SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
- --------------------------------------------------------------------------------
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 7, 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) 357-4455
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(Registrant's Telephone Number, Including Area Code)
<PAGE>
This Current Report on Form 8-K/A amends and restates, in its entirety, the
Current Report on Form 8-K (date of report July 10, 1998), which was filed with
the Securities and Exchange Commission on July 10, 1998. All share and per share
data has been restated to reflect the three-for-two stock split as previously
reported on the Form 8-K filed with the Securities and Exchange Commission on
July 10, 1998.
Item 2. Acquisition or Disposition of Assets
National Underground Storage, Inc.
On July 1, 1998, as previously reported on the Form 8-K filed with the
Securities and Exchange Commission on July 10, 1998, National Underground
Storage, Inc. ("NUS") merged with and into a wholly owned subsidiary of Iron
Mountain Incorporated (the "Registrant," "Iron Mountain" or the "Company")
pursuant to an Agreement and Plan of Merger dated June 5, 1998 among NUS and the
Registrant's wholly owned subsidiary.
Consideration was comprised of approximately $29 million in cash and assumed
debt. The funds used for the consideration were comprised of a portion of the
net proceeds from the Registrant's public offering (the "Equity Offering") of
6.0 million shares of its Common Stock, $.01 par value per share (the "Common
Stock") and borrowings under the Registrant's $250 million revolving credit
facility dated September 27, 1997, as amended, among the Registrant, various
financial institutions and The Chase Manhattan Bank, as administrative agent for
such lenders (the "Credit Agreement").
The assets acquired by the Registrant included real property, tangible personal
property (consisting primarily of office equipment, furniture and fixtures,
motor vehicles, racking and shelving) and intangible personal property regularly
used in NUS's records management business. The Registrant intends to use the
acquired property and equipment in the operation of its records management
business.
Arcus Group, Inc.
On January 6, 1998, as previously reported on the Form 8-K filed with the
Securities and Exchange Commission on January 13, 1998, the Registrant, Arcus
Group, Inc. ("AGI"), United Acquisition Company ("UAC") and Arcus Technology
Services, Inc. ("ATSI" and together with AGI and UAC, "Arcus") consummated the
transactions contemplated by a certain Agreement and Plan of Merger among the
Registrant and Arcus dated September 26, 1997.
In consideration, the Registrant issued approximately 2.2 million shares of its
Common Stock valued at $39.4 million and options to purchase approximately 0.9
million shares of its Common Stock valued at $15.6 million. In addition, Iron
Mountain paid cash and assumed debt totaling $98.7 million. The funds used for
the consideration were comprised of a portion of the net proceeds from the sale
of the Registrant's $250 million in aggregate principal amount of 8.75% Senior
Subordinated Notes due 2009 (the "1997 Notes") and borrowings under the Credit
Agreement.
2
<PAGE>
HIMSCORP, Inc. and Subsidiaries
On October 31, 1997, as previously reported on the Form 8-K/A filed with the
Securities and Exchange Commission on November 10, 1997, the Registrant acquired
all of the outstanding capital stock of HIMSCORP (d/b/a Record Masters). Total
consideration was $88.4 million consisting of 1.8 million shares of Iron
Mountain Common Stock valued at $36.0 million and cash and assumed indebtedness
of $52.4 million. The cash consideration was financed primarily by a portion of
the net proceeds from the sale of the 1997 Notes.
Allegiance Business Archives, Ltd.
On October 1, 1997, as previously reported on the Form 8-K filed with the
Securities and Exchange Commission on October 16, 1997, Iron Mountain Records
Management, Inc. ("IMRM"), a wholly owned subsidiary of the Registrant, acquired
all of the outstanding capital stock of Allegiance Business Archives, Ltd.
("Allegiance"), a New Jersey Corporation, for $8.8 million in cash, pursuant to
a Stock Purchase and Sale Agreement dated July 29, 1997 among IMRM and the
Stockholders of Allegiance Business Archives, Ltd. The cash consideration was
financed primarily by borrowings under the Registrant's Credit Agreement.
Records Retention/FileSafe
On October 2, 1997, as previously reported on the Form 8-K filed with the
Securities and Exchange Commission on October 16, 1997, IMRM purchased certain
assets, including real property, and assumed certain liabilities of Records
Retention/FileSafe ("FileSafe"), a California limited partnership, for $45.1
million in cash and assumed debt pursuant to an Asset Purchase and Sale
Agreement dated August 20, 1997, among IMRM and FileSafe. The cash consideration
was financed primarily by borrowings under the Credit Agreement.
Safesite Records Management Corporation
As previously reported on the Form 8-K/A filed with the Securities and Exchange
Commission on August 26, 1997, Safesite Records Management Corporation
("Safesite"), a Delaware corporation, merged with and into Iron
Mountain/Safesite, Inc., a wholly owned subsidiary of the Registrant, effective
June 12, 1997, pursuant to an Agreement and Plan of Merger dated February 19,
1997, as amended, among the Registrant, Iron Mountain/Safesite, Inc. and
Safesite. In addition, wholly owned subsidiaries of the Registrant also acquired
certain real property from a trust for the benefit of the controlling
stockholders of Safesite.
The total consideration paid by the Registrant, including transaction costs, was
$62.0 million. The consideration consisted of 2.7 million shares of Common Stock
and options to purchase Common Stock valued at $45.0 million and cash of $17.0
million financed primarily by borrowings under the Credit Agreement.
3
<PAGE>
Item 5. Other Information
On June 30, 1998, the Company's Board of Directors authorized and 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. In order to
prevent dilution of shares of Common Stock registered pursuant to the Company's
Registration Statement on Form S-8 dated April 9, 1997 (File No. 333-24803) and
the Company's Registration Statement on Form S-8 dated August 8, 1997 (File No.
333-33191) in connection with the Company's 1995 Stock Incentive Plan (the
"Stock Incentive Plan S-8's") the number of shares of Common Stock registered
under the Stock Incentive Plan S-8's is increased from 1,400,000 shares of
Common Stock to 2,100,000 shares of Common Stock. In order to prevent dilution
of shares of Common Stock registered pursuant to the Company's Registration
Statement on Form S-8 dated January 8, 1998 (File No. 333-43901) in connection
with the Iron Mountain/UAC 1995 Stock Option Plan and the Iron Mountain/ATSI
Stock Option Plan (the "UAC/ATSI Stock Option Plan S-8") the number of shares of
Common Stock registered under the UAC/ATSI Stock Option Plan S-8 is increased
from 589,987 shares of Common Stock to 884,935 shares of Common Stock.
Concurrently with the filing of this Form 8-K/A, the Company intends to file a
Registration Statement on Form S-8 registering an additional 900,000 shares of
Common Stock under the Company's 1995 Stock Incentive Plan, bringing the total
number of shares of Common Stock registered Stock under the Company's 1995 Stock
Incentive Plan to 3,000,000. Also on August 3, 1998, the Company filed
Post-Effective Amendment No. 1 to its Registration Statement on Form S-4 filed
on January 13, 1998 (File No. 333-44187) to register the additional 337,164
shares of Common Stock issuable as a result of the stock split.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of the Businesses Acquired:
National Underground Storage, Inc.
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Independent Auditors' Report 8
Balance Sheets as of December 31, 1997 and 1996 9
Balance Sheet as of June 30, 1998 (unaudited) 9
Statements of Operations for the years ended December 31, 1997
and 1996 10
Statements of Operations for the six months ended June 30,
1998 and 1997 (unaudited) 10
Statements of Changes in Stockholders' Equity for the years
ended December 31, 1997 and 1996 11
Statements of Cash Flows for the years ended December 31, 1997
and 1996 12
Statements of Cash Flows for the six months ended June 30,
1998 and 1997 (unaudited) 12
Notes to Financial Statements 13
</TABLE>
Arcus Technology Services, Inc.
The audited financial statements of ATSI as of December 31,
1997 and 1996 and for the five month period ended December 31,
1995 and each of the two years ended December 31, 1997, and of
Arcus, Inc. (the "Predecessor Company") for the seven month
period ended July 31, 1995, were previously filed on the Form
8-K filed with the Securities and Exchange Commission on March
9, 1998.
4
<PAGE>
HIMSCORP, Inc. and Subsidiaries
The audited financial statements as of December 31, 1995 and
1996 and for the period from February 1, 1995 (commencement of
operations) to December 31, 1995 and the year ended December
31, 1996, and the unaudited financial statements as of
September 30, 1997 and for the nine months ended September 30,
1996 and 1997, were previously filed on the Form 8-K filed
with the Securities and Exchange Commission on November 25,
1997.
Allegiance Business Archives, Ltd.
The audited financial statements as of and for the year ended
December 31, 1996, and the unaudited financial statements as
of September 30, 1997 and for the nine months ended September
30, 1996 and 1997, were previously filed on the Form 8-K filed
with the Securities and Exchange Commission on November 25,
1997.
Records Retention/FileSafe
The audited financial statements as of and for the years ended
December 31, 1995 and 1996, and the unaudited financial
statements as of September 30, 1997 and for the nine months
ended September 30, 1996 and 1997, were previously filed on
the Form 8-K filed with the Securities and Exchange Commission
on November 25, 1997.
Safesite Records Management Corporation
The audited financial statements as of December 31, 1995 and
1996 and for each of the three years ended December 31, 1996,
were previously filed in the Registrant's Registration
Statement on Form S-4, as amended, filed with the Securities
and Exchange Commission on April 4, 1997 (Reg. No. 333-24635).
The unaudited financial statements as of March 31, 1997 and
for the three months ended March 31, 1996 and 1997, were
previously filed on the Form 8-K/A filed with the Securities
and Exchange Commission on August 26, 1997.
5
<PAGE>
<TABLE>
<CAPTION>
Page
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(b) Pro Forma Financial Information: 20
Pro Forma Condensed Consolidated Balance Sheet as of
June 30, 1998 (Unaudited) 21
Pro Forma Condensed Consolidated Statement of
Operations for the Six Months Ended June 30, 1998
(Unaudited) 22
Pro Forma Condensed Consolidated Statement of
Operations for the Year Ended December 31, 1997
(Unaudited) 23-24
Notes to the Pro Forma Condensed Consolidated
Financial Statements (Unaudited) 25-27
</TABLE>
(c) Exhibits:
Exhibit 2.1 Agreement and Plan of Merger, dated as of
February 19, 1997, by and among Iron Mountain, IM-1
Acquisition Corp. and Safesite Records Management
Corporation filed as an exhibit to Iron Mountain's
Annual Report on Form 10-K for the year ended
December 31, 1996 filed with the Securities and
Exchange Commission (File No. 0-27584).
Exhibit 2.2 Amendment No. 1 to Agreement and Plan of Merger,
dated as of April 1, 1997, by and among Iron
Mountain, IM-1 Acquisition Corp. and Safesite Records
Management Corporation filed as an exhibit to Iron
Mountain's Registration Statement No. 333-24635 filed
with the Securities and Exchange Commission on April
4, 1997, as amended on May 7, 1997 and May 13, 1997.
Exhibit 2.3 Amendment No. 2 to Agreement and Plan of Merger,
dated as of May 7, 1997, by and among Iron Mountain,
IM-1 Acquisition Corp. and Safesite Records
Management Corporation filed as an exhibit to Iron
Mountain's Registration Statement No. 333-24635 filed
with the Securities and Exchange Commission on April
4, 1997, as amended on May 7, 1997 and May 13, 1997.
Exhibit 2.4 Agreement and Plan of Merger, dated as of September
17, 1997, by and among Iron Mountain, IM-3
Acquisition Corp. and HIMSCORP, Inc. filed as an
exhibit to Iron Mountain's Current Report on Form
8-K/A dated November 10, 1997 filed with the
Securities and Exchange Commission (File No.
0-27584).
Exhibit 2.5 Agreement and Plan of Merger, dated as of
September 26, 1997, by and among Iron Mountain, Arcus
Group, Inc., United Acquisition Company and Arcus
Technology Services, Inc., filed as an exhibit to
Iron Mountain's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997 filed with the
Securities and Exchange Commission (File No.
0-27584).
6
<PAGE>
Exhibit 2.6 Amendment No. 1 to Agreement and Plan of Merger,
dated as of November 25, 1997, by and among Iron
Mountain, Arcus Group, Inc., United Acquisition
Company and Arcus Technology Services, Inc., filed as
an exhibit to Iron Mountain's Registration Statement
No. 333-41045 filed with the Securities and Exchange
Commission on November 26, 1997.
Exhibit 2.7 The Agreement and Plan of Merger, by and among
Iron Mountain Records Management, Inc., Iron
Mountain/NUS, Inc. and National Underground Storage,
Inc. dated as of September 26, 1997 filed as an
exhibit to Iron Mountain's Current Report on Form 8-K
dated July 10, 1998 filed with the Securities and
Exchange Commission (File No. 0-27584).
Exhibit 23.1 Consent of Carbis Walker & Associates, LLP (National
Underground Storage, Inc.)
Exhibit 99 Press Release, dated as of July 30, 1998, by the
Company pertaining to the Company's financial results
for the three and six month periods ended June 30,
1998.
7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Iron Mountain Incorporated:
We have audited the accompanying balance sheets of National Underground
Storage, Inc. (a Pennsylvania Corporation) as of December 31, 1997 and 1996 and
the related statements of operations, changes in stockholders' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of National Underground
Storage, Inc. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
CARBIS WALKER & ASSOCIATES, LLP
Butler, Pennsylvania
July 30, 1998
8
<PAGE>
<TABLE>
<CAPTION>
NATIONAL UNDERGROUND STORAGE, INC.
BALANCE SHEETS
June 30, December 31,
1998 1997 1996
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(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 157,531 $ 67,634 $ 92,550
Accounts receivable, net of allowance
for doubtful accounts of $4,095 in
1998, $4,895 in 1997 and $151 in 1996 1,449,200 1,325,216 1,226,979
Prepaid expenses and other 437,560 320,796 411,435
Deferred tax asset 402,746 493,652 512,757
----------- ----------- -----------
Total current assets $ 2,447,037 $ 2,207,298 $ 2,243,721
----------- ----------- -----------
OTHER ASSETS $ 479,264 $ 485,568 $ 487,089
----------- ----------- -----------
PROPERTY, PLANT, AND EQUIPMENT
General facilities $28,380,072 $28,094,372 $26,390,660
Furniture and fixtures 3,192,157 3,192,157 2,862,089
Machinery and equipment 1,573,623 1,234,322 1,141,162
Motor vehicles 525,807 564,797 488,560
----------- ----------- -----------
$33,671,659 $33,085,648 $30,882,471
Less accumulated depreciation 14,278,297 13,606,995 12,248,096
----------- ----------- -----------
$19,393,362 $19,478,653 $18,634,375
Land 584,965 584,965 584,965
Construction in progress 808,487 661,930 599,297
----------- ----------- -----------
Net property and equipment $20,786,814 $20,725,548 $19,818,637
----------- ----------- -----------
Total assets $23,713,115 $23,418,414 $22,549,447
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997 1996
----------- ------------------------
(Unaudited)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 1,342,833 $ 1,273,333 $ 1,341,033
Accounts payable 97,538 148,887 101,357
Accrued expenses 351,753 291,990 345,036
Deferred revenue 1,483,821 1,811,330 1,687,279
Accrued leave 288,294 288,294 301,397
----------- ----------- -----------
Total current liabilities $ 3,564,239 $ 3,813,834 $ 3,776,102
----------- ----------- -----------
LONG-TERM DEBT, net of current portion (Note 3) $ 5,875,072 $ 6,107,906 $ 6,681,040
----------- ----------- -----------
DEFERRED TAXES $ 1,482,815 $ 1,511,104 $ 1,386,763
----------- ----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $ 25 par value;
authorized 40,000 shares;
issued 10,175 shares $254,375 $254,375 $ 254,375
Additional paid-in capital 361,523 308,270 268,808
Retained earnings 13,496,883 12,769,999 11,472,218
----------- ----------- -----------
$14,112,781 $13,332,644 $11,995,401
Less treasury stock, 2,980 shares,
1998; 3,037 shares, 1997;
3,044 shares, 1996; at cost 1,321,792 1,347,074 1,289,859
----------- ----------- -----------
Total stockholders' equity $12,790,989 $11,985,570 $10,705,542
----------- ----------- -----------
Total liabilities and
stockholders' equity $23,713,115 $23,418,414 $22,549,447
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
NATIONAL UNDERGROUND STORAGE, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
----------------------------------------------------------------------------------
1998 1997 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Storage $ 4,657,294 $4,412,118 $ 8,930,659 $ 8,139,538
Service & storage
materials sales 884,605 852,537 1,752,579 1,879,243
----------- ---------- ----------- -----------
Total Revenues $ 5,541,899 $5,264,655 $10,683,238 $10,018,781
----------- ---------- ----------- -----------
Operating Expenses:
Cost of sales
(excluding
depreciation) $ 2,115,765 $2,079,144 $ 4,160,871 $ 3,934,400
Selling, general,
and administrative 1,121,150 995,220 2,024,052 1,901,830
Depreciation 713,292 671,332 1,374,162 1,252,593
----------- ---------- ----------- -----------
Total Operating
Expenses $ 3,950,207 $3,745,696 $ 7,559,085 $ 7,088,823
----------- ---------- ----------- -----------
Operating
Income $ 1,591,692 $1,518,959 $ 3,124,153 $ 2,929,958
Interest Expense, Net (281,850) (309,136) (610,337) (596,001)
----------- ---------- ----------- -----------
Income Before
Provision for
Income Taxes $ 1,309,842 $1,209,823 $ 2,513,816 $ 2,333,957
Provision for
Income Taxes 543,699 462,440 1,023,474 973,490
----------- ---------- ----------- -----------
Net Income $ 766,143 $ 747,383 $ 1,490,342 $ 1,360,467
=========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
NATIONAL UNDERGROUND STORAGE, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Retained Treasury Stockholders'
Stock Capital Earnings Stock Equity
--------- ------------ ------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $254,375 $168,272 $10,294,801 $(1,299,984) $ 9,417,464
Net income -- -- 1,360,467 -- 1,360,467
Purchase of 105 shares of -- -- -- (136,648) (136,648)
treasury stock
Sale of 218 shares -- 100,536 -- 146,773 247,309
of treasury stock
Dividends on common stock -- -- (183,050) -- (183,050)
--------- ------------ ------------- ------------ ---------------
Balance, December 31, 1996 $254,375 $268,808 $11,472,218 $(1,289,859) $10,705,542
Net income -- -- 1,490,342 -- 1,490,342
Purchase of 42 shares -- -- -- (78,287) (78,287)
of treasury stock
Sale of 49 shares -- 39,462 -- 21,072 60,534
of treasury stock
Dividends on common stock -- 0 (192,561) -- (192,561)
--------- ------------ ------------- ------------ ---------------
Balance, December 31, 1997 $254,375 $308,270 $12,769,999 $(1,347,074) $11,985,570
========= ============ ============= ============ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
NATIONAL UNDERGROUND STORAGE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
-------------------------- ---------------------------
1998 1997 1997 1996
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 766,143 $ 747,383 $ 1,490,342 $ 1,360,467
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 713,292 671,332 1,374,162 1,252,593
Deferred taxes 62,617 58,340 143,446 179,546
Gain on sale of equipment -- -- (5,375) --
Changes in assets and liabilities:
Accounts receivable (123,984) (87,261) (98,237) 48,272
Prepaid expenses and other (116,764) 7,006 90,639 21,442
Accounts payable (51,349) (3,028) 47,530 (62,988)
Accrued expenses 59,763 (95,618) (53,046) 22,919
Deferred revenue (327,509) (64,860) 124,051 166,749
Accrued leave -- -- (13,103) 26,818
----------- ----------- ----------- -----------
Net cash provided by
operating activities $ 982,209 $ 1,233,294 $ 3,100,409 $ 3,015,818
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment $ (774,558) $ (866,065) $(2,285,111) $(3,263,913)
Proceeds from sale of property and equipment -- -- 9,413 --
Other 6,304 (12,190) 1,521 (325,969)
----------- ----------- ----------- -----------
Net cash used in
investing activities $ (768,254) $ (878,255) $(2,274,177) $(3,589,882)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt $ 675,000 $ 361,667 $ 800,000 $ 2,200,000
Principal payments on long-term debt (838,334) (674,584) (1,440,834) (1,509,462)
Dividends (39,259) (74,855) (192,561) (183,050)
Purchase of treasury stock -- (8,837) (78,287) (136,648)
Sale of treasury stock 78,535 3,706 60,534 247,309
----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities $ (124,058) $ (392,903) $ (851,148) $ 618,149
----------- ----------- ----------- -----------
Net increase (decrease) in cash $ 89,897 $ (37,864) $ (24,916) $ 44,085
Cash and cash equivalents:
Beginning of period 67,634 92,550 92,550 48,465
----------- ----------- ----------- -----------
End of period $ 157,531 $ 54,686 $ 67,634 $ 92,550
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
NATIONAL UNDERGROUND STORAGE, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. Nature of Business
National Underground Storage, Inc., (the Company) is a records
management company, serving a diverse range of customers storing
records in an underground storage facility located in western
Pennsylvania.
Note 2. Summary of Significant Accounting Policies
Cash and cash equivalents:
For purposes of reporting the statements of cash flows, the Company
considers all cash accounts, which are not subject to withdrawal
restrictions or penalties, and all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents.
Revenue recognition:
Storage income is recognized on the accrual basis for financial
statement purposes. Certain rental contracts include provision for
advance billings for which income is deferred to a future period in
which it is earned. Storage and service revenues are recognized in
the month the respective service is provided. Storage material sales
are recognized when shipped to the customer. Amounts related to
future storage for customers where storage fees are billed in advance
are accounted for as deferred income and amortized over the
applicable period. The Company has no concentrations of credit risk.
Property, plant, and equipment:
Property, plant, and equipment, which is carried at cost, is
depreciated using the straight-line method using the following
estimated useful lives:
Years
----------
General facilities 5-30 years
Furniture and fixtures 5-10 years
Machinery and equipment 10 years
Motor vehicles 5 years
Minor maintenance costs are expensed as incurred. Significant
additions, renewals or betterments that extend the useful lives of
the assets are capitalized.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 2. Summary of Significant Accounting Policies (Continued)
Impairment of long-lived assets:
In accordance with FASB Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of", the Company records impairment losses on long-lived
assets used in operations when events and circumstances indicate that
the assets might be impaired and the undiscounted cash flows
estimated to be generated by those assets are less than the carrying
amounts of those assets. Management has not identified any assets
that might be impaired.
Income taxes:
The Company's method of accounting for income taxes is the liability
method. Under this method, either a deferred tax asset or a deferred
tax liability is recognized. The deferred tax asset or liability is
based on the amounts of assets and liabilities shown in the financial
statements as compared to those amounts used for tax purposes.
Deferred income tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates as of the date of enactment.
Pension costs:
The Company applies the provisions of FASB Statement No. 87 in
accounting for its pension costs.
Bonus and stock purchase plan:
Bonuses are recorded and expensed in the year earned. Stock purchased
by directors or key employees are purchased at book value and
recorded as reduction of treasury stock with the difference being
recorded to paid-in capital in the year purchased.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and revenues and expenses during
the reporting period. Actual results could differ from those
estimates. Any differences are not expected to be material.
Unaudited financial statements:
The unaudited financial statements included herein have been prepared
in accordance with generally accepted accounting principles. In the
opinion of management, the unaudited financial statements include all
adjustments of a normal and recurring nature which are necessary for
a fair presentation. The results of operations and cash flows for the
six months ended June 30, 1998 and 1997 are not necessarily
indicative of the results expected for the full year.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 3. Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Mortgage notes and notes payable ranging from 7.4%
to 8.5% at December 31, 1997, payable
monthly through 2011 $7,346,039 $7,986,873
7% subordinated debentures 35,200 35,200
---------- ----------
$7,381,239 $8,022,073
Less current maturities 1,273,333 1,341,033
---------- ----------
Long-term portion $6,107,906 $6,681,040
========== ==========
</TABLE>
The notes and mortgages are collateralized by substantially all of
the Company's general facilities, equipment, and certain leases upon
the mortgaged premises. The mortgage notes require, among other
things, the Company to maintain certain financial covenants. The
Company is in compliance with these covenants.
Future principal maturities on long-term debt are as follows:
Year Ended
December 31,
------------
1998 $1,273,333
1999 1,140,832
2000 998,333
2001 998,333
2002 825,833
Thereafter 2,144,575
----------
$7,381,239
==========
Note 4. Lines of Credit
The Company has two lines of credit available from local financial
institutions for $ 1,000,000. There were no borrowings against the
lines of credit at December 31, 1997 and 1996. The interest rate is
prime.
Note 5. Employee Benefit Plans
The Company contributes to a defined benefit pension plan covering
substantially all employees. Plan assets are primarily investments in
fixed income and equity mutual funds. The Company's funding policy is
to contribute at least the minimum amounts required by the Employee
Retirement Income Security Act of 1974. Pension expense for the Company
sponsored plan was approximately $65,800 in 1997 and $68,900 in 1996.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 5. Employee Benefit Plans (Continued)
The following table sets forth the plan's funded status and benefit
obligations at December 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Actuarial present value of
accumulated benefit obligations:
Vested $ 539,206 $ 519,378
Non-vested 72,325 64,937
---------- ---------
$ 611,531 $ 584,315
========== =========
Plan assets at fair value $ 911,567 $ 827,891
Projected benefit obligation 930,394 878,012
---------- ---------
Projected benefit obligation in
excess of plan assets $ (18,827) $ (50,121)
Unrecognized transition amount at
December 31 58,749 66,776
Unrecognized net (gain) (143,781) (138,011)
---------- ---------
Accrued pension cost $ (103,859) $(121,356)
========== =========
Net pension cost includes:
Service costs, benefits earned during year $ 57,078 $ 53,792
Interest cost on projected benefit obligation 65,800 58,990
Actual return on plan assets (142,020) (102,872)
Net amortization of transition amount 4,934 5,497
Deferral of actual return over
planned return 79,979 53,493
---------- ---------
Net pension cost $ 65,771 $ 68,900
========== =========
</TABLE>
The assumptions used in determining the projected benefit obligation
and net pension cost were:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Discount rate 7.5% 7.5%
Rate of return on plan assets 7.5% 7.5%
Rate of compensation increase 4.5% 4.5%
</TABLE>
Certain key executives have a non-qualified supplemental executive
retirement plan. Upon retirement, participating executives are entitled
to receive a specified monthly benefit for life. Amounts accrued under
this plan have been recorded as accrued expenses.
The Company also has a 401(k) profit-sharing plan covering
substantially all employees. The plan allows participants to defer up
to 10% of their compensation in the form of salary deferred
contributions. Employer contributions, which are made annually at the
discretion of the Board of Directors, were approximately $206,300 in
1997 and $191,500 in 1996.
Due to the purchase of the Company by Iron Mountain Incorporated on
July 1, 1998, the 401(k) plan was terminated on or about June 30, 1998.
The Company is in the process of preparing an application for an IRS
determination letter.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 6. Income Taxes
Net deferred tax liabilities consist of the following components as of
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax asset:
Deferred revenue $ 515,378 $ 480,591
Vacation accrual 63,375 66,793
Accrued pension cost -- 35,455
Miscellaneous 5,280 5,486
------------ ------------
$ 584,033 $ 588,325
------------ ------------
Deferred tax liabilities:
Property and equipment $(1,480,715) $(1,340,856)
Rent concession (112,950) (121,475)
Other (7,820) -
------------ ------------
$(1,601,485) $(1,462,331)
------------ ------------
Net deferred tax liabilities $(1,017,452) $ (874,006)
============ ============
The deferred tax amounts mentioned above have been classified on the
accompanying balance sheets as of December 31, 1997 and 1996 as
follows:
Noncurrent liabilities $(1,511,104) $(1,386,763)
Current assets 493,652 512,757
------------ ------------
$(1,017,452) $ (874,006)
============ ============
The provision for income taxes charged to operations for the years
ended December 31, 1997 and 1996 consists of the following:
Current tax expense $ 880,028 $ 793,944
Deferred tax expense 143,446 179,546
------------ ------------
$ 1,023,474 $ 973,490
============ ============
The income tax provision differs from the amount of income tax
determined by applying the U.S. federal income tax rate to pretax
income for the years ended December 31, 1997 and 1996 due to the
following:
Computed "expected" tax expense $ 854,478 $ 794,396
Increase (decrease) in income taxes
resulting from:
Other non-deductible expenses 6,241 6,554
State income taxes, net of Federal
tax benefit 166,758 174,669
Tax exempt interest income (4,003) (2,129)
------------ ------------
$ 1,023,474 $ 973,490
============ ============
</TABLE>
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 7. Leasing Arrangements
The Company's leasing operations consist of rental of underground
storage facilities which are classified as operating leases for
financial reporting purposes. Future minimum rents due the Company on
non-cancelable operating leases for the next five years aggregate
approximately $25,000,000.
Note 8. Stock Repurchase Agreements
The Company has an agreement with certain key employees which provides
a guaranteed market for their shares upon death if tendered. The
purchase price is based upon a specified formula. The agreement limits
payments in any one year to 10% of net earnings of the Company.
Interest is due on the unpaid balance at 6% per annum.
Note 9. Bonus and Stock Purchase Plan
Effective in 1992, the Company adopted a non-qualified bonus and stock
purchase plan which provided for the granting of bonuses and the
opportunity to purchase stock to directors and certain key employees.
525 shares of stock were originally reserved under this plan.
Annually bonuses are issued based upon certain corporate and individual
performance goals. Part of the bonus may then be used to purchase
corporate stock. Under this program, 54 and 58 shares were eligible for
purchase in 1996 and 1997, respectively, and 45 and 49 were purchased
in 1996 and 1997. At December 31, 1997, there were 272 shares reserved
for issuance under this plan.
Note 10. Statements of Cash Flows
In accordance with FASB Statement No. 95, the Company has presented a
statement of cash flows. FASB Statement No. 95 requires the following
disclosures:
Supplemental disclosure of cash flow information:
1997 1996
---- ----
Cash paid during the year:
Interest $632,918 $607,105
======== ========
Income taxes $788,975 $813,802
======== ========
Note 11. Subsequent Events
Sale of Company Stock:
On July 1, 1998, the stockholders of the Company sold their stock to
Iron Mountain Incorporated for approximately $22,000,000 plus the
assumption of approximately $7,000,000 of debt.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 11. Subsequent Events (Continued)
Bonus and Stock Purchase Plan:
Under the Bonus and Stock Purchase Plan, in 1998, 60 shares were
eligible for purchase and 57 shares were actually purchased.
Subsequent to the 1998 purchases, the plan was terminated.
Defined Benefit Plan:
Due to the purchase of the Company on July 1, 1998, benefit accruals
are expected to be frozen as of July 31, 1998. Additionally, the Plan
is expected to be terminated on September 15, 1998. The Plan will be
applying for an IRS determination letter in the near future.
Long-Term Debt Retirement:
On July 1, 1998, Iron Mountain Incorporated paid off the balances of
National Underground Storage, Inc.'s long-term debt as of June 30,
1998.
19
<PAGE>
<PAGE>
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet has been
prepared based on the unaudited historical condensed consolidated balance sheets
of the Company and NUS as of June 30, 1998, and gives effect to the NUS
acquisition as if it had occurred as of June 30, 1998. The following Unaudited
Pro Forma Condensed Consolidated Statements of Operations for the six months
ended June 30, 1998 and for the year ended December 31, 1997, give effect to the
NUS acquisition and to the acquisitions of Safesite, Allegiance, FileSafe,
Record Masters and Arcus (together with related real estate transactions, the
"Previous Acquisitions") 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.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations for the
six months ended June 30, 1998 and for the year ended December 31, 1997, give
effect to 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 1997 Notes and the
application of the net proceeds therefrom 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 prior to their respective date of acquisition, or
pro forma adjustments, for the 14 acquisitions completed in 1997 and the six
acquisitions completed in 1998 that are not specifically defined herein as the
Previous 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 NUS acquisition, the Previous 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 NUS acquisition and the Previous 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.
20
<PAGE>
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1998
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
Iron Historical Pro Forma Iron
Mountain NUS Adjustments Mountain
-------- --- ----------- --------
<S> <C> <C> <C> <C>
Assets
Current Assets $108,033 $ 2,447 $(14,589) (A) $ 95,891
Property, Plant and Equipment, net 220,168 20,787 -- 240,955
Goodwill, net 509,436 -- 9,843 (B) 519,279
Other Long-term Assets 29,395 479 -- 29,874
-------- ------- -------- --------
Total Assets $867,032 $23,713 $ (4,746) $885,999
======== ======= ======== ========
Liabilities and Stockholders' Equity
Current Liabilities $ 76,674 $ 3,564 $ (698) (C)(D) $ 79,540
Long-term Debt, net of Current Portion 427,034 5,875 8,743 (E) 441,652
Deferred Rent 8,874 -- -- 8,874
Deferred Income Taxes 8,442 1,483 -- 9,925
Other Long-term Liabilities 5,475 -- -- 5,475
Stockholders' Equity 340,533 12,791 (12,791) (F) 340,533
-------- ------- -------- --------
Total Liabilities and Stockholders'
Equity $867,032 $23,713 $ (4,746) $885,999
======== ======= ======== ========
</TABLE>
The accompanying Notes are an integral part of these pro forma
financial statements.
21
<PAGE>
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Historical Pro Forma
Iron Historical Pro Forma Iron
Mountain NUS Adjustments Mountain
-------- --- ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Storage $108,540 $ 4,657 $ -- $113,197
Service and Storage Material Sales 94,007 885 -- 94,892
-------- ------- -------- --------
Total Revenues 202,547 5,542 -- 208,089
Operating Expenses:
Cost of Sales (Excluding Depreciation) 106,274 2,116 -- 108,390
Selling, General and Administrative 50,219 1,121 -- 51,340
Depreciation and Amortization 23,386 713 (87) (G) 24,013
-------- ------- -------- --------
Total Operating Expenses 179,879 3,950 (87) 183,743
-------- ------- -------- --------
Operating Income 22,668 1,592 87 24,346
Interest Expense, net 23,229 282 (1,732) (H)(J) 21,779
Other Income 1,700 -- -- 1,700
-------- ------- -------- --------
Income Before Provision for Income Taxes 1,139 1,310 1,819 4,268
Provision for Income Taxes 1,714 544 773 (I)(K) 3,031
-------- ------- -------- --------
Net Income (Loss) $ (575) $ 766 $ 1,045 $ 1,237
======== ======= ======== ========
Net Income (Loss) per Common Share -
Basic and Diluted $ (0.02) $ 0.04
======== ========
Weighted Average Common Shares
Outstanding - Basic 25,648 3,169 (L) 28,817
======== ======== ========
Weighted Average Common Shares
Outstanding - Diluted 25,648 4,084 (L)(M) 29,732
======== ======== ========
EBITDA $ 46,054 $ 2,305 $ -- $ 48,359
======== ======= ======== ========
</TABLE>
The accompanying Notes are an integral part of these pro forma
financial statements.
22
<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>
Pro Forma
Historical For Pro Forma
Iron Previous Previous Historical Iron
Mountain Acquisitions(1) Adjustments Acquisitions NUS Adjustments Mountain
--------- --------------- ----------- ------------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Storage $ 125,968 $ 81,683 $ -- $207,651 $ 8,931 $ -- $216,582
Service and Storage
Material Sales 82,797 58,335 -- 141,132 1,752 -- 142,884
--------- --------- ------- -------- ------- ------ --------
Total Revenues 208,765 140,018 -- 348,783 10,683 -- 359,466
Operating Expenses:
Cost of Sales
(Excluding
Depreciation) 106,879 74,644 (187) (N) 181,336 4,161 -- 185,497
Selling, General and
Administrative 51,668 47,426 (8,867) (O) 90,227 2,024 -- 92,251
Depreciation and
Amortization 27,107 8,919 4,770 (P) 40,796 1,374 (121) (P) 42,049
--------- --------- ------- -------- ------- ------ --------
Total Operating
Expenses 185,654 130,989 (4,284) 312,359 7,559 (121) 319,797
--------- --------- ------- -------- ------- ------ --------
Operating Income 23,111 9,029 4,284 36,424 3,124 121 39,669
Interest Expense, net 27,712 5,364 8,660 (Q)(S)(T) 41,736 610 463 (Q) 42,809
--------- --------- ------- -------- ------- ------ --------
Income (Loss) Before
Provision (Credit)
for Income Taxes (4,601) 3,665 (4,376) (5,312) 2,514 (342) (3,140)
Provision (Credit) for
Income Taxes (80) 676 1,467 (R)(U) 2,063 1,024 (24) (R) 3,063
--------- --------- ------- -------- ------- ------ --------
Net Income (Loss) $ (4,521) $ 2,989 $(5,843) $(7,375) $1,490 $ (318) $ (6,203)
========= ========= ======= ======== ======= ====== ========
Net Loss per Common
Share - Basic and
Diluted $ (0.26) $(0.26) $ (0.22)
========= ======== ========
Weighted Average
Common Shares
Outstanding 17,172 10,870 (V) 28,042 28,042
========= ======= ======== ========
EBITDA $ 50,218 $ 17,948 $ 9,054 $ 77,220 $ 4,498 $ -- $ 81,718
========= ========= ======= ======== ======= ====== ========
</TABLE>
- -------------------------
(1) See Schedule A for detail of the Previous Acquisitions.
The accompanying Notes are an integral part of these pro forma
financial statements.
23
<PAGE>
Schedule A
IRON MOUNTAIN INCORPORATED
SCHEDULE OF PREVIOUS ACQUISITIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Previous Acquisitions (1)
------------------------------------------------------------------ Total
Record Previous
Safesite FileSafe Allegiance Masters(2) Arcus(3) Acquisitions
---------- -------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Storage $ 4,198 $ 5,254 $1,625 $18,999 $51,607 $ 81,683
Service and Storage Material
Sales 6,034 3,419 1,132 4,012 43,738 58,335
-------- -------- -------- ------- ------- --------
Total Revenues 10,232 8,673 2,757 23,011 95,345 140,018
Operating Expenses:
Cost of Sales (Excluding
Depreciation) 5,111 3,019 1,378 11,813 53,323 74,644
Selling, General and
Administrative 4,460 1,497 580 5,493 35,396 (4) 47,426
Depreciation and Amortization 397 289 149 2,067 6,017 8,919
-------- -------- -------- ------- ------- --------
Total Operating Expenses 9,968 4,805 2,107 19,373 94,736 130,989
-------- -------- -------- ------- ------- --------
Operating Income 264 3,868 650 3,638 609 9,029
Interest (Income) Expense 26 142 (31) 1,910 3,317 5,364
-------- -------- -------- ------- ------- --------
Income (Loss) Before Provision
(Credit) for Income Taxes 238 3,726 681 1,728 (2,708) 3,665
Provision (Credit) for Income
Taxes 77 -- 28 1,267 (696) 676
-------- -------- -------- ------- ------- --------
Net Income (Loss) $ 161 $ 3,726 $ 653 $ 461 $(2,012) $ 2,989
======== ======== ======== ======= ======= ========
EBITDA $ 661 $ 4,157 $ 799 $ 5,705 $ 6,626 $ 17,948
======== ======== ======== ======= ======= ========
</TABLE>
- ----------------------
(1) Represents historical results of operations for each Previous Acquisition
for the period in 1997 prior to acquisition by the Company.
(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.
(3) Does not include results of operations prior to the date of acquisition, or
pro forma adjustments, for an acquisition completed by Arcus in 1997.
(4) Includes $8.1 million of stock compensation expense directly attributable
to the Arcus Merger.
The accompanying Notes are an integral part of these pro forma
financial statements.
24
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
(1) Purchase Price Allocation
The purchase price of the NUS acquisition has been allocated to the acquired
assets and liabilities based upon their estimated fair values. It is not
practicable at this time to estimate the fair value of the property, plant and
equipment; accordingly, the net book value has been used for pro forma purposes.
Any excess has been allocated to goodwill. The purchase price allocation is
preliminary and subject to adjustment based on the final determination of the
fair value of the net assets acquired.
Purchase Price:
Cash Paid $21,989
Assumption of Long-term Debt 7,218
-------
Total Purchase Price $29,207
-------
Allocation of Purchase Price:
Current Assets $ 2,447
Property, Plant and Equipment 20,787
Other Long-term Assets 479
Current Liabilities (2,866)
Deferred Income Taxes (1,483)
-------
Fair Value of Net Assets Acquired 19,364
-------
Goodwill $ 9,843
=======
(2) Pro Forma Balance Sheet Adjustments
The pro forma adjustments to the Unaudited Pro Forma Condensed
Consolidated Balance Sheet as of June 30, 1998 consist of the
following:
<TABLE>
<CAPTION>
Pro Forma
Adjustments
-------------
<S> <C>
(A) To record the use of a portion of the net proceeds from the Equity
Offering, included in cash as of June 30, 1998, to fund a portion of
the purchase price of the NUS acquisition $(14,589)
(B) To record increase in goodwill equal to the excess of purchase
price over fair value of net assets acquired 9,843
(C) To record the retirement of debt in connection with the NUS acquisition (1,343)
(D) To record purchase reserves 645
(E) To record additional debt incurred to finance the NUS acquisition 8,743
(F) To reverse the equity of NUS (12,791)
</TABLE>
25
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
(Continued)
(3) Pro Forma Statements of Operations Adjustments
The pro forma adjustments to the Unaudited Pro Forma Condensed
Consolidated Statement of Operations for the Six Months Ended June 30,
1998 consist of the following:
<TABLE>
<CAPTION>
Pro Forma
Adjustments
----------------
<S> <C>
Acquisition Adjustments:
(G) To reflect reduction in depreciation expense based on the fair value
of the assets acquired and the remaining useful lives and the
amortization of goodwill $ (87)
(H) To reverse interest expense on retired debt and to record interest
expense on the additional debt incurred to finance the NUS
acquisition 256
(I) To adjust the provision for income taxes to a 40% rate on pro
forma income before nondeductible goodwill amortization (22)
Equity Offering Adjustments:
(J) To reverse interest expense on Iron Mountain Debt, outstanding under
the Credit Agreement, assumed to be retired with a portion of the
net proceeds from the Equity Offering (1,988)
(K) To adjust the provision for income taxes to a 40% rate on pro forma
income before nondeductible goodwill amortization $ 795
(L) To adjust pro forma weighted average common shares outstanding as
if the Equity Offering had occurred as of January 1, 1997 3,169
(M) To adjust pro forma weighted average common shares outstanding to
give effect to all dilutive potential common shares required due
to pro forma net income 915
</TABLE>
26
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
(Continued)
The pro forma adjustments to the Unaudited Pro Forma Condensed
Consolidated Statement of Operations for the Year Ended December 31,
1997 consist of the following:
<TABLE>
<CAPTION>
1997
Bonds Previous Acquisitions Total
and the ------------------------------------------------------- Previous
Equity Record Acquisition NUS
Offering Safesite FileSafe Allegiance Masters Arcus Adjustments Adjustments
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Acquisition Adjustments:
(N) To eliminate rent expense
to reflect the purchase
of facilities previously
leased $ -- $ (187) $ -- $ -- $ -- $ -- $ (187) $ --
(O) To reverse stock
compensation charge
directly attributable
to the Arcus Merger and
to conform the accounting
policy of Arcus to that
of the Company with
respect to the
capitalization of costs
for software developed
for internal use -- -- -- -- -- (8,867) (8,867) --
(P) To adjust depreciation
expense based on the
fair value of assets
acquired and the
remaining estimated
useful lives and the
amortization of
goodwill -- 629 921 178 757 2,285 4,770 (121)
(Q) To reverse interest
expense on retired debt
and to record interest
expense on the additional
debt incurred
to finance the
acquisition -- 572 2,456 591 1,277 4,014 8,910 463
(R) To adjust the provision for
income taxes to a 40% rate
before nondeductible
goodwill amortization -- (56) 139 25 (720) 1,779 1,167 (24)
1997 Bond and Equity
Offering Adjustments:
(S) To reverse interest expense
on the Company's Debt,
outstanding under the
Credit Agreement, assumed
to be retired with a portion
of the net proceeds from
the Equity Offering (18,474) -- -- -- -- -- (18,474) --
(T) To record interest expense
on the 1997 Bonds as if
they had been issued on
January 1, 1997 18,224 -- -- -- -- -- 18,224 --
(U) To adjust the provision for
income taxes to a 40% rate
before nondeductible goodwill
amortization $ 300 $ -- $ -- $ -- $ -- $ -- $ 300 $ --
(V) To adjust pro forma weighted
average common shares
outstanding as if the
Previous Acquisitions
and the Equity Offering
had occurred as of
January 1, 1997 6,038 1,178 -- -- 1,497 2,157 10,870 --
</TABLE>
27
<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)
August 7, 1998 By: /s/ Jean A. Bua
- -------------- ---------------
(date) Jean A. Bua
Vice President and Corporate Controller
(Principal Accounting Officer)
28
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation of our
report on National Underground Storage, Inc.'s financial statements included in
this Current Report on Form 8-K, into Iron Mountain Incorporated's previously
filed registration statements on Forms S-3 (File No. 333-44185), S-4 (File No.
333-44187) and S-8 (File Nos. 333-24803, 333-33191 and 333-43901).
Carbis Walker & Associates, LLP
Butler, Pennsylvania
August 3, 1998
FOR IMMEDIATE RELEASE
Contact: John F. Kenny, Jr.
Executive Vice President and
Chief Financial Officer
(617) 357-6966 ext. 294
Iron Mountain Revenues Increase 121 Percent for Second Quarter 1998
Boston, MA -- July 30, 1998 -- Iron Mountain Incorporated (NASDAQ: IMTN),
America's largest records and information management services company, reported
substantially higher revenues and EBITDA for the second quarter of 1998 compared
to the same period in 1997.
Iron Mountain's total revenues for the second quarter of 1998 grew to $103.1
million, an increase of 121 percent compared to the same period in 1997. Total
revenues for the first half of 1998 were $202.5 million, up 128 percent.
Iron Mountain's earnings before interest, taxes, depreciation, amortization and
extraordinary items ("EBITDA") increased 111 percent to $23.6 million for the
second quarter of 1998. For the first six months of 1998, EBITDA increased 116
percent to $46.1 million. The Company believes that EBITDA is the standard
financial measure of performance used for valuing companies in the records and
information management services industry and is also used by lenders in both the
public and private debt markets as the primary determinant of borrowing
capacity.
Total revenues for the Company's core business of records and information
management services ("RIMS") grew to $93.5 million for the second quarter of
1998, an increase of 101 percent over the same period in 1997. EBITDA for the
RIMS business was $23.1 million, an increase of 106 percent over the same period
in 1997. The revenue growth is comprised of growth through acquisitions and
internal growth. Internal growth for the second quarter of 1998 was 13 percent.
Storage revenues increased 99 percent to $55.6 million for the second quarter of
1998 from $28.0 million for the same period in 1997. This marks the 38th
consecutive quarter for which Iron Mountain has reported increased storage
revenues. Storage revenues, which are considered a key performance indicator for
the records and information management services industry, are largely recurring
since customers typically retain their records for many years.
-- more --
<PAGE>
Iron Mountain Revenues Increase for Second Quarter / Page 2
For the first half of 1998, the RIMS business reported total revenues of $182.5
million, an increase of 106 percent compared to the first half of 1997. EBITDA
for the RIMS business increased 110 percent, to $44.8 million.
The Company's staffing services business reported total revenues and EBITDA of
$9.6 million and $0.5 million, respectively, for the second quarter of 1998. For
the first half of 1998, total revenues and EBITDA for this business were $20.0
million and $1.2 million, respectively. The staffing services business was
acquired as part of the Arcus transaction completed in January 1998.
Iron Mountain has completed five acquisitions since the first quarter of 1998.
InterMation, Inc. (Seattle and Portland, Oregon) and Bekins Moving & Storage Co.
d/b/a Bekins Northwest (Seattle and Portland, Oregon) were completed in April
and June, respectively. In July 1998, the Company completed the acquisition of
National Underground Storage, Inc. (Pittsburgh), Rockford Information Management
Services (Austin) and Hart Information Services (Austin).
In April, the Company successfully completed an offering of its common stock.
Proceeds to the Company before underwriters' discounts and commissions and
related expenses were $140 million. In June, the Company's Board of Directors
authorized and approved a three-for-two stock split, effected in the form of a
dividend on the Company's common stock, payable on July 31, 1998 to all
stockholders of record as of the close of business on July 17, 1998.
Richard Reese, the Company's Chairman and Chief Executive Officer, stated: "This
has been yet another quarter of solid results for Iron Mountain as our business,
including the major acquisitions completed during the past year, continued to
perform as expected. During the quarter, we strengthened our balance sheet via a
successful follow-on offering of stock. Since then, we have completed five
attractive acquisitions expanding our business records product line into two new
markets and bolstering our leadership position in the Pacific Northwest. This
brings to 10 the number of acquisitions closed to date in 1998, putting us in
line with the acquisition pace of the past two years."
Iron Mountain currently operates 232 records management facilities in 55 markets
in the United States and one in the United Kingdom. The Company serves more than
50,000 customer accounts, including more than half of the Fortune 500 Companies.
Iron Mountain provides a full array of records and information management
services including: (i) off-site storage, management and related consulting
services for business, healthcare and vital records; (ii) data security services
including off-site storage and rotation of electronic records; (iii) information
technology staffing services; and (iv) sales of related products.
NOTE: Condensed Consolidated Statements of Operations and Condensed Consolidated
Balance Sheets to follow.
-- more --
<PAGE>
Iron Mountain Revenues Increase for Second Quarter / Page 3
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ---------------------
1998 1997 1998 1997
-------- ------- -------- --------
<S> <C> <C> <C> <C>
REVENUES:
Storage $ 55,592 $27,987 $108,540 $53,810
Service and Storage Material Sales 47,471 18,598 94,007 34,929
-------- ------- -------- -------
Total Revenues 103,063 46,585 202,547 88,739
OPERATING EXPENSES:
Cost of Sales (Excluding Depreciation) 53,664 24,108 106,274 45,872
Selling, General and Administrative 25,801 11,296 50,219 21,503
Depreciation and Amortization 12,122 6,243 23,386 11,965
-------- ------- -------- -------
Total Operating Expenses 91,587 41,647 179,879 79,340
-------- ------- -------- -------
OPERATING INCOME 11,476 4,938 22,668 9,399
INTEREST EXPENSE 10,897 5,940 23,229 11,080
OTHER INCOME (1) 1,700 -- 1,700 --
-------- ------- -------- -------
Income (Loss) Before Provision (Credit) for
Income Taxes 2,279 (1,002) 1,139 (1,681)
PROVISION (CREDIT) FOR INCOME TAXES 2,540 (33) 1,714 (196)
-------- ------- -------- -------
Net Loss $ (261) $ (969) $ (575) $(1,485)
======== ======= ======== =======
NET LOSS PER COMMON SHARE - BASIC AND DILUTED (2) $ (0.01) $ (0.06) $ (0.02) $ (0.10)
======== ======= ======== =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (2) 28,989 15,767 25,648 15,489
======== ======= ======== =======
EBITDA (1) $ 23,598 $11,181 $ 46,054 $21,364
======== ======= ======== =======
</TABLE>
(1) Other income for the three and six month periods ended June 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 facilities. The gain is not included in the calculation
of EBITDA for any of the periods presented.
(2) Share and per share amounts have been restated to reflect the Company's
announced three-for-two stock split for all periods presented.
-- more --
<PAGE>
Iron Mountain Revenues Increase for Second Quarter / Page 4
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 14,589 $ 24,510
Accounts Receivable (less allowances of $2,823
and $1,929, respectively) 68,296 40,545
Other Current Assets 25,148 16,872
-------- --------
Total Current Assets 108,033 81,927
-------- --------
PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment at Cost 293,956 245,174
Less: Accumulated Depreciation (73,788) (61,276)
-------- --------
Property, Plant and Equipment, net 220,168 183,898
-------- --------
OTHER ASSETS:
Goodwill, net 509,436 340,852
Other Non-current Assets, net 29,395 30,109
-------- --------
Total Other Assets 538,831 370,961
-------- --------
Total Assets $867,032 $636,786
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current Portion of Long-term Debt $ 2,085 $ 520
Note Payable -- 3,000
Other Current Liabilities 74,589 52,233
-------- --------
Total Current Liabilities 76,674 55,753
LONG-TERM DEBT, NET OF CURRENT PORTION 427,034 424,498
OTHER LONG-TERM LIABILITIES 22,791 18,802
STOCKHOLDERS' EQUITY 340,533 137,733
-------- --------
Total Liabilities and Stockholders' Equity $867,032 $636,786
======== ========
</TABLE>
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