
Canada
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
68 Grant Timmins Drive,
Kingston
3005 Boul. Jean-Baptiste
Deschamps, Lachine
1655 Fleetwood, Laval
4005 Richelieu, Montreal
1209 Algoma Rd, Ottawa
235 Edson Street, Saskatoon
640 Coronation Drive,
Scarborough
610 Sprucewood Ave, Windsor
1
1
1
1
1
181
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
15
196
$
— $
5,399
$
3,227
$
8,626
$
—
—
—
—
14,793
4,496
3,906
1,307
8,457
1,629
208
2,077
23,250
6,125
4,114
3,384
2,870
8,624
2,930
111
1,142
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
912,136
791,576
1,703,712
605,773
3,847
5,403
5,007
8,091
4,326
14,658
2,020
3,639
2,751
8,196
1,800
1,059
829
1,853
1,243
4,118
4,992
16,037
709
6,634
7,061
448
—
16
7,965
10,395
21,044
8,800
10,960
21,719
2,468
3,639
2,767
13,970
22,166
1,077
5,744
1,316
754
316
2,877
6,803
2,145
2,607
1,559
3,101
3,915
5,134
3,611
3,429
8,627
1,245
—
1,104
9,457
1,239
3,027
607
986
461
64,722
63,192
127,914
976,858
854,768
1,831,626
45,943
651,716
2002
2002
2001
2015
1999
2000
2000
2000
2001
2005
2000
2000
2016
2000
2000
2000
2000
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
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
163
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2016
(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(2)
Gross amount
carried at
close
of current
period(1)(3)
Accumulated
depreciation at
close of current
period(1)(3)
Date of
construction or
acquired(4)
Life on which
depreciation in
latest income
statement is
computed
$
— $
6,542
$
5,806
$
12,348
$
Gewerbeparkstr. 3, Vienna,
Austria
Woluwelaan 147, Diegem,
Belgium
628 Western Avenue, Acton,
England
65 Egerton Road, Birmingham,
England
Otterham Quay Lane,
Gillingham, England
Pennine Way, Hemel Hempstead,
England
Kemble Industrial Park, Kemble,
England
Gayton Road, Kings Lynn,
England
24/26 Gillender Street, London,
England
Cody Road, London, England
Deanston Wharf, London,
England
Unit 10 High Cross Centre,
London, England
Old Poplar Bus Garage, London,
England
17 Broadgate, Oldham, England
Harpway Lane, Sopley, England
Unit 1A Broadmoor Road,
Swindom, England
Jeumont-Schneider, Champagne
Sur Seine, France
Bat I-VII Rue de Osiers,
Coignieres, France
26 Rue de I Industrie,
Fergersheim, France
Bat A, B, C1, C2, C3 Rue
Imperiale, Gue de Longroi,
France
Le Petit Courtin Site de Dois,
Gueslin, Mingieres, France
ZI des Sables, Morangis, France
45 Rue de Savoie, Manissieux,
Saint Priest, France
Gutenbergstrabe 55, Hamburg,
Germany
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
1
1
1
1
9
1
2
3
1
2
1
1
1
1
1
1
3
4
1
1
1
1
1
1
1
1
1
1
1
1
1
2
1
1
1
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,409
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,541
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
1,750
21,318
1,322
3,390
14,141
12,407
5,546
4,022
3,220
9,040
2,818
16,034
1,852
1,258
1,357
6,970
113
4,726
(342)
915
2,368
3,686
6,012
1,047
1,424
3,443
(2,602)
180
1,373
30
1,280
279
2,217
(1,791)
(111)
(285)
(1,187)
6,641
(466)
(337)
1,462
1,600
685
4,575
1,782
(751)
987
4,592
2,007
7,267
1,728
7,895
9,786
14,533
11,289
4,166
6,090
23,750
13,222
3,778
6,012
4,069
1,961
2,915
3,967
19,527
1,211
3,105
12,954
19,048
5,080
3,685
4,682
10,640
3,503
20,609
3,634
507
2,344
11,562
2,120
1,798
3,168
668
3,953
4,247
5,588
7,096
2,415
2,269
8,640
2,900
1,039
3,031
1,866
1,122
856
1,776
658
42
120
310
14,653
134
68
2,757
3,267
1,047
5,217
1,608
156
1,531
3,297
2010
2003
2003
2003
2003
2004
2004
2003
2003
2003
2015
2003
2003
2008
2004
2006
2003
2016
2016
2016
2016
2004
2016
2016
2006
2014
2001
2012
2015
2015
2015
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
(6) 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
(5) Up to 40 years
(5) Up to 40 years
(5) Up to 40 years
(5) Up to 40 years
Up to 40 years
(5) Up to 40 years
(5) Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
(6) Up to 40 years
(6) Up to 40 years
(6) Up to 40 years
Various
Up to 40 years
788
2004
Up to 40 years
11,517
21,114
32,631
13,594
2001
Up to 40 years
186
11,011
226
1,641
412
12,652
296
2,086
2014
2010
Up to 40 years
Up to 40 years
164
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2016
(Dollars in thousands)
(A)
(B)
(C)
(D)
(E)
(F)
Facilities(1)
Encumbrances
Initial cost to
Company
Cost
capitalized
subsequent to
acquisition(2)
Gross amount
carried at
close
of current
period(1)(3)
Accumulated
depreciation at
close of current
period(1)(3)
Date of
construction or
acquired(4)
Life on which
depreciation in
latest income
statement is
computed
$
— $
3,981
$
5,180
$
9,161
$
—
—
1,022
1,053
2,276
(312)
3,298
741
5,037
1,384
2001
2002
Up to 40 years
Up to 40 years
186
Various
Up to 40 years
1,409
236,512
81,370
317,882
110,668
1
1
2
58
2
1
1
1
1
2
3
1
2
4
1
1
2
2
1
1
7
2
1
Region/Country/State/Campus
Address
Europe (Continued)
Ctra M.118 , Km.3 Parcela 3,
Madrid, Spain
Fundicion 8, Rivas-Vaciamadrid,
Spain
Abanto Ciervava, Spain
Latin America
Amancio Alcorta 2396, Buenos
Aires, Argentina
Azara 1245, Buenos Aires,
Argentina
Saraza 6135, Buenos Aires,
Argentina
Spegazzini, Ezeiza Buenos Aires,
Argentina
Av Ernest de Moraes 815, Bairro
Fim do Campo, Jarinu Brazil
Rua Peri 80, Jundiai, Brazil
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
Tula KM Parque de Las,
Huehuetoca, Mexico
Carretera Pesqueria Km2.5(M3),
Monterrey, Mexico
Lote 2, Manzana A, (T2& T3),
Toluca, Mexico
Prolongacion de la Calle 7 (T4),
Toluca, Mexico
Panamericana Sur, KM 57.5, Lima,
Peru
Av. Elmer Faucett 3462, Lima, Peru
Calle Los Claveles-Seccion 3, Lima,
Peru
Asia Pacific
8 Whitestone Drive, Austins Ferry,
Australia
6 Norwich Street, South
Launceston, Australia
Warehouse No 4, Shanghai, China
2 Yung Ho Road, Singapore
26 Chin Bee Drive, Singapore
IC1 69 Moo 2, Soi Wat Namdaeng,
Bangkok, Thailand
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,475
—
—
655
166
144
12,773
12,562
8,894
1,868
24,078
2,629
4,001
374
905
4,096
241
992
(1,356)
696
493
11,177
7,205
36,076
16,158
898
859
4,751
407
1,136
11,417
13,258
9,387
13,045
31,283
38,705
20,159
1,272
1,764
19,937
(3,416)
16,521
3,537
2,204
7,544
1,549
4,112
8,179
2,625
3,004
9,379
647
4,484
6,162
5,208
16,923
2,196
8,596
23,987
32,166
1,255
Various
Up to 40 years
182
278
861
346
255
2,209
1,742
8,400
6,183
722
678
868
1,648
3,579
4,939
1,120
3,902
5,431
191
35
200
251
348
474
1998
1995
2012
2016
2016
Up to 40 years
Up to 40 years
Up to 40 years
(5) Up to 40 years
(5) Up to 40 years
Various
Up to 40 years
2014
2006
2004
2002
2004
2016
2004
2002
2007
Various
Various
2010
2012
2015
2013
2016
2016
2016
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
(5) 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
(5) Up to 40 years
(5) Up to 40 years
(5) Up to 40 years
1,499
Up to 40 years
36
3,475
116,111
118,245
234,356
44,598
1
1
1
1
1
2
7
—
—
—
—
—
—
—
681
1,090
1,530
10,395
15,699
13,226
42,621
2,621
(56)
723
(748)
(1,130)
(355)
1,055
3,302
1,034
2,253
9,647
14,569
12,871
43,676
Total
297
$
4,884
$
1,372,102
$
1,055,438
$
2,427,540
$
808,481
____________________________________
165
IRON MOUNTAIN INCORPORAT
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2016
(Dollars in thousands)
(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 1,146 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) Amount includes cumulative impact of foreign currency translation fluctuations.
(3) 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.
(4) Date of construction or acquired represents the date we constructed the facility, acquired the facility through purchase
or acquisition.
(5) Property was acquired in connection with the Recall Transaction.
(6) This date represents the date the categorization of the property was changed from a leased facility to an owned facility.
The change in gross carrying amount of real estate owned for the years ended December 31, 2015 and 2016 is as follows:
Year Ended December 31,
2015
2016
Gross amount at beginning of period
$ 2,019,585
$ 2,204,988
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
33,180
136,398
101,386
(85,092)
185,872
131,665
108,760
42,904
(37,653)
245,676
(469)
$ 2,204,988
(23,124)
$ 2,427,540
_______________________________________________________________________________
(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.
166
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2016
(Dollars in thousands)
The change in accumulated depreciation amount of real estate owned for the years ended December 31, 2015 and 2016 is
as follows:
Year Ended December 31,
2015
2016
Gross amount of accumulated depreciation at beginning of
period
Additions during period:
$
648,734
$
745,186
Depreciation
Other adjustments(1)
Foreign currency translation fluctuations
Deductions during period:
77,976
39,937
(21,310)
96,603
77,664
7,700
(13,129)
72,235
Amount of accumulated depreciation for real estate assets
sold or disposed
Gross amount of end of period
(151)
745,186
$
(8,940)
808,481
$
_______________________________________________________________________________
(1) Includes accumulated depreciation associated with building improvements and racking, which were previously subject
to leases.
167
Item 16. Form 10-K Summary.
Not applicable.
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/ STUART B. BROWN
Stuart B. Brown
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated: February 23, 2017
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/ STUART B. BROWN
Stuart B. Brown
Title
President and Chief Executive Officer and
Director (Principal Executive Officer)
Date
February 23, 2017
Executive Vice President and Chief
Financial Officer (Principal Financial and
Accounting Officer)
February 23, 2017
/s/ JENNIFER M. ALLERTON
Director
February 23, 2017
Jennifer M. Allerton
/s/ TED R. ANTENUCCI
Director
February 23, 2017
Ted R. Antenucci
/s/ PAMELA M. ARWAY
Director
February 23, 2017
Pamela M. Arway
/s/ CLARKE H. BAILEY
Director
February 23, 2017
Clarke H. Bailey
/s/ NEIL G. CHATFIELD
Director
February 23, 2017
Neil G. Chatfield
/s/ KENT P. DAUTEN
Director
February 23, 2017
Kent P. Dauten
168
Name
Title
Date
/s/ PAUL F. DENINGER
Director
February 23, 2017
Paul F. Deninger
/s/ PER-KRISTIAN HALVORSEN Director
February 23, 2017
Per-Kristian Halvorsen
/s/ WENDY J. MURDOCK
Director
February 23, 2017
Wendy J. Murdock
/s/ WALTER C. RAKOWICH
Director
February 23, 2017
Walter. C. Rakowich
/s/ ALFRED J. VERRECCHIA
Director
February 23, 2017
Alfred J. Verrecchia
169
Certain exhibits indicated below are incorporated by reference to documents we have filed with the SEC. Each exhibit
marked by a pound sign (#) is a management contract or compensatory plan.
INDEX TO EXHIBITS
Exhibit
2.1
2.2
2.3
3.1
3.2
3.3
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
dated March 31,
dated June 8, 2015.)
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
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.)
Amendment to Scheme Implementation Deed, dated as of March 31, 2016, between the Company and Recall
Holdings Limited. (Incorporated by reference to the Company’s Current Report on
2016.)
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
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
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, 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
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 September 29, 2011, File Number 001-13045.)
dated January 21, 2015.)
dated January 21, 2015.)
K dated August 13, 2013.)
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, 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
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
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.)
Second Supplemental Indenture, dated as of January 20, 2015, 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.)
dated January 21, 2015.)
dated August 13, 2013.)
dated
170
Exhibit
4.10
4.11
4.12
4.13
4.14
4.15
4.16
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
Item
dated January 21, 2015.)
dated January 21, 2015.)
dated September 29, 2015.)
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, relating to the 6.125% GBP Senior Notes due 2022.
(Incorporated by reference to the Company’s Current Report on
dated September 22, 2014.)
First Supplemental Indenture, dated as of January 20, 2015, among Iron Mountain Europe PLC, the Company,
the Predecessor Registrant, 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
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
Senior Indenture, dated as of May 27, 2016, among the Company, the Guarantors named therein and Wells
Fargo Bank, National Association, as trustee, relating to the 4.375% Senior Notes due 2021. (Incorporated by
reference to the Company’s Current Report on Form 8-K dated May 27, 2016.)
Senior Indenture, dated as of May 27, 2016, among Iron Mountain US Holdings, Inc., the Company, the
Guarantors named therein and Wells Fargo Bank, National Association, as trustee, relating to the 5.375%
Senior Notes due 2026. (Incorporated by reference to the Company’s Current Report on Form 8-K dated May
27, 2016.)
Senior Indenture, dated as of September 15, 2016, among Iron Mountain Canada Operations ULC, the
Company, the Guarantors named therein and Wells Fargo Bank, National Association, as trustee, relating to
the 5.375% CAD Senior Notes due 2023. (Incorporated by reference to the Company’s Current Report on
Form 8-K dated September 15, 2016.)
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
for the quarter ended
Plan. (#) (Incorporated by reference to the Company’s Quarterly Report on
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
Amendment to Iron Mountain Incorporated 1997 Stock Option Plan, as amended. (#) (Incorporated by
reference to the Company’s Current Report on
Iron Mountain Incorporated 1995 Stock Incentive Plan, as amended. (#) (Incorporated by reference to Iron
Mountain /DE’s Current Report on
Iron Mountain Incorporated 2002 Stock Incentive Plan. (#) (Incorporated by reference to the Company’s
Annual Report on
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
Sixth Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#) (Incorporated by
for the quarter ended June 30, 2011, File
reference to the Company’s Quarterly Report on
Number 001-13045.)
Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan. (#) (Incorporated by reference to Annex C 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.)
for the year ended December 31, 2000, File Number 001-13045.)
for the year ended December 31, 2002, File Number 001-13045.)
dated December 10, 2008, File Number 001-13045.)
dated December 10, 2008, File Number 001-13045.)
dated April 16, 1999, File Number 001-13045.)
dated June 4, 2010, File Number 001-13045.)
for the year ended December 31,
for the year ended
for the year ended
171
Exhibit
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
Item
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
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. (#)
for the year ended December 31,
for the year ended December 31, 2004, File Number 001-13045.)
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,
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
Plan (version 1). (#) (Incorporated by reference to the Company’s Annual Report on
for the year
ended December 31, 2014.)
Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2014 Stock and Cash
Incentive Plan (version 1). (#) (Filed herewith.)
for the year ended December 31,
for the
for
for the quarter
Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2014 Stock and Cash
Incentive Plan (version 2). (#) (Filed herewith.)
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
dated April 5, 2005, File Number 001-13045.)
dated June 4, 2010, File Number 001-13045.)
for the quarter ended
172
Exhibit
10.34
10.35
10.36
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
dated June 4, 2010, File Number 001-13045.)
dated June 1, 2006, File Number 001-13045.)
Item
Iron Mountain Incorporated 2006 Senior Executive Incentive Program. (#) (Incorporated by reference to the
Company’s Current Report on
Amendment to the Iron Mountain Incorporated 2006 Senior Executive Incentive Program. (#) (Incorporated
by reference to the Company’s Current Report on
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.)
Addendum, dated March 19, 2012, to the Contract of Employment between Iron Mountain BPM International
Sàrl and Marc Duale, dated September 29, 2011, together with the Contract of Employment between Iron
Mountain BPM International Sàrl 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 Sàrl and Marc Duale, dated September 29, 2011, as amended March 19, 2012, together with the
Contract of Employment between Iron Mountain BPM International Sàrl 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
dated December 30, 2009, File
for the quarter ended
for the quarter ended March 31, 2015.)
Third Amended and Restated Employment Contract between Iron Mountain BPM International Sàrl and Marc
Duale, dated February 24, 2016. (#) (Incorporated by reference to the Company’s Annual Report on
for the year ended December 31, 2015.)
Employment Offer Letter, dated November 30, 2012, from the Company to William L. Meaney. (#)
(Incorporated by reference to the Company’s Current Report on
Contract of Employment with Iron Mountain, between Patrick Keddy and Iron Mountain (UK) Ltd., effective
as of April 2, 2015. (#) (Incorporated by reference to the Company’s Annual Report on
year ended December 31, 2015.)
Separation Agreement, dated July 1, 2016, between the Company and Roderick Day. (#) (Incorporated by
reference to the Company’s Quarterly Report on
Restated Compensation Plan for Non-Employee Directors. (#) (Filed herewith.)
for the quarter ended June 30, 2016.)
dated December 3, 2012.)
for the
dated March 13, 2012.)
for the quarter ended March 31, 2012.)
for the year ended December 31, 2012.)
for the year ended December 31, 2007, File Number 001-13045.)
Iron Mountain Incorporated Director Deferred Compensation Plan. (#) (Incorporated by reference to the
Company’s Annual Report on
The Iron Mountain Companies Severance Plan. (#) (Incorporated by reference to the Company’s Current
Report on
Amended and Restated Severance Plan Severance Program No. 1. (#) (Incorporated by reference to the
Company’s Quarterly Report on
First Amendment to Amended and Restated Severance Plan Severance Program No. 1. (#) (Incorporated by
reference to the Company’s Annual Report on
Second Amendment to The Iron Mountain Companies Severance Plan Severance Program No. 1. (#)
(Incorporated by reference to the Company’s Current Report on
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
First Amendment, dated as of April 29, 2016, to 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 Form 8-K dated April
29, 2016.)
dated December 19, 2014.)
dated July 2, 2015.)
173
Exhibit
10.52
10.53
10.54
10.55
10.56
12
21.1
23.1
31.1
31.2
32.1
32.2
101.1
Item
Second Amendment, dated as of June 24, 2016, to 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 Form 8-K
dated June 24, 2016.)
Commitment Increase Supplement, dated as of June 24, 2016, among Iron Mountain Information
Management, LLC, the lenders and other financial institutions party thereto and JPMorgan Chase Bank, N.A.,
as Administrative Agent. (Incorporated by reference to the Company’s Current Report on Form 8-K dated
June 24, 2016.)
Third Amendment, dated as of January 31, 2017, to 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. (Filed herewith.)
Commitment Letter, dated as of April 19, 2016 among the Company, Iron Mountain Information Management,
LLC, the lenders and other financial institutions party thereto and JPMorgan Chase Bank, N.A., as
Administrative Agent. (Incorporated by reference to the Company’s Current Report on
19, 2016.)
Bridge Credit Agreement, dated as of April 29, 2016, among the Company, Iron Mountain Information
Management, LLC, the lenders and other financial institutions party thereto and JPMorgan Chase Bank, N.A.,
as Administrative Agent. (Incorporated by reference to the Company’s Current Report on Form 8-K dated
April 29, 2016.)
Statement re: Computation of Ratios. (Filed herewith.)
dated April
Subsidiaries of the Company. (Filed herewith.)
Consent of Deloitte & Touche LLP (Iron Mountain Incorporated, Delaware). (Filed herewith.)
Certification of Chief Executive Officer. (Filed herewith.)
Certification of Chief Financial Officer. (Filed herewith.)
Section 1350 Certification of Chief Executive Officer. (Furnished herewith.)
Section 1350 Certification of Chief Financial Officer. (Furnished herewith.)
The following materials from Iron Mountain Incorporated’s Annual Report on
December 31, 2016 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
174
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(This page has been left blank intentionally.)
CORPORATE DIRECTORS AND OFFICERS
(As of 04/03/17)
DIRECTORS
Alfred J. Verrecchia 3, 6
Chairperson of the Board of Directors
Iron Mountain Incorporated
Boston, MA
Jennifer Allerton 1, 5
Retired Executive
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 Executive
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
Neil Chatfield 1,5
Retired Executive
Toll Holdings Limited
Melbourne, Australia
SENIOR OFFICERS
William L. Meaney
President and Chief Executive Officer
Edward Bicks
Senior Vice President,
Chief Strategy Officer
Stuart Brown
Executive Vice President
and Chief Financial Officer
Ernest W. Cloutier
Executive Vice President
and General Manager,
International
Deirdre Evens
Executive Vice President,
Chief People Officer
Patrick Keddy
Executive Vice President and General Manager,
North America and Western Europe
Kent P. Dauten 1, 3, 4
Managing Director
Keystone Capital, Inc.
Deerfield, IL
Paul F. Deninger 4
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
Wendy Murdock 2,3
Retired Executive
MasterCard Worldwide
New York, NY
Walter C. Rakowich 1, 3
Retired Executive
Former CEO of Prologis
San Francisco, CA
Theodore MacLean
Executive Vice President,
Chief Marketing Officer
Deborah Marson
Executive Vice President,
General Counsel and Secretary
Fidelma Russo
Executive Vice President
and Chief Technology Officer
Eileen Sweeney
Senior Vice President and General Manager,
Data Management
John Tomovcsik
Executive Vice President
and General Manager, Records
and Information Management, North America
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:
79,049, as of March 1, 2017
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
Wednesday May 24, 2017, 9:00am ET
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 as well as fire and safety
standards; (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 23, 2017 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 12/31/16)
Greece
Hungary
Netherlands
Northern Ireland
Norway
Poland
Republic of Ireland
Romania
Russia
Scotland
Serbia
Slovakia
Spain
Switzerland
Turkey
Ukraine
Latin America
Argentina
Brazil
Chile
Mexico
Peru
Colombia
Middle East and Africa
South Africa
North America
Canada
United States
Asia Pacific
Australia
China
Hong Kong-SAR
India
Malaysia
New Zealand
Singapore
Thailand
Europe
Austria
Belgium
Czech Republic
Denmark
England
Estonia
Finland
France
Germany
Latvia
Lithuania
Sweden
IRM Stock Performance
Comparison of 60 Month Cumulative Total Return
Among Iron Mountain, the MSCI REIT Index, the S&P 500 and the Russell 1000
275
250
225
200
175
150
125
100
s
r
a
l
l
o
D
Iron
Mountain
Russell 1000
Index
S&P 500
MSCI REIT
Index
75
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
30MAR201719341627
Note: Fiscal year end December 31, 2016
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, 2011, through December 31, 2016. This comparison assumes an investment of $100
on December 31, 2011, and the reinvestments of any dividends.
3APR201420591154