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
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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:
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our ability to remain qualified for taxation as a real estate investment trust for United States federal income tax
purposes ("REIT");
the adoption of alternative technologies and shifts by our customers to storage of data through non-paper based
technologies;
changes in customer preferences and demand for our storage and information management services;
the cost to comply with current and future laws, regulations and customer demands relating to data security and
privacy issues, as well as fire and safety standards;
the impact of litigation or disputes that may arise in connection with incidents in which we fail to protect our
customers' information 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.
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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
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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:
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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:
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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.
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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:
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the impact of foreign government regulations and United States regulations that apply to us in foreign countries where
we operate; in particular, we are subject to United States and foreign anticorruption laws, such as the Foreign Corrupt
Practices Act and the United Kingdom Bribery Act, and, although we have implemented internal controls, policies and
procedures and training to deter prohibited practices, our employees, partners, contractors or agents may violate or
circumvent such policies and the law;
the volatility of certain foreign economies in which we operate;
political uncertainties and changes in the global political climate which may impose restrictions on global operations;
unforeseen liabilities, particularly within acquired businesses;
costs and difficulties associated with managing international operations of varying sizes and scale;
the risk that business partners upon whom we depend for technical assistance or management and acquisition
expertise in some markets outside of the United States will not perform as expected;
difficulties attracting and retaining local management and key employees to operate our business in certain countries;
cultural differences and differences in business practices and operating standards; and
foreign currency fluctuations.
In particular, our net income, 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.
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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:
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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.
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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:
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challenges and difficulties associated with managing our larger, more complex, company;
conforming standards, controls, procedures and policies, business cultures and compensation 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.
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We may be subject to certain costs and potential liabilities associated with the real estate required for our business.
Because our business is heavily dependent on real estate, we face special risks attributable to the real estate we own
or lease. Such risks include:
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acquisition and occupancy costs that make it difficult to meet anticipated margins and difficulty locating suitable
facilities due to a relatively small number of available buildings having the desired characteristics in some real estate
markets;
uninsured losses or damage to our storage facilities due to an inability to obtain full coverage on a cost-effective basis
for some casualties, such as fires, 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.
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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