4AUG201721502439
2017 Annual Financial Report and
Stockholder Letter
Dear Fellow Stockholders,
2017 was a successful year characterized by significant progress against our strategic plan and solid momentum in the business.
We achieved strong internal storage revenue growth—or before acquisitions—in all markets. Furthermore, we continued to
expand into high-growth emerging markets and leveraged our brand through extension into Adjacent Businesses. Additionally, we
announced three acquisitions in the data center space that further expand our market position in this high-growth segment. As a
result of this shift in our business mix, we expect to accelerate growth in internal revenue and Adjusted EBITDA between now
and the end of 2020, compared with our expectations just one year ago.
Our performance for 2017 was consistent with our expectations, reflecting the strength of our global position and the discipline of
our management team, and was underscored by robust storage rental growth and enhanced margins. Our 2017 financial results
also benefitted from favorable currency translation after three years of foreign exchange headwinds. We remain steadily on track
to deliver on our 2020 financial and strategic goals through continued growth in our core business and further expansion into
emerging markets and adjacent businesses whilst continuing to de-lever. And our plan to achieve these targets is anchored by a
disciplined investment strategy oriented toward faster-growing, value-creating businesses.
Strong 2017 Financial Performance Consistent with Expectations
Total revenue grew by 10% year-over-year, reflecting the continued durability of both our physical records and data management
businesses, as well as acquisition benefits and favorable foreign exchange fluctuations. Internal storage rental growth of 3.9% for
the year—our strongest performance since 2009—was primarily driven by revenue management efforts in developed markets,
despite flat records management volumes. Globally, we continued to see volume growth, driven primarily by emerging markets. In
2017, we added more than 47 million cubic feet of new records from new and existing customers globally, or net volume growth
of 7 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 our customer relationships. Adjusted EBITDA
growth of 16% for the year exceeded revenue growth, demonstrating continued margin improvement. Growth in Adjusted
EBITDA and margins was driven by synergies from the Recall Transaction as well as savings from our Transformation Initiative.
Adjusted Funds From Operations, or AFFO, for 2017 was at the high end of our expectations as we continued to optimize our
capital expenditures. We believe AFFO is a more representative metric of the cash generation characteristics of our operating
business and provides a good measure for dividend coverage. Lastly, and most importantly, our strong cash generation drove
roughly 7% growth in our dividend per share and supported discretionary investments.
Our growth expectations for 2018 on a constant dollar basis remain consistent with our long-term strategic plans and reflect the
durability of our storage rental business as well as our expanding Data Center platform. At the midpoint of our guidance ranges
and on a constant currency basis, we expect growth in Total Revenues of 8%, Adjusted EBITDA of 14%, and AFFO of 9% in
2018. We expect to drive this performance through continued internal storage rental revenue growth, which is expected to be
between 3% and 3.5%, reflecting ongoing revenue management efforts in developed markets and volume growth in emerging
markets. Lastly, we continue to expect our cash available for distributions and investments to cover our anticipated 2018
dividend, required capital expenditures and a portion of our discretionary investments and acquisitions.
Continuing to Deliver on our Strategic Plan
Our strategic plan remains focused on extending our durable business model through: continued nurturing of our core developed
markets, expanding into faster-growing emerging markets, and scaling our storage-related Adjacent Businesses, such as data
centers as well as fine art and entertainment services. We continue to focus on shifting our revenue mix toward our higher
growth portfolio, which includes Emerging Markets and Adjacent Businesses. Following our transformative acquisition of IO Data
Centers, our Data Center platform is expected to drive Adjacent Businesses to approximately 10% of total revenues by 2020
compared to our initial goal of 5%. We expect to grow our data center business through expansion within our existing footprint,
greenfield development in the largest U.S. markets such as Northern Virginia, and targeted acquisitions in the top 20 global data
center markets. In Emerging Markets, we have made great strides to expand our presence—both organically and through
acquisitions in core records management businesses. Our expectation remains that these high growth markets will represent 20%
of revenues by 2020. Therefore, our objective by 2020 is to reach 30% of total revenues from our higher growth portfolio
compared to 20% currently. As this shift in mix progresses, we expect to see faster Adjusted EBITDA growth and further
improvement in Adjusted EBITDA margins.
Driving Growth and Profitability in Developed Markets
In our Developed Markets segments, which include North American Records and Information Management as well as North
American Data Management and our Western European segment, we achieved internal storage revenue growth of 3.4% with
modestly positive internal volume growth on a trailing twelve month basis. Internal storage revenue growth in North America—
and increasingly in Western Europe—is driven more by revenue management rather than by organic volume growth. It is
important to note that whilst our successful revenue management effort may marginally impact incoming volume from existing
customers, it has not significantly impacted new customer behavior, nor has it caused an increase in customer terminations or
destructions.
Given our successful implementation in North America, we plan to add revenue management resources to Western Europe, Asia,
Latin America, Australia and Eastern Europe during 2018. Furthermore, we will continue to seek growth from existing customers
through revenue management programs and sales of services, and we will focus on volume growth from further penetration of
unvended customers such as those in the mid-market and U.S. Federal government segments.
Emerging Markets Offer High-growth Potential
Our goal remains to expand into faster-growing emerging markets, which now represent more than 18% of total revenue, almost
double the relative size from about four years ago. Our progress was supported by emerging market acquisitions closed during
the year with a total purchase price of more than $87 million. Notable among emerging market transactions in 2017 were:
acquisition of the remaining portions of our 2016 acquisition of Santa Fe businesses in South Korea, the Philippines and China;
our entry into the Middle East; acquisitions in Peru and Cyprus; and a transaction in India that moved us into the market-leading
position. We continue to have a strong pipeline of attractive acquisition opportunities in emerging markets supporting our
confidence in reaching our goal of 20% of total revenue from these markets by the end 2020. We are pleased with the progress
we’re making to deepen our presence in key growth markets that continue to experience strong high-single-digit internal storage
revenue growth.
Significant Progress and Realignment in Adjacent Businesses
Given our acquisition of IO Data Centers, we have begun reporting on our data center business as a separate segment. We have
removed entertainment services from our North American Data Management segment and combined it with our fine art storage
business, as the nature of the storage assets and customer bases for these two businesses are more similar. As a result, our
Corporate & Other Business segment, which includes Adjacent Businesses, now comprises fine art storage as well as
Entertainment Services. In September 2017, we completed the acquisition of Bonded Services, a provider of storage and services
for media content preservation, including fine art vaults and shipping; logistics and distribution; and related services for
high-value physical and digital assets such as film, audio and video. Bonded managed more than 10 million of these assets for its
2,000 clients worldwide, with offices in the United States, Canada, the United Kingdom, France, the Netherlands and Hong
Kong, providing digital services that help media and entertainment companies extend their content across digital platforms. This
acquisition also scales our existing U.S. entertainment services business and broadens our geographic footprint.
Innovation to Fuel Future Growth
We continue to drive toward diversification of our revenue streams through innovation. At a high level, our innovation efforts are
focused on customer solutions and processes that can further strengthen our differentiation and support growth in storage and
service, whilst addressing our customers’ requirements for their own digital transformations. A couple of examples to highlight
are working in partnership with our customers and machine learning companies to seek deeper insight into the data we store on
their behalf, trials in the consumer storage space, and our recently launched Iron Cloud(cid:2). Iron Cloud is an enterprise-class data
management platform that delivers integrity, availability and protection of digital assets, enabling our customers to securely
manage video content, mitigate cyber threats, increase operational efficiency and drive more value from digital information.
Focus on Data Centers—Transformative IO Data Centers Acquisition
In December of 2017, we announced our agreement to acquire the United States operations of IO Data Centers, a leading data
center colocation space and solutions provider based in Phoenix, Arizona. The purchase included the land and buildings
associated with four data centers in Phoenix and Scottsdale, Arizona; Edison, New Jersey; and Columbus, Ohio, for $1.3 billion,
plus up to $35 million of potential future payments associated with the execution of future customer contracts. We completed the
acquisition early in January 2018, funding it through the issuance of equity and debt. Also in 2017, we acquired Fortrust Data
Center, providing us with a top-quality Tier 3 facility serving the attractive Denver market, and announced our plan to acquire
two Credit Suisse data centers located in London and Singapore, which we closed in March 2018. Our data center expansion is
closely aligned with our strategic goals, extending our business model to a faster growing segment whilst increasing our existing
data center capacity to a potential of more than 250 MW. It also builds on customer relationships and leverages our strong brand
for safety, security and trust. We expect our expanded footprint will increase attractiveness to enterprise data center customers.
Importantly, it protects our durable, growing, high-margin business by increasing our exposure to faster-growth businesses with
higher-margin storage revenue that are also REIT-friendly and tax-efficient. And lastly, it helps drive sustainable growth in cash
flow and dividend per share whilst de-leveraging, with a continued focus on maximizing shareholder value. The data center
market continues to be very attractive, fueled in a large way by the movement of enterprise customers to private and public cloud
computing environments. For Iron Mountain, the data center business has proven to be a natural extension of our brand where
customers see us as their trusted guardian for all things information and data storage related.
In conclusion, 2017 was a very good year with solid execution on our strategic plan. We continued to drive improved internal
storage revenue growth across both developed and emerging markets. The recent expansion of our Data Center business is
expected to accelerate our organic EBITDA growth from 3.5% currently to more than 5% in 2020. We have done all this whilst
remaining committed to our financial framework and targets. From a yield perspective, we continue to be a standout in the
S&P 500 with a strong dividend, plus robust and sustainable growth. As we continue to execute on our strategic plan to extend
the durability of our business by capturing opportunities in adjacent businesses and emerging markets, we are truly appreciative
of the continued support of our customers, stockholders and Mountaineers around the globe.
Yours sincerely,
9OCT201511395301
William L. Meaney, President and Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
____________________________________________________________________________
FORM 10-K
____________________________________________________________________________
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2017
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, smaller reporting
company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and
"emerging growth 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
Emerging growth 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, 2017, the aggregate market value of the Common Stock of the registrant held by non-affiliates of the registrant was
approximately $9.0 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 9, 2018: 285,311,549
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 2018 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, 2017.
IRON MOUNTAIN INCORPORATED
2017 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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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 records stored with us
from existing customers, (3) expected 2018 consolidated internal storage rental revenue growth rate and capital expenditures,
(4) 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, (5) statements regarding our expectation to reduce our leverage ratio, (6) our ability to close pending acquisitions
and (7) expectations regarding the impact of the recent United States tax reform legislation on our consolidated results of
operations. 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 data security and
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
and changes in the global political climate;
our ability or inability to manage growth, expand internationally, complete acquisitions on satisfactory terms, to
close pending acquisitions and to integrate acquired companies efficiently;
changes in the amount of our growth and maintenance capital expenditures and our ability to invest according to
plan;
our ability to comply with our existing debt obligations and restrictions in our debt instruments or to obtain
additional financing to meet our working capital needs;
the impact of service interruptions or equipment damage and the cost of power on our data center operations;
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 or otherwise. Readers are also urged to carefully review and consider the various
disclosures we have made in this document, as well as our other periodic reports filed with the SEC.
iii
Item 1. Business.
Business Overview
We store records, primarily physical records and data backup media, provide colocation and wholesale data center space,
and provide information management and data center solutions that help organizations around the world protect their
information, lower storage rental costs, comply with regulations, facilitate corporate disaster recovery, and better use their
information and information technology ("IT") infrastructure 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. We provide data center facilities to
protect digital information and ensure the continued operation of our customers’ IT infrastructures, with secure and reliable
colocation and wholesale options. Founded in an underground facility near Hudson, New York in 1951, Iron Mountain
Incorporated, a Delaware corporation, has more than 225,000 customers in a variety of industries in 53 countries around the
world as of December 31, 2017. We currently serve customers across an array of market verticals - commercial, legal, financial,
healthcare, insurance, life sciences, energy, business services, entertainment and government organizations, including
approximately 95% of the Fortune 1000. As of December 31, 2017, we employed more than 24,000 people.
Now in our 67th 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, data center space and a broad range of related records and information
management and data center solutions, as well as entertainment, arts and media storage and services, to customers in markets
around the world with over 1,400 facilities (87.5 million square feet) and total revenues of more than $3.8 billion for the year
ended December 31, 2017. 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, 2017, we were number 729 on the Fortune 1000.
We have been organized and have operated as a REIT beginning with our taxable year ended December 31, 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.
Recall Acquisition
On May 2, 2016 (Sydney, Australia time), we completed the Recall Transaction. We purchased Recall, a multi-national
records and information management company for approximately $2.2 billion, comprising of $331.8 million in cash and
approximately 50.2 million shares of our common stock 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.
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 or governments (unvended) or it can be 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 storage and 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. 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) requirements to support current and 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; (7) the need to keep backup
copies of certain records in off-site locations for business continuity purposes in the event of disaster; and (8) the opportunity
for companies to monetize the value that may reside in stored data and information for new commercial purposes.
Business Strategy
Overview
We have transitioned from a growth strategy driven primarily by organic growth and acquisitions of storage and
information management services companies to a strategy that targets multiple sources of revenue growth. Our growth 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, Africa 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. We have made significant progress through acquisitions and organic growth in scaling our data center
business, which began as an ABO but now has achieved such a size that we no longer consider it an ABO. In addition, we
continue to pursue other businesses adjacent to our core such as entertainment, fine art and consumer storage and services.
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 data centers and 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, data management services and archival cloud storage for
digital records. 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.
2
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. We seek to maintain high levels of customer retention by
providing premium customer service and a variety of services tied to records management and information governance. While
the rate of growth of new physical records from existing customers in our more mature markets has been declining, we seek to
maintain revenue growth from existing customers through sales of services, further penetration of unvended customers in the
mid-market and United States federal government vertical market segments and revenue management programs.
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 service and product
offerings. 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 United States federal government vertical market
segments.
Growth through Acquisitions in our Core Business
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 those 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
acquisitions of businesses we believe 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 and the United Kingdom).
We believe the acquisition of Recall accelerates our 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 are 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.
3
The experience, depth and strength of local management are particularly important to our emerging markets 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, 2017, we operated in 53 countries. These transactions have taken, and
may continue to take, the form of acquisitions of an entire business or controlling or minority investments generally 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 their 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 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.
Growth of our Data Center Business
With the rapid acceleration of growth in digital data and use of cloud storage, highly regulated companies and public
sector organizations are selecting third-party providers such as us to host their data center infrastructure. The primary benefits
of outsourcing include the ability to make more efficient use of real estate and the benefits of professional management. In
addition, data center outsourcing provides improved connectivity, increased operational efficiency, predictable cost structure,
consumption-based pricing, and flexibility with access to seamless expansion.
We have been providing customers, primarily in highly regulated industries, with colocation and wholesale data center
space and solutions for more than 15 years. We seek to differentiate ourselves from the competition due to our experience with
highly regulated industries, chief compliance officers and customers who are particularly focused on data security and
mitigating risk. Our commitment to and reputation for highly secure operations was a major driver behind our agreement
announced in October 2017 to acquire two data centers from Credit Suisse in London and Singapore for an aggregate cash
purchase price of approximately $100.0 million (see Note 6 to Notes to Financial Consolidated Statements included in this
Annual Report). We intend to continue to expand our data center capabilities to service customers in multiple geographies,
focused on the top 20 global data center markets based on space absorption. We expect to grow through organic expansion
within our existing footprint, greenfield development in the largest United States markets such as our campus in Manassas,
Virginia, and targeted acquisitions of properties with customer profiles that closely mirror our own, such as the acquisition of
Fortrust, a Denver based data center provider, in September 2017 for a total aggregate purchase price of approximately $137.5
million.
On December 11, 2017, we entered into a purchase agreement to acquire the United States operations of IO Data Centers,
LLC (“IODC”), a leading data center colocation space and solutions provider based in Phoenix, Arizona, including the land and
buildings associated with four state-of-the-art data centers in Phoenix and Scottsdale, Arizona, Edison, New Jersey, and
Columbus, Ohio, for an aggregate cash purchase price of $1,315.0 million (the “Initial IODC Consideration”), plus up to $60.0
million of additional proceeds (including (i) $25.0 million of contingent consideration (the “IODC Contingent Consideration”)
and (ii) $35.0 million of contingent payments associated with the execution of future customer contracts), subject to certain
adjustments as set forth in the purchase agreement (the “IODC Transaction”).
On January 10, 2018, we completed the IODC Transaction. At the closing of the IODC Transaction, we paid
approximately $1,340.0 million of total consideration, consisting of the Initial IODC Consideration and the full amount of the
IODC Contingent Consideration. We financed the consideration for the IODC Transaction with the proceeds from the Equity
Offering, the Over-Allotment Option and the issuance of the 5¼% Notes (each as defined in Notes 4 and 13 to Notes to
Consolidated Financial Statements included in this Annual Report). The existing data center space in the four owned facilities
totals 728,000 square feet, providing 62 megawatts ("MW") of capacity with expansion potential of an additional 77 MW in
Arizona and New Jersey. This acquisition marks a transformative step toward addressing our customers’ data center needs by
dramatically expanding our platform and capabilities. It positions us as a leading data center company with an expanded
platform and ability to offer colocation space in certain leading markets. With this transaction and following the closing of the
aforementioned Credit Suisse acquisition expected in early 2018, our data center portfolio will total more than 90 MW of
existing capacity, with an additional 26 MW of capacity currently under construction and planned and future expansion
potential of another 135 MW.
4
Growth through ABOs
ABOs, which currently primarily consist of our entertainment and fine art storage and services businesses, include
business lines that we consider investing in to grow and diversify our business. We are seeking businesses with long-term,
recurring revenues, 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. 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.
We have been in the entertainment storage and services business for a number of years, providing storage and solutions to
entertainment and media companies in North America. Entertainment and media companies around the globe require
specialized storage facilities and solutions for protecting and preserving their intellectual property ("IP") while maintaining
accessibility with changing technology and uses. Essential to those needs are secure, climate-controlled vaults for physical
media preservation (art, film and audio/video tape) as well as a digital environment capable of protecting that IP from hackers
and data loss. Having a single provider - the physical and digital storage, as well as the capabilities to transform content to new
media formats for monetization and longer-term preservation - provides chain-of-custody for these companies. We are well
positioned to meet these customer needs.
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, since our acquisition of Crozier, we have expanded our fine arts storage business by
acquiring the assets of two art storage and handling companies in the United States: Fairfield Fine Arts in Ridgefield,
Connecticut and Cirkers Brooklyn in Brooklyn, New York.
We believe 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. We believe 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 will result in continued growth of the fine art storage industry.
On September 29, 2017, we completed the acquisition of Bonded Services of America, Inc. and Bonded Services
Acquisition, Ltd. (together, "Bonded"), providers of media asset storage and management services for global entertainment and
media companies, for approximately 62.0 million British pounds sterling (or approximately $83.0 million, based upon the
exchange rate between the British pound sterling and the United States dollar on the closing date of the acquisition of Bonded),
subject to customary adjustments. Bonded provides storage and services for media content preservation, management and
distribution, including fine art vaults and shipping; logistics and distribution; supply chain; and related services for high value
physical and digital assets, including works of art, film, audio and video. Bonded managed more than 10 million of these assets
for its 2,000 clients worldwide, with offices in the United States, Canada, the United Kingdom, France, the Netherlands and
Hong Kong, capable of providing in-house digital services that help media and entertainment companies extend their content
across digital platforms. This acquisition scales our existing entertainment storage and services business and broadens our
geographic footprint.
5
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"), data restoration projects, the storage, assembly, reporting and delivery of customer
marketing literature, or fulfillment services ("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, 2017, we assess the performance of our storage rental
business predominantly by analyzing trends in segment-level storage rental volume and storage rental revenue. Additionally,
our storage operations include technology escrow services.
Records storage consists primarily of the archival storage of records for long periods of time according to applicable
laws, regulations and industry best practices. The secure off-site storage of data backup media is a key component of a
company's disaster recovery and business continuity programs. Storage rental charges are generally billed monthly on a per
storage unit basis and include the provision of space, racking systems, computerized inventory and activity tracking, and
physical security.
Physical Records Storage
Physical records may be broadly divided into two categories: active and inactive. Active records relate to ongoing and
recently completed activities or contain information that is frequently referenced. Active records are usually stored and
managed on-site by their owners to ensure ready availability. Inactive physical records are the principal focus of the storage and
information management services industry and consist of those records that are not needed for immediate access but which
must be retained for legal, regulatory and compliance reasons or for occasional reference in support of ongoing business
operations. Inactive physical records are typically stored for long periods of time with limited activity in cartons packed by the
customer. For some customers, we store individual files on an open shelf basis as these files are typically more active.
Physical records may also include critical or irreplaceable data such as 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 and data backup and storage on our proprietary cloud. 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.
6
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.
In 2017, we launched Iron Mountain Iron Cloud. Iron Cloud is our enterprise-class cloud storage platform and services
offering for comprehensive data protection, preservation, restoration and recovery. With Iron Cloud, organizations can deploy a
hybrid data management strategy with the benefits of a cloud service, but with predictable cost models and integrated security
that scales for enterprises of all sizes, as well as data accessibility through a self-service portal providing transparency and
control for efficient storage operations. Iron Cloud provides on demand block and object storage, accessible through secure
connectivity from the enterprise to Iron Mountain's network of secure data centers. Iron Cloud addresses the critical stages of
enterprise data management with advanced orchestration and automation for managing data sprawl, while securing data in
motion and at rest and catering to the unique security and operational needs of medical imaging, surveillance video and other
specialty media.
Cloud services are increasingly becoming an integral part of many organizations' IT and data environments. As companies
continue to transform their businesses with technology, they are facing data growth and complex challenges of determining
what data to retain, where to store it and how to manage data access. Seeking to address these challenges, organizations are
systematically replacing the practice of retaining data on premises and opting for hybrid models that require reliable and secure
cloud storage. As a cloud storage platform for end-to-end data management, Iron Cloud addresses where to store data and the
challenges of protecting, preserving and accessing data to address business requirements. Our approach to data management
also enables organizations to manage risk by complying with industry standards and implementing advanced schemes to protect
against cyberattacks.
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, 2017, our courier fleet consisted of approximately
4,700 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.
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 IT 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.
7
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 offerings
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 offerings 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, such as 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.
Business Segments
Our North American Records and Information Management Business, North American Data Management Business,
Western European Business, Other International Business and Global Data Center Business segments offer the storage and
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, Global Data Center 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, 2015, 2016 and 2017, 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, 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; and related services offerings, including our Iron Cloud solutions.
8
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 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 Cyprus, the Czech Republic, Denmark, Finland, Greece,
Hungary, Norway, Poland, Romania, Serbia, Slovakia and Turkey; 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
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 and Macau), Hong
Kong, India, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Thailand and the United Arab Emirates. Our
African operations provide Records Management, Data Protection & Recovery and Information Governance and Digital
Solutions in South Africa.
Global Data Center Business
Our Global Data Center segment provides data center facilities to protect mission-critical assets and ensure the continued
operation of our customers’ IT infrastructures, with secure and reliable colocation and wholesale options. As of December 31,
2017, we had data center operations in five markets in the United States including: Denver, Colorado; Kansas City, Missouri;
Boston, Massachusetts; Boyers, Pennsylvania; and Manassas, Virginia and had binding agreements to acquire data center
operations in Arizona, New Jersey and Ohio as well as London and Singapore.
Corporate and Other Business
Our Corporate and Other Business segment primarily consists of the storage, safeguarding and electronic or physical
delivery of physical media of all types and digital content repository systems to house, distribute, and archive key media assets,
primarily for entertainment and media industry clients (“Entertainment Services”), throughout the United States, Canada,
France, Hong Kong, the Netherlands and the United Kingdom, as well as our fine art storage businesses and consumer storage
businesses in the United States. These businesses represent the primary product offerings of our Adjacent Businesses operating
segment. Additionally, our Corporate and Other Business segment includes costs related to executive and staff functions,
including finance, human resources and IT, 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.
9
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 storage rental revenue base also provides the foundation for our service revenues and
increases in 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").
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 of incoming volume from our existing customers, as well as customer satisfaction with our services and
contractual net price increases. On a global basis, 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 2%, 26% and 2% on a global basis for 2015, 2016 and 2017,
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, 2017, we had more than 225,000 customers in a variety of
industries in 53 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, 2015, 2016 and 2017. For each of the
three years 2015 through 2017, the average annual volume reduction due to customers terminating their relationship
with us was approximately 2%.
10
• 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, data center expansion, 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 (including our At The Market (ATM) Equity Program (as defined below),
dependent on market conditions. We made two changes to our capital expenditure categories in 2017. We now
separately identify two additional capital expenditure categories, Innovation and Growth Investment Capital Spend
(previously included within Non-Real Estate Investment) and Data Center Capital Spend (previously primarily
included in Real Estate Investment and Non-Real Estate Investment). We have reclassified the categorization of our
prior year capital expenditures to conform with our current presentation. 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 2018:
Real Estate:
•
•
Investment: 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.
Maintenance: 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:
•
•
Investment: 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.
Maintenance: 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 capital to support initiatives such as sales and marketing and IT projects to support infrastructure
requirements, or Non-Real Estate Maintenance.
Data Center Investment and Maintenance:
•
Defined as capital expenditures that support data center business growth, primarily related to investments in
new construction of data center facilities (including the acquisition of land and development of facilities) or
capacity expansion in existing buildings, as well as capital expenditures that are expected to support
incremental improvements to our data center business, through either increasing revenue, improving
operating efficiency, or extending the useful life of our real estate operating assets. This also includes capital
expenditures necessary to maintain ongoing business operations primarily related to the repair or
maintenance of assets, as well as for the re-configuration of existing assets.
Innovation and Growth Investment:
•
Defined as discretionary capital expenditures in significant new products and services in new, existing or
adjacent business opportunities.
11
The following table presents our capital spend for 2015, 2016 and 2017 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
Data Center Investment and Maintenance Capital Spend
Innovation and Growth Investment Capital Spend
Total Capital Spend (on accrual basis)
Net (decrease) increase in prepaid capital expenditures
Net (increase) decrease accrued capital expenditures(1)
Total Capital Spend (on cash basis)
Year Ended December 31,
2015
2016
2017
$
$
$
151,695
52,826
204,521
$
133,079
63,543
196,622
139,822
77,660
217,482
46,411
23,372
69,783
20,624
—
294,928
(362)
(4,317)
290,249
$
40,509
20,642
61,151
72,728
8,573
339,074
374
(10,845)
328,603
$
56,297
29,721
86,018
92,597
20,583
416,680
1,629
(75,178)
343,131
_______________________________________________________________________________
(1) The amount at December 31, 2017 includes approximately $66,800 related to a capital lease associated with our data
center in Manassas, Virginia.
Competition
We are a global leader in the physical storage and information management services industry with operations in 53
countries as of December 31, 2017. We compete with our current and potential customers' internal storage and information
management services capabilities. We 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 records and
information customers is based on price, reputation and reliability, quality and security of storage, quality of service and scope
and scale of technology, and we believe we generally compete effectively in these areas.
We also compete with numerous data center developers, owners and operators, many of whom own properties similar to
ours in some of the same metropolitan areas where our facilities are located. We believe that competition for data center
customers is based on available power, security considerations, location, connectivity and rental rates, 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. While storage of physical documents continues to grow, 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, 2017, we employed more than 8,400 employees in the United States and more than 15,600
employees outside of the United States. At December 31, 2017, 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 3,600 employees were represented by unions in Latin America (in Argentina, Brazil and Chile).
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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. 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 data center, 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 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.
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
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.
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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. We are 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 "Investors" section on our website, we make available, free of
charge, our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") as soon as reasonably practicable after such forms are filed with or furnished to the SEC. We are not including
the information contained on or available through our website as a part of, or incorporating such information by reference into,
this Annual Report. Copies of our corporate governance guidelines, code of ethics and the charters of our audit, compensation,
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."
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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.
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 continues to
accelerate. 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.
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, the
United States 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 data protection
and privacy laws, or are expected to do so. In Europe, Regulation (EU) 2016/679 (commonly referred to as GDPR) on the
protection of natural persons with regard to the processing of personal data and on the free movement of such data will 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.
The continued emphasis on information security and compliance as well as increasing concerns about government
surveillance may lead customers to request that we take additional measures to enhance security, store electronic data locally,
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 IT 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 IT 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 IT and network infrastructure may be vulnerable to attacks by hackers or breaches due to employee error or other
disruptions. Moreover, our ability to integrate businesses we acquire may challenge our ability to prevent such security
breaches. We have, and expect to continue to, outsource certain accounting, payroll IT, human resource, facility management
and back office support services to third parties, which may subject our IT and other sensitive information to additional risk. A
successful breach of the security of our IT 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, 2017, we operated 1,316 records management, off-site data protection, data center and fine art
storage facilities worldwide, including 627 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 (and other businesses we have acquired or may acquire) 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, information, or other items 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,
data center, Destruction and other services unrelated to records, information and other items stored with us is often limited to a
percentage of annual revenue under the contract; however, some of our contracts with large customers 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 make up a commensurately larger percentage of our customer
contracts, and as we expand our operations in storage of fine arts and other valuable items and respond to customer demands
for higher limitation of liability as a result of regulatory changes, 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, 2017, we provided storage and information management services in 52 countries outside the United
States. Our international operations account for a significant portion of our overall operations, and 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 in foreign countries where
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.
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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
primarily transact 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 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.
Having the United States Government as a customer 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
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 some of 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 IT
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.
Following the consummation of the IODC Transaction, our data center business comprises a greater portion of our overall
operations, increasing the likelihood that significant costs or disruptions at our data centers could adversely affect our
business, financial condition and results of operations.
During 2017 and the first quarter of 2018, we made several acquisitions in the data center space and we expect to
continue to grow our data center business, both organically and through acquisitions. Our data center business depends on
providing customers with highly reliable facilities, power infrastructure and operations solutions, and we will need to retain and
hire qualified personnel to manage our data center business. Service interruptions or significant equipment damage could result
in difficulty maintaining service level commitment obligations that we owe to certain of our customers. Service interruptions or
equipment damage may occur at one or more of our data centers as a result of numerous factors, including:
human error;
equipment failure;
physical, electronic and cyber security breaches;
fire, hurricane, flood, earthquake and other natural disasters;
extreme temperatures;
power loss or telecommunications failure;
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sabotage and vandalism.
Our data center business is susceptible to regional costs of power, power shortages, planned or unplanned power outages
and limitations on the availability of adequate power resources. We rely on third parties to provide power to our data centers.
We are therefore subject to an inherent risk that such third parties may fail to deliver such power in adequate quantities or on a
consistent basis. If the power delivered to our data centers is insufficient or interrupted, we would be required to provide power
through the operation of our on-site generators, generally at a significantly higher operating cost. Additionally, global
fluctuations in the price of power can increase the cost of energy. We may be limited in our ability to, or may not always choose
to, pass these increased costs on to our customers. We also rely on third party telecommunications carriers to provide internet
connectivity to our customers. These carriers may elect not to offer their services within our data centers or may elect to
discontinue such services. Furthermore, carriers may face business difficulties, which could affect their ability to provide
telecommunications services or the quality of such services. If connectivity is interrupted or terminated, our financial condition
and results of operations may be adversely affected. Events such as these may also impact our reputation as a data center
provider which could adversely affect our results of operations.
Our data centers are subject to environmental laws and regulations. For example, our emergency generators are subject to
regulations and permit requirements governing air pollutants, and the heating, ventilation and air conditioning and fire
suppression systems at some of our data centers as well as our data management locations may include ozone-depleting
substances that are subject to regulation. Changes in law or our operations could increase compliance costs or impose
limitations on our operations. While environmental regulations do not normally impose material costs upon operations at our
data centers, unexpected events, equipment malfunctions, human error and changes in law or regulations, among other factors,
could result in unexpected costs due to violation of environmental laws, required permits or additional operation limitations or
costs.
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Furthermore, after giving effect to the IODC Transaction, the Credit Suisse transaction and our acquisition in September
2017 of Mag Datacenters LLC, which operated Fortrust, a Denver-based data center provider, we will have paid an aggregate
cash purchase price of over $1.5 billion for data center businesses in 2017 and the first quarter of 2018. We may be required to
commit significant operational and financial resources in connection with the growth of our data center business. However,
there can be no assurance we will have sufficient customer demand to support these data centers or that we will not be
adversely affected by the risks noted above, which could make it difficult for us to realize expected returns on our investments,
if any.
Our shared service center initiative may not create the operational efficiencies that we expect, and may create risks relating to
the processing of transactions and recording of financial information, which could have an adverse effect on our financial
condition and results of operations.
We have undertaken a shared service center initiative pursuant to which we are centralizing certain finance, human
resources and IT functions. We have and will continue to align the design and operation of our financial control environment as
part of our shared service center initiative. As part of this initiative, we are outsourcing, and will continue to outsource, certain
IT accounting, payroll, IT, facility management, and human resource functions to third party service providers. The parties that
we utilize for these services may not be able to handle the volume of activity or perform the quality of service necessary to
support our operations. The failure of these parties to fulfill their obligations could disrupt our operations. In addition, the move
to a shared service environment, including our reliance on third party providers, may create risks relating to the processing of
transactions and recording of financial information. Particularly during the transition period, we could experience a lapse in the
operation of internal controls due to turnover, lack of legacy knowledge, inappropriate training and use of third party providers,
which could result in significant deficiencies or material weaknesses in our internal control over financial reporting and have an
adverse effect on our 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 IP 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 IP rights are being infringed or
violated by our use of IP. 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 IP on reasonable terms, we may be required
to develop alternative IP 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.
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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, 2017, our total long-term debt was approximately
$7.1 billion. Our substantial indebtedness could have important consequences to our current and potential investors. These risks
include:
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inability to satisfy our obligations with respect to our various debt instruments;
inability to make borrowings to fund future working capital, capital expenditures, strategic opportunities, including
acquisitions and expansions into adjacent businesses, and other general corporate requirements, including possible
required repurchases of our various indebtedness;
limits on our distributions to stockholders; in this regard if these limits prevented us from satisfying our REIT
distribution requirements, we could fail to remain qualified for taxation as a REIT or, if these limits do not jeopardize
our qualification for taxation as a REIT but do nevertheless prevent us from distributing 100% of our REIT taxable
income, we will be subject to federal corporate income tax, and potentially a nondeductible excise tax, on the retained
amounts;
limits on 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;
restrictions on our ability to refinance our indebtedness on commercially reasonable terms;
limits on our flexibility in planning for, or reacting to, changes in our business and the information management
services industry; and
inability to adjust to adverse economic conditions.
In connection with the IODC Transaction, we incurred approximately $825.0 million of additional indebtedness. As a
result of the indebtedness we incurred in connection with the IODC Transaction, we are subject to increased risks associated
with debt financing, including an increased risk that our cash flow could be insufficient to meet required payments on our debt.
Restrictive debt covenants may limit our ability to pursue our growth strategy.
Our indentures and our Credit Agreement contain covenants restricting or limiting our ability to, among other things:
incur additional indebtedness;
pay dividends or make other restricted payments;
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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," as defined in our indentures we will be required to offer to repurchase all
of our outstanding senior or senior subordinated notes. However, it is possible that we will not have sufficient funds at the time
of a change of control to make the required repurchase of any outstanding 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.
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Iron Mountain is a holding company, and, therefore, our ability to make payments on our various debt obligations depends in
large 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.
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 data centers and 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 our results of operations.
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 significant acquisitions, such as IODC and Recall, will depend, in large part, on our
ability to realize the anticipated benefits, including cost savings from combining the acquired businesses with ours. To realize
these anticipated benefits, we must be able to successfully integrate our business and the acquired businesses, and this
integration is complex and time-consuming. We may encounter challenges in the integration process including the following:
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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;
potential unknown liabilities and unforeseen expenses or delays associated with an acquisition; and
our ability to deliver on our strategy going forward.
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Further, our acquisitions subject us to liabilities (including tax liabilities) that may exist at an acquired company, some of
which may be unknown. Although we and our advisors conduct due diligence on the operations of businesses we acquire, there
can be no guarantee that we are aware of all liabilities of an acquired company. These liabilities, and any additional risks and
uncertainties related to an acquired company not known to us or that we may deem immaterial or unlikely to occur at the time
of the acquisition, 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. 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 financial
condition and results of operations.
We may be unable to continue our international expansion.
An important part of our growth strategy involves expanding operations in international markets, including in markets
where we currently do not operate, and we expect to continue this expansion. Europe, Latin America and Australia have been
our primary areas of focus for international expansion, and we have expanded into Asia, Africa and the Middle East to a lesser
extent. We have entered into joint ventures or 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 or 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:
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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.
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. As a result, the purchase prices for the Divestments may be adjusted in accordance with the terms of the
sale agreements. 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. 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.
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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.
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 for taxation 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 applicable REIT 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 on our taxable income at regular corporate income 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.
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As a REIT, failure to make required distributions would subject us to federal corporate income tax.
We expect to continue paying regular quarterly distributions; 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, or in limited circumstances, the following 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 payment of expenses and
the recognition of income and expenses 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, interest expense
deductions limited by Section 163(j) of the Code, 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 on our undistributed taxable income if the actual amount that we distribute to our stockholders for a
calendar year is less than the minimum amount specified under the Code.
We may be required to borrow funds, sell assets or raise equity to satisfy REIT distribution requirements, to comply with asset
ownership tests or to fund capital expenditures, future growth and expansion initiatives.
In order to meet the REIT distribution requirements and maintain our qualification and taxation as a REIT, or to fund
capital expenditures, future growth and expansion initiatives, we may need to borrow funds, sell assets or raise equity, even if
the then-prevailing market conditions are not favorable for these borrowings, sales or offerings. Any insufficiency of our cash
flows to cover our REIT distribution requirements could adversely impact our ability to raise short- and long-term debt, to sell
assets, or to offer equity securities in order to fund distributions required to maintain our qualification and taxation as a REIT.
Furthermore, the REIT distribution requirements may increase the financing we need to fund capital expenditures, future
growth and expansion initiatives, 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
assets or to forgo our pursuit of otherwise attractive investments. These actions may reduce our income and amounts available
for distribution to our stockholders.
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 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 taxable REIT subsidiaries ("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.
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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. In addition,
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.
Our ability to fully deduct our interest expense may be limited, or we may be required to adjust the tax depreciation of our real
property in order to maintain the full deductibility of our interest expense.
December 2017 amendments to the Code, which are described more fully in the Tax Reform section of "Critical
Accounting Policies" within Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
included in this Annual Report (the "Tax Reform Legislation"), limit interest deductions for businesses, whether in corporate or
passthrough form, to the sum of the taxpayer’s business interest income for the tax year and 30% of the taxpayer’s adjusted
taxable income for that tax year. This limitation does not apply to an “electing real property trade or business.” We have not yet
determined whether we or any of our subsidiaries will elect out of the new interest expense limitation or whether any of our
subsidiaries is eligible to elect out, although legislative history indicates that a real property trade or business includes a trade or
business conducted by a corporation or a REIT. Depreciable real property (including specified improvements) held by electing
real property trades or businesses must be depreciated for United States federal income tax purposes under the alternative
depreciation system of the Code, which generally imposes a class life for depreciable real property of up to 40 years.
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 or
colocation or wholesale data center 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. 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 (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. Further, a substantial portion of our TRSs are overseas, and a material change in
foreign currency rates could also negatively impact our ability to remain qualified for taxation as a REIT.
The Tax Reform Legislation has imposed limitations on the ability of our TRSs to utilize specified income tax deductions,
including limits on the use of net operating losses and limits on the deductibility of interest expense. Further, these amendments
made substantial changes to the taxation of international income. Some of these changes did not contemplate what we believe
were unintended consequences of such reforms on REITs with global operations, and we may be required to recognize income
on account of the activities of our foreign TRSs that may not be treated as qualifying income for purposes of the REIT gross
income tests that we are required to satisfy.
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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, 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 our 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.
We will also be subject to a federal corporate level income tax at the highest regular corporate income tax rate (currently
21%, following the enactment of the Tax Reform Legislation) on gains 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 21% 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 as a result of certain accounting method changes that we have made will be fully subject to this
21% tax.
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 by us 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 and may 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 income or gain in the TRSs.
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Distributions payable by REITs generally do not qualify for preferential tax rates.
Dividends payable by United States corporations to noncorporate stockholders, such as individuals, trusts and estates, are
generally eligible for reduced United States federal income tax rates applicable to “qualified dividends.” Distributions paid by
REITs generally are not treated as “qualified dividends” under the Code, and the reduced rates applicable to such dividends do
not generally apply. However, for tax years beginning after 2017 and before 2026, REIT dividends paid to noncorporate
stockholders are generally taxed at an effective tax rate lower than applicable ordinary income tax rates due to the availability
of a deduction under the Code for specified forms of income from passthrough entities. More favorable rates will nevertheless
continue to apply to regular corporate “qualified” dividends, which may cause some investors to perceive that an investment in
a REIT is less attractive than an investment in a non-REIT entity that pays dividends, thereby reducing the demand and market
price of our common stock.
The ownership and transfer restrictions contained in our certificate of incorporation may not protect our qualification for
taxation as a REIT, could have unintended antitakeover effects and may prevent our stockholders from receiving a takeover
premium.
In order for us to remain qualified for taxation as a REIT, no more than 50% of the value of outstanding shares of our
capital stock may be owned, beneficially or constructively, by five or fewer individuals at any time during the last half of each
taxable year other than the first year for which we elected 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.
Legislative or other actions affecting REITs could have a negative effect on us or our stockholders.
At any time, the federal or state income tax laws governing REITs, or the administrative interpretations of those laws,
may be amended. Federal and state tax laws are constantly under review by persons involved in the legislative process, the IRS,
the United States Department of the Treasury (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 TRSs, particularly non-United States TRSs.
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The Tax Reform Legislation has made substantial changes to the Code, particularly as it relates to the taxation of both
corporate income and international income. Among those changes are a significant permanent reduction in the generally
applicable corporate income tax rate and the modification of tax policies, credits and deductions for businesses and individuals.
This legislation also imposes additional limitations on the deduction of net operating losses, which may in the future cause us to
make distributions that will be taxable to our stockholders to the extent of our current or accumulated earnings and profits in
order to comply with the REIT distribution requirements. The effect of these and other changes made in this legislation is
highly uncertain, both in terms of their direct effect on the taxation of an investment in our securities and their indirect effect on
the value of properties owned by us. Furthermore, many of the provisions of the new law will require guidance through the
issuance of Treasury regulations in order to assess their effect. There may be a substantial delay before such regulations are
promulgated, increasing the uncertainty as to the ultimate effect of the statutory amendments on us or our stockholders. It is
also possible that there will be technical corrections legislation proposed with respect to the Tax Reform Legislation, the effect
of which cannot be predicted and may be adverse to us or our stockholders. Our stockholders are encouraged to consult with
their tax advisors about the potential effects that changes in law may have on them and their ownership of our securities.
Risks Related to our Common Stock
Sales or issuances of shares of our common stock may adversely affect the market price of our common stock.
Future sales or issuances of common stock or other equity related securities may adversely affect the market price of our
common stock, including any shares of our common stock issued to finance capital expenditures, finance acquisitions or repay
debt. In October 2017, we established an "at-the-market" stock offering program (the "At The Market (ATM) Equity Program")
with a syndicate of 10 banks (the “Agents”), pursuant to which we may sell, from time to time, up to an aggregate sales price of
$500.0 million of our common stock through the Agents. As of December 31, 2017, we have sold 1,481,053 shares of our common
stock for gross proceeds of approximately $60.0 million under the At The Market (ATM) Equity Program.
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.
Item 1B. Unresolved Staff Comments.
None.
29
Item 2. Properties.
As of December 31, 2017, we conducted operations through 1,131 leased facilities and 307 owned facilities. Our facilities are
divided among our reportable operating segments as follows: North American Records and Information Management Business (654),
North American Data Management Business (56), Western European Business (211), Other International Business (461), Global Data
Center Business (5) and Corporate and Other Business (51). These facilities contain a total of approximately 87.5 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
Montana
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
3
12
2
65
11
6
4
2
34
15
16
5
2
2
2
3
1
16
8
16
15
2
13
1
1
7
—
35
1
23
19
1
13
4
12
27
5
3
7
4
43
2
2
14
6
2
6
493
55
548
312,473
555,701
63,604
4,427,674
539,731
252,474
309,067
40,912
2,375,487
1,157,076
1,403,581
213,010
145,138
164,544
64,000
210,350
9,000
1,647,631
598,281
864,883
1,047,935
171,000
1,248,946
27,490
34,560
276,520
—
2,544,977
37,000
1,215,656
976,504
5,361
799,155
170,428
407,680
1,848,713
210,449
130,559
371,035
166,993
2,244,584
78,148
55,200
726,046
312,763
137,274
316,857
30,916,450
3,263,245
34,179,695
30
1
4
—
15
6
6
1
—
5
5
7
1
1
—
4
2
1
3
8
6
—
—
4
—
3
1
1
10
2
13
3
—
7
3
1
10
1
1
2
5
29
1
—
7
6
—
1
187
16
203
12,621
239,110
—
1,964,572
517,700
665,013
120,921
—
263,930
265,049
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
150,624
—
660,778
140,000
55,621
2,771,483
54,352
12,748
214,238
153,659
2,395,607
90,553
—
605,566
472,896
—
10,655
20,206,599
1,783,258
21,989,857
4
16
2
80
17
12
5
2
39
20
23
6
3
2
6
5
2
19
16
22
15
2
17
1
4
8
1
45
3
36
22
1
20
7
13
37
6
4
9
9
72
3
2
21
12
2
7
680
71
751
325,094
794,811
63,604
6,392,246
1,057,431
917,487
429,988
40,912
2,639,417
1,422,125
2,713,556
344,516
159,338
164,544
482,760
424,975
104,000
1,974,889
1,771,784
1,210,619
1,047,935
171,000
1,622,066
27,490
351,530
383,561
146,467
4,643,980
146,473
2,401,922
1,127,128
5,361
1,459,933
310,428
463,301
4,620,196
264,801
143,307
585,273
320,652
4,640,191
168,701
55,200
1,331,612
785,659
137,274
327,512
51,123,049
5,046,503
56,169,552
Country/State
International
Argentina
Australia
Austria
Belgium
Brazil
Chile
China (including Taiwan and Macau)
Columbia
Cyprus
Czech Republic
Denmark
England
Estonia
Finland
France
Germany
Greece
Hong Kong
Hungary
India
Indonesia
Ireland
Latvia
Lithuania
Malaysia
Mexico
The Netherlands
New Zealand
Northern Ireland
Norway
Peru
Philippines
Poland
Romania
Scotland
Serbia
Singapore
Slovakia
South Africa
South Korea
Spain
Sweden
Switzerland
Thailand
Turkey
United Arab Emirates
Total
Leased
Owned
Total
Number
Square Feet
Number
Square Feet
Number
Square Feet
4
50
1
4
45
11
32
19
1
9
3
47
1
2
35
16
6
10
7
100
—
4
1
2
9
11
6
6
2
5
9
2
20
8
6
2
4
3
14
1
35
6
9
1
8
6
583
1,131
225,334
3,038,770
3,300
202,106
2,984,851
420,084
674,618
577,410
28,514
187,472
161,361
2,207,979
38,861
84,680
2,322,747
743,873
271,207
813,928
350,898
2,887,773
—
33,425
15,145
60,543
451,335
506,284
373,725
413,959
55,310
199,219
445,486
46,855
760,901
351,999
184,298
75,217
239,060
133,567
407,827
1,830
737,659
764,777
203,394
91,191
552,560
40,068
25,371,400
59,551,095
5
2
1
1
7
6
1
—
2
—
—
26
—
—
12
2
—
—
—
—
1
3
—
—
—
8
3
—
—
—
10
—
—
—
4
—
2
—
—
—
6
—
—
2
—
—
104
307
469,748
33,845
30,000
104,391
324,655
232,314
20,518
—
46,246
—
—
1,525,848
—
—
936,486
93,226
—
—
—
—
21,103
158,558
—
—
—
585,931
102,199
—
—
—
301,781
—
—
—
375,294
—
274,100
—
—
—
203,000
—
—
105,487
—
—
5,944,730
27,934,587
9
52
2
5
52
17
33
19
3
9
3
73
1
2
47
18
6
10
7
100
1
7
1
2
9
19
9
6
2
5
19
2
20
8
10
2
6
3
14
1
41
6
9
3
8
6
687
1,438
695,082
3,072,615
33,300
306,497
3,309,506
652,398
695,136
577,410
74,760
187,472
161,361
3,733,827
38,861
84,680
3,259,233
837,099
271,207
813,928
350,898
2,887,773
21,103
191,983
15,145
60,543
451,335
1,092,215
475,924
413,959
55,310
199,219
747,267
46,855
760,901
351,999
559,592
75,217
513,160
133,567
407,827
1,830
940,659
764,777
203,394
196,678
552,560
40,068
31,316,130
87,485,682
The leased facilities typically have initial lease terms of five to ten years with one or more 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.
31
Our Total Building Utilization and Total Racking Utilization by region as of December 31, 2017 for the records and
information management business and data management business are as follows:
Region
North America
Europe(2)
Latin America
Asia
Total
Records and Information Management
Business
Data Management Business(1)
Building
Utilization
Racking
Utilization
Building
Utilization
Racking
Utilization
85%
87%
85%
84%
85%
90%
93%
93%
96%
92%
75%
50%
76%
50%
69%
83%
78%
84%
58%
82%
______________________________________________________________
(1) Total Building Utilization and Total Racking Utilization for our data management business as of December 31, 2017
excludes certain data management operations of Recall, as Recall's unit of measurement for computer media was not
consistent with ours.
(2) Includes the records and information management businesses and data management businesses in South Africa and
United Arab Emirates.
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.
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.
32
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"). Each CDI represents 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 2016 and 2017:
2016
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2017
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Sale Prices
High
Low
$
$
$
$
34.15
39.84
41.50
37.51
37.75
36.70
40.64
41.53
23.64
32.12
35.42
30.75
32.27
32.53
32.92
36.93
The closing price of our common stock on the NYSE on February 9, 2018 was $33.10. As of February 9, 2018, there
were 1,508 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, 2016 and 2017, 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
February 15, 2017
May 24, 2017
July 27, 2017
October 24, 2017
$
0.4750
0.4750
0.4750
0.4850
0.4850
0.4850
0.4850
0.5500
0.5500
0.5500
0.5500
0.5875
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
March 15, 2017
June 15, 2017
September 15, 2017
December 15, 2017
Total
Amount
(in thousands)
99,795
$
100,119
100,213
102,438
102,651
127,469
127,737
145,006
145,235
145,417
146,772
166,319
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
April 3, 2017
July 3, 2017
October 2, 2017
January 2, 2018
During the years ended December 31, 2015, 2016 and 2017, we declared distributions to our stockholders of
$402.6 million, $502.9 million and $603.7 million, respectively. These distributions represent approximately $1.91 per share,
$2.04 per share and $2.27 per share for the years ended December 31, 2015, 2016 and 2017, respectively, based on the
weighted average number of common shares outstanding during each respective year.
On February 14, 2018, we declared a dividend to our stockholders of record as of March 15, 2018 of $0.5875 per share,
payable on April 2, 2018.
33
For federal income tax purposes, distributions to our stockholders are generally treated as nonqualified ordinary
dividends (potentially eligible for the lower effective tax rates available for "qualified REIT dividends" for tax years beginning
after 2017) 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, 2015, 2016 and 2017, 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,
2015
49.3%
2016
45.5%
2017
82.1%
17.9%
21.0%
39.1%
11.6%
—%
33.5%
100.0% 100.0% 100.0%
Dividends paid during the years ended December 31, 2015, 2016 and 2017 which were classified as qualified ordinary
dividends for federal income tax purposes primarily related to the distribution of historical C corporation earnings and profits
related to certain acquisitions completed during the years ended December 31, 2015, 2016 and 2017.
The change in the percentage of our dividends that were characterized as a return of capital in 2015 and 2016 (11.6% and
33.5%, respectively) compared to 2017 (0.0%) is primarily a result of the impact of the Deemed Repatriation Transition Tax (as
defined in Note 7 to Notes to Consolidated Financial Statements included in this Annual Report) associated with the Tax
Reform Legislation that impacted the characterization of our 2017 dividends for United States federal income tax purposes. See
the Tax Reform section of "Critical Accounting Policies" within Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations included in this Annual Report for further disclosure regarding the impact of the Deemed
Repatriation Transition Tax and the Tax Reform Legislation on our 2017 dividends.
At The Market (ATM) Equity Program
In October 2017, we entered into a distribution agreement (the “Distribution Agreement”) with a syndicate of 10 banks
(the “Agents”) pursuant to which we may sell, from time to time, up to an aggregate sales price of $500.0 million of our
common stock through the Agents (the “At The Market (ATM) Equity Program”). Sales of our common stock made pursuant to
the Distribution Agreement may be made in negotiated transactions or transactions that are deemed to be “at the market”
offerings as defined in Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"), including sales made
directly on the NYSE, or sales made to or through a market maker other than on an exchange, or as otherwise agreed between
the applicable Agent and us. We intend to use the net proceeds from sales of our common stock pursuant to the At The Market
(ATM) Equity Program for general corporate purposes, including financing the expansion of our data center business and
adjacent businesses through acquisitions, and repaying amounts outstanding from time to time under the Revolving Credit
Facility (as defined in Note 4 to Notes to Consolidated Financial Statements included in this Annual Report).
During the quarter ended December 31, 2017 under the At The Market (ATM) Equity Program, we sold an aggregate of
1,481,053 shares of common stock for gross proceeds of approximately $60.0 million, generating net proceeds of $59.1 million
after deducting commissions of $0.9 million. As of December 31, 2017, the remaining aggregate sale price of shares of our
common stock available for distribution under the At The Market (ATM) Equity Program was approximately $440.0 million.
Equity Offering
On December 12, 2017, we entered into an underwriting agreement (the “Underwriting Agreement”) with a syndicate of
16 banks (the “Underwriters”), related to the public offering by us of 14,500,000 shares (the “Firm Shares”) of our common
stock (the “Equity Offering”). The offering price to the public for the Equity Offering was $37.00 per share, and we agreed to
pay the Underwriters an underwriting commission of $1.38195 per share. The net proceeds to us from the Equity Offering, after
deducting underwriters' commissions, was $516.5 million.
34
Pursuant to the Underwriting Agreement, we granted the Underwriters a 30-day option to purchase from us up to an
additional 2,175,000 shares of common stock (the “Option Shares”) at the public offering price, less the underwriting
commission and less an amount per share equal to any dividends or distributions declared by us and payable on the Firm Shares
but not payable on the Option Shares (the “Over-Allotment Option”). On January 10, 2018, the Underwriters exercised the
Over-Allotment Option in its entirety. The net proceeds to us from the exercise of the Over-Allotment Option, after deducting
underwriters' commissions and the per share value of the dividend we declared on our common stock on October 24, 2017 (for
which the record date was December 15, 2017) which was paid on January 2, 2018, was approximately $76.2 million. The net
proceeds of the Equity Offering and the Over-Allotment Option, together with the net proceeds from the issuance of the 51/4%
Notes (as defined in Note 4 to Notes to Consolidated Financial Statements included in this Annual Report), were used to
finance the purchase price of the IODC Transaction, which closed on January 10, 2018, and to pay related fees and expenses.
At December 31, 2017, the net proceeds of the Equity Offering, together with the net proceeds from the 51/4% Notes, were used
to temporarily repay borrowings under our Revolving Credit Facility and invest in money market funds.
Unregistered Sales of Equity Securities and Use of Proceeds
We did not sell any unregistered equity securities during the three months ended December 31, 2017, nor did we
repurchase any shares of our common stock during the three months ended December 31, 2017.
35
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,
2013
2014
2015
2016(1)
2017
(In thousands)
$1,784,721
$1,860,243
$1,837,897
$2,142,905
$2,377,557
1,239,902
1,257,450
1,170,079
1,368,548
1,468,021
3,024,623
3,117,693
3,007,976
3,511,453
3,845,578
Cost of sales (excluding depreciation and amortization)
1,288,878
1,344,636
1,290,025
1,567,777
1,685,318
Selling, general and administrative
Depreciation and amortization
Intangible impairments
Loss on disposal/write-down of property, plant and
equipment (excluding real estate), net
924,031
322,037
—
430
869,572
353,143
—
844,960
345,464
—
988,332
452,326
—
984,965
522,376
3,011
1,065
3,000
1,412
799
Total Operating Expenses
2,535,376
2,568,416
2,483,449
3,009,847
3,196,469
Operating Income
Interest Expense, Net
Other Expense, Net
489,247
254,174
75,202
549,277
260,717
65,187
524,527
263,871
98,590
501,606
310,662
44,300
649,109
353,575
79,429
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
Income (Loss) from Discontinued Operations, Net of Tax
Net Income
Less: Net Income Attributable to Noncontrolling
Interests
Net Income Attributable to Iron Mountain Incorporated
(footnotes follow)
159,871
62,127
(1,417)
99,161
831
99,992
223,373
(97,275)
(8,307)
328,955
(209)
328,746
162,066
37,713
(850)
125,203
—
146,644
44,944
(2,180)
103,880
3,353
125,203
107,233
216,105
25,947
(1,565)
191,723
(6,291)
185,432
3,530
96,462
2,627
$ 326,119
1,962
$ 123,241
2,409
$ 104,824
1,611
$ 183,821
$
36
Earnings (Losses) per Share—Basic:
Income from Continuing Operations
Total Income (Loss) from Discontinued Operations
Net Income Attributable to Iron Mountain Incorporated
Earnings (Losses) per Share—Diluted:
Income from Continuing Operations
Total Income (Loss) from Discontinued Operations
Net Income Attributable to Iron Mountain Incorporated
Year Ended December 31,
2013
2014
2015
2016(1)
2017
(In thousands, except per share data)
$
$
$
$
$
$
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
$
0.71
$ (0.02)
0.69
$
0.71
$
$ (0.02)
0.69
$
Weighted Average Common Shares Outstanding—Basic
190,994
195,278
210,764
246,178
265,898
Weighted Average Common Shares Outstanding—Diluted
192,412
196,749
212,118
247,267
266,845
Dividends Declared per Common Share
(footnotes follow)
$ 1.0800
$ 5.3713
$ 1.9100
$ 2.0427
$ 2.2706
Other Data:
Adjusted EBITDA(2)
Adjusted EBITDA Margin(2)
Ratio of Earnings to Fixed Charges
(footnotes follow)
2013
2014
2015
2016(1)
2017
Year Ended December 31,
(In thousands)
$
894,581
$
925,797
$
920,005
$ 1,087,288
$ 1,260,196
29.6%
1.5x
29.7%
1.7x
30.6%
1.5x
31.0%
1.4x
32.8%
1.5x
2013
2014
2015
2016(1)
2017
As of December 31,
(In thousands)
Consolidated Balance Sheet Data:
Cash and Cash Equivalents(3)
$
154,386
$
159,793
$
128,381
$
236,484
$
925,699
Total Assets
6,607,398
6,523,265
6,350,587
9,486,800
10,972,402
Total Long-Term Debt (including Current
Portion of Long-Term Debt)
4,126,115
4,616,454
4,845,678
6,251,181
7,043,271
Redeemable Noncontrolling Interests
—
—
—
54,697
91,418
Total Equity
(footnotes follow)
1,051,734
869,955
528,607
1,936,671
2,298,842
_______________________________________________________________________________
(1) The selected financial data above for 2016 includes the results of Recall from May 2, 2016.
(2) For definitions of Adjusted EBITDA and Adjusted EBITDA Margin, a reconciliation of Adjusted EBITDA to income
(loss) from continuing operations and a discussion of why we believe these non-GAAP measures provide relevant and
useful information to our current and potential investors, see "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations—Non-GAAP Measures" of this Annual Report.
(3) Includes restricted cash of $33.9 million, $33.9 million and $22.2 million as of December 31, 2013, 2014 and 2017,
respectively.
37
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 15 of this Annual Report.
Overview
Acquisitions
a. 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 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)
operating expenditures associated with the Recall Transaction, including: (1) advisory and professional fees to complete the
Recall Transaction; (2) costs associated with 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 approvals (including transitional
services); and (3) costs to integrate Recall with our existing operations, including moving, severance, facility upgrade, REIT
conversion and system upgrade costs, as well as certain costs associated with our shared service center initiative for our
finance, human resources and information technology functions ("Recall Costs"), and (ii) capital expenditures to integrate
Recall with our existing operations. From January 1, 2015 through December 31, 2017, we have incurred cumulative operating
and capital expenditures associated with the Recall Transaction of $313.8 million, including $263.9 million of Recall Costs and
$49.9 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.
b. IODC Acquisition
On December 11, 2017, we entered into a purchase agreement to acquire IODC, a leading data center colocation space
and solutions provider based in Phoenix, Arizona, including the land and buildings associated with four data centers in Phoenix
and Scottsdale, Arizona; Edison, New Jersey; and Columbus, Ohio, for an aggregate cash purchase of the Initial IODC
Consideration, plus up to $60.0 million of additional proceeds (including the IODC Contingent Consideration) and (ii) $35.0
million of contingent payments associated with the execution of future customer contracts), subject to certain adjustments as set
forth in the purchase agreement for the IODC Transaction.
On January 10, 2018, we completed the IODC Transaction. At the closing of the IODC Transaction, we paid
approximately $1,340.0 million of total consideration, including the Initial IODC Consideration and the IODC Contingent
Consideration. We financed the IODC Transaction through the proceeds from the Equity Offering, the Over-Allotment Option
and the issuance of the 5¼% Notes.
38
Divestitures
a. 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 Statements of Operations for the years ended December 31, 2016 and 2017 and the
cash flows associated with the Recall Divestments are presented as a component of cash flows from discontinued operations in
our Consolidated Statements of Cash Flows for the years ended December 31, 2016 and 2017.
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 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, 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, 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, 2015, 2016 and 2017.
b. Iron Mountain - Russia and Ukraine Divestment
On May 30, 2017, Iron Mountain EES Holdings Ltd. ("IM EES"), a consolidated subsidiary of IMI, sold its records and
information management operations in Russia and Ukraine to OSG Records Management (Europe) Limited (“OSG”) in a stock
transaction (the “Russia and Ukraine Divestment”). As consideration for the Russia and Ukraine Divestment, IM EES received
a 25% equity interest in OSG (the "OSG Investment").
We have concluded that the Russia and Ukraine Divestment does not meet the criteria to be reported as discontinued
operations in our consolidated financial statements, 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
these businesses are presented as a component of income (loss) from continuing operations in our Consolidated Statements of
Operations for the years ended December 31, 2015, 2016 and 2017, respectively, 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, 2015, 2016 and 2017, respectively. Our businesses in Russia and Ukraine represent
approximately $16.3 million, $17.5 million and $8.6 million of total revenues for the years ended December 31, 2015, 2016
and 2017, respectively. Our businesses in Russia and Ukraine represent approximately $(16.2) million, $0.3 million and $0.9
million of total (loss) income from continuing operations for the years ended December 31, 2015, 2016 and 2017, respectively.
39
As a result of the Russia and Ukraine Divestment, we recorded a gain on sale of $38.9 million to other expense (income),
net, in the second quarter of 2017, representing the excess of the fair value of the consideration received over the carrying value
of our businesses in Russia and Ukraine. As of the closing date of the Russia and Ukraine Divestment, the fair value of the
OSG Investment was approximately $18.0 million. As of the closing date of the Russia and Ukraine Divestment, the carrying
value of our businesses in Russia and Ukraine was a credit balance of $20.9 million, which consisted of (i) a credit balance of
approximately $29.1 million of cumulative translation adjustment associated with our businesses in Russia and Ukraine that
was reclassified from accumulated other comprehensive items, net, (ii) the carrying value of the net assets of our businesses in
Russia and Ukraine, excluding goodwill, of $4.7 million and (iii) $3.5 million of goodwill associated with our Northern and
Eastern Europe reporting unit (of which our businesses in Russia and Ukraine were a component of prior to the Russia and
Ukraine Divestment), which was allocated, on a relative fair value basis, to our businesses in Russia and Ukraine.
Transformation Initiative
During the third quarter of 2015, we implemented a plan that calls for certain organizational realignments to reduce our
overhead costs, particularly in our developed markets, in order to optimize our selling, general and administrative cost structure
and to support investments to advance our growth strategy (the “Transformation Initiative”). As a result of the Transformation
Initiative, we recorded charges (which are included within selling, general and administrative expenses) of $10.2 million, $6.0
million and $0.5 million for the years ended December 31, 2015, 2016 and 2017, respectively, primarily related to employee
severance and associated benefits.
Costs recorded by segment associated with the Transformation Initiative are as follows (in thousands):
North American Records and Information Management Business
$
5,403
$
2,329
$
275
Year Ended December 31,
2015
2016
2017
North American Data Management Business
Western European Business
Other International Business
Global Data Center Business
Corporate and Other Business
Total
241
1,537
—
—
395
204
—
—
2,986
3,079
$
10,167
$
6,007
$
—
—
—
—
225
500
Through December 31, 2017, we have recorded cumulative charges to our Consolidated Statements of Operations
associated with the Transformation Initiative of $16.7 million.
40
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, technology escrow services that protect
and manage source code, data backup and storage on our proprietary cloud and revenues associated with our data center
operations. Service revenues include charges for related service activities, which include: (1) the handling of records, including
the addition of new records, temporary removal of records from storage, refiling of removed records and the destruction of
records; (2) courier operations, consisting primarily of the pickup and delivery of records upon customer request; (3) secure
shredding of sensitive documents and the related sale of recycled paper, the price of which can fluctuate from period to period;
(4) other services, including the scanning, imaging and document conversion services of active and inactive records, or
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; (10) cloud-related data
protection, preservation, restoration and recovery; and (11) 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, IT, 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 relative to revenue 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 generally 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.
Our consolidated revenues and expenses are subject to the net effect of foreign currency translation related to 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 2015 results at the 2016 average exchange
rates and the 2016 results at the 2017 average exchange rates. Constant currency growth rates are a non-GAAP measure.
41
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,
2016
2017
0.744
0.288
1.356
0.755
1.107
$
$
$
$
$
0.767
0.313
1.288
0.771
1.130
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
$
$
$
$
$
$
$
$
$
$
Percentage
Strengthening /
(Weakening) of
Foreign Currency
3.1 %
8.7 %
(5.0)%
2.1 %
2.1 %
Percentage
Strengthening /
(Weakening) of
Foreign Currency
(1.2)%
(5.6)%
(11.3)%
(3.7)%
(0.3)%
42
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: (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) gain on sale of real estate, net of tax; (5) Recall Costs; and
(6) 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(1)
Provision (Benefit) for Income Taxes
Other Expense (Income), Net
Interest Expense, Net
Loss (Gain) on Disposal/Write-Down of Property, Plant
and Equipment (Excluding Real Estate), Net
Depreciation and Amortization
Intangible Impairments
Recall Costs
REIT Costs(2)
Adjusted EBITDA
Year Ended December 31,
2013
99,161
2014
$ 328,955
2015
$ 125,203
2016
$ 103,880
2017
$ 191,723
$
(1,417)
62,127
75,202
(8,307)
(97,275)
65,187
(850)
37,713
98,590
(2,180)
44,944
44,300
(1,565)
25,947
79,429
254,174
260,717
263,871
310,662
353,575
430
1,065
3,000
1,412
799
322,037
353,143
345,464
452,326
522,376
—
—
—
—
—
—
47,014
131,944
82,867
22,312
—
—
3,011
84,901
—
$ 894,581
$ 925,797
$ 920,005
$1,087,288
$1,260,196
_______________________________________________________________________________
(1) Tax expense associated with the gain on sale of real estate for the years ended December 31, 2013, 2014, 2015, 2016
and 2017 was $0.4 million, $2.2 million, $0.2 million, $0.1 million and $0.0 million, respectively.
(2) Includes costs associated with our conversion to a REIT, excluding REIT compliance costs beginning January 1, 2014
("REIT Costs").
43
Adjusted EPS
Adjusted EPS is defined as reported earnings per share fully diluted from continuing operations excluding: (1) loss (gain)
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,
2013
2014
2015
2016
2017
Reported EPS—Fully Diluted from Continuing Operations
$
0.52
$
1.67
$
0.59
$
0.41
$
0.71
Add/(Deduct):
Income (Loss) Attributable to Noncontrolling Interests
Gain on Sale of Real Estate, Net of Tax
Other Expense (Income), Net
Loss (Gain) on Disposal/Write-down of Property, Plant and
Equipment (Excluding Real Estate), Net
Intangible Impairments
Recall Costs
REIT Costs
Tax Impact of Reconciling Items and Discrete Tax Items(1)
Adjusted EPS—Fully Diluted from Continuing Operations(2)
$
—
(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
$
0.01
(0.01)
0.30
—
0.01
0.32
—
(0.19)
1.16
_______________________________________________________________________________
(1) The difference between our effective tax rate and our structural tax rate (or adjusted effective tax rate) for the years
ended December 31, 2013, 2014, 2015, 2016 and 2017 is primarily due to (i) the reconciling items above, which
impact our reported income (loss) from continuing operations before provision (benefit) for income taxes but have an
insignificant impact on our reported provision (benefit) 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, 2013, 2014, 2015,
2016 and 2017 was 15.0%, 14.4%, 16.8%, 18.5% and 19.7%, respectively.
(2) Columns may not foot due to rounding.
44
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 (loss) 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) Recall Costs; (5) the tax impact of reconciling items and discrete tax items; (6) (income) loss from
discontinued operations, net of tax; and (7) 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):
Loss (Gain) on Disposal/Write-Down of Property,
Plant and Equipment (Excluding Real Estate), Net
Other Expense (Income), Net(3)
Recall Costs
REIT Costs
Intangible Impairments
Year Ended December 31,
2014
$ 328,746
2015
$ 125,203
2016
$ 107,233
2017
$ 185,432
184,170
(8,307)
504,609
178,800
(850)
303,153
226,258
(2,180)
331,311
259,287
(1,565)
443,154
1,065
65,187
—
22,312
—
3,000
98,590
47,014
—
—
1,412
44,300
131,944
—
—
799
79,429
84,901
—
3,011
Tax Impact of Reconciling Items and Discrete Tax
Items(4)
(Income) Loss from Discontinued Operations, Net of
Tax(5)
FFO (Normalized)
(142,194)
(14,480)
(15,019)
(49,865)
209
—
$ 451,188
$ 437,277
(3,353)
$ 490,595
6,291
$ 567,720
_______________________________________________________________________________
(1) Includes depreciation expense related to real estate assets (land improvements, buildings, building improvements, leasehold
improvements and racking).
(2) Tax expense associated with the gain on sale of real estate for the years ended December 31, 2014, 2015, 2016 and 2017 was
$2.2 million, $0.2 million, $0.1 million and $0.0 million, respectively.
(3) Includes foreign currency transaction losses, net of $58.3 million, $70.9 million, $20.4 million and $43.2 million for the
years ended December 31, 2014, 2015, 2016 and 2017, respectively. See Note 2.v. to Notes to Consolidated Financial
Statements included in this Annual Report for additional information regarding the components of Other expense (income),
net.
(4) Represents the tax impact of (i) the reconciling items above, which impact our reported income (loss) from continuing
operations before provision (benefit) for income taxes but have an insignificant impact on our reported provision (benefit)
for income taxes and (ii) other discrete tax items. Discrete tax items resulted in a (benefit) provision for income taxes of
$(140.8) million, $(14.6) million, $(2.4) million and $(38.3) million for the years ended December 31, 2014, 2015, 2016 and
2017, respectively.
(5) Net of tax provision (benefit) of $0.0 million, $0.0 million, $0.8 million and $(1.8) million for the years ended December 31,
2014, 2015, 2016 and 2017, respectively.
45
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.
During the third quarter of 2017, we adopted Accounting Standards Update No. 2017-01, Business Combinations (Topic
805): Clarifying the Definition of a Business ("ASU 2017-01"). ASU 2017-01 provides guidance for evaluating whether
transactions should be accounted for as acquisitions of assets or businesses. The guidance provides a screen to determine when
an integrated set of assets and activities does not qualify to be a business. The screen requires that when substantially all of the
fair value of the gross assets acquired is concentrated in an identifiable asset or a group of similar identifiable assets, the
acquisition should not be accounted for as the acquisition of a business, but rather the acquisition of an asset. If an acquisition
is determined to be a business, goodwill is recognized as part of purchase accounting, whereas with the acquisition of an asset
there is no goodwill recognized.
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 and lease-based 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.
46
Of the net assets acquired in our acquisitions, the fair value of owned buildings, customer relationship and lease-based
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 and lease-based 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 and leased-based 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 and lease-based
intangible assets, which requires a significant amount of judgment by management, including estimating expected lives of the
relationships, expected future cash flows and discount rates.
Of the key assumptions that impact the estimated fair values of customer relationship intangible assets, the expected
future cash flows and discount rate are among the most sensitive and are considered to be critical assumptions. To illustrate the
sensitivity of changes in key assumptions used in determining the fair value of customer relationship intangible assets acquired
in the Bonded Transaction (one of our more significant acquisitions in fiscal year 2017), a hypothetical increase of 10% in the
expected annual future cash flows attributable to the Bonded Transaction, with all other assumptions unchanged, would have
increased the calculated fair value of the acquired customer relationship intangible assets for the Bonded Transaction by
$4.7 million (or 10.1%), 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 Bonded Transaction by $3.9 million (or 8.4%), 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.
47
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, 2015 and 2016, concluding that no goodwill was impaired as of such dates. We performed
our annual goodwill impairment review as of October 1, 2017 and, as a result of that review, we determined that the fair value
of the Consumer Storage reporting unit (formerly referred to as the Adjacent Businesses - Consumer Storage reporting unit)
was less than its carrying value and, therefore, we recorded a $3.0 million impairment charge on the goodwill associated with
this reporting unit during the fourth quarter of 2017, which represents a write-off of all goodwill associated with this reporting
unit. We concluded that goodwill associated with the remainder of our reporting units was not impaired as of October 1, 2017.
Our reporting units at which level we performed our goodwill impairment analysis as of October 1, 2017 were as follows: (1)
North American Records and Information Management; (2) North American Data Management; (3) Global Data Center; (4)
Consumer Storage; (5) Fine Arts (formerly referred to as the Adjacent Businesses - Fine Arts reporting unit); (6) Western
Europe; (7) Northern/Eastern Europe and Middle East, Africa and India (the "NEE and MEAI reporting unit"); (8) Latin
America; (9) Australia and New Zealand; and (10) Asia (formerly referred to as the Southeast Asia reporting unit). See Note
2.h. to Notes to Consolidated Financial Statements included in this Annual Report for a description of our reporting units.
Based on our goodwill impairment analysis as of October 1, 2017, our North American Records and Information
Management, North American Data Management, Western Europe, NEE and MEAI and Asia reporting units had estimated fair
values that exceeded their carrying values by greater than 20%. These reporting units represent approximately $3,538.2 million,
or 86.9%, of our consolidated goodwill balance at December 31, 2017. Our Global Data Center reporting unit does not have
goodwill. Our Consumer Storage reporting unit as of December 31, 2017 does not have goodwill, as the $3.0 million
impairment charge disclosed above represented a full write-down of the goodwill associated with this reporting unit. Our Fine
Arts, Latin America and Australia and New Zealand reporting units had estimated fair values that exceeded their carrying
values by less than 20%. These reporting units (including the Entertainment Services reporting unit that was created in the
fourth quarter of 2017, as described below) represent approximately $532.1 million, or 13.1%, of our consolidated goodwill
balance at December 31, 2017. The following is a summary of the Fine Arts, Latin America and Australia and New Zealand
reporting units, including goodwill balances (in thousands), percentage by which the fair value of these reporting units
exceeded its carrying value, and certain key assumptions used by us in determining the fair value of the reporting unit as of
October 1, 2017:
Reporting Unit
Fine Arts
Latin America
Australia and New Zealand
Goodwill
balance at
October 1,
2017
$
25,527
163,450
317,477
Percentage by
which the fair
value of the
reporting unit
exceeded the
reporting unit
carrying value as
of October 1, 2017
*
19.6%
9.2%
Key assumptions in the fair value of reporting unit
measurement as of October 1, 2017
Average
annual
contribution
margin used
in
discounted
cash flow
24.0%
28.0%
33.0%
Average
annual
capital
expenditures
as
percentage
of revenue(1)
9.0%
8.0%
6.0%
Discount
rate
13.0%
10.3%
7.0%
Terminal
growth
rate(2)
2.0%
2.0%
1.5%
_______________________________________________________________________________
* The fair value of the reporting unit approximates the carrying value of the reporting unit at October 1, 2017.
(1) For purposes of our goodwill impairment analysis, the term "capital expenditures" includes both growth investment
and maintenance capital expenditures.
(2) Terminal growth rates are applied in year ten of our discounted cash flow analysis.
48
As described below, reporting unit valuations are generally determined using a combined approach based on the Income
Approach and Market Multiple Approach (both as defined below). There are inherent uncertainties and judgments involved
when determining the fair value of the reporting units for purposes of our annual goodwill impairment testing. The following
includes supplemental information to the table above for those reporting units where the estimated fair values exceeded their
carrying values by less than 20% as of October 1, 2017. The success of each of these businesses and the achievement of certain
key assumptions developed by management and used in the discounted cash flow analyses are contingent upon various factors
including, but not limited to, (i) achieving volume growth from existing customers, (ii) sales to new customers, (iii) increased
market penetration, (iv) successful execution of pricing initiatives and (v) successful facility optimization and site consolidation
plans.
Our Fine Arts business operates in a growing, but fragmented, industry marked by increasing international interest and
changes in purchasing habits by collectors and museums. We believe the increase in contemporary art as a focus for collectors
will result in increasing 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 will result in continued growth of the fine art storage industry. The fine arts storage
market continues to change and expand, and the assumptions used when determining the fair value of the Fine Arts reporting
unit reflect this growth potential and the capital needs required to respond to the expansion opportunities. The Fine Arts
reporting unit is primarily composed of a business we acquired in the fourth quarter of 2015; therefore, we would expect the
fair value of this reporting unit to closely approximate carrying value.
Our Australia and New Zealand business operates in a more mature and established market. In 2016, we completed the
sale of the Australia Divestment Business, which consisted of the majority of our legacy business in Australia as it existed prior
to the Recall Transaction. Accordingly, our Australia and New Zealand business is primarily comprised of the Australia and
New Zealand businesses we acquired as part of the Recall Transaction in 2016. Therefore, we would expect the fair value of
this reporting unit to closely approximate its carrying value.
Our Latin America business operates in emerging markets. The success of this business is driven by our ability to improve
contribution margin through operational efficiencies. We have completed many acquisitions in our Latin America business over
the past several years and we continue to integrate these acquisitions into our existing operations. Our ability to drive our
growth agenda while also maintaining cost discipline as we integrate our acquisitions will be important to the success of our
Latin America business.
Key factors that could reasonably be expected to have a negative impact on the estimated fair value of these reporting
units and potentially result in impairment charges include, but are not limited to: (i) a deterioration in general economic
conditions, (ii) significant adverse changes in legal factors or in the business climate, and (iii) adverse actions or assessment by
regulators, all of which could result in adverse changes to the key assumptions used in valuing the reporting units. The inability
to meet the assumptions used in the Income Approach and Market Approach for each of the reporting units, or future adverse
market conditions not currently known, could lead to a fair value that is less than the carrying value in any one of our reporting
units.
As of December 31, 2017, no factors were identified that would alter our October 1, 2017 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. As described more fully in Note 2.h. to Notes to Consolidated Financial
Statements included in this Annual Report, during the fourth quarter of 2017, as a result of changes in the management of our
entertainment storage and services business, we reassessed the composition of our reportable operating segments as well as our
reporting units. We determined that our entertainment storage and services businesses in the United States and Canada, which
were previously included within our North American Data Management reporting unit, were being managed in conjunction
with our entertainment storage and services businesses in France, Hong Kong, the Netherlands and the United Kingdom (the
majority of which were acquired during the third quarter of 2017 as part of the Bonded Transaction). This newly formed
reporting unit is referred to as the Entertainment Services reporting unit. The fair value of the Entertainment Services reporting
unit closely approximated its carrying value as of December 31, 2017.
Reporting unit valuations are generally determined using a combined approach based on the present value of future cash
flows (the "Income Approach") and market multiples (the "Market Multiple Approach"). 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.
49
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, 2017. With respect to the North American Records and Information Management, North American Data
Management, Western Europe, NEE and MEAI and Asia reporting units as of October 1, 2017, we noted that, based on the
estimated fair value of these reporting units determined as of October 1, 2017, (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, 2017 by approximately 10.0% 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, 2017 by a range of approximately 6.1% to 7.8% 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 Fine Arts, Latin America and Australia and New Zealand reporting units, we noted that, as of October 1,
2017, the estimated fair value of these reporting units exceeds their carrying value by less than 20%. 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.
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 income tax purposes or TRSs. We will also be subject to a separate corporate income tax on any gains recognized on the
sale or disposition of any asset previously owned by a C corporation during a five-year period following the date on which that
asset was first owned by a REIT that are attributable to "built-in" gains with respect to that asset on that date (e.g. with respect
to the REIT conversion, 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 income tax rates. Even if we remain qualified for taxation as a REIT, we may be subject
to some federal, state, local and foreign taxes on our income and property in addition to taxes owed with respect to our TRS
operations. In particular, while state income tax regimes often parallel the federal income tax regime for REITs, many states do
not completely follow federal rules and some do not follow them at all.
Accounting for income taxes requires the recognition of deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the tax and financial reporting bases of assets and liabilities and for loss and
credit carryforwards. 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 2036, of $66.3 million at December
31, 2017 to reduce future federal taxable income, of which $1.7 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 2018 through 2036, of which an insignificant state tax benefit is expected to be
realized. We have assets for foreign net operating losses of $103.6 million, with various expiration dates (and in some cases no
expiration date), subject to a valuation allowance of approximately 59%. 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.
50
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, 2016
and 2017, we had approximately $59.5 million and $38.5 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.
Following our conversion to a REIT in 2014, we concluded that it was not our intent to reinvest our current and future
undistributed earnings of our foreign subsidiaries indefinitely outside the United States.
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 $230.0 million as of December 31, 2017.
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).
51
Tax Reform
On December 22, 2017, the Tax Reform Legislation was enacted into law in the United States. The Tax Reform
Legislation amends the Code to reduce tax rates and modify policies, credits and deductions for businesses and individuals. The
following summarizes certain components of the Tax Reform Legislation that had an impact on our results of operations for the
taxable year ended December 31, 2017, or that we expect could have an impact on our results of operations in future taxable
periods:
a. Corporate Tax Rate Reduction
The Tax Reform Legislation reduced the United States corporate federal income tax rate from 35% to 21% for taxable
years beginning after December 31, 2017 (the “U.S. Federal Rate Reduction”). Our deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be realized or settle. As a result of the Tax Reform Legislation being enacted prior to December 31, 2017, our
consolidated balance sheet as of December 31, 2017 reflects the revaluation of our deferred tax assets and liabilities based upon
the U.S. Federal Rate Reduction. During the fourth quarter of 2017, we recorded a discrete tax benefit of approximately $4.7
million, representing the revaluation of our deferred tax assets and liabilities as a result of the U.S. Federal Rate Reduction
included in the Tax Reform Legislation.
Beginning with our taxable year ending December 31, 2018, we expect that the U.S. Federal Rate Reduction will both
increase the after-tax earnings of our TRSs and result in a lower overall structural tax rate (or adjusted effective tax rate)
compared to our taxable year ended December 31, 2017.
b. Deemed Repatriation Transition Tax
The Tax Reform Legislation imposes a transition tax (the “Deemed Repatriation Transition Tax”) on a mandatory deemed
repatriation of post-1986 undistributed foreign earnings and profits not previously subject to United States tax as of November
2, 2017 or December 31, 2017, whichever is greater (the “Undistributed E&P”) as of the last taxable year beginning before
January 1, 2018. The Deemed Repatriation Transition Tax varies depending on whether the Undistributed E&P is held in liquid
(as defined in the Tax Reform Legislation) or non-liquid assets. A participation deduction against the deemed repatriation will
result in a Deemed Repatriation Transition Tax on Undistributed E&P of 15.5% if held in cash and liquid assets and 8% if held
in non-liquid assets. The Deemed Repatriation Transition Tax applies regardless of whether or not an entity has cash in its
foreign subsidiaries and regardless of whether the entity actually repatriates the Undistributed E&P back to the United States.
Our current estimate of the amount of Undistributed E&P deemed repatriated under the Tax Reform Legislation in our
taxable year ending December 31, 2017 is approximately $186.0 million (the “Estimated Undistributed E&P”). We have opted
to include the full amount of Estimated Undistributed E&P in our 2017 taxable income, rather than spread it over eight years
(as permitted by the Tax Reform Legislation). Accordingly, included in our REIT taxable income for 2017 is approximately
$82.0 million related to the deemed repatriation of Undistributed E&P (the “Deemed Repatriation Taxable Income”). 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 gains) each year to our stockholders.
We have considered the Estimated Undistributed E&P when determining the federal income tax characterization of our
2017 dividends (see Note 13 to Notes to Consolidated Financial Statements included in this Annual Report). As a result of the
inclusion of the Estimated Undistributed E&P in 2017, $0.531000 per share, or approximately 90%, of the cash dividend paid
on January 2, 2018 with a record date of December 15, 2017 (the “January 2018 Distribution”) has been treated as a 2017
distribution for United States federal income tax purposes and $0.056500, or approximately 10%, of the January 2018
Distribution will be treated as a 2018 distribution for United States federal income tax purposes.
Our current estimate of Estimated Undistributed E&P includes certain assumptions made by us regarding the cumulative
earnings and profits of our foreign subsidiaries, as well as the characterization of such Estimated Undistributed E&P (liquid
versus non-liquid assets). In 2018, we will perform additional analysis to determine the actual amount of Undistributed E&P
associated with our foreign subsidiaries, as well as the characterization of such Undistributed E&P. We do not believe this will
have an impact on our provision for income taxes or our qualification as a REIT. However, it may impact our shareholder
dividend reporting.
52
c. Full Expensing of Qualified Property
The Tax Reform Legislation permits us to expense 100% of the cost of qualified property placed in service after
September 27, 2017 and before January 1, 2023 (the “Full Expensing Provision”). The Full Expensing Provision is phased
down by 20% per calendar year beginning in 2023, with normal depreciation rules applicable after that. We elected to fully
expense qualified property placed in service after September 27, 2017. Our application of the Full Expensing Provision in our
2017 taxable year resulted in a $3.8 million reduction of 2017 taxable income, resulting in a reduction of cash taxes of
approximately $1.3 million.
Beginning with our taxable year ending December 31, 2018, we expect the Full Expensing Provision to result in higher
deductions being available to us, primarily associated with our United States TRSs, for purposes of determining our United
States federal taxable income, which we expect will result in lower overall normalized cash taxes compared to our taxable year
ended December 31, 2017.
d. Global Intangible Low-Taxed Income
For taxable years beginning after December 31, 2017, the Tax Reform Legislation introduces new provisions intended to
prevent the erosion of the United States federal income tax base through the taxation of certain global intangible low-taxed
income (“GILTI”). GILTI creates a new requirement that certain income earned by controlled foreign corporations (“CFCs”)
must be included currently in the gross income of the CFC’s United States tax resident shareholder. Generally, GILTI is the
excess of the United States shareholders’ pro rata portion of the income of its foreign subsidiaries over the net deemed tangible
income return of such subsidiaries.
GILTI also provides for certain deductions against the inclusion of GILTI in taxable income; however, REITs are not
eligible for such deductions. Therefore, 100% of our GILTI will be included in our taxable income and will increase the
required minimum distribution to our stockholders, similar to the Subpart F income inclusion we are subject to today.
We are currently in the process of developing our estimates of GILTI. Provided that the income associated with GILTI
will be treated as qualifying income for purposes of the REIT gross income tests that we are required to satisfy, we do not
expect GILTI to impact our provision for income taxes. However, we do expect GILTI to impact the United States federal
income tax characterization of dividends that we expect to pay in future taxable years. Please see "Risks Related to our
Taxation as a REIT" within Item 1A. Risk Factors included in this Annual Report for additional information regarding the
uncertainty pertaining to income that we are required to recognize on account of the Tax Reform Legislation being treated as
qualifying income for purposes of the REIT gross income tests that we are required to satisfy.
e. Interest Deduction Limitation
The Tax Reform Legislation also limits, for certain entities, the deduction for net interest expense to the sum of business
interest income plus 30% of adjusted taxable income (the “Interest Deduction Limitation”). Adjusted taxable income is defined
in the Tax Reform Legislation similar to earnings before interest, taxes, depreciation and amortization ("EBITDA") for taxable
years beginning after December 31, 2017 and before January 1, 2022, and is defined similar to earnings before interest and
taxes ("EBIT") for taxable years beginning after December 31, 2021.
The Interest Deduction Limitation does not apply to companies that make an election to be treated as a “real property
trade or business”. We are currently in the process of determining if we will be subject to the Interest Deduction Limitation, in
order to determine whether or not to elect to be treated as a “real property trade or business” under the Tax Reform Legislation.
If we do not elect to be treated as a “real property trade or business”, we will remain subject to the Interest Deduction
Limitation and may be limited in the amount of interest expense we can deduct for United States federal income tax purposes
beginning in our taxable year ending December 31, 2018. If we do elect to be treated as a “real property trade or business”, we
will be required to utilize the alternative depreciation system (“ADS”) for our real property. The use of the ADS may result in a
tax accounting method change, which could require us to pay additional cash taxes in future taxable years.
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.
53
Results of Operations
Comparison of Year Ended December 31, 2017 to Year Ended December 31, 2016 and Comparison of Year Ended
December 31, 2016 to Year Ended December 31, 2015 (in thousands):
Year Ended December 31,
Revenues
Operating Expenses
Operating Income
Other Expenses, Net
Income from Continuing Operations
Income (Loss) from Discontinued Operations, Net of Tax
Net Income
Net Income Attributable to Noncontrolling Interests
$
2016
3,511,453
3,009,847
501,606
397,726
103,880
3,353
107,233
2,409
Net Income Attributable to Iron Mountain Incorporated $
104,824
Adjusted EBITDA(1)
Adjusted EBITDA Margin(1)
2017
3,845,578
3,196,469
649,109
457,386
191,723
(6,291)
185,432
1,611
183,821
1,260,196
$
$
$
$
1,087,288
31.0%
32.8%
Year Ended December 31,
$
2015
3,007,976
2,483,449
524,527
399,324
125,203
—
125,203
1,962
123,241
920,005
2016
3,511,453
3,009,847
501,606
397,726
103,880
3,353
107,233
2,409
104,824
1,087,288
31.0%
Revenues
Operating Expenses
Operating Income
Other Expenses, Net
Income from Continuing Operations
Income (Loss) from Discontinued Operations, Net of Tax
$
Net Income
Net Income Attributable to Noncontrolling Interests
Net Income Attributable to Iron Mountain Incorporated $
$
Adjusted EBITDA(1)
Adjusted EBITDA Margin(1)
_______________________________________________________________________________
30.6%
$
$
Dollar
Change
334,125
186,622
147,503
59,660
87,843
(9,644)
78,199
(798)
78,997
172,908
Percentage
Change
9.5 %
6.2 %
29.4 %
15.0 %
84.6 %
(287.6)%
72.9 %
(33.1)%
75.4 %
15.9 %
Dollar
Change
Percentage
Change
503,477
526,398
(22,921)
(1,598)
(21,323)
3,353
(17,970)
447
(18,417)
167,283
16.7 %
21.2 %
(4.4)%
(0.4)%
(17.0)%
100.0 %
(14.4)%
22.8 %
(14.9)%
18.2 %
$
$
$
$
$
$
(1) See "Non-GAAP Measures—Adjusted EBITDA" in this Annual Report for the definitions of Adjusted EBITDA and
Adjusted EBITDA Margin, reconciliation of Adjusted EBITDA to Income (Loss) from Continuing Operations and a
discussion of why we believe these non-GAAP measures provide relevant and useful information to our current and
potential investors.
54
REVENUES
Storage Rental
Service
Total Revenues
Storage Rental
Service
Total Revenues
Year Ended December 31,
2016
2,142,905
1,368,548
3,511,453
$
$
2017
2,377,557
1,468,021
3,845,578
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
234,652
99,473
334,125
Dollar
Change
305,008
198,469
503,477
$
$
$
$
$
$
$
$
Percentage Change
Actual
Constant
Currency(1)
Internal
Growth(2)
11.0%
7.3%
9.5%
10.4%
6.6%
8.9%
3.9 %
(0.3)%
2.3 %
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 %
_______________________________________________________________________________
(1) Constant currency growth rates are calculated by translating the 2016 results at the 2017 average exchange rates and
the 2015 results at the 2016 average exchange rates.
(2) Our internal revenue growth rate, which is a non-GAAP measure, represents the 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 through the one-year anniversary of the Recall Transaction. Our
internal revenue growth rate includes the impact of acquisitions of customer relationships.
Storage Rental Revenues
In the year ended December 31, 2017, the increase in reported consolidated storage revenue was driven by the favorable
impact of acquisitions/divestitures, consolidated internal storage rental revenue growth and favorable fluctuations in foreign
currency exchange rates. The net impact of acquisitions/divestitures contributed 6.5% to the reported storage rental revenue
growth rate for the year ended December 31, 2017 compared to the prior year period, primarily driven by our acquisition of
Recall. Internal storage rental revenue growth of 3.9% in the year ended December 31, 2017 compared to the prior year period
was driven by internal storage rental revenue growth of 3.2% in our North American Records and Information Management
Business segment, due to net price increases, as well as internal storage rental revenue growth of 2.4%, 2.3% and 6.6% in our
North American Data Management Business, Western European Business and Other International Business segments,
respectively, primarily driven by volume increases. Excluding the impact of acquisitions/divestitures, global records
management net volumes as of December 31, 2017 increased by 1.1% over the ending volume as of December 31, 2016.
Global records management reported net volumes, including acquisitions/divestitures, as of December 31, 2017 increased by
1.7% over the ending volume at December 31, 2016, supported by volume increases of 1.7% and 6.0% in our Western
European Business and Other International Business segments, respectively. Ending net volume including acquisitions/
divestitures at December 31, 2017 in our North American Records and Information Management Business segment was flat
compared to the ending net volume at December 31, 2016 due to customers generating fewer documents requiring storage.
Foreign currency exchange rate fluctuations increased our reported storage rental revenue growth rate for the year ended
December 31, 2017 by 0.6%, compared to the prior year period.
55
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 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%, 1.9%, 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 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.
Service Revenues
In the year ended December 31, 2017, the increase in reported consolidated service revenue was driven by the favorable
impact of acquisitions/divestitures and favorable fluctuations in foreign currency exchange rates, partially offset by negative
internal service revenue growth compared to the year ended December 31, 2016. The net impact of acquisitions/divestitures
contributed 6.9% to the reported service revenue growth rate for the year ended December 31, 2017, compared to the prior year
period, primarily driven by our acquisition of Recall. Foreign currency exchange rate fluctuations increased our reported
service revenue growth for the year ended December 31, 2017 by 0.7%, compared to the prior year period. Internal service
revenue growth was negative 0.3% for the year ended December 31, 2017, compared to the prior year period. The negative
internal service revenue growth for the year ended December 31, 2017 reflects continued declines in retrieval/re-file activity
and the related decrease in transportation revenues within our North American Records and Information Management Business
and Western European Business segments as well as declines in service revenue activity levels in our North American Data
Management Business segment, as the storage business becomes more archival in nature, and declines in project activity in our
Other International Business segment. These declines were partially offset by growth in secure shredding revenues in our North
American Records and Information Management Business segment, in part due to higher recycled paper prices and increased
project activity in our Western European Business segment.
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 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 10.2% 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.
56
Total Revenues
For the reasons stated above, our reported consolidated revenues increased $334.1 million, or 9.5%, to $3,845.6 million
for the year ended December 31, 2017 from $3,511.5 million for the year ended December 31, 2016. The net impact of
acquisitions/divestitures contributed 6.6% to the reported consolidated revenue growth rate for the year ended December 31,
2017 compared to the prior year period, primarily driven by our acquisition of Recall. Consolidated internal revenue growth
was 2.3% in the year ended December 31, 2017 compared to the prior year period. Foreign currency exchange rate fluctuations
increased our reported consolidated revenue by 0.6% in the year ended December 31, 2017 compared to the prior year period,
primarily due to the strengthening of the Australian dollar, Brazilian real, Canadian dollar and the Euro against the United
States dollar, somewhat offset by the weakening of the British pound sterling against the United States dollar, based on an
analysis of weighted average rates for the comparable periods.
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 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 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 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.
Internal Growth—Eight-Quarter Trend
2016
2017
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Storage Rental Revenue
Service Revenue
Total Revenue
2.2%
1.6%
2.0%
2.1 %
(2.1)%
0.4 %
2.1 %
(1.3)%
0.8 %
2.9 %
(0.9)%
1.4 %
3.0%
0.6%
2.0%
4.8 %
(1.1)%
2.5 %
3.5 %
(0.2)%
2.0 %
4.2 %
(0.1)%
2.5 %
We expect our consolidated internal storage rental revenue growth rate for 2018 to be approximately 3.0% to 3.5%.
During the past eight quarters, our internal storage rental revenue growth rate has ranged between 2.1% and 4.8%.
Consolidated internal storage rental revenue growth and consolidated total internal revenue growth benefited by approximately
0.8% and 0.5%, respectively, in the second quarter of 2017, from a $4.2 million customer termination fee in our Global Data
Center Business segment. Our internal storage rental revenue growth rates have improved over the past two fiscal years, as
internal storage rental revenue growth for full year 2016 and 2017 was 2.3% and 3.9%, respectively. At various points in the
economic cycle, internal storage rental revenue growth may be influenced by changes in pricing and volume. In North America,
internal storage rental revenue growth in 2017 resulted primarily from price increases in our North American Records and
Information Management Business segment as well as internal storage rental revenue growth in our North American Data
Management Business segment, although North America volume continues to be flat due to customers generating fewer
documents requiring storage. In 2018, we expect this trend of flat to modestly decreasing volume growth to continue with
organic growth to come primarily from increased pricing in our North American Records and Information Management
Business and North American Data Management Business segments and volume growth in our Other International Business
segment. 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 mid to 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.
57
OPERATING EXPENSES
Cost of Sales
Consolidated cost of sales (excluding depreciation and amortization) consists of the following expenses (in thousands):
Percentage
Change
% of
Consolidated
Revenues
Dollar
Change
Actual
Constant
Currency
2016
2017
Year Ended December 31,
Labor
Facilities
$
Transportation
Product Cost of Sales
and Other
Recall Costs
$
$
2016
756,525
522,696
132,183
144,410
11,963
2017
786,314
581,112
142,184
155,215
20,493
29,789
58,416
10,001
10,805
8,530
Total Cost of Sales
$ 1,567,777
$ 1,685,318
$
117,541
Labor
Facilities
$
Transportation
Product Cost of Sales
and Other
Recall Costs
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
3.9%
11.2%
7.6%
7.5%
71.3%
7.5%
3.2% 21.5% 20.4%
10.4% 14.9% 15.1%
6.9% 3.8%
3.7%
6.5% 4.1%
67.3% 0.3%
4.0%
0.5%
6.7% 44.6% 43.8%
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%
Percentage
Change
(Favorable)/
Unfavorable
(1.1)%
0.2 %
(0.1)%
(0.1)%
0.2 %
(0.8)%
Percentage
Change
(Favorable)/
Unfavorable
—%
0.7%
0.4%
0.2%
0.3%
1.7%
Total Cost of Sales
$ 1,290,025
$ 1,567,777
$
277,752
21.5%
24.8% 42.9% 44.6%
Labor
Labor expenses decreased to 20.4% of consolidated revenues in the year ended December 31, 2017 compared to 21.5% in
the year ended December 31, 2016. The decrease in labor expenses as a percentage of consolidated revenues was primarily
driven by an approximately 100 basis point decrease in labor expenses associated with our North American Records and
Information Management Business segment as a percentage of consolidated revenues, primarily associated with wages and
benefits growing at a lower rate than revenue, partially attributable to synergies associated with our acquisition of Recall. On a
constant dollar basis, labor expenses for the year ended December 31, 2017 increased by $24.3 million, or 3.2%, compared to
the prior year period, primarily driven by our acquisition of Recall.
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 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 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 prior year period, primarily driven by our acquisition of Recall.
58
Facilities
Facilities expenses increased to 15.1% of consolidated revenues in the year ended December 31, 2017 compared to
14.9% in the year ended December 31, 2016. The 20 basis points increase in facilities expenses as a percentage of consolidated
revenues was primarily driven 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. On a constant dollar basis, facilities expenses for the year ended December 31, 2017 increased by
$55.0 million, or 10.4%, compared to the prior year period, primarily driven by our acquisition of Recall.
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. 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 prior year period, primarily driven by our acquisition of Recall.
Transportation
Transportation expenses decreased to 3.7% of consolidated revenues for the year ended December 31, 2017 compared to
3.8% for the year ended December 31, 2016. The decrease in transportation expenses as a percentage of consolidated revenues
was driven by a decrease in vehicle lease expense, primarily associated with our North American Records and Information
Management Business segment, partially offset by an increase in third party carrier costs as a percentage of consolidated
revenue, primarily associated with our Other International Business segment. On a constant dollar basis, transportation
expenses for the year ended December 31, 2017 increased by $9.2 million, or 6.9%, compared to the prior year period,
primarily driven by our acquisition of Recall.
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 prior year period, primarily driven by our
acquisition of Recall.
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, decreased to 4.0% of consolidated revenues for the year
ended December 31, 2017 compared to 4.1% in the year ended December 31, 2016. The decrease in product cost of sales and
other was driven by special project costs. On a constant dollar basis, product cost of sales and other increased by $9.5 million,
or 6.5%, compared to the prior year period, primarily driven by our acquisition of Recall.
For the year ended December 31, 2016, product cost of sales and other increased by $32.1 million, or 28.5%, on a
constant dollar basis compared to the prior year period, primarily driven by our acquisition of Recall.
Recall Costs
Recall Costs included in cost of sales were $20.5 million for the year ended December 31, 2017, and primarily consisted
of employee severance costs and facility integration costs including labor, maintenance, transportation and other costs related to
building moves and consolidation. 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.
59
Selling, General and Administrative Expenses
Selling, general and administrative expenses consists of the following expenses (in thousands):
Year Ended December 31,
2016
504,545
$
2017
520,504
Dollar
Change
$ 15,959
238,178
116,923
8,705
119,981
253,117
132,110
14,826
64,408
14,939
15,187
6,121
(55,573)
Percentage
Change
% of
Consolidated
Revenues
Actual
3.2 %
6.3 %
13.0 %
70.3 %
Constant
Currency
2016
2.8 % 14.4% 13.5%
2017
6.0 % 6.8% 6.6%
12.8 % 3.3% 3.4%
70.7 % 0.2% 0.4%
(46.3)% (46.8)% 3.4% 1.7%
Percentage
Change
(Favorable)/
Unfavorable
(0.9)%
(0.2)%
0.1 %
0.2 %
(1.7)%
$
988,332
$
984,965
$ (3,367)
(0.3)%
(0.7)% 28.1% 25.6%
(2.5)%
General and Administrative $
Sales, Marketing &
Account Management
Information Technology
Bad Debt Expense
Recall Costs
Total Selling, General and
Administrative Expenses
Year Ended December 31,
Percentage
Change
% of
Consolidated
Revenues
General and Administrative $
2015
468,959
$
2016
504,545
Dollar
Change
$ 35,586
Actual
7.6 %
Constant
Currency
2015
10.2 % 15.6% 14.4%
2016
Sales, Marketing &
Account Management
Information Technology
Bad Debt Expense
Recall Costs
Total Selling, General and
Administrative Expenses
General and Administrative
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%
— %
Percentage
Change
(Favorable)/
Unfavorable
(1.2)%
(0.3)%
— %
(0.3)%
1.8 %
General and administrative expenses decreased to 13.5% of consolidated revenues for the year ended December 31, 2017
compared to 14.4% for the year ended December 31, 2016. The decrease in general and administrative expenses as a
percentage of consolidated revenues was driven mainly by a decrease in compensation expense, partially attributable to the
Transformation Initiative and synergies associated with our acquisition of Recall, partially offset by an increase in professional
fees associated with innovation initiatives. On a constant dollar basis, general and administrative expenses for the year ended
December 31, 2017 increased by $14.4 million, or 2.8%, compared to the prior year period, primarily driven by our acquisition
of Recall.
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 prior year period, primarily driven by our acquisition of Recall.
60
Sales, Marketing & Account Management
Sales, marketing and account management expenses decreased to 6.6% of consolidated revenues for the year ended
December 31, 2017 compared to 6.8% for the year ended December 31, 2016. The decrease was driven by a decrease in sales,
marketing and account management expenses in our North American Records and Information Business segment 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. On a constant dollar basis, sales, marketing and account management
expenses for the year ended December 31, 2017 increased by $14.4 million, or 6.0%, compared to the prior year period,
primarily driven by our acquisition of Recall.
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 prior year period, primarily driven by
our acquisition of Recall.
Information Technology
Information technology expenses increased to 3.4% of consolidated revenues for the year ended December 31, 2017
compared to 3.3% for the year ended December 31, 2016. Information technology expenses as a percentage of consolidated
revenues reflect an increase in professional fees and software maintenance and license fees, partially offset by lower
compensation expense, partially attributable to the Transformation Initiative and synergies associated with our acquisition of
Recall. On a constant dollar basis, information technology expenses for the year ended December 31, 2017 increased by $15.0
million, or 12.8%, compared to the prior year period, primarily driven by our acquisition of Recall.
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 prior year period, primarily driven by our acquisition of
Recall.
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, 2017 increased to 0.4% of
consolidated revenues for the year ended December 31, 2017 compared to 0.2% for the year ended December 31, 2016. On a
constant dollar basis, bad debt expenses for the year ended December 31, 2017 increased by $6.1 million, or 70.7%, compared
to the prior year period primarily due to higher bad debt expense in our Other International Business segment.
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 prior year period.
Recall Costs
Recall Costs included in selling, general and administrative expenses were $64.4 million and $120.0 million for the years
ended December 31, 2017 and 2016, respectively, and primarily consisted 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, and primarily consisted of advisory and professional fees.
61
Depreciation and Amortization
Depreciation expense increased $40.8 million, or 11.2%, on a reported dollar basis for the year ended December 31, 2017
compared to the year ended December 31, 2016, primarily due to the increased depreciation of property, plant and equipment
acquired in the Recall Transaction. 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 $64.3 million, or 21.3%, on a reported 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.
Amortization expense increased $29.3 million, or 33.7%, on a reported dollar basis for the year ended December 31, 2017
compared to the year ended December 31, 2016, 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 $42.5 million, or 96.2%, on a reported 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.
OTHER EXPENSES, NET
Interest Expense, Net (in thousands)
Interest expense, net increased $42.9 million to $353.6 million for the year ended December 31, 2017 from $310.7
million for the year ended December 31, 2016. 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. The increase in interest expense, net in
each of the years ended December 31, 2017 and 2016 compared to the prior year period was the result of higher average debt
outstanding during those periods. Our weighted average interest rate was 5.0% and 5.2% at December 31, 2017 and 2016,
respectively. See Note 4 to Notes to Consolidated Financial Statements included in this Annual Report for additional
information regarding our indebtedness.
Other Expense (Income), Net (in thousands)
Foreign currency transaction losses, net
Debt extinguishment expense
Other, net
$
2016
20,413
9,283
14,604
Year Ended
December 31,
2017
43,248
$
Dollar
Change
$ 22,835
78,368
(42,187)
79,429
69,085
(56,791)
$ 35,129
$
44,300
$
Foreign currency transaction losses, net
Debt extinguishment expense
Other, net
Foreign Currency Transaction Losses
Year Ended
December 31,
2015
70,851
27,305
434
98,590
$
$
2016
20,413
9,283
14,604
44,300
$
$
Dollar
Change
$ (50,438)
(18,022)
14,170
$ (54,290)
We recorded net foreign currency transaction losses of $43.2 million in the year ended December 31, 2017, based on
period-end exchange rates. These losses resulted primarily from the impact of changes in the exchange rate of each of the
British pound sterling, Canadian dollar and Euro against the United States dollar compared to December 31, 2016 on our
intercompany balances with and between certain of our subsidiaries and Euro denominated bonds issued by IMI (the Euro
Notes, as defined below). These losses were partially offset by gains resulting primarily from the impact of changes in the
exchange rate of each of the Australian dollar, Mexican peso and Russian ruble against the United States dollar compared to
December 31, 2016 on our intercompany balances with and between certain of our subsidiaries, as well as Euro forward
contracts.
62
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.
Debt Extinguishment Expense
During the year ended December 31, 2017, we recorded a debt extinguishment charge of $78.4 million primarily related
to the early extinguishment of (i) the 6% Notes due 2020, (ii) the CAD Notes due 2021 and (iii) the GBP Notes due 2022 (each
as defined and described more fully in Note 4 to Notes to Consolidated Financial Statements included in this Annual Report),
consisting of the write-off of unamortized deferred financing costs and call premiums. During the year ended December 31,
2016, we recorded a debt extinguishment charge of $9.3 million related to the termination of the Bridge Facility (as defined and
described more fully in Note 4 to Notes to Consolidated Financial Statements included in this Annual Report), 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% Euro Senior Subordinated Notes due 2018, 73/4% Senior Subordinated Notes due
2019 and the remaining portion outstanding of the 83/8% Senior Subordinated Notes due 2021 in the fourth quarter of 2015.
This charge consists of call premiums, original issue discounts and unamortized deferred financing costs.
Other, Net
Other, net in the year ended December 31, 2017 includes a gain of $38.9 million associated with the Russia and Ukraine
Divestment (see Note 14 to Notes to Consolidated Financial Statements included in this Annual Report). 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.
Provision (Benefit) for Income Taxes
Our effective tax rates for the years ended December 31, 2015, 2016 and 2017 were 23.3%, 30.6% and 12.0%,
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.
The primary reconciling items between the former 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 former 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.
63
The primary reconciling items between the former federal statutory tax rate of 35.0% and our overall effective tax rate for
the year ended December 31, 2017 were the benefit derived from the dividends paid deduction of $78.9 million, the impact of
differences in the tax rates at which our foreign earnings are subject resulting in a tax benefit of $11.9 million, a release of
valuation allowances on certain of our foreign net operating losses of $4.3 million as a result of the merger of certain of our
foreign subsidiaries, partially offset by the impact of the Tax Reform Legislation of $24.8 million (reflecting the impact of the
Deemed Repatriation Transition Tax, partially offset by the impact of the U.S. Federal Rate Reduction).
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, net of tax for the year ended December 31, 2017 was $1.6 million and consisted
primarily of the sale of land and a building in the United States for net proceeds of approximately $12.7 million. Consolidated
gain on sale of real estate, net of tax for the year ended December 31, 2016 was $2.2 million, associated with the sale of certain
land and buildings in North America. Consolidated gain on sale of real estate, net of tax for the year ended December 31, 2015
was $0.9 million, associated with the sale of a building in the United Kingdom.
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,
2016
2017
Dollar
Change
Percentage
Change
Income from
Continuing Operations $ 103,880
$ 191,723
$
87,843
84.6%
Income from
Continuing Operations
as a percentage of
Consolidated Revenue
3.0%
5.0%
Adjusted EBITDA
$1,087,288
$1,260,196
$
172,908
15.9%
Adjusted EBITDA
Margin
31.0%
32.8%
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%
64
INCOME (LOSS) FROM DISCONTINUED OPERATIONS
(Loss) income from discontinued operations, net of tax was $(6.3) million and $3.4 million for the years ended
December 31, 2017 and 2016, respectively, 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).
NONCONTROLLING INTERESTS
Net income attributable to noncontrolling interests resulted in a decrease in net income attributable to IMI of $1.6
million, $2.4 million and $2.0 million for the years ended December 31, 2017, 2016 and 2015, respectively. These amounts
represent our noncontrolling partners' share of earnings/losses in our majority-owned international subsidiaries that are
consolidated in our operating results.
65
Segment Analysis (in thousands)
During the fourth quarter of 2017, as a result of changes in the management of our entertainment storage and services
business, we reassessed the composition of our reportable operating segments. As a result of this reassessment, we determined
that our entertainment storage and services businesses in the United States and Canada, which were previously included within
our North American Data Management Business segment, were now being managed in conjunction with our entertainment
storage and services businesses in France, Hong Kong, the Netherlands and the United Kingdom (the majority of which were
acquired in the third quarter of 2017 as part of the Bonded Transaction) as a component of our Adjacent Businesses operating
segment which is included within our Corporate and Other Business reportable operating segment.
Additionally, during the fourth quarter of 2017, we determined that our global data center business was now being
managed as a separate reportable operating segment, rather than as a component of our Adjacent Businesses operating segment.
We now present our Global Data Center Business operating segment as a separate reportable operating segment.
As a result of the changes noted above, previously reported segment information has been restated to conform to the
current presentation. 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,
2016
$ 1,150,646
2017
$ 1,221,495
780,053
828,851
$ 1,930,699
$ 2,050,346
Segment Adjusted EBITDA(1)
$
775,717
$
884,158
Segment Adjusted EBITDA Margin(1)(2)
40.2%
43.1%
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 Margin(1)(2)
40.3%
40.2%
Percentage Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
70,849
48,798
119,647
108,441
6.2%
6.3%
6.2%
5.9%
6.0%
6.0%
3.2%
1.1%
2.4%
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%
$
$
$
$
$
$
_______________________________________________________________________________
(1) See "Non-GAAP Measures—Adjusted EBITDA" in this Annual Report for the definitions of Adjusted EBITDA and
Adjusted EBITDA Margin, a reconciliation of Adjusted EBITDA to Income (Loss) from Continuing Operations and a
discussion of why we believe these non-GAAP measures provide relevant and useful information to our current and
potential investors.
(2) Segment Adjusted EBITDA Margin is calculated by dividing Segment Adjusted EBITDA by total segment revenues.
66
For the year ended December 31, 2017, reported revenue in our North American Records and Information Management
Business segment increased 6.2% compared to the year ended December 31, 2016, primarily due to the favorable net impact of
acquisitions/divestitures and internal revenue growth. The net impact of acquisitions/divestitures contributed 3.6% to the
reported revenue growth rate in our North American Records and Information Management Business segment for the year
ended December 31, 2017 compared to the prior year period, driven by our acquisition of Recall. Internal revenue growth of
2.4% in the year ended December 31, 2017 was primarily the result of (i) internal storage rental revenue growth of 3.2% in the
year ended December 31, 2017, due to net price increases and (ii) internal service revenue growth of 1.1% in the year ended
December 31, 2017, driven by growth in secure shredding revenues, in part due to higher recycled paper prices, partially offset
by a decline in retrieval/re-file activity and the related decrease in transportation revenues. Adjusted EBITDA margin increased
290 basis points during the year ended December 31, 2017 compared to the year ended December 31, 2016, primarily driven by
a decrease in wages and benefits as a percentage of segment revenue, partially attributable to the Transformation Initiative and
synergies associated with our acquisition of Recall, as well as lower professional fees.
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 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. Adjusted EBITDA margin 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 and 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.
67
North American Data Management Business
Storage Rental
Service
Segment Revenue
Segment Adjusted EBITDA(1)
Year Ended December 31,
2016
264,148
128,666
392,814
224,522
$
$
$
2017
276,416
125,224
401,640
223,324
$
$
$
Segment Adjusted EBITDA Margin(1)(2)
57.2%
55.6%
Storage Rental
Service
Segment Revenue
Segment Adjusted EBITDA(1)
Year Ended December 31,
2015
246,744
130,561
377,305
203,237
$
$
$
2016
264,148
128,666
392,814
224,522
$
$
$
Percentage Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
12,268
(3,442)
8,826
(1,198)
4.6 %
(2.7)%
2.2 %
4.5 %
(2.8)%
2.1 %
2.4 %
(7.8)%
(1.0)%
Percentage Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
17,404
(1,895)
15,509
21,285
7.1 %
(1.5)%
4.1 %
7.3 %
(1.2)%
4.3 %
1.9 %
(10.2)%
(2.3)%
$
$
$
$
$
$
Segment Adjusted EBITDA Margin(1)(2)
53.9%
57.2%
_______________________________________________________________________________
(1) See "Non-GAAP Measures—Adjusted EBITDA" in this Annual Report for the definitions of Adjusted EBITDA and
Adjusted EBITDA Margin, a reconciliation of Adjusted EBITDA to Income (Loss) from Continuing Operations and a
discussion of why we believe these non-GAAP measures provide relevant and useful information to our current and
potential investors.
(2) Segment Adjusted EBITDA Margin is calculated by dividing Segment Adjusted EBITDA by total segment revenues.
For the year ended December 31, 2017, reported revenue in our North American Data Management Business segment
increased 2.2%, compared to the year ended December 31, 2016, due to the favorable net impact of acquisitions/divestitures.
The net impact of acquisitions/divestitures contributed 3.1% to the reported revenue growth rates in our North American Data
Management Business segment for the year ended December 31, 2017, compared to the prior year period, primarily driven by
our acquisition of Recall. The negative internal revenue growth of 1.0% for the year ended December 31, 2017 was primarily
attributable to negative internal service revenue growth of 7.8% for the year ended December 31, 2017 due to continued
declines in service revenue activity levels as the business becomes more archival in nature, partially offset by internal storage
rental revenue growth of 2.4% in the year ended December 31, 2017, primarily attributable to volume increases. Adjusted
EBITDA margin decreased 160 basis points during the year ended December 31, 2017 compared to the year ended
December 31, 2016, primarily driven by an increase in selling, general and administrative expenses, partially attributable to
investments associated with product management and development.
For the year ended December 31, 2016, reported revenue in our North American Data Management Business segment
increased 4.1% 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 6.6% to the reported revenue growth rates in our North American Data Management Business segment for the year
ended December 31, 2016, compared to the 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 10.2% 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 1.9% in
the year ended December 31, 2016, primarily attributable to volume increases. Adjusted EBITDA margin increased 330 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.
68
Western European Business
Storage Rental
Service
Segment Revenue
Segment Adjusted EBITDA(1)
Segment Adjusted EBITDA Margin(1)(2)
Storage Rental
Service
Segment Revenue
Segment Adjusted EBITDA(1)
Segment Adjusted EBITDA Margin(1)(2)
Year Ended December 31,
2016
275,659
178,552
454,211
137,506
2017
303,205
198,537
501,742
160,024
$
$
$
30.3%
31.9%
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%
$
$
$
$
$
$
$
$
$
$
$
$
Percentage Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
27,546
19,985
47,531
22,518
10.0%
11.2%
10.5%
11.4%
12.0%
11.6%
2.3%
1.4%
2.0%
Percentage Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
36,402
20,296
56,698
16,857
15.2%
12.8%
14.3%
24.5%
21.4%
23.2%
0.8 %
(5.6)%
(1.7)%
_______________________________________________________________________________
(1) See "Non-GAAP Measures—Adjusted EBITDA" in this Annual Report for the definitions of Adjusted EBITDA and
Adjusted EBITDA Margin, a reconciliation of Adjusted EBITDA to Income (Loss) from Continuing Operations and a
discussion of why we believe these non-GAAP measures provide relevant and useful information to our current and
potential investors.
(2) Segment Adjusted EBITDA Margin is calculated by dividing Segment Adjusted EBITDA by total segment revenues.
For the year ended December 31, 2017, reported revenue in our Western European Business segment increased 10.5%,
compared to the year ended December 31, 2016, due to the favorable net impact of acquisitions/divestitures and internal
revenue growth, partially offset by unfavorable fluctuations in foreign currency exchange rates. The net impact of acquisitions/
divestitures contributed 9.6% to the reported revenue growth rates in our Western European Business segment for the year
ended December 31, 2017, compared to the prior year period, primarily driven by our acquisition of Recall. Internal revenue
growth for the year ended December 31, 2017 was 2.0%, primarily attributable to internal storage rental revenue growth of
2.3% for the year ended December 31, 2017, primarily associated with volume increases. For the year ended December 31,
2017, foreign currency exchange rate fluctuations decreased our reported revenues for the Western European Business segment
by 1.1%, compared to the prior year period due to the weakening of the British pound sterling against the United States dollar.
Adjusted EBITDA margin increased 160 basis points during the year ended December 31, 2017 compared to the year ended
December 31, 2016, driven by a decrease in selling, general and administrative expenses as a percentage of segment revenue,
associated with wages and benefits growing at a lower rate than revenue as a result of the Transformation Initiative and
synergies associated with our acquisition of Recall.
69
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 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 prior year period due to the weakening of the British pound sterling and
Euro against the United States dollar. Adjusted EBITDA margin 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.
70
Other International Business
Storage Rental
Service
Segment Revenue
Segment Adjusted EBITDA(1)
Segment Adjusted EBITDA Margin(1)(2)
Storage Rental
Service
Segment Revenue
Segment Adjusted EBITDA(1)
Year Ended December 31,
2016
393,005
259,511
652,516
169,042
2017
493,118
291,737
784,855
226,430
$
$
$
25.9%
28.8%
Year Ended December 31,
2015
245,154
176,206
421,360
87,341
2016
393,005
259,511
652,516
169,042
$
$
$
Dollar
Change
100,113
32,226
132,339
57,388
Dollar
Change
147,851
83,305
231,156
81,701
$
$
$
$
$
$
$
$
$
$
$
$
Percentage Change
Actual
Constant
Currency
Internal
Growth
25.5%
12.4%
20.3%
21.9%
9.2%
16.9%
6.6 %
(0.7)%
3.7 %
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%
Segment Adjusted EBITDA Margin(1)(2)
20.7%
25.9%
_______________________________________________________________________________
(1) See "Non-GAAP Measures—Adjusted EBITDA" in this Annual Report for the definitions of Adjusted EBITDA and
Adjusted EBITDA Margin, a reconciliation of Adjusted EBITDA to Income (Loss) from Continuing Operations and a
discussion of why we believe these non-GAAP measures provide relevant and useful information to our current and
potential investors.
(2) Segment Adjusted EBITDA Margin is calculated by dividing Segment Adjusted EBITDA by total segment revenues.
For the year ended December 31, 2017, reported revenue in our Other International Business segment increased 20.3%
compared to the year ended December 31, 2016, due to the favorable net impact of acquisitions/divestitures, internal revenue
growth and favorable fluctuations in foreign currency exchange rates. The net impact of acquisitions/divestitures contributed
13.2% to the reported revenue growth rate in our Other International Business segment for the year ended December 31, 2017
compared to the prior year period, primarily driven by our acquisition of Recall. Internal revenue growth for the year ended
December 31, 2017 was 3.7%, supported by 6.6% internal storage rental revenue growth, primarily due to volume increases,
partially offset by negative 0.7% internal service revenue growth, primarily due to decreased project activity. Foreign currency
fluctuations in the year ended December 31, 2017 resulted in increased revenue, as measured in United States dollars, of
approximately 3.4% compared to the prior year period, primarily due to the strengthening of the Australian dollar, Brazilian
real and Euro against the United States dollar. Adjusted EBITDA margin increased 290 basis points during the year ended
December 31, 2017 compared to the year ended December 31, 2016, primarily due to a higher margin business in Australia as a
result of our acquisition of Recall and to a lesser extent, synergies associated with our acquisition of Recall.
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 favorable 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 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 prior year period, primarily due to the weakening of the Australian dollar and Brazilian real against the United
States dollar. Adjusted EBITDA margin 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.
71
Global Data Center Business
Storage Rental
Service
Segment Revenue
Segment Adjusted EBITDA(1)
Segment Adjusted EBITDA Margin(1)(2)
Storage Rental
Service
Segment Revenue
Segment Adjusted EBITDA(1)
Segment Adjusted EBITDA Margin(1)(2)
Year Ended December 31,
2016
22,026
2,223
24,249
6,212
25.6%
$
$
$
2017
35,839
1,855
37,694
11,275
29.9%
Year Ended December 31,
2015
17,660
1,405
19,065
1,860
9.8%
$
$
$
2016
22,026
2,223
24,249
6,212
25.6%
$
$
$
$
$
$
$
$
$
$
$
$
Percentage Change
Actual
62.7 %
(16.6)%
55.4 %
Constant
Currency
Internal
Growth
62.7 %
(16.6)%
55.4 %
29.0 %
(24.8)%
24.0 %
Dollar
Change
13,813
(368)
13,445
5,063
Percentage Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
4,366
818
5,184
4,352
24.7%
58.2%
27.2%
24.7%
58.2%
27.2%
24.7%
58.2%
27.2%
_______________________________________________________________________________
(1) See "Non-GAAP Measures—Adjusted EBITDA" in this Annual Report for the definitions of Adjusted EBITDA and
Adjusted EBITDA Margin, a reconciliation of Adjusted EBITDA to Income (Loss) from Continuing Operations and a
discussion of why we believe these non-GAAP measures provide relevant and useful information to our current and
potential investors.
(2) Segment Adjusted EBITDA Margin is calculated by dividing Segment Adjusted EBITDA by total segment revenues.
For the year ended December 31, 2017, reported revenue in our Global Data Center Business segment increased 55.4%
compared to the year ended December 31, 2016, due to the favorable net impact of acquisitions/divestitures and internal
revenue growth. The net impact of acquisitions/divestitures contributed 31.4% to the reported revenue growth rate in our
Global Data Center Business segment for the year ended December 31, 2017 compared to the prior year period, primarily
driven by our acquisition of Mag Datacenters LLC, which operated Fortrust. Internal revenue growth for the year ended
December 31, 2017 was 24.0%, supported by 29.0% internal storage rental revenue growth. Internal storage rental revenue
growth and total internal revenue growth benefited by approximately 14.3% and 13.0%, respectively, from a $4.2 million
customer termination fee in the second quarter of 2017. Adjusted EBITDA margin increased 430 basis points during the year
ended December 31, 2017 compared to the year ended December 31, 2016, primarily due to the customer termination fee
mentioned above.
For the year ended December 31, 2016, reported revenue in our Global Data Center Business segment increased 27.2%
compared to the year ended December 31, 2015, due to internal revenue growth. Internal revenue growth for the year ended
December 31, 2016 was 27.2%, supported by 24.7% internal storage rental revenue growth. Adjusted EBITDA margin
increased 1,580 basis points during the year ended December 31, 2016 compared to the year ended December 31, 2015,
primarily due to revenue growth.
72
Corporate and Other Business
Storage Rental
Service
Segment Revenue
Year Ended December 31,
2016
37,421
19,543
56,964
$
$
2017
47,484
21,817
69,301
$
$
Segment Adjusted EBITDA(1)
$ (225,711)
$ (245,015)
Segment Adjusted EBITDA(1) as a
Percentage of Consolidated Revenue
(6.4)%
(6.4)%
Storage Rental
Service
Segment Revenue
Year Ended December 31,
2015
11,777
5,591
17,368
$
$
2016
37,421
19,543
56,964
$
$
Segment Adjusted EBITDA(1)
$ (207,721)
$ (225,711)
Segment Adjusted EBITDA(1) as a
Percentage of Consolidated Revenue
(6.9)%
(6.4)%
Percentage Change
Dollar
Change
Actual
Constant
Currency
Internal
Growth
$
$
$
$
$
$
10,063
2,274
12,337
(19,304)
Dollar
Change
25,644
13,952
39,596
(17,990)
26.9%
11.6%
21.7%
26.9%
11.6%
21.7%
4.0 %
(8.7)%
(0.3)%
Percentage Change
Actual
217.7%
249.5%
228.0%
Constant
Currency
Internal
Growth
217.7%
249.5%
228.0%
11.3%
9.7%
10.9%
_______________________________________________________________________________
(1) See "Non-GAAP Measures—Adjusted EBITDA" in this Annual Report for the definition of Adjusted EBITDA, a
reconciliation of Adjusted EBITDA to Income (Loss) from Continuing Operations and a discussion of why we believe
this non-GAAP measure provides relevant and useful information to our current and potential investors.
During the year ended December 31, 2017, Adjusted EBITDA in the Corporate and Other Business segment as a
percentage of consolidated revenues remained unchanged from the year ended December 31, 2016 at 6.4%. Adjusted EBITDA
in the Corporate and Other Business segment decreased $19.3 million in the year ended December 31, 2017 compared to the
year ended December 31, 2016, primarily driven by an increase in information technology expenses associated with our
acquisition of Recall, professional fees associated with our innovation investments and $3.5 million of costs associated with
natural disasters, primarily Hurricane Maria, which damaged certain of our facilities in Puerto Rico in the third quarter of 2017.
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 $18.0 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.
73
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
$
2015
541,760
(456,646)
(108,511)
128,381
$
2016
541,216
(632,703)
125,373
236,484
2017
724,259
(599,448)
540,425
925,699
Net cash provided by operating activities from continuing operations was $724.3 million for the year ended
December 31, 2017 compared to $541.2 million for the year ended December 31, 2016. The $183.0 million year-over-year
increase in cash flows from operating activities resulted from an increase in net income (including non-cash charges and
realized foreign exchange losses) of $224.2 million, offset by an increase in cash used in working capital of $41.2 million,
primarily related to the timing of payments associated with our accounts payable year-over-year.
Our business requires capital expenditures to maintain our ongoing operations, support our expected revenue growth and
new products and services, and increase our profitability. These expenditures are included in the cash flows from investing
activities. The nature of our capital expenditures has evolved over time along with the nature of our business. Our capital goes
to support business-line growth and our ongoing operations, but we also expend capital to support the development and
improvement of products and services and projects designed to increase our profitability. These expenditures are generally
discretionary in nature. Cash paid for our capital expenditures, cash paid for acquisitions (net of cash acquired), acquisition of
customer relationships and customer inducements during the year ended December 31, 2017 amounted to $343.1 million,
$219.7 million, $55.1 million and $20.1 million, respectively. For the year ended December 31, 2017, these expenditures were
primarily funded with cash flows from operations, as well as through borrowings under both our Former Revolving Credit
Facility and the Revolving Credit Facility (each as defined below), as well as the issuance of the Euro Notes. 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 on real estate and non-real estate maintenance as
well as non-real estate investment to be approximately $155.0 million to $165.0 million, our capital expenditures on our data
center business to be approximately $185.0 million, and our capital expenditures on real estate investment and innovation to be
approximately $150.0 million to $160.0 million in the year ending December 31, 2018.
Net cash provided by financing activities from continuing operations was $540.4 million for the year ended December 31,
2017, consisting primarily of net proceeds of $910.1 million associated with the issuance and retirement of senior notes, net
proceeds of $516.5 million associated with the Equity Offering and net proceeds of $58.6 million associated with the At The
Market (ATM) Equity Program, partially offset by the net payments of $512.6 million under both the Former Revolving Credit
Facility and Revolving Credit Facility (each as defined below), the payment of dividends in the amount of $440.0 million on
our common stock and the payment of $14.2 million for debt and equity issuance costs.
As of December 31, 2017, pending their use to finance the purchase price of the IODC Transaction, the net proceeds of
the Equity Offering, together with the net proceeds from the 51/4% Notes, were used to temporarily repay approximately $807.0
million of borrowings under our Revolving Credit Facility and invest approximately $524.0 million in money market funds.
74
Capital Expenditures
The following table presents our capital spend for 2015, 2016 and 2017 organized by the type of the spending as
described in the "Our Business Fundamentals" section of "Item 1. Business" included in this Annual Report. We now separately
identify two additional capital expenditure categories, Innovation and Growth Investment Capital Spend (previously included
within Non-Real Estate Investment) and Data Center Capital Spend (previously included primarily in Real Estate Investment
and Non-Real Estate Investment). We have reclassified the categorization of our prior year capital expenditures to conform with
our current presentation.
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
Data Center Investment and Maintenance Capital Spend
Innovation and Growth Investment Capital Spend
Total Capital Spend (on accrual basis)
Net (decrease) increase in prepaid capital expenditures
Net (increase) decrease accrued capital expenditures
Total Capital Spend (on cash basis)
Year Ended December 31,
2015
2016
2017
$
$
$
151,695
52,826
204,521
$
133,079
63,543
196,622
139,822
77,660
217,482
46,411
23,372
69,783
20,624
—
294,928
(362)
(4,317)
290,249
$
40,509
20,642
61,151
72,728
8,573
339,074
374
(10,845)
328,603
$
56,297
29,721
86,018
92,597
20,583
416,680
1,629
(75,178)
343,131
_______________________________________________________________________________
(1) The amount at December 31, 2017 includes approximately $66,800 related to a capital lease associated with our data
center in Manassas, Virginia.
Dividends
See "Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities" of this Annual Report for information on dividends.
Financial Instruments and Debt
Financial instruments that potentially subject us to credit risk consist principally of cash and cash equivalents (including
money market funds and time deposits) and accounts receivable. The only significant concentrations of liquid investments as of
December 31, 2017 relate to cash and cash equivalents held on deposit with seven global banks and 12 "Triple A" rated money
market funds, all of which we consider to be large, highly-rated investment-grade institutions. As per our risk management
investment policy, we limit exposure to concentration of credit risk by limiting the amount invested in any one mutual fund to a
maximum of $50.0 million or in any one financial institution to a maximum of $75.0 million. As of December 31, 2017, our
cash and cash equivalents balance was $925.7 million, which included money market funds amounting to $585.0 million and
time deposits amounting to $24.5 million.
75
Our consolidated debt as of December 31, 2017 comprised the following (in thousands):
December 31, 2017
Revolving Credit Facility(1)
Term Loan(1)
Australian Dollar Term Loan (the "AUD Term Loan")(2)
43/8% Senior Notes due 2021 (the "43/8% Notes")(3)(4)
6% Senior Notes due 2023 (3)
53/8% CAD Senior Notes due 2023 (the "CAD Notes due 2023")(4)(5)
53/4% Senior Subordinated Notes due 2024(3)
3% Euro Senior Notes due 2025 (the "Euro Notes")(3)(4)
37/8% GBP Senior Notes due 2025 (the "GBP Notes due 2025")(4)(6)
53/8% Senior Notes due 2026 (the "53/8% Notes")(4)(7)
47/8% Senior Notes due 2027 (the "47/8% Notes")(3)(4)
51/4% Senior Notes due 2028 (the "51/4% Notes")(3)(4)
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
Debt
(inclusive of
discount)
$
466,593
243,750
187,504
500,000
600,000
199,171
1,000,000
359,386
539,702
250,000
1,000,000
825,000
649,432
258,973
50,000
7,129,511
(146,300)
$ 6,983,211
$
Unamortized
Deferred
Financing
Costs
(14,407) $
—
(3,382)
(5,874)
(6,224)
(3,295)
(9,156)
(4,691)
(7,718)
(3,615)
(13,866)
(11,817)
(566)
(356)
(1,273)
(86,240)
—
Carrying
Amount
452,186
243,750
184,122
494,126
593,776
195,876
990,844
354,695
531,984
246,385
986,134
813,183
648,866
258,617
48,727
7,043,271
(146,300)
(86,240) $ 6,896,971
$
_______________________________________________________________________________
(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 the Revolving Credit Facility.
(2) The amount of debt for the AUD Term Loan reflects an unamortized original issue discount of $1.5 million as of
December 31, 2017.
(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, IM UK
(as defined below), 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 43/8% Notes, the Euro Notes, the GBP Notes due 2025, the CAD Notes due 2023, the 53/8% Notes, the 47/8%
Notes and the 51/4% Notes (collectively, the "Unregistered Notes") have not been registered under 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.
76
(5) Canada Company is the direct obligor on the CAD Notes due 2023, 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) Iron Mountain (UK) PLC ("IM UK") is the direct obligor on the GBP Notes due 2025, 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) Iron Mountain US Holdings, Inc., 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 $20.2 million, (ii) capital lease obligations of $436.3 million, and (iii) other
various notes and other obligations, which were assumed by us as a result of certain acquisitions, of $193.0 million.
(9) The Accounts Receivable Securitization Special Purpose Subsidiaries are the obligors under this program.
(10) Iron Mountain Mortgage Finance I, LLC (the "Mortgage Securitization Special Purpose Subsidiary") is the obligor
under this program.
a. Credit Agreement
On August 21, 2017, we entered into a new credit agreement (the "Credit Agreement") which amended and restated our
then existing credit agreement (the "Former Credit Agreement") which consisted of a revolving credit facility (the "Former
Revolving Credit Facility") and a term loan (the "Former Term Loan") and was scheduled to terminate on July 6, 2019. The
Credit Agreement consists of a revolving credit facility (the "Revolving Credit Facility") and a term loan (the "Term Loan").
The maximum amount permitted to be borrowed under the Revolving Credit Facility is $1,750.0 million. The original amount
of the Term Loan was $250.0 million. We have the option to request additional commitments of up to $500.0 million, in the
form of term loans or through increased commitments under the Revolving Credit Facility, subject to the conditions specified in
the Credit Agreement. The Credit Agreement is scheduled to mature on August 21, 2022, at which point all obligations become
due.
The Revolving Credit Facility 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 and
Euros, among other currencies) in an aggregate outstanding amount not to exceed $1,750.0 million. The Term Loan is to be
paid in quarterly installments in an amount equal to $3.1 million per quarter, with the remaining balance due on August 21,
2022.
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, 2017, we had $466.6 million and
$243.8 million of outstanding borrowings under the Revolving Credit Facility and the Term Loan, respectively. Of the $466.6
million of outstanding borrowings under the Revolving Credit Facility, $465.0 million was denominated in United States
dollars and 2.0 million was denominated in Canadian dollars. In addition, we also had various outstanding letters of credit
totaling $52.8 million under the Revolving Credit Facility. The remaining amount available for borrowing under the Revolving
Credit Facility as of December 31, 2017, which is 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 $1,230.6 million (which amount represents the maximum availability as of such date). The average
interest rate in effect under the Credit Agreement was 3.4% as of December 31, 2017. The average interest rate in effect under
the Revolving Credit Facility was 3.5% and ranged from 3.4% to 5.5% as of December 31, 2017 and the interest rate in effect
under the Term Loan as of December 31, 2017 was 3.5%.
77
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.
Our leverage and fixed charge coverage ratios under the Former Credit Agreement as of December 31, 2016 and the
Credit Agreement as of December 31, 2017, as well as our leverage ratio under our indentures as of December 31, 2016 and
2017 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, 2016
5.7
December 31, 2017
Maximum/Minimum Allowable
5.0 Maximum allowable of 6.5(1)(2)
2.7
5.2
2.4
1.6 Maximum allowable of 4.0
5.8 Maximum allowable of 6.5-7.0(3)(4)
2.1 Minimum allowable of 1.5
______________________________________________________________
(1) Our maximum allowable net total lease adjusted leverage ratio under the Former Credit Agreement was 6.5. The
Former Credit Agreement also contained a provision which limited, in certain circumstances, our cash dividends in
any four consecutive fiscal quarters to 95% of Funds From Operations (as defined in the Former 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 former limitation
only applied in certain circumstances, including where our net total lease adjusted leverage ratio exceeded 6.0 as
measured as of the end of the most recently completed fiscal quarter (the “Dividend Limitation Leverage Condition”).
The Credit Agreement does not contain a Dividend Limitation Leverage Condition. The maximum allowable net total
lease adjusted leverage ratio under the Credit Agreement is 6.5.
(2) The definition of the net total lease adjusted leverage ratio was modified under the Credit Agreement. The net total
lease adjusted leverage ratio at December 31, 2017 was calculated as defined in the Credit Agreement, while the net
total lease adjusted leverage ratio at December 31, 2016 was calculated as defined in the Former Credit Agreement.
Had the net total lease adjusted leverage ratio at December 31, 2016 been calculated as defined in the Credit
Agreement it would have been 5.4.
(3) The maximum allowable leverage ratio under our indenture for the 47/8% Notes, the GBP Notes due 2025 and the
51/4% Notes is 7.0. For all other notes the maximum allowable leverage ratio is 6.5. In certain instances, as provided in
our indentures, we have the ability to incur additional indebtedness that would result in our bond leverage ratio
exceeding the maximum allowable ratio under our indentures and still remain in compliance with the covenant.
(4) At December 31, 2017, a portion of the net proceeds from the 51/4% Notes, together with a portion of the net proceeds
of the Equity Offering, were used to temporarily repay approximately $807.0 million of outstanding indebtedness
under our Revolving Credit Facility until the closing of the IODC Transaction, which occurred on January 10, 2018
(as described in Note 6 in Notes to Consolidated Financial Statements included in this Annual Report). The bond
leverage ratio at December 31, 2017 is calculated based on our outstanding indebtedness at this date, which reflects
the temporary repayment of the Revolving Credit Facility.
78
Noncompliance with these leverage and fixed charge coverage ratios would have a material adverse effect on our
financial condition and liquidity.
b. 2017 Issuances
In May 2017, IMI completed a private offering of 300.0 million Euros in aggregate principal amount of the Euro Notes,
which were issued at par. The net proceeds to IMI from the Euro Notes of 296.3 million Euros (or $332.7 million, based upon
the exchange rate between the Euro and the United States dollar on May 23, 2017 (the settlement date for the Euro Notes)),
after deducting discounts to the initial purchasers, were used to repay outstanding borrowings under the Former Revolving
Credit Facility.
In September 2017, IMI completed a private offering of $1,000.0 million in aggregate principal amount of the 47/8%
Notes, which were issued at par. The net proceeds of approximately $987.5 million from the 47/8% Notes after deducting
discounts to the initial purchasers, together with borrowings under the Revolving Credit Facility, were used to fund the
redemption of all of the 6% Notes due 2020.
In November 2017, IM UK completed a private offering of 400.0 million British pounds sterling in aggregate principal
amount of the GBP Notes due 2025, which were issued at par. The net proceeds to IM UK of 395.0 million British pounds
sterling (or $522.1 million, based upon the exchange rate between the British pounds sterling and the United States dollar on
November 13, 2017 (the settlement date for the GBP Notes due 2025)), after deducting discounts to the initial purchasers, were
used, together with borrowings under the Revolving Credit Facility, to fund the redemption of all the GBP Notes due 2022.
In December 2017, IMI completed a private offering of $825.0 million in aggregate principal amount of the 51/4% Notes.
The 51/4% Notes were issued at par. The net proceeds of approximately $814.7 million from the 51/4% Notes after deducting
discounts to the initial purchasers, together with the net proceeds from the Equity Offering and the Over-Allotment Option were
used to finance the purchase price of the IODC Transaction, which closed on January 10, 2018, and to pay related fees and
expenses. At December 31, 2017, the net proceeds from the 51/4% Notes, together with the net proceeds of the Equity Offering,
were used to temporarily repay borrowings under our Revolving Credit Facility and invest in money market funds.
c. 2017 Redemptions
In August 2017, we redeemed all of the 200.0 million Canadian dollars in aggregate principal outstanding of the CAD
Notes due 2021 (approximately $157.5 million, based upon the exchange rate between the Canadian dollar and the United
States dollar on August 15, 2017 (the redemption date for the CAD Notes due 2021)) at 103.063% of par, plus accrued and
unpaid interest to, but excluding the redemption date, utilizing borrowings under the Former Revolving Credit Facility. We
recorded a charge of $6.4 million to other expense (income), net in the third quarter of 2017 related to the early extinguishment
of this debt, representing the call premium associated with the early redemption, as well as a write-off of unamortized deferred
financing costs.
In September 2017, we redeemed all of the $1,000.0 million in aggregate principal outstanding of the 6% Notes due 2020
at 103.155% of par, plus accrued and unpaid interest to, but excluding, the redemption date. We recorded a charge of $41.7
million to other expense (income), net in the third quarter of 2017 related to the early extinguishment of this debt, representing
the call premium associated with the early redemption, as well as a write-off of unamortized deferred financing costs.
In November 2017, we redeemed all of the GBP Notes due 2022 at 104.594% of par, plus accrued and unpaid interest to,
but excluding, the redemption date. We recorded a charge of $30.1 million to other expense (income), net in the fourth quarter
of 2017 related to the early extinguishment of this debt, representing the call premium associated with the early redemption, as
well as a write-off of unamortized deferred financing costs.
79
d. 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. Iron Mountain
Information Management, LLC ("IMIM") retains the responsibility of servicing the accounts receivable balances pledged as
collateral for the Accounts Receivable Securitization Program and IMI provides a performance guaranty. 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, 2016, the maximum availability allowed and amount outstanding under the
Accounts Receivable Securitization Program was $247.0 million. The interest rate in effect under the Accounts Receivable
Securitization Program was 1.7% as of December 31, 2016.
On July 31, 2017, we amended the Accounts Receivable Securitization Program to (i) increase the maximum amount
available from $250.0 million to $275.0 million and (ii) to extend the maturity date from March 6, 2018 to July 30, 2020, at
which point all obligations become due. As of December 31, 2017, the maximum availability allowed and amount outstanding
under the Accounts Receivable Securitization Program was $259.0 million. The interest rate in effect under the Accounts
Receivable Securitization Program was 2.2% as of December 31, 2017. Commitment fees at a rate of 40 basis points are
charged on amounts made available but not borrowed under the Accounts Receivable Securitization Program.
e. 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 debit balances of other participating subsidiaries, and legal rights of offset are provided and, therefore,
amounts are presented in our Consolidated Balance Sheets on a net basis. Each subsidiary receives interest on the cash balances
held on deposit or pays interest on the debit balances 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 debit balances of approximately $67.8 million by participating subsidiaries).
During the first quarter of 2017, we significantly expanded our utilization of the Cash Pools and reduced our utilization of
our financing centers in Europe for purposes of meeting our global liquidity requirements. We currently utilize two separate
cash pools with BMG, one of which we utilize to manage global liquidity requirements for our QRSs (the "QRS Cash Pool")
and the other for our TRSs (the "TRS Cash Pool"). During the second quarter of 2017, we executed overdraft facility
agreements for the QRS Cash Pool and TRS Cash Pool, each in an amount not to exceed $10.0 million. Each overdraft facility
permits us to cover a temporary net debit position in the applicable pool. As of December 31, 2017, we had a net cash position
of approximately $5.7 million in the QRS Cash Pool (which consisted of a gross cash position of approximately $383.7 million
less outstanding debit balances of approximately $378.0 million by participating subsidiaries) and we had a zero balance in the
TRS Cash Pool (which consisted of a gross cash position of approximately $229.6 million less outstanding debit balances of
approximately $229.6 million by participating subsidiaries). The net cash position balances as of December 31, 2016 and 2017
are reflected as cash and cash equivalents in the Consolidated Balance Sheets.
_______________________________________________________________________________
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.
80
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.
Equity Financing
a. At The Market (ATM) Equity Program
In October 2017, we entered into the Distribution Agreement with the Agents pursuant to which we may sell, from time to
time, up to an aggregate sales price of $500.0 million of our common stock through the At The Market (ATM) Equity Program.
Sales of our common stock made pursuant to the Distribution Agreement may be made in negotiated transactions or
transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act, including sales
made directly on the NYSE, or sales made to or through a market maker other than on an exchange, or as otherwise agreed
between the applicable Agent and us. We intend to use the net proceeds from sales of our common stock pursuant to the At The
Market (ATM) Equity Program for general corporate purposes, including financing the expansion of our data center business
and adjacent businesses through acquisitions, and repaying amounts outstanding from time to time under the Revolving Credit
Facility.
During the quarter ended December 31, 2017 under the At The Market (ATM) Equity Program, we sold an aggregate of
1,481,053 shares of common stock for gross proceeds of $60.0 million, generating net proceeds of $59.1 million, after
deducting commissions of $0.9 million. As of December 31, 2017, the remaining aggregate sale price of shares of our common
stock available for distribution under the At The Market (ATM) Equity Program was approximately $440.0 million.
b. Equity Offering
On December 12, 2017, we entered into the Underwriting Agreement with the Underwriters related to the Equity
Offering. The offering price to the public for the Equity Offering was $37.00 per share, and we agreed to pay the Underwriters
an underwriting commission of $1.38195 per share. The net proceeds to us from the Equity Offering, after deducting
underwriters' commissions, was $516.5 million.
Pursuant to the Underwriting Agreement, we granted the Underwriters the Over-Allotment Option. On January 10, 2018,
the Underwriters exercised the Over-Allotment Option in its entirety. The net proceeds to us from the exercise of the Over-
Allotment Option, after deducting underwriters' commissions and the per share value of the dividend that we declared on our
common stock, with the record date on December 15, 2017 and which was paid on January 2, 2018, was approximately $76.2
million. The net proceeds of the Equity Offering and the Over-Allotment Option, together with the net proceeds from the
issuance of the 5¼% Notes, were used to finance the purchase price of the IODC Transaction, which closed on January 10,
2018, and to pay related fees and expenses. At December 31, 2017, the net proceeds of the Equity Offering, together with the
net proceeds from the 51/4% Notes, were used to temporarily repay borrowings under our Revolving Credit Facility and invest
in money market funds.
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
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 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)
Recall Costs and (ii) capital expenditures to integrate Recall with our existing operations.
81
The following table presents the operating and capital expenditures associated with the Recall Transaction incurred for the
years ended December 31, 2015, 2016 and 2017 and the cumulative amount incurred through December 31, 2017 (in
thousands):
Year Ended
December 31, 2015
Year Ended
December 31, 2016
Year Ended
December 31, 2017
Recall Costs
Recall Capital Expenditures
Total
$
$
47,014
65
47,079
$
$
131,944
18,391
150,335
$
$
84,901
31,441
116,342
$
$
Cumulative
Total
263,859
49,897
313,756
b. Noteworthy 2017 Acquisitions
In November 2016, we entered into a binding agreement to acquire the storage and information management assets and
operations of Santa Fe Group A/S ("Santa Fe") in ten regions within Europe and Asia in order to expand our presence in
southeast Asia and western Europe. In December 2016, we acquired the storage and 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.
During the first half of 2017, we acquired, in two separate transactions, (i) the storage and information management assets
and operations of Santa Fe in Macau and South Korea, and (ii) the storage and information management assets and operations
of Santa Fe in India, Indonesia and the Philippines (collectively, the “2017 Santa Fe Transaction”) for approximately 11.7
million Euros (or approximately $13.0 million, based upon the exchange rate between the United States dollar and the Euro on
the closing dates of the respective transactions).
In November 2017, in order to expand our existing operations in China, we entered into an agreement to acquire (i) the
storage and information management assets and operations of Santa Fe in China (the “Santa Fe China Transaction”) for
approximately 14.0 million Euros and (ii) certain real estate property located in Beijing, China owned by Santa Fe (the “Beijing
Property”) for approximately 9.0 million Euros, representing a total purchase price of approximately 23.0 million Euros,
subject to customary purchase price adjustments. On December 29, 2017, we closed on the Santa Fe China Transaction. The
purchase price for the Santa Fe China Transaction was not paid until January 2018 and, therefore, we have accrued for the
purchase price of the Santa Fe China Transaction (which was approximately $16.8 million, based upon the exchange rate
between the Euro and the United States dollar on the closing date of the Santa Fe China Transaction) in our consolidated
balance sheet as of December 31, 2017 (the “Accrued Purchase Price”). The Accrued Purchase Price is presented as a
component of current portion of long-term debt in our consolidated balance sheet as of December 31, 2017. We expect to close
the acquisition of the Beijing Property during the first half of 2018. The completion of the acquisition of the Beijing Property is
subject to closing conditions; accordingly, we can provide no assurances that we will be able to complete the acquisition of the
Beijing Property, that it will not be delayed or that the terms will remain the same.
In June 2017, in order to expand our presence in Peru, we acquired the storage and information management assets and
operations of Ransa Comercial, S.A. and Depositos, S.A, two records and storage and information management companies
with operations in Peru, for approximately $14.7 million.
In July 2017, in order to expand our European operations, we acquired Fileminders Ltd., a storage and records
management company with operations in Cyprus for approximately 24.9 million Euros (or approximately $28.5 million, based
upon the exchange rate between the United States dollar and the Euro on the closing date of the acquisition).
82
In September 2017, in order to expand our data center operations in the United States, we acquired Mag Datacenters LLC,
which operated Fortrust, a private data center business with operations in Denver, Colorado (the “Fortrust Transaction”). At the
closing of the Fortrust Transaction, we paid approximately $54.5 million in cash (the "Fortrust Cash Consideration") and issued
2.2 million shares of our common stock (the "Fortrust Stock Consideration"). The shares of our common stock issued to the
former owners of Fortrust in connection with the Fortrust Transaction contain certain restrictions that impact the marketability
of such shares for a period of six months following the closing date of the Fortrust Transaction (the “Lack of Marketability
Restriction”). The 2.2 million shares issued as part of the Fortrust Stock Consideration were valued at approximately $37.84
per share, which represents the closing price of our common stock as of August 31, 2017 (the last day of trading on the NYSE
prior to the closing of the Fortrust Transaction), discounted for the Lack of Marketability Restriction, resulting in a total
purchase price (including the Fortrust Cash Consideration and the Fortrust Stock Consideration) of approximately $137.5
million.
In September 2017, in order to expand our existing entertainment storage and services operations in the United States and
to expand our entertainment storage and services operations into Canada, France, Hong Kong, the Netherlands and the United
Kingdom, we acquired Bonded Services of America, Inc. and Bonded Services Acquisition, Ltd., providers of media asset
storage and management services for global entertainment and media companies (the “Bonded Transaction”), for
approximately 62.0 million British pounds sterling (or approximately $83.0 million, based upon the exchange rate between the
British pound sterling and the United States dollar on September 29, 2017, the closing date of the Bonded Transaction).
In October 2017, in order to expand our presence in India, we acquired OEC Records Management, a storage and
information management company with operations in India for approximately $19.3 million.
In addition to the transactions noted above, during 2017, in order to enhance our existing operations in the United States,
Greece and South Africa and to expand our operations into the United Arab Emirates, we completed the acquisition of five
storage and records management companies, one storage and data management company and one art storage company for total
consideration of approximately $22.7 million. The individual purchase prices of these acquisitions were each less than $5.0
million.
c. Acquisitions Closed or Expected to Close in 2018
On January 10, 2018, we completed the IODC Transaction. At the closing of the IODC Transaction, we paid
approximately $1,340.0 million of total consideration, including the Initial IODC Consideration and the IODC Contingent
Consideration. The proceeds for the IODC Transaction were provided by the Equity Offering, the Over-Allotment Option and
the issuance of the 5¼% Notes. At December 31, 2017, the net proceeds from the 51/4% Notes and the Equity Offering were
used to temporarily repay borrowings under our Revolving Credit Facility and invest in money market funds. At the closing of
the IODC Transaction, we utilized the cash in the money market funds and additional borrowings under our Revolving Credit
Facility to finance the purchase price of the IODC Transaction.
In October 2017, we entered into agreements to acquire two data centers located in London and Singapore from Credit
Suisse International and Credit Suisse AG (together, "Credit Suisse") for an aggregate cash purchase price of approximately
$100.0 million (the “Credit Suisse Transaction”). As part of the Credit Suisse Transaction, we will take ownership of both data
center facilities, with Credit Suisse entering into a long-term lease with us to maintain existing data center operations. The
completion of the Credit Suisse Transaction is subject to closing conditions; accordingly, we can provide no assurance that we
will be able to complete the Credit Suisse Transaction, that the Credit Suisse Transaction will not be delayed or that the terms
will remain the same. We expect to close the Credit Suisse Transaction during the first half of 2018.
83
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2017 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
$
57,902
$
89,276
$
61,217
$
More than
5 Years
227,890
88,398
344,207
313,922
78,368
418,365
644,351
563,408
30,512
1,363,630
4,824,378
578,874
467,533
7,881
804,337
1,222,028
28,945
Total
436,285
$
6,694,771
2,371,769
2,566,891
145,706
Total(3)(4)
$ 12,215,422
$
882,797
$ 1,745,912
$ 2,479,135
$ 7,107,578
_______________________________________________________________________________
(1) Amounts include variable rate interest payments, which are calculated utilizing the applicable interest rates as of
December 31, 2017; 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 $36.4 million in total (including $7.5 million, $10.9 million, $8.7 million
and $9.3 million, in less than 1 year, 1-3 years, 3-5 years and more than 5 years, respectively).
(3) The table above excludes $38.5 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 $91.4 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. This table also excludes purchase commitments associated with acquisitions closed or expected to close in
2018.
We expect to meet our cash flow requirements for the next twelve months from cash generated from operations, cash on
hand, borrowings under the Credit Agreement and other financings (including the issuance of equity under our At The Market
(ATM) Equity Program). 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, primarily as a result of costs incurred to fund the REIT
conversion, the Recall Transaction and, more recently, the IODC Transaction. We expect our leverage ratio to reduce over time
through effective capital allocation strategies and business growth.
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 2036, of $66.3 million at December
31, 2017 to reduce future federal taxable income, of which $1.7 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 2018 through 2036, of which an insignificant state tax benefit is expected to be
realized. We have assets for foreign net operating losses of $103.6 million, with various expiration dates (and in some cases no
expiration date), subject to a valuation allowance of approximately 59%.
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.
84
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Credit Risk
Financial instruments that potentially subject us to credit risk consist principally of cash and cash equivalents (including
money market funds and time deposits) and accounts receivable. The only significant concentrations of liquid investments as of
December 31, 2017 relate to cash and cash equivalents held on deposit with seven global banks and 12 "Triple A" rated money
market funds, all of which we consider to be large, highly-rated investment-grade institutions. As per our risk management
investment policy, we limit exposure to concentration of credit risk by limiting the amount invested in any one mutual fund to a
maximum of $50.0 million or in any one financial institution to a maximum of $75.0 million. As of December 31, 2017, our
cash and cash equivalents balance was $925.7 million, which included money market funds amounting to $585.0 million and
time deposits amounting to $24.5 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 may 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, 2017, we had $1,354.5 million of variable rate debt outstanding with a weighted average variable
interest rate of approximately 4.4%, and $5,775.0 million of fixed rate debt outstanding. As of December 31, 2017,
approximately 81% 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, 2017 would have been reduced by approximately
$15.0 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, 2017.
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.
85
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. IM UK has financed a portion of its capital needs through the issuance in British pounds
sterling of the GBP Notes due 2025. 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
due 2023. This creates a tax efficient natural currency hedge. During the year ended December 31, 2017, we designated a
portion of the Euro Notes and 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 $15.0 million ($15.0 million, net of tax) of
foreign exchange losses related to the "marking-to-market" of such debt to currency translation adjustments which is a
component of accumulated other comprehensive items, net included in stockholders' equity for the year ended December 31,
2017. As of December 31, 2017, cumulative net gains of $3.2 million, net of tax are recorded in accumulated other
comprehensive items, net associated with this net investment hedge.
Historically, we have entered into forward contracts to hedge our exposures in Euros, British pounds sterling and
Australian dollars. As of December 31, 2017, we had outstanding forward contracts to (i) purchase $138.8 million United
States dollars and sell 176.0 million Canadian dollars, (ii) purchase 135.0 million Euros and sell $160.8 million United States
dollars and (iii) purchase $114.4 million United States dollars and sell 96.2 million Euros to hedge our foreign exchange
exposures. 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 any of the forward contracts we have
entered as hedges. During the year ended December 31, 2017, cash receipts included in cash from operating activities from
continuing operations related to settlements associated with foreign currency forward contracts were $9.1 million. We recorded
net gains in connection with forward contracts of $8.3 million, including an unrealized foreign exchange loss of $0.8 million
related to the forward contracts in other expense (income), net as of December 31, 2017 in the Consolidated Financial
Statements included in this Annual Report. As of December 31, 2017, 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 2017 functional
currencies, relative to the United States dollar, would result in a reduction in our equity of approximately $241.5 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.
86
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, 2017 (the "Evaluation Date"), we carried out an evaluation,
under the supervision and with the participation of our management, including our chief executive officer and chief financial
officer, of the effectiveness of our disclosure controls and procedures. Based upon that evaluation, our chief executive officer
and chief financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective.
Management's Report on Internal Control over Financial Reporting
Our management, with the participation of our principal executive officer and principal financial officer, is responsible
for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
of the Exchange Act. Our internal control system is designed to provide reasonable assurance to our management and board of
directors regarding the preparation and fair presentation of published financial statements. Due to their inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness
to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the
degree of compliance with policies or procedures may deteriorate. Under the supervision and with the participation of our
management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness
of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management
concluded that our internal control over financial reporting was effective as of December 31, 2017.
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.
87
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Iron Mountain Incorporated
Boston, Massachusetts
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Iron Mountain Incorporated and subsidiaries (the
“Company”) as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on
criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2017, of the Company and
our report dated February 16, 2018, expressed an unqualified opinion on those financial statements.
Basis for Opinion
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 are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 16, 2018
88
Changes in 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.
As part of our shared service center initiative, we are centralizing certain finance, human resources and IT functions.
During the last six months of the year ended December 31, 2017, we implemented significant steps in this plan related to
certain accounting, accounts payable, payroll and IT support functions. We have and will continue to align the design and
operation of our financial control environment as part of the shared service center initiative.
There have been no other 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, 2017 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
89
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, 2016 and 2017
Consolidated Statements of Operations, Years Ended December 31, 2015, 2016 and 2017
Consolidated Statements of Comprehensive Income (Loss), Years Ended December 31, 2015, 2016 and 2017
Consolidated Statements of Equity, Years Ended December 31, 2015, 2016 and 2017
Consolidated Statements of Cash Flows, Years Ended December 31, 2015, 2016 and 2017
Notes to Consolidated Financial Statements
Financial Statement Schedule III—Schedule of Real Estate and Accumulated Depreciation
Page
91
92
93
94
95
96
97
176
(b) Exhibits filed as part of this report: As listed in the Exhibit Index following the Financial Statement Schedule III-
Schedule of Real Estate and Accumulated Depreciation.
90
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Iron Mountain Incorporated
Boston, Massachusetts
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Iron Mountain Incorporated and subsidiaries (the
"Company") as of December 31, 2017 and 2016, 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, 2017, and the related notes and the
schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and
the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity
with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated February 16, 2018, expressed an unqualified opinion on the Company's internal
control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 16, 2018
We have served as the Company's auditor since 2002.
91
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 $44,290 and $46,648 as of
December 31, 2016 and 2017, respectively)
Prepaid expenses and other
Total Current Assets
Property, Plant and Equipment:
Property, plant and equipment
Less—Accumulated depreciation
Property, Plant and Equipment, net
Other Assets, net:
Goodwill
Customer relationships and customer inducements
Other
Total Other Assets, net
Total Assets
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt
Accounts payable
Accrued expenses
Deferred revenue
Total Current Liabilities
Long-term Debt, net of current portion
Other Long-term Liabilities
Deferred Rent
Deferred Income Taxes
Commitments and Contingencies (see Note 10)
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 263,682,670 shares and 283,110,183 shares as of December 31, 2016 and
2017, 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,
2016
2017
$
236,484
$
925,699
691,249
184,374
1,112,107
5,535,783
(2,452,457)
3,083,326
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
$
$
835,742
188,874
1,950,315
6,251,100
(2,833,421)
3,417,679
4,070,267
1,400,547
133,594
5,604,408
10,972,402
146,300
289,137
653,146
241,590
1,330,173
6,896,971
73,039
126,231
155,728
54,697
91,418
—
—
2,636
3,489,795
(1,343,311)
(212,573)
1,936,547
124
1,936,671
9,486,800
$
2,831
4,164,562
(1,765,966)
(103,989)
2,297,438
1,404
2,298,842
10,972,402
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
92
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended December 31,
2015
2016
2017
Revenues:
Storage rental
Service
Total Revenues
Operating Expenses:
$
$
1,837,897
1,170,079
3,007,976
$
2,142,905
1,368,548
3,511,453
Cost of sales (excluding depreciation and amortization)
Selling, general and administrative
Depreciation and amortization
Intangible impairments
Loss (Gain) on disposal/write-down of property, plant and equipment
(excluding real estate), net
Total Operating Expenses
Operating Income (Loss)
Interest Expense, Net (includes Interest Income of $3,984, $7,558 and
$7,659 in 2015, 2016 and 2017, respectively)
Other Expense (Income), Net
Income (Loss) from Continuing Operations Before Provision
(Benefit) for Income Taxes and Gain on Sale of Real Estate
Provision (Benefit) for Income Taxes
Gain on Sale of Real Estate, Net of Tax
Income (Loss) from Continuing Operations
Income (Loss) from Discontinued Operations, Net of Tax
Net Income (Loss)
Less: Net Income (Loss) Attributable to Noncontrolling Interests
Net Income (Loss) Attributable to Iron Mountain Incorporated
Earnings (Losses) per Share—Basic:
Income (Loss) from Continuing Operations
Total Income (Loss) from Discontinued Operations, Net 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
$
$
$
$
$
$
$
$
1,290,025
844,960
345,464
—
3,000
2,483,449
524,527
263,871
98,590
162,066
37,713
(850)
125,203
—
125,203
1,962
123,241
$
0.59
$
— $
$
0.58
0.59
$
— $
$
0.58
210,764
212,118
1.9100
$
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
$
$
$
$
$
$
$
$
2,377,557
1,468,021
3,845,578
1,685,318
984,965
522,376
3,011
799
3,196,469
649,109
353,575
79,429
216,105
25,947
(1,565)
191,723
(6,291)
185,432
1,611
183,821
0.71
(0.02)
0.69
0.71
(0.02)
0.69
265,898
266,845
2.2706
The accompanying notes are an integral part of these consolidated financial statements.
93
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Net Income (Loss)
Other Comprehensive (Loss) Income:
Foreign Currency Translation Adjustment
Market Value Adjustments for Securities
Total Other Comprehensive (Loss) Income
Comprehensive Income (Loss)
Comprehensive Income (Loss) Attributable to Noncontrolling Interests
Year Ended December 31,
2015
$ 125,203
2016
$ 107,233
2017
$ 185,432
(100,970)
(245)
(101,215)
23,988
(35,641)
(734)
(36,375)
70,858
633
3,690
108,564
—
108,564
293,996
1,591
Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated
$ 23,355
$ 67,168
$ 292,405
The accompanying notes are an integral part of these consolidated financial statements.
94
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, 2014
$
869,955
209,818,812
$
2,098
$
1,588,841
$
(659,553)
$
(75,031)
$
13,600
$
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
—
—
—
—
(99,641)
(245)
—
—
—
Balance, December 31, 2015
528,607
211,340,296
2,113
1,623,863
(942,218)
(174,917)
Reclassification to redeemable
noncontrolling interests
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)
Change in value of redeemable
noncontrolling interests (see Note 2.x.)
Parent cash dividends declared
Foreign currency translation adjustment
Market value adjustments for securities
Net income (loss)
Noncontrolling interests equity
contributions
Noncontrolling interests dividends
Purchase of noncontrolling interests
(25,437)
—
60,260
2,108,962
—
21
—
60,239
1,835,026
50,233,412
502
1,834,524
(28,831)
(505,917)
(36,056)
(734)
106,646
1,299
(1,698)
3,506
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(28,831)
—
—
—
—
—
—
—
—
—
—
—
(505,917)
—
—
104,824
—
—
—
—
—
—
—
—
(36,922)
(734)
—
—
—
—
Balance, December 31, 2016
1,936,671
263,682,670
2,636
3,489,795
(1,343,311)
(212,573)
Issuance of shares under employee
stock purchase plan and option plans
and stock-based compensation
Issuance of shares in connection with
the Equity Offering, net of
underwriting discounts and offering
expenses (see Note 13)
Issuance of shares through the At The
Market (ATM) Equity Program, net of
underwriting discounts and offering
expenses (see Note 13)
Issuance of shares in connection with
the Fortrust Transaction (see Note 6)
Change in value of redeemable
noncontrolling interests (see Note 2.x.)
Parent cash dividends declared
Foreign currency translation adjustment
Net income (loss)
Noncontrolling interests equity
contributions
Noncontrolling interests dividends
Purchase of noncontrolling interests
43,110
1,252,823
13
43,097
515,952
14,500,000
145
515,807
58,566
1,481,053
83,014
2,193,637
(25,680)
(606,476)
108,481
185,653
—
(1,956)
1,507
—
—
—
—
—
—
—
15
22
—
—
—
—
—
—
—
58,551
82,992
(25,680)
—
—
—
—
—
—
—
—
—
—
—
(606,476)
—
183,821
—
—
—
—
—
—
—
—
—
108,584
—
—
—
—
Balance, December 31, 2017
$
2,298,842
283,110,183
$
2,831
$
4,164,562
$
(1,765,966)
$
(103,989)
$
The accompanying notes are an integral part of these consolidated financial statements.
95
—
—
—
—
—
—
—
—
—
—
—
(1,329)
—
1,962
7,590
(2,057)
19,766
(25,437)
25,437
—
—
—
—
866
—
1,822
1,299
(1,698)
3,506
124
—
—
—
—
—
—
(103)
1,832
—
(1,956)
1,507
1,404
—
—
28,831
—
415
—
587
—
(573)
—
54,697
—
—
—
—
25,680
—
83
(221)
13,230
(2,051)
—
$
91,418
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
2015
2016
2017
Cash Flows from Operating Activities:
Net income (loss)
(Income) loss from discontinued operations
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Depreciation
Amortization (includes amortization of deferred financing costs and discount of $9,249, $13,151 and $14,962 in 2015, 2016 and
2017, respectively)
Intangible impairments
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
Loss (gain) on disposal/write-down of property, plant and equipment, net (including real estate)
Loss on disposal of Iron Mountain Divestments (see Note 14)
Gain on Russia and Ukraine Divestment (see Note 14)
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 (see Note 6)
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:
$
125,203
$
—
107,233
$
(3,353)
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)
(32,611)
(22,500)
—
2,272
(456,646)
—
(456,646)
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)
Repayment of revolving credit, term loan facilities, bridge facilities and other debt
Proceeds from revolving credit, term loan facilities, bridge facilities and other debt
(10,796,873)
10,925,709
(14,851,440)
14,544,388
Early retirement of senior subordinated and senior 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 associated with the Equity Offering
Net proceeds associated with the At The Market (ATM) Program
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
(Decrease) Increase in Cash and Cash Equivalents
Cash and Cash Equivalents, including Restricted Cash, Beginning of Year
Cash and Cash Equivalents, including Restricted Cash, 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
Accrued Purchase Price and Other Holdbacks (see Note 6)
Dividends Payable
Fair Value of Stock Issued for Recall Transaction (see Note 6)
Fair Value of Initial OSG Investment (see Note 14)
Fair Value of Stock Issued for Fortrust Transaction (see Note 6)
(814,728)
985,000
7,590
(2,016)
(406,508)
—
—
7,149
327
(14,161)
(108,511)
—
(108,511)
(8,015)
(31,412)
159,793
128,381
259,815
42,440
50,083
51,846
$
$
$
$
$
—
925,443
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
74,881
62,691
$
$
$
$
$
— $
5,950
$
— $
— $
— $
— $
5,625
1,835,026
$
$
— $
— $
$
$
$
$
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
96
185,432
6,291
406,283
131,055
3,011
11,253
30,019
(36,370)
78,368
(766)
—
(38,869)
50,503
(89,653)
(25,281)
34,898
(35,079)
13,164
724,259
(3,291)
720,968
(343,131)
(219,705)
(55,126)
(20,059)
29,236
9,337
(599,448)
—
(599,448)
(14,429,695)
13,917,055
(1,746,856)
2,656,948
13,230
(4,151)
(439,999)
516,462
59,129
13,095
—
(14,793)
540,425
—
540,425
27,270
689,215
236,484
925,699
368,468
104,498
166,843
71,098
20,093
172,102
—
18,000
83,014
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2017
(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,
provide colocation and wholesale data center spaces and provide information management and data center solutions that help
organizations in various locations throughout North America, Europe, Latin America, Asia and Africa protect their information,
lower storage rental costs, comply with regulations, facilitate corporate disaster recovery, and better use their information and
information technology ("IT") infrastructure for business advantages, regardless of its format, location or life cycle stage. We
currently serve customers across an array of market verticals - commercial, legal, financial, healthcare, insurance, life sciences,
energy, business services, entertainment and government organizations.
We have been organized and have operated as a real estate investment trust for United States federal income tax purposes
("REIT") beginning with our taxable year ended December 31, 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"). 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.
At December 31, 2017, we had approximately $22,167 of restricted cash held by certain financial institutions related to
bank guarantees. We adopted Accounting Standards Update ("ASU") No. 2016-18, Statement of Cash Flows (Topic 230):
Restricted Cash ("ASU 2016-18"), which is discussed in greater detail in Note 2.w., during the fourth quarter of 2017. Our
consolidated statement of cash flows for the years ended December 31, 2015, 2016 and 2017 reflect our adoption of ASU
2016-18.
97
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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, net components of Iron Mountain Incorporated Stockholders' Equity. 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 63/4% Euro Senior
Subordinated Notes due 2018 (the "63/4% Notes"), (ii) our 3% Euro Senior Notes due 2025 (the "Euro 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, 2015, 2016 and 2017 is as follows:
Total loss on foreign currency transactions
e. Derivative Instruments and Hedging Activities
Year Ended December 31,
2015
70,851
$
2016
20,413
$
2017
43,248
$
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. We had no forward contracts outstanding as of December 31, 2016. As of December 31, 2017, none of our
derivative instruments contained credit-risk related contingent features. See Note 3.
98
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
f. Property, Plant and Equipment
Property, plant and equipment are stated at cost and depreciated using the straight-line method with the following useful
lives (in years):
Buildings and building improvements
5 to 40
Range
Leasehold improvements
Racking
Warehouse equipment/vehicles
Furniture and fixtures
Computer hardware and software
5 to 10 or life of the lease (whichever is shorter)
1 to 20 or life of the lease (whichever is shorter)
1 to 10
1 to 10
2 to 5
Property, plant and equipment (including capital leases in the respective category), at cost, consist of the following:
Land
Buildings and building improvements
Leasehold improvements
Racking
Warehouse equipment/vehicles
Furniture and fixtures
Computer hardware and software
Construction in progress
December 31,
2016
2017
$
260,059
$
314,897
1,702,448
538,368
1,875,771
395,595
52,836
588,980
121,726
2,039,902
592,700
1,996,594
467,345
55,245
627,571
156,846
$
5,535,783
$
6,251,100
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, 2015, 2016 and 2017, we capitalized $26,201, $16,438 and
$25,166 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 year ended December 31, 2016, we wrote off $1,833 of previously deferred software costs within the North
American Records and Information Management Business segment 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. We did not record any write-offs of
deferred software costs during the years ended December 31, 2015 and 2017.
99
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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:
Asset Retirement Obligations, beginning of the year
Liabilities Assumed
Liabilities Incurred
Liabilities Settled
Accretion Expense
Foreign Currency Translation Adjustments
Asset Retirement Obligations, end of the year
December 31,
2016
13,997
10,678
687
(1,106)
1,587
(355)
25,488
$
$
2017
25,488
1,990
433
(1,369)
1,538
(323)
27,757
$
$
g. Long-Lived Assets
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. Annually, or more
frequently if events or circumstances warrant, we assess whether a change in the lives over which long-lived assets, including
finite-lived intangible assets, are amortized is necessary.
Consolidated loss (gain) 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 losses associated with the write-off of certain property in our
Western European Business and North American Records and Information Management Business segments. Consolidated loss
(gain) 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. Consolidated loss (gain) on disposal/write-down of
property, plant and equipment (excluding real estate), net was $799 for the year ended December 31, 2017 and consisted
primarily of losses associated with the write-off of certain property in our Other International 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.
100
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Gain on sale of real estate for the year ended December 31, 2015 was $850, net of tax of $209, and consisted primarily of
the sale of a building in the United Kingdom. Gain on sale of real estate for the year ended December 31, 2016 was $2,180, net
of tax of $130, and consisted primarily of the sale of land and buildings in the United States and Canada. Gain on sale of real
estate for the year ended December 31, 2017 was $1,565 and consisted primarily of the sale of land and building in the United
States for net proceeds of approximately $12,700.
h. Goodwill and Other Indefinite-Lived Intangible Assets
Goodwill and intangible assets with indefinite lives are not amortized but are reviewed annually for impairment or more
frequently if impairment indicators arise. Other than goodwill, we currently have no intangible assets that have indefinite lives
and which are not amortized.
We have selected October 1 as our annual goodwill impairment review date. We have performed our annual goodwill
impairment review as of October 1, 2015 and 2016 and concluded that goodwill was not impaired as of such dates. We have
performed our annual goodwill impairment review as of October 1, 2017 and as a result of that review, we determined that the
fair value of the Consumer Storage reporting unit (formerly referred to as the Adjacent Businesses - Consumer Storage
reporting unit) was less than its carrying value and, therefore, we recorded a $3,011 impairment charge on the goodwill
associated with this reporting unit during the fourth quarter of 2017, which represents a write-off of all goodwill associated with
this reporting unit.
The following is a discussion regarding (i) the reporting units at which level we tested goodwill for impairment as of
October 1, 2016, (ii) our reporting units as of December 31, 2016 (including the amount of goodwill associated with each
reporting unit), (iii) the reporting units at which level we tested goodwill for impairment as of October 1, 2017, and (iv) our
reporting units as of December 31, 2017 (including the amount of goodwill associated with each reporting unit). When changes
occur in the composition of one or more reporting units, the goodwill is reassigned to the reporting units affected based upon
their relative fair values.
101
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Goodwill Impairment Analysis - 2016
Our reporting units at which level we performed our goodwill impairment analysis as of October 1, 2016 were as follows
(each as described in our Annual Report on Form 10-K for the year ended December 31, 2016): (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.
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 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)
Western Europe(4)
Northern and Eastern Europe(5)
Latin America(5)
Australia and New Zealand(5)
Southeast Asia(5)
Africa and India(5)
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 was included in the North American Records and Information Management Business segment.
(2) This reporting unit was included in the North American Data Management Business segment.
(3) This reporting unit was included in the Corporate and Other Business segment.
(4) This reporting unit was included in the Western European Business segment.
(5) This reporting unit was included in the Other International Business segment.
102
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Goodwill Impairment Analysis - 2017
a. Changes to Composition of Reporting Units between December 31, 2016 and October 1, 2017
Prior to the Russia and Ukraine Divestment (as defined and more fully disclosed in Note 14), our businesses in Russia and
Ukraine were a component of our Northern and Eastern Europe reporting unit. As disclosed in Note 14, on May 30, 2017, Iron
Mountain EES Holdings Ltd. ("IM EES"), a consolidated subsidiary of IMI, sold its records and information management
operations in Russia and Ukraine. As a result of the Russia and Ukraine Divestment, $3,515 of goodwill associated with our
Northern and Eastern Europe reporting unit was allocated, on a relative fair value basis, to the Russia and Ukraine Divestment
and included in the carrying value of the divested businesses.
During the second quarter of 2017, as a result of changes in the management of our businesses included in our Other
International Business segment, we reassessed the composition of our reporting units. As a result of this reassessment, we
determined that our businesses in our former Africa and India reporting unit, which included our businesses in South Africa and
India, as well as our business in the United Arab Emirates which was acquired in the first quarter of 2017, were now being
managed in conjunction with our businesses included in our Northern and Eastern Europe reporting unit. This newly formed
reporting unit, which consists of (i) the businesses included in our former Northern and Eastern Europe reporting unit and (ii)
our businesses in the United Arab Emirates, South Africa and India is referred to as the Northern/Eastern Europe and Middle
East, Africa and India, or NEE and MEAI, reporting unit.
During the second quarter of 2017, we reassessed the composition of our reporting units included in our North American
Records and Information Management Business segment. As a result of this reassessment, we determined that the discrete
financial information and operating results of our North American Secure Shredding business are no longer being regularly
reviewed by the segment manager of our North American Records and Information Management Business segment. Therefore,
we have concluded that our secure shredding operations in North America no longer constitute a separate reporting unit and that
our North American Records and Information Management Business segment consists of one reporting unit, which is referred
to as the North American Records and Information Management reporting unit.
b. Reporting Units as of October 1, 2017
As a result of the changes described above, our reporting units at which level we performed our goodwill impairment
analysis as of October 1, 2017 were as follows: (1) North American Records and Information Management; (2) North American
Data Management; (3) Global Data Center (which had no goodwill at October 1, 2017 and was formerly referred to as the
Adjacent Businesses - Data Centers reporting unit); (4) Consumer Storage; (5) Fine Arts (formerly referred to as the Adjacent
Businesses - Fine Arts reporting unit); (6) Western Europe; (7) NEE and MEAI; (8) Latin America; (9) Australia and New
Zealand; and (10) Asia (formerly referred to as the Southeast Asia reporting unit). As discussed above, we recorded a $3,011
impairment charge on the goodwill associated with our Consumer Storage reporting unit during the fourth quarter of 2017,
which represents a write-off of all goodwill associated with this reporting unit. We concluded that the goodwill associated with
each of our other reporting units was not impaired as of such date.
c. Changes to Composition of Reporting Units as of December 31, 2017
During the fourth quarter of 2017, as a result of changes in the management of our entertainment storage and services
business, we reassessed the composition of our reportable operating segments (see Note 9 for a description of our reportable
operating segments) as well as our reporting units. As a result of this reassessment, we determined that our entertainment
storage and services businesses in the United States and Canada, which were previously included within our North American
Data Management reporting unit, were being managed in conjunction with our entertainment storage and services businesses in
France, Hong Kong, the Netherlands and the United Kingdom (the majority of which were acquired in the third quarter of 2017
as part of the Bonded Transaction (as defined and more fully disclosed in Note 6)). This newly formed reporting unit is referred
to as the Entertainment Services reporting unit. We have reassigned the related goodwill associated to the reporting units
impacted by this change on a relative fair value basis.
103
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
As of December 31, 2017, no factors were identified that would alter our October 1, 2017 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.
Goodwill by Reporting Unit as of December 31, 2017
The carrying value of goodwill, net for each of our reporting units described above as of December 31, 2017 is as follows:
North American Records and Information Management(1)
North American Data Management(2)
Consumer Storage(3)
Fine Arts(3)
Entertainment Services(3)
Western Europe(4)
NEE and MEAI(5)(6)
Latin America(5)
Australia and New Zealand(5)
Asia(5)(7)
Global Data Center(8)
Total
$
$
Carrying Value
as of
December 31, 2017
2,269,446
497,851
—
25,298
34,750
396,489
188,265
155,115
316,883
186,170
—
4,070,267
_______________________________________________________________________________
(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.
(6) Included in this reporting unit at December 31, 2017 is the goodwill associated with the OEC Transaction, as defined
and more fully described in Note 6.
(7) Included in this reporting at December 31, 2017 is the goodwill associated with the Santa Fe China Transaction, as
defined and more fully described in Note 6.
(8) This reporting unit is included in the Global Data Center Business segment.
Reporting unit valuations have generally been determined using a combined approach based on the present value of future
cash flows and market multiples. 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.
104
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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, 2016 and 2017 is as follows:
North
American
Records and
Information
Management
Business
North
American
Data
Management
Business
Western
European
Business
Other
International
Business
Global Data
Center
Business
Corporate
and Other
Business
Total
Consolidated
$
1,620,425
$
411,882
$
381,149
$
225,626
$
— $
37,910
$
2,676,992
—
—
—
—
—
—
—
—
—
—
—
—
—
215
—
(479)
—
—
1,656,163
(43,421)
(1,607)
(68,259)
37,646
4,219,868
717
10,885
24,533
(3,011)
—
—
163
49,503
(3,011)
(3,515)
6,628
106,503
— $
60,048
$
4,386,861
— $
— $
316,014
—
—
—
—
—
—
(1,167)
314,847
1,747
— $
— $
316,594
— $
37,646
— $
60,048
$
$
3,905,021
4,070,267
— $
— $
— $
132,409
— $
— $
3,011
$
135,420
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(1)
Fair value and other
adjustments(2)
Currency effects
Gross Balance as of December 31,
2016
Deductible goodwill acquired
during the year
Non-deductible goodwill acquired
during the year
Goodwill impairment
Goodwill allocated to Russia and
Ukraine Divestment(3)
Fair value and other
adjustments(4)
Currency effects
Gross Balance as of December 31,
2017
Accumulated Amortization
Balance as of December 31, 2015
Currency effects
Accumulated Amortization
Balance as of December 31, 2016
Currency effects
Accumulated Amortization
Balance as of December 31, 2017
Net Balance as of December 31,
2016
Net Balance as of December 31,
2017
Accumulated Goodwill
Impairment Balance as of
December 31, 2016
Accumulated Goodwill
Impairment Balance as of
December 31, 2017
—
—
—
—
867,756
135,836
73,760
578,596
(3,332)
(157)
1,114
—
—
1
—
—
(49,338)
(40,089)
(971)
(20,036)
2,485,806
547,719
405,571
743,126
894
—
—
—
(25,195)
13,324
2,474,829
204,681
214
204,895
488
205,383
2,280,911
2,269,446
85,909
85,909
$
$
$
$
$
$
$
$
$
$
$
$
$
$
—
—
—
—
208
3,799
551,726
53,699
54
53,753
122
53,875
493,966
497,851
$
$
$
$
$
—
—
—
—
10,536
37,430
453,537
57,505
(1,355)
56,150
898
57,048
349,421
396,489
— $
46,500
— $
46,500
$
$
$
$
$
$
$
9,274
24,970
—
(3,515)
21,079
51,787
846,721
129
(80)
49
239
288
743,077
846,433
$
$
$
$
$
___________________________________________________________________
105
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
(1) 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.
(2) 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.
(3) Goodwill allocated to the Russia and Ukraine Divestment.
(4) Total fair value and other adjustments primarily include net adjustments of $6,628 primarily related to property, plant
and equipment, and customer relationship intangible assets (which represent adjustments within the applicable
measurement period to provisional amounts recognized in purchase accounting).
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 ten to 30 years (weighted average of 18 years at December 31,
2017). 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 ten to 30 years
(weighted average of 26 years as of December 31, 2017), 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 five to 15 years (weighted average of seven years as of
December 31, 2017), 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 a weighted average of four years as of December 31, 2017, and are included in depreciation and amortization in
the accompanying Consolidated Statements of Operations.
106
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
The gross carrying amount and accumulated amortization of our finite-lived intangible assets as of December 31, 2016 and
2017, respectively, are as follows:
December 31, 2016
December 31, 2017
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Customer relationships and Customer
Inducements
Other finite-lived intangible assets
(included in other assets, net)
Total
$1,604,020
$ (351,497) $1,252,523
$1,863,449
$ (462,902) $1,400,547
24,788
$1,628,808
(7,989)
16,799
$ (359,486) $1,269,322
20,929
$1,884,378
(10,728)
10,201
$ (473,630) $1,410,748
Amortization expense associated with finite-lived intangible assets and revenue reduction associated with the amortization
of Permanent Withdrawal Fees for the years ended December 31, 2015, 2016 and 2017 are as follows:
Year Ended December 31,
2015
2016
2017
Customer relationships and Customer Inducements:
Amortization expense included in depreciation and amortization
$
43,614
$
84,349
$
115,387
Revenue reduction associated with amortization of Permanent
Withdrawal Fees
Other finite-lived intangible assets:
11,670
12,217
11,253
Amortization expense included in depreciation and amortization
631
2,451
706
Estimated amortization expense for existing finite-lived intangible assets (excluding deferred financing costs, as disclosed
in Note 2.j.) is as follows:
2018
2019
2020
2021
2022
Estimated Amortization
Included in Depreciation
and Amortization
Charged to Revenues
$
$
110,388
108,604
105,341
103,358
102,335
8,097
6,172
4,657
3,166
2,142
107
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
j. Deferred Financing Costs
Deferred financing costs are amortized over the life of the related debt using the effective interest rate method. If debt is
retired early, the related unamortized deferred financing costs are written-off in the period the debt is retired to other expense
(income), net. As of December 31, 2016 and 2017, the gross carrying amount of deferred financing costs was $92,982 and
$113,678, respectively, and accumulated amortization of those costs was $25,047 and $27,438, 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:
2018
2019
2020
2021
2022
Thereafter
$
Estimated Amortization of
Deferred Financing Costs
13,853
13,614
13,466
12,334
10,306
22,667
k. Prepaid Expenses and Accrued Expenses
There are no prepaid expenses with items greater than 5% of total current assets as of December 31, 2016 and 2017.
Accrued expenses, with items greater than 5% of total current liabilities are shown separately, and consist of the
following:
Interest
Payroll and vacation
Incentive compensation
Dividend
Other
Accrued expenses
December 31,
2016
2017
$
76,615
$
68,067
70,117
5,625
229,833
$
450,257
$
71,176
67,379
72,006
172,102
270,483
653,146
108
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
l. Revenues
Our revenues consist of storage rental revenues as well as service revenues and are reflected net of sales and value added
taxes. Storage rental revenues, which are considered a key driver of financial performance for the storage and information
management services industry, consist primarily of recurring periodic rental charges related to the storage of materials or data
(generally on a per unit basis) 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; (10) cloud-related data protection, preservation, restoration
and recovery; and (11) 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, 2017, have historically not been significant.
In May 2014, the Financial Accounting Standards Board ("FASB") issued 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 (which is a component of Other Long-Term Liabilities) 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.
109
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
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, 2015, 2016 and 2017 was $27,585 ($19,679 after tax or $0.09 per
basic and diluted share), $28,976 ($22,364 after tax or $0.09 per basic and diluted share) and $30,019 ($26,512 after tax or
$0.10 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,
2015
2016
2017
$
$
220
27,365
27,585
$
$
110
28,866
28,976
$
$
108
29,911
30,019
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.
A summary of our stock options outstanding as of December 31, 2017 by vesting terms is as follows:
Three-year vesting period (10 year contractual life)
Five-year vesting period (10 year contractual life)
December 31, 2017
Stock Options
Outstanding
3,285,529
386,211
3,671,740
% of
Stock Options
Outstanding
89.5%
10.5%
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, as amended (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 12,750,000. The 2014 Plan permits us to continue to grant awards through May 24, 2027.
A total of 48,253,839 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 ESPP, at December 31, 2017 was 8,059,090.
110
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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 2015, 2016 and 2017 was $4.84, $2.56 and $4.28 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
2015
2016
2017
28.4%
1.70%
5%
27.2%
1.32%
7%
25.7%
1.96%
6%
5.4 years
5.6 years
5.0 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, 2017 is as follows:
Outstanding at December 31, 2016
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2017
Options exercisable at December 31, 2017
Options expected to vest
Options
3,451,698
1,058,445
(742,131)
(94,491)
(1,781)
3,671,740
1,637,103
1,948,054
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
$
$
$
$
31.79
37.05
26.09
33.79
38.83
34.41
31.53
36.73
7.28
5.69
8.55
$
$
$
16,373
12,806
3,432
The aggregate intrinsic value of stock options exercised for the years ended December 31, 2015, 2016 and 2017 is as
follows:
Aggregate intrinsic value of stock options exercised
Restricted Stock Units
Year Ended December 31,
2015
$
9,056
$
2016
18,298
2017
$
8,485
Under our various equity compensation plans, we may also grant RSUs. Our RSUs generally have a vesting period of
three 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).
111
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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, 2015, 2016 and 2017, are as follows:
Cash dividends accrued on RSUs
Cash dividends paid on RSUs
Year Ended December 31,
2015
2016
2017
$
2,508
$
2,525
$
2,927
2,363
2,590
2,370
The fair value of RSUs vested during the years ended December 31, 2015, 2016 and 2017, are as follows:
Fair value of RSUs vested
Year Ended December 31,
2015
24,345
$
2016
22,236
$
2017
19,825
$
A summary of RSU activity for the year ended December 31, 2017 is as follows:
Non-vested at December 31, 2016
Granted
Vested
Forfeited
Non-vested at December 31, 2017
Weighted-
Average
Grant-Date
Fair Value
33.21
36.87
32.82
35.21
35.38
RSUs
1,163,393
640,530
(604,037)
(128,417)
1,071,469
$
$
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.
112
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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, 2015, 2016 and 2017, are as follows:
Cash dividends accrued on PUs
Cash dividends paid on PUs
Year Ended December 31,
2015
2016
2017
$
874
$
1,078
$
1,015
645
1,290
205
During the years ended December 31, 2015, 2016 and 2017, we issued 159,334, 231,672 and 229,692 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, 2017, we expected 50%, 100% and 100%
achievement of the predefined revenue and ROIC targets associated with the awards of PUs made in 2015, 2016 and 2017,
respectively.
The fair value of earned PUs that vested during the years ended December 31, 2015, 2016 and 2017, is as follows:
Fair value of earned PUs that vested
Year Ended December 31,
2015
2016
2017
$
2,107
$
5,748
$
1,242
A summary of PU activity for the year ended December 31, 2017 is as follows:
Non-vested at December 31, 2016
Granted
Vested
Forfeited/Performance or Market Conditions Not
Achieved
Non-vested at December 31, 2017
Original
PU Awards
559,340
229,692
(42,484)
(28,670)
717,878
PU
Adjustment(1)
(121,038)
—
—
Total
PU Awards
438,302
229,692
(42,484)
(129,029)
(250,067)
(157,699)
467,811
$
Weighted-
Average
Grant-Date
Fair Value
33.67
$
41.93
29.23
30.25
39.28
_______________________________________________________________________________
(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.
113
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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, 2015,
2016 and 2017, there were 122,209, 110,835 and 102,826 shares, respectively, purchased under the ESPP. As of December 31,
2017, we have 624,768 shares available under the ESPP.
_______________________________________________________________________________
As of December 31, 2017, unrecognized compensation cost related to the unvested portion of our Employee Stock-Based
Awards was $37,849 and is expected to be recognized over a weighted-average period of 1.9 years.
We 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.
114
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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, 2015, 2016 and 2017 is as
follows:
Income (loss) from continuing operations
Less: Net income (loss) attributable to noncontrolling interests
Income (loss) from continuing operations (utilized in numerator
of Earnings Per Share calculation)
Income (loss) 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
Effect of Over-Allotment Option(1)
Weighted-average shares—diluted
Earnings (losses) per share—basic:
Income (loss) from continuing operations
$
$
$
$
$
Income (loss) from discontinued operations, net of tax
Net income (loss) attributable to Iron Mountain Incorporated(2) $
Earnings (losses) per share—diluted:
Income (loss) from continuing operations
$
Income (loss) from discontinued operations, net of tax
Net income (loss) attributable to Iron Mountain Incorporated(2) $
Year Ended December 31,
2015
2016
2017
$
125,203
1,962
123,241
$
— $
123,241
$
103,880
2,409
101,471
3,353
104,824
$
$
$
$
191,723
1,611
190,112
(6,291)
183,821
210,764,000
246,178,000
265,898,000
834,659
519,426
—
574,954
514,044
—
431,071
509,235
6,278
212,118,085
247,266,998
266,844,584
0.59
—
0.58
0.59
—
0.58
$
$
$
$
0.41
0.01
0.43
0.41
0.01
0.42
$
$
$
$
0.71
(0.02)
0.69
0.71
(0.02)
0.69
Antidilutive stock options, RSUs and PUs, excluded from the
calculation
1,435,297
1,790,362
2,326,344
___________________________________________________________________
(1) See Note 13.
(2) Columns may not foot due to rounding.
115
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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,
2015
2016
2017
Balance at
Beginning of
the Year
Credit Memos
Charged to
Revenue
Allowance for
Bad Debts
Charged to
Expense
$
$
32,141
31,447
44,290
$
42,497
37,616
38,966
15,326
8,705
14,826
_______________________________________________________________________________
Other(1)
$ (4,511) $
16,528
1,905
Deductions(2)
Balance at
End of
the Year
(54,006) $
(50,006)
(53,339)
31,447
44,290
46,648
(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
money market funds and time deposits) and accounts receivable. The only significant concentrations of liquid investments as of
December 31, 2016 and 2017, respectively, related to cash and cash equivalents. At December 31, 2016, we had time deposits
with six global banks. At December 31, 2017, we had money market funds with 12 "Triple A" rated money market funds and
time deposits with seven global banks. As per our risk management investment policy, we limit exposure to concentration of
credit risk by limiting the amount invested in any one mutual fund to a maximum of $50,000 or in any one financial institution
to a maximum of $75,000. As of December 31, 2016 and 2017, our cash and cash equivalents balance was $236,484 and
$925,699, respectively. At December 31, 2016, our cash and cash equivalents included time deposits of $22,240. At December
31, 2017, our cash and cash equivalents included money market funds of $585,000 and time deposits of $24,482.
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.
116
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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, 2016 and 2017,
respectively, are as follows:
Description
Time Deposits(1)
Trading Securities
Description
Money Market Funds(1)
Time Deposits(1)
Trading Securities
Derivative Assets(4)
Derivative Liabilities(4)
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)
—
—
Fair Value Measurements at
December 31, 2017 Using
Total Carrying
Value at
December 31,
2017
Quoted prices
in active
markets
(Level 1)
Significant other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
$
585,000
24,482
11,784
1,579
2,329
$
$
$
—
—
11,279 (2)
—
—
585,000
24,482
$
505 (3)
1,579
2,329
—
—
—
—
—
_______________________________________________________________________________
(1) Money market funds and time deposits are measured based on quoted prices for similar assets and/or subsequent
transactions.
(2) Certain trading securities are measured at fair value using quoted market prices.
(3) Certain trading securities are measured based on inputs other than quoted market prices that are observable.
(4) Derivative assets and liabilities relate to short-term (six months or less) foreign currency contracts that we have
entered into to hedge certain of our foreign exchange intercompany exposures, as more fully disclosed at Note 3. We
calculate the value of such forward contracts by adjusting the spot rate utilized at the balance sheet date for translation
purposes by an estimate of the forward points observed in active markets.
Disclosures are required in the financial statements for items measured at fair value on a non-recurring basis. We did not
have any material items that are measured at fair value on a non-recurring basis for the years ended December 31, 2015, 2016
and 2017, with the exception of: (i) the reporting units as presented in our goodwill impairment analysis (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); (iv) the redemption value of certain redeemable noncontrolling interests (as
disclosed in Note 2.x.); and (v) our investment in OSG (as defined and disclosed in Note 14), all of which are based on Level 3
inputs.
117
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
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, 2016 and 2017.
t.
Trading Securities
As of December 31, 2016 and 2017, we have one trust that holds marketable securities. As of December 31, 2016 and
2017, the fair value of the money market and mutual funds included in this trust amounted to $10,659 and $11,784,
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 $56, $472 and $2,148 for the years ended
December 31, 2015, 2016 and 2017, 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, 2015, 2016 and 2017 are
as follows:
Balance as of December 31, 2014
Other comprehensive (loss) income:
Foreign currency translation adjustment
Market value adjustments for securities
Total other comprehensive (loss) income
Balance as of December 31, 2015
Other comprehensive (loss) income:
Foreign currency translation adjustment
Market value adjustments for securities
Total other comprehensive (loss) income
Balance as of December 31, 2016
Other comprehensive (loss) income:
Foreign currency translation adjustment(1)
Market value adjustments for securities
Total other comprehensive income (loss)
Balance as of December 31, 2017
Foreign
Currency
Translation
Adjustments
$
(76,010) $
Market Value
Adjustments
for Securities
979
Total
(75,031)
$
(99,641)
—
(99,641)
$ (175,651) $
(36,922)
—
(36,922)
$ (212,573) $
108,584
—
108,584
$ (103,989) $
—
(245)
(245)
734
(99,641)
(245)
(99,886)
$ (174,917)
—
(734)
(734)
(36,922)
(734)
(37,656)
— $ (212,573)
—
—
108,584
—
—
108,584
— $ (103,989)
______________________________________________________________
(1) During the year ended December 31, 2017, approximately $29,100 of cumulative translation adjustment associated
with our businesses in Russia and Ukraine was reclassified from accumulated other comprehensive items, net and was
included in the gain on sale associated with the Russia and Ukraine Divestment (see Note 14).
118
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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:
Foreign currency transaction losses, net
Debt extinguishment expense, net
Other, net
Year Ended December 31,
$
$
2015
70,851
27,305
434
$
2016
20,413
9,283
14,604
$
98,590
$
44,300
$
2017
43,248
78,368
(42,187)
79,429
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 defined and disclosed in Note 6) and a charge of $1,421 associated with the loss on disposal
of the Iron Mountain Canadian Divestments (as defined and disclosed in Note 6), partially offset by $837 of gains associated
with the deferred compensation plan we sponsor. Other, net for the year ended December 31, 2017 includes a gain of $38,869
associated with the Russia and Ukraine Divestment (as described and defined in Note 14) and $2,148 of gains associated with
the deferred compensation plan we sponsor.
w. New Accounting Pronouncements
Recently Adopted Accounting Pronouncements
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. We adopted ASU 2017-04 in the
first quarter of 2017.
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. We adopted ASU 2017-01 in
the third quarter of 2017. ASU 2017-01 did not have a material impact on our consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a Consensus
of the FASB Emerging Issues Task Force) ("ASU 2016-18"). ASU 2016-18 requires that restricted cash and restricted cash
equivalents be included with cash and cash equivalents when reconciling the cash and cash equivalents as of the beginning of
the period to the cash and cash equivalents as of the end of the period in the statement of cash flows. We adopted ASU 2016-18
during the fourth quarter of 2017 retrospectively for the earliest year presented in our consolidated statement of cash flows.
ASU 2016-18 did not have a material impact on our consolidated financial statements.
119
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
As Yet Adopted Accounting Pronouncements
a. ASU 2014-09
In May 2014, the FASB issued ASU No. 2014-09. ASU 2014-09 provides guidance for 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.
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 as of 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 finalizing our 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 finalizing our assessments of the
quantification of the impacts of adopting ASU 2014-09 on our consolidated financial statements, 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 related to our long-term storage
contracts (“Accounting for Commissions”) and (ii) certain policy changes related to initial moves of physical storage
(“Accounting for Initial Moves”). Based on our current analysis, on the date of adoption we expect a net decrease to
(distributions in excess of earnings) earnings in excess of distributions to account for commissions and initial moves in
accordance with ASU 2014-09 of approximately $17,000 to $21,000. We do not expect the tax impact to be material based on
our current analysis.
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 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. We expect the net commission asset recognized upon adoption to be approximately $28,000 to $32,000. Upon the
adoption of ASU 2014-09, commissions will be capitalized and amortized over a period of three years.
120
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
ii. Accounting for Initial Moves
Under current GAAP, intake costs incurred but not charged to a customer to transport records to 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 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
initial move spending 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. Upon the adoption of ASU 2014-09, we expect a net decrease to (distributions in excess of earnings) earnings in
excess of distributions of approximately $30,000 to $34,000 to account for initial moves. This net decrease to (distributions in
excess of earnings) earnings in excess of distributions represents the write-off of our historical move cost asset associated with
intake costs incurred but not charged to a customer, which are currently capitalized and amortized over periods ranging from
five to 30 years, partially offset by the recognition of an asset for all initial move costs, including those that were expensed and
those that were capitalized and amortized under current GAAP, both of which are expected to be capitalized and amortized over
a period of three years upon the adoption of ASU 2014-09. At the time of adoption, we expect certain revenues will be deferred
and recognized over a period of three years under ASU 2014-09 of approximately $15,000 to $19,000.
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, while eliminating the
available-for-sale classification for equity securities with readily determinable fair values and the cost method for equity
investments without readily determinable fair values. ASU 2016-01 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 will adopt ASU 2016-01 on January 1, 2018 and are currently evaluating the impact ASU 2016-01 will have 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 August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to
Accounting for Hedging Activities ("ASU 2017-12"). ASU 2017-12 amends the hedge accounting recognition and presentation
requirements as outlined in Accounting Standards Codification Topic 815 with the objective of improving the financial
reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial
statements and enhance the transparency and understandability of hedge transactions. In addition, ASU 2017-12 simplifies the
application of the hedge accounting guidance. ASU 2017-12 is effective for us on January 1, 2019, with early adoption
permitted. We are currently evaluating the impact ASU 2017-12 will have on our consolidated financial statements.
121
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
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 Additional Paid-in Capital.
122
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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 associated with certain foreign currencies. At
the maturity of the forward contracts, we may enter into new forward contracts to hedge movements in the underlying
currencies. At the time of settlement, we either pay or receive the net settlement amount from the forward contract and
recognize this amount in Other expense (income), net in our Consolidated Statements of Operations as a realized foreign
exchange gain or loss. At the end of each month, we mark the outstanding forward contracts to market and record an unrealized
foreign exchange gain or loss for the mark-to-market valuation. We have not designated any of the forward contracts we have
entered into as hedges. Our policy is to record the fair value of each derivative instrument on a gross basis. As of December 31,
2016, we had no forward contracts outstanding. As of December 31, 2017, we had outstanding forward contracts to (i) purchase
$138,823 United States dollars and sell 176,000 Canadian dollars, (ii) purchase 135,000 Euros and sell $160,757 United States
dollars and (iii) purchase $114,390 United States dollars and sell 96,150 Euros to hedge our foreign exchange exposures. As of
December 31, 2017, we recorded a derivative asset of $1,579 as a component of Prepaid expenses and other on our
Consolidated Balance Sheet and a derivative liability of $2,329 as a component of Accrued expenses on our Consolidated
Balance Sheet, associated with open forward contracts as of December 31, 2017.
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, 2015, 2016 and 2017, are as follows:
Net payments (receipts)
Year Ended December 31,
2015
22,705
$
$
2016
2017
— $
(9,073)
Losses (gains) for our derivative instruments for the years ended December 31, 2015, 2016 and 2017 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
2015
20,294
$
2016
$
— $
2017
(8,292)
We have designated a portion of (i) our previously outstanding 63/4% Notes, (ii) our Euro denominated borrowings by
IMI under our Former Revolving Credit Facility (as defined in Note 4), and (iii) our Euro Notes (as defined in Note 4) as a
hedge of net investment of certain of our Euro denominated subsidiaries. For the years ended December 31, 2015, 2016 and
2017, we designated on average 34,331, 29,649 and 103,682 Euros, respectively, of the previously outstanding 63/4% Notes,
Euro denominated borrowings by IMI under our Former Revolving Credit Facility and Euro Notes as a hedge of net investment
of certain of our Euro denominated subsidiaries. As a result, we recorded the following foreign exchange gains (losses) 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)
Year Ended December 31,
2015
2016
$
3,284
$
1,107
2017
$ (15,015)
As of December 31, 2017, cumulative net gains of $3,188, net of tax, are recorded in accumulated other comprehensive
items, net associated with this net investment hedge.
123
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
4. Debt
Long-term debt is as follows:
December 31, 2016
December 31, 2017
Debt
(inclusive of
discount)
Unamortized
Deferred
Financing
Costs
Carrying
Amount
Fair
Value
Debt
(inclusive of
discount)
Unamortized
Deferred
Financing
Costs
Carrying
Amount
Fair
Value
Former Revolving Credit
Facility(1)
$
953,548
$
(7,530)
$
946,018
$
953,548
$
Former Term Loan(1)
234,375
234,375
234,375
— $
—
— $
—
— $
—
—
—
—
—
—
—
—
—
—
466,593
243,750
(14,407)
—
452,186
243,750
—
—
466,593
243,750
Revolving Credit
Facility(1)
Term Loan(1)
Australian Dollar Term
Loan (the "AUD Term
Loan")(2)
6% Senior Notes due
2020 (the "6% Notes due
2020")(3)(4)(5)
43/8% Senior Notes due
2021 (the "43/8% Notes")
(3)(4)(5)
61/8% CAD Senior Notes
due 2021 (the "CAD
Notes due 2021")(3)(6)
61/8% GBP Senior Notes
due 2022 (the "GBP
Notes due 2022")(3)(5)
(7)
6% Senior Notes due
2023 (the "6% Notes due
2023")(3)(4)
53/8% CAD Senior Notes
due 2023 (the "CAD
Notes due 2023")(3)(5)
(6)
53/4% Senior
Subordinated Notes due
2024 (the "53/4% Notes")
(3)(4)
3% Euro Senior Notes
due 2025 (the "Euro
Notes")(3)(4)(5)
37/8% GBP Senior Notes
due 2025 (the "GBP
Notes due 2025")(3)(5)
(8)
53/8% Senior Notes due
2026 (the "53/8% Notes")
(3)(5)(9)
47/8% Senior Notes due
2027 (the "47/8% Notes")
(3)(4)(5)
51/4% Senior Notes due
2028 (the "51/4% Notes")
(3)(4)(5)
Real Estate Mortgages,
Capital Leases and
Other(10)
Accounts Receivable
Securitization
Program(11)
Mortgage Securitization
Program(12)
Total Long-term Debt
Less Current Portion
Long-term Debt, Net of
Current Portion
177,198
(3,774)
173,424
178,923
187,504
(3,382)
184,122
189,049
1,000,000
(12,730)
987,270
1,052,500
—
—
—
—
500,000
(7,593)
492,407
511,250
500,000
(5,874)
494,126
507,500
148,792
(1,635)
147,157
155,860
493,648
(6,214)
487,434
527,562
—
—
—
—
—
—
—
—
600,000
(7,322)
592,678
637,500
600,000
(6,224)
593,776
625,500
185,990
(3,498)
182,492
188,780
199,171
(3,295)
195,876
208,631
1,000,000
(10,529)
989,471
1,027,500
1,000,000
(9,156)
990,844
1,012,500
—
—
—
—
—
—
—
—
359,386
(4,691)
354,695
364,776
539,702
(7,718)
531,984
527,559
250,000
(4,044)
245,956
242,500
250,000
(3,615)
246,385
256,875
—
—
—
—
—
—
—
—
1,000,000
(13,866)
986,134
1,000,000
825,000
(11,817)
813,183
826,031
478,565
(1,277)
477,288
478,565
649,432
(566)
648,866
649,432
247,000
(384)
246,616
247,000
258,973
(356)
258,617
258,973
50,000
6,319,116
(172,975)
(1,405)
(67,935)
48,595
6,251,181
—
(172,975)
50,000
50,000
7,129,511
(146,300)
(1,273)
(86,240)
48,727
7,043,271
—
(146,300)
50,000
$
6,146,141
$
(67,935)
$
6,078,206
$
6,983,211
$
(86,240)
$
6,896,971
______________________________________________________________
124
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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 (as 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, 2016 and 2017, respectively.
(2) 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 and $1,545 as of December 31, 2016
and 2017, respectively.
(3) 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, 2016 and 2017, respectively.
(4) 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"),
IM UK (as defined below), 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.
(5) The 6% Notes due 2020, the 43/8% Notes, the GBP Notes due 2022, the CAD Notes due 2023, the Euro Notes, the
GBP Notes due 2025, the 53/8% Notes, the 47/8% Notes and the 51/4% 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.
(6) 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.
(7) IME was the direct obligor on the GBP Notes due 2022, which were 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.
(8) Iron Mountain (UK) PLC ("IM UK") is the direct obligor on the GBP Notes due 2025, 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.
(9) Iron Mountain US Holdings, Inc. ("IM US Holdings"), 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.
125
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
4. Debt (Continued)
(10) Includes (i) real estate mortgages of $20,884 and $20,183 as of December 31, 2016 and 2017, respectively, which bear
interest at approximately 4.4% as of December 31, 2016 and 4.3% as of December 31, 2017 and are payable in various
installments through 2021, (ii) capital lease obligations of $309,860 and $436,285 as of December 31, 2016 and 2017,
respectively, which bear a weighted average interest rate of 4.6% at December 31, 2016 and 4.9% at December 31,
2017, and (iii) other notes and other obligations, which were assumed by us as a result of certain acquisitions, of
$147,821 and $192,964 as of December 31, 2016 and 2017, respectively, and bear a weighted average interest rate of
12.6% at December 31, 2016 and 11.2% at December 31, 2017, respectively. We believe the fair value (Level 3 of fair
value hierarchy described at Note 2.s.) of this debt approximates its carrying value.
(11) The Accounts Receivable Securitization Special Purpose Subsidiaries (as defined below) 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.
(12) The Mortgage Securitization Special Purpose Subsidiary (as defined below) 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 August 21, 2017, we entered into a new credit agreement (the "Credit Agreement") which amended and restated our
then existing credit agreement (the "Former Credit Agreement") which consisted of a revolving credit facility (the "Former
Revolving Credit Facility") and a term loan (the "Former Term Loan") and was scheduled to terminate on July 6, 2019. The
Credit Agreement consists of a revolving credit facility (the "Revolving Credit Facility") and a term loan (the "Term Loan").
The maximum amount permitted to be borrowed under the Revolving Credit Facility is $1,750,000. The original amount of the
Term Loan was $250,000. We have the option to request additional commitments of up to $500,000, in the form of term loans
or through increased commitments under the Revolving Credit Facility, subject to the conditions specified in the Credit
Agreement. The Credit Agreement is scheduled to mature on August 21, 2022, at which point all obligations become due.
The Revolving Credit Facility 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 and
Euros, 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 August 21, 2022.
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, 2017, we had $466,593 and $243,750
of outstanding borrowings under the Revolving Credit Facility and the Term Loan, respectively. Of the $466,593 of outstanding
borrowings under the Revolving Credit Facility, $465,000 was denominated in United States dollars and 2,000 was
denominated in Canadian dollars. In addition, we also had various outstanding letters of credit totaling $52,847 under the
Revolving Credit Facility. The remaining amount available for borrowing under the Revolving Credit Facility as of December
31, 2017, which is 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 $1,230,560 (which amount represents the maximum availability as of such date). The average interest rate in effect under
the Credit Agreement was 3.4% as of December 31, 2017. The average interest rate in effect under the Revolving Credit
Facility was 3.5% and ranged from 3.4% to 5.5% as of December 31, 2017 and the interest rate in effect under the Term Loan
as of December 31, 2017 was 3.5%.
The Credit Agreement, our indentures and other agreements governing our indebtedness contain certain restrictive
financial and operating covenants, including covenants that restrict our ability to complete acquisitions, pay cash dividends,
incur indebtedness, make investments, sell assets and take certain other corporate actions. The covenants do not contain a rating
trigger. Therefore, a change in our debt rating would not trigger a default under the Credit Agreement, our indentures or other
agreements governing our indebtedness. The Credit Agreement uses EBITDAR-based calculations as the primary measures of
financial performance, including leverage and fixed charge coverage ratios.
126
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
4. Debt (Continued)
Our leverage and fixed charge coverage ratios under the Former Credit Agreement as of December 31, 2016 and the
Credit Agreement as of December 31, 2017, as well as our leverage ratio under our indentures as of December 31, 2016 and
2017 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, 2016
5.7
December 31, 2017
Maximum/Minimum Allowable
5.0 Maximum allowable of 6.5(1)(2)
2.7
5.2
2.4
1.6 Maximum allowable of 4.0
5.8 Maximum allowable of 6.5-7.0(3)(4)
2.1 Minimum allowable of 1.5
______________________________________________________________
(1) Our maximum allowable net total lease adjusted leverage ratio under the Former Credit Agreement was 6.5. The
Former Credit Agreement also contained a provision which limited, in certain circumstances, our cash dividends in
any four consecutive fiscal quarters to 95% of Funds From Operations (as defined in the Former 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 former limitation only applied
in certain circumstances, including where our net total lease adjusted leverage ratio exceeded 6.0 as measured as of the
end of the most recently completed fiscal quarter (the “Dividend Limitation Leverage Condition”). The Credit
Agreement does not contain a Dividend Limitation Leverage Condition. The maximum allowable net total lease
adjusted leverage ratio under the Credit Agreement is 6.5.
(2) The definition of the net total lease adjusted leverage ratio was modified in the Credit Agreement. The net total lease
adjusted leverage ratio at December 31, 2017 was calculated as defined in the Credit Agreement, while the net total
lease adjusted leverage ratio at December 31, 2016 was calculated as defined in the Former Credit Agreement. Had the
net total lease adjusted leverage ratio at December 31, 2016 been calculated as defined in the Credit Agreement it
would have been 5.4.
(3) The maximum allowable leverage ratio under our indenture for the 47/8% Notes, the GBP Notes due 2025 and the
51/4% Notes is 7.0, while the maximum allowable leverage ratio under the indenture pertaining to our remaining senior
and senior subordinated notes is 6.5. In certain instances as provided in our indentures, we have the ability to incur
additional indebtedness that would result in our bond leverage ratio exceeding the maximum allowable ratio under our
indentures and still remain in compliance with the covenant.
(4) At December 31, 2017, a portion of the net proceeds from the 51/4% Notes, together with a portion of the net proceeds
of the Equity Offering, were used to temporarily repay approximately $807,000 of outstanding indebtedness under our
Revolving Credit Facility until the closing of the IODC Transaction, which occurred on January 10, 2018 (as described
in Note 6). The bond leverage ratio at December 31, 2017 is calculated based on our outstanding indebtedness at this
date, which reflects the temporary payment of the Revolving Credit Facility.
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, 2015, 2016 and 2017, are as follows:
Commitment fees and letters of credit fees
Year Ended December 31,
2015
2016
2017
$
3,743
$
3,533
$
4,091
127
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
4. Debt (Continued)
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
$850,000 (the "Bridge Facility"). We used the proceeds from the Bridge Facility, together with borrowings under the Former
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 4 % Notes and the 5 % Notes, together with cash on
hand and borrowings under the Former 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.
c. Notes Issued under Indentures
As of December 31, 2017, we had nine series of senior subordinated or senior notes issued under various indentures, six
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; one of which (the CAD Notes due 2023) is a direct obligation of Canada Company; and one of which (the GBP
Notes due 2025) is a direct obligation of IM UK. Each series of 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:
•
•
43/8% Notes: $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;
6% Notes due 2023: $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;
• CAD Notes due 2023: 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;
•
53/4% Notes: $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;
• Euro Notes: 300,000 Euro principal amount of senior notes maturing on January 15, 2025 and bearing interest at a rate
of 3% per annum, payable semi-annually in arrears on January 15 and July 15;
• GBP Notes due 2025: 400,000 British pounds sterling principal amount of senior notes maturing on November 15,
2025 and bearing interest at a rate of 37/8% per annum, payable semi-annually in arrears on May 15 and November 15;
•
•
•
53/8% Notes: $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;
47/8% Notes: $1,000,000 principal amount of senior notes maturing on September 15, 2027 and bearing interest at a
rate of 47/8% per annum, payable semi-annually in arrears on March 15 and September 15; and
51/4% Notes: $825,000 principal amount of senior notes maturing on March 15, 2028 and bearing interest at a rate of
51/4% per annum, payable semi-annually in arrears on March 15 and September 15.
128
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
4. Debt (Continued)
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% Senior
Subordinated Notes due 2021 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.
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.
In May 2017, IMI completed a private offering of 300,000 Euros in aggregate principal amount of the Euro Notes, which
were issued at par. The net proceeds to IMI from the Euro Notes of 296,250 Euros (or $332,683, based upon the exchange rate
between the Euro and the United States dollar on May 23, 2017 (the settlement date for the Euro Notes)), after deducting
discounts to the initial purchasers, were used to repay outstanding borrowings under the Former Revolving Credit Facility.
In August 2017, we redeemed all of the 200,000 Canadian dollars in aggregate principal outstanding of the CAD Notes
due 2021 (approximately $157,458, based upon the exchange rate between the Canadian dollar and the United States dollar on
August 15, 2017 (the redemption date for the CAD Notes due 2021)) at 103.063% of par, plus accrued and unpaid interest to,
but excluding the redemption date, utilizing borrowings under the Former Revolving Credit Facility. We recorded a charge of
$6,354 to other expense (income), net in the third quarter of 2017 related to the early extinguishment of this debt, representing
the call premium associated with the early redemption, as well as a write-off of unamortized deferred financing costs.
In September 2017, IMI completed a private offering of $1,000,000 in aggregate principal amount of the 47/8% Notes,
which were issued at par. The net proceeds of approximately $987,500 from the 47/8% Notes after deducting discounts to the
initial purchasers, together with borrowings under the Revolving Credit Facility, were used to fund the redemption of all of the
6% Notes due 2020. In September 2017, we redeemed all of the $1,000,000 in aggregate principal outstanding of the 6% Notes
due 2020 at 103.155% of par, plus accrued and unpaid interest to, but excluding, the redemption date. We recorded a charge of
$41,738 to other expense (income), net in the third quarter of 2017 related to the early extinguishment of this debt, representing
the call premium associated with the early redemption, as well as a write-off of unamortized deferred financing costs.
In November 2017, IM UK completed a private offering of 400,000 British pounds sterling in aggregate principal amount
of the GBP Notes due 2025, which were issued at 100% of par. The net proceeds to IM UK of 395,000 British pounds sterling
(or $522,077, based upon the exchange rate between the British pounds sterling and the United States dollar on November 13,
2017 (the settlement date for the GBP Notes due 2025)), after deducting discounts to the initial purchasers, were used, together
with borrowings under the Revolving Credit Facility, to fund the redemption of all the GBP Notes due 2022. In November
2017, we redeemed all of the GBP Notes due 2022 at 104.594% of par, plus accrued and unpaid interest to, but excluding, the
redemption date. We recorded a charge of $30,056 to other expense (income), net in the fourth quarter of 2017 related to the
early extinguishment of this debt, representing the call premium associated with the early redemption, as well as a write-off of
unamortized deferred financing costs.
129
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
4. Debt (Continued)
In December 2017, IMI completed a private offering of $825,000 in aggregate principal amount of the 51/4% Notes. The
51/4% Notes were issued at par. The net proceeds of approximately $814,688 from the 51/4% Notes after deducting discounts to
the initial purchasers, together with the net proceeds from the Equity Offering and the Over-Allotment Option (each as defined
and described in Note 13), were used to finance the purchase price of the IODC Transaction (as defined and described in Note
6), which closed on January 10, 2018, and to pay related fees and expenses. At December 31, 2017, the net proceeds from the
51/4% Notes, together with the net proceeds of the Equity Offering, were used to temporarily repay borrowings under our
Revolving Credit Facility and invest in money market funds.
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
43/8% Notes
June 1,
6% Notes due
2023
August 15,
CAD Notes due
2023
September 15,
53/4% Notes
August 15,
Euro Notes
January 15,
GBP Notes
due 2025
November 15,
53/8% Notes
June 1,
47/8% Notes
September 15,
51/4% Notes
March 15,
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
102.188% (1)
103.000% (1)
—
101.917% (1)
101.094%
102.000%
104.031% (1)
100.958%
—
—
—
—
100.000%
101.000%
102.688%
100.000%
101.500% (1)
101.938% (1)
—
—
—
100.000%
100.000%
101.344%
100.000%
100.750%
100.969%
102.688% (1)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
100.000%
100.000%
100.000%
100.000%
100.000%
101.792%
102.438% (1)
102.625% (1)
100.000%
100.000%
100.000%
100.000%
100.000%
100.896%
101.625%
101.750%
—
—
—
—
—
—
—
—
—
—
100.000%
100.000%
100.000%
100.000%
100.813%
100.875%
—
—
—
—
100.000%
100.000%
100.000%
100.000%
100.000%
—
—
—
—
—
—
100.000%
100.000%
100.000%
—
—
100.000%
100.000%
—
100.000%
_______________________________________________________________________________
(1) Prior to this date, the relevant notes are redeemable, at our option, in whole or in part, at a specified redemption price
or make-whole price, as the case may be.
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.
130
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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 Former 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 the 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) and as of
December 31, 2017, we had 242,188 Australian dollars ($189,049 based upon the exchange rate between the United States
dollar and the Australian dollar as of December 31, 2017) outstanding on the AUD Term Loan. The interest rate in effect under
the AUD Term Loan was 6.1% as of December 31, 2016 and 2017.
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. Iron Mountain
Information Management, LLC ("IMIM") retains the responsibility of servicing the accounts receivable balances pledged as
collateral for the Accounts Receivable Securitization Program and IMI provides a performance guaranty. 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, 2016, the maximum availability allowed and amount outstanding under the
Accounts Receivable Securitization Program was $247,000. The interest rate in effect under the Accounts Receivable
Securitization Program was 1.7% as of December 31, 2016.
On July 31, 2017, we amended the Accounts Receivable Securitization Program to (i) increase the maximum amount
available from $250,000 to $275,000 and (ii) to extend the maturity date from March 6, 2018 to July 30, 2020, at which point
all obligations become due. As of December 31, 2017, the maximum availability allowed and amount outstanding under the
Accounts Receivable Securitization Program was $258,973. The interest rate in effect under the Accounts Receivable
Securitization Program was 2.2% as of December 31, 2017. Commitment fees at a rate of 40 basis points are charged on
amounts made available but not borrowed under the Accounts Receivable Securitization Program.
131
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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 Sheets, (ii) our Consolidated
Statements 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 Statements of Cash Flows. The Mortgage Securitization Program is
scheduled to terminate on November 6, 2026, at which point all obligations become due. The outstanding amount under the
Mortgage Securitization Program was $50,000 at both December 31, 2016 and 2017. The interest rate in effect under the
Mortgage Securitization Program was 3.5% as of December 31, 2016 and 2017.
g. Cash Pooling
Certain of our subsidiaries participate in cash pooling arrangements (the “Cash Pools”) with Bank Mendes Gans
(“BMG”), an independently operated wholly owned subsidiary of ING Group, in order to help manage global liquidity
requirements. Under the Cash Pools, cash deposited by participating subsidiaries with BMG is pledged as security against the
debit balances of other participating subsidiaries, and legal rights of offset are provided and, therefore, amounts are presented in
our Consolidated Balance Sheets on a net basis. Each subsidiary receives interest on the cash balances held on deposit or pays
interest on its debit balances based on an applicable rate as defined in the Cash Pools. At December 31, 2016, we had a net cash
position of approximately $1,700 (which consisted of a gross cash position of approximately $69,500 less outstanding debit
balances of approximately $67,800 by participating subsidiaries).
During the first quarter of 2017, we significantly expanded our utilization of the Cash Pools and reduced our utilization of
our financing centers in Europe for purposes of meeting our global liquidity requirements. We currently utilize two separate
cash pools with BMG, one of which we utilize to manage global liquidity requirements for our QRSs (the "QRS Cash Pool")
and the other for our TRSs (the "TRS Cash Pool"). During the second quarter of 2017, we executed overdraft facility
agreements for the QRS Cash Pool and TRS Cash Pool, each in an amount not to exceed $10,000. Each overdraft facility
permits us to cover a temporary net debit position in the applicable pool. As of December 31, 2017, we had a net cash position
of approximately $5,700 in the QRS Cash Pool (which consisted of a gross cash position of approximately $383,700 less
outstanding debit balances of approximately $378,000 by participating subsidiaries) and we had a zero balance in the TRS Cash
Pool (which consisted of a gross cash position of approximately $229,600 less outstanding debit balances of approximately
$229,600 by participating subsidiaries). The net cash position balances as of December 31, 2016 and 2017 are reflected as cash
and cash equivalents in the Consolidated Balance Sheets.
_______________________________________________________________________________
132
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
4. Debt (Continued)
Maturities of long-term debt are as follows:
Year
2018
2019
2020
2021
2022
Thereafter
Net Discounts
Net Deferred Financing Costs
Total Long-term Debt (including current portion)
_______________________________________________________________________________
$
$
Amount(1)
146,300
129,194
378,447
568,486
856,361
5,052,268
7,131,056
(1,545)
(86,240)
7,043,271
(1) Amounts reflect temporary repayment of $807,000 of borrowings under the Revolving Credit Facility from a portion
of the net proceeds from the 51/4% Notes and a portion of the net proceeds from the Equity Offering at December 31,
2017, pending their use to finance the purchase price of the IODC Transaction, which closed on January 10, 2018.
133
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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,
2016 and 2017 and for the years ended December 31, 2015, 2016 and 2017 and are prepared on the same basis as the
consolidated financial statements.
The Parent Notes, CAD Notes, GBP Notes due 2022, GBP Notes due 2025 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 due 2022, which
were issued by IME, the GBP Notes due 2025, which were issued by IM UK, and the 53/8% Notes, which were issued by IM
US Holdings. Canada Company, IME and IM UK do not guarantee the Parent Notes. The subsidiaries that do not guarantee the
Parent Notes, the CAD Notes, the GBP Notes due 2022, the GBP Notes due 2025, and the 53/8% Notes, including IME, IM UK,
the Accounts Receivable Securitization Special Purpose Subsidiaries and the Mortgage Securitization Special Purpose
Subsidiary, are referred to below as the Non-Guarantors. As discussed below, the results of the Non-Guarantors for 2015 and
2016 exclude the results of Canada Company, as those are presented in a separate column.
The CAD Notes due 2021 were issued by Canada Company and registered under the Securities Act of 1933, as amended
(the “Securities Act”). The CAD Notes due 2023 have not been registered under the Securities Act, or under the securities laws
of any other jurisdiction. As disclosed in Note 4, we redeemed the CAD Notes due 2021 in August 2017 and, therefore, as of
December 31, 2017, Canada Company had no outstanding debt registered under the Securities Act that would require the
presentation of Canada Company on a standalone basis in the accompanying consolidating financial statements. Accordingly,
(i) the assets, liabilities and equity of Canada Company are presented as a component of the Non-Guarantor subsidiaries in the
accompanying Consolidated Balance Sheet as of December 31, 2017, (ii) the revenues, expenses and other comprehensive
income (loss) of Canada Company are presented as a component of the Non-Guarantor subsidiaries in the Consolidated
Statement of Operations and Comprehensive Income (Loss) for the year ended December 31, 2017, and (iii) the operating,
investing and financing cash flows for Canada Company are presented as a component of the Non-Guarantor subsidiaries in the
Consolidated Statement of Cash Flows for the year ended December 31, 2017.
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.
134
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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, 2016
Canada
Company
Non-
Guarantors
Eliminations
Consolidated
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
Assets
Current Assets:
Cash and cash equivalents
Accounts receivable
Intercompany receivable
Prepaid expenses and other
Total Current Assets
Property, Plant and Equipment, Net
Other Assets, Net:
Long-term notes receivable from affiliates and
intercompany receivable
Investment in subsidiaries
Goodwill
Other
Total Other Assets, Net
Total Assets
Liabilities and Equity
Intercompany Payable
$
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
5,673,848
4,068,893
—
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) $
Current Portion of Long-term Debt
Total Other Current Liabilities
—
58,478
51,456
488,194
Long-term Debt, Net of Current Portion
3,093,388
1,055,642
—
40,442
335,410
121,548
286,468
1,593,766
(29)
—
—
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
135
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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, 2017
Non-
Guarantors
Eliminations
Consolidated
Property, Plant and Equipment, Net
316
2,030,875
Assets
Current Assets:
Cash and cash equivalents(1)
Accounts receivable
Intercompany receivable
Prepaid expenses and other
Total Current Assets
Other Assets, Net:
Long-term notes receivable from affiliates and
intercompany receivable
Investment in subsidiaries
Goodwill
Other
Total Other Assets, Net
Total Assets
Liabilities and Equity
Intercompany Payable
Debit Balances Under Cash Pools
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)
$
2,433
$
634,317
$
383,675
$
(94,726) $
—
332,293
1,579
336,305
32,972
149,731
103,643
920,663
802,770
—
83,681
1,270,126
1,386,488
—
(482,024)
(29)
(576,779)
—
4,578,995
1,858,045
—
—
6,437,040
—
885,999
2,577,310
796,913
4,260,222
—
—
(4,578,995)
(2,744,044)
1,492,957
737,228
—
—
2,230,185
(7,323,039)
(7,899,818) $
10,972,402
$
$
6,773,661
$
7,211,760
$
4,886,799
— $
— $
482,024
—
—
235,062
4,232,759
56,233
54,247
527,549
758,166
38,493
92,082
421,262
1,906,046
$
$
—
—
4,578,995
113,024
241,974
—
(4,578,995)
(482,024) $
(94,726)
(29)
—
—
—
—
925,699
835,742
—
188,874
1,950,315
3,417,679
—
—
4,070,267
1,534,141
5,604,408
—
—
146,300
1,183,873
6,896,971
—
354,998
91,418
Redeemable Noncontrolling Interests (see Note 2.x.)
8,402
—
83,016
Total Iron Mountain Incorporated Stockholders' Equity
2,297,438
1,123,546
1,620,498
(2,744,044)
2,297,438
Noncontrolling Interests
Total Equity
Total Liabilities and Equity
—
—
1,404
—
1,404
2,297,438
1,123,546
1,621,902
(2,744,044)
2,298,842
$
6,773,661
$
7,211,760
$
4,886,799
$
(7,899,818) $
10,972,402
______________________________________________________________
(1) Included within Cash and Cash Equivalents at December 31, 2017 is approximately $38,400 and $62,000 of cash on
deposit associated with our Cash Pools for the Guarantors and Non-Guarantors, respectively. See Note 4 for more
information on our Cash Pools.
136
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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, 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 (Benefit)
Provision 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 Adjustment
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) $
—
(19,003)
(85,251)
(245)
—
—
(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
137
—
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, 2017
(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 Adjustment
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
138
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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, 2017
Parent
Guarantors
Non-
Guarantors
Eliminations
Consolidated
$
— $
1,437,466
$
940,091
$
— $
2,377,557
863,623
4,577
604,398
24,613
2,305,666
1,569,102
—
1,468,021
(29,190)
(29,190)
—
3,845,578
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
Intangible impairments
(Gain) Loss 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
—
—
—
—
—
161
167
—
—
328
(328)
163,541
47,176
925,385
24,613
654,213
309,883
3,011
(999)
1,916,106
389,560
6,996
9,112
(Loss) Income from Continuing Operations Before Provision
(Benefit) for Income Taxes and Gain on Sale of Real Estate
(211,045)
373,452
Provision (Benefit) for Income Taxes
Gain on Sale of Real Estate, Net of Tax
Equity in the (Earnings) Losses of Subsidiaries, 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 $
Net Income (Loss)
Other Comprehensive Income (Loss):
$
—
—
(394,866)
183,821
—
183,821
5,854
—
(25,385)
392,983
(4,370)
388,613
—
—
183,821
183,821
$
$
388,613
388,613
$
$
759,933
4,577
330,591
212,326
—
1,798
1,309,225
259,877
183,038
23,141
53,698
20,093
(1,565)
—
35,170
(1,921)
33,249
1,611
31,638
33,249
—
1,685,318
(29,190)
—
—
—
—
—
984,965
522,376
3,011
799
(29,190)
3,196,469
—
—
—
—
—
—
420,251
(420,251)
—
(420,251)
—
$
$
(420,251) $
(420,251) $
649,109
353,575
79,429
216,105
25,947
(1,565)
—
191,723
(6,291)
185,432
1,611
183,821
185,432
Foreign Currency Translation Adjustment
(15,015)
—
123,579
—
108,564
Equity in Other Comprehensive Income (Loss) of
Subsidiaries
Total Other Comprehensive Income (Loss)
Comprehensive Income (Loss)
Comprehensive Income (Loss) Attributable to
Noncontrolling Interests
123,599
108,584
292,405
82,127
82,127
470,740
—
123,579
156,828
(205,726)
(205,726)
(625,977)
—
108,564
293,996
—
—
1,591
—
1,591
Comprehensive Income (Loss) Attributable to Iron Mountain
Incorporated
$
292,405
$
470,740
$
155,237
$
(625,977) $
292,405
139
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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
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
Acquisitions of customer relationships and customer
inducements
Proceeds from sales of property and equipment and other,
net (including real estate)
—
—
334,019
(25,276)
—
—
(189,693)
(78,004)
320,932
(25,276)
(15,128)
(5,260)
—
—
(85,428)
(30,294)
—
—
(44,578)
(576)
(9,957)
586
49
1,637
—
—
(290,249)
(113,558)
(654,951)
50,552
—
—
—
—
(55,111)
2,272
Cash Flows from Investing Activities
308,743
(16,033)
(20,915)
(124,042)
(604,399)
(456,646)
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
—
—
—
—
—
—
—
—
3,577
8,203
4,979
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)
(31,412)
159,793
128,381
$
13,182
$
107,245
$
— $
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
—
(36,108)
36,259
Cash and cash equivalents, end of year
$
151
$
—
3,090
4,713
7,803
140
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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
$
(168,389) $
633,808
$
41,885
$
33,912
$
— $
541,216
Year Ended December 31, 2016
Parent
Guarantors
Canada
Company
Non-
Guarantors
Eliminations
Consolidated
Net proceeds from sales of senior notes
492,500
246,250
186,693
—
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 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 and term loan facilities,
bridge facilities and other debt
Proceeds from revolving credit and term loan facilities,
bridge facilities and other debt
Debt (repayment to) financing from and equity
(distribution to) contribution from 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
—
(168,389)
1,076
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)
4,032
(10,183)
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)
—
78,564
16,153
1,995
173,507
(313,132)
(13,025)
(398,004)
—
14,663
96,712
(535,991)
(1,163,654)
(7,511,941)
(1,273,228)
(4,902,617)
1,150,628
7,144,874
1,130,193
5,118,693
—
—
—
(505,871)
31,922
(8,389)
—
—
(466)
(183,454)
(67,514)
262,461
1,585
—
—
—
—
—
1,585
—
—
(3,489)
(895)
(5,830)
—
—
—
—
(11,493)
(3,170)
—
—
—
(14,851,440)
14,544,388
925,443
(466)
—
—
(505,871)
31,922
(18,603)
(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
$
— $
141
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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
$
(203,403) $
738,256
$
189,406
$
— $
724,259
Year Ended December 31, 2017
Parent
Guarantors
Non-
Guarantors
Eliminations
Consolidated
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 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 and other
debt
Proceeds from revolving credit, term loan facilities and other
debt
Early retirement of senior subordinated and senior notes
Net proceeds from sales of senior notes
Debit balances (payments) under cash pools
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 associated with the Equity Offering
Net proceeds associated with the At The Market (ATM)
Program
Net proceeds (payments) associated with employee stock-based
awards
Payment of debt financing and stock issuance costs
—
(203,403)
—
—
(990,635)
(16,170)
—
—
—
(1,006,805)
—
(1,345)
736,911
(235,996)
(96,946)
(344,919)
—
(63,765)
—
12,963
(728,663)
—
(1,946)
187,460
(107,135)
(122,759)
—
—
(11,420)
29,236
(3,626)
(215,704)
—
—
—
—
—
1,335,554
16,170
—
—
—
1,351,724
—
(3,291)
720,968
(343,131)
(219,705)
—
—
(75,185)
29,236
9,337
(599,448)
—
(1,006,805)
(728,663)
(215,704)
1,351,724
(599,448)
(262,579)
(8,077,553)
(6,089,563)
224,660
7,650,617
—
—
—
—
(14,429,695)
13,917,055
(1,746,856)
2,656,948
—
—
56,233
—
982,783
—
—
—
—
—
(9,391)
602,689
—
602,689
—
610,937
23,380
6,041,778
(715,302)
522,078
38,493
9,079
352,771
16,170
—
—
—
—
(1,554)
173,950
—
173,950
27,270
172,976
210,699
(94,726)
—
(1,335,554)
(16,170)
—
—
—
—
—
(1,446,450)
—
(1,446,450)
—
(94,726)
—
—
9,079
—
—
(439,999)
516,462
59,129
13,095
(14,793)
540,425
—
540,425
27,270
689,215
236,484
925,699
(1,031,554)
2,134,870
—
—
—
—
(439,999)
516,462
59,129
13,095
(3,848)
Cash Flows from Financing Activities-Continuing Operations
1,210,236
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
—
1,210,236
—
28
2,405
Cash and cash equivalents, end of year
$
2,433
$
634,317
$
383,675
$
(94,726) $
142
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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.
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 and 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, 2015, 2016 and 2017,
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”).
143
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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 (the "Access
Contingent Consideration") on August 4, 2018, the 27-month anniversary of the closing of the Access Sale. We have recorded a
non-trade receivable related to our estimate of the Access Contingent Consideration included in Prepaid expenses and other in
our Consolidated Balance Sheet as of December 31, 2017. The Access Contingent Consideration is subject to adjustments for
customer attrition subsequent to the closing of the Access Sale and potential indemnity obligations due to Access CIG.
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 Information Management LLC and Arkive Information Management Ltd., both information
management companies (collectively, "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 (as defined below) 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”).
144
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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 bore interest at 3.3% per annum and matured on December 29, 2017, at which
point all outstanding obligations became due. During the fourth quarter of 2017, we received proceeds for the full outstanding
amount of the Bridging Loan Note. 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 Australia 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 during the year ended December 31, 2016.
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”.
_______________________________________________________________________________
145
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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, 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, 2017, 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
$
$
$
13,221
0.05
0.05
$
0.53
2016
$3,763,929
$ 138,954
0.53
$
The amount of revenue and earnings in our Consolidated Statements of Operations for the years ended December 31,
2016 and 2017 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 2015, 2016 and 2017. The Pro
Forma Financial Information does not reflect these acquisitions due to the insignificant impact of these acquisitions on our
consolidated results of operations.
146
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
6. Acquisitions (Continued)
b. Other Noteworthy Acquisitions
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
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 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 for the year ended December 31, 2015.
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.
In November 2016, we entered into a binding agreement to acquire the storage and information management assets and
operations of Santa Fe Group A/S ("Santa Fe") in ten regions within Europe and Asia in order to expand our presence in
southeast Asia and western Europe. In December 2016, we acquired the storage and 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 (or 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.
147
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
6. Acquisitions (Continued)
Acquisitions Completed During the Year Ended December 31, 2017
During the first half of 2017, we acquired, in two separate transactions, (i) the storage and information management
assets and operations of Santa Fe in Macau and South Korea, and (ii) the storage and information management assets and
operations of Santa Fe in India, Indonesia and the Philippines (collectively, the “2017 Santa Fe Transaction”) for an aggregate
cash purchase price of approximately 11,700 Euros (or approximately $13,000, based upon the exchange rate between the
United States dollar and the Euro on the closing dates of the respective transactions).
In November 2017, we entered into an agreement to acquire (i) the storage and information management assets and
operations of Santa Fe in China (the “Santa Fe China Transaction”) for approximately 14,000 Euros and (ii) certain real estate
property located in Beijing, China owned by Santa Fe (the “Beijing Property”) for approximately 9,000 Euros, representing a
total purchase price of approximately 23,000 Euros, subject to customary purchase price adjustments. On December 29, 2017,
we closed on the Santa Fe China Transaction. The purchase price for the Santa Fe China Transaction was not paid until January
2018 and, therefore, we have accrued for the purchase price of the Santa Fe China Transaction (which was approximately
$16,800, based upon the exchange rate between the Euro and the United States dollar on the closing date of the Santa Fe China
Transaction) in our Consolidated Balance Sheet as of December 31, 2017 (the “Accrued Purchase Price”). The Accrued
Purchase Price is presented as a component of the current portion of long-term debt in our Consolidated Balance Sheet as of
December 31, 2017. We expect to close on the acquisition of the Beijing Property during the first half of 2018. The completion
of the acquisition of the Beijing Property is subject to closing conditions; accordingly, we can provide no assurances that we
will be able to complete the acquisition of the Beijing Property, that it will not be delayed or that the terms will remain the
same.
In June 2017, in order to expand our presence in Peru, we acquired the storage and information management assets and
operations of Ransa Comercial, S.A. and Depositos, S.A. (the "Ransa and Depositos Transaction"), two records and storage and
information management companies with operations in Peru, for approximately $14,700.
In July 2017, in order to expand our European operations, we acquired Fileminders Ltd., a storage and records
management company with operations in Cyprus (the "Fileminders Transaction"), for approximately 24,900 Euros (or
approximately $28,500, based upon the exchange rate between the United States dollar and the Euro on the closing date of the
acquisition).
In September 2017, in order to expand our data center operations in the United States, we acquired Mag Datacenters LLC,
which operated Fortrust, a private data center business with operations in Denver, Colorado (the “Fortrust Transaction”). At the
closing of the Fortrust Transaction, we paid approximately $54,500 in cash (the "Fortrust Cash Consideration") and issued
2,193,637 shares of our common stock (the "Fortrust Stock Consideration"). The shares of our common stock issued to the
former owners of Fortrust in connection with the Fortrust Transaction contain certain restrictions that impact the marketability
of such shares for a period of six months following the closing date of the Fortrust Transaction (the “Lack of Marketability
Restriction”). The 2,193,637 shares issued as part of the Fortrust Stock Consideration were valued at approximately $37.84 per
share, which represents the closing price of our common stock as of August 31, 2017 (the last day of trading on the NYSE prior
to the closing of the Fortrust Transaction), discounted for the Lack of Marketability Restriction, resulting in a total purchase
price (including the Fortrust Cash Consideration and the Fortrust Stock Consideration) of approximately $137,500.
In September 2017, in order to expand our existing entertainment storage and services operations in the United States and
to expand our entertainment storage and services operations into Canada, the United Kingdom, France, the Netherlands and
Hong Kong, we completed the acquisition of Bonded Services of America, Inc. and Bonded Services Acquisition, Ltd.
(together, "Bonded") (the "Bonded Transaction"), providers of media asset storage and management services for global
entertainment and media companies, for approximately 62,000 British pounds sterling (or approximately $83,000, based upon
the exchange rate between the British pound sterling and the United States dollar on the closing date of the Bonded
Transaction).
148
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
6. Acquisitions (Continued)
In October 2017, in order to expand our presence in India, we acquired OEC Records Management, a storage and
information management company with operations in India (the "OEC Transaction") for approximately $19,300.
In addition to the transactions noted above, during 2017, in order to enhance our existing operations in the United States,
Greece and South Africa and to expand our operations into the United Arab Emirates, we completed the acquisition of five
storage and records management companies, one storage and data management company and one art storage company for total
consideration of approximately $22,700. The individual purchase prices of these acquisitions were each less than $5,000.
_______________________________________________________________________________
149
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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 for all of our acquisitions in
each respective year is as follows:
Cash Paid (gross of cash acquired)(1)
Accrued Purchase Price and Other
Holdbacks(2)
Fair Value of Common Stock Issued
2015
$ 111,907
Recall
$ 331,834
2016
Other Fiscal
Year 2016
Acquisitions
37,350
$
Total
$ 369,184
2017
$ 234,314
—
—
— 1,835,026
—
—
— 1,835,026
20,093
83,014
1,507
Fair Value of Noncontrolling Interests
—
—
3,506
3,506
Total Consideration
111,907 2,166,860
40,856
2,207,716
338,928
Fair Value of Identifiable Assets Acquired:
Cash
2,041
Accounts Receivable and Prepaid Expenses
10,629
Fair Value of Recall Divestments(3)
Other Assets
—
7,032
76,461
176,775
121,689
57,563
576
2,703
—
541
Property, Plant and Equipment(4)
43,505
622,063
10,963
77,037
179,478
121,689
58,104
633,026
14,746
19,309
—
5,070
150,878
Customer Relationship Intangible Assets &
Acquired in Place Lease Value (5)
Other Intangible Assets
Debt Assumed
Accounts Payable, Accrued Expenses and
Other Liabilities
Deferred Income Taxes
Total Fair Value of Identifiable Net Assets
Acquired
34,988
709,139
20,842
729,981
122,328
—
—
—
(792,385)
—
—
—
(792,385)
(20,729)
(6,078)
(276,814)
(164,074)
(11,504)
(2,985)
(288,318)
(167,059)
14,487
(5,287)
(24,869)
(18,122)
71,388
530,417
21,136
551,553
278,540
Goodwill Initially Recorded(6)
$ 40,519 $1,636,443
$
19,720
$1,656,163
$
60,388
_______________________________________________________________________________
(1) 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. Included in cash paid for acquisitions in the Consolidated Statement of Cash Flows for the year
ended December 31, 2017 is net cash acquired of $14,746 and contingent and other payments, net of $137 related to
acquisitions made in years prior to 2017.
(2) Represents $16,771 purchase price accrued for the Santa Fe China Transaction and $3,322 of holdbacks of purchase
price for other 2017 acquisitions.
(3) 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.
(4) Consists primarily of buildings, building improvements, leasehold improvements, racking structures, warehouse
equipment and computer hardware and software.
150
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
6. Acquisitions (Continued)
(5) The weighted average lives of customer relationship intangible assets associated with acquisitions in 2015, 2016 and
2017 was 16 years, 13 years and 12 years, respectively.
(6) 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.
Allocations of the purchase price for acquisitions made in 2015, 2016 and 2017 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, 2017
primarily relate to the final assessment of the fair values of intangible assets (primarily customer relationship intangible assets
and acquired in-place lease value), property, plant and equipment (primarily building, building improvements and racking
structures), operating leases, contingencies and income taxes (primarily deferred income taxes), primarily associated with the
Santa Fe China Transaction, the Fortrust Transaction, the Bonded Transaction and the OEC Transaction.
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 2017 were not
material to our results from operations.
c. Acquisitions Closed or Expected to Close in 2018
On December 11, 2017, we entered into a purchase agreement to acquire the United States operations of IO Data Centers,
LLC (“IODC”), a leading data center colocation space and solutions provider based in Phoenix, Arizona, including the land and
buildings associated with four data centers in Phoenix and Scottsdale, Arizona; Edison, New Jersey; and Columbus, Ohio, for
an aggregate cash purchase price of $1,315,000 (the “Initial IODC Consideration”), plus up to $60,000 of additional proceeds
(including (i) $25,000 of contingent consideration (the “IODC Contingent Consideration”) and (ii) $35,000 of contingent
payments associated with the execution of future customer contracts), subject to certain adjustments as set forth in the IODC
Purchase Agreement (the “IODC Transaction”).
On January 10, 2018, we completed the IODC Transaction. At the closing of the IODC Transaction, we paid
approximately $1,340,000 of total consideration, consisting of the Initial IODC Consideration and the IODC Contingent
Consideration. The proceeds for the IODC Transaction were provided by the Equity Offering, the Over-Allotment Option (each
as defined in Note 13) and the issuance of the 5¼% Notes. At December 31, 2017, the net proceeds from the 51/4% Notes and
the Equity Offering were used to temporarily repay borrowings under our Revolving Credit Facility and invest in money market
funds. At the closing of the IODC Transaction, we utilized the cash in the money market funds and additional borrowings under
our Revolving Credit Facility to finance the purchase price of the IODC Transaction.
151
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
6. Acquisitions (Continued)
Due to the recent timing of the closing of the IODC Transaction, we are in the preliminary stages of the valuations of the
assets and liabilities for purposes of purchase price allocations and it is not yet practical for us to provide consolidated pro
forma financial information which summarizes the combined results of us and IODC on a pro forma basis as if the IODC
Transaction had occurred on January 1, 2016. We expect that the majority of the total consideration paid for the IODC
Transaction will be allocated to property, plant and equipment and intangible assets on our consolidated balance sheet upon the
completion of the valuation of the acquired assets and liabilities of IODC for purposes of purchase price allocations.
In October 2017, we entered into agreements to acquire two data centers located in London and Singapore from Credit
Suisse International and Credit Suisse AG (together, "Credit Suisse") for an aggregate cash purchase price of approximately
$100,000 (the “Credit Suisse Transaction”). As part of the Credit Suisse Transaction, we will take ownership of both data center
facilities, with Credit Suisse entering into a long-term lease with us to maintain existing data center operations. The completion
of the Credit Suisse Transaction is subject to closing conditions; accordingly, we can provide no assurance that we will be able
to complete the Credit Suisse Transaction, that the Credit Suisse Transaction will not be delayed or that the terms will remain
the same. We expect to close the Credit Suisse Transaction during the first half of 2018.
7. Income Taxes
We have been organized and have operated as a REIT effective beginning with our taxable year that ended on December
31, 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 on the sale or
disposition of any asset previously owned by a C corporation during a five-year period following the date on which that asset
was first owned by a REIT that are attributable to "built-in" gains with respect to that asset on that date (e.g. with respect to the
REIT conversion, 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 income 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.
On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Reform Legislation”) was enacted into law in the United
States. The Tax Reform Legislation amends the Internal Revenue Code of 1986, as amended (the “Code”), to reduce tax rates
and modify policies, credits and deductions for businesses and individuals. The following summarizes certain components of
the Tax Reform Legislation and the impact such components of the Tax Reform Legislation had on our results of operations for
the taxable year ended December 31, 2017:
a. Corporate Tax Rate Reduction
The Tax Reform Legislation reduced the United States corporate federal income tax rate from 35% to 21% for taxable
years beginning after December 31, 2017 (the “U.S. Federal Rate Reduction”). Our deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be realized or settled. As a result of the Tax Reform Legislation being enacted prior to December 31, 2017, our
consolidated balance sheet as of December 31, 2017 reflects the revaluation of our deferred tax assets and liabilities based upon
the U.S. Federal Rate Reduction. During the fourth quarter of 2017, we recorded a discrete tax benefit of approximately $4,685,
representing the revaluation of our deferred tax assets and liabilities as a result of the U.S. Federal Rate Reduction included in
the Tax Reform Legislation.
152
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
7. Income Taxes (Continued)
b. Deemed Repatriation Transition Tax
The Tax Reform Legislation imposes a transition tax (the “Deemed Repatriation Transition Tax”) on a mandatory deemed
repatriation of post-1986 undistributed foreign earnings and profits not previously subject to United States tax as of November
2, 2017 or December 31, 2017, whichever is greater (the “Undistributed E&P”) as of the last taxable year beginning before
January 1, 2018. The Deemed Repatriation Transition Tax varies depending on whether the Undistributed E&P is held in liquid
(as defined in the Tax Reform Legislation) or non-liquid assets. A participation deduction against the deemed repatriation will
result in a Deemed Repatriation Transition Tax on Undistributed E&P of 15.5% if held in cash and liquid assets and 8% if held
in non-liquid assets. The Deemed Repatriation Transition Tax applies regardless of whether or not an entity has cash in its
foreign subsidiaries and regardless of whether the entity actually repatriates the Undistributed E&P back to the United States.
Our current estimate of the amount of Undistributed E&P deemed repatriated under the Tax Reform Legislation in our
taxable year ending December 31, 2017 is approximately $186,000 (the “Estimated Undistributed E&P”). We have opted to
include the full amount of Estimated Undistributed E&P in our 2017 taxable income, rather than spread it over eight years (as
permitted by the Tax Reform Legislation). Accordingly, included in our REIT taxable income for 2017 is approximately
$82,000 related to the deemed repatriation of Undistributed E&P (the “Deemed Repatriation Taxable Income”). 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 gains) each year to our stockholders.
Our current estimate of Estimated Undistributed E&P includes certain assumptions made by us regarding the cumulative
earnings and profits of our foreign subsidiaries, as well as the characterization of such Estimated Undistributed E&P (liquid
versus non-liquid assets). In 2018, we will perform additional analysis to determine the actual amount of Undistributed E&P
associated with our foreign subsidiaries, as well as the characterization of such Undistributed E&P. We do not believe this will
have an impact on our provision for income taxes or our qualification as a REIT. However, it may impact our shareholder
dividend reporting.
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,
2016
2017
$
30,901
$
2,930
98,879
12,036
20,131
(71,359)
93,518
17,565
1,337
105,026
3,051
20,029
(61,756)
85,252
(179,977)
(52,572)
(232,549)
(139,031) $
(168,028)
(61,530)
(229,558)
(144,306)
$
153
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
7. Income Taxes (Continued)
The deferred tax assets and liabilities are presented below:
Noncurrent deferred tax assets (Included in Other, a component of Other
Assets, net)
$
Noncurrent deferred tax liabilities
December 31,
2016
2017
12,264
(151,295)
$
11,422
(155,728)
We have federal net operating loss carryforwards, which expire from 2023 through 2036, of $66,313 at December 31,
2017 to reduce future federal taxable income, of which $1,662 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 2018 through 2036, of which an insignificant state tax benefit is expected to be realized.
We have assets for foreign net operating losses of $103,550, with various expiration dates (and in some cases no expiration
date), subject to a valuation allowance of approximately 59%.
Rollforward of the valuation allowance is as follows:
Year Ended December 31,
2015
2016
2017
Balance at
Beginning of
the Year
Charged
(Credited) to
Expense
$
$
40,182
60,009
71,359
33,509
7,660
(4,317)
Other
Increases/
(Decreases)(1)
$
(13,682) $
3,690
(5,286)
Balance at
End of
the Year
60,009
71,359
61,756
_______________________________________________________________________________
(1) Other increases and decreases in valuation allowances are primarily related to changes in foreign currency exchange
rates and disposal of certain foreign subsidiaries.
The components of income (loss) from continuing operations before provision (benefit) for income taxes and gain on sale
of real estate are:
United States
Canada
Other Foreign
Year Ended December 31,
2015
$ 179,928
2016
$ 106,223
2017
$ 161,198
37,131
(54,993)
$ 162,066
28,157
12,264
50,019
4,888
$ 146,644
$ 216,105
154
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
7. Income Taxes (Continued)
The provision (benefit) for income taxes consists of the following components:
Federal—current
Federal—deferred
State—current
State—deferred
Foreign—current
Foreign—deferred
Year Ended December 31,
$
$
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
$
$
2017
16,345
(12,655)
3,440
(1,276)
42,532
(22,439)
25,947
A reconciliation of total income tax expense and the amount computed by applying the former federal income tax rate of
35.0% to income from continuing operations before provision (benefit) for income taxes and gain on sale of real estate for the
years ended December 31, 2015, 2016 and 2017, 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 (decrease) in valuation allowance (net operating losses)
Foreign repatriation
U.S. Federal Rate Reduction
Reserve (reversal) accrual and audit settlements (net of federal tax benefit)
Foreign tax rate differential
Disallowed foreign interest, Subpart F income, and other foreign taxes
Other, net
Provision (Benefit) for Income Taxes
$
Year Ended December 31,
2015
56,723
$
2016
51,325
$
2017
75,637
$
(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
$
(78,873)
—
2,692
(4,317)
29,476
(4,685)
(9,103)
(11,949)
29,325
(2,256)
25,947
Our effective tax rates for the years ended December 31, 2015, 2016 and 2017 were 23.3%, 30.6% and 12.0%,
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.
The primary reconciling items between the former 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.
155
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
7. Income Taxes (Continued)
The primary reconciling items between the former 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.
The primary reconciling items between the former federal statutory tax rate of 35.0% and our overall effective tax rate for
the year ended December 31, 2017 were the benefit derived from the dividends paid deduction of $78,873, the impact of
differences in the tax rates at which our foreign earnings are subject resulting in a tax benefit of $11,949, and a release of
valuation allowances on certain of our foreign net operating losses of $4,317 as a result of the merger of certain of our foreign
subsidiaries, partially offset by the impact of the Tax Reform Legislation of $24,791 (reflecting the impact of the Deemed
Repatriation Transition Tax, partially offset by the impact of the U.S. Federal Rate Reduction).
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.
Following our conversion to a REIT in 2014, we concluded that it was not our intent to reinvest our current and future
undistributed earnings of our foreign subsidiaries indefinitely outside the United States.
During 2016, as a result of the closing of the Recall Transaction and the subsequent integration of Recall’s operations into
our operations, we 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 approximately $230,000 as of
December 31, 2017. 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 and certain other foreign TRSs
(excluding unconverted foreign 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
$2,173, $1,805 and $289 for gross interest and penalties for the years ended December 31, 2015, 2016 and 2017, respectively.
We had $8,646 and $7,061 accrued for the payment of interest and penalties as of December 31, 2016 and 2017, respectively.
A summary of tax years that remain subject to examination by major tax jurisdictions is as follows:
Tax Years
See Below
2012 to present
2014 to present
Tax Jurisdiction
United States—Federal and State
Canada
United Kingdom
156
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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 2014, 2015 and 2016 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 2001 and
2008 through 2014 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, 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. As of December 31, 2017,
we had $38,533 of reserves related to uncertain tax positions, of which $34,003 and $4,530 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, 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
Gross reductions for tax positions of prior years(1)
Lapses of statutes
Settlements
Gross tax contingencies—December 31, 2016
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, 2017
$
$
$
$
55,951
3,484
979
(3,588)
(9,141)
—
47,685
3,704
12,207
(1,740)
(2,390)
—
59,466
4,067
3,368
(2,789)
(2,629)
(22,950)
38,533
_______________________________________________________________________________
157
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
7. Income Taxes (Continued)
(1) This amount includes gross additions related to the Recall Transaction.
The reversal of these reserves of $38,533 ($35,776 net of federal tax benefit) as of December 31, 2017 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 $4,524 of our unrecognized tax positions may be recognized by the end of 2018 as a result of a lapse of statute
of limitations or upon closing and settling significant audits in various worldwide jurisdictions. Additionally, we believe that it
is reasonably possible that an amount up to $14,020, which is included as a component of accrued expenses (and not included
in the above table) in our Consolidated Balance Sheet as of December 31, 2017, could be released by the end of 2018 as a result
of the resolution of a tax matter.
158
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
8. Quarterly Results of Operations (Unaudited)
Quarter Ended
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
2017
Total revenues
Operating income (loss)
Income (loss) from continuing operations
Total (loss) income from discontinued operations
Net income (loss)
Net income (loss) attributable to Iron Mountain
Incorporated
Earnings (losses) per Share-Basic:
Income (loss) per share from continuing
operations
Total (loss) income per share from discontinued
operations
Net income (loss) per share attributable to Iron
Mountain Incorporated
Earnings (losses) per Share-Diluted:
Income (loss) per share from continuing
operations
Total (loss) income per share from discontinued
operations
Net income (loss) per share attributable to Iron
Mountain Incorporated
March 31
June 30
September 30 December 31
$ 750,690
$ 883,748
$ 942,822
$ 934,193
130,066
63,041
—
63,041
96,626
(14,720)
1,587
(13,133)
135,454
139,460
5,759
2,041
7,800
49,800
(275)
49,525
62,774
(13,968)
7,080
48,938 (1)
0.30
—
0.30
0.30
—
0.30
(0.06)
0.01
(0.06)
(0.06)
0.01
(0.06)
0.02
0.01
0.03
0.02
0.01
0.03
0.19
—
0.19
0.19
—
0.19
$ 938,876
$ 949,806
$ 965,661
$ 991,235
147,755
170,194
176,756
154,405
58,844
(337)
58,507
83,148
(2,026)
81,122
25,382
(1,058)
24,324
24,349
(2,870)
21,479
58,125
78,630
24,345
22,721 (2)
0.22
—
0.22
0.22
—
0.22
0.31
(0.01)
0.30
0.30
(0.01)
0.30
0.10
—
0.09
0.10
—
0.09
0.09
(0.01)
0.08
0.09
(0.01)
0.08
_______________________________________________________________________________
159
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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 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 (as described in 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.
(2) The change in net income (loss) attributable to Iron Mountain Incorporated in the fourth quarter of 2017 compared to
the third quarter of 2017 is primarily attributable to increases in operating expenses, primarily associated with
increased Recall Costs and bad debt expenses, as well as a $3,011 intangible impairment charge recorded during the
fourth quarter of 2017. This increase in operating expenses was partially offset by a decrease in debt extinguishment
expense in the fourth quarter of 2017 compared to the third quarter of 2017 of approximately $18,200, as well as a
decrease in the provision for income taxes recorded in the fourth quarter of 2017 compared to the third quarter of 2017
of approximately $5,800. The decrease in the tax provision is primarily attributable to benefits derived from (i) rate
changes as a result of the Tax Reform Legislation, (ii) the release of reserves and benefits recorded as a result of
closing tax years; and (iii) the change in our estimated annual effective tax rate, which were partially offset by a
provision related to the establishment of a valuation allowance on certain of our foreign net operating losses in Brazil.
160
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
9. Segment Information
During the fourth quarter of 2017, as a result of changes in the management of our entertainment storage and services
business, we reassessed the composition of our reportable operating segments. As a result of this reassessment, we determined
that our entertainment storage and services business in the United States and Canada, which were previously included within
our North American Data Management Business segment, were now being managed in conjunction with our entertainment
storage and services business in France, Hong Kong, the Netherlands and the United Kingdom (the majority of which were
acquired in the third quarter of 2017 as part of the Bonded Transaction) as a component of our Adjacent Businesses operating
segment which is included within our Corporate and Other Business reportable operating segment.
Additionally, during the fourth quarter of 2017, we determined that our global data center business was now being
managed as a separate operating segment, rather than as a component of our Adjacent Businesses operating segment. We now
present our Global Data Center Business operating segment as a separate reportable operating segment.
As a result of the changes noted above, previously reported segment information has been restated to conform to the
current presentation.
As of December 31, 2017, our six 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; and related services offerings including our Iron Cloud solutions.
• 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 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 Cyprus, the Czech Republic, Denmark,
Finland, Greece, Hungary, Norway, Poland, Romania, Serbia, Slovakia, and Turkey; 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 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 and Macau), Hong Kong, India, Indonesia, Malaysia, the
Philippines, Singapore, South Korea, Thailand and United Arab Emirates. Our African operations provide Records
Management, Data Protection & Recovery, and Information Governance and Digital Solutions in South Africa.
• Global Data Center Business—provides data center facilities to protect mission-critical assets and ensure the continued
operation of our customers’ IT infrastructures, with secure and reliable colocation and wholesale options. As of
December 31, 2017, we have data center operations in five markets in the United States including: Denver, Colorado;
Kansas City, Missouri; Boston, Massachusetts; Boyers, Pennsylvania; and Manassas,Virginia.
161
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
9. Segment Information (Continued)
• Corporate and Other Business—primarily consists of the storage, safeguarding and electronic or physical delivery of
physical media of all types and digital content repository systems to house, distribute, and archive key media assets,
primarily for entertainment and media industry clients throughout the United States, Canada, France, Hong Kong, the
Netherlands and the United Kingdom, as well as our fine art and consumer storage businesses, 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 IT, 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.
162
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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
Global Data
Center Business
Corporate and
Other Business
Total
Consolidated
As of and for the Year Ended
December 31, 2015
Total Revenues
$
1,775,365
$
377,305
$
397,513
$
421,360
$
19,065
$
17,368
$
3,007,976
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
As of and for the Year Ended
December 31, 2017
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
183,507
163,647
19,860
714,639
3,627,843
192,935
141,964
19,530
19,100
430
203,237
602,398
21,915
14,873
12,795
(21)
38,176
7,063
1,930,699
215,330
186,467
28,863
775,717
4,996,216
145,636
111,062
392,814
26,629
20,666
5,963
224,522
826,320
26,054
22,731
44,691
38,710
5,981
120,649
871,571
27,278
17,378
2,596
7,304
454,211
55,582
42,613
12,969
137,506
1,031,313
31,530
31,014
57,025
39,439
17,586
87,341
893,530
94,483
64,227
27,688
2,568
652,516
100,490
67,310
33,180
169,042
2,103,725
365,566
62,315
(2,591)
(59)
(6,878)
300,451
37,165
3,382
7,394
2,800
501,742
64,689
47,907
16,782
160,024
923,814
21,909
19,838
784,855
118,764
78,283
40,481
226,430
2,388,777
166,001
76,664
2,050,346
240,524
201,204
39,320
884,158
5,050,240
205,531
134,785
6,624
64,122
401,640
34,759
24,623
10,136
223,324
839,539
31,279
31,279
—
—
4,302
4,102
200
1,860
99,347
22,751
22,751
—
—
24,249
4,827
4,610
217
6,212
167,757
70,060
70,060
—
—
37,694
10,224
8,617
1,607
11,275
382,198
86,543
32,015
36,409
36,221
188
(207,721)
255,898
99,556
29,056
345,464
301,219
44,245
920,005
6,350,587
458,918
290,249
70,500
113,558
—
55,111
56,964
49,468
43,860
5,608
(225,711)
361,469
32,488
31,421
3,511,453
452,326
365,526
86,800
1,087,288
9,486,800
671,334
328,603
1,042
291,965
25
50,766
69,301
53,416
45,649
7,767
3,845,578
522,376
406,283
116,093
(245,015)
1,260,196
1,387,834
10,972,402
126,758
48,550
638,021
343,131
_______________________________________________________________________________
(1) Excludes all intercompany receivables or payables and investment in subsidiary balances.
163
—
80,345
54,528
78,208
219,705
2,071
8,992
—
—
75,185
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
9. Segment Information (Continued)
(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: (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) gain on sale of real estate, net of tax; and (5) Recall Costs (as
defined below). 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
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
Intangible Impairments
Recall Costs(1)
Income (Loss) from Continuing Operations
_______________________________________________________________________________
Year Ended December 31,
2015
$ 920,005
2016
$1,087,288
2017
$1,260,196
(850)
37,713
98,590
(2,180)
44,944
44,300
(1,565)
25,947
79,429
263,871
310,662
353,575
3,000
1,412
799
345,464
452,326
522,376
—
—
47,014
131,944
3,011
84,901
$ 125,203
$ 103,880
$ 191,723
(1) Represents operating expenditures associated with the Recall Transaction, including: (i) advisory and professional fees
to complete the Recall Transaction; (ii) costs associated with the Divestments required in connection with receipt of
regulatory approvals (including transitional services); and (iii) costs to integrate Recall with our existing operations,
including moving, severance, facility upgrade, REIT conversion and system upgrade costs, as well as certain costs
associated with our shared service center initiative for our finance, human resources and information technology
functions ("Recall Costs").
164
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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,
2015
2016
2017
$
$
$
$
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
$
$
$
$
2,310,296
246,373
243,625
157,333
887,951
3,845,578
5,476,551
529,233
500,396
470,432
2,045,475
9,022,087
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)
Data Center(5)
Total Revenues
Year Ended December 31,
2015
2016
2017
$
2,255,206
$
2,631,895
$
2,847,691
490,196
243,509
19,065
525,086
330,223
24,249
574,251
385,942
37,694
$
3,007,976
$
3,511,453
$
3,845,578
_______________________________________________________________________________
(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.
(5) Previously included as part of Data Management. Prior periods presented have been restated to conform to the current
year presentation.
165
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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 $242,205, $321,337 and $350,403 for the years ended
December 31, 2015, 2016 and 2017, 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
2018
2019
2020
2021
2022
Thereafter
Total minimum lease payments
Less amounts representing interest
Present value of capital lease obligations
Operating Lease
Payments
Sublease
Income
Capital
Leases
$
321,404
$
301,262
273,062
247,159
229,072
1,231,304
$
2,603,263
$
(7,482) $
(6,069)
(4,847)
(4,612)
(4,086)
(9,276)
(36,372)
$
74,392
64,944
53,334
47,042
35,796
318,890
594,398
(158,113)
436,285
In addition, we have certain contractual obligations related to purchase commitments which require minimum payments
as follows:
Year
2018
2019
2020
2021
2022
Thereafter
Purchase
Commitments
68,317
19,033
11,479
6,943
937
1,188
107,897
$
$
166
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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, 2016 and 2017 there were $37,368 and $38,460, 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 $21,500 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 six customers. Four of those lawsuits
have been settled and two remain pending, including a claim asserted by Azienda per i Transporti Autoferrotranviari del
Comune di Roma, S.p.A, seeking 42,600 Euros for the loss of its current and historical archives. We have also received
correspondence from other affected customers, including certain customers demanding payment under various theories of
liability. Although our warehouse legal liability insurer has reserved its rights to contest coverage related to certain types of
potential claims, we believe we carry adequate insurance. We deny any liability with respect to the fire and we have referred
these claims to our warehouse legal liability insurer for an appropriate response. We do not expect that this event will have a
material impact on our consolidated financial condition, results of operations or cash flows. 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.
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.
167
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
10. Commitments and Contingencies (Continued)
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.
h. Puerto Rico Facility Damage
In September 2017, two of our four facilities in Puerto Rico, one owned and one leased, sustained damage as a result of
Hurricane Maria. The leased facility experienced structural damage to a portion of the roof and wall, while the owned facility
sustained non-structural damage to a portion of the roof. Both buildings sustained water damage that impacted certain customer
records and we are in the process of fully assessing the extent of the damage to our customers’ records at these facilities. We
believe we carry adequate insurance coverage for this event and do not believe it will have a material impact to our
consolidated financial condition, results of operations or cash flows. Revenues from our operations in Puerto Rico represent less
than 0.5% of our consolidated revenues.
_______________________________________________________________________________
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.
11. Related Party Transactions
During the years ended December 31, 2015, 2016 and 2017, the Company had no related party transactions.
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 $16,355, $24,407 and $21,192 for the years ended
December 31, 2015, 2016 and 2017, respectively, associated with these plans.
168
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(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.
In 2015, 2016 and 2017, 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
February 15, 2017
May 24, 2017
July 27, 2017
October 24, 2017
$
0.4750
0.4750
0.4750
0.4850
0.4850
0.4850
0.4850
0.5500
0.5500
0.5500
0.5500
0.5875
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
March 15, 2017
June 15, 2017
September 15, 2017
December 15, 2017
$
Total
Amount
99,795
100,119
100,213
102,438
102,651
127,469
127,737
145,006
145,235
145,417
146,772
166,319
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
April 3, 2017
July 3, 2017
October 2, 2017
January 2, 2018
_______________________________________________________________________________
During the years ended December 31, 2015, 2016 and 2017, we declared distributions to our stockholders of $402,565,
$502,863 and $603,743, respectively. These distributions represent approximately $1.91 per share, $2.04 per share and $2.27
per share for the years ended December 31, 2015, 2016 and 2017, respectively, based on the weighted average number of
common shares outstanding during each respective year.
For federal income tax purposes, distributions to our stockholders are generally treated as nonqualified ordinary dividends
(potentially eligible for the lower effective tax rates available for "qualified REIT dividends" for tax years beginning after
2017), 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, 2015, 2016 and 2017, 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,
2015
2016
2017
49.3%
39.1%
11.6%
45.5%
21.0%
33.5%
82.1%
17.9%
—%
100.0%
100.0%
100.0%
Dividends paid during the years ended December 31, 2015, 2016 and 2017 which were classified as qualified ordinary
dividends for federal income tax purposes primarily related to the distribution of historical C corporation earnings and profits
related to certain acquisitions completed during the years ended December 31, 2015, 2016 and 2017.
169
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
13. Stockholders' Equity Matters (Continued)
The change in the percentage of our dividends that were characterized as a return of capital in 2015 and 2016 (11.6% and
33.5%, respectively) compared to 2017 (0.0%) is primarily a result of the impact of the Deemed Repatriation Transition Tax
associated with the Tax Reform Legislation that impacted the characterization of our 2017 dividends for United States federal
income tax purposes. See Note 7 for further disclosure regarding the impact of the Deemed Repatriation Transition Tax on our
2017 dividends.
At The Market (ATM) Equity Program
In October 2017, we entered into a distribution agreement (the “Distribution Agreement”) with a syndicate of 10 banks
(the “Agents”) pursuant to which we may sell, from time to time, up to an aggregate sales price of $500,000 of our common
stock through the Agents (the “At The Market (ATM) Equity Program”). Sales of our common stock made pursuant to the
Distribution Agreement may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings
as defined in Rule 415 under the Securities Act, including sales made directly on the NYSE, or sales made to or through a
market maker other than on an exchange, or as otherwise agreed between the applicable Agent and us. We intend to use the net
proceeds from sales of our common stock pursuant to the At The Market (ATM) Equity Program for general corporate
purposes, including financing the expansion of our data center business and adjacent businesses through acquisitions, and
repaying amounts outstanding from time to time under the Revolving Credit Facility.
During the quarter ended December 31, 2017 under the At The Market (ATM) Equity Program, we sold an aggregate of
1,481,053 shares of common stock for gross proceeds of approximately $60,000, generating net proceeds of $59,100, after
deducting commissions of $900. As of December 31, 2017, the remaining aggregate sale price of shares of our common stock
available for distribution under the At The Market (ATM) Equity Program was approximately $440,000.
Equity Offering
On December 12, 2017, we entered into an underwriting agreement (the "Underwriting Agreement") with a syndicate of
16 banks (the “Underwriters”) related to the public offering by us of 14,500,000 shares (the “Firm Shares”) of our common
stock (the “Equity Offering”). The offering price to the public for the Equity Offering was $37.00 per share, and we agreed to
pay the Underwriters an underwriting commission of $1.38195 per share. The net proceeds to us from the Equity Offering, after
deducting underwriters' commissions, was $516,462.
Pursuant to the Underwriting Agreement, we granted the Underwriters a 30-day option to purchase from us up to an
additional 2,175,000 shares of common stock (the “Option Shares”) at the public offering price, less the underwriting
commission and less an amount per share equal to any dividends or distributions declared by us and payable on the Firm Shares
but not payable on the Option Shares (the “Over-Allotment Option"). On January 10, 2018, the Underwriters exercised the
Over-Allotment Option in its entirety. The net proceeds to us from the exercise of the Over-Allotment Option, after deducting
underwriters' commissions, offering expenses and the per share value of the dividend we declared on our common stock on
October 24, 2017 (for which the record date was December 15, 2017) which was paid on January 2, 2018, was approximately
$76,200. The net proceeds of the Equity Offering and the Over-Allotment Option, together with the net proceeds from the
issuance of the 51/4% Notes, were used to finance the purchase price of the IODC Transaction, which closed on January 10,
2018, and to pay related fees and expenses. At December 31, 2017, the net proceeds of the Equity Offering, together with the
net proceeds from the 51/4% Notes, were used to temporarily repay borrowings under our Revolving Credit Facility and invest
in money market funds.
14. Divestitures
a. 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.
170
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
14. Divestitures (Continued)
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 the Australia Divestment
Business Purchasers 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 Australia 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, 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, 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, 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).
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 Statements of Operations and Consolidated Statements of Cash Flows for the years ended
December 31, 2016 and 2017, 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
for the years ended December 31, 2016 and 2017:
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
Year Ended December 31,
2016(1)
2017
$
13,047
$
—
4,105
752
(8,118)
(1,827)
$
3,353
$
(6,291)
______________________________________________________________________________
(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". See Note 6.
171
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
14. Divestitures (Continued)
b. Russia and Ukraine Divestment
On May 30, 2017, IM EES, a consolidated subsidiary of IMI, sold its records and information management operations in
Russia and Ukraine to OSG Records Management (Europe) Limited (“OSG”) in a stock transaction (the “Russia and Ukraine
Divestment”). As consideration for the Russia and Ukraine Divestment, IM EES received a 25% equity interest in OSG (the
“OSG Investment”).
We have concluded that the Russia and Ukraine Divestment does not meet the criteria to be reported as discontinued
operations in our consolidated financial statements, 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
these businesses are presented as a component of income (loss) from continuing operations in our Consolidated Statements of
Operations for the years ended December 31, 2015, 2016 and 2017 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 years
ended December 31, 2015, 2016 and 2017 through the sale date.
As a result of the Russia and Ukraine Divestment, we recorded a gain on sale of $38,869 to other expense (income), net,
in the second quarter of 2017, representing the excess of the fair value of the consideration received over the carrying value of
our businesses in Russia and Ukraine. As of the closing date of the Russia and Ukraine Divestment, the fair value of the OSG
Investment was approximately $18,000. As of the closing date of the Russia and Ukraine Divestment, the carrying value of our
businesses in Russia and Ukraine was a credit balance of $20,869, which consisted of (i) a credit balance of approximately
$29,100 of cumulative translation adjustment associated with our businesses in Russia and Ukraine that was reclassified from
accumulated other comprehensive items, net, (ii) the carrying value of the net assets of our businesses in Russia and Ukraine,
excluding goodwill, of $4,716 and (iii) $3,515 of goodwill associated with our Northern and Eastern Europe reporting unit (of
which our businesses in Russia and Ukraine were a component of prior to the Russia and Ukraine Divestment), which was
allocated, on a relative fair value basis, to our businesses in Russia and Ukraine.
We account for the OSG Investment as an equity method investment. As of December 31, 2017, the fair value of the OSG
Investment is $17,539 and is presented as a component of Other within Other assets, net in our Consolidated Balance Sheet.
172
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
15. Cost Optimization Plans
Transformation Initiative
During the third quarter of 2015, we implemented a plan that calls for certain organizational realignments to reduce our
overhead costs, particularly in our developed markets, in order to optimize our selling, general and administrative cost structure
and to support investments to advance our growth strategy (the “Transformation Initiative”). As a result of the Transformation
Initiative, we recorded charges of $10,167, $6,007 and $500 for the years ended December 31, 2015, 2016 and 2017,
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:
Cost of sales (excluding depreciation and amortization)
Selling, general and administrative expenses
Total
Year Ended December 31,
2016
2017
2015
$
$
— $
— $
10,167
6,007
10,167
$
6,007
$
—
500
500
Costs recorded by segment associated with the Transformation Initiative are as follows:
North American Records and Information Management Business
$
5,403
$
2,329
$
275
Year Ended December 31,
2015
2016
2017
North American Data Management Business
Western European Business
Other International Business
Global Data Center Business
Corporate and Other Business
Total
241
1,537
—
—
395
204
—
—
2,986
3,079
$
10,167
$
6,007
$
—
—
—
—
225
500
Through December 31, 2017, we have recorded cumulative charges to our Consolidated Statements of Operations
associated with the Transformation Initiative of $16,674. At December 31, 2017, we had no material accruals related to the
Transformation Initiative.
173
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
16. Recall Costs
We currently estimate total acquisition and integration expenditures associated with the Recall Transaction to be
approximately $380,000. From January 1, 2015 through December 31, 2017, we have incurred cumulative operating and capital
expenditures associated with the Recall Transaction of $313,756, which is composed of $263,859 of Recall Costs and $49,897
of capital expenditures.
Recall Costs included in the accompanying Consolidated Statements of Operations are as follows:
Cost of sales (excluding depreciation and amortization)
$
— $ 11,963
Selling, general and administrative expenses
Total Recall Costs
47,014
119,981
$ 47,014
$131,944
2015
2016
2017
$ 20,493
64,408
$ 84,901
Year Ended December 31,
Recall Costs included in the accompanying Consolidated Statements of Operations by segment are as follows:
Year Ended December 31,
North American Records and Information Management Business
$
North American Data Management Business
Western European Business
Other International Business
Global Data Center Business
Corporate and Other Business
Total Recall Costs
2015
52
—
104
31
—
46,827
2016
14,394
$
2017
15,763
$
2,581
16,654
18,361
—
79,954
2,099
20,290
9,570
—
37,179
84,901
$
47,014
$
131,944
$
A rollforward of accrued liabilities related to Recall Costs on our Consolidated Balance Sheets as of December 31, 2016
to 2017 is as follows:
Balance at December 31, 2016
Amounts accrued
Change in estimates(1)
Payments
Currency translation adjustments
Balance at December 31, 2017(2)
Accrual for Recall
Costs
$
$
4,914
27,181
(539)
(19,044)
110
12,622
_______________________________________________________________________________
(1) Includes adjustments made to amounts accrued in a prior period.
(2) Accrued liabilities related to Recall Costs as of December 31, 2017 presented in the table above generally related to
employee severance costs and onerous lease liabilities. We expect that the majority of these liabilities will be paid
throughout 2018. Additional Recall Costs recorded in our Consolidated Statement of Operations for the year ended
December 31, 2017 have either been settled in cash during the year ended December 31, 2017 or are included in our
Consolidated Balance Sheet as of December 31, 2017 as a component of accounts payable.
174
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2017
(In thousands, except share and per share data)
17. Subsequent Events
Acquisition of IO Data Centers, LLC
On January 10, 2018, we completed the IODC Transaction. At the closing of the IODC Transaction, we paid
approximately $1,340,000 of total consideration, including the Initial IODC Consideration and the IODC Contingent
Consideration.
175
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2017
(Dollars in thousands)
Schedule III - Schedule of Real Estate and Accumulated Depreciation ("Schedule III") reflects the cost and associated
accumulated depreciation for the real estate facilities that are owned. The gross cost included in Schedule III includes the cost
for land, land improvements, buildings, building improvements and racking. Schedule III does not reflect the 1,131 leased
facilities in our real estate portfolio. In addition, Schedule III does not include any value for capital leases for property that is
classified as land, buildings and building improvements in our consolidated financial statements.
The following table presents a reconciliation of the gross amount of real estate assets, as presented in Schedule III below,
to the sum of the historical book value of land, buildings and building improvements, racking and construction in progress as
disclosed in Note 2.f. to Notes to Consolidated Financial Statements as of December 31, 2017:
Gross Amount of Real Estate Assets, As Reported on Schedule III
$ 2,707,925
Add Reconciling Items:
Book value of racking included in leased facilities(1)
Book value of capital leases(2)
Book value of construction in progress(3)
Total Reconciling Items
1,274,097
400,221
125,996
1,800,314
Gross Amount of Real Estate Assets, As Disclosed in Note 2.f.
$ 4,508,239
_______________________________________________________________________________
(1) Represents the gross book value of racking installed in our 1,131 leased facilities, which is included in historical book
value of racking in Note 2.f., but excluded from Schedule III.
(2) Represents the gross book value of buildings and building improvements that are subject to capital leases, which are
included in the historical book value of building and building improvements in Note 2.f., but excluded from Schedule
III.
(3) Represents the gross book value of non-real estate assets that are included in the historical book value of construction
in progress assets in Note 2.f., but excluded from Schedule III, as such assets are not considered real estate associated
with owned buildings. The historical book value of real estate assets associated with owned buildings that were related
to construction in progress as of December 31, 2017 is included in Schedule III.
176
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2017
(Dollars in thousands)
The following table presents a reconciliation of the accumulated depreciation of real estate assets, as presented in
Schedule III below, to the total accumulated depreciation for all property, plant and equipment presented on our Consolidated
Balance Sheet as of December 31, 2017:
Accumulated Depreciation of Real Estate Assets, As Reported on
Schedule III
$
909,092
Add Reconciling Items:
Accumulated Depreciation - non-real estate assets(1)
Accumulated Depreciation - racking in leased facilities(2)
Accumulated Depreciation - capital leases(3)
Total Reconciling Items
1,183,604
652,764
87,961
1,924,329
Accumulated Depreciation, As Reported on Consolidated Balance Sheet $ 2,833,421
_______________________________________________________________________________
(1) Represents the accumulated depreciation of non-real estate assets that is included in the total accumulated depreciation
of property, plant and equipment on our Consolidated Balance Sheet, but excluded from Schedule III as the assets to
which this accumulated depreciation relates are not considered real estate assets associated with owned buildings.
(2) Represents the accumulated depreciation of racking as of December 31, 2017 installed in our 1,131 leased facilities,
which is included in total accumulated depreciation of property, plant and equipment on our Consolidated Balance
Sheet, but excluded from Schedule III, as disclosed in Footnote 1 to Schedule III.
(3) Represents the accumulated depreciation of buildings and building improvements as of December 31, 2017 that are
subject to capital leases, which is included in the total accumulated depreciation of property, plant and equipment on
our Consolidated Balance Sheet, but excluded from Schedule III, as disclosed in Footnote 1 to Schedule III.
177
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2017
(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)(7)(8)
Accumulated
depreciation at
close of current
period(1)(3)(7)
Date of
construction or
acquired(4)
Life on which
depreciation in
latest income
statement is
computed
$
— $
1,322
$
879
$
2,201
$
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
4300 Brighton Boulevard,
Denver, 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
7801 Riviera Blvd, Miramar,
Florida
10002 Satellite Blvd, Orlando,
Florida
3501 Electronics Way, West Palm
Beach, Florida
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
1
2
2
1
1
1
1
1
1
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
958
1,585
4,088
4,505
2,450
343
8,557
2,749
3,120
8,300
72
11,730
13,932
1,550
8,091
6,307
1,828
3,950
4,010
1,777
1,408
1,518
1,469
8,067
1,136
5,689
1,204
2001
2001
2007
2012
2000
1997
2002
2002
2002
2002
2014
1988
1997
2002
2012
2002
2001
2002
2002
2001
2001
2001
2017
2001
2014
2002
2000
2001
2002
2002
2001
2001
2017
2001
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
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
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
108,822
7,403
6,312
7,417
1,768
2,612
2,667
891
4,237
(60)
8,426
1,585
2,271
12,939
—
21,495
6,048
324
143
6,762
1,110
2,125
5,090
1,749
1,911
2,707
6,331
9,910
95
1,647
850
4,249
14,845
8,196
5,859
700
18,898
6,347
9,071
27,524
749
31,663
21,220
4,900
28,100
17,274
4,530
8,454
14,735
4,798
3,494
3,468
115,153
17,313
6,407
9,064
2,618
10,447
30,373
40,820
17,279
4,021
7,226
1,853
3,293
8,250
1,927
4,201
1,384
894
337
2,800
23
294
5,405
8,120
2,190
6,093
8,273
2,221
13,185
17,386
2,576
4,682
800
2,764
392
783
5,719
178
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2017
(Dollars in thousands)
(A)
(B)
(C)
(D)
(E)
(F)
Region/Country/State/Campus
Address
United States (Including Puerto
Rico) (continued)
Facilities(1)
Encumbrances
Initial cost
to Company
Cost
capitalized
subsequent to
acquisition(2)
Gross amount
carried at close
of current
period
(1)(3)(7)(8)
Accumulated
depreciation at
close of current
period(1)(3)(7)
Date of
construction or
acquired(4)
Life on which
depreciation in
latest income
statement is
computed
1890 MacArthur Blvd, Atlanta
Georgia
3881 Old Gordon Rd, Atlanta,
Georgia
5319 Tulane Drive SW, Atlanta,
Georgia
6111 Live Oak Parkway,
Norcross, Georgia
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
1
1
1
1
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
$
— $
1,786
$
661
$
2,447
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,185
2,808
3,542
463
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
321
3,430
224
646
18,842
13,057
1,428
2,697
3,878
266
904
7,966
446
11,313
1,133
3,885
29
6,218
920
7,612
3,851
523
5,368
775
51
1,044
22,634
1,030
1,102
441
2,426
1,145
3,146
951
18,854
8,899
4,177
179
1,506
6,238
3,766
1,109
26,789
17,321
8,898
3,101
5,867
22,314
2,282
12,793
1,068
12,022
8,740
6,565
8,366
8,416
4,702
17,717
7,072
687
7,188
2,686
5,464
2,342
78,557
11,315
2,396
2,243
5,852
5,145
6,218
29,233
21,778
12,329
10,356
978
787
2,353
161
669
14,180
7,302
3,818
2,664
1,185
8,022
124
5,419
339
4,149
5,524
2,534
2,679
2,969
2,287
8,801
3,322
494
4,860
1,951
438
1,119
2002
2001
2002
2017
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
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
37,026
Various
Up to 40 years
3,180
1,172
970
3,356
2,342
1,958
5,880
5,862
5,004
5,804
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
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2017
(Dollars in thousands)
(A)
(B)
(C)
(D)
(E)
(F)
Region/Country/State/Campus
Address
United States (Including Puerto
Rico) (continued)
Kimberly Rd, East Brunsick,
New Jersey
811 Route 33, Freehold, New
Jersey
51-69 & 77-81 Court St, Newark,
New Jersey
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
826 Church Street, Morrisville,
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
2300 Newlins Mill Road, Palmer
Township, 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
Facilities(1)
Encumbrances
Initial cost
to Company
Cost
capitalized
subsequent to
acquisition(2)
Gross amount
carried at close
of current
period
(1)(3)(7)(8)
Accumulated
depreciation at
close of current
period(1)(3)(7)
Date of
construction or
acquired(4)
Life on which
depreciation in
latest income
statement is
computed
3
3
1
1
1
1
1
1
1
1
1
2
1
1
3
2
1
1
1
1
1
1
1
1
1
1
1
3
1
3
1
1
1
1
3
1
1
1
$
— $
22,105
$
5,785
$
27,890
$
12,665
Various
Up to 40 years
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
38,697
11,734
9,522
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
7,087
4,259
786
3,129
3,336
1,030
4,317
602
11,437
5,187
21,166
1,057
2,457
2,397
18,365
24,153
4,185
2,659
11,776
54,485
1,882
570
960
11,497
795
1,933
10,844
1,124
4,513
2,959
1,417
945
8,411
10,645
2,113
314
2,012
—
518
863
476
2,985
1,644
14,441
1,027
269
1,874
210,250
12,466
937
6,921
3,708
10,114
3,381
2,155
1,623
180
93,182
13,616
10,092
9,905
15,082
4,878
4,734
12,168
6,210
7,124
3,061
7,136
5,268
31,548
15,787
5,042
1,916
3,892
7,087
4,777
1,649
3,605
6,321
2,674
18,758
1,629
11,706
7,061
231,416
13,523
3,394
9,318
22,073
34,267
7,566
4,814
13,399
45,520
Various
Up to 40 years
522
415
429
4,909
2,266
2,460
5,623
3,232
4,118
1,376
2,308
1,878
20,322
5,612
2,579
112
1,593
902
2,572
773
1,810
2,626
1,335
6,583
617
2,594
3,813
2015
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
Up to 40 years
Various
Up to 40 years
1997
2015
1999
2017
2015
2000
1999
2001
1999
2003
2001
2015
2002
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
(6) Up to 40 years
Up to 40 years
45,506
Various
Up to 40 years
6,169
1,845
3,681
164
2001
2000
1999
2017
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
16,037
Various
Up to 40 years
3,840
2,535
2,318
2001
2001
2016
Up to 40 years
Up to 40 years
(6) Up to 40 years
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2017
(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)(7)(8)
Accumulated
depreciation at
close of current
period(1)(3)(7)
Date of
construction or
acquired(4)
Life on which
depreciation in
latest income
statement is
computed
United States (Including Puerto
Rico) (continued)
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
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
1
2
1
2
1
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
$
— $
2,846
$
523
$
3,369
$
853
2016
(6) Up to 40 years
5,151
6,241
4,589
7,478
4,802
8,379
20,389
2,784
6,940
2,819
4,025
5,891
10,399
43,637
4,215
7,964
5,680
2,072
2,794
14,396
7,296
3,638
2,724
11,697
5,098
620
4,483
10,331
3,592
21,008
7,480
2,669
16,722
7,792
11,300
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
718
2,312
1,827
5,489
4,519
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
4,433
3,929
2,762
1,989
283
80
716
610
3,422
1,542
810
563
2,045
37,310
1,375
277
2,213
1,040
999
11,208
973
1,958
1,150
7,886
1,215
227
957
4,092
1,883
28
953
92
2,555
2,562
3,702
181
1,618
3,404
1,569
3,738
1,022
2,391
8,024
1,198
3,926
1,919
2,276
2,588
5,238
9,644
2,277
5,364
2,350
989
1,155
7,827
1,476
1,076
1,196
4,140
2,386
214
2,600
4,464
1,583
4,537
2,740
830
8,831
2,865
5,374
Various
Up to 40 years
2000
2000
2002
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
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
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
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2017
(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)(7)(8)
Accumulated
depreciation at
close of current
period(1)(3)(7)
Date of
construction or
acquired(4)
Life on which
depreciation in
latest income
statement is
computed
$
— $
2,078
$
2,199
$
4,277
$
510
5,399
14,793
4,496
3,906
1,307
4,230
3,236
8,912
1,652
510
2,108
4,740
8,635
23,705
6,148
4,416
3,415
1,058,202
846,392
1,904,594
665,156
4,698
6,437
17,683
1,386
7,464
8,714
630
771
228
8,545
11,840
22,690
9,477
11,790
23,372
2,650
4,410
2,979
3,636
4,563
6,401
4,169
4,056
9,989
1,435
100
1,267
17,175
25,371
11,054
Region/Country/State/Campus
Address
United States (Including Puerto
Rico) (continued)
307 South 140th St, Burien,
Washington
8908 W. Hallett Rd, Cheney,
Washington
6600 Hardeson Rd, Everett,
Washington
19826 Russell Rd, South, Kent,
Washington
1201 N. 96th St, Seattle,
Washington
4330 South Grove Road,
Spokane, Washington
12021 West Bluemound 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
1650 Comstock Rd, Ottawa
235 Edson Street, Saskatoon
640 Coronation Drive,
Scarborough
610 Sprucewood Ave, Windsor
1
1
1
1
1
1
1
187
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
16
203
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,847
5,403
5,007
8,091
4,326
14,658
2,020
3,639
2,751
8,196
1,800
1,059
7,478
829
1,853
1,243
1999
1999
2002
2002
2001
2015
1999
2000
2000
2000
2001
2005
2000
2000
2016
2000
2000
2000
2000
2017
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
Up to 40 years
Up to 40 years
Up to 40 years
2,040
1,698
3,092
9,311
3,144
216
1,244
1,453
3,552
2,365
725
1,144
551
56,460
721,616
1,543
6,290
188
1,489
1,058
489
3,343
7,349
7,666
2,318
2,911
1,732
72,200
76,243
148,443
1,130,402
922,635
2,053,037
182
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2017
(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)(7)(8)
Accumulated
depreciation at
close of current
period(1)(3)(7)
Date of
construction or
acquired(4)
Life on which
depreciation in
latest income
statement is
computed
Gewerbeparkstr. 3, Vienna,
Austria
Woluwelaan 147, Diegem,
Belgium
Kratitirion 9 Kokkinotrimithia
Industrial District, Nicosia,
Cyprus
Karyatidon 1, Agios Sylas
Industrial Area (3rd), Limassol,
Cyprus
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
1
1
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
$
— $
6,542
$
7,103
$
13,645
$
6,985
3,218
1,984
1,900
8,714
10,703
17,233
12,385
4,846
6,678
26,196
14,460
4,279
6,643
4,474
2,153
3,187
4,294
20,384
1,290
4,369
14,813
21,458
5,715
4,984
5,067
11,397
3,580
22,328
3,473
1,815
2,240
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,288
—
—
—
—
—
—
—
—
—
2,541
4,444
3,136
1,935
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
82
49
(170)
1,734
3,285
6,386
7,108
1,727
2,012
5,889
(1,364)
681
2,004
435
1,472
551
2,544
(934)
(32)
979
672
9,051
169
962
1,847
2,357
762
6,294
1,621
557
883
183
2,496
3,301
58
36
765
4,574
4,908
6,468
8,091
2,739
2,682
10,176
2010
2003
2017
2017
2003
2003
2003
2004
2004
2003
2003
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
Up to 40 years
Up to 40 years
3,515
2015
(6) Up to 40 years
1,207
3,504
2,162
1,289
1,030
2,061
2003
2003
2008
2004
2006
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
1,716
2016
(5) Up to 40 years
116
2016
(5) Up to 40 years
412
893
17,044
389
463
3,212
3,743
1,160
6,054
1,722
1,497
1,503
2016
(5) Up to 40 years
2016
2004
2016
2016
2006
2014
2001
2012
2015
2015
2015
(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
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2017
(Dollars in thousands)
(A)
(B)
(C)
(D)
(E)
(F)
Region/Country/State/Campus
Address
Europe (Continued)
Howemoss Drive, Aberdeen,
Scotland
Traquair Road, Innerleithen,
Scotland
Nettlehill Road, Houston Industrial
Estate, Livingston, Scotland
Av Madrid s/n Poligono Industrial
Matillas, Alcala de Henares, Spain
Calle Bronce, 37, Chiloeches, Spain
Ctra M.118 , Km.3 Parcela 3,
Madrid, Spain
Fundicion 8, Rivas-Vaciamadrid,
Spain
Abanto Ciervava, Spain
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
Facilities(1)
Encumbrances
Initial cost to
Company
Cost
capitalized
subsequent to
acquisition(2)
Gross amount
carried at close
of current
period
(1)(3)(7)(8)
Accumulated
depreciation at
close of current
period(1)(3)(7)
Date of
construction or
acquired(4)
Life on which
depreciation in
latest income
statement is
computed
2
1
1
1
1
1
1
2
$
— $
6,970
$
5,798
$
12,768
$
4,072
Various
Up to 40 years
—
—
—
—
—
—
—
113
11,517
186
11,011
3,981
1,022
1,053
2,220
25,447
259
2,682
5,934
2,548
(14)
2,333
36,964
445
13,693
9,915
3,570
1,039
950
15,958
268
1,988
3,264
1,165
2004
2001
2014
2010
2001
2002
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
Up to 40 years
445
Various
Up to 40 years
60
1,288
241,583
116,034
357,617
129,096
1,283
Various
Up to 40 years
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
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
178
619
1,121
824
613
1,923
2,603
10,559
6,973
823
819
1,072
2,060
3,864
6,111
1,107
4,372
6,734
53,658
2
1
1
1
1
2
3
1
2
4
1
1
2
2
1
1
7
2
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,895
—
—
655
166
144
12,773
12,562
8,894
1,868
24,078
2,629
4,001
374
905
3,635
190
1,195
(2,897)
(478)
(409)
9,229
6,719
39,096
17,280
1,058
990
4,290
356
1,339
9,876
12,084
8,485
11,097
30,797
41,725
21,281
1,432
1,895
19,937
(2,230)
17,707
3,537
2,204
7,544
1,549
4,112
8,179
3,174
3,384
11,616
754
4,858
27,024
6,711
5,588
19,160
2,303
8,970
35,203
240,299
36
2,895
116,111
124,188
184
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2017
(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)(7)(8)
Accumulated
depreciation at
close of current
period(1)(3)(7)
Date of
construction or
acquired(4)
Life on which
depreciation in
latest income
statement is
computed
Asia
8 Whitestone Drive, Austins Ferry,
Australia
6 Norwich Street, South
Launceston, Australia
Warehouse No 4, Shanghai, China
Jalan Karanggan Muda Raya No
59, Bogor Indonesia
2 Yung Ho Road, Singapore
26 Chin Bee Drive, Singapore
IC1 69 Moo 2, Soi Wat Namdaeng,
Bangkok, Thailand
1
1
1
1
1
1
2
8
$
— $
681
$
2,898
$
3,579
$
—
—
—
—
—
—
—
1,090
1,530
7,897
10,395
15,699
13,226
50,518
31
776
(106)
(1,381)
(2,086)
6,322
6,454
1,121
2,306
7,791
9,014
13,613
19,548
56,972
2012
2015
2013
2017
2016
2016
2016
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
294
60
287
563
459
695
2,364
4,722
Total
307
$
4,183
$
1,538,614
$
1,169,311
$
2,707,925
$
909,092
____________________________________
(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 1,131 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.
185
IRON MOUNTAIN INCORPORATED
SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2017
(Dollars in thousands)
(7) The following tables present the changes in gross carrying amount of real estate owned and accumulated depreciation
for the years ended December 31, 2016 and 2017:
Gross Carrying Amount of Real Estate
Gross amount at beginning of period
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
Year Ended December 31,
2016
$ 2,204,988
2017
$ 2,427,540
131,665
108,760
42,904
(37,653)
245,676
121,790
94,658
—
66,666
283,114
(23,124)
$ 2,427,540
(2,729)
$ 2,707,925
_______________________________________________________________________________
(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.
Accumulated Depreciation
Gross amount of accumulated depreciation at beginning of
period
Additions during period:
Depreciation
Other adjustments(1)
Foreign currency translation fluctuations
Year Ended December 31,
2016
2017
$
745,186
$
808,481
77,664
7,700
(13,129)
72,235
83,488
—
18,183
101,671
Deductions during period:
Amount of accumulated depreciation for real estate assets
sold or disposed
Gross amount of end of period
(8,940)
808,481
$
(1,060)
909,092
$
_______________________________________________________________________________
(1) Includes accumulated depreciation associated with building improvements and racking, which were
previously subject to leases.
The aggregate cost of our real estate assets for federal tax purposes at December 31, 2017 was approximately $2,500,000.
186
Item 16. Form 10-K Summary.
Not applicable.
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
2.4
3.1
3.2
3.3
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
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 Form 8 K dated June 8, 2015.)
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 Form 8 K dated March 31,
2016.)
Purchase Agreement, dated as of December 11, 2017, by and among IRM Data Centers Expansion LLC, IO Data
Centers, LLC, the Sellers named therein, the Sellers Representative and, with respect to Articles 1, 10 and 11, the
Company. (Incorporated by reference to the Company’s Current Report on Form 8 K/A dated December 11,
2017.)
Certificate of Incorporation of the Company, as filed with the Secretary of State of the State of Delaware on June
26, 2014, as corrected by the Certificate of Correction of the Company filed with the Secretary of State of the
State of Delaware on June 30, 2014. (Incorporated by reference to Annex B-1 to the Iron Mountain Incorporated
Proxy Statement for the Special Meeting of Stockholders, filed with the SEC on December 23, 2014, File No.
001-13045.)
Certificate of Merger, filed by the Company, effective as of January 20, 2015. (Incorporated by reference to the
Company’s Current Report on Form 8 K dated January 21, 2015.)
Bylaws of the Company. (Incorporated by reference to the Company’s Annual Report on Form 10-K for the year
ended December 31, 2014.)
Senior Subordinated Indenture, dated as of September 23, 2011, among the Company, the Guarantors named
therein and The Bank of New York Mellon Trust Company, N.A., as trustee. (Incorporated by reference to the
Company’s Current Report on Form 8 K dated September 29, 2011, File Number 001-13045.)
Second Supplemental Indenture, dated as of August 10, 2012, among the Company, the Guarantors named
therein and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the 53/4% Senior
Subordinated Notes due 2024. (Incorporated by reference to the Company’s Current Report on Form 8 K dated
August 10, 2012, File Number 001-13045.)
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 Form 8 K dated January 21, 2015.)
Senior Indenture, dated as of August 13, 2013, among the Company, the Guarantors named therein and Wells
Fargo Bank, National Association, as trustee. (Incorporated by reference to the Company’s Current Report on
Form 8 K dated August 13, 2013.)
First Supplemental Indenture, dated as of August 13, 2013, among the Company, the Guarantors named therein
and Wells Fargo Bank, National Association, as trustee, relating to the 6% Senior Notes due 2023.
(Incorporated by reference to the Company’s Current Report on Form 8 K dated August 13, 2013.)
Second Supplemental Indenture, dated as of January 20, 2015, 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 Form 8 K dated January 21, 2015.)
Senior Indenture, dated as of August 13, 2013, among Iron Mountain Canada Operations ULC, the Company,
the Guarantors named therein and Wells Fargo Bank, National Association, as trustee. (Incorporated by
reference to the Company’s Current Report on Form 8 K dated August 13, 2013.)
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 Form 8 K dated
January 21, 2015.)
187
Exhibit
4.9
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
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.)
Senior Indenture, dated as of May 23, 2017, among the Company, the Guarantors named therein, Wells Fargo
Bank, National Association, as trustee, and Société Générale Bank & Trust, as paying agent, registrar and
transfer agent. (Incorporated by reference to the Company’s Current Report on Form 8-K dated May 23, 2017.)
Senior Indenture, dated as of September 18, 2017, among the Company, the Guarantors named therein and Wells
Fargo Bank, National Association, as trustee. (Incorporated by reference to the Company’s Current Report on
Form 8-K dated September 18, 2017.)
Senior Indenture, dated as of November 13, 2017, among the Company, the Guarantors named therein, Wells
Fargo Bank, National Association, as trustee, and Société Générale Bank & Trust, as paying agent, registrar
and transfer agent. (Incorporated by reference to the Company’s Current Report on Form 8-K dated November
13, 2017.)
Senior Indenture, dated as of December 27, 2017, among the Company, the Guarantors named therein and Wells
Fargo Bank, National Association, as trustee. (Incorporated by reference to the Company’s Current Report on
Form 8-K dated December 27, 2017.)
Form of Stock Certificate representing shares of Common Stock, $0.01 par value per share, of the Company.
(Incorporated by reference to the Company’s Current Report on Form 8 K dated January 21, 2015.)
2008 Restatement of the Iron Mountain Incorporated Executive Deferred Compensation Plan. (#) (Incorporated
by reference to the Company’s Annual Report on Form 10 K for the year ended December 31, 2007, File
Number 001-13045.)
First Amendment to 2008 Restatement of the Iron Mountain Incorporated Executive Deferred Compensation
Plan. (#) (Incorporated by reference to the Company’s Annual Report on Form 10 K for the year ended
December 31, 2008, File Number 001-13045.)
Third Amendment to 2008 Restatement of the Iron Mountain Incorporated Executive Deferred Compensation
Plan. (#) (Incorporated by reference to the Company’s Quarterly Report on Form 10 Q for the quarter ended
June 30, 2012, File Number 001-13045.)
Fourth Amendment to 2008 Restatement of the Iron Mountain Incorporated Executive Deferred Compensation
Plan. (#) (Incorporated by reference to the Company’s Annual Report on Form 10 K for the year ended
December 31, 2012, File Number 001-13045.)
Iron Mountain Incorporated 1997 Stock Option Plan, as amended. (#) (Incorporated by reference to the
Company’s Annual Report on Form 10 K for the year ended December 31, 2000, File Number 001-13045.)
Amendment to Iron Mountain Incorporated 1997 Stock Option Plan, as amended. (#) (Incorporated by reference
to the Company’s Current Report on Form 8 K dated December 10, 2008, File Number 001-13045.)
Iron Mountain Incorporated 1995 Stock Incentive Plan, as amended. (#) (Incorporated by reference to Iron
Mountain /DE’s Current Report on Form 8 K dated April 16, 1999, File Number 001-14937.)
Iron Mountain Incorporated 2002 Stock Incentive Plan. (#) (Incorporated by reference to the Company’s Annual
Report on Form 10 K for the year ended December 31, 2002, File Number 001-13045.)
Third Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#) (Incorporated by reference
to the Company’s Current Report on Form 8-K dated June 11, 2008, File Number 001-13045.)
Fourth Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#) (Incorporated by reference
to the Company’s Current Report on Form 8 K dated December 10, 2008, File Number 001-13045.)
Fifth Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#) (Incorporated by reference
to the Company’s Current Report on Form 8 K dated June 9, 2010, File Number 001-13045.)
Sixth Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#) (Incorporated by reference
to the Company’s Quarterly Report on Form 10 Q for the quarter ended June 30, 2011, File 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.)
188
Exhibit
10.14
Item
First Amendment to the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan. (#) (Incorporated by
reference to the Company’s Current Report on Form 8-K dated May 23, 2017.)
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
10.34
Form of Iron Mountain Incorporated Amended and Restated Non Qualified Stock Option Agreement. (#)
(Incorporated by reference to the Company’s Annual Report on Form 10 K for the year ended December 31,
2004, File Number 001-13045.)
Form of Iron Mountain Incorporated Incentive Stock Option Agreement. (#) (Incorporated by reference to the
Company’s Annual Report on Form 10 K for the year ended December 31, 2004, File Number 001-13045.)
Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Non Qualified Stock Option Agreement. (#)
(Incorporated by reference to the Company’s Annual Report on Form 10 K for the year ended December 31,
2004, File Number 001-13045.)
Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Amended and Restated Iron Mountain
Non Qualified Stock Option Agreement. (#) (Incorporated by reference to the Company’s Annual Report on
Form 10 K for the year ended December 31, 2004, File Number 001-13045.)
Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Incentive Stock Option Agreement. (#)
(Incorporated by reference to the Company’s Annual Report on Form 10 K for the year ended December 31,
2004, File Number 001-13045.)
Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Non Qualified Stock Option Agreement. (#)
(Incorporated by reference to the Company’s Annual Report on Form 10 K for the year ended December 31,
2004, File Number 001-13045.)
Form of Iron Mountain Incorporated 1997 Stock Option Plan Stock Option Agreement (version 1). (#)
(Incorporated by reference to the Company’s Annual Report on Form 10 K for the year ended December 31,
2004, File Number 001-13045.)
Form of Iron Mountain Incorporated 1997 Stock Option Plan Stock Option Agreement (version 2). (#)
(Incorporated by reference to the Company’s Annual Report on Form 10 K for the year ended December 31,
2004, File Number 001-13045.)
Form of Iron Mountain Incorporated 2002 Stock Incentive Plan Stock Option Agreement (version 2B). (#)
(Incorporated by reference to the Company’s Annual Report on Form 10 K for the year ended December 31,
2013.)
Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2002 Stock Incentive Plan
(version 3). (#) (Incorporated by reference to the Company’s Quarterly Report on Form 10 Q for the quarter
ended March 31, 2013.)
Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2002 Stock Incentive Plan
(version 20). (#) (Incorporated by reference to the Company’s Quarterly Report on Form 10 Q for the quarter
ended March 31, 2013.)
Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2002 Stock Incentive Plan
(version 21). (#) (Incorporated by reference to the Company’s Current Report on Form 8 K dated March 19,
2014.)
Form of Restricted Stock Unit Agreement pursuant to the Iron Mountain Incorporated 2002 Stock Incentive Plan
(version 3). (#) (Incorporated by reference to the Company’s Quarterly Report on Form 10 Q for the quarter
ended June 30, 2012, File Number 001-13045.)
Form of Restricted Stock Unit Agreement pursuant to the Iron Mountain Incorporated 2002 Stock Incentive Plan
(version 12). (#) (Filed herewith.)
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 Form 10 K for the
year ended December 31, 2014.)
Form of Restricted Stock Unit Agreement pursuant to the Iron Mountain Incorporated 2014 Stock and Cash
Incentive Plan (version 2). (#) (Filed herewith.)
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 Form 10 K for the year
ended December 31, 2014.)
Form of Stock Option Agreement pursuant to the Iron Mountain Incorporated 2014 Stock and Cash Incentive
Plan (version 2). (#) (Filed herewith.)
Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2014 Stock and Cash
Incentive Plan (version 1). (#) (Incorporated by reference to the Company’s Annual Report on Form 10 K for the
year ended December 31, 2016.)
Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2014 Stock and Cash
Incentive Plan (version 2). (#) (Incorporated by reference to the Company’s Annual Report on Form 10 K for the
year ended December 31, 2016.)
189
Exhibit
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
10.52
10.53
10.54
10.55
12
21.1
23.1
31.1
Item
Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2014 Stock and Cash
Incentive Plan (version 3). (#) (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 Form 10 Q for the quarter ended March 31,
2014.)
Iron Mountain Incorporated 2003 Senior Executive Incentive Program. (#) (Incorporated by reference to the
Company’s Current Report on Form 8 K dated April 5, 2005, File Number 001-13045.)
Amendment to the Iron Mountain Incorporated 2003 Senior Executive Incentive Program. (#) (Incorporated by
reference to the Company’s Current Report on Form 8 K dated June 9, 2010, File Number 001-13045.)
Iron Mountain Incorporated 2006 Senior Executive Incentive Program. (#) (Incorporated by reference to the
Company’s Current Report on Form 8 K dated June 1, 2006, File Number 001-13045.)
Amendment to the Iron Mountain Incorporated 2006 Senior Executive Incentive Program. (#) (Incorporated by
reference to the Company’s Current Report on Form 8 K dated June 9, 2010, File Number 001-13045.)
Employment Offer Letter, dated November 30, 2012, from the Company to William L. Meaney. (#) (Incorporated
by reference to the Company’s Current Report on Form 8 K dated December 3, 2012, File Number 001-13045.)
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 Form 10 K for the 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 Form 10 Q for the quarter ended June 30, 2016.)
Marc Duale Separation Agreement, dated March 13, 2017. (#) (Incorporated by reference to the Company’s
Quarterly Report on Form 10 Q for the quarter ended March 31, 2017.)
Ernest Cloutier Secondment Letter, dated March 27, 2017. (#) (Incorporated by reference to the Company’s
Quarterly Report on Form 10 Q for the quarter ended March 31, 2017.)
Advisory Agreement between Marc Duale and Iron Mountain Europe PLC, dated April 12, 2017. (#)
(Incorporated by reference to the Company’s Quarterly Report on Form 10 Q for the quarter ended March 31,
2017.)
Restated Compensation Plan for Non-Employee Directors. (#)(Filed herewith.)
Iron Mountain Incorporated Director Deferred Compensation Plan. (#) (Incorporated by reference to the
Company’s Annual Report on Form 10 K for the year ended December 31, 2007, File Number 001-13045.)
The Iron Mountain Companies Severance Plan. (#) (Incorporated by reference to the Company’s Current Report
on Form 8 K, dated March 13, 2012, File Number 001-13045.)
Amended and Restated Severance Plan Severance Program No. 1. (#) (Incorporated by reference to the
Company’s Quarterly Report on Form 10 Q for the quarter ended March 31, 2012, File Number 001-13045.)
First Amendment to Amended and Restated Severance Plan Severance Program No. 1. (#) (Incorporated by
reference to the Company’s Annual Report on Form 10 K for the year ended December 31, 2012, File Number
001-13045.)
Second Amendment to The Iron Mountain Companies Severance Plan Severance Program No. 1. (#)
(Incorporated by reference to the Company’s Current Report on Form 8 K dated December 19, 2014.)
Severance Program No. 2. (#) (Incorporated by reference to the Company’s Current Report on Form 8 K dated
December 3, 2012, File Number 001-13045.)
Credit Agreement, dated as of June 27, 2011, as amended and restated as of August 21, 2017, 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 August 21, 2017.)
First Amendment, dated as of December 12, 2017, to Credit Agreement, dated as of June 27, 2011, as amended
and restated as of August 21, 2017, 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.)
Statement re: Computation of Ratios. (Filed herewith.)
Subsidiaries of the Company. (Filed herewith.)
Consent of Deloitte & Touche LLP (Iron Mountain Incorporated, Delaware). (Filed herewith.)
Rule 13a 14(a) Certification of Chief Executive Officer. (Filed herewith.)
190
Exhibit
31.2
32.1
32.2
101.1
Rule 13a 14(a) Certification of Chief Financial Officer. (Filed herewith.)
Section 1350 Certification of Chief Executive Officer. (Furnished herewith.)
Item
Section 1350 Certification of Chief Financial Officer. (Furnished herewith.)
The following materials from Iron Mountain Incorporated’s Annual Report on Form 10 K for the year ended
December 31, 2017 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.)
191
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/ DANIEL BORGES
Daniel Borges
Vice President, Chief Accounting Officer
(Principal Accounting Officer)
Dated: February 16, 2018
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
/s/ DANIEL BORGES
Daniel Borges
Title
President and Chief Executive Officer and
Director (Principal Executive Officer)
Date
February 16, 2018
Executive Vice President and Chief
Financial Officer (Principal Financial
Officer)
February 16, 2018
Vice President, Chief Accounting Officer
(Principal Accounting Officer)
February 16, 2018
/s/ JENNIFER M. ALLERTON
Director
February 16, 2018
Jennifer M. Allerton
/s/ TED R. ANTENUCCI
Director
February 16, 2018
Ted R. Antenucci
/s/ PAMELA M. ARWAY
Director
February 16, 2018
Pamela M. Arway
/s/ CLARKE H. BAILEY
Director
February 16, 2018
Clarke H. Bailey
/s/ KENT P. DAUTEN
Director
February 16, 2018
Kent P. Dauten
/s/ PAUL F. DENINGER
Director
February 16, 2018
Paul F. Deninger
192
Name
Title
Date
/s/ PER-KRISTIAN HALVORSEN Director
February 16, 2018
Per-Kristian Halvorsen
/s/ WENDY J. MURDOCK
Director
February 16, 2018
Wendy J. Murdock
/s/ WALTER C. RAKOWICH
Director
February 16, 2018
Walter. C. Rakowich
/s/ ALFRED J. VERRECCHIA
Director
February 16, 2018
Alfred J. Verrecchia
193
CORPORATE DIRECTORS AND OFFICERS
(As of 04/03/18)
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 3, 5
Chief Executive Officer and
Chairperson of the Board of Directors
EDCI Holdings, Inc.
New York, NY
Kent P. Dauten 1, 3, 4
Chairman
Keystone Capital, Inc.
Deerfield, IL
SENIOR OFFICERS
William L. Meaney
President and Chief Executive Officer
Peter Allen
Senior Vice President and General Manager,
Data Management
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 and
Chief of Operations
Raymond C. Fox
Executive Vice President and
Chief Risk Officer
Paul F. Deninger 2, 4
Executive Chairman
IDL Development, Inc.
Taunton, MA
Per-Kristian Halvorsen 2, 5
Senior Vice President
and Senior Engineering Fellow
Intuit Inc.
Mountain View, CA
William L. Meaney
President and Chief Executive Officer
Iron Mountain Incorporated
Boston, MA
Wendy Murdock 2, 4
Retired Executive
MasterCard Worldwide
New York, NY
Walter C. Rakowich 1, 3
Retired Executive
Former CEO of Prologis
San Francisco, CA
Patrick Keddy
Executive Vice President and General Manager,
North America and Western Europe
Mark Kidd
Senior Vice President and
General Manager, Data Centers
Theodore MacLean
Executive Vice President,
Adjacent Businesses
Deborah Marson
Executive Vice President,
General Counsel and Secretary
Fidelma Russo
Executive Vice President
and Chief Technology Officer
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
Copies of the Annual Report on Form 10-K
are available upon request by contacting
the company at the address below,
attention: Investor Relations
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:
137,700 as of April 3, 2018
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 June 14, 2018, 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 expected growth due to shift in revenue mix,
projected revenues from our emerging market acquisition pipeline
and acquisitions and valuation creation and returns associated with
our data center business. 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 non-paper 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 and changes in the political climate; (viii) our ability or
inability to manage growth, expand internationally, complete
acquisitions on satisfactory terms and to integrate acquired
companies efficiently; (ix) changes in the amount of our growth and
maintenance capital expenditures; (x) our ability to comply with our
existing debt obligations and restrictions in our debt instruments or
to obtain additional financing to meet our working capital needs;
(xi) the impact of service interruptions or equipment damage and
the cost of power in our data center operations (xii) changes in the
cost of our debt; (xiii) the impact of alternative, more attractive
investments on dividends; (xiv) the cost or potential liabilities
associated with real estate necessary for our business; (xv) the
performance of business partners upon whom we depend for
technical assistance or management expertise outside the United
States; (xvi) other trends in competitive or economic conditions
affecting our financial condition or results of operations not
presently contemplated; and (xvii) other risks described more fully in
our Annual Report on Form 10-K filed with the Securities and
Exchange Commission, or SEC, on February 16, 2018 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 12/31/17)
Greece
Hungary
Netherlands
Northern Ireland
Norway
Poland
Republic of Ireland
Romania
Russia
Scotland
Serbia
Slovakia
Spain
Switzerland
Turkey
Ukraine
Uzbekistan
Asia Pacific
Australia
China
Hong Kong-SAR
India
Malaysia
New Zealand
Philippines
Singapore
South Korea
Thailand
Europe
Armenia
Austria
Belarus
Belgium
Cyprus
Czech Republic
Denmark
England
Estonia
Finland
France
Germany
Latvia
Lithuania
Sweden
IRM Stock Performance
Latin America
Argentina
Brazil
Chile
Mexico
Peru
Colombia
Middle East and Africa
South Africa
United Arab Emirates
North America
Canada
United States
Comparison of 60 Month Cumulative Total Return
Among Iron Mountain, the MSCI REIT Index, the S&P 500 and the Russell 1000
275
250
225
200
175
150
125
100
s
r
a
l
l
o
D
Iron Mountain,Inc.
Russell 1000
S&P 500
MSCI REIT Index
75
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
8APR201823234261
Note: Fiscal year end December 31, 2017
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, 2012, through December 31, 2017. This comparison assumes an investment of $100
on December 31, 2012, and the reinvestments of any dividends.
4AUG201721502439