Iron Mountain
Annual Report 2018

Plain-text annual report

4AUG201721502439 2018 Annual Financial Report and Stockholder Letter (cid:1) To Our Shareholders, 2018 marked a year of continued strong growth for Iron Mountain, highlighted by global organic storage revenue growth, significant growth in our Data Center business, continued expansion of our Adjacent Businesses, and further scale in our Emerging Markets – all whilst continuing to make progress in reducing our impact on the environment. Below are performance highlights from our 2018 financial results: (cid:120) revenue increased 10% on a constant currency basis, driven in part by the contribution from recent data center acquisitions and strong growth in service revenue; (cid:120) total organic revenue growth was 3.6% for the full year, a strong acceleration from the 2.3% we reported in 2017; (cid:120) Adjusted EBITDA grew 14% year over year resulting in a 120 basis point improvement in our margin; (cid:120) we generated 16% growth in Adjusted Funds from Operations, or AFFO – and 8% if we adjust for our increased share count – whilst continuing to reinvest in the growth of our business and grow our dividend by 4%; and (cid:120) we achieved significant growth whilst continuing our progress in deleveraging – with our net total lease adjusted leverage ratio going from 5.8 to 5.6 times (adjusting for the timing of the close of IO Data Centers). Above and beyond our strong financial execution, 2018 was a year of continued evolution for Iron Mountain. We made significant progress in shifting our revenue mix to high-growth businesses, completing more than $1.7 billion in targeted acquisitions. This progression is highlighted by the ongoing expansion of our global Data Center footprint with the acquisitions of IO Data Centers, the Credit Suisse data centers, and EvoSwitch. Our growth portfolio, which consists of Emerging Markets, Data Center, and Adjacent Businesses, now comprises 19% of our total revenue and grew approximately 7% year over year on an organic basis. Moreover, we secured long-term purchase of electricity from wind, which more than offsets the total power consumption of our Data Center business on a global basis, and we are the first data center provider who can pass these green credits onto our end customers. With this letter, I would like to reflect on where we have been, where we are going and why we continue to be optimistic about the opportunities ahead of us. Since its inception, Iron Mountain has been a market leader in the physical ecosystem around information storage and retrieval, as most businesses have relied on paper documents or computer tapes to store their valuable information. Over the past ten years, the volume of records we store on behalf of our more than 225,000 customers, including approximately 95% of the Fortune 1000, has increased more than 1.5 times, to approximately 690 million cubic feet. This results in a durable and consistent cash flow stream, supported by storage gross margin of nearly 75%. Over time, customers are increasing the amount of their digital information, with the new information storage ecosystem being a hybrid of physical and digital mediums. We are well positioned to capitalize on these trends, offering a full suite of "mission-critical" storage and related services to help our customers along their digital transformation and utilizing the key elements of our strategy outlined below to grow our business and create value for our employees, customers, and shareholders. Driving Growth and Margins in Records and Information Management in Developed Markets In our Developed Markets, which includes our North American Records and Information Management Business, North American Data Management Business and Western European Business segments, organic storage revenue grew 1.4% year over year, on slightly negative volume, reflecting the contribution from revenue management. We made good progress in penetrating historically unvended channels of the markets, including the U.S. Federal government, which saw revenue and volume increase 11% and 4%, respectively, year over year. We are encouraged by the new customer relationships we established in 2018, and continue to focus on elevating the global customer experience for all of our customers. Expansion of Records and Information Management in Emerging Markets In 2018, we made further progress on our strategic goal to deepen our presence in higher growth Emerging Markets by establishing and enhancing leadership positions in key markets including South Korea, China, and the Philippines. This was achieved primarily through strategic acquisitions that enabled us to drive scale and expand our geographic reach. In addition, organic storage revenue from Emerging Markets grew more than 5% in 2018 and we continue to view the opportunity in these markets as quite attractive given higher GDP growth rates and the potential for continued outsourcing of records management as these geographies mature and customers better understand the Iron Mountain value proposition. Continued Expansion of Data Center Business Through both organic growth and targeted acquisitions, we continue to scale our Data Center business, with enterprise-class colocation and wholesale data center storage and solutions in key markets across the United States, Europe and Asia. Our existing capacity of over 100 megawatts of leasable capacity was 91.4% leased at the end of 2018, with total potential capacity of approximately 350 megawatts, including our recently announced acquisition of permitted land in Frankfurt, Germany. We continue to see very good traction within our enterprise customer base, leveraging the relationships built on trust and security for decades, resulting in organic revenue growth of 9% in 2018. Whilst our Data Center business was only 5% of total revenue in 2018, it is already impacting our results in a meaningful way, delivering over 1.5% of organic Adjusted EBITDA growth on a consolidated basis. Investing in Faster Growing Adjacent Businesses We continue to identify, acquire, incubate and scale complementary Adjacent Businesses to support our long-term growth objectives and drive solid returns on invested capital. Our Adjacent Businesses include our Fine Art storage and Entertainment Services businesses. Our Fine Art business grew strongly in 2018 and saw organic sales increase by 18% whilst we continue to expand the geographic reach of our market-leading Crozier brand with acquisitions in the UK, and most recently, Zurich, Switzerland. Investing in Innovation to Fuel Future Growth Innovation is an essential part of our strategy and value creation, and we are focused on investing in solutions and services to enable our customers to navigate the hybrid world of physical and digital. As an organization, we look to identify essential opportunities that will enhance customer experiences and generate revenue growth, allowing our sales team to “Sell the Mountain” by better understanding our customers’ evolving needs. An example of this is our partnership with Google to support Iron Mountain InSight, which is a content services platform that provides actionable business and predictive analytics through Machine-Learning-based classification of a company’s physical and digital information. insights Continue to Focus on Growth and Margin Expansion We are fortunate to have built a durable and steady records and information management business that is high margin and continues to generate consistent cash flow, which feeds both our growing dividend as well as funding investment for future growth. To that point, we will continue to build from our strong capabilities and core competencies developed over many decades of managing our customers’ valuable physical and digital information assets to extend our storage capabilities beyond records and data management to a more comprehensive portfolio of physical storage solutions. Today, we store many of our customers’ valuable assets in addition to information assets, which leverages our knowhow and utilizes our existing storage facilities and logistics expertise whilst enhancing our returns. To conclude, I am proud of what the Iron Mountain team accomplished in 2018, with good progress on our strategic initiatives and strong financial performance, highlighted by robust AFFO growth and return on invested capital well in excess of our weighted average cost of capital. As we look to the remainder of 2019, we expect consistent performance expectations for Records and Information Management business fundamentals, with further physical storage potential from newer adjacencies; ongoing strong growth in Emerging Markets, Data Center and Adjacent Businesses; and continued investment in the business to support strategic initiatives and innovation around digital solutions. We will focus on continuing to increase the mix of our revenue from high-growth businesses, supporting our target of generating 5%-plus organic Adjusted EBITDA growth by the end of 2020, whilst returning cash to our shareholders with 4% annual dividend-per-share growth and continuing our path of gradual deleveraging. Thank you for your continued support as an Iron Mountain shareholder. Yours sincerely, William L. Meaney, President and Chief Executive Officer UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ____________________________________________________________________________ FORM 10-K ____________________________________________________________________________ (Mark One) ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2018 or o 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 ý No o 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 o No ý 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 ý No o Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted 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 such files). Yes ý No o 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 o 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 ý Non-accelerated filer o Accelerated filer o Smaller reporting company o Emerging growth company o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý As of June 30, 2018, the aggregate market value of the Common Stock of the registrant held by non-affiliates of the registrant was approximately $9.9 billion based on the closing price on the New York Stock Exchange on such date. Number of shares of the registrant's Common Stock at February 8, 2019: 286,365,695 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 2019 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, 2018. IRON MOUNTAIN INCORPORATED 2018 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 ii Page 1 6 21 22 24 24 25 26 28 70 71 71 72 74 75 75 75 75 75 75 173 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 2019 consolidated internal storage rental revenue growth rate, consolidated internal total revenue growth rate and capital expenditures, (4) expectation that profits will increase in our Emerging Markets (as defined below), (5) expectation that our growth portfolio will become a large part of our business over time, (6) statements made in relation (i) to our acquisition of Recall Holdings Limited ("Recall") pursuant to the Scheme Implementation Deed, as amended, with Recall (the "Recall Transaction") and (ii) our acquisition of IO Data Centers, LLC ("IODC"), including the total acquisition expenditures related to Recall and IODC and the cost to integrate Recall into our existing operations, (7) statements regarding our expectation to reduce our leverage ratio, (8) our ability to close pending acquisitions, (9) expectations regarding the impact of United States tax reform legislation and related administrative guidance on our consolidated results of operations and (10) expectations regarding the impact of ASU 2016-02 (as defined below) on our consolidated financial statements. These forward-looking statements are subject to various known and unknown risks, uncertainties and other factors. When we use words such as "believes," "expects," "anticipates," "estimates" or similar expressions, we are making forward-looking statements. Although we believe that our forward-looking statements are based on reasonable assumptions, our expected results may not be achieved, and actual results may differ materially from our expectations. In addition, important factors that could cause actual results to differ from expectations include, among others: • • • • • • • • • • • • • • • • our ability to remain qualified for taxation as a real estate investment trust for United States federal income tax purposes ("REIT"); the adoption of alternative technologies and shifts by our customers to storage of data through non-paper based technologies; changes in customer preferences and demand for our storage and information management services; the cost to comply with current and future laws, regulations and customer demands relating to 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 or our internal records or information technology ("IT") systems and the impact of such incidents on our reputation and ability to compete; 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. iii 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. iv Item 1. Business. Business Overview PART I We help organizations around the world protect their information, reduce storage rental costs, comply with regulations, facilitate corporate disaster recovery, and better use their information and IT infrastructure for business advantages, regardless of its format, location or life cycle stage. We do this by storing physical records and data backup media, offering information management solutions, and providing enterprise-class colocation and wholesale data center space. 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, legal and regulatory compliance, and disaster recovery requirements. We provide secure and reliable data center facilities to protect digital information and ensure the continued operation of our customers’ IT infrastructure, with flexible deployment options, including both colocation and wholesale space. Founded in an underground facility near Hudson, New York in 1951, Iron Mountain Incorporated, a Delaware corporation, has approximately 225,000 customers in a variety of industries in approximately 50 countries around the world, as of December 31, 2018. 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, 2018, we employed more than 26,000 people. We are listed on the New York Stock Exchange (the "NYSE") and are a constituent of the Standard & Poor's 500 Index and the MSCI REIT index. As of December 31, 2018, we were number 619 on the Fortune 1000. We have been organized and have operated as a REIT beginning with our taxable year ended December 31, 2014. Business Strategy Overview Our company has been a market leader in the physical ecosystem around information storage and retrieval, as most businesses have relied on paper documents or computer tapes to store their valuable information. Over time, customers are increasing their digital information, with the new information storage ecosystem being a hybrid of physical and digital mediums. We offer a suite of "mission-critical" storage and related services to help customers with this transformation, and utilize the strategy outlined below to grow our business. • • • Driving Growth and Margins in Records and Information Management in Developed Markets - We are focused on increasing revenues in developed markets such as the United States, Canada, western Europe, Australia and New Zealand, primarily through more targeted sales and marketing efforts to support sales to new customers that do not currently outsource some or all of their storage and information management needs to us, as well as gaining incremental volumes from existing customers and successful revenue management. We expect to continue to pursue attractive acquisitions, designed to optimize the utilization of our existing assets, expand our presence and better serve our customers, as well as invest in acquisitions of customer relationships and storage and information management services businesses. In our developed markets, we expect continuous improvement initiatives will continue to generate margin expansion opportunities. Expansion of Records and Information Management in Emerging Markets - Part of our strategy is to establish and enhance leadership positions in high-growth emerging markets such as central and eastern Europe, Latin America, Africa and Asia (excluding Australia and New Zealand, ("Emerging Markets")), primarily through acquisitions. In our existing Emerging Markets locations, we expect profits will grow as the local businesses achieve scale, and we will look to reinvest a portion of the cash flows generated to support the growth of these businesses. Investing in Faster-Growing Businesses - We continue to identify, acquire, incubate and scale complementary Adjacent Businesses ("ABs") to support our long-term growth objectives and drive solid returns on invested capital. The opportunities complementary to our business include entertainment, fine art and consumer storage and related services. 1 • Continued Expansion of Data Center Business - We have made significant progress through acquisitions and organic growth in scaling our data center business, which began as an AB but has now grown to such a size that we no longer consider it an AB. As of December 31, 2018, 91.4% of our capacity is leased, with total potential capacity of 324.9 megawatts. Our strategy is underpinned by our persistent focus on customer experience, as we continue to seek innovative solutions to help our customers navigate the journey from physical storage to a digital ecosystem. Business Segments The amount of revenues derived from our business segments and other relevant data, including financial information about geographic areas and product and service lines, for the years ended December 31, 2016, 2017 and 2018, 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 includes three distinct offerings. First, we provide records and information management storage and related 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 customers (“Records Management”) throughout the United States and Canada. Second, this segment includes certain services related to Records Management, including secure shredding operations, which typically include the scheduled pick-up of loose office records that customers accumulate in specially designed secure containers we provide. Secure shredding, which involves the shredding of sensitive documents for customers that, in many cases, store their records with us, is a natural extension of our hard copy records management operations and completes the lifecycle of a record. 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 and Canada. The third offering, Information Governance and Digital Solutions ("IGDS"), develops, implements and supports comprehensive storage and information management solutions for the complete lifecycle of our customers' information, including the management of physical records, document conversion and digital storage in the United States and Canada. • 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 Mountain Iron Cloud solution, (collectively, "Data Management"). • Western European Business: Our Western European Business segment provides Records Management, Data Management and IGDS throughout Austria, Belgium, France, Germany, Ireland, the Netherlands, Spain, Switzerland and the United Kingdom. • • Other International Business: Our Other International Business segment provides Records Management, Data Management and IGDS throughout the remaining European countries in which we operate, as well as the countries in which we operate in Latin America, Asia, the Middle East and Africa. Global Data Center Business: Our Global Data Center Business segment provides enterprise-class data center facilities to protect mission-critical assets and ensure the continued operation of our customers’ IT infrastructure, with secure and reliable colocation and wholesale options. As of December 31, 2018, we had data center operations in eight markets in the United States: Denver, Colorado; Kansas City, Missouri; Boston, Massachusetts; Boyers, Pennsylvania; Manassas, Virginia; Edison, New Jersey; Columbus, Ohio; and Phoenix and Scottsdale, Arizona and three international markets: Amsterdam, London, and Singapore. 2 • 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, China - Hong Kong S.A.R., the Netherlands and the United Kingdom, and our fine art storage businesses and consumer storage businesses in the United States, Canada, Europe and China - Hong Kong S.A.R. These businesses represent the primary 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. 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. Business Attributes Our business has the following attributes: • • • • • Large, Diversified, Global Business - Our mission-critical storage offerings and related services generated more than $4.2 billion in annual revenue in 2018. Our business has a highly diverse customer base of approximately 225,000 customers - with no single customer accounting for more than 1% of revenue - and operates in approximately 50 countries globally. Recurring, Durable Revenue Stream - We generate a majority of our revenues from fixed periodic, usually monthly storage rental fees, via contracts that generally range from one-five years in length. Historically, we have seen strong customer retention (of approximately 98%) and solid physical records retention; more than 50% of physical records that entered our facilities 15 years ago, are still with us today. Significant Owner and Operator of Real Estate - We operate approximately 90 million square feet of real estate in over 1,400 facilities worldwide. Our owned real estate footprint spans nearly 30 million square feet and is concentrated in major metropolitan statistical areas in North America, Western Europe and Latin America. Limited Revenue Cyclicality - Historically, economic downturns have not significantly affected our storage rental business. Due to the stability in our total global physical records volumes, the success of our revenue management, and the growth of our data center business, we believe we can continue to grow storage rental revenue over time. Shifting Revenue Mix - Our growth portfolio, which consists of our business in Emerging Markets, our data center business, and our Adjacent Businesses, comprised 19% of our total revenue in 2018, and grew 7% year over year, on an internal basis. We expect our growth portfolio to comprise an increasingly larger percentage of our overall business in the coming years. Significant Acquisitions 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. We have been providing customers with colocation and wholesale data center space and solutions for more than 15 years, and have significantly expanded our data center business in the last few years with acquisitions, the most significant one being that of IO Data Centers, LLC (“IODC”). On January 10, 2018, we completed the acquisition of the United States operations of IODC, a leading data center colocation space and solutions provider based in Phoenix, Arizona, for approximately $1.34 billion (the "IODC Transaction"). See Note 6 to Notes to Consolidated Financial Statements included in this Annual Report. The purchase included the land and buildings associated with four state-of-the-art data centers in Phoenix and Scottsdale, Arizona, Edison, New Jersey, and Columbus, Ohio. This acquisition marked a transformative step toward addressing our customers’ data center needs by dramatically expanding our platform and capabilities. With the build-out of our existing footprint and the additional capacity from IODC and other recent acquisitions, our data center portfolio as of December 31, 2018 totals more than 100 megawatts of existing capacity, with an additional 11 megawatts of capacity currently under construction and planned and future expansion potential of another 211 megawatts. 3 We have completed many acquisitions over the years to achieve scale, expand geographically and broaden our offerings. While most of these acquisitions have been smaller in size given the fragmented nature of the records management industry, our acquisition of Recall in 2016 was another significant transaction. On May 2, 2016 we purchased Recall, a multi-national records and information management company, for approximately $2.2 billion, comprised of $331.8 million in cash and approximately 50.2 million shares of our common stock. Competition We compete with storage and information management services managed and operated internally by organizations and thousands of storage and information management services providers 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 availability of power, security considerations, location, connectivity and rental rates, and we generally believe we compete effectively in each of these areas. Additionally, we believe our strong brand, global footprint and excellent commercial relationships enable us to compete successfully. Employees As of December 31, 2018, we employed more than 9,000 employees in the United States and more than 17,200 employees outside of the United States. As of December 31, 2018, approximately 500 employees in California, Georgia and New Jersey and three provinces in Canada were represented by unions in North America and approximately 1,400 employees were represented by unions in Latin America (in Argentina, Brazil, Chile and Mexico). 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. 4 Our customer contracts typically contain provisions limiting our liability for damages regarding the loss or destruction of, or damage to, records, and other information and valuable 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 data center, IGDS, destruction services 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 environmental review of all of our properties, including those we have acquired. We therefore may be potentially liable for environmental cost and may be unable to sell, rent, mortgage or use contaminated real estate owned or leased by us. Under various federal, state and local environmental laws, we may be liable for environmental compliance and remediation costs to address contamination, if any, located at owned and leased properties as well as damages arising from such contamination, whether or not we know of, or were responsible for, the contamination, or the contamination occurred while we owned or leased the property. Environmental conditions for which we might be liable may also exist at properties that we may acquire in the future. In addition, future regulatory action and environmental laws may impose costs for environmental compliance that do not exist today. We transfer a portion of our risk of financial loss due to currently undetected environmental matters by purchasing an environmental impairment liability insurance policy, which covers all owned and leased locations. Coverage is provided for both liability and remediation costs. Corporate Social 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 member of the FTSE4 Good 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." 5 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. Business 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 traditional physical records and tape storage, and as alternative technologies are adopted, storage volume and/or requirements for storage related services may decline. For example, we experienced slight volume declines in our North American Records and Information Management Business and North American Data Management Business segments in 2018 and we expect these trends to continue over the near term. 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 non-tape-based technologies, whether now existing or developed in the future, could adversely affect our businesses. Failure to execute our strategic growth plan may adversely impact our financial condition and results of operations. As part of our strategic growth plan, we expect to continue to invest in our existing businesses, including records and information management storage and services businesses in Emerging Markets, data centers and ABs, and in new businesses, business strategies, products, services, technologies and geographies, and we may selectively divest certain businesses. These initiatives may involve significant risks and uncertainties, including: • • • • • • • • • • our inability to identify suitable companies to acquire or invest in; our inability to complete acquisitions or investments on satisfactory terms; our inability to structure investments or acquisitions in a manner that complies with our debt covenants and is consistent with our leverage ratio goals; our inability to successfully expand our infrastructure and sales force to support growth; failure to achieve satisfactory returns on acquired companies, particularly in markets where we do not currently operate; incurring 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; distraction of management from current operations; increasing our leverage; insufficient revenues to offset expenses and liabilities associated with new investments; and our inability to attract, develop and retain skilled employees to lead and support new initiatives. Our data center expansion in particular requires significant capital commitments. We have paid an aggregate cash purchase price of over $1.7 billion for data center businesses in 2017 and 2018. Our data center expansion and other 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 data center, international and adjacent businesses, some of which possess substantial financial and other resources. As a result, we may be unable to acquire, or may pay a premium purchase price for, data centers, international and adjacent businesses that support our strategic growth plan. 6 As stored records and tapes become less active our service revenue growth and profitability from related services may decline. Our records management and data management service revenue growth is being negatively impacted by declining activity rates as stored records and tapes are becoming less active and more archival. The amount of information available to customers digitally or in their own information systems has been steadily increasing in recent years, and we believe this trend continues to accelerate. As a result, our customers are less likely than they have been in the past to retrieve records and rotate tapes, thereby reducing their 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. Our future growth depends in part upon our ability to continue to effectively manage and execute on revenue management. Over the past years, our internal revenue growth has been positively impacted by our ability to effectively introduce, expand and monitor revenue management initially in our developed markets, and subsequently in our emerging markets. If we are not able to continue and effectively manage pricing, our results of operations could be adversely affected and we may not be able to execute on our strategic growth plan. Changes in customer behavior with respect to document destruction could adversely affect our business, financial condition and results of operations. Over the past year, we have experienced increased destruction rates (as a percentage of inventory). While increased destruction rates have a positive impact on our service revenues in the year of destruction, it negatively impacts our longer term storage revenues. If destruction rates do not decrease to historical levels or continue to increase, 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, all states in the United States have adopted breach of data security statutes or regulations that require notification to consumers and regulators 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 not only expand the federal data breach notification requirement beyond the financial and healthcare fields but also grant consumers privacy rights similar to those conferred under Regulation (EU) 2016/679 (commonly referred to as "GDPR") in Europe (as discussed further below). 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, GDPR, on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, went into effect in May 2018. GDPR enhances the security and privacy obligations of entities, such as us, that process data of residents of members of the European Economic Area and substantially increases penalties for violations. 7 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 business 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 outsourced, 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. As of December 31, 2018 we operated over 1,400 facilities worldwide, including over 600 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 applicable laws and regulations in effect at the time of their construction or outfitting. In some instances local authorities 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 businesses we have acquired or may acquire is the process of making investments in the acquired 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. 8 Changes to environmental laws and standards may increase the cost to operate some of our businesses. Furthermore, if we fail to meet our commitment to transition to more renewable and sustainable sources of energy, it may negatively impact our ability to attract and retain customers and investors who focus on this commitment. This could impact our results of operations and the trading of our stock. Changes in environmental laws in any of the jurisdictions in which we operate could increase compliance costs or impose limitations on our operations. For example, our emergency generators at our data centers 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 and data management locations may include ozone-depleting substances that are subject to regulation. While environmental regulations do not normally impose material costs upon operations at our facilities, unexpected events, equipment malfunctions, human error and changes in law or regulations, among other factors, could result in unexpected costs, which could be material. Furthermore, we have made a commitment to transition to more renewable and sustainable sources of energy. If we are not successful in this transition, it may negatively impact our ability to attract and retain customers and investors who focus on this commitment. This could negatively impact our results of operations and the trading of our stock. 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. 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 IGDS, 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 related 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. 9 International operations may pose unique risks. As of December 31, 2018, we operated in approximately 50 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 its share to increase as we continue to acquire or invest in businesses in select foreign markets, including countries where we do not currently operate. International operations are subject to numerous risks, including: • • • • • • • • • the impact of foreign government regulations and United States regulations that apply to us 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, cash flows, debt balances or leverage can be significantly affected by fluctuations in currencies. 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. 10 Significant costs or disruptions at our data centers could adversely affect our business, financial condition and results of operations. During the prior two years, we have substantially expanded our data center business through acquisitions and organically and we expect to continue to grow our data center business in both ways going forward. For example, we paid an aggregate cash purchase price of over $1.7 billion for data center businesses we acquired in 2017 and 2018 and incurred other costs associated with the development of real estate to support this business. 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; war, terrorism and any related conflicts or similar events worldwide; and sabotage and vandalism. In addition, climate change may increase the likelihood that our data centers are affected by some of these factors. While these risks could impact our overall business, they could have a more significant impact on our data center business, where we have service level commitment obligations to certain of our customers. As a result, service interruptions or significant equipment damage at our data centers could result in difficulty maintaining service level commitments to these customers and potential claims related to such failures. Because our data centers are critical to many of our customers’ businesses, service interruptions or significant equipment damage at our data centers could also result in lost profits or other indirect or consequential damages to our customers. 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, and 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 or to restrict 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. We may be required to commit significant operational and financial resources in connection with the organic growth of our data center business, generally 12 to 18 months in advance of securing customer contracts, and we may not have sufficient customer demand to support these data centers when they are built. There can be no assurance we will have sufficient customer demand to support these data centers or data centers we have acquired 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. 11 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 and reputation. 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. 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 depends, 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: • • • • • • challenges and difficulties associated with managing our larger, more complex, company; conforming standards, controls, procedures and policies, business cultures and compensation and benefits 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. 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, Asia and Australia have historically been our primary areas of focus for international expansion of our records and information management services business, with expansion of our records and information management services business into Africa and the Middle East and expansion of our data center and adjacent business operations becoming more of a focus recently. We have entered into joint ventures or have acquired all or a majority of the equity in storage and information management services and data center businesses operating in these areas and may enter into joint ventures and/or acquire other storage and information management services, data center or adjacent 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. 12 We may be subject to certain costs and potential liabilities associated with the real estate required for our business. Because our business is heavily dependent on real estate, we face special risks attributable to the real estate we own or lease. Such risks include: • • • • acquisition and occupancy costs that make it difficult to meet anticipated margins and difficulty locating suitable facilities due to a relatively small number of available buildings having the desired characteristics in some real estate markets; uninsured losses or damage to our storage facilities due to an inability to obtain full coverage on a cost-effective basis for some casualties, such as fires, hurricanes and 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 environmental review of all of our properties, including those we have acquired. We therefore may be potentially liable for environmental costs like those discussed above and may be unable to sell, rent, mortgage or use contaminated real estate owned or leased by us. Environmental conditions for which we might be liable may also exist at properties that we may acquire in the future. In addition, future regulatory action and environmental laws may impose costs for environmental compliance that do not exist today. Unexpected events could disrupt our operations and adversely affect our reputation and results of operations. Unexpected events, including fires or explosions at our facilities, natural disasters such as hurricanes and earthquakes, war or terrorist activities, unplanned power outages, supply disruptions and failure of equipment or systems, could adversely affect our reputation and results of operations. Our customers rely on us to securely store and timely retrieve their critical information, and these events could result in customer service disruption, physical damage to one or more key operating facilities and the information stored in those facilities, the temporary closure of one or more key operating facilities or the temporary disruption of information systems, each of which could negatively impact our reputation and results of operations. During the past several years we have seen an increase in severe weather events and we expect this trend to continue due to climate change. Some of our key facilities worldwide are vulnerable to severe weather events. 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. 13 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 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. 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 intellectual property ("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 businesses 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. 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 United States Internal Revenue Service (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. 14 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 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, 2018, our total long-term debt was approximately $8.2 billion. Our substantial indebtedness could have important consequences to our current and potential investors. These risks include: • • • • • • • • inability to satisfy our obligations with respect to our various debt instruments; inability to make borrowings to fund future working capital, capital expenditures and strategic opportunities, including acquisitions, further organic development of our data center business and expansions into adjacent businesses, and other general corporate requirements, including possible required repurchases, redemptions or prepayments 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 that could place us at a disadvantage to our competitors with less debt and who, therefore, may be able to take advantage of opportunities that our indebtedness prevents us from pursuing. 15 Restrictive debt covenants may limit our ability to pursue our growth strategy. Our indentures and our Credit Agreement (as defined in Note 4 to Notes to Consolidated Financial Statements included in this Annual Report) contain covenants restricting or limiting our ability to, among other things: incur additional indebtedness; pay dividends or make other restricted payments; • • • make asset dispositions; • • • • make acquisitions and other investments; and enter into partnerships and joint ventures. • create or permit liens; sell, transfer or exchange assets; guarantee certain indebtedness; These restrictions and our long-term commitment to reduce our leverage ratio 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 and 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. 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 consolidated 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, whose ability to distribute funds may be limited by local capital requirements, joint venture structures and other applicable restrictions. 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, which represent the substantial majority of our United States operations. 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. 16 Any such corporate tax liability could be substantial and would reduce the amount of cash available for other purposes. If we fail to remain qualified for taxation as a REIT, we may need to borrow additional funds or liquidate some investments to pay any additional tax liability. Accordingly, funds available for investment and distributions to stockholders could be reduced. As a REIT, failure to make required distributions would subject us to federal corporate income tax. We expect to continue paying regular quarterly distributions; 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, 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. 17 Complying with REIT requirements may limit our flexibility or cause us to forgo otherwise attractive opportunities we would otherwise pursue to execute our growth strategy. 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. This may restrict our ability to enter into joint ventures or acquire minority interests of companies. Furthermore, acquisition opportunities in domestic and international markets may be adversely affected if we need or require the target company to comply with some REIT requirements prior to closing. We conduct a significant portion of our business activities, including our information management services businesses and several of our international operations, through domestic and foreign TRSs. Under the Code, no more than 25% of the value of the assets of a REIT may be represented by securities of one or more TRSs and other nonqualifying assets. 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. 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, which 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 operations are conducted overseas, and a material change in foreign currency rates could also affect the value of our foreign holdings in our TRSs, negatively impacting our ability to remain qualified for taxation as a REIT. 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”), impose limitations on the ability of our TRSs to deduct certain items for income tax purposes, including limits on the use of net operating losses and limits on the deductibility of interest expense. 18 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%) on gains we recognize within a specified period 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 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 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. 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. 19 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. The Tax Reform Legislation 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 still uncertain in many respects, 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 additional guidance in order to assess their effect. 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. 20 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, 2018, we have sold 1,754,539 shares of our common stock for gross proceeds of approximately $68.8 million under the At The Market (ATM) Equity Program. See Note 12 to Notes to Consolidated Financial Statements included in this Annual Report. 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. Furthermore, we are committed to growing our dividends, and have stated this publicly. 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 related services. Consequently, our distribution levels may fluctuate and we may not be able to meet our public commitments with respect to dividend growth. Item 1B. Unresolved Staff Comments. None. 21 Item 2. Properties. As of December 31, 2018, we conducted operations through 1,140 leased facilities and 312 owned facilities. Our facilities are divided among our reportable operating segments as follows: North American Records and Information Management Business (630), North American Data Management Business (54), Western European Business (207), Other International Business (483), Global Data Center Business (13) and Corporate and Other Business (65). These facilities contain a total of approximately 89.9 million square feet of space. A breakdown of owned and leased facilities by country (and by state within the United States) is listed below: Country/State North America United States (Including Puerto Rico) Alabama Arizona Arkansas California Colorado Connecticut Delaware District of Columbia Florida Georgia Idaho 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 312,473 570,701 63,604 4,306,926 518,969 226,714 309,067 40,912 2,390,714 914,206 60,021 1,274,382 213,010 145,138 288,919 116,000 233,850 — 1,726,050 545,039 857,563 878,474 171,000 1,270,738 35,990 34,560 276,520 — 2,379,177 37,000 1,248,463 976,504 5,361 763,405 170,428 407,680 1,679,360 255,089 130,559 318,475 166,993 2,086,367 78,148 55,200 690,984 298,555 174,929 316,857 30,021,074 3,211,871 33,232,945 3 14 2 67 10 5 4 2 35 11 1 17 5 2 3 3 8 — 17 8 15 12 2 11 3 1 7 — 31 1 24 19 1 12 4 12 21 6 3 5 4 41 2 2 14 5 3 6 484 54 538 22 1 6 — 15 6 6 1 — 5 5 — 7 1 1 — 4 2 1 3 8 6 — — 4 — 3 1 1 11 2 13 3 — 8 3 1 10 1 1 2 5 28 1 — 7 — 6 — 1 190 16 206 12,621 897,932 — 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 2,285,095 109,473 1,186,266 150,624 — 686,378 140,000 55,621 2,771,483 54,352 12,748 214,238 153,659 2,343,171 90,553 — 605,566 472,896 — 10,655 21,024,677 1,783,258 22,807,935 4 20 2 82 16 11 5 2 40 16 1 24 6 3 3 7 10 1 20 16 21 12 2 15 3 4 8 1 42 3 37 22 1 20 7 13 31 7 4 7 9 69 3 2 21 11 3 7 674 70 744 325,094 1,468,633 63,604 6,271,498 1,036,669 891,727 429,988 40,912 2,654,644 1,179,255 60,021 2,584,357 344,516 159,338 288,919 534,760 448,475 95,000 2,053,308 1,718,542 1,203,299 878,474 171,000 1,643,858 35,990 351,530 383,561 146,467 4,664,272 146,473 2,434,729 1,127,128 5,361 1,449,783 310,428 463,301 4,450,843 309,441 143,307 532,713 320,652 4,429,538 168,701 55,200 1,296,550 771,451 174,929 327,512 51,045,751 4,995,129 56,040,880 Country/State International Argentina Australia Austria Belgium Brazil Chile China Mainland (including China-Taiwan and China-Macau S.A.R.) China - Hong Kong S.A.R. Colombia Croatia Cyprus Czech Republic Denmark England Estonia Finland France Germany Greece 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 49 1 4 43 11 42 9 19 — 1 9 3 54 1 3 33 15 4 7 93 2 6 1 2 8 10 9 6 2 5 3 10 20 9 4 2 4 3 19 13 31 6 8 1 9 4 225,334 3,271,802 3,300 202,106 2,961,225 420,084 1,197,112 796,630 647,054 — 27,986 187,042 161,361 2,777,858 38,861 132,352 2,342,557 705,726 291,273 350,898 2,819,427 80,988 157,153 24,768 60,543 437,335 475,341 670,006 413,959 55,310 199,219 60,652 277,482 760,901 477,686 155,211 75,217 239,060 133,567 468,792 420,916 691,795 759,793 255,580 91,191 706,321 50,233 5 2 1 1 7 7 1 — — 1 2 — — 26 — — 12 2 — — — — 1 3 — — — — 8 3 — — — 10 — — — 3 — 3 — — — 6 — — 2 — — 469,748 33,845 30,000 104,391 324,655 260,147 20,518 — — 36,447 43,648 — — 1,615,623 — — 936,486 93,226 — — — 37,674 158,558 — — — 585,885 102,199 — — — 433,770 — — — 136,378 — 345,056 — — — 203,000 — — 105,487 — — 9 51 2 5 50 18 43 9 19 1 3 9 3 80 1 3 45 17 4 7 93 3 9 1 2 8 18 12 6 2 5 13 10 20 9 7 2 7 3 19 13 37 6 8 3 9 4 695,082 3,305,647 33,300 306,497 3,285,880 680,231 1,217,630 796,630 647,054 36,447 71,634 187,042 161,361 4,393,481 38,861 132,352 3,279,043 798,952 291,273 350,898 2,819,427 118,662 315,711 24,768 60,543 437,335 1,061,226 772,205 413,959 55,310 199,219 494,422 277,482 760,901 477,686 291,589 75,217 584,116 133,567 468,792 420,916 894,795 759,793 255,580 196,678 706,321 50,233 602 1,140 27,759,007 60,991,952 106 312 6,076,741 28,884,676 708 1,452 33,835,748 89,876,628 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. 23 Our Total Building Utilization and Total Racking Utilization by region as of December 31, 2018 for our 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% 83% 86% 89% 85% 90% 91% 90% 96% 91% 75% 50% 74% 77% 69% 83% 73% 82% 81% 81% ______________________________________________________________ (1) Total Building Utilization and Total Racking Utilization for our data management business as of December 31, 2018 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 as a lessee. 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. _______________________________________________________________________________ The following table sets forth a summary of the lease expirations for leases in place related to our data center business, for which we are the lessor, as of December 31, 2018. The information set forth in the table assumes that tenants exercise no renewal options and all early termination rights. Year 2019 2020 2021 2022 2023 2024 2025 Thereafter Total Number of Leases Expiring Total Megawatts Expiring Percentage of Total Megawatts Expiring Annualized Total Contract Rent Expiring (In thousands) Percentage of Total Contract Value Annualized Rent 609 292 224 78 61 22 10 15 1,311 18.5 14.5 20.5 3.3 7.6 5.6 4.4 23.9 98.3 18.8% $ 14.8% 20.9% 3.4% 7.7% 5.7% 4.4% 24.3% 62,363 42,380 50,205 9,231 16,222 12,196 11,345 35,340 100.0% $ 239,282 26.1% 17.7% 21.0% 3.8% 6.8% 5.1% 4.7% 14.8% 100.0% 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. 24 PART II Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our common stock is traded on the NYSE under the symbol "IRM". The closing price of our common stock on the NYSE on February 8, 2019 was $36.51. As of February 8, 2019, there were 9,276 holders of record of our common stock. Prior to August 2018, our shares of common stock also traded on the Australian Securities Exchange (“ASX”) in the form of CHESS Depositary Interests (“CDIs”), each CDI representing a beneficial interest in one share of our common stock. At our request, our CDIs were suspended from quotation on August 13, 2018 and on August 17, 2018 our CDIs were removed from the official list of ASX. See Note 12 to Notes to Consolidated Financial Statements included in this Annual Report for additional information on dividends declared on our common stock. 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, which may include acquisitions and investments, including acquisitions and investments in our data center business, 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 year 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. During the quarter ended December 31, 2018, there were no shares of common stock sold under the At The Market (ATM) Equity Program. During the year ended December 31, 2018, under the At The Market (ATM) Equity Program, we sold an aggregate of 273,486 shares of common stock for gross proceeds of approximately $8.8 million, generating net proceeds of $8.7 million, after deducting commissions of $0.1 million. As of December 31, 2018, the remaining aggregate sale price of shares of our common stock available for distribution under the At The Market (ATM) Equity Program was approximately $431.2 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. 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. Unregistered Sales of Equity Securities and Use of Proceeds We did not sell any unregistered equity securities during the three months ended December 31, 2018, nor did we repurchase any shares of our common stock during the three months ended December 31, 2018. 25 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, 2014 2015 2016(1) 2017 2018(2)(3) (In thousands) $1,860,243 1,257,450 $1,837,897 1,170,079 $2,142,905 1,368,548 $2,377,557 1,468,021 $2,622,455 1,603,306 3,117,693 3,007,976 3,511,453 3,845,578 4,225,761 Cost of sales (excluding depreciation and amortization) 1,344,636 1,290,025 1,567,777 1,685,318 1,801,582 Selling, general and administrative Depreciation and amortization Intangible impairments 869,572 353,143 — 844,960 345,464 — 988,332 452,326 984,965 1,038,975 522,376 639,514 — 3,011 — Loss (gain) on disposal/write-down of property, plant and equipment (excluding real estate), net 1,065 3,000 1,412 799 Total Operating Expenses 2,568,416 2,483,449 3,009,847 3,196,469 Operating Income Interest Expense, Net Other Expense (Income), Net 549,277 260,717 65,187 524,527 263,871 98,590 501,606 310,662 44,300 649,109 353,575 79,429 (9,818) 3,470,253 755,508 409,289 (11,692) Income from Continuing Operations Before Provision (Benefit) for Income Taxes and Gain on Sale of Real Estate (Benefit) Provision for Income Taxes Gain on Sale of Real Estate, Net of Tax Income from Continuing Operations (Loss) Income from Discontinued Operations, Net of Tax Net Income Less: Net Income Attributable to Noncontrolling Interests Net Income Attributable to Iron Mountain Incorporated (footnotes follow) 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) 185,432 357,911 36,263 (55,328) 376,976 (12,427) 364,549 2,627 $ 326,119 1,962 $ 123,241 2,409 $ 104,824 1,611 $ 183,821 1,198 $ 363,351 26 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 Weighted Average Common Shares Outstanding—Basic Weighted Average Common Shares Outstanding—Diluted Dividends Declared per Common Share (footnotes follow) $ $ $ $ $ Year Ended December 31, 2014 2015 2016(1) 2017 2018(2)(3) (In thousands, except per share data) 1.68 $ — $ $ 1.67 0.59 $ — $ $ 0.58 0.41 0.01 0.43 $ 0.71 1.31 $ $ (0.02) $ (0.04) 1.27 $ 0.69 $ 1.67 0.41 0.59 $ — $ $ 210,764 $ — $ $ 246,178 0.58 0.42 0.01 1.66 $ 195,278 $ 0.71 1.31 $ $ (0.02) $ (0.04) 1.27 $ 265,898 $ 285,913 0.69 196,749 $ 5.3713 212,118 $ 1.9100 247,267 $ 2.0427 266,845 $ 2.2706 286,653 $ 2.3753 Other Data: Adjusted EBITDA(4) 2014 2015 2016(1) 2017 2018(2)(3) Year Ended December 31, (In thousands) $ 925,797 $ 920,005 $ 1,087,288 $ 1,260,196 $ 1,435,869 Adjusted EBITDA Margin(4) 29.7% 30.6% 31.0% 32.8% 34.0% (footnotes follow) 2014 2015 2016(1) 2017 2018(2)(3) As of December 31, (In thousands) Consolidated Balance Sheet Data: Cash and Cash Equivalents(5) $ 159,793 $ 128,381 $ 236,484 $ 925,699 $ 165,485 Total Assets 6,523,265 6,350,587 9,486,800 10,972,402 11,852,247 Total Long-Term Debt (including Current Portion of Long-Term Debt) 4,616,454 4,845,678 6,251,181 7,043,271 8,142,823 Redeemable Noncontrolling Interests — — 54,697 91,418 70,532 Total Equity (footnotes follow) 869,955 528,607 1,936,671 2,298,842 1,885,589 _______________________________________________________________________________ (1) The selected financial data above for 2016 includes the results of Recall from May 2, 2016. (2) The selected financial data above for 2018 includes the results of IODC from January 10, 2018. (3) On January 1, 2018, we adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). The selected financial data above for 2018 reflects the adoption of ASU 2014-09. At January 1, 2018, we recognized the cumulative effect of initially applying ASU 2014-09 as an adjustment to the opening balance of (distributions in excess of earnings) earnings in excess of distributions, resulting in a decrease of approximately $30.2 million to stockholders' equity. (4) 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" included in this Annual Report. (5) Includes restricted cash of $33.9 million, $22.2 million and $15.1 million as of December 31, 2014, 2017 and 2018, respectively. 27 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 6 of this Annual Report. Overview 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, the most significant of which include: (1) the handling of records, including the addition of new records, temporary removal of records from storage, refiling of removed records and courier operations, consisting primarily of the pickup and delivery of records upon customer request; (2) destruction services, consisting primarily of secure shredding of sensitive documents and the related sale of recycled paper, the price of which can fluctuate from period to period, and customer termination and permanent removal fees; (3) other services, including the scanning, imaging and document conversion services of active and inactive records and project revenues; (4) consulting services; and (5) cloud-related data protection, preservation, restoration and recovery. Our service revenue growth has been negatively impacted by declining activity rates as stored records are becoming less active. While customers continue to store their records and tapes with us, they are less likely than they have been in the past to retrieve records for research and other purposes, thereby reducing service activity levels. Cost of sales (excluding depreciation and amortization) consists primarily of wages and benefits for field personnel, facility occupancy costs (including rent and utilities), transportation expenses (including vehicle leases and fuel), other product cost of sales and other equipment costs and supplies. Of these, wages and benefits and facility occupancy costs are the most significant. Selling, general and administrative expenses consist primarily of wages and benefits for management, administrative, information technology, sales, account management and marketing personnel, as well as expenses related to communications and data processing, travel, professional fees, bad debts, training, office equipment and supplies. Trends in facility occupancy costs are impacted by the total number of facilities we occupy, the mix of properties we own versus properties we occupy under operating leases, fluctuations in per square foot occupancy costs, and the levels of utilization of these properties. Trends in total wages and benefits in dollars and as a percentage of total consolidated revenue are influenced by changes in headcount and compensation levels, achievement of incentive compensation targets, workforce productivity and variability in costs associated with medical insurance and workers' compensation. The expansion of our international businesses has impacted the major cost of sales components and selling, general and administrative expenses. Our international operations are more labor intensive 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 larger percentage of our consolidated results. Our depreciation and amortization charges result primarily from depreciation related 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, contract fulfillment costs and data center lease-based intangible assets. Both depreciation and amortization are impacted by the timing of acquisitions. 28 Our consolidated revenues and expenses are subject to the net effect of foreign currency translation related to our operations 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 2016 results at the 2017 average exchange rates and the 2017 results at the 2018 average exchange rates. Constant currency growth rates are a non-GAAP measure. The following table is a comparison of underlying average exchange rates of the foreign currencies that had the most significant impact on our United States dollar-reported revenues and expenses: Percentage of United States Dollar-Reported Revenue Average Exchange Rates for the Year Ended December 31, 2017 2018 2017 2018 Percentage Strengthening / (Weakening) of Foreign Currency 4.1% 3.6% 6.4% 6.3% 6.7% 3.7% $ 2.9% $ 6.6% $ 5.9% $ 7.3% $ 0.767 0.313 1.288 0.771 1.130 $ $ $ $ $ 0.748 0.276 1.335 0.772 1.181 (2.5)% (11.8)% 3.6 % 0.1 % 4.5 % Percentage of United States Dollar-Reported Revenue Average Exchange Rates for the Year Ended December 31, 2016 2017 2016 2017 Percentage Strengthening / (Weakening) of Foreign Currency 4.2% 3.2% 6.8% 6.6% 6.1% 4.1% $ 3.6% $ 6.4% $ 6.3% $ 6.7% $ 0.744 0.288 1.356 0.755 1.107 $ $ $ $ $ 0.767 0.313 1.288 0.771 1.130 3.1 % 8.7 % (5.0)% 2.1 % 2.1 % Australian dollar Brazilian real British pound sterling Canadian dollar Euro Australian dollar Brazilian real British pound sterling Canadian dollar Euro The percentage of United States dollar-reported revenues for all other foreign currencies was 11.2%, 12.8% and 12.6% for the years ended December 31, 2016, 2017 and 2018, respectively. Acquisitions a. Recall Acquisition On May 2, 2016, we completed the Recall Transaction. The results of operations of Recall have been included in our consolidated results from May 2, 2016. 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. 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 year ended December 31, 2016. 29 b. IODC Acquisition On January 10, 2018, we completed the IODC Transaction and at the closing of the IODC Transaction, we paid approximately $1,347.0 million. In addition to the amount paid at the closing of the IODC Transaction, there was the potential of $35.0 million in additional payments associated with the execution of future customer contracts through the one-year anniversary of the IODC Transaction, of which approximately $31.0 million is accrued at December 31, 2018. This amount is reported as a third-party commissions asset as a component of Other within Other assets, net, on our Consolidated Balance Sheet at December 31, 2018. See Note 6 to Notes to Consolidated Financial Statements included in this Annual Report for unaudited pro forma results of operations for us and IODC, as if the IODC Transaction was completed on January 1, 2017, for the years ended December 31, 2017 and 2018. Divestments a. Recall Divestments See Note 6 to Notes to Consolidated Financial Statements included in this Annual Report for information regarding divestments we agreed to make in connection with the receipt of regulatory approval of the Recall Transaction. See Note 13 to Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding the presentation of the Divestments (as defined in Note 6 to Notes to Consolidated Financial Statements included in this Annual Report) in our Consolidated Statements of Operations and Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2017 and 2018. 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, 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, 2016 and 2017, respectively, through the sale date. Our businesses in Russia and Ukraine represented approximately $17.5 million and $8.6 million of total revenues for the years ended December 31, 2016 and 2017, respectively. Our businesses in Russia and Ukraine represented approximately $0.3 million and $0.9 million of total (loss) income from continuing operations for the years ended December 31, 2016 and 2017, respectively. 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. 30 c. IMFS Divestment On September 28, 2018, Iron Mountain Fulfillment Services ("IMFS"), a consolidated subsidiary of IMI that operated our fulfillment services business in the United States, sold substantially all of its assets for total consideration of approximately $3.0 million (the "IMFS Divestment"). We have concluded that the IMFS Divestment does not meet the criteria to be reported as discontinued operations in our consolidated financial statements, as our decision to divest this business 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 this business are presented as a component of income (loss) from continuing operations in our Consolidated Statements of Operations for the years ended December 31, 2016, 2017 and 2018 and the cash flows associated with this business are presented as a component of cash flows from continuing operations in our Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2017 and 2018 through the sale date. The fair value of the consideration received as a result of the IMFS Divestment approximated the carrying value of IMFS and, therefore, during the third quarter of 2018, we recorded an insignificant loss in connection with the IMFS Divestment to Other expense (income), net. Our IMFS business represented approximately $23.8 million, $22.3 million and $20.2 million of total revenues for the years ended December 2016, 2017 and 2018, respectively. Our IMFS business represented approximately $2.7 million, $2.1 million and $1.6 million of total income from continuing operations for the years ended December 31, 2016, 2017 and 2018, respectively. Revenues for the year ended December 31, 2018 reflect the impact of the adoption of ASU 2014-09 whereas revenues for the years ended December 31, 2016 and 2017 do not. Significant Acquisition Costs We currently estimate total acquisition and integration expenditures associated with the Recall Transaction and acquisition expenditures associated with the IODC Transaction to be approximately $405.0 million, the substantial majority of which was incurred prior to the end of 2018. This amount consists of operating expenditures associated with (1) the Recall Transaction, including: (i) advisory and professional fees to complete the Recall Transaction; (ii) 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 (iii) costs to integrate Recall with our existing operations, including moving, severance, facility upgrade, REIT integration 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; and (2) the advisory and professional fees to complete the IODC Transaction (collectively, "Significant Acquisition Costs"). From January 1, 2015 through December 31, 2018, we have incurred cumulative operating and capital expenditures associated with the Recall Transaction and the IODC Transaction of $388.1 million, including $314.5 million of Significant Acquisition Costs and $73.6 million of capital expenditures. See Note 14 to Notes to Consolidated Financial Statements included in this Annual Report for more information on Significant Acquisition Costs, including costs recorded by segment as well as recorded between cost of sales and selling, general and administrative expenses. Adoption of ASU 2014-09, Revenue from Contracts with Customers In May 2014, the Financial Accounting Standards Board ("FASB") issued 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. We adopted ASU 2014-09 as of January 1, 2018 using the modified retrospective method for all of our customer contracts, whereby the cumulative effect of applying ASU 2014-09 is recognized at the date of initial application. See Note 2.l. to Notes to Consolidated Financial Statements included in this Annual Report for information on the impact to opening balance of (distributions in excess of earnings) earnings in excess of distributions on the Consolidated Balance Sheet. As a result of the adoption of ASU 2014-09, Adjusted EBITDA for the year ended December 31, 2018 increased by approximately $25.3 million, compared to the prior year period. The adoption of ASU 2014-09 did not have a material impact on Adjusted EPS, FFO (Nareit) or FFO (Normalized) for the year ended December 31, 2018 compared to the prior year period. The revenues for the year ended December 31, 2018 reflect a net $14.2 million, reclassification of certain components of storage rental revenues to service revenues associated with the adoption of ASU 2014-09. 31  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) (gain) loss 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) Significant Acquisition 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): Year Ended December 31, 2014 2015 2016 2017 2018(3) Income (Loss) from Continuing Operations $ 328,955 $ 125,203 $ 103,880 $ 191,723 $ 376,976 Add/(Deduct): Gain on Sale of Real Estate, Net of Tax(1) (Benefit) Provision 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 Significant Acquisition Costs REIT Costs(2) Adjusted EBITDA (8,307) (97,275) 65,187 (850) 37,713 98,590 (2,180) 44,944 44,300 (1,565) 25,947 79,429 260,717 263,871 310,662 353,575 1,065 3,000 1,412 799 353,143 345,464 452,326 522,376 — — — — 47,014 131,944 3,011 84,901 (55,328) 36,263 (11,692) 409,289 (9,818) 639,514 — 50,665 22,312 $ 925,797 — $ 920,005 — $1,087,288 — $1,260,196 — $1,435,869 _______________________________________________________________________________ (1) Tax expense associated with the gain on sale of real estate for the years ended December 31, 2014, 2015, 2016, 2017 and 2018 was $2.2 million, $0.2 million, $0.1 million, $0.0 million and $8.5 million, respectively. (2) Includes costs associated with our conversion to a REIT, excluding REIT compliance costs beginning January 1, 2014 ("REIT Costs"). (3) On January 1, 2018, we adopted ASU 2014-09. For information regarding the impact of the adoption of ASU 2014-09 on our consolidated financial statements, see the Revenue Recognition section of Critical Accounting Policies included in Management's Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report. 32 Adjusted EPS Adjusted EPS is defined as reported earnings per share fully diluted from continuing operations excluding: (1) (gain) loss on disposal/write-down of property, plant and equipment (excluding real estate), net; (2) gain on sale of real estate, net of tax; (3) intangible impairments; (4) other expense (income), net; (5) Significant Acquisition 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, 2014 2015 2016 2017 2018 Reported EPS—Fully Diluted from Continuing Operations $ 1.67 $ 0.59 $ 0.41 $ 0.71 $ 1.31 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 Significant Acquisition Costs REIT Costs Tax Impact of Reconciling Items and Discrete Tax Items(1) Adjusted EPS—Fully Diluted from Continuing Operations(2) $ — (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 $ — (0.19) (0.04) (0.03) — 0.18 — (0.12) 1.10 _______________________________________________________________________________ (1) The difference between our effective tax rate and our structural tax rate (or adjusted effective tax rate) for the years ended December 31, 2014, 2015, 2016, 2017 and 2018 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, 2014, 2015, 2016, 2017 and 2018 was 14.4%, 16.8%, 18.5%, 19.7% and 18.2%, respectively. (2) Columns may not foot due to rounding. 33 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, gains on sale of real estate, net of tax and amortization of data center leased-based intangibles ("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 (loss). Although Nareit has published a definition of FFO, modifications to FFO (Nareit) are common among REITs as companies seek to provide financial measures that most meaningfully reflect their particular business. Our definition of FFO (Normalized) excludes certain items included in FFO (Nareit) that we believe are not indicative of our core operating results, specifically: (1) (gain) loss on disposal/write-down of property, plant and equipment (excluding real estate), net; (2) intangible impairments; (3) other expense (income), net; (4) real estate capital lease depreciation; (5) Significant Acquisition Costs; (6) REIT Costs; (7) the tax impact of reconciling items and discrete tax items; (8) loss (income) from discontinued operations, net of tax; and (9) loss (gain) on sale of discontinued operations, net of tax. In December 2018, Nareit issued a white paper that provided clarified guidance on the calculation of FFO (Nareit). The calculations below reflect the clarified guidance provided in the Nareit white paper. All previously reported periods have been restated to conform to the current presentation. 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) Data Center Lease-Based Intangible Assets Amortization(3) FFO (Nareit) Add/(Deduct): Loss (Gain) on Disposal/Write-Down of Property, Plant and Equipment (Excluding Real Estate), Net Other Expense (Income), Net(4) Real Estate Capital Lease Depreciation Significant Acquisition Costs REIT Costs Intangible Impairments Tax Impact of Reconciling Items and Discrete Tax Items(5) Loss (Income) from Discontinued Operations, Net of Tax(6) FFO (Normalized) Year Ended December 31, 2014 2015 2016 2017 2018 $ 328,746 $ 125,203 $ 107,233 $ 185,432 $ 364,549 177,754 (8,307) 171,640 (850) 218,644 (2,180) 247,792 (1,565) 284,804 (55,328) — — — 643 498,193 295,993 323,697 432,302 43,061 637,086 1,065 65,187 6,416 — 22,312 — 3,000 98,590 7,160 47,014 — — 1,412 44,300 7,614 131,944 — — 799 79,429 11,495 84,901 — 3,011 (9,818) (11,692) 13,650 50,665 — — (142,194) (14,480) (15,019) (49,865) (34,222) 209 $ 451,188 — $ 437,277 (3,353) $ 490,595 6,291 $ 568,363 12,427 $ 658,096 _______________________________________________________________________________ (1) Includes depreciation expense related to real estate assets (land improvements, buildings, building improvements, leasehold improvements and racking), excluding depreciation related to real estate capital lease. (2) Tax expense associated with the gain on sale of real estate for the years ended December 31, 2014, 2015, 2016, 2017 and 2018 was $2.2 million, $0.2 million, $0.1 million, $0.0 million and $8.5 million, respectively. (3) Includes amortization expense for Data Center In-Place Lease Intangible Assets and Data Center Tenant Relationship Intangible Assets as defined in Note 2.i. to Notes to Consolidated Financial Statements included in this Annual Report. 34 (4) Includes foreign currency transaction losses (gains), net of $58.3 million, $70.9 million, $20.4 million, $43.2 million and $(15.6) million for the years ended December 31, 2014, 2015, 2016, 2017 and 2018, respectively. See Note 2.u. to Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding the components of Other expense (income), net. (5) 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, $(38.3) million and $(27.8) million for the years ended December 31, 2014, 2015, 2016, 2017 and 2018, respectively. (6) Net of tax provision (benefit) of $0.0 million, $0.0 million, $0.8 million, $(1.8) million and $(0.1) million for the years ended December 31, 2014, 2015, 2016, 2017 and 2018, respectively. 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 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 revenues for the year ended December 31, 2018, have historically not been significant. The performance obligation is a series of distinct services (as determined for purposes of ASU 2014-09, a “series”) that have the same pattern of transfer to the customer that is satisfied over time. For those contracts that qualify as a series, we have a right to consideration from the customer in an amount that corresponds directly with the value of the underlying performance obligation transferred to the customer to date. This concept is known as "right to invoice" and we are applying the "right to invoice" practical expedient to all revenues, with the exception of storage revenues in our data center business. For all of our businesses, with the exception of the storage component of our data center business, each purchasing decision is fully in the control of the customer and, therefore, consideration beyond the current reporting period is variable and allocated to the specific period, which is consistent with the practical expedient described above. Our data center business features storage rental provided to the customer at contractually specified rates over a fixed contractual period. The storage rental revenue related to the storage component of our data center business is recognized on a straight-line basis over the contract term. The revenue related to the service component of our data center business is recognized in the period the data center access or related services are provided. The costs associated with the initial movement of customer records into physical storage and certain commissions are considered costs to obtain or fulfill customer contracts (“Contract Fulfillment Costs”). See Note 2.l. to Notes to Consolidated Financial Statements included in this Annual Report for information on each of the Contract Fulfillment Costs recognized under ASU 2014-09. 35 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 ASU 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 acquisitions of a business 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 data center lease-based intangible assets), property, plant and equipment (primarily building, building improvements, leasehold improvements, data center infrastructure 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. As it relates to our data center acquisitions, the fair values of the net assets acquired requires management's judgment and often involves the use of assumptions with respect to (i) certain economic costs (as described more fully in Note 2.i. to Notes to Consolidated Financial Statements included in this Annual Report) avoided by acquiring a data center operation with active tenants that would have otherwise been incurred if the data center operation was purchased vacant, (ii) market rental rates and (iii) expectations of lease renewals and extensions. Due to the inherent uncertainty of future events, actual values of net assets acquired could be different from our estimated fair values and could have a material impact on our financial statements. Of the net assets acquired in our acquisitions, the fair value of owned buildings, including building improvements, customer relationship and data center 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, including building improvements, customer relationship and lease-based intangible assets and market rental rates for acquired operating leases. For each of the significant acquisitions in our data center business that were completed in 2018, we have engaged third parties to assist us in calculating the fair value of the acquired assets, including lease-based intangible assets. 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, including building improvements, and market rental rates for acquired operating leases. When not using third party appraisals of the fair value of acquired net assets, the fair value of acquired customer relationship intangible assets, above and below market operating leases, 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 assets, which requires a significant amount of judgment by management, including estimating expected lives of the relationships, expected future cash flows and discount rates. We determine the fair value of tangible data center assets using an estimated replacement cost at the date of acquisition, then discounting for age, economic and functional obsolescence. 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. Total property, plant and equipment acquired in our 2018 acquisitions was approximately $1,088.9 million, the significant majority of which we engaged with a third party to assist us in calculating the fair value. 36 Impairment of Tangible and Intangible Assets Assets subject to depreciation or amortization: We review long-lived assets and all finite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. Examples of events or circumstances that may be indicative of impairment include, but are not limited to: • • • • • • A significant decrease in the market price of an asset; A significant change in the extent or manner in which a long-lived asset is being used or in its physical condition; A significant adverse change in legal factors or in the business climate that could affect the value of the asset; An accumulation of costs significantly greater than the amount originally expected for the acquisition or construction of an asset;   A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset; and A current expectation that, more likely than not, an asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. If events indicate the carrying value of such assets may not be recoverable, recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to their carrying amount. The operations are generally distinguished by the business segment and geographic region in which they operate. If it is determined that we are unable to recover the carrying amount of the assets, the long-lived assets are written down, on a pro rata basis, to fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets. Goodwill and other indefinite-lived intangible assets not subject to amortization: Goodwill and intangible assets with indefinite lives are not amortized but are reviewed annually for impairment, or more frequently if impairment indicators arise. Other than goodwill, we currently have no intangible assets that have indefinite lives and which are not amortized. We have selected October 1 as our annual goodwill impairment review date. We have performed our annual goodwill impairment review as of October 1, 2016, 2017 and 2018. We concluded that as of October 1, 2016 and October 1, 2018, goodwill was not impaired. As of October 1, 2017, we determined that the fair value of the 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 full write-off of all goodwill associated with this reporting unit. We concluded that the goodwill associated with each of our other reporting unit was not impaired as of October 1, 2017. Our reporting units at which level we performed our goodwill impairment analysis as of October 1, 2018 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; (6) Entertainment Services; (7) Western Europe; (8) Northern/Eastern Europe and Middle East and India ("NEE and MEI"); (9) Latin America; (10) Australia, New Zealand and South Africa ("ANZ SA"); and (11) Asia. See Note 2.h. to Notes to Consolidated Financial Statements included in this Annual Report for a description of our reporting units. 37   Based on our goodwill impairment analysis as of October 1, 2018, our North American Records and Information Management, North American Data Management, Fine Arts, Western Europe, NEE and MEI, Latin America, ANZ SA, and Asia reporting units had estimated fair values that exceeded their carrying values by greater than 20%. These reporting units represent approximately $3,980.8 million, or 89.6%, of our consolidated goodwill balance at December 31, 2018. Our Consumer Storage reporting unit as of December 31, 2018 does not have goodwill. Our Global Data Center and Entertainment Services reporting units had estimated fair values that exceeded their carrying values by less than 20%. These reporting units represent approximately $460.2 million, or 10.4%, of our consolidated goodwill balance at December 31, 2018. The following is a summary of the Global Data Center and Entertainment Services 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, 2018: Reporting Unit Goodwill balance at October 1, 2018 Percentage by which the fair value of the reporting unit exceeded the reporting unit carrying value as of October 1, 2018 Key assumptions in the fair value of reporting unit measurement as of October 1, 2018 Average annual contribution margin used in discounted cash flow Average annual capital expenditures as percentage of revenue(1) Terminal growth rate (2) Discount rate Global Data Center $ 454,329 Entertainment Services 37,370 8.8% 18.4% 10.0% 13.0% 50.2% 32.7% 36.1% 13.5% 3.0% 0.8% _______________________________________________________________________________ (1) For purposes of our goodwill impairment analysis, the term "capital expenditures" includes both growth investment and recurring capital expenditures. (2) Terminal growth rates are applied in year ten of our discounted cash flow analysis. 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, 2018. 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 growth from existing customers, (ii) sales to new customers, (iii) increased market penetration and (iv) accurately timing the capital investments related to expansions. Our Global Data Center business operates in eight markets in the United States and three international markets. We provide mission-critical data centers that are designed and operated to protect and ensure the continued operation of IT infrastructure for our customers. Data centers are highly specialized and secure assets that serve as centralized repositories of server, storage and network equipment. They are capital intensive and designed to provide the space, power, cooling and network connectivity necessary to efficiently operate mission-critical IT equipment. The demand for data center infrastructure is being driven by many factors, but most importantly by significant growth in data as well as an increased demand for outsourcing. In order to attract and retain customers, as well as sustain growth in our existing and new markets, we must have the capability to tailor our facilities to meet the customers’ needs. This may include expansion in an existing data center, acquisition of new facilities or land for development. Our estimate of fair value reflects the expected growth in each of our data center markets along with the corresponding capital investments required to meet demand. The business is primarily comprised of acquisitions completed in late 2017 and 2018; therefore, we would expect that the fair value of this reporting unit will closely approximate its carrying value. The Entertainment Services business operates in a growing, but specialized, global industry influenced by fluctuation and innovation in content production and media storage needs in the studios, sports and marketing industries. It is expected that the growing consumer demand for new content will continue to drive the need for secure storage of digital media, while the rise of streaming media and the proliferation of platforms and formats will drive the need for services associated with the preservation, conversion and restoration of historical content and master film as archives are reviewed, indexed and discovered. Taken together, we believe these factors will result in continued growth of the entertainment storage industry. Our estimate of fair value reflects such growth potential and the corresponding capital needs. 38 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 regulatory 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, 2018, no factors were identified that would alter our October 1, 2018 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 2018, as a result of changes in the management of our Information Governance and Digital Solutions business in Sweden, we reassessed the composition of our reportable operating segments (see Note 9 to Notes to Consolidated Financial Statements included in this Annual Report for a description of our reportable operating segments). As a result of this reassessment, we determined that our Information Governance and Digital Solutions business in Sweden (which was previously managed as a component of our Western Europe reporting unit) is now being managed in conjunction with our businesses included in our NEE and MEI reporting unit, which already included the remainder of our business in Sweden. We concluded that the goodwill associated with our Western Europe and NEE and MEI reporting units was not impaired following this change in reporting units. 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. 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, 2018. With respect to the North American Records and Information Management, North American Data Management, Fine Arts, Western Europe, NEE and MEI, Latin America, ANZ SA and Asia reporting units as of October 1, 2018, we noted that, based on the estimated fair value of these reporting units determined as of October 1, 2018, (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, 2018 by approximately 8.5% to 10.4% but would not, however, have resulted in the carrying value of any of these reporting units with goodwill exceeding their estimated fair value; and (ii) a hypothetical increase of 100 basis points in the discount rate, with all other assumptions unchanged, would have decreased the estimated fair value of these reporting units as of October 1, 2018 by a range of approximately 6.2% to 8.8% 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 Global Data Center and Entertainment Services reporting units, we noted that, as of October 1, 2018, 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. 39 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. 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 and the IODC 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. At December 31, 2018, we have federal net operating loss carryforwards of $163.0 million available to reduce future federal taxable income, the majority of which expire from 2023 through 2037. Of the $163.0 million, we expect to utilize $49.4 million and realize a federal tax benefit of $10.4 million. A majority of the net operating loss carryforwards and federal tax benefit expected to be realized were generated by the IODC Transaction. 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 2019 through 2038, of which an insignificant state tax benefit is expected to be realized. We have assets for foreign net operating losses of $82.5 million, with various expiration dates (and in some cases no expiration date), subject to a valuation allowance of approximately 67%. If actual results differ unfavorably from certain of our estimates used, we may not be able to realize all or part of our net deferred income tax assets and additional valuation allowances may be required. Although we believe our estimates are reasonable, no assurance can be given that our estimates reflected in the tax provisions and accruals will equal our actual results. These differences could have a material impact on our income tax provision and operating results in the period in which such determination is made. The evaluation of an uncertain tax position is a two-step process. The first step is a recognition process whereby we determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The second step is a measurement process whereby a tax position that meets the more likely than not recognition threshold is calculated to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. We are subject to income taxes in the United States and numerous foreign jurisdictions. We are subject to examination by various tax authorities in jurisdictions in which we have business operations or a taxable presence. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. As of December 31, 2017 and 2018, we had approximately $38.5 million and $35.3 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. 40 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 $249.2 million as of December 31, 2018. 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). Tax Reform On December 22, 2017, the Tax Reform Legislation was enacted into law in the United States. The Tax Reform Legislation 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. One of the primary components of the Tax Reform Legislation was a reduction in the United States corporate federal income tax rate from 35% to 21% for taxable years beginning after December 31, 2017. a. Deemed Repatriation Transition Tax The Tax Reform Legislation imposed 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 varied 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 would result in a Deemed Repatriation Transition Tax on Undistributed E&P of 15.5% if held in cash and liquid assets and 8.0% 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. We have completed our analysis and determined that the amount of Undistributed E&P deemed repatriated under the Tax Reform Legislation in our taxable year ending December 31, 2017 was $160.0 million (the “Undistributed E&P”). We opted to include the full amount of Undistributed E&P in our 2017 taxable income, rather than spread it over eight years (as permitted by the Tax Reform Legislation). After applying the participation deduction, included in our REIT taxable income for 2017 was approximately $70.9 million related to the deemed repatriation of Undistributed E&P. b. Global Intangible Low-Taxed Income For taxable years beginning after December 31, 2017, the Tax Reform Legislation introduced 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”). The GILTI provisions created 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 shareholder’s pro rata portion of the income of its foreign subsidiaries over the net deemed tangible income return of such subsidiaries. The GILTI provisions also provide for certain deductions against the inclusion of GILTI in taxable income; however, REITs are not eligible for such deductions. Therefore, 100% of our GILTI is included in our taxable income and will increase the required minimum distribution to our stockholders. We estimate the amount of the GILTI in our taxable income for the year ending December 31, 2018 to be approximately $20.8 million. We have adopted a policy such that we will recognize no deferred taxes related to basis differences resulting from GILTI. 41 The Internal Revenue Service recently issued guidance clarifying that GILTI included in a REIT's taxable income is qualifying income for purposes of the 95% REIT gross income test that we are required to satisfy. We do not expect the GILTI provision will impact our provision for income taxes. However, the GILTI provision may impact the amount and characterization of dividends that we expect to pay in future taxable years. c. 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 for taxable years beginning after December 31, 2017 and before January 1, 2022, and is defined similar to earnings before interest and taxes for taxable years beginning after December 31, 2021. The Interest Deduction Limitation does not apply to taxpayers that qualify, and make an election, to be treated as an “electing real property trade or business”. As a REIT, IMI, including all of our QRSs, expects to make an election to be treated as an “electing real property trade or business” beginning in our taxable year ended December 31, 2018. As such, the interest deduction limitation will not apply to IMI or our QRSs; however, IMI will be required to utilize the alternative depreciation system for its real property. This election will not have a material impact on our consolidated financial statements. We do not generally believe that our TRSs are eligible for treatment as “electing real property trades or businesses”. 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. 42 Results of Operations Comparison of Year Ended December 31, 2018 to Year Ended December 31, 2017 and Comparison of Year Ended December 31, 2017 to Year Ended December 31, 2016 (in thousands): Year Ended December 31, 2017 2018 Dollar Change Percentage Change $ 3,845,578 $ 4,225,761 $ 380,183 Revenues Operating Expenses Operating Income Other Expenses, Net Income from Continuing Operations (Loss) Income from Discontinued Operations, Net of Tax Net Income Net Income Attributable to Noncontrolling Interests Net Income Attributable to Iron Mountain Incorporated $ $ Adjusted EBITDA(1) Adjusted EBITDA Margin(1) Revenues Operating Expenses Operating Income Other Expenses, Net Income from Continuing Operations 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) 3,196,469 3,470,253 649,109 457,386 191,723 (6,291) 185,432 1,611 183,821 1,260,196 $ $ 755,508 378,532 376,976 (12,427) 364,549 1,198 363,351 1,435,869 32.8% 34.0% Year Ended December 31, 2016 3,511,453 3,009,847 501,606 397,726 103,880 3,353 107,233 2,409 104,824 1,087,288 2017 3,845,578 3,196,469 649,109 457,386 191,723 (6,291) 185,432 1,611 183,821 1,260,196 $ $ $ 31.0% 32.8% $ $ $ $ $ 273,784 106,399 (78,854) 185,253 (6,136) 179,117 (413) 179,530 175,673 9.9 % 8.6 % 16.4 % (17.2)% 96.6 % 97.5 % 96.6 % (25.6)% 97.7 % 13.9 % Dollar Change Percentage Change 334,125 186,622 147,503 59,660 87,843 (9,644) 78,199 (798) 78,997 172,908 9.5 % 6.2 % 29.4 % 15.0 % 84.6 % (287.6)% 72.9 % (33.1)% 75.4 % 15.9 % _______________________________________________________________________________ (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. 43 REVENUES Storage Rental Service Total Revenues Storage Rental Service Total Revenues Year Ended December 31, 2017 2,377,557 1,468,021 3,845,578 $ $ 2018 2,622,455 1,603,306 4,225,761 Year Ended December 31, 2016 2,142,905 1,368,548 3,511,453 $ $ 2017 2,377,557 1,468,021 3,845,578 Dollar Change 244,898 135,285 380,183 Dollar Change 234,652 99,473 334,125 $ $ $ $ $ $ $ $ Percentage Change Actual Constant Currency(1) Internal Growth(2) 10.3% 9.2% 9.9% 10.6% 9.7% 10.2% 2.4% 5.4% 3.6% 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 % _______________________________________________________________________________ (1) Constant currency growth rates are calculated by translating the 2017 results at the 2018 average exchange rates and the 2016 results at the 2017 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, foreign currency exchange rate fluctuations and the impact of the adoption of ASU 2014-09. 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, 2018, the increase in reported consolidated storage revenue was driven by the favorable impact of acquisitions/divestitures and consolidated internal storage rental revenue growth, partially offset by unfavorable fluctuations in foreign currency exchange rates. The impact of acquisitions/divestitures, net of the impact of the adoption of ASU 2014-09, contributed 8.2% to the reported storage rental revenue growth rates for the year ended December 31, 2018 compared to the prior year period, primarily driven by acquisitions in our Global Data Center Business segment. Internal storage rental revenue growth of 2.4% in the year ended December 31, 2018 compared to the prior year period was driven by internal storage rental revenue growth of 1.7% in our North American Records and Information Management Business segment, including results from revenue management, as well as internal storage rental revenue growth of 1.9% and 5.4% in our Western European Business and Other International Business segments, respectively, primarily caused by volume increases and, to a lesser extent, by revenue management in our Western European Business segment. Internal storage rental revenue growth in our North American Data Management Business was negative 0.3% for the year ended December 31, 2018, primarily due to lower storage volume. Excluding the impact of acquisitions/divestitures, global records management net volumes as of December 31, 2018 were flat compared to the ending volume as of December 31, 2017. Including the impact of acquisitions/ divestitures, global records management reported net volumes as of December 31, 2018 increased by 1.0% over the ending volume at December 31, 2017, supported by volume increases of 0.8% and 7.0% in our Western European Business and Other International Business segments, respectively, partially offset by a net volume decrease of 1.4% in our North American Records and Information Management Business segment. Foreign currency exchange rate fluctuations decreased our reported storage rental revenue growth rate for the year ended December 31, 2018 by 0.3%, compared to the prior year period. 44 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 revenue management, 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. Service Revenues In the year ended December 31, 2018, the increase in reported consolidated service revenue was driven by internal service revenue growth and the favorable impact of acquisitions/divestitures, partially offset by unfavorable fluctuations in foreign currency exchange rates. The net impact of acquisitions/divestitures and the adoption of ASU 2014-09 contributed 4.3% to the reported service revenue growth rate for the year ended December 31, 2018, compared to the prior year period. Internal service revenue growth was 5.4% for the year ended December 31, 2018, compared to the prior year period, and was primarily driven by increased secured shredding revenues, in part due to higher recycled paper prices and customer acquisitions, and increased project activity in our North American Records and Information Management Business segment and project activity in our Other International Business and Western European Business segments, partially offset by continued declines in service revenue activity levels in our North American Data Management Business segment, as the storage business in this segment becomes more archival in nature and tape volumes decline. Foreign currency exchange rate fluctuations decreased our reported service revenue growth for the year ended December 31, 2018 by 0.5%, compared to the prior year period. 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. 45 Total Revenues For the reasons stated above, our reported consolidated revenues increased $380.2 million, or 9.9%, to $4,225.8 million for the year ended December 31, 2018 from $3,845.6 million for the year ended December 31, 2017. The net impact of acquisitions/divestitures contributed 6.6% to the reported consolidated revenue growth rate for the year ended December 31, 2018 compared to the prior year period, primarily driven by acquisitions in our Global Data Center Business segment. Consolidated internal revenue growth was 3.6% in the year ended December 31, 2018 compared to the prior year period. Foreign currency exchange rate fluctuations decreased our reported consolidated revenue by 0.3% in the year ended December 31, 2018 compared to the prior year period, primarily due to the weakening of the Australian dollar and Brazilian real against the United States dollar, partially offset by the strengthening of the 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. 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, partially 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. Internal Growth—Eight-Quarter Trend 2017 2018 First Quarter Second Quarter Third Quarter Fourth Quarter First Quarter Second Quarter Third Quarter Fourth Quarter Storage Rental Revenue Service Revenue Total Revenue 3.0% 0.6% 2.0% 4.8 % (1.1)% 2.5 % 3.5 % (0.2)% 2.0 % 4.2 % (0.1)% 2.5 % 3.7% 1.4% 2.8% 1.9% 7.6% 4.1% 2.3% 7.1% 4.1% 1.9% 6.1% 3.5% We expect our consolidated internal storage rental revenue growth rate for 2019 to be approximately 1.75% to 2.5% and our consolidated internal total revenue growth rate to be approximately 2.0% to 2.5%. During the past eight quarters, our internal storage rental revenue growth rate has ranged between 1.9% 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. Conversely, consolidated internal storage rental revenue growth and consolidated total internal revenue growth for the second quarter of 2018 were negatively impacted by the 0.8% and 0.5%, respectively, related to this termination fee. Our internal storage rental revenue growth rates have declined over the past two fiscal years, as internal storage rental revenue growth for full year 2017 and 2018 was 3.9% and 2.4%, respectively. At various points in the economic cycle, internal storage rental revenue growth may be influenced by changes in pricing and volume. In 2018, we experienced modest volume declines in our North American Records and Information Management Business and North American Data Management Business segments, with internal storage rental revenue growth coming primarily from revenue management in these segments and volume growth in our Western European Business and Other International Business segments, although at a slower rate than prior quarters. Within these business segments, we expect these trends to continue into the next few years. 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. The recent increase in internal service revenue growth rates of 7.6%, 7.1% and 6.1% in the second, third and fourth quarters of 2018, respectively, reflects a strong contribution from our secure shredding business, which benefited from higher recycled paper prices, higher destruction activity and customer acquisitions in recent quarters. We do not expect these trends to be as favorable in 2019. 46 OPERATING EXPENSES Cost of Sales Consolidated cost of sales (excluding depreciation and amortization) consists of the following expenses (in thousands): Year Ended December 31, Percentage Change % of Consolidated Revenues 2017 2018 $ 786,314 $ 818,729 $ 581,112 142,184 651,114 158,528 Dollar Change 32,415 70,002 16,344 Actual 4.1 % 12.0 % 11.5 % Constant Currency 2017 2018 4.7 % 20.4% 19.4% 12.5 % 15.1% 15.4% 3.8% 12.2 % 3.7% Percentage Change (Favorable)/ Unfavorable (1.0)% 0.3 % 0.1 % 155,215 165,583 10,368 6.7 % 8.0 % 4.0% 3.9% (0.1)% 20,493 $ 1,685,318 7,628 $ 1,801,582 $ (12,865) 116,264 (62.8)% (63.0)% 0.5% 0.2% 7.5 % 43.8% 42.6% 6.9 % Percentage Change % of Consolidated Revenues (0.3)% (1.2)% Percentage Change (Favorable)/ Unfavorable Year Ended December 31, 2016 2017 $ 756,525 $ 786,314 $ 522,696 132,183 581,112 142,184 Dollar Change Actual Constant Currency 2016 2017 29,789 58,416 10,001 3.9% 11.2% 7.6% 3.2% 21.5% 20.4% 10.4% 14.9% 15.1% 3.7% 6.9% 3.8% (1.1)% 0.2 % (0.1)% 144,410 155,215 10,805 7.5% 6.5% 4.1% 4.0% (0.1)% 11,963 $ 1,567,777 20,493 $ 1,685,318 8,530 $ 117,541 71.3% 7.5% 67.3% 0.3% 0.5% 6.7% 44.6% 43.8% 0.2 % (0.8)% Labor Facilities Transportation Product Cost of Sales and Other Significant Acquisition Costs Total Cost of Sales Labor Facilities Transportation Product Cost of Sales and Other Significant Acquisition Costs Total Cost of Sales Labor Labor expenses decreased to 19.4% of consolidated revenues in the year ended December 31, 2018 compared to 20.4% in the year ended December 31, 2017. The decrease in labor expenses as a percentage of consolidated revenues was primarily driven by a decrease in labor expenses associated with our North American Records and Information Management Business segment as a percentage of consolidated revenues, partially attributable to synergies associated with our acquisition of Recall and cost management initiatives. On a constant dollar basis, labor expenses for the year ended December 31, 2018 increased by $37.1 million, or 4.7%, compared to the prior year period, primarily driven by recent acquisitions. 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 a 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 revenues, 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. 47 Facilities Facilities expenses increased to 15.4% of consolidated revenues in the year ended December 31, 2018 compared to 15.1% in the year ended December 31, 2017. The 30 basis points increase in facilities expenses as a percentage of consolidated revenues was primarily driven by a 115 basis point increase in facilities expenses in our Global Data Center Business segment, primarily driven by an increase in utility costs, which most customers are billed for, supporting power generation as a result of an increase in the number of facilities from our recent acquisitions, partially offset by a 80 basis point decrease in facilities expenses in our North American Records and Information Management Business segment partially attributable to synergies associated with our acquisition of Recall. On a constant dollar basis, facilities expenses for the year ended December 31, 2018 increased by $72.2 million, or 12.5%, compared to the prior year period, primarily driven by recent acquisitions in our Global Data Center Business segment. 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. Transportation Transportation expenses increased to 3.8% of consolidated revenues for the year ended December 31, 2018 compared to 3.7% for the year ended December 31, 2017. The increase in transportation expenses as a percentage of consolidated revenues was driven by higher fuel costs and the impact of our adoption of ASU 2014-09. On a constant dollar basis, transportation expenses for the year ended December 31, 2018 increased by $17.2 million, or 12.2%, compared to the prior year period, primarily driven by increases in third party carrier expenses, in part due to recent acquisitions in our Corporate and Other Business segment, fuel costs and the impact of our adoption of ASU 2014-09. 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. 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 3.9% of consolidated revenues for the year ended December 31, 2018 compared to 4.0% in the year ended December 31, 2017. The decrease in product cost of sales and other as a percentage of revenue was driven by costs associated with project activity growing at a lower rate than revenue, primarily in our North American Records and Information Management Business segment. On a constant dollar basis, product cost of sales and other increased by $12.3 million, or 8.0%, compared to the prior year period, primarily driven by special project costs, in part due to acquisitions in our Global Data Center Business segment. For the year ended December 31, 2017, product cost of sales and other increased by $9.5 million, or 6.5%, on a constant dollar basis compared to the prior year period, primarily driven by our acquisition of Recall. Significant Acquisition Costs Significant Acquisition Costs included in cost of sales were $7.6 million for the year ended December 31, 2018, and primarily consisted of employee severance costs and facility integration costs associated with the Recall acquisition. Significant Acquisition 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. 48 Selling, General and Administrative Expenses Selling, general and administrative expenses consists of the following expenses (in thousands): Year Ended December 31, Percentage Change % of Consolidated Revenues 2017 2018 Dollar Change Actual Constant Currency 2017 2018 Percentage Change (Favorable)/ Unfavorable 520,504 $ 566,406 $ 45,902 8.8 % 9.2 % 13.5% 13.4% (0.1)% 253,117 132,110 14,826 257,306 153,601 18,625 4,189 21,491 3,799 1.7 % 16.3 % 25.6 % 1.6 % 6.6% 6.1% 16.4 % 3.4% 3.6% 29.4 % 0.4% 0.4% (0.5)% 0.2 % — % 64,408 43,037 (21,371) (33.2)% (32.7)% 1.7% 1.0% (0.7)% $ 984,965 $ 1,038,975 $ 54,010 5.5 % 5.8 % 25.6% 24.6% (1.0)% Year Ended December 31, Percentage Change % of Consolidated Revenues 2016 2017 Dollar Change Actual Constant Currency 2016 2017 Percentage Change (Favorable)/ Unfavorable 504,545 $ 520,504 $ 15,959 3.2 % 2.8 % 14.4% 13.5% (0.9)% 238,178 116,923 8,705 253,117 132,110 14,826 14,939 15,187 6,121 6.3 % 13.0 % 70.3 % 6.0 % 6.8% 6.6% 12.8 % 3.3% 3.4% 70.7 % 0.2% 0.4% (0.2)% 0.1 % 0.2 % 119,981 64,408 (55,573) (46.3)% (46.8)% 3.4% 1.7% (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 Significant Acquisition Costs Total Selling, General and Administrative Expenses General and Administrative $ Sales, Marketing & Account Management Information Technology Bad Debt Expense Significant Acquisition Costs Total Selling, General and Administrative Expenses General and Administrative General and administrative expenses decreased to 13.4% of consolidated revenues for the year ended December 31, 2018 compared to 13.5% for the year ended December 31, 2017. The decrease in general and administrative expenses as a percentage of consolidated revenues was driven by a decrease in compensation expense as a percentage of consolidated revenues, partially attributable to synergies associated with our acquisition of Recall, as well as lower professional fees. On a constant dollar basis, general and administrative expenses for the year ended December 31, 2018 increased by $47.6 million, or 9.2%, compared to the prior year period, primarily driven by acquisitions in our Global Data Center Business segment. 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 plan implemented during the third quarter of 2015 that called 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") 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. 49 Sales, Marketing & Account Management Sales, marketing and account management expenses decreased to 6.1% of consolidated revenues for the year ended December 31, 2018 compared to 6.6% for the year ended December 31, 2017. The decrease in sales, marketing and account management expenses as a percentage of consolidated revenues was driven by a decrease in compensation expense, primarily due to the impact of our adoption of ASU 2014-09 related to capitalization of commissions. On a constant dollar basis, sales, marketing and account management expenses for the year ended December 31, 2018 increased by $4.1 million, or 1.6%, compared to the prior year period, primarily driven by recent acquisitions in our Global Data Center Business segment. 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. Information Technology Information technology expenses increased to 3.6% of consolidated revenues for the year ended December 31, 2018 compared to 3.4% for the year ended December 31, 2017. Information technology expenses as a percentage of consolidated revenues reflect an increase in professional fees. On a constant dollar basis, information technology expenses for the year ended December 31, 2018 increased by $21.7 million, or 16.4%, compared to the prior year period, primarily driven by an increase in professional fees. 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. 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, 2018 is 0.4% of consolidated revenues compared to 0.4% for the year ended December 31, 2017. On a constant dollar basis, bad debt expense for the year ended December 31, 2018 increased by $4.2 million, or 29.4%, compared to the prior year period primarily due to higher bad debt expense associated with our North American Records and Information Management Business and North American Data Management Business segments. 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 expense 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. Significant Acquisition Costs Significant Acquisition Costs included in selling, general and administrative expenses were $43.0 million, $64.4 million and $120.0 million for the years ended December 31, 2018, 2017, and 2016, respectively, and primarily consisted of advisory and professional fees and labor costs, as well as severance costs. 50 Depreciation and Amortization Depreciation expense increased $46.4 million, or 11.4%, on a reported dollar basis for the year ended December 31, 2018 compared to the year ended December 31, 2017, primarily due to increased depreciation of property, plant and equipment acquired in the recent acquisitions in our Global Data Center Business segment. 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 $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. Amortization expense increased $70.7 million, or 60.9%, on a reported dollar basis for the year ended December 31, 2018 compared to the year ended December 31, 2017, primarily due to recent acquisitions in our Global Data Center Business segment and, to a lesser extent, the adoption of ASU 2014-09. 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. Gain on Disposal/Write-Down of Property, Plant and Equipment (Excluding Real Estate), Net Consolidated gain on disposal/write-down of property, plant and equipment (excluding real estate), net was $9.8 million for the year ended December 31, 2018 and consisted primarily of gains associated with the involuntary conversion of assets included in a facility that we own in Argentina which was partially destroyed in a fire in 2014, for which we received insurance proceeds in excess of the carrying amount of such assets during the fourth quarter of 2018. OTHER EXPENSES, NET Interest Expense, Net (in thousands) Consolidated interest expense, net increased $51.7 million to $409.3 million for the year ended December 31, 2018 from $353.6 million for the year ended December 31, 2017. 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. The increase in interest expense, net in each of the years ended December 31, 2018 and 2017 compared to the prior year period was the result of higher average debt outstanding during those periods. Our weighted average interest rate was 4.9% and 5.0% at December 31, 2018 and 2017, 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) Year Ended December 31, 2017 2018 Dollar Change $ 43,248 78,368 (42,187) 79,429 $ $ (15,567) $ (58,815) — (78,368) 46,062 $ (11,692) $ (91,121) 3,875 Year Ended December 31, 2016 2017 $ 20,413 $ 43,248 9,283 14,604 44,300 78,368 (42,187) 79,429 $ $ Dollar Change $ 22,835 69,085 (56,791) $ 35,129 Foreign currency transaction losses, net Debt extinguishment expense Other, net Foreign currency transaction losses, net Debt extinguishment expense Other, net 51 Foreign Currency Transaction Losses We recorded net foreign currency transaction gains of $15.6 million in the year ended December 31, 2018, based on period-end exchange rates. These gains resulted primarily from the impact of changes in the exchange rate of each of the British pound sterling and Canadian dollar against the United States dollar compared to December 31, 2017 on our intercompany balances with and between certain of our subsidiaries and the Euro Notes (as defined below). These gains were partially offset by losses resulting primarily from the impact of changes in the exchange rate of each of the Australian dollar, Brazilian real and the Turkish lira against the United States dollar compared to December 31, 2017 on our intercompany balances with and between certain of our subsidiaries. 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. 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. 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 61/8% CAD Senior 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. 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 13 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. Provision (Benefit) for Income Taxes Our effective tax rates for the years ended December 31, 2016, 2017 and 2018 were 30.6%, 12.0% and 10.1%, 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. On December 22, 2017, the Tax Reform Legislation was enacted into law in the United States. The Tax Reform Legislation amended the Code to reduce tax rates and modify policies, credits and deductions for businesses and individuals. The components of the Tax Reform Legislation are described in detail in Note 7 to Notes to Consolidated Financial Statements included in our Annual Report. One of the primary components of the Tax Reform Legislation was a reduction in the United States corporate federal income tax rate from 35.0% to 21.0% for taxable years beginning after December 31, 2017. 52 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. 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). The primary reconciling items between the current federal statutory tax rate of 21.0% and our overall effective tax rate for the year ended December 31, 2018 were the benefit derived from the dividends paid deduction of $35.2 million, the impact of differences in the tax rates at which our foreign earnings are subject to, resulting in a tax provision of approximately $5.5 million and a discrete tax benefit of approximately $14.0 million associated with the resolution of a tax matter. 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, 2018 was $55.3 million and consisted primarily of the sale of land and buildings in the United Kingdom. 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. 53 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, 2017 2018 Dollar Change Percentage Change Income from Continuing Operations $ 191,723 Income from Continuing Operations as a percentage of Consolidated Revenue 5.0% $ 376,976 $ 185,253 96.6% 8.9% Adjusted EBITDA $1,260,196 $1,435,869 $ 175,673 13.9% Adjusted EBITDA Margin 32.8% 34.0% Year Ended December 31, 2016 2017 Dollar Change Percentage Change Income from Continuing Operations $ 103,880 Income from Continuing Operations as a percentage of Consolidated Revenue 3.0% $ 191,723 $ 87,843 84.6% 5.0% Adjusted EBITDA $1,087,288 $1,260,196 $ 172,908 15.9% Adjusted EBITDA Margin 31.0% 32.8% INCOME (LOSS) FROM DISCONTINUED OPERATIONS (Loss) income from discontinued operations, net of tax was $(12.4) million, $(6.3) million and $3.4 million for the years ended December 31, 2018, 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 $1.2 million, $1.6 million and $2.4 million for the years ended December 31, 2018, 2017 and 2016, respectively. These amounts represent our noncontrolling partners' share of earnings/losses in our majority-owned international subsidiaries that are consolidated in our operating results. Segment Analysis (in thousands) See Note 9 to Notes to Consolidated Financial Statements included in this Annual Report for a description of our reportable operating segments. 54 North American Records and Information Management Business Storage Rental Service Segment Revenue Segment Adjusted EBITDA(1) Year Ended December 31, 2017 2018 $ 1,221,495 828,851 $ 2,050,346 884,158 $ $ 1,222,230 915,551 $ 2,137,781 956,890 $ Segment Adjusted EBITDA Margin(2) 43.1% 44.8% Storage Rental Service Segment Revenue Segment Adjusted EBITDA(1) Year Ended December 31, 2016 2017 $ 1,150,646 780,053 $ 1,930,699 775,717 $ $ 1,221,495 828,851 $ 2,050,346 884,158 $ Percentage Change Dollar Change Actual Constant Currency Internal Growth 735 86,700 87,435 72,732 0.1% 10.5% 4.3% 0.1% 10.4% 4.3% 1.7% 7.8% 4.2% 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% $ $ $ $ $ $ Segment Adjusted EBITDA Margin(2) 40.2% 43.1% _______________________________________________________________________________ (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, 2018, reported revenue in our North American Records and Information Management Business segment increased 4.3% compared to the year ended December 31, 2017, due to internal revenue growth and the favorable net impact of acquisitions and the adoption of ASU 2014-09. Internal revenue growth of 4.2% was primarily the result of internal storage rental revenue growth of 1.7%, driven by revenue management, partially offset by volume decreases, and internal service revenue growth of 7.8% driven by growth in secure shredding revenue, in part due to higher recycled paper prices and customer acquisitions, and increased project and destruction activity. The net impact of acquisitions and the adoption of ASU 2014-09 contributed 0.1% to the reported revenue growth rates in our North American Records and Information Management Business segment for the year ended December 31, 2018, compared to the prior year period. Adjusted EBITDA margin increased 170 basis points during the year ended December 31, 2018 compared to the year ended December 31, 2017, primarily driven by a decrease in wages and benefits as a percentage of segment revenue, partially attributable to synergies associated with our acquisition of Recall, cost management initiatives, the capitalization of certain commissions as a result of our adoption of ASU 2014-09 and the benefit of revenue management. 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 internal storage rental revenue growth of 3.2% in the year ended December 31, 2017, due to revenue management and 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. 55 North American Data Management Business Storage Rental Service Segment Revenue Segment Adjusted EBITDA(1) Segment Adjusted EBITDA Margin(2) Storage Rental Service Segment Revenue Segment Adjusted EBITDA(1) Year Ended December 31, 2017 276,416 125,224 401,640 223,324 2018 273,193 120,800 393,993 213,893 $ $ $ 55.6% 54.3% Year Ended December 31, 2016 264,148 128,666 392,814 224,522 2017 276,416 125,224 401,640 223,324 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ Percentage Change Dollar Change Actual Constant Currency Internal Growth (3,223) (4,424) (7,647) (9,431) (1.2)% (3.5)% (1.9)% (1.2)% (3.5)% (1.9)% (0.3)% (5.4)% (1.9)% 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)% Segment Adjusted EBITDA Margin(2) 57.2% 55.6% _______________________________________________________________________________ (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, 2018, reported revenue in our North American Data Management Business segment decreased 1.9%, compared to the year ended December 31, 2017, due to negative internal revenue growth. The negative internal revenue growth of 1.9% for the year ended December 31, 2018 was primarily attributable to a decline in internal service revenue growth of 5.4% due to continued declines in service revenue activity levels as the business becomes more archival in nature, as well as a decline in internal storage rental revenue of 0.3%, primarily attributable to volume decreases partially offset by the impact of revenue management. Adjusted EBITDA margin decreased 130 basis points during the year ended December 31, 2018 compared to the year ended December 31, 2017, primarily associated with investments in product management and development, as well as lower revenue not being offset by fixed costs. 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. 56 Western European Business Storage Rental Service Segment Revenue Segment Adjusted EBITDA(1) Segment Adjusted EBITDA Margin(2) Storage Rental Service Segment Revenue Segment Adjusted EBITDA(1) Segment Adjusted EBITDA Margin(2) Year Ended December 31, 2017 303,205 187,541 490,746 159,142 2018 325,624 195,931 521,555 180,172 $ $ $ 32.4% 34.5% Year Ended December 31, 2016 275,659 171,698 447,357 136,985 2017 303,205 187,541 490,746 159,142 $ $ $ 30.6% 32.4% $ $ $ $ $ $ $ $ $ $ $ $ Percentage Change Dollar Change Actual Constant Currency Internal Growth 22,419 8,390 30,809 21,030 7.4% 4.5% 6.3% 3.4% 0.4% 2.2% 1.9% 1.1% 1.6% Percentage Change Dollar Change Actual Constant Currency Internal Growth 27,546 15,843 43,389 22,157 10.0% 9.2% 9.7% 11.4% 10.2% 10.9% 2.3% 1.3% 1.9% _______________________________________________________________________________ (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, 2018, reported revenue in our Western European Business segment increased 6.3%, compared to the year ended December 31, 2017, due to favorable fluctuations in foreign currency exchange rates and internal revenue growth. Internal revenue growth was 1.6%, primarily attributable to internal storage rental revenue growth of 1.9%, primarily associated with volume increases, and to a lesser extent, revenue management and internal service revenue growth of 1.1%, driven by increased project and destruction activity. For the year ended December 31, 2018, foreign currency exchange rate fluctuations increased our reported revenues for the Western European Business segment by 4.1%, compared to the prior year period due to the strengthening of the Euro and British pound sterling against the United States dollar. Adjusted EBITDA margin increased 210 basis points during the year ended December 31, 2018 compared to the year ended December 31, 2017, primarily driven by wages and benefits and transportation expense growing at a lower rate than revenue as a result of synergies associated with our acquisition of Recall, cost management initiatives and the impact of our adoption of ASU 2014-09, partially offset by higher bad debt expense. For the year ended December 31, 2017, reported revenue in our Western European Business segment increased 9.7%, 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 9.0% 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 1.9%, 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 1.2%, compared to the prior year period due to the weakening of the British pound sterling against the United States dollar. Adjusted EBITDA margin increased 180 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. 57 Other International Business Storage Rental Service Segment Revenue Segment Adjusted EBITDA(1) Segment Adjusted EBITDA Margin(2) Storage Rental Service Segment Revenue Segment Adjusted EBITDA(1) Segment Adjusted EBITDA Margin(2) Year Ended December 31, 2017 493,118 302,733 795,851 227,312 2018 512,358 308,975 821,333 243,008 $ $ $ 28.6% 29.6% Year Ended December 31, 2016 393,005 266,365 659,370 169,563 2017 493,118 302,733 795,851 227,312 $ $ $ 25.7% 28.6% $ $ $ $ $ $ Percentage Change Dollar Change Actual Constant Currency Internal Growth $ $ $ $ $ $ 19,240 6,242 25,482 15,696 Dollar Change 100,113 36,368 136,481 57,749 3.9% 2.1% 3.2% 7.8% 6.6% 7.4% 5.4% 5.0% 5.2% Percentage Change Actual Constant Currency Internal Growth 25.5% 13.7% 20.7% 21.9% 10.4% 17.3% 6.6 % (0.6)% 3.7 % _______________________________________________________________________________ (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, 2018, reported revenue in our Other International Business segment increased 3.2% compared to the year ended December 31, 2017, due to internal revenue growth and the favorable impact of acquisitions/ divestitures, partially offset by unfavorable fluctuations in foreign currency exchange rates. Internal revenue growth was 5.2%, supported by 5.4% internal storage rental revenue growth, primarily due to volume increases, and 5.0% internal service revenue growth, primarily due to increased project activity. The net impact of acquisitions/divestitures contributed 2.2% to reported revenue growth for the year ended December 31, 2018, compared to the prior year period. For the year ended December 31, 2018, foreign currency exchange rate fluctuations decreased our reported revenues for the Other International Business segment by 4.2% 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 100 basis points during the year ended December 31, 2018 compared to the year ended December 31, 2017, primarily due to compensation growing at a lower rate than revenue, in part due to cost management initiatives and lower bad debt expense, partially offset by increases in facility maintenance and project costs. For the year ended December 31, 2017, reported revenue in our Other International Business segment increased 20.7% 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 13.6% 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 0.6% 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. 58 Global Data Center Business Storage Rental Service Segment Revenue Segment Adjusted EBITDA(1) Segment Adjusted EBITDA Margin(2) Storage Rental Service Segment Revenue Segment Adjusted EBITDA(1) Segment Adjusted EBITDA Margin(2) Year Ended December 31, 2017 35,839 1,855 37,694 11,275 2018 218,675 10,308 228,983 99,574 $ $ $ 29.9% 43.5% 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% $ $ $ $ $ $ Dollar Change 182,836 8,453 191,289 88,299 Dollar Change 13,813 (368) 13,445 5,063 $ $ $ $ $ $ Percentage Change Actual 510.2% 455.7% 507.5% Constant Currency Internal Growth 510.2% 455.7% 507.5% 8.2% 24.5% 9.0% 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 % _______________________________________________________________________________ (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, 2018, reported revenue in our Global Data Center Business segment increased 507.5% compared to the year ended December 31, 2017, due to the impact of acquisitions. The impact of acquisitions contributed 498.5% to the reported revenue growth rate in our Global Data Center Business segment for the year ended December 31, 2018 compared to the prior year period (see Note 6 of Notes to Consolidated Financial Statements included in this Annual Report for additional acquisition details). Adjusted EBITDA increased $88.3 million for the year ended December 31, 2018 compared to prior year period, primarily due to acquisitions. 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. 59 Corporate and Other Business Storage Rental Service Segment Revenue Segment Adjusted EBITDA(1) Segment Adjusted EBITDA(1) as a Percentage of Consolidated Revenue Storage Rental Service Segment Revenue Segment Adjusted EBITDA(1) Segment Adjusted EBITDA(1) as a Percentage of Consolidated Revenue Year Ended December 31, 2017 2018 $ 47,484 $ 70,375 21,817 69,301 $ $ (245,015) 51,741 $ 122,116 $ (257,668) (6.4)% (6.1)% Year Ended December 31, 2016 2017 $ 37,421 $ 47,484 19,543 21,817 56,964 $ $ (225,711) 69,301 $ $ (245,015) (6.4)% (6.4)% $ $ $ $ $ $ Percentage Change Actual 48.2% 137.2% 76.2% Constant Currency Internal Growth 48.2% 137.2% 76.2% 5.6% 21.2% 10.6% Dollar Change 22,891 29,924 52,815 (12,653) Percentage Change Dollar Change Actual Constant Currency Internal Growth 10,063 2,274 12,337 (19,304) 26.9% 11.6% 21.7% 26.9% 11.6% 21.7% 4.0 % (8.7)% (0.3)% _______________________________________________________________________________ (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, 2018, Adjusted EBITDA in the Corporate and Other Business segment as a percentage of consolidated revenues increased 30 basis points compared to the year ended December 31, 2017. Adjusted EBITDA in the Corporate and Other Business segment decreased $12.7 million in the year ended December 31, 2018 compared to the year ended December 31, 2017, primarily driven by higher professional fees, partially offset by profitability associated with recent acquisitions in our Adjacent Businesses operating segment. 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. 60 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 $ 2016 541,216 (632,703) 125,373 236,484 $ 2017 724,259 (599,448) 540,425 925,699 2018 936,544 (2,230,128) 550,678 165,485 Cash Flows from Operating Activities For the year ended December 31, 2018, net cash flows provided by operating activities increased by $212.3 million compared to the prior year period. The primary factors that impacted the increase in cash flows provided by operating activities were an increase in net income (including non-cash charges and realized foreign exchange losses) of $160.6 million and a decrease in cash used in working capital of $51.7 million, primarily related to the timing of collections of accounts receivable, partially offset by the timing of payments associated with our accounts payable. Cash Flows from Investing Activities 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. Our significant investing activities for the year ended December 31, 2018 are highlighted below: • We paid cash for acquisitions (net of cash acquired) of $1,758.6 million, primarily funded by the net proceeds of our issuance of the 51/4% Notes, the net proceeds of the Equity Offering and Over-Allotment Option and borrowings under our Revolving Credit Facility (each as defined below). • We paid cash for capital expenditures of $460.1 million. Our business requires capital expenditures to maintain our ongoing operations, support our expected revenue growth and new products and services, and increase our profitability. All of these expenditures are included in the cash flows from investing activities. Additional details of our capital spending is included in the Capital Expenditures section below. • We acquired customer relationships, and incurred both customer inducements (which consists of permanent withdrawal fees following the adoption of ASU 2014-09) and Contract Fulfillment Costs (as defined in Note 2.l. to Notes to Consolidated Financial Statements included in this Annual Report) for the year ended December 31, 2018 of $63.6 million, $8.9 million and $26.2 million, respectively. Cash Flows from Financing Activities Our significant financing activities for the year ended December 31, 2018 included: • • • • • • • Net proceeds of $288.0 million primarily associated with the borrowings and repayments on our Revolving Credit Facility. Net proceeds of $178.3 million associated with the borrowings on our UK Bilateral Facility (as defined below). Net proceeds of $693.2 million associated with the borrowing of our Term Loan B (as defined below). Net proceeds of $76.2 million from the exercise of the Over-Allotment Option. Net proceeds of $8.7 million from sales of stock under our At The Market (ATM) Equity Program. Payment of dividends in the amount of $673.6 million on our common stock. Payment of $16.4 million for debt financing and equity issuance costs. 61  Capital Expenditures We present two categories of capital expenditures: (1) Growth Investment Capital Expenditures and (2) Recurring Capital Expenditures with the following sub-categories: (i) Real Estate, (ii) Non-Real Estate, (iii) Data Center and (iv) Innovation (for growth investment only). Data Center capital expenditures, which was previously presented as its own category that included growth and recurring capital expenditures, is now a sub-category with capital expenditures allocated between Growth Investment Capital Expenditures and Recurring Capital Expenditures. Growth Investment Capital Expenditures: Real Estate: Expenditures primarily related to investments in land, buildings, building improvements, leasehold improvements and racking structures to grow our revenues or achieve operational efficiencies. Non-Real Estate: Expenditures that support the growth of our business, and/or increase our profitability, such as customer-inventory technology systems, security upgrades or system enhancements. Data Center: Expenditures 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. Innovation: Discretionary capital expenditures in significant new products and services in new, existing or AB opportunities. Recurring Capital Expenditures: Real Estate: Expenditures primarily related to the replacement of components of real estate assets such as buildings, building improvements, leasehold improvements and racking structures. Non-Real Estate: Expenditures primarily related to the replacement of customer-facing assets such as containers and shred bins, warehouse equipment, fixtures, computer hardware, or third-party or internally-developed software assets. Data Center: Expenditures related to the upgrade or re-configuration of existing data center assets. • • • • • • • The following table presents our capital spend for 2016, 2017 and 2018 organized by the type of the spending as described above. We have reclassified the categorization of our prior year capital expenditures to conform with our current presentation. Nature of Capital Spend (in thousands) Growth Investment Capital Expenditures: Real Estate Non-Real Estate Data Center Innovation Total Growth Investment Capital Expenditures Recurring Capital Expenditures: Real Estate Non-Real Estate Data Center Total Recurring Capital Expenditures Total Capital Spend (on accrual basis) Net increase (decrease) in prepaid capital expenditures Net (increase) decrease in accrued capital expenditures(1) Total Capital Spend (on cash basis) ___________________________________________________________________ 2016 2017 2018 $ $ 133,079 40,509 72,571 8,573 254,732 63,543 20,642 157 84,342 339,074 374 (10,845) 328,603 $ $ 139,822 56,297 92,265 20,583 308,967 77,660 29,721 332 107,713 416,680 1,629 (75,178) 343,131 $ $ 138,307 52,737 162,666 15,857 369,567 73,146 23,187 9,051 105,384 474,951 (1,844) (13,045) 460,062 (1) The amount at December 31, 2017 includes approximately $66,800 related to a capital lease associated with our data center in Manassas, Virginia. 62 Excluding capital expenditures associated with potential future acquisitions, opportunistic real estate investments and capital expenditures associated with the integrations of Recall and IODC, we expect our recurring capital expenditures on real estate and non-real estate, as well as non-real estate growth investment capital expenditures, to be approximately $145.0 million to $155.0 million, our capital expenditures on our data center business to be approximately $250.0 million and our capital expenditures on real estate growth investment and innovation to be approximately $175.0 million in the year ending December 31, 2019. Dividends See Note 12 to Notes to Consolidated Financial Statements included in this Annual Report for information on dividends. 63 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, 2018 relate to cash and cash equivalents held on deposit with seven global banks, all of which we consider to be large, highly-rated investment-grade institutions. As per our risk management investment policy, we limit exposure to concentration of credit risk by limiting the amount invested in any one mutual fund to a maximum of 1% of the fund total assets or in any one financial institution to a maximum of $50.0 million. As of December 31, 2018, our cash and cash equivalents balance was $165.5 million. Long-term debt as of December 31, 2018 is as follows (in thousands): December 31, 2018 Debt (inclusive of discount) Unamortized Deferred Financing Costs Carrying Amount Revolving Credit Facility Term Loan A Term Loan B Australian Dollar Term Loan (the "AUD Term Loan") UK Bilateral Revolving Credit Facility ("UK Bilateral Facility") 43/8% Senior Notes due 2021 (the "43/8% Notes") 6% Senior Notes due 2023 53/8% CAD Senior Notes due 2023 (the "CAD Notes due 2023") 53/4% Senior Subordinated Notes due 2024 3% Euro Senior Notes due 2025 (the "Euro Notes") 37/8% GBP Senior Notes due 2025 (the "GBP Notes due 2025") 53/8% Senior Notes due 2026 (the "53/8% Notes") 47/8% Senior Notes due 2027 (the "47/8% Notes") 51/4% Senior Notes due 2028 (the "51/4% Notes") Real Estate Mortgages, Capital Leases and Other Accounts Receivable Securitization Program Mortgage Securitization Program Total Long-term Debt Less Current Portion Long-term Debt, Net of Current Portion $ 793,832 $ 240,625 693,169 233,955 178,299 500,000 600,000 183,403 1,000,000 343,347 509,425 250,000 1,000,000 825,000 606,702 221,673 50,000 8,229,430 (126,406) $ 8,103,024 $ (14,117) $ — (8,742) (3,084) (2,357) (4,155) (5,126) (2,506) (7,782) (4,098) (6,573) (3,185) (12,442) (10,923) (171) (218) (1,128) (86,607) — 779,715 240,625 684,427 230,871 175,942 495,845 594,874 180,897 992,218 339,249 502,852 246,815 987,558 814,077 606,531 221,455 48,872 8,142,823 (126,406) (86,607) $ 8,016,417 See Note 4 to Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding our long-term debt. 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 which consisted of a revolving credit facility (the "Former Revolving Credit Facility") and a 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 A"). The maximum amount permitted to be borrowed under the Revolving Credit Facility is $1,750.0 million. The original amount of the Term Loan A was $250.0 million. Under the Revolving Credit Facility, we had 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 was originally scheduled to mature on August 21, 2022, at which point all obligations were to become due. 64 On March 22, 2018, we entered into an amendment (the “2018 First Amendment”) to the Credit Agreement which provided us with the option to request additional commitments of up to approximately $1,260.0 million under the Credit Agreement in the form of term loans or through increased commitments under the Revolving Credit Facility, subject to the conditions specified in the Credit Agreement. On June 4, 2018, we entered into another amendment (the "2018 Second Amendment") to the Credit Agreement which (i) reduced interest rate margins applicable to existing and future borrowings under the Revolving Credit Facility and Term Loan A by 0.25% and (ii) extended the maturity date of the Credit Agreement to June 4, 2023. The amount available for borrowing under the Revolving Credit Facility as of December 31, 2018 was $912.9 million (which amount represents the maximum availability as of such date). In connection with the 2018 First Amendment, IMI's wholly owned subsidiary, Iron Mountain Information Management, LLC ("IMIM"), entered into an incremental term loan activation notice (the "Activation Notice"), with certain lenders pursuant to which the lenders party to the Activation Notice agreed to provide commitments to fund an incremental term loan B in the amount of $700.0 million (the “Term Loan B”). On March 26, 2018, IMIM borrowed the full amount of the Term Loan B, which matures on January 2, 2026. The Term Loan B was issued at 99.75% of par. The aggregate net proceeds of approximately $689.9 million, after paying commissions to the joint lead arrangers and net of the original discount, were used to repay outstanding borrowings under the Revolving Credit Facility. The Term Loan B holders benefit from the same security and guarantees as other borrowings under the Credit Agreement. The Term Loan B holders also benefit from the same affirmative and negative covenants as other borrowings under the Credit Agreement; however, the Term Loan B holders are not generally entitled to the benefits of the financial covenants under the Credit Agreement. As of December 31, 2018, we had $693.2 million outstanding on the Term Loan B and the interest rate in effect under the Term Loan B was 4.3%. The amount of debt for the Term Loan B reflects an unamortized original issue discount of $1.6 million as of December 31, 2018. b. Australian Dollar Term Loan Amendment On March 27, 2018, Iron Mountain Australia Group Pty Ltd ("IM Australia"), a wholly owned subsidiary of IMI, amended its AUD Term Loan (the "AUD Term Loan Amendment") to (i) increase the borrowings under the AUD Term Loan from 250.0 million Australian dollars to 350.0 million Australian dollars; (ii) increase the quarterly principal payments from 6.3 million Australian dollars per year to 8.8 million Australian dollars per year and (iii) decrease the interest rate on the AUD Term Loan from BBSY (an Australian benchmark variable interest rate) plus 4.3% to BBSY plus 3.875%. The interest rate in effect under the AUD Term Loan was 6.0% as of December 31, 2018. The AUD Term Loan matures in September 2022. All indebtedness associated with the AUD Term Loan was issued at 99% of par. The net proceeds associated with the AUD Term Loan Amendment of approximately 99.0 million Australian dollars (or approximately $75.6 million, based upon the exchange rate between the Australian dollar and the United States dollar on March 29, 2018 (the closing date of the AUD Term Loan Amendment)), net of the original discount, were used to repay outstanding borrowings under the Revolving Credit Facility. See Note 4 to Notes to Consolidated Financial Statements included in this Annual Report for additional details on the AUD Term Loan. c. UK Bilateral Revolving Credit Facility On September 24, 2018, Iron Mountain (UK) PLC and Iron Mountain (UK) Data Centre Limited entered into a 140.0 million British pounds sterling Revolving Credit Facility (the "UK Bilateral Facility") with Barclays Bank PLC. The maximum amount permitted to be borrowed under the UK Bilateral Facility is 140.0 million British pounds sterling, and we have the option to request additional commitments of up to 125.0 million British pounds sterling, subject to the conditions specified in the UK Bilateral Facility. The UK Bilateral Facility was fully utilized on September 24, 2018 (the closing date of the UK Bilateral Facility). The UK Bilateral Facility is scheduled to mature on September 23, 2022, at which point all obligations become due. The UK Bilateral Facility contains an option to extend the maturity date for an additional year, subject to the conditions specified in the UK Bilateral Facility, including the lender's consent. The UK Bilateral Facility bears interest at LIBOR plus 2.25%. The interest rate in effect under the UK Bilateral Facility as of December 31, 2018 was 3.1%. The initial net proceeds received under the UK Bilateral Facility of 138.3 million British pounds sterling (or approximately $180.3 million, based upon the exchange rate between the British pound sterling and the United States dollar on September 24, 2018 (the closing date of the UK Bilateral Facility)), net of upfront fees, were used to repay borrowings under the Revolving Credit Facility. The UK Bilateral Facility is secured by certain properties in the United Kingdom. IMI and its direct and indirect 100% owned United States subsidiaries that represent the substantial majority of its United States operations guarantee all the obligations under the UK Bilateral Facility. 65 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. 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. 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, 2018, the maximum availability allowed and amount outstanding under the Accounts Receivable Securitization Program was $221.7 million, respectively. The interest rate in effect under the Accounts Receivable Securitization Program was 3.0% as of December 31, 2018, respectively. Commitment fees at a rate of 40 basis points are charged on amounts made available but not borrowed under the Accounts Receivable Securitization Program. e. Debt Covenants 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 Credit Agreement as of December 31, 2017 and 2018, as well as our leverage ratio under our indentures as of December 31, 2017 and 2018 are as follows: December 31, 2017 December 31, 2018 Maximum/Minimum Allowable Net total lease adjusted leverage ratio Net secured debt lease adjusted leverage ratio Bond leverage ratio (not lease adjusted) Fixed charge coverage ratio 5.0 1.6 5.8 2.1 ______________________________________________________________ 5.6 Maximum allowable of 6.5 2.6 Maximum allowable of 4.0 5.8 Maximum allowable of 6.5-7.0(1)(2) 2.2 Minimum allowable of 1.5 (1) The maximum allowable leverage ratio under our indentures 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 indentures 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. (2) 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. 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. _______________________________________________________________________________ 66 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, which may include acquisitions and investments, including acquisitions and investments in our data center business, and repaying amounts outstanding from time to time under the Revolving Credit Facility. During the quarter ended December 31, 2018, there were no shares of common stock sold under the At The Market (ATM) Equity Program. During the year ended December 31, 2018, under the At The Market (ATM) Equity Program, we sold an aggregate of 273,486 shares of common stock for gross proceeds of approximately $8.8 million, generating net proceeds of $8.7 million, after deducting commissions of $0.1 million. As of December 31, 2018, the remaining aggregate sale price of shares of our common stock available for distribution under the At The Market (ATM) Equity Program was approximately $431.2 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 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, were used to finance the purchase price of the IODC Transaction, and to pay related fees and expenses. 67 Acquisitions a. Noteworthy 2018 Acquisitions On January 10, 2018, we completed the IODC Transaction and at the closing of the IODC Transaction, we paid approximately $1,347.0 million. In addition to the amount paid at the closing of the IODC Transaction, there was the potential of $35.0 million in additional payments associated with the execution of future customer contracts through the one-year anniversary of the IODC Transaction, of which approximately $31.0 million is accrued at December 31, 2018. This amount is reported as a third-party commissions asset as a component of Other within Other assets, net, on our Consolidated Balance Sheet at December 31, 2018. On March 8, 2018, in order to expand our data center operations into Europe and Asia, we acquired the operations of two data centers in London and Singapore from Credit Suisse International and Credit Suisse AG (together, "Credit Suisse") for a total of (i) 34.6 million British pounds sterling and (ii) 81.0 million Singapore dollars (or collectively, approximately $111.4 million, based upon the exchange rates between the United States dollar and the British pound sterling and Singapore dollar on the closing date of the Credit Suisse transaction) (the “Credit Suisse Transaction”). As part of the Credit Suisse Transaction, Credit Suisse entered into a long-term lease with us to maintain existing data center operations. On May 25, 2018, in order to further expand our data center operations in Europe, we acquired EvoSwitch Netherlands B.V. and EvoSwitch Global Services B.V. (collectively, "EvoSwitch"), a data center colocation space and solutions provider with a data center in Amsterdam (the "EvoSwitch Transaction"), for (i) cash consideration of 189.0 million Euros (or approximately $222.0 million, based upon the exchange rate between the Euro and the United States dollar on the closing date of the EvoSwitch Transaction) and (ii) $25.0 million of additional consideration in the form of future services we will provide to the seller. See Note 6 to Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding our 2018 acquisitions. b. Significant Acquisition Costs Included in Significant Acquisition Costs are certain costs associated with the Recall Transaction and the IODC Transaction. This amount consists of (i) Significant Acquisition Costs and (ii) capital expenditures to integrate Recall with our existing operations. We currently estimate total acquisition and integration expenditures associated with the Recall Transaction and acquisition expenditures associated with the IODC Transaction to be approximately $405.0 million, the substantial majority of which was incurred prior to the end of 2018. The following table presents the operating and capital expenditures associated with the Recall Transaction and the IODC Transaction incurred for the years ended December 31, 2016, 2017 and 2018 and the cumulative amount incurred through December 31, 2018 (in thousands): Year Ended December 31, 2016 2017 2018 Cumulative Total Through December 31, 2018 Significant Acquisition Costs Recall Capital Expenditures Total $ $ 131,944 18,391 150,335 $ $ 84,901 31,441 116,342 $ $ 50,665 23,640 74,305 $ $ 314,524 73,537 388,061 68 Contractual Obligations The following table summarizes our contractual obligations as of December 31, 2018 and the anticipated effect of these obligations on our liquidity in future years (in thousands): Payments Due by Period Total Less than 1 Year 1–3 Years 3–5 Years More than 5 Years Capital Lease Obligations $ 447,173 $ 54,566 $ 86,172 $ 58,577 $ 247,858 Long-Term Debt Obligations (excluding Capital Lease Obligations) Interest Payments(1) Operating Lease Obligations(2) Purchase and Asset Retirement Obligations(3) Total(4)(5) 7,785,528 2,425,851 2,639,852 71,840 402,135 323,454 879,328 721,159 560,655 2,188,704 4,645,656 631,967 467,936 670,590 1,287,807 378,572 $ 13,676,976 235,748 $ 1,087,743 89,234 $ 2,336,548 22,848 $ 3,370,032 30,742 $ 6,882,653 _______________________________________________________________________________ (1) Amounts include variable rate interest payments, which are calculated utilizing the applicable interest rates as of December 31, 2018; 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 $41.2 million in total (including $7.5 million, $14.3 million, $13.1 million and $6.3 million, in less than 1 year, 1-3 years, 3-5 years and more than 5 years, respectively). (3) Purchase obligations include future construction costs associated with the expansion of our data center business which represent a substantial portion of the payments due in less than one year. (4) The table above excludes $35.3 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. (5) The table above excludes $70.5 million of redeemable noncontrolling interests, which represents the estimated redemption value of the redeemable noncontrolling interests. See Note 2.v. to Notes to Consolidated Financial Statements included in this Annual Report. This table also excludes purchase commitments associated with acquisitions closed or expected to close in 2019. 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 and 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 At December 31, 2018, we have federal net operating loss carryforwards of $163.0 million available to reduce future federal taxable income, the majority of which expire from 2023 through 2037. Of the $163.0 million, we expect to utilize $49.4 million and realize a federal tax benefit of $10.4 million. A majority of the net operating loss carryforwards and federal tax benefit expected to be realized were generated by the IODC Transaction. 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 2019 through 2038, of which an insignificant state tax benefit is expected to be realized. We have assets for foreign net operating losses of $82.5 million, with various expiration dates (and in some cases no expiration date), subject to a valuation allowance of approximately 67%. 69 Inflation Certain of our expenses, such as wages and benefits, insurance, occupancy costs and equipment repair and replacement, are subject to normal inflationary pressures. Although to date we have been able to offset inflationary cost increases 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. 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, 2018 relate to cash and cash equivalents held on deposit with seven global banks, all of which we consider to be large, highly-rated investment-grade institutions. As per our risk management investment policy, we limit exposure to concentration of credit risk by limiting the amount invested in any one mutual fund to a maximum of 1% of the fund total assets or in any one financial institution to a maximum of $50.0 million. As of December 31, 2018, our cash and cash equivalents balance was $165.5 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, 2018, we had $2,119.8 million of variable rate debt outstanding with a weighted average variable interest rate of approximately 4.5%, and $6,109.6 million of fixed rate debt outstanding. As of December 31, 2018, approximately 74% 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, 2018 would have been reduced by approximately $18.7 million. See Note 4 to Notes to Consolidated Financial Statements included in this Annual Report for a discussion of our long-term indebtedness, including the fair values of such indebtedness as of December 31, 2018. 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 foreign subsidiaries and IME also have intercompany obligations between them. These intercompany obligations are primarily denominated in the local currency of the foreign subsidiary. 70 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, Latin America 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, Iron Mountain Canada Operations ULC 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, 2018, we designated a portion of the Euro Notes as a hedge of net investment of certain of our Euro denominated subsidiaries. As a result, we recorded $11.1 million ($11.1 million, net of tax) of foreign exchange gains related to the "marking-to-market" of such debt to currency translation adjustments which is a component of accumulated other comprehensive items, net included in stockholders' equity for the year ended December 31, 2018. As of December 31, 2018, cumulative net gains of $14.3 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, 2018, we had outstanding forward contracts to purchase 29.0 million Euros and sell $33.4 million United States dollars 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, 2018, cash receipts included in cash from operating activities from continuing operations related to settlements associated with foreign currency forward contracts were $5.8 million. We recorded net gains in connection with forward contracts of $5.0 million, including an unrealized foreign exchange gain of $0.1 million related to the forward contracts in Other expense (income), net as of December 31, 2018 in the Consolidated Financial Statements included in this Annual Report. As of December 31, 2018, 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 2018 functional currencies, relative to the United States dollar, would result in a reduction in our equity of approximately $294.2 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. 71 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, 2018 (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, 2018. The effectiveness of our internal control over financial reporting has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included in this Annual Report. 72 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Iron Mountain Incorporated 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, 2018, 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, 2018, 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, 2018, of the Company and our report dated February 14, 2019, 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 14, 2019 73 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. There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Act of 1934) during the quarter ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. None. 74 Item 10. Directors, Executive Officers and Corporate Governance. PART III 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. PART IV Item 15. Exhibits and Financial Statements. (a) Financial Statements filed as part of this report: A. Iron Mountain Incorporated Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets, December 31, 2017 and 2018 Consolidated Statements of Operations, Years Ended December 31, 2016, 2017 and 2018 Consolidated Statements of Comprehensive Income (Loss), Years Ended December 31, 2016, 2017 and 2018 Consolidated Statements of Equity, Years Ended December 31, 2016, 2017 and 2018 Consolidated Statements of Cash Flows, Years Ended December 31, 2016, 2017 and 2018 Notes to Consolidated Financial Statements Financial Statement Schedule III—Schedule of Real Estate and Accumulated Depreciation Page 76 77 78 79 80 81 82 163 (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. 75 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Iron Mountain Incorporated 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, 2018 and 2017, 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, 2018, 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, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, 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, 2018, 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 14, 2019, 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 14, 2019 We have served as the Company's auditor since 2002. 76 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 $46,648 and $43,584 as of December 31, 2017 and 2018, 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, customer inducements and data center lease-based intangibles 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.v.) 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 283,110,183 shares and 286,321,009 shares as of December 31, 2017 and 2018, 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, 2017 2018 $ 925,699 $ 165,485 835,742 188,874 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 $ $ 846,889 195,740 1,208,114 7,600,949 (3,111,392) 4,489,557 4,441,030 1,506,522 207,024 6,154,576 11,852,247 126,406 318,765 752,684 264,823 1,462,678 8,016,417 111,331 121,864 183,836 91,418 70,532 — — 2,831 4,164,562 (1,765,966) (103,989) 2,297,438 1,404 2,298,842 10,972,402 $ 2,863 4,263,348 (2,116,367) (265,664) 1,884,180 1,409 1,885,589 11,852,247 $ $ $ The accompanying notes are an integral part of these consolidated financial statements. 77 IRON MOUNTAIN INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Year Ended December 31, 2016 2017 2018 Revenues: Storage rental Service Total Revenues Operating Expenses: $ $ 2,142,905 1,368,548 3,511,453 $ 2,377,557 1,468,021 3,845,578 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 $7,558, $7,659 and $6,553 in 2016, 2017 and 2018, 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 $ $ $ $ $ $ $ $ 1,567,777 988,332 452,326 — 1,412 3,009,847 501,606 1,685,318 984,965 522,376 3,011 799 3,196,469 649,109 310,662 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 $ $ $ $ $ $ $ $ 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. 2,622,455 1,603,306 4,225,761 1,801,582 1,038,975 639,514 — (9,818) 3,470,253 755,508 409,289 (11,692) 357,911 36,263 (55,328) 376,976 (12,427) 364,549 1,198 363,351 1.31 (0.04) 1.27 1.31 (0.04) 1.27 285,913 286,653 2.3753 78 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 Change in Fair Value of Interest Rate Swap Agreements Total Other Comprehensive (Loss) Income Comprehensive Income (Loss) Comprehensive Income (Loss) Attributable to Noncontrolling Interests Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated Year Ended December 31, 2016 2017 2018 $ 107,233 $ 185,432 $ 364,549 (35,641) (734) — (36,375) 70,858 108,564 — — 108,564 293,996 3,690 $ 67,168 1,591 $ 292,405 (164,107) — (973) (165,080) 199,469 (2,207) $ 201,676 The accompanying notes are an integral part of these consolidated financial statements. 79 IRON MOUNTAIN INCORPORATED CONSOLIDATED STATEMENTS OF EQUITY (In thousands, except share data) Iron Mountain Incorporated Stockholders' Equity Common Stock Total Shares Amounts Earnings in Excess of Distributions (Distributions in Excess of Earnings) Accumulated Other Comprehensive Items, Net Additional Paid-in Capital Noncontrolling Interests Redeemable Noncontrolling Interests Balance, December 31, 2015 $ 528,607 211,340,296 1 , $ 2,113 —$ 1,623,863 —$ (942,218) —$ (174,917) $ 19,766 $ — (25,437) 25,437 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.v.) 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 12) Issuance of shares through the At The Market (ATM) Equity Program, net of underwriting discounts and offering expenses (see Note 12) Issuance of shares in connection with the Fortrust Transaction (see Note 6) Change in value of redeemable noncontrolling interests (see Note 2.v.) 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) Cumulative-effect adjustment for adoption of ASU 2014-09 (see Note 2.l.) Issuance of shares under employee stock purchase plan and option plans and stock- based compensation Issuance of shares in connection with the Over-Allotment Option, net of underwriting discounts and offering expenses (see Note 12) Issuance of shares through the At The Market (ATM) Equity Program, net of underwriting discounts and offering expenses (see Note 12) Changes in equity related redeemable noncontrolling interests (see Note 2.v.) Parent cash dividends declared Foreign currency translation adjustment Change in fair value of interest rate swap agreements Net income (loss) Noncontrolling interests dividends Balance, December 31, 2018 $ (30,233) — 30,020 762,340 76,192 2,175,000 8,716 273,486 (16,110) (683,519) (160,548) (973) 363,202 — 1,885,589 — — — — — — — 8 22 2 — — — — — — — (30,233) 30,012 76,170 8,714 (16,110) — — — — — — — — — (683,519) — — 363,351 — — — — — — — (160,702) 154 (973) — — (149) — 286,321,009 $ 2,863 $ 4,263,348 $ (2,116,367) $ (265,664) $ 1,409 $ The accompanying notes are an integral part of these consolidated financial statements. 80 — — — — 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 — — — — (16,151) — (3,559) — 1,347 (2,523) 70,532  IRON MOUNTAIN INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2016 2017 2018 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 discounts of $13,151, $14,962 and $15,675 in 2016, 2017 and 2018, respectively) Intangible impairments Revenue reduction associated with amortization of permanent withdrawal fees and above- and below-market leases (see Note 2.i.) Stock-based compensation expense (Benefit) provision for deferred income taxes Loss on early extinguishment of debt (Gain) loss on disposal/write-down of property, plant and equipment, net (including real estate) Loss on disposal of Iron Mountain Divestments (see Note 13) Gain on Russia and Ukraine Divestment (see Note 13) Foreign currency transactions and other, net (Increase) decrease in assets Increase (decrease) in 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 (see Liquidity and Capital Resources section of Management's Discussion and Analysis of Financial Condition and Results of Operations) Cash paid for acquisitions, net of cash acquired (see Note 6) Acquisition of customer relationships Customer inducements (see Note 2.i.) Customer fulfillment costs (see Note 2.l.) Net proceeds from divestments (see Note 13) Proceeds from sales of property and equipment and other, net (including real estate) and proceeds from involuntary conversion of property and equipment 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 facilities, term loan facilities, bridge facilities and other debt Proceeds from revolving credit facilities, term loan facilities, bridge facilities and other debt 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, including Over-Allotment Option 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 Cash Flows from Financing Activities-Continuing Operations Cash Flows from Financing Activities-Discontinued Operations Cash Flows from Financing Activities Effect of Exchange Rates on Cash and Cash Equivalents Increase (decrease) in Cash and Cash Equivalents Cash and Cash Equivalents, 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 Stock Issued for Fortrust Transaction (see Note 6) Fair Value of Initial OSG Investment (see Note 13) $ 107,233 $ 185,432 $ (3,353) 365,526 99,951 — 12,217 28,976 (50,368) 9,283 (898) 16,838 — 16,624 (67,395) 6,582 541,216 2,679 543,895 (328,603) (291,965) (31,561) (19,205) — 30,654 7,977 (632,703) 96,712 (535,991) 6,291 406,283 131,055 3,011 11,253 30,019 (36,370) 78,368 (766) — (38,869) 50,503 (93,805) (8,146) 724,259 (3,291) 720,968 (343,131) (219,705) (55,126) (20,059) — 29,236 9,337 (599,448) — (599,448) (14,851,440) 14,544,388 — 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 $ $ $ $ $ — $ 5,625 1,835,026 $ $ — $ — $ (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 $ $ $ $ $ $ $ — $ 83,014 18,000 $ $ $ $ $ $ $ $ $ $ $ $ 364,549 12,427 452,740 202,449 — 16,281 31,167 (10,729) — (65,658) — — (16,395) (36,054) (14,233) 936,544 (995) 935,549 (460,062) (1,758,557) (63,577) (8,902) (26,208) 1,019 86,159 (2,230,128) 8,250 (2,221,878) (14,192,139) 15,351,614 — — — (2,523) (673,635) 76,192 8,716 (1,142) (16,405) 550,678 — 550,678 (24,563) (760,214) 925,699 165,485 388,440 64,493 83,948 84,143 35,218 181,986 — — — The accompanying notes are an integral part of these consolidated financial statements. 81 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2018 (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 provide storage of physical records and data backup media, information management solutions and enterprise-class colocation and wholesale data center space that help organizations in various locations throughout North America, Europe, Latin America, Asia and Africa. 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, legal and regulatory compliance and disaster recovery requirements. We provide secure and reliable data center facilities to protect digital information and ensure the continued operation of our customers’ IT infrastructure, with flexible deployment options, including both colocation and wholesale space. 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, 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. On January 1, 2018, we adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). See Note 2.l. On January 10, 2018, we completed the acquisition of IO Data Centers, LLC ("IODC"). 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 and 2018, we had approximately $22,167 and $15,141, respectively, of restricted cash held by certain financial institutions related to bank guarantees. 82 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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, 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 component of Iron Mountain Incorporated Stockholders' Equity. See Note 2.u. e. Derivative Instruments and Hedging Activities Every derivative instrument is required to be recorded in the balance sheet as either an asset or a liability measured at its fair value. Periodically, we acquire derivative instruments that are intended to hedge either cash flows or values that are subject to foreign exchange or other market price risk and not for trading purposes. We have formally documented our hedging relationships, including identification of the hedging instruments and the hedged items, as well as our risk management objectives and strategies for undertaking each hedge transaction. Given the recurring nature of our revenues and the long-term nature of our asset base, we have the ability and the preference to use long-term, fixed interest rate debt to finance our business, thereby preserving our long-term returns on invested capital. We target approximately 75% of our debt portfolio to be fixed with respect to interest rates. Occasionally, we may use interest rate swaps as a tool to maintain our targeted level of fixed rate debt. In addition, we may use borrowings in foreign currencies, either obtained in the United States or by our foreign subsidiaries, to hedge foreign currency risk associated with our international investments. Sometimes we enter into currency swaps to temporarily hedge an overseas investment, such as a major acquisition, while we arrange permanent financing or to hedge our exposure due to foreign currency exchange movements related to our intercompany accounts with and between our foreign subsidiaries. As of December 31, 2017 and 2018, none of our derivative instruments contained credit-risk related contingent features. See Note 3. 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 83 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) Property, plant and equipment (including capital leases in the respective category), at cost, consist of the following: Land Buildings and building improvements Leasehold improvements Racking Warehouse equipment/vehicles Furniture and fixtures Computer hardware and software Construction in progress December 31, 2017 2018 $ 314,897 $ 400,980 2,039,902 592,700 1,996,594 467,345 55,245 627,571 156,846 2,991,307 770,666 2,001,831 481,515 56,207 680,283 218,160 $ 6,251,100 $ 7,600,949 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 capitalize interest expense during the active construction period of major capital projects. Capitalized interest is added to the cost of the underlying assets and is amortized over the useful lives of the assets. During the year ended December 31, 2018, we capitalized interest of $3,732. The amount of capitalized interest during the years ended December 31, 2016 and 2017 was insignificant. 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, 2016, 2017 and 2018, we capitalized $16,438, $25,166 and $29,407 of costs, respectively, associated with the development of internal use computer software projects. Capitalization begins when the design stage of the application has been completed and it is probable that the project will be completed and used to perform the function intended. Capitalization ends when the asset is ready for its intended use. Depreciation begins when the software is placed in service. Computer software costs that are capitalized are periodically evaluated for impairment. We did not record any material write-offs of deferred software costs during the years ended December 31, 2016, 2017 and 2018. 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. Our asset retirement obligations at December 31, 2017 and 2018 were $27,757 and $28,256, respectively. 84 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) 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 sum of 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 (i) $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; (ii) $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; and (iii) $(9,818) for the year ended December 31, 2018 and consisted primarily of gains associated with the involuntary conversion of assets included in a facility that we own in Argentina which was partially destroyed in a fire in 2014, for which we received insurance proceeds in excess of the carrying amount of such assets during the fourth quarter of 2018. See Note 10.e. 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. Gain on sale of real estate for the year ended December 31, 2018 was $55,328, net of tax of $8,476, and consisted primarily of the sale of land and buildings in the United Kingdom. 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, 2016, 2017 and 2018. We concluded that as of October 1, 2016 and October 1, 2018, goodwill was not impaired. As of October 1, 2017, we determined that the fair value of the 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 full 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 October 1, 2017. The following is a discussion regarding (i) the reporting units at which level we tested goodwill for impairment as of October 1, 2017, (ii) our reporting units as of December 31, 2017 (including the amount of goodwill associated with each reporting unit), (iii) changes to the composition of our reporting units between December 31, 2017 and October 1, 2018, (iv) the reporting units at which level we tested goodwill for impairment as of October 1, 2018, and (v) our reporting units as of December 31, 2018 (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. 85 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) Goodwill Impairment Analysis - 2017 a. Reporting Units 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 (which had no goodwill at October 1, 2017); (4) Consumer Storage; (5) Fine Arts; (6) Western Europe; (7) Northern/Eastern Europe and Middle East, Africa and India ("NEE and MEAI"); (8) Latin America; (9) Australia and New Zealand; and (10) Asia. b. Changes to Composition of Reporting Units between October 1, 2017 and December 31, 2017 During the fourth quarter of 2017, as a result of changes in the management of our entertainment storage and related services businesses, 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 related 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 China - Hong Kong S.A.R., France, 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. 86 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) 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) Latin America(5) Australia and New Zealand(5) Asia(5) Global Data Center(6) 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) This reporting unit is included in the Global Data Center Business segment. 87 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) Goodwill Impairment Analysis - 2018 a. Changes to Composition of Reporting Units between December 31, 2017 and October 1, 2018 During the second quarter of 2018, 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 business in South Africa, which was previously included within our NEE and MEAI reporting unit, was now being managed in conjunction with our businesses included in our Australia and New Zealand reporting unit. This newly formed reporting unit, which consists of our businesses in Australia, New Zealand and South Africa is referred to as the Australia, New Zealand and South Africa reporting unit, or the ANZ SA reporting unit. Our former NEE and MEAI reporting unit, which no longer includes our business in South Africa, is referred to as the Northern/Eastern Europe and Middle East and India reporting unit, or the NEE and MEI reporting unit. b. Reporting Units as of October 1, 2018 As a result of the changes described above, our reporting units at which level we performed our goodwill impairment analysis as of October 1, 2018 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; (6) Entertainment Services; (7) Western Europe; (8) NEE and MEI; (9) Latin America; (10) ANZ SA; and (11) Asia. We concluded that the goodwill associated with each of our reporting units was not impaired as of such date. c. Changes to Composition of Reporting Units between October 1, 2018 and December 31, 2018 During the fourth quarter of 2018, as a result of changes in the management of our Information Governance and Digital Solutions business in Sweden, we reassessed the composition of our reporting units as well as our reportable operating segments (see Note 9 for a description of our reportable operating segments). As part of this reassessment, we determined that our Information Governance and Digital Solutions business in Sweden (which was previously managed along with our other businesses within the Western Europe reporting unit) is now being managed in conjunction with our businesses included in our NEE and MEI reporting unit, which already included the remainder of our business in Sweden. We concluded that the goodwill associated with our Western Europe and NEE and MEI reporting units was not impaired following this change in reporting units. See Note 9 for disclosure regarding the impact of this change in management of our business in Sweden on our reportable operating segments. 88 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) Goodwill by Reporting Unit as of December 31, 2018 The carrying value of goodwill, net for each of our reporting units described above as of December 31, 2018 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 MEI(5) Latin America(5) ANZ SA(5) Asia(5) Global Data Center(6) Total $ $ Carrying Value as of December 31, 2018 2,251,795 493,491 — 35,526 34,233 381,806 169,780 136,099 300,204 212,140 425,956 4,441,030 _______________________________________________________________________________ (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) This reporting unit is included in the Global Data Center Business segment. 89 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) 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. The changes in the carrying value of goodwill attributable to each reportable operating segment for the years ended December 31, 2017 and 2018 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 $ 2,280,911 $ 493,966 $ 349,421 $ 743,077 $ — $ 37,646 $ 3,905,021 894 — — — (25,195) 12,836 — — — — 208 3,677 — — — — 10,536 36,532 9,274 24,970 — (3,515) 21,079 51,548 2,269,446 497,851 396,489 846,433 — — (1,202) (423) (16,026) $ $ $ 2,251,795 85,909 85,909 $ $ $ — — — — — 5,231 — — (4,360) (19,914) 493,491 $ 381,806 — $ 46,500 — $ 46,500 $ $ $ — — — — — — — — — — 717 10,885 24,533 (3,011) — — 163 49,503 (3,011) (3,515) 6,628 104,756 60,048 4,070,267 6,644 3,620 — 609 9,895 467,703 (1,202) 4,469 28,999 429,853 3,251 — 4,283 (64,743) (3,897) (1,162) (110,102) 818,223 $ 425,956 $ 69,759 — $ — $ 3,011 — $ — $ 3,011 $ $ $ 4,441,030 135,420 135,420 Goodwill balance, net of accumulated amortization, 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 (see Note 13) Fair value and other adjustments (1) Currency effects Goodwill balance, net of accumulated amortization, as of December 31, 2017 Deductible goodwill acquired during the year Non-deductible goodwill acquired during the year Goodwill allocated to IMFS Divestment (see Note 13) Fair value and other adjustments (2) Currency effects Goodwill balance, net of accumulated amortization, as of December 31, 2018 Accumulated Goodwill Impairment Balance as of December 31, 2017 Accumulated Goodwill Impairment Balance as of December 31, 2018 ___________________________________________________________________ (1) 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. (2) Total fair value and other adjustments primarily include net adjustments of $(2,717) primarily related to property, plant and equipment, customer relationship intangible assets and deferred income taxes and other liabilities and $7,186 of cash paid related to certain acquisitions completed in 2017. 90 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) i. Finite-lived Intangible Assets and Liabilities i. Customer Relationship 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, 2018) and are included in depreciation and amortization in the accompanying Consolidated Statements of Operations. The value of customer relationship intangible assets is calculated based upon estimates of their fair value. ii. Customer Inducements Prior to the adoption of ASU 2014-09, free intake costs to transport boxes to one of our facilities, which include labor and transportation costs ("Free Move Costs"), were capitalized and amortized over periods ranging from ten to 30 years. The amortization of Free Move Costs is included in depreciation and amortization in the accompanying Consolidated Statements of Operations for the years ended December 31, 2016 and 2017. Subsequent to the adoption of ASU 2014-09, Free Move Costs are considered a Contract Fulfillment Cost (as defined in Note 2.l.) and, therefore, are now deferred and amortized and included in amortization expense over three years, consistent with the transfer of the performance obligation to the customer to which the asset relates. See Note 2.l. for information regarding the accounting for Free Move Costs, which are now a component of Intake Costs (as defined in Note 2.l.), following the adoption of ASU 2014-09. 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, 2018) and are included in storage and service revenue in the accompanying Consolidated Statements of Operations. Our accounting for Permanent Withdrawal Fees did not change as a result of the adoption of ASU 2014-09. Free Move Costs (prior to the adoption of ASU 2014-09) 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. 91 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) iii. Data Center Intangible Assets and Liabilities Finite-lived intangible assets associated with our data center business consist of the following: Data Center In-Place Lease Intangible Assets and Data Center Tenant Relationship Intangible Assets Data Center In-Place Lease Intangible Assets (“Data Center In-Place Leases”) and Data Center Tenant Relationship Intangible Assets (“Data Center Tenant Relationships") are acquired through either business combinations or asset acquisitions in our data center business. These intangible assets reflect the value associated with acquiring a data center operation with active tenants as of the date of acquisition. The value of Data Center In-Place Leases is determined based upon an estimate of the economic costs (such as lost revenues, tenant improvement costs, commissions, legal expenses and other costs to acquire new data center leases) avoided by acquiring a data center operation with active tenants that would have otherwise been incurred if the data center operation was purchased vacant. Data Center In-Place Leases are amortized over the weighted average remaining term of the acquired data center leases (weighted average of six years as of December 31, 2018) and are included in depreciation and amortization in the accompanying Consolidated Statements of Operations. The value of Data Center Tenant Relationships is determined based upon an estimate of the economic costs avoided upon lease renewal of the acquired tenants, based upon expectations of lease renewal. Data Center Tenant Relationships are amortized over the weighted average remaining anticipated life of the relationship with the acquired tenant (weighted average of nine years as of December 31, 2018) and are included in depreciation and amortization in the accompanying Consolidated Statements of Operations. Data Center In-Place Leases and Data Center Tenant Relationships are included in Customer relationships, customer inducements and data center lease-based intangibles in the accompanying Consolidated Balance Sheets. Data Center Above-Market and Below-Market In-Place Lease Intangible Assets Data Center Above-Market In-Place Lease Intangible Assets (“Data Center Above-Market Leases”) and Data Center Below-Market In-Place Lease Intangible Assets (“Data Center Below-Market Leases”) are acquired through either business combinations or asset acquisitions in our data center business. We record Data Center Above-Market Leases and Data Center Below-Market Leases at the net present value of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of the fair market lease rates for each corresponding in-place lease. Data Center Above-Market Leases (weighted average of four years as of December 31, 2018) and Data Center Below-Market Leases (weighted average of nine years as of December 31, 2018) are amortized over the remaining non-cancellable term of the acquired in-place lease to storage revenue in the accompanying Consolidated Statements of Operations. Data Center Above- Market Leases are included in Customer relationships, customer inducements and data center lease-based intangibles in the accompanying Consolidated Balance Sheets. Data Center Below-Market Leases are included in Other long-term liabilities in the accompanying Consolidated Balance Sheets. 92 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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, 2017 and 2018, respectively, are as follows: December 31, 2017 December 31, 2018 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount $1,704,105 140,030 $ (395,278) $1,308,827 73,049 (66,981) $1,718,919 56,478 $ (455,705) $1,263,214 22,297 (34,181) 19,314 — $1,863,449 (643) — 18,671 271,818 221,011 (50,807) (1,089) — $ (462,902) $1,400,547 30,071 $2,077,286 28,982 $ (541,782) $1,535,504 Assets: Customer relationship intangible assets Customer inducements(1) Data center lease-based intangible assets(2) Third-party commissions asset(3) Liabilities: Data center below-market leases $ — $ — $ — $ 12,318 $ (1,642) $ 10,676 _______________________________________________________________________________ (1) The gross carrying amount, accumulated amortization and net carrying amount of customer inducements as of December 31, 2017 includes Free Move Costs, which were capitalized as Customer Inducements prior to the adoption of ASU 2014-09. Subsequent to the adoption of ASU 2014-09, Free Move Costs are considered Contract Fulfillment Costs and Customer Inducements consist exclusively of Permanent Withdrawal Fees. Contract Fulfillment Costs are included in Other, a component of Other assets, net, in the accompanying Consolidated Balance Sheet as of December 31, 2018. See Note 2.l. for information regarding Contract Fulfillment Costs included in our Consolidated Balance Sheet as of December 31, 2018. (2) Includes Data Center In-Place Leases, Data Center Tenant Relationships and Data Center Above-Market Leases. (3) Third-party commissions asset is included in Other, a component of Other assets, net in the accompanying Consolidated Balance Sheet as of December 31, 2018. See Note 6 for additional information on the third-party commissions 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, 2018, and are included in depreciation and amortization in the accompanying Consolidated Statements of Operations. December 31, 2017 December 31, 2018 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Other finite-lived intangible assets (included in other assets, net) $ 20,929 $ (10,728) $ 10,201 $ 20,310 $ (14,798) $ 5,512 93 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) Amortization expense associated with finite-lived intangible assets, revenue reduction associated with the amortization of Permanent Withdrawal Fees and net revenue reduction associated with the amortization of Data Center Above-Market Leases and Data Center Below-Market Leases for the years ended December 31, 2016, 2017 and 2018 are as follows: Year Ended December 31, 2016 2017 2018 Amortization expense included in depreciation and amortization associated with: Customer relationship and customer inducement intangible assets $ 84,349 $ 109,563 $ 113,782 Data center in-place leases and tenant relationships Other finite-lived intangible assets Third-party commissions asset Revenue reduction associated with amortization of: — 2,451 — — 6,530 — 43,061 4,624 1,089 Permanent withdrawal fees $ 12,217 $ 11,253 $ 11,408 Data center above-market leases and data center below-market leases — — 4,873 Estimated amortization expense for existing finite-lived intangible assets (excluding deferred financing costs, as disclosed in Note 2.j. and Contract Fulfillment Costs, as defined and disclosed in Note 2.l.) is as follows: Estimated Amortization Revenue Reduction Associated with the Amortization of Permanent Withdrawal Fees Revenue Reduction (Increase) Associated with Amortization of Data Center Above-market leases and Below-market leases Included in Depreciation and Amortization $ 2019 2020 2021 2022 2023 Thereafter $ 160,048 155,324 151,546 121,459 118,586 800,248 $ 7,386 5,705 3,792 1,667 1,192 1,387 4,332 1,260 676 157 (523) (3,902) 94 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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. 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, 2017 and 2018, the gross carrying amount of deferred financing costs was $113,678 and $128,469, respectively, and accumulated amortization of those costs was $27,438 and $41,862, 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: 2019 2020 2021 2022 2023 Thereafter Estimated Amortization of Deferred Financing Costs 15,544 $ 15,396 14,272 13,227 10,108 18,060 k. Prepaid Expenses and Accrued Expenses There are no prepaid expenses with items greater than 5% of total current assets as of December 31, 2017 and 2018. 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 Sales tax and VAT payable Dividend Other Accrued expenses December 31, 2017 2018 $ 71,176 $ 67,379 72,006 63,725 172,102 206,758 $ 653,146 $ 83,854 65,846 75,256 96,564 181,986 249,178 752,684 95 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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) 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, the most significant of which include: (1) the handling of records, including the addition of new records, temporary removal of records from storage, refiling of removed records and courier operations, consisting primarily of the pickup and delivery of records upon customer request; (2) destruction services, consisting primarily of secure shredding of sensitive documents and the related sale of recycled paper, the price of which can fluctuate from period to period, and customer termination and permanent removal fees; (3) other services, including the scanning, imaging and document conversion services of active and inactive records and project revenues; (4) consulting services; and (5) cloud-related data protection, preservation, restoration and recovery. In May 2014, the Financial Accounting Standards Board ("FASB") issued 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. We adopted ASU 2014-09 as of January 1, 2018 using the modified retrospective method for all of our customer contracts, whereby the cumulative effect of applying ASU 2014-09 is recognized at the date of initial application. At January 1, 2018, we recognized the cumulative effect of initially applying ASU 2014-09 as an adjustment to the opening balance of (distributions in excess of earnings) earnings in excess of distributions, resulting in a decrease of $30,233 to stockholders' equity. The reduction of (distribution in excess of earnings) earnings in excess of distributions represents the net effect of (i) the write-off of Free Move Costs, net (which were capitalized and amortized prior to the adoption of ASU 2014-09) based upon the net book value of the Free Move Costs as of December 31, 2017, (ii) the recognition of certain Contract Fulfillment Costs, specifically Intake Costs (each as defined below) and commission assets, (iii) the recognition of deferred revenue associated with Intake Costs billed to our customers, and (iv) the deferred income tax impact of the aforementioned items. As we adopted ASU 2014-09 on a modified retrospective basis, the comparative Consolidated Balance Sheet as of December 31, 2017 and the comparative Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income (Loss), Consolidated Statements of Equity and the Consolidated Statements of Cash Flows for the years ended December 31, 2016 and 2017 have not been restated to reflect the adoption of ASU 2014-09 and reflect our revenue policies in place at that time. 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, 2018, have historically not been significant. The performance obligation is a series of distinct services (as determined for purposes of ASU 2014-09, a “series”) that have the same pattern of transfer to the customer that is satisfied over time. For those contracts that qualify as a series, we have a right to consideration from the customer in an amount that corresponds directly with the value of the underlying performance obligation transferred to the customer to date. This concept is known as "right to invoice" and we are applying the "right to invoice" practical expedient to all revenues, with the exception of storage revenues in our data center business. For all of our businesses, with the exception of the storage component of our data center business, each purchasing decision is fully in the control of the customer and, therefore, consideration beyond the current reporting period is variable and allocated to the specific period, which is consistent with the practical expedient described above. Our data center business features storage rental provided to the customer at contractually specified rates over a fixed contractual period. 96 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) The costs associated with the initial movement of customer records into physical storage and certain commissions are considered costs to obtain or fulfill customer contracts (“Contract Fulfillment Costs”). The following describes each of these Contract Fulfillment Costs recognized under ASU 2014-09: Intake Costs (and associated deferred revenue) Prior to the adoption of ASU 2014-09, intake costs incurred but not charged to a customer to transport records to our facilities (or Free Move Costs, as described in Note 2.i.), which include labor and transportation costs, were capitalized and amortized as a component of depreciation and amortization in our Consolidated Statements of Operations. The initial movement of customer records into physical storage must take place prior to initiation of the storage of records and is not considered a separate performance obligation and, therefore, the costs of the initial intake of customer records into physical storage (“Intake Costs”) represent a contract fulfillment cost for the storage of records as the earnings process does not commence until a customer’s records or other assets are in our possession. Accordingly, upon the adoption of ASU 2014-09, all Intake Costs, regardless of whether or not the services associated with such initial moves are billed to the customer or are provided to the customer at no charge, will be deferred and amortized as a component of depreciation and amortization in our Consolidated Statements of Operations over three years, consistent with the transfer of the performance obligation to the customer to which the asset relates. Similarly, in instances where such Intake Costs are billed to the customer, the associated revenue will be deferred and recognized over the same three-year period. Commissions Prior to the adoption of ASU 2014-09, commissions we paid related to our long-term storage contracts were expensed as incurred. Upon the adoption of ASU 2014-09, certain commission payments that are directly associated with the fulfillment of long-term storage contracts are capitalized and amortized as a component of depreciation and amortization in our Consolidated Statements of Operations over three years, consistent with the transfer of the performance obligation to the customer to which the asset relates. Certain direct commission payments associated with contracts with a duration of one year or less are expensed as incurred under the practical expedient which allows an entity to expense as incurred an incremental cost of obtaining a contract if the amortization period of the asset that the entity otherwise would have recognized is one year or less. The Contract Fulfillment Costs recorded as a result of the adoption of ASU 2014-09 as of January 1, 2018 and December 31, 2018 are as follows: Description Intake Costs asset Commissions asset Location in Balance Sheet Other (within Other Assets, Net) Other (within Other Assets, Net) January 1, 2018 (Date of Adoption of ASU 2014-09) December 31, 2018 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount $ 31,604 $ (14,954) $ 16,650 $ 39,748 $ (24,504) 15,244 42,072 (21,173) 20,899 58,424 (34,637) 23,787 Amortization expense associated with Contract Fulfillment Costs for the year ended December 31, 2018 is $10,380 and $13,838, respectively. 97 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) Estimated amortization expense for Contract Fulfillment Costs is as follows: 2019 2020 2021 Estimated Amortization 21,227 $ 12,526 5,278 Deferred revenue liabilities are reflected as follows in our Consolidated Balance Sheets: Description Deferred revenue - Current Balance Sheet Location Deferred revenue Deferred revenue - Long-term Other Long-term Liabilities — December 31, 2017 2018 $ 241,590 $ 264,823 26,401 Of the total deferred revenue recorded on our Consolidated Balance Sheet as of December 31, 2018, we expect to recognize approximately 91% as revenue within the next 12 months. The following table presents certain components of our Consolidated Statements of Operations for the year ended December 31, 2018 as reported and as if we had not adopted ASU 2014-09 on January 1, 2018: Year Ended December 31, 2018 Revenues Operating Income Income from Continuing Operations As Reported $ 4,225,761 755,508 $ $ 376,976 Per Share Income from Continuing Operations - Basic $ Per Share Income from Continuing Operations - Diluted $ 1.31 1.31 If ASU 2014-09 was not adopted $ 4,219,663 751,648 $ $ $ $ 373,113 1.30 1.30 Data Center Our data center business features storage rental provided to the customer at contractually specified rates over a fixed contractual period and are accounted for under Accounting Standards Codification ("ASC") 840, Leases, and therefore, the majority of our revenues from our data center business are recognized on a straight-line basis. Storage rental revenue associated with our data center business was $218,675 for the year ended December 31, 2018, which includes approximately $38,800 of revenue associated with power and connectivity. The revenue related to the service component of our data center business is recognized in the period the data center access or related services are provided. The future minimum lease payments to be received under non-cancellable data center operating leases, for which we are the lessor, excluding month to month leases, for the next five years are as follows: 2019 2020 2021 2022 2023 Future minimum lease payments 178,196 138,216 92,724 71,784 57,882 $ 98 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) m. Rent Normalization We have entered into various leases for buildings that expire over various terms. Certain leases have fixed escalation clauses (excluding those tied to the consumer price index or other inflation-based indices) or other features (including return to original condition, primarily in the United Kingdom) which require normalization of the rental expense over the life of the lease, resulting in deferred rent being reflected as a liability in the accompanying Consolidated Balance Sheets. In addition, we have assumed various above and below market leases in connection with certain of our acquisitions. The difference between the present value of these lease obligations and the market rate at the date of the acquisition was recorded as 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. 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, 2016, 2017 and 2018 was $28,976 ($22,364 after tax or $0.09 per basic and diluted share), $30,019 ($26,512 after tax or $0.10 per basic and diluted share) and $31,167 ($28,998 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, 2016 2017 2018 $ $ 110 28,866 28,976 $ $ 108 29,911 30,019 $ $ 119 31,048 31,167 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, or (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. 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, 2018 by vesting terms is as follows: December 31, 2018 Stock Options Outstanding 3,965,018 306,816 4,271,834 % of Stock Options Outstanding 92.8% 7.2% 100.0% Three-year vesting period (10 year contractual life) Five-year vesting period (10 year contractual life) 99 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) Our equity compensation plans generally provide that, upon a vesting change in control (as defined in each plan), any unvested options and other awards granted thereunder shall vest immediately if an employee is terminated as a result of the change in control or terminates their own employment for good reason (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, 2018 was 6,053,429. The weighted average fair value of stock options granted in 2016, 2017 and 2018 was $2.56, $4.28 and $3.50 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 2016 2017 2018 Expected volatility Risk-free interest rate Expected dividend yield Expected life 27.2% 1.32% 7% 5.6 years 25.7% 1.96% 6% 5.0 years 25.4% 2.65% 7% 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, 2018 is as follows: Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Options Outstanding at December 31, 2017 3,671,740 $ Granted Exercised Forfeited Expired Outstanding at December 31, 2018 Options exercisable at December 31, 2018 Options expected to vest 846,517 (182,607) (47,754) (16,062) 4,271,834 2,393,010 1,808,321 $ $ $ 34.41 33.71 22.36 34.69 34.69 34.78 34.51 35.10 7.03 5.97 8.36 $ $ $ 6,066 5,785 279 100 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) The aggregate intrinsic value of stock options exercised for the years ended December 31, 2016, 2017 and 2018 is as follows: Aggregate intrinsic value of stock options exercised $ 18,298 $ 8,485 $ 2,181 Year Ended December 31, 2016 2017 2018 Restricted Stock Units 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 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). Cash dividends accrued and paid on RSUs for the years ended December 31, 2016, 2017 and 2018, are as follows: Cash dividends accrued on RSUs Cash dividends paid on RSUs Year Ended December 31, 2016 2017 2018 $ 2,525 $ 2,590 $ 2,363 2,370 2,899 2,477 The fair value of RSUs vested during the years ended December 31, 2016, 2017 and 2018, are as follows: Fair value of RSUs vested Year Ended December 31, 2016 22,236 $ 2017 19,825 $ 2018 20,454 $ A summary of RSU activity for the year ended December 31, 2018 is as follows: Non-vested at December 31, 2017 Granted Vested Forfeited Non-vested at December 31, 2018 Weighted- Average Grant-Date Fair Value 35.38 33.59 35.10 34.92 34.33 RSUs 1,071,469 $ 814,659 (582,687) (106,875) 1,196,566 $ 101 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) Performance Units Under our various equity compensation plans, we may also make awards of PUs. For the majority of outstanding PUs, the number of PUs earned is determined based on our performance against predefined targets of revenue and return on invested capital ("ROIC") and, beginning with PUs granted in 2018, Adjusted EBITDA (as defined in Note 9). 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 either (i) a subset of the Standard & Poor's 500 Index (for certain PUs granted prior to 2017), or (ii) the MSCI United States REIT Index (for certain PUs granted in 2017 and thereafter), rather than the revenue, ROIC and Adjusted EBITDA 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. Cash dividends accrued and paid on PUs for the years ended December 31, 2016, 2017 and 2018, are as follows: Cash dividends accrued on PUs Cash dividends paid on PUs Year Ended December 31, 2016 2017 2018 $ 1,078 $ 1,290 $ 645 205 1,804 644 During the years ended December 31, 2016, 2017 and 2018, we issued 231,672, 229,692 and 353,507 PUs, respectively. We forecast the likelihood of achieving the predefined revenue, ROIC and Adjusted EBITDA targets for our PUs 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 of the grant date) over the vesting period for each of the awards. The fair value of PUs based on our performance against revenue, ROIC and Adjusted EBITDA 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, 2018, we expected 65%, 100% and 100% achievement of the predefined revenue, ROIC and Adjusted EBITDA targets associated with the awards of PUs made in 2016, 2017 and 2018, respectively. 102 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) The fair value of earned PUs that vested during the years ended December 31, 2016, 2017 and 2018, is as follows: Fair value of earned PUs that vested Year Ended December 31, 2016 2017 2018 $ 5,748 $ 1,242 $ 3,117 A summary of PU activity for the year ended December 31, 2018 is as follows: Non-vested at December 31, 2017 Granted Vested Forfeited/Performance or Market Conditions Not Achieved Non-vested at December 31, 2018 Original PU Awards PU Adjustment(1) Total PU Awards Weighted- Average Grant-Date Fair Value 717,878 353,507 (81,305) (23,031) 967,049 (250,067) — — 467,811 $ 353,507 (81,305) (49,881) (299,948) (72,912) 667,101 $ 39.28 33.64 38.34 38.01 36.54 _______________________________________________________________________________ (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. 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, 2016, 2017 and 2018, there were 110,835, 102,826 and 119,123 shares, respectively, purchased under the ESPP. As of December 31, 2018, we have 505,645 shares available under the ESPP. _______________________________________________________________________________ As of December 31, 2018, unrecognized compensation cost related to the unvested portion of our Employee Stock-Based Awards was $43,248 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. 103 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) 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. 104 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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, 2016, 2017 and 2018 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, 2016 2017 2018 103,880 $ 191,723 $ 2,409 1,611 101,471 3,353 104,824 $ $ 190,112 (6,291) 183,821 $ $ 376,976 1,198 375,778 (12,427) 363,351 246,178,000 265,898,000 285,913,000 574,954 514,044 — 431,071 509,235 6,278 234,558 505,030 — 247,266,998 266,844,584 286,652,588 0.41 0.01 0.43 0.41 0.01 0.42 $ $ $ $ 0.71 (0.02) 0.69 0.71 (0.02) 0.69 $ $ $ $ 1.31 (0.04) 1.27 1.31 (0.04) 1.27 Antidilutive stock options, RSUs and PUs, excluded from the calculation 1,790,362 2,326,344 3,258,078 ___________________________________________________________________ (1) See Note 12. (2) Columns may not foot due to rounding. 105 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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 write-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, 2016 2017 2018 Balance at Beginning of the Year Credit Memos Charged to Revenue Allowance for Bad Debts Charged to Expense $ $ 31,447 44,290 46,648 $ 37,616 38,966 36,329 8,705 14,826 18,625 Other(1) $ 16,528 1,905 (1,568) _______________________________________________________________________________ Balance at End of the Year Deductions(2) $ (50,006) $ (53,339) (56,450) 44,290 46,648 43,584 (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, 2017 and 2018, respectively, related to cash and cash equivalents. At December 31, 2017, we had money market funds with 12 "Triple A" rated money market funds and time deposits with seven global banks. At December 31, 2018, we had no 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 1% of the fund total assets or in any one financial institution to a maximum of $50,000. As of December 31, 2017 and 2018, our cash and cash equivalents balance was $925,699 and $165,485, respectively. At December 31, 2017, our cash and cash equivalents included money market funds of $585,000 and time deposits of $24,482. 106 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) s. Fair Value Measurements Entities are permitted under GAAP to elect to measure certain 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. 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, 2017 and 2018, respectively, are as follows: Description 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) Money Market Funds(1) $ 585,000 $ Time Deposits(1) Trading Securities Derivative Assets(4) Derivative Liabilities(4) 24,482 11,784 1,579 2,329 $ — — 585,000 24,482 $ 11,279 (2) 505 (3) — — 1,579 2,329 Fair Value Measurements at December 31, 2018 Using Description Time Deposits(1) Trading Securities Derivative Assets(4) Interest Rate Swap Agreements Liabilities(5) Total Carrying Value at December 31, 2018 Quoted prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) $ 956 $ — $ 10,753 93 973 10,248 (2) — — 956 $ 505 (3) 93 973 _____________________________________________________________ (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. 107 — — — — — — — — — IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) (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. (5) We have entered into interest rate swap agreements to hedge certain of our interest rate exposures, as more fully disclosed in Note 3. The interest rate swap agreements are designated as cash flow hedges and are measured based on inputs other than quoted market prices that are observable. 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, 2016, 2017 and 2018, 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.v.); and (v) our investment in OSG (as defined and disclosed in Note 13), all of which are based on Level 3 inputs. The fair value of our long-term debt, which was determined based on either Level 1 inputs or Level 3 inputs, is disclosed in Note 4. Long-term debt is measured at cost in our Consolidated Balance Sheets as of December 31, 2017 and 2018. 108 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) t. Accumulated Other Comprehensive Items, Net The changes in accumulated other comprehensive items, net for the years ended December 31, 2016, 2017 and 2018 are as follows: 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) Total other comprehensive (loss) income Balance as of December 31, 2017 Other comprehensive (loss) income: Foreign currency translation adjustment Fair value adjustments for interest rate swap agreements Total other comprehensive (loss) income Balance as of December 31, 2018 ______________________________________________________________ Foreign Currency Translation Adjustments Market Value Adjustments for Securities Fair Value Adjustments for Interest Rate Swap Agreements Total $ (175,651) $ 734 $ — $ (174,917) (36,922) — (36,922) $ (212,573) $ — (734) (734) — 108,584 108,584 $ (103,989) $ (160,702) — (160,702) $ (264,691) $ — — — — — — — $ — — (36,922) (734) — (37,656) — $ (212,573) — 108,584 — 108,584 — $ (103,989) — (160,702) (973) (973) (161,675) (973) (973) $ (265,664) (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 13). 109 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) u. Other Expense (Income), Net (including Foreign Currency) Other expense (income), net consists of the following: Foreign currency transaction losses (gains), net(1) $ 20,413 $ 43,248 $ Debt extinguishment expense, net Other, net(2) 9,283 14,604 $ 44,300 $ 78,368 (42,187) 79,429 $ (15,567) — 3,875 (11,692) _______________________________________________________________________________ Year Ended December 31, 2016 2017 2018 (1) 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, includes gains or losses primarily related to (i) our Euro Notes (as defined in Note 4), (ii) borrowings in certain foreign currencies under our Revolving Credit Facility and our Former Revolving Credit Facility (each as defined in Note 4), (iii) certain foreign currency denominated intercompany obligations of our foreign subsidiaries to us and between our foreign subsidiaries, which are not considered permanently invested and (iv) amounts that are paid or received on the net settlement amount from forward contracts (as more fully discussed in Note 3). (2) 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 in Note 6) and a charge of $1,421 associated with the loss on disposal of the Iron Mountain Canadian Divestments (as defined in Note 6). Other, net for the year ended December 31, 2017 includes a gain of $38,869 associated with the Russia and Ukraine Divestment (as defined in Note 13). v. Redeemable Noncontrolling Interests Certain unaffiliated third parties own noncontrolling interests in our consolidated subsidiaries in Chile, India and South Africa. The underlying 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 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. In 2018, certain of our noncontrolling interest shareholders exercised their option to put their ownership interest back to us. Upon the exercise of the put option, this noncontrolling interest became mandatorily redeemable by us, and, therefore, is accounted for as a liability rather than a component of redeemable noncontrolling interests. We and these noncontrolling interest shareholders are currently in a dispute with respect to the fair value of the noncontrolling interest shares. We have recorded our estimate of the fair value of these noncontrolling interest shares as a component of Accrued expenses on our Consolidated Balance Sheet as of December 31, 2018. Subsequent to these noncontrolling interest shares becoming mandatorily redeemable, any increase or decrease in the fair value of such noncontrolling interest will be included as a component of Other expense (income), net on our Consolidated Statements of Operations in future periods. 110 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) w. New Accounting Pronouncements Recently Adopted Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09. We adopted ASU 2014-09 on January 1, 2018 using the modified retrospective method. See Note 2.l. for information regarding the impact of the adoption of ASU 2014-09 on our consolidated financial statements. In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). ASU 2016-01 requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income, 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. We adopted ASU 2016-01 on January 1, 2018. ASU 2016-01 did not have an impact 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. We adopted ASU 2017-12 on January 1, 2018. ASU 2017-12 did not have a material impact on our consolidated financial statements. Other As Yet Adopted Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) as amended ("ASU 2016-02"). ASU 2016-02 will require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases. 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 was effective for us on January 1, 2019. ASU 2016-02 permits the use of a modified retrospective approach which requires an entity to recognize and measure leases existing at, or entered into after, either (1) the beginning of the earliest comparative period presented (“Option 1”) or (2) at the beginning of the period of adoption (“Option 2”). We will be electing Option 2, under which we will apply ASC 840, Leases (prior to the adoption of ASU 2016-02) to all comparative periods, including disclosures, and recognize the effects of applying ASU 2016-02 as a cumulative-effect adjustment to retained earnings as of January 1, 2019, the effective date of the standard. The transition guidance associated with ASU 2016-02 also permits certain practical expedients. We will elect the package of practical expedients permitted under the transition guidance which, among other things, allows us to carryforward the historical lease classification. We will also adopt an accounting policy election such that leases with an initial term of 12 months or less will not be included on our balance sheet. We will recognize those lease payments in the Consolidated Statements of Operations on a straight-line basis over the lease term. We are finalizing certain aspects of adopting ASU 2016-02, including finalizing our discount rates. ASU 2016-02 will have a material impact on our Consolidated Balance Sheets, but will not have a material impact on our Consolidated Statements of Operations. The most significant impact of the adoption of ASU 2016-02 is the recognition of additional right-of-use assets and lease liabilities for operating leases. We currently estimate the lease liabilities to be between $1,750,000 and $1,950,000 at January 1, 2019, the date of initial application, and the right-of-use assets to be approximately $100,000 less than the lease liabilities. The accounting for our existing capital leases remains substantially unchanged by the provisions of ASU 2016-02. We also expect to record an immaterial adjustment to our opening retained earnings balance as a result of certain build-to-suit leases that were accounted for as capital leases under the old standard but will be accounted for as operating leases under ASU 2016-02. 111 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 2. Summary of Significant Accounting Policies (Continued) In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force) ("ASU 2018-15"). ASU 2018-15 aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. ASU 2018-15 is effective for us on January 1, 2020, with early adoption permitted. We do not expect ASU 2018-15 will have a material impact on our consolidated financial statements. 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, 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, 2018, we had outstanding forward contracts to purchase 29,000 Euros and sell $33,374 United States dollars. The following table provides the fair value of our derivative instruments not designated as hedging instruments as of December 31, 2017 and 2018: Derivatives Not Designated as Hedging Instruments Derivative assets Derivative liabilities Balance Sheet Location Prepaid expenses and other Accrued expenses December 31, 2017 1,579 $ 2,329 December 31, 2018 93 $ — Net cash (receipts) payments included in cash from operating activities related to settlements associated with foreign currency forward contracts for the years ended December 31, 2016, 2017 and 2018, are as follows: Net (receipts) payments Year Ended December 31, 2016 2017 2018 $ — $ (9,073) $ 5,797 (Gains) losses for our derivative instruments for the years ended December 31, 2016, 2017 and 2018 are as follows: Derivatives Not Designated as Hedging Instruments Location of Loss (Gain) Recognized in Income on Derivative 2016 2017 2018 Foreign exchange contracts Other expense (income), net $ — $ (8,292) $ 4,954 Amount of (Gain) Loss Recognized in Income on Derivatives December 31, 112 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 3. Derivative Instruments and Hedging Activities (Continued) We have designated a portion of (i) our Euro denominated borrowings by IMI under our Former Revolving Credit Facility and (ii) our Euro Notes as a hedge of net investment of certain of our Euro denominated subsidiaries. For the years ended December 31, 2016, 2017 and 2018, we designated on average 29,649, 103,682 and 224,424 Euros, respectively, of our 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, 2016 2017 2018 $ 1,107 $ (15,015) $ 11,070 As of December 31, 2018, cumulative net gains of $14,258, net of tax, are recorded in accumulated other comprehensive items, net associated with this net investment hedge. In March 2018, we entered into interest rate swap agreements to limit our exposure to changes in interest rates on a portion of our floating rate indebtedness. As of December 31, 2018, we have $350,000 in notional value of interest rate swap agreements outstanding, which expire in March 2022. Under the interest rate swap agreements, we receive variable rate interest payments associated with the notional amount of each interest rate swap, based upon one-month LIBOR, in exchange for the payment of fixed interest rate payments (at the fixed rate interest specified in the interest rate swap agreements). We have designated these interest rate swaps as cash flow hedges. Unrealized gains are recognized as assets while unrealized losses are recognized as liabilities. The fair value of the interest rate swaps are estimated using industry standard valuation models using market-based observable inputs, including interest rate curves (Level 2, as described in Note 2.s.). At December 31, 2018, we had a derivative liability of $973, which was recorded as a component of Other Long-term Liabilities in our Consolidated Balance Sheet, which represents the fair value of our interest rate swap agreements. We have recorded the change in fair value of the interest rate swap agreements to accumulated other comprehensive income. We have recorded unrealized losses of $973 for the year ended December 31, 2018 associated with our interest rate swap agreements. At December 31, 2018, we have recorded cumulative unrealized losses of $973 within accumulated other comprehensive items, net associated with these agreements. 113 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 4. Debt Long-term debt is as follows: December 31, 2017 December 31, 2018 Debt (inclusive of discount) Unamortized Deferred Financing Costs Carrying Amount Fair Value Debt (inclusive of discount) Unamortized Deferred Financing Costs Carrying Amount Fair Value 466,593 243,750 — (14,407) — — 452,186 243,750 — 466,593 243,750 — 793,832 240,625 693,169 (14,117) — (8,742) 779,715 240,625 684,427 793,832 240,625 660,013 187,504 (3,382) 184,122 189,049 233,955 (3,084) 230,871 235,645 — — — — 178,299 (2,357) 175,942 178,299 500,000 (5,874) 494,126 507,500 500,000 (4,155) 495,845 488,750 600,000 (6,224) 593,776 625,500 600,000 (5,126) 594,874 606,000 199,171 (3,295) 195,876 208,631 183,403 (2,506) 180,897 186,154 1,000,000 (9,156) 990,844 1,012,500 1,000,000 (7,782) 992,218 940,000 359,386 (4,691) 354,695 364,776 343,347 (4,098) 339,249 321,029 539,702 (7,718) 531,984 527,559 509,425 (6,573) 502,852 453,811 250,000 (3,615) 246,385 256,875 250,000 (3,185) 246,815 224,375 1,000,000 (13,866) 986,134 1,000,000 1,000,000 (12,442) 987,558 855,000 825,000 (11,817) 813,183 826,031 825,000 (10,923) 814,077 713,625 649,432 (566) 648,866 649,432 606,702 (171) 606,531 606,702 258,973 (356) 258,617 258,973 221,673 (218) 221,455 221,673 50,000 7,129,511 (146,300) (1,273) (86,240) 48,727 7,043,271 — (146,300) 50,000 50,000 8,229,430 (126,406) (1,128) (86,607) 48,872 8,142,823 — (126,406) 50,000 $ 6,983,211 $ (86,240) $ 6,896,971 $ 8,103,024 $ (86,607) $ 8,016,417 Revolving Credit Facility (1) Term Loan A(1) Term Loan B(1)(2) Australian Dollar Term Loan (the "AUD Term Loan")(3)(4) UK Bilateral Revolving Credit Facility ("UK Bilateral Facility")(4) 43/8% Senior Notes due 2021 (the "43/8% Notes") (5)(6)(7) 6% Senior Notes due 2023 (the "6% Notes due 2023")(5)(6) 53/8% CAD Senior Notes due 2023 (the "CAD Notes due 2023")(5)(7)(8) 53/4% Senior Subordinated Notes due 2024 (the "53/4% Notes")(5)(6) 3% Euro Senior Notes due 2025 (the "Euro Notes") (5)(6)(7) 37/8% GBP Senior Notes due 2025 (the "GBP Notes due 2025")(5)(7)(9) 53/8% Senior Notes due 2026 (the "53/8% Notes") (5)(7)(10) 47/8% Senior Notes due 2027 (the "47/8% Notes") (5)(6)(7) 51/4% Senior Notes due 2028 (the "51/4% Notes") (5)(6)(7) Real Estate Mortgages, Capital Leases and Other (11) Accounts Receivable Securitization Program (12) Mortgage Securitization Program(13) Total Long-term Debt Less Current Portion Long-term Debt, Net of Current Portion ______________________________________________________________ (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. 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, 2017 and 2018, respectively. 114 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 4. Debt (Continued) (2) The amount of debt for the Term Loan B (as defined below) reflects an unamortized original issue discount of $1,581 as of December 31, 2018. (3) The amount of debt for the AUD Term Loan reflects an unamortized original issue discount of $1,545 and $1,690 as of December 31, 2017 and 2018, respectively. (4) 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. (5) 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, 2017 and 2018, respectively. (6) 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 IMI's 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. The remainder of our subsidiaries do not guarantee the Parent Notes. See Note 5. (7) The 43/8% Notes, 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. (8) 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. (9) 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. (10) 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. (11) Includes (i) real estate mortgages of $20,183 and $18,576 as of December 31, 2017 and 2018, respectively, which bear interest at approximately 4.3% as of December 31, 2017 and 4.1% as of December 31, 2018 and are payable in various installments through 2021, (ii) capital lease obligations of $436,285 and $447,173 as of December 31, 2017 and 2018, respectively, which bear a weighted average interest rate of 4.9% at December 31, 2017 and 5.7% at December 31, 2018, and (iii) other notes and other obligations, which were assumed by us as a result of certain acquisitions, of $192,964 and $140,953 as of December 31, 2017 and 2018, respectively, and bear a weighted average interest rate of 11.2% at December 31, 2017 and 11.1% at December 31, 2018, respectively. 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 Accounts Receivable Securitization Special Purpose Subsidiaries are the obligors under this program. We believe the fair value (Level 3 of fair value hierarchy described at Note 2.s.) of this debt approximates its carrying value. (13) The Mortgage Securitization Special Purpose Subsidiary is the obligor under this program. We believe the fair value (Level 3 of fair value hierarchy described at Note 2.s.) of this debt approximates its carrying value. 115 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 4. Debt (Continued) 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 which consisted of a revolving credit facility (the "Former Revolving Credit Facility") and a 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 A"). The maximum amount permitted to be borrowed under the Revolving Credit Facility is $1,750,000. The original amount of the Term Loan A was $250,000. Under the Revolving Credit Facility, we had 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 was originally scheduled to mature on August 21, 2022, at which point all obligations were to become due. On March 22, 2018, we entered into an amendment (the “2018 First Amendment”) to the Credit Agreement which provided us with the option to request additional commitments of up to approximately $1,260,000 under the Credit Agreement in the form of term loans or through increased commitments under the Revolving Credit Facility, subject to the conditions specified in the Credit Agreement. On June 4, 2018, we entered into another amendment (the "2018 Second Amendment") to the Credit Agreement which (i) reduced interest rate margins applicable to existing and future borrowings under the Revolving Credit Facility and Term Loan A by 0.25% and (ii) extended the maturity date of the Credit Agreement to June 4, 2023. 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 A is to be paid in quarterly installments in an amount equal to $3,125 per quarter, with the remaining balance due on June 4, 2023. 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, 2018, we had $793,832 and $240,625 of outstanding borrowings under the Revolving Credit Facility and the Term Loan A, respectively. Of the $793,832 of outstanding borrowings under the Revolving Credit Facility, $619,800 was denominated in United States dollars, 93,700 was denominated in Canadian dollars and 92,000 was denominated in Euros. In addition, we also had various outstanding letters of credit totaling $43,297 under the Revolving Credit Facility. The remaining amount available for borrowing under the Revolving Credit Facility as of December 31, 2018, 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 $912,871 (which amount represents the maximum availability as of such date). The average interest rate in effect under the Credit Agreement was 3.9% as of December 31, 2018. The average interest rate in effect under the Revolving Credit Facility was 3.9% as of December 31, 2018 and the interest rate in effect under the Term Loan A as of December 31, 2018 was 4.2%. In connection with the 2018 First Amendment, Iron Mountain Information Management, LLC ("IMIM") entered into an incremental term loan activation notice, or the Activation Notice, with certain lenders pursuant to which the lenders party to the Activation Notice agreed to provide commitments to fund an incremental term loan B in the amount of $700,000 (the “Term Loan B”). On March 26, 2018, IMIM borrowed the full amount of the Term Loan B, which matures on January 2, 2026. The Term Loan B was issued at 99.75% of par. The aggregate net proceeds of approximately $689,850, after paying commissions to the joint lead arrangers and net of the original discount, were used to repay outstanding borrowings under the Revolving Credit Facility. The Term Loan B holders benefit from the same security and guarantees as other borrowings under the Credit Agreement. The Term Loan B holders also benefit from the same affirmative and negative covenants as other borrowings under the Credit Agreement; however, the Term Loan B holders are not generally entitled to the benefits of the financial covenants under the Credit Agreement. 116 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 4. Debt (Continued) Principal payments on the Term Loan B are to be paid in quarterly installments of $1,750 per quarter during the period June 30, 2018 through December 31, 2025, with the balance due on January 2, 2026. The Term Loan B may be prepaid without penalty at any time. The Term Loan B bears interest at a rate of LIBOR plus 1.75%. The interest rate in effect under Term Loan B as of December 31, 2018 was 4.3%. b. Notes Issued under Indentures As of December 31, 2018, 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 (i) is effectively subordinated to all of our secured indebtedness, including under the Credit Agreement, to the extent of the value of the collateral securing such indebtedness, (ii) ranks pari passu in right of payment with each other and with debt outstanding under the Credit Agreement, except the 53/4% Notes which are subordinated in right of payment to the Credit Agreement, the senior notes shown below and other "Senior Debt" as defined in, and to the extent set forth in, our indenture for the 53/4% Notes, and (iii) is structurally subordinated to all liabilities of our subsidiaries that do not guarantee such series of notes: • • • • • • • • • 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. 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 Former Revolving Credit Facility, for the repayment of all outstanding borrowings under a bridge credit agreement which provided a portion of the financing necessary to close the Recall Transaction. 117 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 4. Debt (Continued) In September 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 Former 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 paying the initial purchasers' commissions, 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 61/8% CAD Senior Notes due 2021 (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. 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 in Note 12), were used to finance the purchase price of the IODC Transaction (as defined 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. 118 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 4. Debt (Continued) The following table presents the various redemption dates and prices of the senior or senior subordinated notes. The redemption dates reflect the date at or after which the notes may be redeemed at our option at a premium redemption price. After these dates, the notes may be redeemed at 100% of face value: Redemption Date 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, 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 101.094% (1) 102.000% (1) 104.031% (1) 100.958% (1) — — 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. c. Australian Dollar Term Loan On March 27, 2018, Iron Mountain Australia Group Pty, Ltd. ("IM Australia"), a wholly owned subsidiary of IMI, amended its AUD Term Loan (the "AUD Term Loan Amendment") to (i) increase the borrowings under the AUD Term Loan from 250,000 Australian dollars to 350,000 Australian dollars; (ii) increase the quarterly principal payments from 6,250 Australian dollars per year to 8,750 Australian dollars per year; and (iii) decrease the interest rate on the AUD Term Loan from BBSY (an Australian benchmark variable interest rate) plus 4.3% to BBSY plus 3.875%. The AUD Term Loan matures in September 2022. All indebtedness associated with the AUD Term Loan was issued at 99% of par. The net proceeds associated with the AUD Term Loan Amendment of approximately 99,000 Australian dollars (or approximately $75,621, based upon the exchange rate between the Australian dollar and the United States dollar on March 29, 2018 (the closing date of the AUD Term Loan Amendment)), net of the original discount, were used to repay outstanding borrowings under the Revolving Credit Facility. Principal payments on the AUD Term Loan are to be paid in quarterly installments in an amount equivalent to an aggregate of 8,750 Australian dollars per year, with the remaining balance due September 22, 2022. The AUD Term Loan is secured by substantially all assets of IM Australia. IMI and the Guarantors guarantee all obligations under the AUD Term Loan. 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. As of December 31, 2018, we had 334,063 Australian dollars ($235,645 based upon the exchange rate between the United States dollar and the Australian dollar as of December 31, 2018) outstanding on the AUD Term Loan. The interest rate in effect under the AUD Term Loan was 6.1% and 6.0% as of December 31, 2017 and 2018, respectively. 119 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 4. Debt (Continued) d. UK Bilateral Revolving Credit Facility On September 24, 2018, IM UK and Iron Mountain (UK) Data Centre Limited entered into a 140,000 British pounds sterling Revolving Credit Facility (the "UK Bilateral Facility") with Barclays Bank PLC. The maximum amount permitted to be borrowed under the UK Bilateral Facility is 140,000 British pounds sterling, and we have the option to request additional commitments of up to 125,000 British pounds sterling, subject to the conditions specified in the UK Bilateral Facility. The UK Bilateral Facility was fully utilized on September 24, 2018 (the closing date of the UK Bilateral Facility). The UK Bilateral Facility is scheduled to mature on September 23, 2022, at which point all obligations become due. The UK Bilateral Facility contains an option to extend the maturity date for an additional year, subject to the conditions specified in the UK Bilateral Facility, including the lender's consent. The UK Bilateral Facility bears interest at a rate of LIBOR plus 2.25%. The interest rate in effect under the UK Bilateral Facility as of December 31, 2018 is 3.1%. The initial net proceeds received under the UK Bilateral Facility of 138,250 British pounds sterling (or approximately $180,300, based upon the exchange rate between the British pound sterling and the United States dollar on September 24, 2018), net of upfront fees, were used to repay borrowings under the Revolving Credit Facility. The UK Bilateral Facility is secured by certain properties in the United Kingdom. IMI and the Guarantors guarantee all obligations under the UK Bilateral Facility. 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. 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 and 2018, the maximum availability allowed and amount outstanding under the Accounts Receivable Securitization Program was $258,973 and $221,673, respectively. The interest rate in effect under the Accounts Receivable Securitization Program was 2.2% and 3.0% as of December 31, 2017 and 2018, respectively. Commitment fees at a rate of 40 basis points are charged on amounts made available but not borrowed under the Accounts Receivable Securitization Program. 120 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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, 2017 and 2018. The interest rate in effect under the Mortgage Securitization Program was 3.5% as of December 31, 2017 and 2018. 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. 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 qualified REIT subsidiaries (the "QRS Cash Pool") and the other for our taxable REIT subsidiaries (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). As of December 31, 2018, we had a net cash position of approximately $2,000 in the QRS Cash Pool (which consisted of a gross cash position of approximately $300,800 less outstanding debit balances of approximately $298,800 by participating subsidiaries) and we had a net cash position of approximately $2,200 in the TRS Cash Pool (which consisted of a gross cash position of approximately $281,500 less outstanding debit balances of approximately $279,300 by participating subsidiaries). The net cash position balances as of December 31, 2017 and 2018 are reflected as cash and cash equivalents in the Consolidated Balance Sheets. h. Debt Covenants 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. 121 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 4. Debt (Continued) Our leverage and fixed charge coverage ratios under the Credit Agreement as of December 31, 2017 and 2018, as well as our leverage ratio under our indentures as of December 31, 2017 and 2018 are as follows: December 31, 2017 December 31, 2018 Maximum/Minimum Allowable Net total lease adjusted leverage ratio Net secured debt lease adjusted leverage ratio Bond leverage ratio (not lease adjusted) Fixed charge coverage ratio 5.0 1.6 5.8 2.1 ______________________________________________________________ 5.6 Maximum allowable of 6.5 2.6 Maximum allowable of 4.0 5.8 Maximum allowable of 6.5-7.0(1)(2) 2.2 Minimum allowable of 1.5 (1) The maximum allowable leverage ratio under our indentures 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 indentures 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. (2) 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 (as defined in Note 12), 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. i. Maturities of long-term debt (gross of discounts) are as follows: Year 2019 2020 2021 2022 2023 Thereafter Net Discounts Net Deferred Financing Costs Total Long-term Debt (including current portion) Amount $ 126,406 381,741 583,759 447,153 1,800,128 4,893,514 8,232,701 (3,271) (86,607) $ 8,142,823 122 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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, 2017 and 2018 and for the years ended December 31, 2016, 2017 and 2018 and are prepared on the same basis as the consolidated financial statements. The Parent Notes, CAD Notes due 2023, 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 due 2023, which were issued by Canada Company, 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 and IM UK do not guarantee the Parent Notes. The subsidiaries that do not guarantee the Parent Notes, the CAD Notes due 2023, the GBP Notes due 2025 and the 53/8% Notes are referred to below as the Non-Guarantors. As discussed below, the results of the Non-Guarantors for 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. 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 Sheets as of December 31, 2017 and 2018, (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 Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2017 and 2018, 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 Statements of Cash Flows for the years ended December 31, 2017 and 2018. 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. 123 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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, 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 Pool 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.v.) 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. 124 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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, 2018 Non- Guarantors Eliminations Consolidated $ 132 $ 61,650 $ 169,318 $ (65,615) $ Assets Current Assets: Cash and cash equivalents(1) 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 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) Redeemable Noncontrolling Interests (see Note 2.v.) — — 93 225 190 4,954,686 1,885,174 — — 6,839,860 6,840,275 462,927 — — 268,373 4,223,822 — 973 — $ $ 47,900 818,463 108,879 1,036,892 3,002,104 — 1,006,144 2,858,539 979,483 4,844,166 798,989 — 86,797 1,055,104 1,487,263 — (818,463) (29) (884,107) — — — (4,954,686) (2,891,318) 1,582,491 734,063 — — 2,316,554 (7,846,004) $ $ 8,883,162 $ 4,858,921 — $ 355,536 $ $ (8,730,111) $ 11,852,247 10,612 63,703 616,826 1,877,649 4,954,686 115,994 55,003 62,732 451,073 1,914,946 300,064 — 70,532 (818,463) $ (65,615) (29) — — — — — (4,954,686) 165,485 846,889 — 195,740 1,208,114 4,489,557 — — 4,441,030 1,713,546 6,154,576 — — 126,406 1,336,272 8,016,417 — 417,031 70,532 Total Iron Mountain Incorporated Stockholders' Equity 1,884,180 1,243,692 1,647,626 (2,891,318) 1,884,180 Noncontrolling Interests Total Equity Total Liabilities and Equity — — 1,409 — 1,409 1,884,180 1,243,692 1,649,035 (2,891,318) 1,885,589 $ 6,840,275 $ 8,883,162 $ 4,858,921 $ (8,730,111) $ 11,852,247 ______________________________________________________________ (1) Included within Cash and Cash Equivalents at December 31, 2018 is approximately $57,200 and $12,700 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. 125 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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, 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) 110,659 71,335 312,124 (7,741) (13,247) (Loss) Income from Continuing Operations Before (Benefit) Provision 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) Net Income (Loss) 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) $ 104,824 $ $ 328,677 328,677 $ $ 11,872 11,872 $ $ (18,350) $ (322,199) $ (15,941) $ (322,199) $ 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 1,107 — (38,763) (37,656) 67,168 — (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) — — — 3,690 — 3,690 Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated $ 67,168 $ 324,779 $ 5,070 $ (56,379) $ (273,470) $ 67,168 126 501,606 310,662 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 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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 (Loss) Income 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) $ 292,405 127 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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, 2018 Parent Guarantors Non- Guarantors Eliminations Consolidated $ — $ 1,600,230 $ 1,022,225 $ — $ 2,622,455 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 (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 — — — — — (288) 122 — (166) 166 199,955 2,328 (Loss) Income from Continuing Operations Before Provision (Benefit) for Income Taxes and Gain on Sale of Real Estate (202,117) 413,305 (Benefit) Provision 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) — — (565,468) 363,351 — 363,351 (2,418) (836) (156,993) 573,552 (12,283) 561,269 Less: Net Income (Loss) Attributable to Noncontrolling Interests Net Income (Loss) Attributable to Iron Mountain Incorporated $ Net Income (Loss) $ — — 363,351 363,351 $ $ 561,269 561,269 $ $ Other Comprehensive Income (Loss): Foreign Currency Translation Adjustment Change in Fair Value of Interest Rate Swap Agreements Equity in Other Comprehensive Income (Loss) of Subsidiaries Total Other Comprehensive Income (Loss) Comprehensive Income (Loss) Comprehensive Income (Loss) Attributable to Noncontrolling Interests Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated 11,070 (973) (171,772) (161,675) 201,676 — — (139,971) (139,971) 421,298 970,678 4,759 632,628 18,439 2,575,667 1,673,292 — 1,603,306 (23,198) (23,198) — 4,225,761 1,007,794 18,439 711,702 403,480 793,788 4,759 327,561 235,912 (1,489) (8,329) — 1,801,582 (23,198) — — — — 1,038,975 639,514 (9,818) 2,139,926 435,741 5,692 16,744 1,353,691 (23,198) 3,470,253 319,601 203,642 (30,764) 146,723 38,681 (54,492) — 162,534 (144) — — — — — — 722,461 (722,461) — 162,390 (722,461) 1,198 161,192 162,390 (175,177) — — (175,177) (12,787) — $ $ (722,461) $ (722,461) $ — — 311,743 311,743 (410,718) 755,508 409,289 (11,692) 357,911 36,263 (55,328) — 376,976 (12,427) 364,549 1,198 363,351 364,549 (164,107) (973) — (165,080) 199,469 — — (2,207) — (2,207) $ 201,676 $ 421,298 $ (10,580) $ (410,718) $ 201,676 128 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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, 2016 Parent Guarantors Canada Company Non- Guarantors Eliminations Consolidated Cash Flows from Operating Activities: Cash Flows from Operating Activities $ (168,389) $ 633,808 $ 41,885 $ 33,912 $ — $ 541,216 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) and proceeds from involuntary conversion of property and equipment — (168,389) 1,076 634,884 1,710 43,595 (107) 33,805 — — 175,092 (1,585) — — — (192,736) 4,007 (166,400) (1,585) (40,217) — (10,284) (2,405) (20,185) — (366) 4,032 (125,583) (293,567) — — (10,183) 26,622 5,235 30 2,712 — — — — 11,493 3,170 — — — 2,679 543,895 (328,603) (291,965) — — (50,766) 30,654 7,977 Cash Flows from Investing Activities 173,507 (391,696) (29,178) (399,999) 14,663 (632,703) Cash Flows from Investing Activities-Discontinued Operations — 78,564 16,153 1,995 Cash Flows from Investing Activities 173,507 (313,132) (13,025) (398,004) — 14,663 96,712 (535,991) 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 (1,163,654) (7,511,941) (1,273,228) (4,902,617) 1,150,628 7,144,874 1,130,193 5,118,693 Net proceeds from sales of senior notes 492,500 246,250 186,693 — Debt (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 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, including Restricted Cash, beginning of year Cash and cash equivalents, including Restricted Cash, end of year — — — (505,871) 31,922 (8,389) (2,864) — 2,254 151 — — (183,454) (67,514) 1,585 — — — — — (466) 262,461 1,585 — — (3,489) (895) (5,830) (306,175) (24,751) 473,826 (14,663) — — — (2,864) (306,175) (24,751) — 15,577 (1,891) 3,928 — 473,826 (23,283) 86,344 7,803 13,182 107,245 — — — — (11,493) (3,170) — — — — (14,663) — — — (14,851,440) 14,544,388 925,443 (466) — — (505,871) 31,922 (18,603) 125,373 — 125,373 (25,174) 108,103 128,381 $ 2,405 $ 23,380 $ 17,110 $ 193,589 $ — $ 236,484 129 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued) CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Year Ended December 31, 2017 Parent Guarantors Non- Guarantors Eliminations Consolidated Cash Flows from Operating Activities: Cash Flows from Operating Activities $ (203,403) $ 738,256 $ 189,406 $ — $ 724,259 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) and proceeds from involuntary conversion of property and equipment — (203,403) — — (990,635) (16,170) — — — Cash Flows from Investing Activities-Continuing Operations (1,006,805) Cash Flows from Investing Activities-Discontinued Operations — (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) — Cash Flows from Investing Activities (1,006,805) (728,663) (215,704) 1,351,724 (599,448) 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 Early retirement of senior subordinated and senior notes Net proceeds from sales of senior notes Debit balances (payments) under cash pools 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 Net proceeds associated with the Equity Offering, including Over- Allotment Option Net proceeds associated with the At The Market (ATM) Program Payment of debt financing and stock issuance costs (262,579) (8,077,553) (6,089,563) 224,660 7,650,617 6,041,778 — — — — (14,429,695) 13,917,055 (1,746,856) 2,656,948 (1,031,554) 2,134,870 — — — — (439,999) 13,095 516,462 59,129 (3,848) — — 56,233 — 982,783 — — — — — (9,391) 602,689 — (715,302) 522,078 38,493 9,079 352,771 16,170 — — — — (1,554) 173,950 — 173,950 27,270 172,976 (94,726) — (1,335,554) (16,170) — — — — — (1,446,450) — (1,446,450) — (94,726) — 9,079 — — (439,999) 13,095 516,462 59,129 (14,793) 540,425 — 540,425 27,270 689,215 236,484 925,699 Cash Flows from Financing Activities-Continuing Operations 1,210,236 Cash Flows from Financing Activities-Discontinued Operations — Cash Flows from Financing Activities 1,210,236 602,689 Effect of exchange rates on cash and cash equivalents Increase (Decrease) in cash and cash equivalents Cash and cash equivalents, including Restricted Cash, beginning of year — 28 — 610,937 Cash and cash equivalents, including Restricted Cash, end of year $ 2,433 $ 634,317 $ 383,675 $ (94,726) $ 130 2,405 23,380 210,699 — IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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 $ (217,819) $ 877,864 $ 276,499 $ — $ 936,544 Year Ended December 31, 2018 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 Acquisitions of customer relationships, customer inducements and data center lease-based intangibles Net proceeds from Divestments (see Note 6) Proceeds from sales of property and equipment and other, net (including real estate) and proceeds from involuntary conversion of property and equipment — (217,819) — — 805,799 — — — (995) 876,869 (312,856) (1,338,888) 90,569 (73,429) 1,019 299 Cash Flows from Investing Activities-Continuing Operations 805,799 (1,633,286) Cash Flows from Investing Activities-Discontinued Operations — 8,250 — 276,499 (147,206) (419,669) — — — — — (896,368) (25,258) — 85,860 (506,273) — — — — 805,799 (1,625,036) (506,273) (896,368) (2,221,878) (896,368) (2,230,128) — 8,250 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 Debit (payments) balances under cash pools Debt (repayment to) financing from and equity (distribution to) contribution from noncontrolling interests, net Intercompany loans from parent Parent cash dividends Net payments associated with employee stock-based awards Net proceeds associated with the Equity Offering, including Over-Allotment Option Net proceeds associated with the At The Market (ATM) Program Payment of debt financing and stock issuance costs — — — — — (673,635) (1,142) 76,192 8,716 (412) Cash Flows from Financing Activities-Continuing Operations (590,281) 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 — (590,281) — (2,301) (7,355,086) (6,837,053) 8,445,509 (45,621) — (856,911) — — — — (12,391) 175,500 — 175,500 — (572,667) 6,906,105 16,510 (2,523) (39,457) — — — — (3,602) 39,980 — 39,980 (24,563) (214,357) — — 29,111 — 896,368 — — — — — 925,479 — 925,479 — 29,111 Cash and cash equivalents, including Restricted Cash, beginning of year 2,433 634,317 383,675 (94,726) Cash and cash equivalents, including Restricted Cash, end of year $ 132 $ 61,650 $ 169,318 $ (65,615) $ 131 (995) 935,549 (460,062) (1,758,557) — (98,687) 1,019 86,159 (14,192,139) 15,351,614 — (2,523) — (673,635) (1,142) 76,192 8,716 (16,405) 550,678 — 550,678 (24,563) (760,214) 925,699 165,485 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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. We have assessed our acquisitions in accordance with the guidance in ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. a. Acquisition of Recall On May 2, 2016, 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 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 13 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, 2016, 2017 and 2018, 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”). 132 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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 were entitled to receive up to $25,000 of additional cash proceeds (the "Access Contingent Consideration"). The Access Contingent Consideration was subject to adjustments subsequent to the closing of the Access Sale. We were also subject to potential indemnity obligations as part of the Access Sale. We 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. During the third quarter of 2018, we settled the Access Contingent Consideration with Access CIG, as well as indemnification claims Access CIG previously raised in connection with the Access Sale. Changes to the realizable value of the Access Contingent Consideration were recorded to our Consolidated Statement of Operations as a component of discontinued operations. 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. Following a notice and resolution period, ARKIVE may be entitled to receive from us cash payments, up to the total consideration paid by ARKIVE, based on lost revenues attributable to the acquired customer base calculated based upon the 24-month period following the closing of the ARKIVE sale. 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”). 133 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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”. 134 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 6. Acquisitions (Continued) b. Acquisition of IO Data Centers On January 10, 2018, we completed the acquisition of the United States operations of 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 (the “IODC Transaction”). At the closing of the IODC Transaction, we paid approximately $1,347,000. In addition to the amount paid at the closing of the IODC Transaction, there was the potential of $35,000 in additional payments associated with the execution of future customer contracts through the one-year anniversary of the IODC Transaction, of which approximately $31,000 is accrued at December 31, 2018. This amount is reported as a third-party commissions asset as a component of Other within Other assets, net, on our Consolidated Balance Sheet at December 31, 2018. We have accounted for the IODC Transaction as an acquisition of a business in accordance with the guidance in ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. _______________________________________________________________________________ The unaudited consolidated pro forma financial information (the "Pro Forma Financial Information") below summarizes the combined results of us, Recall and IODC on a pro forma basis as if the Recall Transaction had occurred on January 1, 2015, and the IODC Transaction had occurred on January 1, 2017. 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 acquisitions had taken place on the dates indicated above. The Pro Forma Financial Information for the year ended December 31, 2016, 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, 2018, 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) and we and IODC have collectively incurred $28,064 of operating expenditures to complete the IODC Transaction (including advisory and professional fees). The operating expenditures to complete the Recall Transaction and the IODC Transaction have been reflected within the results of operations in the Pro Forma Financial Information as if they were incurred on January 1, 2015 and January 1, 2017, respectively. The costs we have incurred to integrate Recall with our existing operations (including moving, severance, facility upgrade, REIT integration and system upgrade costs) are reflected in the Pro Forma Financial Information in the period in which they were incurred. 135 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 6. Acquisitions (Continued) The Pro Forma Financial Information for the year ended December 31, 2016, 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 13 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 13 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 $46,655 of total revenues and $2,603 of total income from continuing operations for the year ended December 31, 2016, respectively. Total Revenues Income (Loss) from Continuing Operations Per Share Income (Loss) from Continuing Operations - Basic Per Share Income (Loss) from Continuing Operations - Diluted (Unaudited) Year Ended December 31, 2016(1) 2017(2) 2018(2) $ 3,763,929 138,954 $ $ 3,983,016 124,385 $ $ 4,229,251 386,928 $ $ $ 0.53 0.53 $ $ 0.43 0.43 $ $ 1.35 1.35 ______________________________________________________________________________ (1) The Pro Forma Financial Information for the year ended December 31, 2016 only reflect the pro forma results of us and Recall. (2) The Pro Forma Financial Information for the years ended December 31, 2017 and 2018 only reflect pro forma results of us and IODC as Recall was included in our actual financial results for the years ended December 31, 2017 and 2018. The amount of revenue and earnings in our Consolidated Statements of Operations for the years ended December 31, 2016, 2017 and 2018 related to Recall and IODC is impracticable for us to determine. Subsequent to the closings of the Recall Transaction and IODC Transaction, we began integrating Recall and IODC and our existing operations in order to achieve operational synergies. As a result, the revenue generated by Recall and IODC, as well as the underlying costs of sales and selling, general and administrative expenses to support Recall's and IODC's businesses, 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 acquisitions of Recall and IODC. In addition to our acquisitions of Recall and IODC, we completed certain other acquisitions during 2016, 2017 and 2018. The Pro Forma Financial Information does not reflect these acquisitions due to the insignificant impact of these acquisitions on our consolidated results of operations. c. Other Noteworthy Acquisitions 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. 136 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 6. Acquisitions (Continued) 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 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. 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 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 the storage and information management assets and operations of Santa Fe in China (the “Santa Fe China Transaction”) for approximately $16,800, 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 accrued for the purchase price 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. 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 $14,700. In July 2017, in order to expand our European operations, we acquired Fileminders Ltd., a storage and records management company with operations in Cyprus, 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 reflects a discount related to 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). 137 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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 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. Acquisitions Completed During the Year Ended December 31, 2018 On March 8, 2018, in order to expand our data center operations into Europe and Asia, we acquired the operations of two data centers in London and Singapore from Credit Suisse International and Credit Suisse AG (together, "Credit Suisse") for a total of (i) 34,600 British pounds sterling and (ii) 81,000 Singapore dollars (or collectively, approximately $111,400, based upon the exchange rates between the United States dollar and the British pound sterling and Singapore dollar on the closing date of the Credit Suisse transaction) (the “Credit Suisse Transaction”). As part of the Credit Suisse Transaction, Credit Suisse entered into a long-term lease with us to maintain existing data center operations. On May 25, 2018, in order to further expand our data center operations in Europe, we acquired EvoSwitch Netherlands B.V. and EvoSwitch Global Services B.V. (collectively, "EvoSwitch"), a data center colocation space and solutions provider with a data center in Amsterdam (the "EvoSwitch Transaction"), for (i) cash consideration of 189,000 Euros (or approximately $222,000, based upon the exchange rate between the Euro and the United States dollar on the closing date of the EvoSwitch Transaction) and (ii) $25,000 of additional consideration in the form of future services we will provide to the seller, which is included in purchase price holdbacks and other in the allocation of the purchase price paid table below. In August 2018, in order to expand our presence in China, we acquired the Chinese-Mainland operations of GRM Document Management, a storage and records management company, for approximately $34,100. In addition to the transactions noted above, during 2018, in order to enhance our existing operations in the United States, Brazil, India, Ireland, Philippines, South Korea and the United Kingdom and to expand our operations into Croatia, we completed the acquisition of ten storage and records management companies and three art storage companies for total consideration of approximately $64,000. The individual purchase prices of these acquisitions ranged from approximately $1,000 to $18,000. 138 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 6. Acquisitions (Continued) d. Purchase Price Allocation 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) $ 331,834 $ 37,350 $ 369,184 $ 234,314 $ 1,347,046 $ 432,078 $ 1,779,124 2016 Other Fiscal Year 2016 Acquisitions Recall 2017 Total Total IODC Transaction 2018 Other Fiscal Year 2018 Acquisitions Total Purchase Price Holdbacks and Other(2) Fair Value of Common Stock Issued Fair Value of Noncontrolling Interests Total Consideration Fair Value of Identifiable Assets Acquired: Cash Accounts Receivable and Prepaid Expenses Fair Value of Recall Divestments(3) Other Assets Property, Plant and Equipment(4) Customer Relationship Intangible Assets(5) Data Center In-Place Leases(6) Data Center Tenant Relationships(7) Data Center Above-Market Leases(8) Other Intangible Assets Debt Assumed Accounts Payable, Accrued Expenses and Other Liabilities Deferred Income Taxes Data Center Below-Market Leases(8) Total Fair Value of Identifiable Net Assets Acquired — 1,835,026 — 2,166,860 76,461 176,775 121,689 57,563 622,063 709,139 — — — — (792,385) (276,814) (164,074) — — — 3,506 40,856 576 2,703 — 541 10,963 20,842 — — — — — — 1,835,026 3,506 20,093 83,014 1,507 — — — 35,218 35,218 — — — — 2,207,716 338,928 1,347,046 467,296 1,814,342 77,037 179,478 121,689 58,104 633,026 729,981 — — — — (792,385) 14,746 19,309 — 5,070 150,878 116,028 6,300 — — 14,487 (5,287) (24,869) (18,122) 34,307 7,070 — — 10,227 13,076 — 4,586 44,534 20,146 — 4,586 863,027 225,848 1,088,875 — 104,340 77,362 16,439 — — (36,230) — 44,622 36,130 18,410 2,381 — 44,622 140,470 95,772 18,820 — (12,312) (12,312) (17,206) (43,218) (694) (53,436) (43,218) (12,115) (11,504) (288,318) (2,985) (167,059) — — — (11,421) 530,417 21,136 551,553 278,540 1,054,894 281,850 1,336,744 Goodwill Initially Recorded(9) $ 1,636,443 $ 19,720 $ 1,656,163 $ 60,388 $ 292,152 $ 185,446 $ 477,598 _______________________________________________________________________________ (1) 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. Included in cash paid for acquisitions in the Consolidated Statement of Cash Flows for the year ended December 31, 2018 is net cash acquired of $44,534 and contingent and other payments, net of $23,967 related to acquisitions made in years prior to 2018. (2) Purchase price holdbacks and other includes $16,771 purchase price accrued for the Santa Fe China Transaction in 2017 and includes $18,824 purchase price accrued for the EvoSwitch Transaction in 2018. (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, data center infrastructure, racking structures, warehouse equipment and computer hardware and software. (5) The weighted average lives of customer relationship intangible assets associated with acquisitions in 2016, 2017 and 2018 was 13 years, 12 years and 10 years, respectively. 139 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 6. Acquisitions (Continued) (6) The weighted average lives of data center in-place leases associated with acquisitions in 2018 was 6 years. (7) The weighted average lives of data center tenant relationships associated with acquisitions in 2018 was 9 years. (8) The weighted average lives of data center above-market leases associated with acquisitions in 2018 was 3 years and the weighted average lives of data center below-market leases associated with acquisitions in 2018 was 7 years. (9) The goodwill associated with acquisitions, including Recall and IODC, 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 2016, 2017 and 2018 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, 2018 primarily relate to the final assessment of the fair values of intangible assets (primarily customer relationship intangible assets and data center lease-based intangible assets), property, plant and equipment (primarily building, building improvements, data center infrastructure and racking structures), operating leases, contingencies and income taxes (primarily deferred income taxes), primarily associated with the EvoSwitch Transaction, as well as other acquisitions we closed in 2018. 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 2018 were not material to our results from operations. 140 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 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 taxable REIT subsidiaries ("TRSs"), which hold our domestic operations that may not be REIT-compliant as currently operated and structured, is subject, as applicable, to federal and state corporate income tax. In addition, we and our subsidiaries continue to be subject to foreign income taxes in jurisdictions in which we have business operations or a taxable presence, regardless of whether assets are held or operations are conducted through subsidiaries disregarded for federal 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. 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 and IODC 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, legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Legislation”) was enacted into law in the United States. The Tax Reform Legislation amended 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. One of the primary components of the Tax Reform Legislation was a reduction in the United States corporate federal income tax rate from 35% to 21% for taxable years beginning after December 31, 2017. a. Deemed Repatriation Transition Tax The Tax Reform Legislation imposed 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 varied 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 would 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. We have completed our analysis and determined that the amount of Undistributed E&P deemed repatriated under the Tax Reform Legislation in our taxable year ending December 31, 2017 was $160,000 (the “Undistributed E&P”). We opted to include the full amount of Undistributed E&P in our 2017 taxable income, rather than spread it over eight years (as permitted by the Tax Reform Legislation). After applying the participation deduction, included in our REIT taxable income for 2017 was approximately $70,900 related to the deemed repatriation of Undistributed E&P. b. Global Intangible Low-Taxed Income For taxable years beginning after December 31, 2017, the Tax Reform Legislation introduced 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”). The GILTI provisions created 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 shareholder’s pro rata portion of the income of its foreign subsidiaries over the net deemed tangible income return of such subsidiaries. 141 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 7. Income Taxes (Continued) The GILTI provisions also provide for certain deductions against the inclusion of GILTI in taxable income; however, REITs are not eligible for such deductions. Therefore, 100% of our GILTI is included in our taxable income and will increase the required minimum distribution to our stockholders. We estimate the amount of the GILTI in our taxable income for the year ending December 31, 2018 to be approximately $20,791. We have adopted a policy such that we will recognize no deferred taxes related to basis differences resulting from GILTI. c. 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 for taxable years beginning after December 31, 2017 and before January 1, 2022, and is defined similar to earnings before interest and taxes for taxable years beginning after December 31, 2021. The Interest Deduction Limitation does not apply to taxpayers that qualify, and make an election, to be treated as an “electing real property trade or business”. As a REIT, IMI, including all of our QRSs, expects to make an election to be treated as an "electing real property trade or business" beginning in our taxable year ended December 31, 2018. As such, the interest deduction limitation will not apply to IMI or our QRSs; however, IMI will be required to utilize the alternative depreciation system for its real property. This election will not have a material impact on our consolidated financial statements. We do not generally believe our TRSs are eligible for treatment as "electing real property trades or businesses". The significant components of our deferred tax assets and deferred tax liabilities are presented below: Deferred Tax Assets: Accrued liabilities and other adjustments Net operating loss carryforwards Federal benefit of unrecognized tax benefits Valuation allowance Deferred Tax Liabilities: Other assets, principally due to differences in amortization Plant and equipment, principally due to differences in depreciation Other(1) Net deferred tax liability December 31, 2017 2018 $ 38,931 $ 105,026 3,051 (61,756) 85,252 (168,028) (61,530) — (229,558) (144,306) $ $ 54,506 92,952 2,925 (55,666) 94,717 (166,469) (74,147) (26,260) (266,876) (172,159) ______________________________________________________________________________ (1) Other consists primarily of withholding taxes on the earnings of foreign qualified REIT subsidiaries, capital lease obligations and an accounting method change for certain tangible assets acquired as part of the IODC Transaction. At December 31, 2017, the comparable amount of approximately $12,800 was presented as a reduction to accrued liabilities and other adjustments in the table above. 142 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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 $ 11,422 (155,728) $ 11,677 (183,836) December 31, 2017 2018 At December 31, 2018, we have federal net operating loss carryforwards of $163,022 available to reduce future federal taxable income, the majority of which expire from 2023 through 2037. Of the $163,022, we expect to utilize $49,436 and realize a federal tax benefit of $10,382. A majority of the net operating loss carryforwards and federal tax benefit expected to be realized were generated by the IODC Transaction. 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 2019 through 2038, of which an insignificant state tax benefit is expected to be realized. We have assets for foreign net operating losses of $82,485, with various expiration dates (and in some cases no expiration date), subject to a valuation allowance of approximately 67%. Rollforward of the valuation allowance is as follows: Year Ended December 31, 2016 2017 2018 Balance at Beginning of the Year Charged (Credited) to Expense Other Increases/ (Decreases)(1) Balance at End of the Year $ $ 60,009 71,359 61,756 $ 7,660 (4,317) 3,568 $ 3,690 (5,286) (9,658) 71,359 61,756 55,666 _______________________________________________________________________________ (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, 2016 2017 2018 $ 106,223 $ 161,198 $ 201,730 28,157 12,264 50,019 4,888 53,779 102,402 $ 146,644 $ 216,105 $ 357,911 143 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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, 2016 2017 2018 $ $ 52,944 (28,127) 6,096 (1,479) 36,272 (20,762) 44,944 $ $ 16,345 (12,655) 3,440 (1,276) 42,532 (22,439) 25,947 $ $ 703 (4,675) 918 627 45,371 (6,681) 36,263 A reconciliation of total income tax expense and the amount computed by applying the former federal statutory 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, 2016 and 2017 and the current federal statutory tax rate of 21.0% to income from continuing operations before provision (benefit) for income taxes and gain on sale of real estate for the year ended December 31, 2018 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 Year Ended December 31, 2016 2017 2018 $ 51,325 $ 75,637 $ 75,161 (18,526) 247 3,796 7,660 510 — 1,898 (13,328) 7,773 3,589 (78,873) — 2,692 (4,317) 29,476 (4,685) (9,103) (11,949) 29,325 (2,256) 25,947 $ (35,165) — 1,599 3,568 — — (13,985) 5,545 903 (1,363) 36,263 Provision (Benefit) for Income Taxes $ 44,944 $ Our effective tax rates for the years ended December 31, 2016, 2017 and 2018 were 30.6%, 12.0% and 10.1%, 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, 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. 144 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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, 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). The primary reconciling items between the current federal statutory tax rate of 21.0% and our overall effective tax rate for the year ended December 31, 2018 were the benefit derived from the dividends paid deduction of $35,165, the impact of differences in the tax rates at which our foreign earnings are subject to, resulting in a tax provision of $5,545 and a discrete tax benefit of approximately $14,000 associated with the resolution of a tax matter (which was included as a component of Accrued expenses in our Consolidated Balance Sheet as of December 31, 2017). 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 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 $249,200 as of December 31, 2018. 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. 145 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 7. Income Taxes (Continued) We have elected to recognize interest and penalties associated with uncertain tax positions as a component of the provision (benefit) for income taxes in the accompanying Consolidated Statements of Operations. We recorded an increase of $1,805, $289 and $1,961 for gross interest and penalties for the years ended December 31, 2016, 2017 and 2018, respectively. We had $7,061 and $7,557 accrued for the payment of interest and penalties as of December 31, 2017 and 2018, 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 2015 to present Tax Jurisdiction United States—Federal and State Canada United Kingdom The normal statute of limitations for United States federal tax purposes is three years from the date the tax return is filed; however, the statute of limitations may remain open for periods longer than three years in instances where a federal tax examination is in progress. The 2015, 2016 and 2017 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 through 2002 and 2009 through 2015 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, 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. As of December 31, 2018, we had $35,320 of reserves related to uncertain tax positions, of which $32,144 and $3,176 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. 146 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 7. Income Taxes (Continued) A rollforward of unrecognized tax benefits is as follows: 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 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(1) Lapses of statutes Settlements Gross tax contingencies—December 31, 2017 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, 2018 $ $ $ $ 47,685 3,704 12,207 (1,740) (2,390) — 59,466 4,067 3,368 (2,789) (2,629) (22,950) 38,533 3,147 981 (2,865) (4,462) (14) 35,320 _______________________________________________________________________________ (1) This amount includes gross additions related to the Recall Transaction. The reversal of these reserves of $35,320 ($32,677 net of federal tax benefit) as of December 31, 2018 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 $7,767 ($5,119 net of federal tax benefit) of our unrecognized tax positions may be recognized by the end of 2019 as a result of a lapse of statute of limitations or upon closing and settling significant audits in various worldwide jurisdictions. 147 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 8. Quarterly Results of Operations (Unaudited) Quarter Ended 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 2018 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 $ 938,876 147,755 $ 949,806 170,194 $ 965,661 176,756 $ 991,235 154,405 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 (1) 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 $ 1,042,458 164,559 $ 1,060,823 203,359 $ 1,060,991 195,746 $ 1,061,489 191,844 45,614 (462) 45,152 93,903 (360) 93,543 78,628 (11,605) 67,023 158,831 — 158,831 44,684 93,401 67,148 158,118 (2) 0.16 — 0.16 0.16 — 0.16 0.33 — 0.33 0.33 — 0.33 0.28 (0.04) 0.23 0.27 (0.04) 0.23 0.55 — 0.55 0.55 — 0.55 _______________________________________________________________________________ 148 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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 2017 compared to the third quarter of 2017 is primarily attributable to increases in operating expenses, primarily associated with increased Significant Acquisition 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. (2) The change in net income (loss) attributable to Iron Mountain Incorporated in the fourth quarter of 2018 compared to the third quarter of 2018 is primarily attributable to (i) gains of approximately $54,500 recorded during the fourth quarter of 2018 associated with the sale of land and buildings in the United Kingdom (see Note 2.g.), (ii) a gain on disposal/write-down of property, plant and equipment (excluding real estate) recorded during the fourth quarter of 2018 of approximately $8,800 related to the receipt of insurance proceeds related to the involuntary conversion of certain assets in a facility we own in Argentina (see Note 2.g.), (iii) a decrease in the provision for income taxes recorded in the fourth quarter of 2018 compared to the third quarter of 2018 of approximately $19,900, (iv) an increase in gains on foreign currency transactions in the fourth quarter of 2018 compared to the third quarter of 2018 of approximately $20,000 and (v) a charge of $11,100 recorded during the third quarter of 2018 relating to the resolution of the post-closing adjustments to the Access Contingent Consideration that did not recur during the fourth quarter of 2018. 149 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 9. Segment Information During the fourth quarter of 2018, as a result of changes in the management of our Information Governance and Digital Solutions business in Sweden, we reassessed the composition of our reportable operating segments. As a result of this reassessment, we determined that this business is now being managed as a component of our Other International Business segment rather than as a component of our Western European Business segment. As result of this change, previously reported segment information has been restated to conform to the current presentation. The remainder of our business in Sweden, excluding the Information Governance and Digital Solutions, has previously been managed and reported as a component of our Other International Business segment. As of December 31, 2018, our six reportable operating segments are described as follows: • • North American Records and Information Management Business—provides (i) records and information management storage and related 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 customers (“Records Management”), throughout the United States and Canada; (ii) certain services related to Records Management, including 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 (iii) Information Governance and Digital Solutions, which develops, implements and supports comprehensive storage and information management solutions for the complete lifecycle of our customers' information, including the management of physical records, document conversion and digital storage in the United States and Canada. 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 Mountain Iron Cloud solution. • 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). • • Other International Business—provides records and information management services throughout the remaining European countries in which we operate, as well as the countries in which we operate in Latin America, Asia, the Middle East 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 Croatia, Cyprus, the Czech Republic, Denmark, Finland, Greece, Hungary, Norway, Poland, Romania, Serbia, Slovakia and Turkey and Records Management and Information Governance and Digital Solutions in Estonia, Latvia, Lithuania and Sweden. Our Latin America operations provide records and information management services, including Records Management, Data Protection & Recovery, destruction services 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 services 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- Mainland, China -Taiwan, China-Macau S.A.R., China-Hong Kong S.A.R., 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—provides enterprise-class data center facilities to protect mission-critical assets and ensure the continued operation of our customers’ IT infrastructure, with secure and reliable colocation and wholesale options. As of December 31, 2018, we had data center operations in eight markets in the United States: Denver, Colorado; Kansas City, Missouri; Boston, Massachusetts; Boyers, Pennsylvania; Manassas, Virginia; Edison, New Jersey; Columbus, Ohio; and Phoenix and Scottsdale, Arizona and three international markets: Amsterdam, London, and Singapore. 150 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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 ("Entertainment Services"), throughout the United States, Canada, France, China-Hong Kong S.A.R., the Netherlands and the United Kingdom, and our fine art storage businesses and consumer storage businesses in the United States, Canada, Europe and China - Hong Kong S.A.R. 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 Employee Stock-Based Awards. 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 $ 1,930,699 $ 392,814 $ 447,357 $ 659,370 $ 24,249 $ 56,964 $ 3,511,453 As of and for the Year Ended December 31, 2016 Total Revenues Storage Rental Service 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 Storage Rental Service 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 1,150,646 780,053 215,330 186,467 28,863 775,717 4,996,216 145,636 111,062 264,148 128,666 26,629 20,666 5,963 224,522 826,320 26,054 22,731 275,659 171,698 55,427 42,458 12,969 136,985 1,020,439 31,251 30,735 393,005 266,365 100,645 67,465 33,180 169,563 2,114,599 365,845 62,594 (2,591) (59) (6,878) 300,451 37,165 3,382 7,394 2,800 490,746 303,205 187,541 64,051 47,526 16,525 159,142 911,012 21,853 19,782 795,851 493,118 302,733 119,402 78,664 40,738 227,312 2,401,579 166,057 76,720 2,050,346 1,221,495 828,851 240,524 201,204 39,320 884,158 5,050,240 205,531 134,785 6,624 64,122 401,640 276,416 125,224 34,759 24,623 10,136 223,324 839,539 31,279 31,279 — — 22,026 2,223 4,827 4,610 217 6,212 167,757 70,060 70,060 — — 37,694 35,839 1,855 10,224 8,617 1,607 11,275 382,198 86,543 32,015 37,421 19,543 49,468 43,860 5,608 (225,711) 361,469 32,488 31,421 1,042 2,142,905 1,368,548 452,326 365,526 86,800 1,087,288 9,486,800 671,334 328,603 291,965 25 50,766 69,301 47,484 21,817 53,416 45,649 7,767 3,845,578 2,377,557 1,468,021 522,376 406,283 116,093 (245,015) 1,260,196 1,387,834 10,972,402 126,758 48,550 638,021 343,131 — 80,345 54,528 78,208 219,705 2,071 8,992 — — 75,185 151 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 9. Segment Information (Continued) 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 $ 2,137,781 $ 393,993 $ 521,555 $ 821,333 $ 228,983 $ 122,116 $ 4,225,761 1,222,230 915,551 243,415 190,493 52,922 956,890 4,933,269 196,010 115,555 1,551 78,904 273,193 120,800 38,850 30,066 8,784 213,893 807,564 19,325 19,325 — — 325,624 195,931 64,795 45,590 19,205 180,172 1,179,065 63,142 39,163 14,579 512,358 308,975 125,154 75,294 49,860 243,008 2,262,672 165,167 80,275 218,675 10,308 105,680 58,707 46,973 99,574 2,217,505 1,794,386 152,739 70,375 51,741 61,620 52,590 9,030 2,622,455 1,603,306 639,514 452,740 186,774 (257,668) 1,435,869 452,172 11,852,247 79,276 53,005 2,317,306 460,062 77,087 1,639,427 25,913 1,758,557 9,400 7,805 2,220 358 98,687 As of and for the Year Ended December 31, 2018 Total Revenues Storage Rental Service 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, Customer Inducements and Contract Fulfillment Costs _______________________________________________________________________________ (1) Excludes all intercompany receivables or payables and investment in subsidiary balances. (2) Cash paid for acquisitions, net of cash acquired for the Other International Business segment for the year ended December 31, 2016 primarily consists of the cash component of the purchase price for the Recall Transaction, as the IMI entity that made the cash payment was an Australian subsidiary. However, the Recall Transaction also benefited the North American Records and Information Management Business, North American Data Management Business and Western European Business segments. The accounting policies of the reportable segments are the same as those described in Note 2. Adjusted EBITDA for each segment is defined as income (loss) from continuing operations before interest expense, net, provision (benefit) for income taxes, depreciation and amortization, and also excludes certain items that we believe are not indicative of our core operating results, specifically: (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) Significant Acquisition Costs (as defined below). Internally, we use Adjusted EBITDA as the basis for evaluating the performance of, and allocated resources to, our operating segments. 152 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 9. Segment Information (Continued) 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 Significant Acquisition Costs(1) Income (Loss) from Continuing Operations _______________________________________________________________________________ Year Ended December 31, 2016 2017 2018 $1,087,288 $1,260,196 $1,435,869 (2,180) 44,944 44,300 (1,565) 25,947 79,429 310,662 353,575 1,412 799 452,326 522,376 — 3,011 (55,328) 36,263 (11,692) 409,289 (9,818) 639,514 — 131,944 $ 103,880 84,901 $ 191,723 50,665 $ 376,976 (1) Represents operating expenditures associated with (1) 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 integration 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; and (2) the advisory and professional fees to complete the IODC Transaction (collectively, "Significant Acquisition Costs"). 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, 2016 2017 2018 $ $ $ $ 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 $ $ $ $ 2,579,847 280,993 249,505 155,367 960,049 4,225,761 6,902,232 547,768 453,398 442,755 2,297,980 10,644,133 153 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 9. Segment Information (Continued) Information as to our revenues by product and service lines by segment are 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 For the Year Ended  December 31, 2016 Records Management(1) $ 1,629,367 $ 14,857 $ 373,994 $ 578,209 $ — $ 35,468 $ 2,631,895 Data Management(1) Information Destruction(1)(2) Data Center Total Revenues For the Year Ended  December 31, 2017 Records Management(1) Data Management(1) Information Destruction(1)(2) Data Center Total Revenues For the Year Ended  December 31, 2018 Records Management(1) Data Management(1) Information Destruction(1)(2) Data Center Total Revenues — 301,332 — 1,930,699 1,706,288 — 344,058 — 2,050,346 1,751,058 — 386,723 — 370,419 7,538 — 392,814 — 391,346 10,294 — 401,640 — 384,370 9,623 — 73,182 181 — 447,357 417,221 73,389 136 — 490,746 443,960 77,189 406 — 2,137,781 393,993 521,555 59,989 21,172 — 659,370 686,988 77,413 31,450 — 795,851 708,297 77,476 35,560 — 821,333 — — 24,249 24,249 — — — 37,694 37,694 — — — 228,983 228,983 21,496 — — 525,086 330,223 24,249 56,964 3,511,453 37,194 32,103 4 — 2,847,691 574,251 385,942 37,694 69,301 3,845,578 64,607 57,509 — — 2,967,922 596,544 432,312 228,983 122,116 4,225,761 _______________________________________________________________________________ (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 services offering, which does not have a storage rental component. (2) Includes secure shredding services. 154 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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 vehicles and certain office equipment which have remaining lease lives ranging from one to seven years. Total rent expense under all of our operating leases was $321,337, $350,403 and $365,762 for the years ended December 31, 2016, 2017 and 2018, 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 2019 2020 2021 2022 2023 Thereafter Total minimum lease payments Less amounts representing interest Present value of capital lease obligations Operating Lease Payments Sublease Income Capital Leases $ 323,454 $ 293,276 267,379 246,128 221,808 1,287,807 $ 2,639,852 $ (7,525) $ (7,200) (7,063) (6,694) (6,409) (6,279) (41,170) $ 80,513 71,335 61,269 52,832 44,722 377,750 688,421 (241,248) 447,173 In addition, we have certain contractual obligations related to purchase commitments which require minimum payments as follows: Year 2019 2020 2021 2022 2023 Thereafter Purchase Commitments(1) 232,880 48,436 40,112 20,042 2,196 1,876 345,542 $ $ ______________________________________________________________________________ (1) Purchase commitments include obligations for future construction costs associated with the expansion of our data center business which represent a substantial portion of the amount of purchase commitments due in 2019. 155 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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, 2017 and 2018 there were $38,460 and $41,328, 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 $16,800 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. In December 2018, we received insurance proceeds of approximately $13,700 related to the involuntary conversion of assets included in the facility and, as a result, we recorded a gain on disposal/ write-down of property, plant and equipment (excluding real estate), net of $8,814 during the fourth quarter of 2018. 156 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (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 is one pending customer-related lawsuit stemming from the fire, which is 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. 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 expense (income), 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, 2016, 2017 and 2018, the Company had no related party transactions. 157 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 12. 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 2016, 2017 and 2018, our board of directors declared the following dividends: Declaration Date Dividend Per Share February 17, 2016 May 25, 2016 July 27, 2016 October 31, 2016 February 15, 2017 May 24, 2017 July 27, 2017 October 24, 2017 February 14, 2018 May 24, 2018 July 24, 2018 October 25, 2018 $ 0.4850 0.4850 0.4850 0.5500 0.5500 0.5500 0.5500 0.5875 0.5875 0.5875 0.5875 0.6110 Record Date March 7, 2016 June 6, 2016 September 12, 2016 December 15, 2016 March 15, 2017 June 15, 2017 September 15, 2017 December 15, 2017 March 15, 2018 June 15, 2018 September 17, 2018 December 17, 2018 $ Total Amount 102,651 127,469 127,737 145,006 145,235 145,417 146,772 166,319 167,969 168,078 168,148 174,935 Payment Date March 21, 2016 June 24, 2016 September 30, 2016 December 30, 2016 April 3, 2017 July 3, 2017 October 2, 2017 January 2, 2018 April 2, 2018 July 2, 2018 October 2, 2018 January 3, 2019 During the years ended December 31, 2016, 2017 and 2018, we declared distributions to our stockholders of $502,863, $603,743 and $679,130, respectively. These distributions represent approximately $2.04 per share, $2.27 per share and $2.38 per share for the years ended December 31, 2016, 2017 and 2018, 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. In addition, certain of our distributions qualify as capital gain distributions. For the years ended December 31, 2016, 2017 and 2018, the dividends we paid on our common shares were classified as follows: Nonqualified ordinary dividends Qualified ordinary dividends Capital gains Return of capital Year Ended December 31, 2016 2017 2018 45.5% 21.0% —% 33.5% 100.0% 82.1% 17.9% —% 0.0% 100.0% 83.0% 4.8% 5.8% 6.4% 100.0% 158 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 12. Stockholders' Equity Matters (Continued) Dividends paid during the years ended December 31, 2016, 2017 and 2018 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, 2016, 2017 and 2018. In 2017, none of our dividends were characterized as a return of capital primarily due to 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. In 2018, the percentage of our dividend that is classified as a capital gain was 5.8% and primarily relates to the sale of land and buildings in the United Kingdom. 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, which may include acquisitions and investments, including acquisitions and investments in our data center business, and repaying amounts outstanding from time to time under the Revolving Credit Facility. During the year 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. During the quarter ended December 31, 2018, there were no shares of common stock sold under the At The Market (ATM) Equity Program. During the year ended December 31, 2018, under the At The Market (ATM) Equity Program, we sold an aggregate of 273,486 shares of common stock for gross proceeds of approximately $8,800, generating net proceeds of $8,716, after deducting commissions of $90. As of December 31, 2018 the remaining aggregate sale price of shares of our common stock available for distribution under the At The Market (ATM) Equity Program was approximately $431,200. 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 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, 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. 159 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 13. Divestments a. Recall Divestments As disclosed in Note 6, in connection with the acquisition of Recall, we sought regulatory approval of the Recall Transaction from the DOJ, the ACCC, the CCB and the CMA and, as part of the regulatory approval process, we agreed to make the Divestments. The assets and liabilities related to the Initial United States Divestments were sold to Access CIG in the Access Sale on May 4, 2016; the assets and liabilities related to the Australia Divestment Business were sold to 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 Statement of Cash Flows for the year ended December 31, 2016, 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 year ended December 31, 2016 and the cash flows associated with these businesses are presented as a component of cash flows from continuing operations in our Consolidated Statement of Cash Flows for the year ended December 31, 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, 2017 and 2018 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, 2017 and 2018: 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 2018(2) $ 13,047 $ — $ — 4,105 752 (8,118) (1,827) (12,574) (147) $ 3,353 $ (6,291) $ (12,427) ______________________________________________________________________________ 160 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 13. Divestments (Continued) (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). (2) The loss from discontinued operations during the year ended December 31, 2018 primarily relates to losses incurred due to the resolution of the post-closing adjustments to the Access Contingent Consideration in connection with our agreement with Access CIG. See Note 6. b. 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, 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, 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. We account for the OSG Investment as an equity method investment. 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 former 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. c. IMFS Divestment On September 28, 2018, Iron Mountain Fulfillment Services, Inc. ("IMFS"), a consolidated subsidiary of IMI that operated our fulfillment services business in the United States, sold substantially all of its assets for total consideration of approximately $3,000 (the "IMFS Divestment"). We have concluded that the IMFS Divestment does not meet the criteria to be reported as discontinued operations in our consolidated financial statements, as our decision to divest this business 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 this business are presented as a component of income (loss) from continuing operations in our Consolidated Statements of Operations for the years ended December 31, 2016, 2017 and 2018 and the cash flows associated with this business are presented as a component of cash flows from continuing operations in our Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2017 and 2018 through the sale date. The fair value of the consideration received as a result of the IMFS Divestment approximated the carrying value of IMFS and, therefore, during the third quarter of 2018, we recorded an insignificant loss in connection with the IMFS Divestment to Other expense (income), net. 161 IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DECEMBER 31, 2018 (In thousands, except share and per share data) 14. Significant Acquisition Costs Significant Acquisition Costs included in the accompanying Consolidated Statements of Operations are as follows: Cost of sales (excluding depreciation and amortization) Selling, general and administrative expenses Total Significant Acquisition Costs Year Ended December 31, 2016 2017 2018 $ 11,963 119,981 $ 131,944 $ 20,493 64,408 $ 84,901 $ 7,628 43,037 $ 50,665 Significant Acquisition Costs included in the accompanying Consolidated Statements of Operations by segment are as follows: Year Ended December 31, 2016 2017 2018 North American Records and Information Management Business $ 14,394 $ 15,763 $ North American Data Management Business Western European Business Other International Business Global Data Center Business Corporate and Other Business 2,581 16,173 18,842 — 79,954 2,099 20,290 9,570 — 37,179 Total Significant Acquisition Costs $ 131,944 $ 84,901 $ 6,202 637 8,852 4,899 11,423 18,652 50,665 Accrued liabilities related to Significant Acquisition Costs as of December 31, 2018 was $2,724, which generally relates to employee severance costs and onerous lease liabilities and is expected to be paid in 2019. 162 IRON MOUNTAIN INCORPORATED SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2018 (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 1,140 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, 2018: Gross Amount of Real Estate Assets, As Reported on Schedule III $ 3,700,307 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 Gross Amount of Real Estate Assets, As Disclosed in Note 2.f. _______________________________________________________________________________ 1,270,992 444,711 196,268 1,911,971 $ 5,612,278 (1) Represents the gross book value of racking installed in our 1,140 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, 2018 is included in Schedule III. 163 IRON MOUNTAIN INCORPORATED SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) DECEMBER 31, 2018 (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, 2018: Accumulated Depreciation of Real Estate Assets, As Reported on Schedule III $ 1,011,050 Add Reconciling Items: Accumulated Depreciation - non-real estate assets(1) Accumulated Depreciation - racking in leased facilities(2) Accumulated Depreciation - capital leases(3) 1,292,432 707,628 100,282 Total Reconciling Items 2,100,342 Accumulated Depreciation, As Reported on Consolidated Balance Sheet $ 3,111,392 _______________________________________________________________________________ (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, 2018 installed in our 1,140 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, 2018 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. 164 IRON MOUNTAIN INCORPORATED SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) DECEMBER 31, 2018 (Dollars in thousands) (A) (B) (C) (D) (E) (F) Facilities(1) Encumbrances Initial cost to Company (1) Cost capitalized subsequent to acquisition (1)(2) Gross amount carried at close of current period (1)(8) Accumulated depreciation at close of current period(1)(8) Date of construction or acquired(3) 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 615 North 48th Street, Phoenix, Arizona 2955 S. 18th Place, Phoenix, Arizona 4449 South 36th St, Phoenix, Arizona 851 Princess Drive, Scottsdale, 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 1 1 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 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 1,637 423,107 12,178 7,305 87,865 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 1,583 761 116,336 7,403 6,312 7,417 1,768 2,737 15,110 7,848 1,047 43 4,350 (60) 8,596 1,853 2,308 13,498 — 24,544 6,207 471 183 6,690 1,235 2,251 5,155 1,764 4,320 2,715 12,206 10,168 133 1,867 926 4,374 438,217 20,026 8,352 87,908 5,972 700 19,068 6,615 9,108 28,083 749 34,712 21,379 5,047 28,140 17,202 4,655 8,580 14,800 4,813 5,903 3,476 128,542 17,571 6,445 9,284 2,694 10,447 30,824 41,271 18,845 4,021 7,226 1,853 3,293 8,250 1,927 1,476 997 533 2,957 64 295 165 5,497 8,223 2,386 6,250 8,314 2,222 2,707 4,861 865 2,971 593 834 1,033 1,760 13,283 4,570 4,771 3,887 2,692 — 9,241 2,849 3,345 9,405 90 12,746 14,418 1,689 8,838 6,832 1,888 4,065 4,309 1,928 1,593 1,645 4,565 8,708 1,330 5,909 1,286 2001 2001 2018 2007 2012 2018 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 Up to 40 years Up to 40 years (5) Up to 40 years Up to 40 years Up to 40 years (5) Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years IRON MOUNTAIN INCORPORATED SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) DECEMBER 31, 2018 (Dollars in thousands) (A) (B) (C) (D) (E) (F) Region/Country/State/Campus Address United States (Including Puerto Rico) (continued) 3501 Electronics Way, West Palm Beach, Florida 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 Facilities(1) Encumbrances Initial cost to Company (1) Cost capitalized subsequent to acquisition (1)(2) Gross amount carried at close of current period (1)(8) Accumulated depreciation at close of current period(1)(8) Date of construction or acquired(3) Life on which depreciation in latest income statement is computed 1 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 $ — $ 4,201 $ 13,545 $ 17,746 $ — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 1,786 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 2,924 742 322 3,923 1,087 745 18,915 13,490 1,471 2,733 3,892 1,481 923 8,321 482 12,543 1,307 3,887 286 6,406 1,127 7,679 3,895 742 5,374 788 135 1,079 24,897 1,237 1,124 530 2,613 1,372 3,331 4,158 18,968 166 2,528 1,507 6,731 4,629 1,208 26,862 17,754 8,941 3,137 5,881 23,529 2,301 13,148 1,104 13,252 8,914 6,567 8,623 8,604 4,909 17,784 7,116 906 7,194 2,699 5,548 2,377 80,820 11,522 2,418 2,332 6,039 5,372 6,403 32,440 21,892 6,334 1,049 826 2,731 266 699 15,084 7,862 4,058 2,729 1,350 8,763 189 5,896 373 4,708 5,780 2,782 2,909 3,278 2,443 9,420 3,507 510 5,163 2,022 570 1,194 2001 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 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 (7) Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years 39,580 Various Up to 40 years 3,554 1,206 1,040 3,528 2,503 2,149 6,738 2015 2002 2000 (7) 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 (7) Up to 40 years 6,715 Various Up to 40 years IRON MOUNTAIN INCORPORATED SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) DECEMBER 31, 2018 (Dollars in thousands) (A) (B) (C) (D) (E) (F) Region/Country/State/Campus Address United States (Including Puerto Rico) (continued) 4105 North Lamb Blvd, Las Vegas, Nevada 17 Hydro Plant Rd, Milton, New Hampshire Kimberly Rd, East Brunsick, New Jersey 3003 Woodbridge Avenue, Edison, 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 3366 South Tech Boulevard, Miamisburg, 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 Facilities(1) Encumbrances Initial cost to Company (1) Cost capitalized subsequent to acquisition (1)(2) Gross amount carried at close of current period (1)(8) Accumulated depreciation at close of current period(1)(8) Date of construction or acquired(3) Life on which depreciation in latest income statement is computed 1 1 3 1 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 1 3 1 3 1 1 1 1 $ — $ 3,430 $ 8,909 $ 12,339 $ — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 6,179 22,105 310,404 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 29,092 4,317 602 11,437 5,187 21,166 1,057 2,457 2,397 18,365 4,180 5,882 10,086 54,175 6,273 660 1,202 11,686 852 1,942 10,979 1,132 4,525 2,959 1,417 1,099 10,401 11,312 2,615 328 2,113 153 599 877 576 3,259 1,810 57 15,070 1,079 299 1,874 224,322 12,627 953 7,048 7,313 167 10,359 27,987 320,490 92,872 18,007 10,182 10,147 15,271 4,935 4,743 12,303 6,218 7,136 3,061 7,136 5,422 33,538 16,454 5,544 1,930 3,993 7,240 4,858 1,663 3,705 6,595 2,840 29,149 19,387 1,681 11,736 7,061 245,488 13,684 3,410 9,445 25,678 5,426 6,160 2002 2001 Up to 40 years Up to 40 years 13,467 Various Up to 40 years 8,836 2018 (5) Up to 40 years 48,720 Various Up to 40 years 945 634 655 5,442 2,440 2,613 6,111 3,357 4,387 1,511 2,515 2,075 21,265 6,250 2,741 167 1,749 1,116 2,653 815 1,924 2,901 1,405 962 7,396 683 2,950 4,005 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 2018 2003 2001 2015 2002 Up to 40 years Up to 40 years Up to 40 years Up to 40 years (7) 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 (7) Up to 40 years Up to 40 years 53,526 Various Up to 40 years 6,692 1,959 4,057 674 2001 2000 1999 2017 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, 2018 (Dollars in thousands) (A) (B) (C) (D) (E) (F) Region/Country/State/Campus Address United States (Including Puerto Rico) (continued) Henderson Dr/Elmwood Ave, Sharon Hill, Pennsylvania Las Flores Industrial Park, Rio Grande, Puerto Rico 24 Snake Hill Road, Chepachet, Rhode Island 1061 Carolina Pines Road, Columbia, South Carolina 2301 Prosperity Way, Florence, South Carolina Mitchell Street, Knoxville, Tennessee 415 Brick Church Park Dr, Nashville, Tennessee 6005 Dana Way, Nashville, Tennessee 11406 Metric Blvd, Austin, Texas 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 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 Facilities(1) Encumbrances Initial cost to Company (1) Cost capitalized subsequent to acquisition (1)(2) Gross amount carried at close of current period (1)(8) Accumulated depreciation at close of current period(1)(8) Date of construction or acquired(3) Life on which depreciation in latest income statement is computed 3 1 1 1 1 2 1 2 1 1 3 1 1 1 1 1 1 1 3 1 1 1 1 1 1 1 1 2 1 1 1 1 1 1 1 1 1 $ — $ 24,153 $ 10,314 $ 34,467 $ 17,150 Various Up to 40 years 7,611 4,861 13,469 3,902 5,244 6,503 4,676 7,524 4,915 8,521 20,836 2,920 6,993 2,831 4,027 5,938 10,413 43,803 4,581 8,284 5,846 2,078 2,789 14,655 7,526 3,638 11,721 5,195 623 4,488 10,454 3,599 21,007 7,548 2,706 16,816 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 4,185 2,659 11,776 2,846 718 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 3,811 3,883 393 3,526 6,239 1,709 20,980 6,527 2,577 14,167 3,426 2,202 1,693 1,056 4,526 4,191 2,849 2,035 396 222 1,163 746 3,475 1,554 812 610 2,059 37,476 1,741 597 2,379 1,046 994 11,467 1,203 1,958 7,910 1,312 230 962 4,215 1,890 27 1,021 129 2,649 168 4,129 2,732 2,766 1,015 1,818 3,674 1,741 3,913 1,187 2,523 8,725 1,290 4,055 1,948 2,426 2,769 5,592 11,332 2,426 5,612 2,548 1,037 1,221 8,244 1,651 1,189 4,594 2,553 236 2,753 4,850 1,712 5,157 3,053 974 9,156 2001 2001 2016 2016 Up to 40 years Up to 40 years (7) Up to 40 years (7) Up to 40 years 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 2002 1998 1999 2002 1999 2015 2011 2015 2002 Up to 40 years Up to 40 years Up to 40 years Up to 40 years (7) Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years (7) Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years (7) Up to 40 years Up to 40 years (7) Up to 40 years Up to 40 years IRON MOUNTAIN INCORPORATED SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) DECEMBER 31, 2018 (Dollars in thousands) (A) (B) (C) (D) (E) (F) Facilities(1) Encumbrances Initial cost to Company (1) Cost capitalized subsequent to acquisition (1)(2) Gross amount carried at close of current period (1)(8) Accumulated depreciation at close of current period(1)(8) Date of construction or acquired(3) Life on which depreciation in latest income statement is computed $ — $ 5,230 $ 2,656 $ 7,886 $ Region/Country/State/Campus Address United States (Including Puerto Rico) (continued) 8001 Research Way, Springfield, Virginia 22445 Randolph Dr, Sterling, Virginia 307 South 140th St, Burien, Washington 8908 W. Hallett Rd, Cheney, Washington 6600 Hardeson Rd, Everett, Washington 19826 Russell Rd, South, Kent, Washington 1201 N. 96th St, Seattle, Washington 4330 South Grove Road, Spokane, Washington 12021 West Bluemound 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 1 1 190 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 16 206 2002 2005 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 Up to 40 years Up to 40 years — — — — — — — — — — — — — — — — — — — — — — — — — — — 7,598 2,078 510 5,399 14,793 4,496 3,906 1,307 3,719 2,271 4,253 3,348 9,324 2,036 820 2,124 11,317 4,349 4,763 8,747 24,117 6,532 4,726 3,431 3,123 5,697 2,173 1,880 3,315 10,004 3,348 336 1,344 1,914,610 937,469 2,852,079 752,014 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 4,072 5,661 15,941 1,444 6,584 7,145 469 430 (8) 16,896 1,802 5,861 (404) 1,532 (106) 1,653 7,919 11,064 20,948 9,535 10,910 21,803 2,489 4,069 2,743 25,092 3,602 6,920 7,074 2,361 1,747 2,896 72,200 68,972 141,172 1,986,810 1,006,441 2,993,251 3,642 4,639 6,726 4,120 4,091 9,898 1,414 202 1,243 11,108 1,475 3,551 2,360 737 568 1,137 56,911 808,925 169 IRON MOUNTAIN INCORPORATED SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) DECEMBER 31, 2018 (Dollars in thousands) (A) (B) (C) (D) (E) (F) Region/Country/State/Campus Address Facilities(1) Encumbrances Initial cost to Company(1) Europe Cost capitalized subsequent to acquisition (1)(2) Gross amount carried at close of current period (1)(8) Accumulated depreciation at close of current period(1)(8) Date of construction or acquired(3) Life on which depreciation in latest income statement is computed Gewerbeparkstr. 3, Vienna, Austria Woluwelaan 147, Diegem, Belgium Stupničke Šipkovine 62, Zagreb, Croatia 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 Corby 278, Long Croft Road, Corby, England Otterham Quay Lane, Gillingham, England Pennine Way, Hemel Hempstead, England Kemble Industrial Park, Kemble, England Gayton Road, Kings Lynn, England Cody Road, 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 1 1 1 1 1 1 1 1 9 1 2 3 2 1 1 1 1 1 3 4 1 1 1 1 1 1 1 1 1 1 1 1 $ — $ 6,542 $ 7,121 $ 13,663 $ 8,979 1,374 3,795 2,217 1,779 8,239 19,609 10,088 16,363 11,835 4,736 28,340 4,142 6,286 4,231 2,053 3,008 4,258 22,158 1,267 4,174 14,152 27,518 5,471 4,761 4,839 11,837 3,628 23,384 3,788 625 — — — — — — — — — — — — — — — — — — — — — — 918 — — — — — — — — 2,541 1,408 3,136 1,935 2,070 6,980 20,486 7,418 10,847 5,277 3,119 20,307 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 6,438 (34) 659 282 (291) 1,259 (877) 2,670 5,516 6,558 1,617 8,033 544 1,647 192 1,372 372 2,508 840 (55) 784 11 15,111 (75) 739 1,619 2,797 810 7,350 1,936 (633) 170 2,946 3,926 2010 2003 Up to 40 years Up to 40 years 17 2018 Up to 40 years 201 2017 Up to 40 years 132 754 4,519 177 4,857 6,447 7,951 2,680 10,244 1,219 3,416 2,156 1,277 1,062 2,110 2017 2003 2003 2018 2003 2004 2004 2003 2003 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 Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years 2,993 2016 (4) Up to 40 years 176 2016 (4) Up to 40 years 628 2016 (4) Up to 40 years 1,364 18,505 2016 2004 (4) Up to 40 years Up to 40 years 586 711 3,218 4,244 1,267 6,986 2016 (4) Up to 40 years 2016 (4) Up to 40 years 2006 2014 2001 2012 Up to 40 years Up to 40 years Up to 40 years Up to 40 years 2,082 2015 (7) Up to 40 years 283 2015 (7) Up to 40 years IRON MOUNTAIN INCORPORATED SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) DECEMBER 31, 2018 (Dollars in thousands) (A) (B) (C) (D) (E) (F) Region/Country/State/Campus Address Europe (Continued) Vareseweg 130, Rotterdam, The Netherlands Howemoss Drive, Aberdeen, Scotland Traquair Road, Innerleithen, Scotland Nettlehill Road, Houston Industrial Estate, Livingston, Scotland Av Madrid s/n Poligono Industrial Matillas, Alcala de Henares, Spain Calle Bronce, 37, Chiloeches, Spain Ctra M.118 , Km.3 Parcela 3, Madrid, Spain Fundicion 8, Rivas-Vaciamadrid, Spain Abanto Ciervava, Spain 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(1) Cost capitalized subsequent to acquisition (1)(2) Gross amount carried at close of current period (1)(8) Accumulated depreciation at close of current period(1)(8) Date of construction or acquired(3) Life on which depreciation in latest income statement is computed 1 2 1 1 1 1 1 1 2 $ — $ 1,357 $ 1,500 $ 2,857 $ — — — — — — — — 6,970 113 11,517 186 11,011 3,981 1,022 1,053 5,120 2,092 24,131 240 2,071 5,497 2,389 (60) 12,090 2,205 35,648 426 13,082 9,478 3,411 993 2,106 4,296 981 16,177 324 2,819 5,910 1,969 2015 (7) Up to 40 years Various Up to 40 years 2004 2001 2014 2010 2001 2002 Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years 440 Various Up to 40 years 60 918 242,987 119,800 362,787 134,156 Various Up to 40 years 1998 1995 2012 2016 2016 Up to 40 years Up to 40 years Up to 40 years (4) Up to 40 years (4) 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 (4) Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years Up to 40 years 724 — 161 729 1,135 851 2,827 2,945 9,662 7,928 895 888 1,825 2,328 4,352 6,731 1,206 4,456 7,494 57,137 2 1 1 1 1 2 3 1 2 5 1 1 2 2 1 1 7 2 1 — — — — — — — — — — — — — — — — 2,020 — — 655 166 144 12,773 12,562 8,894 1,868 24,078 2,629 4,001 374 905 2,227 (162) 345 (7,806) (2,149) (1,609) 8,087 2,100 34,372 17,900 1,061 993 2,882 4 489 4,967 10,413 7,285 9,955 26,178 37,001 21,901 1,435 1,898 19,937 (1,910) 18,027 3,537 2,204 7,544 1,549 4,112 8,179 3,227 3,561 12,049 685 4,691 31,813 6,764 5,765 19,593 2,234 8,803 39,992 225,586 37 2,020 116,111 109,475 171 IRON MOUNTAIN INCORPORATED SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) DECEMBER 31, 2018 (Dollars in thousands) (A) (B) (C) (D) (E) (F) Region/Country/State/Campus Address Facilities(1) Encumbrances Initial cost to Company(1) Cost capitalized subsequent to acquisition (1)(2) Gross amount carried at close of current period (1)(8) Accumulated depreciation at close of current period(1)(8) Date of construction or acquired(3) 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 1 Serangoon North Avenue 6, Singapore 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 1 2 9 $ — $ 681 $ 2,550 $ 3,231 $ — — — — — — — — 1,090 1,530 7,897 58,637 10,395 15,699 13,226 109,155 (77) 769 (444) (1,688) 3,667 (465) 5,216 9,528 1,013 2,299 7,453 56,949 14,062 15,234 18,442 118,683 10,832 335 74 452 1,316 3,049 1,144 1,240 3,222 2012 2015 2013 2017 2018 2016 2016 2016 Up to 40 years Up to 40 years Up to 40 years Up to 40 years (6) Up to 40 years (4) Up to 40 years (4) Up to 40 years (4) Up to 40 years Total 312 $ 2,938 $ 2,455,063 $ 1,245,244 $ 3,700,307 $ 1,011,050 ____________________________________ (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 1,140 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) Date of construction or acquired represents the date we constructed the facility, acquired the facility through purchase or acquisition. (4) Property was acquired in connection with the Recall Transaction. (5) Property was acquired in connection with the IODC Transaction. (6) Property was acquired in connection with the Credit Suisse Transaction. (7) This date represents the date the categorization of the property was changed from a leased facility to an owned facility. 172 IRON MOUNTAIN INCORPORATED SCHEDULE III—SCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) DECEMBER 31, 2018 (Dollars in thousands) (8) The following tables present the changes in gross carrying amount of real estate owned and accumulated depreciation for the years ended December 31, 2017 and 2018: Gross Carrying Amount of Real Estate Year Ended December 31, 2017 2018 Gross amount at beginning of period $ 2,427,540 $ 2,707,925 Additions during period: Acquisitions(1) Discretionary capital projects Foreign currency translation fluctuations Deductions during period: Cost of real estate sold or disposed Gross amount at end of period 121,790 94,658 66,666 283,114 918,091 155,901 (58,798) 1,015,194 (2,729) $ 2,707,925 (22,812) $ 3,700,307 _______________________________________________________________________________ (1) Includes acquisition of sites through business combinations and purchase accounting adjustments. Accumulated Depreciation Gross amount of accumulated depreciation at beginning of period Additions during period: Depreciation Foreign currency translation fluctuations Year Ended December 31, 2017 2018 $ 808,481 $ 909,092 83,488 18,183 101,671 125,280 (16,016) 109,264 Deductions during period: Amount of accumulated depreciation for real estate assets sold or disposed Gross amount of end of period (1,060) 909,092 (7,306) $ 1,011,050 $ The aggregate cost of our real estate assets for federal tax purposes at December 31, 2018 was approximately $3,400,000. Item 16. Form 10-K Summary. Not applicable. 173 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 3.1 3.2 3.3 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 Item 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, File Number 001-13045.) 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, File Number 001-13045.) 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 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, relating to the 3.000% Euro Senior Notes due 2025. (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, relating to the 4.875% Senior Notes due 2027. (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, relating to the 3.875% GBP Senior Notes due 2025. (Incorporated by reference to the Company’s Current Report on Form 8-K dated November 13, 2017.) 174 Exhibit 4.13 Item Senior Indenture, dated as of December 27, 2017, among the Company, the Guarantors named therein and Wells Fargo Bank, National Association, as trustee, relating to the 5.25% Senior Notes due 2028. (Incorporated by reference to the Company’s Current Report on Form 8-K dated December 27, 2017.) 4.14 10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 10.9 10.10 10.11 10.12 10.13 10.14 10.15 10.16 10.17 10.18 10.19 10.20 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 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.) 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.) Second Amendment to the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan. (#) (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018.) 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 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, File Number 001-13045.) 175 Exhibit 10.21 10.22 10.23 10.24 10.25 10.26 10.27 10.28 10.29 10.30 10.31 10.32 10.33 10.34 10.35 10.36 10.37 10.38 10.39 10.40 10.41 Item Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2002 Stock Incentive Plan (version 3). (#) (Incorporated by reference to the Company’s Quarterly Report on Form 10‑Q for the quarter ended March 31, 2013, File Number 001-13045.) 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, File Number 001-13045.) 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). (#) (Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.) 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). (#) (Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.) 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). (#) (Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.) 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.) Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan (version 3). (#) (Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.) 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.) 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.) 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.) Separation Agreement, dated October 5, 2017, between the Company and Eileen Sweeney. (#) (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018.) 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.) 176 Exhibit 10.42 10.43 10.44 10.45 10.46 10.47 10.48 10.49 21.1 23.1 31.1 31.2 32.1 32.2 101.1 Item 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. (Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.) Second Amendment, dated as of March 22, 2018, 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. (Incorporated by reference to the Company’s Current Report on Form 8-K dated March 22, 2018.) Third Amendment and Refinancing Facility Agreement, dated as of June 4, 2018, 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. (Incorporated by reference to the Company’s Current Report on Form 8-K dated June 4, 2018.) Incremental Term Loan Activation Notice, dated as of March 22, 2018, among Iron Mountain Information Management, LLC and the lenders party thereto. (Incorporated by reference to the Company’s Current Report on Form 8-K dated March 22, 2018.) Subsidiaries of the Company. (Filed herewith.) Consent of Deloitte & Touche LLP (Iron Mountain Incorporated, Delaware). (Filed herewith.) Rule 13a‑14(a) Certification of Chief Executive Officer. (Filed herewith.) Rule 13a‑14(a) Certification of Chief Financial Officer. (Filed herewith.) Section 1350 Certification of Chief Executive Officer. (Furnished herewith.) Section 1350 Certification of Chief Financial Officer. (Furnished herewith.) The following materials from Iron Mountain Incorporated’s Annual Report on Form 10‑K for the year ended December 31, 2018 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.) 177 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 Senior Vice President, Chief Accounting Officer (Principal Accounting Officer) Dated: February 14, 2019 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Title Date /s/ WILLIAM L. MEANEY William L. Meaney /s/ STUART B. BROWN Stuart B. Brown /s/ DANIEL BORGES Daniel Borges President and Chief Executive Officer and Director (Principal Executive Officer) February 14, 2019 Executive Vice President and Chief Financial Officer (Principal Financial Officer) February 14, 2019 Senior Vice President, Chief Accounting Officer (Principal Accounting Officer) February 14, 2019 /s/ JENNIFER M. ALLERTON Director February 14, 2019 Jennifer M. Allerton /s/ TED R. ANTENUCCI Director February 14, 2019 Ted R. Antenucci /s/ PAMELA M. ARWAY Director February 14, 2019 Pamela M. Arway /s/ CLARKE H. BAILEY Director February 14, 2019 Clarke H. Bailey /s/ KENT P. DAUTEN Director February 14, 2019 Kent P. Dauten /s/ PAUL F. DENINGER Director February 14, 2019 Paul F. Deninger 178 Name Title Date /s/ MONTE E. FORD Monte E. Ford Director February 14, 2019 /s/ PER-KRISTIAN HALVORSEN Director February 14, 2019 Per-Kristian Halvorsen /s/ WENDY J. MURDOCK Director February 14, 2019 Wendy J. Murdock /s/ WALTER C. RAKOWICH Director February 14, 2019 Walter. C. Rakowich /s/ ALFRED J. VERRECCHIA Director February 14, 2019 Alfred J. Verrecchia 179 CORPORATE DIRECTORS AND OFFICERS (As of 04/01/19) 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 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 General Manager, Records and Information Management, North America Raymond C. Fox Executive Vice President and Chief Risk Officer Emma Jefferies Executive Vice President, Chief People Officer Paul F. Deninger 2, 4 Consultant Evercore Inc. Waltham, MA Monte E. Ford 2, 5 Principal Partner CIO Strategy Exchange Westlake, TX 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 Retire Executive Former CEO of Prologis San Francisco, CA Patrick Keddy Executive Vice President and General Manager, North America and Western Europe Mark Kidd Executive Vice President and General Manager, Data Centers Theodore MacLean Executive Vice President, Adjacent Businesses Deborah Marson Executive Vice President, General Counsel and Secretary Greg McIntosh Executive Vice President, Strategic Accounts Fidelma Russo Executive Vice President and Chief Technology Officer John Tomovcsik Executive Vice President and Chief Operating Officer 1 Member of Audit Committee (Mr. Rakowich is Chairperson) 2 Member of the Compensation Committee (Ms. Arway is Chairperson) 3 Member of the Nominating and Governance Committee (Mr. Verrecchia is Chairperson) 4 Member of the Finance Committee (Mr. Dauten is Chairperson) 5 Member of the Risk and Safety Committee (Mr. Bailey is Chairperson) 6 Independent Chairperson of the Board CORPORATE INFORMATION STOCKHOLDER INFORMATION Transfer Agent, Trustee and Registrar Computershare 877/897-6892 201/680-6578 (outside the United States) 800/231-5469 (hearing impaired—TDD phone) shrrelations@cpushareownerservices.com www.computershare.com/investor Address stockholder inquiries and send certificates for transfer and address changes to: Iron Mountain Incorporated c/o Computershare P.O. Box 43006 Providence, RI 02940-3006 Overnight delivery 250 Royal Street Canton, MA 02021 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: 202,863 as of March 20, 2019 Investor Relations Greer Aviv Senior Vice President, Investor Relations Iron Mountain Incorporated One Federal Street Boston, MA 02110 617/535-2887 Annual Meeting Date Iron Mountain Incorporated will conduct its annual meeting of stockholders on Wednesday May 22, 2019, 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 United States 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 data security and 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 or our internal records or information technology systems and the impact of such incidents on our reputation and ability to compete; (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 global political climate; (viii) our ability or inability to manage growth, expand internationally, complete acquisitions on satisfactory terms, to close pending acquisitions and to integrate acquired companies efficiently; (ix) changes in the amount of our growth and maintenance capital expenditures and our ability to invest according to plan; (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 on 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 14, 2019 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 12/31/18) Greece Hungary Netherlands Northern Ireland Norway Poland Republic of Ireland Romania Russia Scotland Serbia Slovakia Spain Switzerland Turkey Ukraine Latin America Argentina Brazil Chile Mexico Peru Colombia Middle East and Africa South Africa United Arab Emirates North America Canada United States Asia Pacific Australia China Hong Kong-SAR India Indonesia Malaysia New Zealand Philippines Singapore South Korea Europe Armenia Austria Belarus Belgium Croatia Cyprus Czech Republic Denmark England Estonia Finland France Germany Kazakhstan Latvia Lithuania Sweden IRM Stock Performance Note: Fiscal year end December 31, 2018 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, 2013, through December 31, 2018. This comparison assumes an investment of $100 on December 31, 2013, and the reinvestments of any dividends. 4AUG201721502439 

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