SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
- --------------------------------------------------------------------------------
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 23, 1998
(June 12, 1997)
IRON MOUNTAIN INCORPORATED
--------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation or Organization)
0-27584 04-3107342
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(Commission file number) (I.R.S. Employer Identification No.)
745 Atlantic Avenue, Boston, MA 02111
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(Address of Principal Executive Offices, Including Zip Code)
(617) 535-4766
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(Registrant's Telephone Number, Including Area Code)
<PAGE>
Item 7. Financial Statements and Exhibits
During 1998 and 1997, the Company acquired several records management
businesses. The following represents Unaudited Pro Forma Condensed Consolidated
Financial Statements for certain such businesses acquired during 1998 and 1997.
Pursuant to Article 11 of Regulation S-X, pro forma effect has only been given
to acquired businesses for which the Company has previously filed audited
financial statements in accordance with Rule 3-05 of Regulation S-X.
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(b) Pro Forma Financial Information: 3
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Nine Months Ended September 30, 1998 4
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Year Ended December 31, 1997 5
Schedule of 1997 Acquisitions 6
Schedule of 1998 Acquisitions 7
Notes to the Unaudited Pro Forma Condensed Consolidated
Financial Statements 8-11
</TABLE>
2
<PAGE>
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Statements of
Operations for the nine months ended September 30, 1998 and for the year ended
December 31, 1997, give effect to the 1997 and 1998 acquisitions, as defined
herein, and related real estate transactions, as if each had occurred as of
January 1, 1997. However, the aforementioned statements of operations do not
include results of operations prior to the date of acquisition, or pro forma
adjustments, for acquisitions completed by Record Masters and Arcus in 1997. Pro
Forma adjustments are described in the accompanying notes. See "Overview" in the
accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations for the
nine months ended September 30, 1998 and for the year ended December 31, 1997,
give effect to the sale of 6.0 million shares of the Company's Common Stock, par
value $.01 per share (the "Common Stock") (the "Equity Offering") and the
application of the net proceeds therefrom as if the Equity Offering had occurred
as of January 1, 1997. In addition, the Unaudited Pro Forma Condensed
Consolidated Statement of Operations for the year ended December 31, 1997, gives
effect to the sale of the Company's 8.75% Senior Subordinated Notes due 2009
(the "1997 Notes") and the application of the net proceeds therefrom (together
with the 1997 and 1998 acquisitions and the Equity Offering, the "Transactions")
as if the sale of the 1997 Notes had occurred as of January 1, 1997. Pursuant to
certain SEC Rules and Regulations, the Unaudited Pro Forma Condensed
Consolidated Statements of Operations do not include results of operations, or
pro forma adjustments, for the 11 acquisitions completed in 1997 and the 10
acquisitions completed in 1998 that are not specifically defined herein as the
1997 or 1998 acquisitions.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations are not
necessarily indicative of the actual results of operations that would have been
reported had the 1997 and 1998 acquisitions, the Equity Offering and the sale of
the 1997 Notes been consummated as of January 1, 1997, nor do they purport to
indicate the results of future operations of the Company. Furthermore, the pro
forma results do not give effect to all cost savings or incremental costs which
may occur as a result of the integration and consolidation of the 1997 and 1998
acquisitions. In the opinion of management, all adjustments necessary to present
fairly such pro forma financial statements have been made.
All of the acquisitions and related real estate transactions have been accounted
for using the purchase method of accounting.
On June 30, 1998, the Company's Board of Directors approved a three-for-two
stock split effected in the form of a dividend on the Company's Common Stock.
Shares of the Common Stock were issued on July 31, 1998 to all stockholders of
record as of the close of business on July 17, 1998. All share and per share
data in the Unaudited Pro Forma Condensed Consolidated Financial Statements has
been restated to reflect the stock split.
3
<PAGE>
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
Iron Pro Forma Iron
Mountain NUS(1) Other(1) Adjustments Mountain
-------- ------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Revenues:
Storage $168,046 $4,657 $1,700 $ -- $174,403
Service and Storage Material Sales 142,461 885 467 -- 143,813
-------- ------ ------ ------- --------
Total Revenues 310,507 5,542 2,167 -- 318,216
Operating Expenses:
Cost of Sales (Excluding
Depreciation) 162,609 2,116 1,042 -- 165,767
Selling, General and
Administrative 76,666 1,121 1,099 -- 78,886
Depreciation and Amortization 36,225 713 169 169 (A) 37,276
-------- ------ ------ ------- --------
Total Operating Expenses 275,500 3,950 2,310 169 281,929
-------- ------ ------ ------- --------
Operating Income (Loss) 35,007 1,592 (143) (169) 36,287
Interest Expense, net 34,228 282 57 (1,132) (D) 33,435
Other Income (2) 1,700 -- -- -- 1,700
-------- ------ ------ ------- --------
Income (Loss) Before Provision for
Income Taxes 2,479 1,310 (200) 963 4,552
Provision for Income Taxes 4,123 544 -- 453 (E) 5,120
-------- ------ ------ ------- --------
Net Income (Loss) $ (1,644) $ 766 $ (200) $ 510 $ (568)
======== ====== ====== ======= ========
Net Loss per Common Share -
Basic and Diluted $ (0.06) $ (0.02)
======== ========
Weighted Average Common Shares
Outstanding 26,848 2,229 (F) 29,077
======== ======= ========
</TABLE>
- ----------------------
(1) Represents historical results of operations for each acquisition for the
period in 1998 prior to acquisition by the Company. See "Overview--1998
Acquisitions" in the accompanying Notes.
(2) Other income for the nine month period ended September 30, 1998 is comprised
of a $1.7 million gain resulting from the settlement of several insurance
claims related to the March 1997 fires at the Company's South Brunswick
Township, New Jersey facilities.
The accompanying Notes are an integral part of these pro forma
financial statements.
4
<PAGE>
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
Iron 1997 1998 Pro Forma Iron
Mountain Acquisitions(1) Acquisitions(1) Adjustments Mountain(2)
-------- --------------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Storage $125,968 $33,873 $ 68,430 $ -- $228,271
Service and Storage
Material Sales 82,797 15,955 48,060 -- 146,812
-------- ------- -------- ------- --------
Total Revenues 208,765 49,828 116,490 -- 375,083
Operating Expenses:
Cost of Sales (Excluding
Depreciation) 106,879 21,859 62,384 (195) (B) 190,927
Selling, General and
Administrative 51,668 15,488 40,303 (8,867) (C) 98,592
Depreciation and
Amortization 27,107 3,385 8,070 6,201 (A) 44,763
-------- ------- -------- ------- --------
Total Operating Expenses 185,654 40,732 110,757 (2,861) 334,282
-------- ------- -------- ------- --------
Operating Income 23,111 9,096 5,733 2,861 40,801
Interest Expense, net 27,712 2,466 4,247 9,783 (D) 44,208
-------- ------- -------- ------- --------
Income (Loss) Before Provision
(Credit) for Income Taxes (4,601) 6,630 1,486 (6,922) (3,407)
Provision (Credit) for Income Taxes (80) 1,375 349 1,918 (E) 3,562
-------- ------- -------- ------- --------
Net Income (Loss) $ (4,521) $ 5,255 $ 1,137 $(8,840) $ (6,969)
======== ======= ======== ======= ========
Net Loss per Common Share -
Basic and Diluted $ (0.26) $ (0.24)
======== ========
Weighted Average Common Shares
Outstanding 17,172 11,587 (F) 28,759
======== ======= ========
</TABLE>
- -----------------
(1) See Schedule A for detail of the 1997 Acquisitions and Schedule B for
detail of the 1998 Acquisitions.
(2) The Unaudited Pro Forma Condensed Consolidated Statement of Operations does
not include results of operations prior to the date of acquisition, or pro
forma adjustments, for acquisitions completed by Record Masters and Arcus
in 1997. In addition, the Unaudited Pro Forma Condensed Consolidated
Statement of Operations does not reflect one disposition by Arcus in June
1997, because the impact is immaterial to such statements. See "Overview"
in the accompanying Notes.
The accompanying Notes are an integral part of these pro forma
financial statements.
5
<PAGE>
Schedule A
IRON MOUNTAIN INCORPORATED
SCHEDULE OF 1997 ACQUISITIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
1997 Acquisitions (1)
-------------------------------------------------------------------- Total
Record 1997
Safesite FileSafe Allegiance Masters(2) Other Acquisitions
-------- -------- ---------- ---------- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Storage $ 4,198 $5,254 $1,625 $18,999 $3,797 $33,873
Service and Storage
Material Sales 6,034 3,419 1,132 4,012 1,358 15,955
------- ------ ------ ------- ------ -------
Total Revenues 10,232 8,673 2,757 23,011 5,155 49,828
Operating Expenses:
Cost of Sales (Excluding
Depreciation) 5,111 3,019 1,378 11,813 538 21,859
Selling, General and 4,460 1,497 580 5,493 3,458 15,488
Administrative
Depreciation and
Amortization 397 289 149 2,067 483 3,385
------- ------ ------ ------- ------ -------
Total Operating Expenses 9,968 4,805 2,107 19,373 4,479 40,732
------- ------ ------ ------- ------ -------
Operating Income 264 3,868 650 3,638 676 9,096
Interest (Income) Expense, net 26 142 (31) 1,910 419 2,466
------- ------ ------ ------- ------ -------
Income Before Provision for
Income Taxes 238 3,726 681 1,728 257 6,630
Provision for Income Taxes 77 -- 28 1,267 3 1,375
------- ------ ------ ------- ------ -------
Net Income $ 161 $3,726 $ 653 $ 461 $ 254 $ 5,255
======= ====== ====== ======= ====== =======
</TABLE>
- ----------------------
(1) Represents historical results of operations for each 1997 Acquisition for
the period in 1997 prior to acquisition by the Company. See "Overview--1997
Acquisitions" in the accompanying Notes.
(2) Does not include results of operations prior to the date of acquisition, or
pro forma adjustments, for an acquisition completed by Record Masters in
1997. See "Overview--1997 Acquisitions" in the accompanying Notes.
6
<PAGE>
Schedule B
IRON MOUNTAIN INCORPORATED
SCHEDULE OF 1998 ACQUISITIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
1998 Acquisitions (1) Total
--------------------------------------------------- 1998
Arcus(2)(3) NUS Other Acquisitions
----------- --- ----- ------------
<S> <C> <C> <C> <C>
Revenues:
Storage $51,607 $ 8,931 $ 7,892 $ 68,430
Service and Storage Material Sales 43,738 1,753 2,569 48,060
------- ------- ------- --------
Total Revenues 95,345 10,684 10,461 116,490
Operating Expenses:
Cost of Sales (Excluding Depreciation) 53,323 4,161 4,900 62,384
Selling, General and Administrative 35,396 2,024 2,883 40,303
Depreciation and Amortization 6,017 1,374 679 8,070
------- ------- ------- --------
Total Operating Expenses 94,736 7,559 8,462 110,757
------- ------- ------- --------
Operating Income 609 3,125 1,999 5,733
Interest Expense, net 3,317 610 320 4,247
------- ------- ------- --------
Income (Loss) Before Provision (Credit) for
Income Taxes (2,708) 2,515 1,679 1,486
Provision (Credit) for Income Taxes (696) 1,023 22 349
------- ------- ------- --------
Net Income (Loss) $(2,012) $ 1,492 $ 1,657 $ 1,137
======= ======= ======= ========
</TABLE>
- ----------------------
(1) Represents historical results of operations for each 1998 Acquisition for
the year ended December 31, 1997. See "Overview--1998 Acquisitions" in the
accompanying Notes.
(2) Does not include results of operations prior to the date of acquisition, or
pro forma adjustments, for an acquisition completed by Arcus in 1997. See
"Overview--1998 Acquisitions" in the accompanying Notes.
(3) Includes $8.1 million of stock compensation expense directly attributable
to the Arcus Merger.
7
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Overview
1997 Acquisitions
In February 1997, Iron Mountain acquired the records management business of
Wellington Financial Services, Inc. (d/b/a Michigan Data Storage) ("MDS"). In
June 1997, Iron Mountain acquired Safesite Records Management Corporation
("Safesite") and certain related real estate for $62.2 million, including $45.0
million in aggregate fair value of Common Stock and options to purchase Common
Stock and the balance in cash. In August 1997, Iron Mountain acquired Concorde
Group, Inc. In September 1997, Iron Mountain acquired Data Securities
International, Inc. In October 1997, Iron Mountain acquired Records
Retention/FileSafe, L.P. ("FileSafe") for $45.1 million in cash and assumed debt
and Allegiance Business Archives, Ltd. ("Allegiance") for $8.7 million in cash.
In November 1997, Iron Mountain acquired HIMSCORP, Inc. (d/b/a Record Masters)
for $85.3 million, including $36.0 million in fair value of Common Stock and the
balance in cash and assumed debt. (In June 1997, Record Masters completed the
acquisition of MKC, Inc. ("MKC"), a medical records management company. The
results of operations of MKC prior to the date of acquisition are not included
in the Pro Forma Statement of Operations. For the five months ended May 31,
1997, MKC had unaudited revenues of $0.9 million). The aggregate purchase price
of the 1997 Acquisitions (including certain related real estate), excluding
Safesite, FileSafe, Allegiance and Record Masters was $33.3 million including
$6.8 million in aggregate fair value of Common Stock and options to purchase
Common Stock.
1998 Acquisitions
In January 1998, Iron Mountain acquired Arcus Group, Inc. ("Arcus") for
$153.7 million, including $55.1 million in aggregate fair value of Common Stock
and options to acquire Common Stock and the balance in cash and assumed debt.
(In August 1997, Arcus completed the acquisition of an IT staffing business. The
results of operations for such IT staffing business prior to the date of
acquisition are not included in the Pro Forma Statement of Operations. For the
period in 1997 prior to the date of acquisition, such IT staffing business had
unaudited revenues of $5.7 million). Additionally, in January 1998, Iron
Mountain acquired Midwest Records Management (a division of I-GO Van & Storage
Co.). In February 1998, Iron Mountain acquired Sloan Vaults, Inc. (d/b/a The
Vault). In April 1998, Iron Mountain acquired InterMation, Inc. In July 1998,
Iron Mountain acquired National Underground Storage, Inc. ("NUS") for $29.9
million in cash and assumed debt. The aggregate purchase price of the 1998
Acquisitions (including certain related real estate), excluding Arcus and NUS
was $34.6 million including $12.1 million in aggregate fair value of Common
Stock.
8
<PAGE>
Allocation of Purchase Price
The aggregate consideration paid for the 1997 and 1998 acquisitions was
$452.8 million, consisting of $155.0 million in aggregate fair value of Common
Stock and options to purchase Common Stock and $297.8 million in cash and
assumed debt. The excess of the purchase price over the book value of the net
assets acquired for each of the acquisitions has been allocated to tangible and
intangible assets, based on the Company's estimate of the fair value of the net
assets acquired. The allocation of the aggregate purchase price is illustrated
below (in millions):
<TABLE>
<S> <C> <C>
1997 Acquisitions:
Allocation of Purchase Price:
Current Assets $ 14.6
Property, Plant and Equipment 30.8
Other Long-term Assets 2.8
Current Liabilities (23.2)
Deferred Income Taxes (1.7)
Other Long-term Liabilities (1.0)
Goodwill 212.3
-------
Purchase Price of 1997 Acquisitions $234.6
1998 Acquisitions:
Allocation of Purchase Price:
Current Assets $ 23.6
Property, Plant and Equipment 42.9
Other Long-term Assets 4.2
Current Liabilities (23.1)
Deferred Income Taxes (1.3)
Other Long-term Liabilities (2.3)
Goodwill 174.2
-------
Purchase Price of 1998 Acquisitions 218.2
------
Total Purchase Price of the 1997 and 1998 Acquisitions $452.8
======
</TABLE>
9
<PAGE>
The 1997 and 1998 acquisitions are assumed to be financed with Common
Stock, options to purchase Common Stock, the 1997 Notes and the Equity Offering
as follows (in millions):
<TABLE>
<CAPTION>
<S> <C> <C>
1997 Acquisitions:
Fair Value of Common Stock Issued $ 84.7
Fair Value of Options Granted 3.1
Proceeds from the 1997 Notes 146.8
-------
Purchase Price of 1997 Acquisitions $234.6
1998 Acquisitions:
Fair Value of Common Stock Issued $ 51.5
Fair Value of Options Granted 15.7
Proceeds from the 1997 Notes 95.8
Proceeds from the Equity Offering 55.2
-------
Purchase Price of 1998 Acquisitions 218.2
------
Total Purchase Price of the 1997 and 1998 Acquisitions $452.8
======
</TABLE>
Statements of Operations
Storage revenues consist of periodic charges related to the storage of
materials. Service and storage material sales revenues consist of charges for
related service activities and the sale of storage materials. In certain
circumstances, based upon customer requirements, storage revenues include
periodic charges associated with normal, recurring service activities.
Pro Forma Adjustments
The accompanying pro forma statements of operations for the nine months
ended September 30, 1998 and the year ended December 31, 1997 have been prepared
as if the Transactions had occurred on January 1, 1997 and reflect the following
pro forma adjustments:
(A) To reflect additional depreciation expense based on the fair value of
the assets acquired and the remaining useful lives and the amortization of
goodwill. Property and equipment are depreciated over three to 50 years,
goodwill is amortized over 25 to 30 years, software is amortized over three
years and covenants not-to-compete are amortized over two to five years on a
straight-line basis. Such depreciation and amortization may change upon final
determination of the fair value of the net assets acquired.
(B) To reduce cost of sales to eliminate rent expense for facilities
purchased by the Company as part of certain acquisitions that would not have
been incurred had such acquisitions occurred as of January 1, 1997. All such
facilities had been previously owned by affiliates of the acquired companies.
10
<PAGE>
(C) To reverse stock compensation expense directly attributable to the
Arcus Merger and to conform the accounting policies of certain acquired
companies to those of the Company with respect to the capitalization of costs
for software developed for internal use.
(D) Pro forma adjustments to Interest Expense consist of the following (in
millions):
<TABLE>
<CAPTION>
Nine Months Year
Ended Ended
September 30, December 31,
1998 1997
-------------- ---------------
<S> <C> <C>
Acquisition Adjustments:
Reverse interest expense on debt retired or not assumed $(0.3) $(6.4)
Use of Proceeds Adjustments:
Reverse interest income on cash balances of the Company used
to finance acquisitions 0.2 0.3
Reverse interest expense on debt of the Company retired with
proceeds from the 1997 Notes and the Equity Offering (1.0) (2.4)
Record interest expense relating to the 1997 Notes including
amortization of deferred financing costs -- 18.3
----- -----
Total Acquisition and Use of Proceeds Adjustments $(1.1) $ 9.8
===== =====
</TABLE>
(E) To adjust the provision for income taxes to a 40% rate on pro forma
income before nondeductible goodwill amortization and other nondeductible
expenses.
(F) To adjust the pro forma weighted average common shares-basic
outstanding as if the Transactions had occurred on January 1, 1997. The number
of shares of Common Stock issued and the adjustments are as follows (in
thousands):
<TABLE>
<CAPTION>
Adjustment to Weighted Average Shares
-----------------------------------------------
Total Number of Nine Months Ended Year Ended
Transactions Shares Issued September 30, 1998 December 31, 1997
- ------------------------------------------- -------------------- --------------------- ----------------------
<S> <C> <C> <C>
Equity Offering 6,038 2,057 6,038
Safesite 2,655 -- 1,178
DSI 341 -- 228
Record Masters 1,803 -- 1,497
Arcus 2,157 -- 2,157
Other 489 172 489
------ ----- ------
Total Shares Issued for the Transactions 13,483 2,229 11,587
====== ===== ======
</TABLE>
11
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
IRON MOUNTAIN INCORPORATED
---------------------------------------
(Registrant)
November 23, 1998 By: /s/ Jean A. Bua
- ----------------- -----------------------------------
(date) Jean A. Bua
Vice President and Corporate Controller
(Principal Accounting Officer)
12
