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): March 22, 1999
(January 4, 1999)
IRON MOUNTAIN INCORPORATED
--------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware
--------
(State or Other Jurisdiction of Incorporation or Organization)
0-27584 04-3107342
------- ----------
(Commission file number) (I.R.S. Employer Identification No.)
745 Atlantic Avenue, Boston, MA 02111
-------------------------------------
(Address of Principal Executive Offices, Including Zip Code)
(617) 535-4766
--------------
(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 (dated January 19, 1999), which was filed with the
Securities and Exchange Commission on January 19, 1999. All share and per share
data has been restated to reflect the three-for-two stock split 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
Britannia Data Management Limited
On January 4, 1999, Iron Mountain Incorporated ("Iron Mountain," the
"Registrant" or the "Company"), through a wholly owned subsidiary, purchased a
majority interest in Britannia Data Management Limited, a corporation formed
under the laws of England and Wales ("BDM"), pursuant to an Agreement, dated
December 2, 1998, between Iron Mountain and Mentmore Abbey plc. The acquisition
will be accounted for as a purchase and BDM will be included in Iron Mountain's
consolidated financial results from the date of acquisition.
Total consideration for the 50.1 percent interest in BDM was $49.8 million
consisting of cash and the capital stock of Arcus Data Security Limited ("ADS"),
Iron Mountain's existing data security business in London. The funds used for
the consideration were comprised of borrowings under Iron Mountain's $250
million revolving credit facility, dated September 27, 1997, as amended, among
Iron Mountain, various financial institutions and The Chase Manhattan Bank, as
administrative agent for such lenders (the "Credit Agreement").
The assets acquired by Iron Mountain 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 BDM's records management business. Iron Mountain intends to use the
acquired property and equipment in the operation of its records management
business in the United Kingdom.
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 pursuant to an Agreement and Plan of Merger dated June 5, 1998 among
NUS and the Registrant's wholly owned subsidiary.
Total consideration was comprised of $29.2 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 Credit Agreement.
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
1
<PAGE>
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.
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, Inc. (d/b/a Record Masters).
Total consideration was $85.4 million, including 1.8 million shares of Iron
Mountain Common Stock valued at $36.0 million and $49.4 million in cash and
assumed indebtedness. 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. 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 total
consideration of $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 a 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.
2
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements of the Businesses Acquired:
<TABLE>
<CAPTION>
Britannia Data Management Limited Page
----
<S> <C>
Report of Independent Auditors 5
Combined Balance Sheets as of October 31, 1997 and 1998 6
Combined Statements of Operations for the years ended
October 31, 1997 and 1998 7
Combined Statements of Stockholders' Equity for the years ended
October 31, 1997 and 1998 8
Combined Statements of Cash Flows for the years ended
October 31, 1997 and 1998 9
Notes to Combined Financial Statements 10
</TABLE>
National Underground Storage, Inc.
The audited financial statements of NUS as of and for the years
ended December 31, 1997 and 1996, and the unaudited financial
statements as of June 30, 1998 and for the six months ended June
30, 1998 and 1997, were previously filed on the Form 8-K filed
with the Securities and Exchange Commission on August 7, 1998.
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.
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.
3
<PAGE>
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.
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(b) Pro Forma Financial Information: 19
Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of September 30, 1998 20
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Nine Months Ended September 30, 1998 21
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Year Ended December 31, 1997 22
Schedule of Previous Acquisitions for the Year Ended
December 31, 1997 23
Notes to the Unaudited Pro Forma Condensed Consolidated
Financial Statements 24
</TABLE>
(c) Exhibits:
Exhibit 2.1 Agreement, dated as of December 2, 1998, by and between
Iron Mountain and Mentmore Abbey plc. filed as an exhibit
to Iron Mountain's Current Report on Form 8-K dated
January 19, 1999 filed with the Securities and Exchange
Commission (File No. 0-27584).
Exhibit 10.1 Strategic Alliance Agreement, dated as of January 4,
1999, by and among Iron Mountain, Iron Mountain (U.K.)
Limited, BDM and Mentmore Abbey plc filed as an exhibit
to Iron Mountain's Current Report on Form 8-K dated
January 19, 1999 filed with the Securities and Exchange
Commission (File No. 0-27584).
Exhibit 23.1 Consent of Robson Rhodes Chartered Accountants (Britannia
Data Management Limited)
4
<PAGE>
BRITANNIA DATA MANAGEMENT LIMITED
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REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of Britannia Data Management Limited:
We have audited the accompanying combined balance sheets of the companies
identified in Note 1 as of October 31, 1997 and 1998 and the related combined
statements of operations, changes in stockholders' equity and cash flows for
each of the two years in the period ended October 31, 1998. These financial
statements are the responsibility of the Company's management and have been
prepared on the basis of notes 1-3. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States 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 from 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 our audits provide a reasonable
basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Britannia
Data Management Limited at October 31, 1997 and 1998 and the combined results of
its operations and its combined cash flows for each of the two years in the
period ended October 31, 1998, in conformity with generally accepted accounting
principles in the United States.
/s/ Robson Rhodes
ROBSON RHODES
Chartered Accountants
Birmingham, England
February 9, 1999
5
<PAGE>
BRITANNIA DATA MANAGEMENT LIMITED
- -------------------------------------------------------------------------------
COMBINED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
Note October 31,
---------------------------
1997 1998
---------------------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ - $ 4,932
Accounts receivable (less allowances of $371 in
1997 and $278 in 1998, respectively) 5,226 5,417
Inventories 134 132
Prepaid expenses and other 1,130 880
Amounts due from related parties 10 2,737 2,209
Income taxes receivable 878 --
--------- ---------
Total Current Assets 10,105 13,570
--------- ---------
Property, Plant and Equipment:
Property, plant and equipment 6 43,604 46,030
Less - Accumulated depreciation (12,280) (14,042)
--------- ---------
Net property, plant and equipment 31,324 31,988
Other Assets:
Goodwill, net 58,825 56,963
--------- ---------
Total Assets $ 100,254 $ 102,521
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Borrowings under line of credit $ 436 $ -
Current portion of long-term debt 4 836 1,677
Obligations under capital leases 1,055 877
Accounts payable 1,436 1,821
Amounts owed to related parties 10 1,344 3,381
Accrued expenses and other payables 7 4,414 4,338
Deferred income 2,132 2,979
--------- ---------
Total Current Liabilities 11,653 15,073
Long-term Debt, Net of Current Portion 4 15,886 14,255
Obligations under Capital Leases, Net of Current Portion 9 1,733 854
Deferred Income Taxes 416 837
Commitments and Contingencies 9
Stockholders' Equity:
Common stock 4,081 4,081
Additional paid-in capital 66,359 66,359
Accumulated deficit (1,785) (1,074)
Cumulative translation adjustment 1,911 2,136
--------- ---------
Total Stockholders' Equity 70,566 71,502
--------- ---------
Total Liabilities and Stockholders' Equity $ 100,254 $ 102,521
========= =========
</TABLE>
The accompanying notes are an integral
part of these combined financial statements.
6
<PAGE>
BRITANNIA DATA MANAGEMENT LIMITED
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COMBINED STATEMENTS OF OPERATIONS
(Amounts in thousands)
<TABLE>
<CAPTION>
Year ended October 31,
---------------------------
Note 1997 1998
---------------------------
<S> <C> <C>
Revenues:
Storage $ 14,958 $ 16,258
Service and storage material sales 13,295 14,062
--------- ---------
Total Revenues 28,253 30,320
Operating Expenses:
Cost of sales (excluding depreciation) 17,298 16,511
Selling, general and administrative 4,337 5,580
Depreciation and amortization 3,915 3,863
--------- ---------
Total Operating Expenses 25,550 25,954
Operating Income 2,703 4,366
Interest Expense 1,654 1,533
--------- ---------
Income Before Provision for Income Taxes 1,049 2,833
Provision for Income Taxes 5 946 1,504
--------- ---------
Net Income $ 103 $ 1,329
========= =========
</TABLE>
The accompanying notes are an integral
part of these combined financial statements.
7
<PAGE>
BRITANNIA DATA MANAGEMENT LIMITED
- -------------------------------------------------------------------------------
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
Retained Total
Common Additional Cumulative earnings/ Stock-
Common Stock Paid-in Translation (Accumulated holders'
Shares Amount Capital Adjustment deficit) Equity
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance
October 31, 1996 25,079,751 $ 4,081 $ 66,359 $ -- $(1,359) $69,081
Net Income -- -- -- -- 103 103
Translation
Adjustment -- -- -- 1,911 -- 1,911
Distributions to
Stockholders -- -- -- -- (529) (529)
---------- ------- -------- -------- --------- --------
Balance
October 31, 1997 25,079,751 4,081 66,359 1,911 (1,785) 70,566
Net Income -- -- -- -- 1,329 1,329
Translation
Adjustment -- -- -- 225 -- 225
Distributions to
Stockholders -- -- -- -- (618) (618)
---------- ------- -------- ------- ------- -------
Balance
October 31, 1998 25,079,751 $ 4,081 $ 66,359 $ 2,136 $(1,074) $71,502
========== ======= ======== ======= ======= =======
</TABLE>
The accompanying notes are an integral
part of these combined financial statements.
8
<PAGE>
BRITANNIA DATA MANAGEMENT LIMITED
- -------------------------------------------------------------------------------
COMBINED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<TABLE>
<CAPTION>
Year ended October 31,
----------------------------
1997 1998
----------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 103 $ 1,329
Adjustments to Reconcile Net Income to Cash Flows Provided by
Operating Activities:
Depreciation and amortization 3,915 3,863
(Gain)/loss on sale of fixed assets (7) 12
Changes in Assets and Liabilities:
Inventories (14) 2
Accounts receivable (947) (191)
Prepaid expenses and other current assets (211) 1,656
Accounts payable (74) 385
Accrued expenses and other payables (572) 3,229
------ -------
Cash Flows Provided by Operating Activities 2,193 10,285
------ -------
Cash Flows from Investing Activities:
Capital expenditures (2,203) (2,253)
Proceeds from sale of assets 555 30
------ -------
Cash Flows Used in Investing Activities (1,648) (2,223)
------ -------
Cash Flows from Financing Activities:
Repayment of debt and capital leases (446) (1,903)
Repayment of line of credit (932) (436)
Distributions to stockholders (529) (618)
------ -------
Cash Flows Used in Financing Activities (1,907) (2,957)
Effect of Exchange Rates on Cash and Cash Equivalents 1,362 (173)
------ -------
Increase in Cash and Cash Equivalents -- 4,932
Cash and Cash Equivalents at Beginning of Year -- --
------ --------
Cash and Cash Equivalents at End of Year $ -- $ 4,932
====== =======
Supplemental Information:
Cash Paid/(Received) for:
Interest $ 1,378 $ 1,534
====== =======
Income Taxes $ (607) $ 185
====== =======
</TABLE>
The accompanying notes are an integral
part of these combined financial statements.
9
<PAGE>
BRITANNIA DATA MANAGEMENT LIMITED
- -------------------------------------------------------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS
(Amounts in thousands)
1. NATURE OF BUSINESS AND CORPORATE STATUS
Principles of combination
Britannia Data Management Limited (the "BDM Group" or "the Company") is
a wholly-owned subsidiary of Mentmore Abbey plc a publicly owned United
Kingdom company. Mentmore Abbey plc acquired Britannia Data Management
Limited on October 8, 1996 and the acquisition was accounted for as a
purchase. These financial statements reflect the "push-down" of Mentmore
Abbey's purchase accounting and therefore the assets and liabilities
have been recorded at the fair market value on the date of the
acquisition. These financial statements have been prepared in accordance
with generally accepted accounting principles in the United States and
represent the business acquired by Iron Mountain Incorporated. See Note
11.
The accompanying financial statements reflect the financial position and
results of operations of the BDM Group on a combined basis. All
significant intercompany and interdivisional balances have been
eliminated. For the purposes of these financial statements, "Britannia
Data Management Limited" or "the BDM Group" mean the combined accounts
of:
- Britannia Data Management Limited;
- British Data Management Limited, a wholly owned subsidiary of
Britannia Data Management Limited;
- Abbey Records Management, a division of Abbey Storage Limited, a
company wholly owned by Mentmore Abbey plc; and
- The Document Storage Company Limited and various other
non-trading wholly owned subsidiaries of Britannia Data
Management Limited.
The financial statements are not comparable to the United Kingdom
financial statements and exclude Britannia Storage Systems Limited, a
wholly owned subsidiary of Britannia Data Management Limited which was
retained by Mentmore Abbey plc. See Note 11.
The BDM Group is a full-service records management company providing
storage and related services for all media in various locations
throughout England to Government departments and commercial,
professional, financial and energy businesses.
On July 21, 1997, Britannia Data Management Limited formally changed its
name from British Data Management Limited and British Data Management
Limited formally changed its name from Britannia Data Management
Limited.
2. BASIS OF PRESENTATION
The Company maintains its accounts in accordance with accounting
principles and practices employed by enterprises in the United Kingdom,
whereas the accompanying financial statements reflect certain
adjustments not recorded in the Company's books, to present these
statements in accordance with generally accepted accounting principles
in the United States. These financial statements have been translated to
US dollars.
10
<PAGE>
BRITANNIA DATA MANAGEMENT LIMITED
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NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Amounts in thousands)
The significant adjustments made to present the financial statements in
accordance with generally accepted accounting principles in the United
States relate primarily to accounting for goodwill and income taxes. At
October 31, 1998, stockholder's equity of $57,468 arises because of
differences between the UK statutory accounts and the US GAAP financial
statements.
Foreign currency translation
The financial information expressed in US dollars is presented solely
for the convenience of the reader. Assets and liabilities have been
translated from UK sterling at the following rates for each US dollar:
October 31, 1997: 1.6722
October 31, 1998: 1.6771
Revenues and expenses have been translated at the average exchange rate
for each US dollar as follows:
Year ended October 31, 1997: 1.6729
Year ended October 31, 1998: 1.6622
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. 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 amounts
of assets and liabilities and the disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
b. Revenue recognition
Revenues consist of storage revenues and service and storage
material sales revenues. Storage revenues consist of periodic
charges related to the storage of materials (either on a per unit
or per cubic foot of records basis). In certain circumstances,
based upon customer requirements, storage revenues include
periodic charges associated with normal recurring service
activities. Service and storage material sales revenues are
comprised of charges for related service activities and the sale
of storage materials. Customers are generally billed on a monthly
basis on contractually agreed-upon terms.
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.
11
<PAGE>
BRITANNIA DATA MANAGEMENT LIMITED
- -------------------------------------------------------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Amounts in thousands)
c. Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and cash
invested in short-term securities which have original maturities
of less than 90 days. Cash and cash equivalents are carried at
cost, which approximates the fair market value.
d. Property, plant and equipment
Property, plant and equipment are stated at cost and depreciated
over the following estimated useful lives on the straight line
method:
Buildings - 50 years
Leasehold improvements - over the lease term
Furniture and fixtures - 10 years
Equipment and racking - 5 - 20 years
Motor vehicles - 4 years
Computer hardware and software - 5 years
Repairs and maintenance costs, except to the extent that they
increase productivity or extend the useful life of an asset, are
expensed when incurred.
During 1998 the estimated useful life of certain equipment and
racking has been revised. The effect of this change is to reduce
depreciation by $173.
e. Goodwill
Goodwill reflects the cost in excess of fair value of the net
assets of companies acquired in purchase transactions. Goodwill
is amortized using the straight line method from the date of
acquisition over the expected period to be benefited, currently
estimated at 30 years. The recoverability of goodwill is
periodically assessed based upon the future undiscounted cash
flows in accordance with Statement of Financial Accounting
Standards ("SFAS") No 121, "Accounting for the Impairment of Long
Lived Assets and for Long Lived Assets to be Disposed Of."
The net book value of goodwill at October 31, 1998 relates to the
acquisition of Britannia Data Management Limited by Mentmore
Abbey plc in October 1996. Accumulated amortization of goodwill
was $1,993 and $4,009 as of October 31, 1997 and 1998,
respectively.
f. Inventories
Inventories are valued at the lower of cost using the first-in,
first-out basis, or market value. Inventories comprise cartons,
magnetic tape and dyeline film and paper.
g. Deferred income taxes
Provision is made at current rates for taxation deferred in
respect of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the
amounts used for tax purposes.
12
<PAGE>
BRITANNIA DATA MANAGEMENT LIMITED
- -------------------------------------------------------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Amounts in thousands)
h. Defined contribution plan
The BDM Group operates a defined contribution plan. The assets of
the plan are held separately from those of the BDM Group in an
independently administered fund. Contributions payable for the
period are charged to the statement of operations. The cost
charged was $156 and $160 in 1997 and 1998, respectively.
i. Foreign currency
All assets and liabilities of the BDM Group are translated at
year-end exchange rates, and revenues and expenses are translated
at average exchange rates for the year in accordance with SFAS
No. 52, "Foreign Currency Translation." Resulting translation
adjustments are reflected as a separate component of
stockholders' equity titled "Cumulative translation adjustment."
Foreign currency transaction gains and losses are included in the
accompanying statements of operations and are not material for
the two years presented.
j. Restructuring
Following the acquisition of the BDM Group in October 1996, the
Company undertook certain restructurings of the acquired
businesses, which were completed within one year from the date of
acquisition. The restructuring activities consisted of certain
reductions in warehouse and overhead staffing levels pursuant to
a formalized plan. In connection with these restructing
activities the Company had established reserves of $281 at
October 31 1996. These amounts were recorded as restructuring
charges in the profit and loss account between the date of
acquisition and October 31, 1996 and were provided in accordance
with Emerging Issues Task Force Issue No. 94-3, "Liability
Recognition For Costs To Exit An Activity (Including Certain
Costs Incurred In A Restructuring)." During the year ended
October 31, 1997 the Company expended $281 for such restructuring
costs. As of October 31, 1997 and 1998 there were no amounts
accrued for restructuring costs.
4. DEBT
The maturities of the long term debt are as follows:
<TABLE>
<CAPTION>
October 31,
1998
-----------
<S> <C>
1999 $ 1,677
2000 1,677
2001 1,677
2002 2,096
2003 2,515
Thereafter 6,290
-------
15,932
Current (1,677)
-------
Long term debt, net of current portion $ 14,255
========
</TABLE>
13
<PAGE>
BRITANNIA DATA MANAGEMENT LIMITED
- -------------------------------------------------------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Amounts in thousands)
On January 21 1997, Britannia Data Management Limited entered into a
$16,000 bank loan. Principal and interest payments are payable monthly
through March 31, 2006. The effective rate of interest on the bank loan
is 1.125% over the London Inter-Bank Offered Rate (LIBOR) (7.7348% at
October 31, 1998). All payments are payable in UK Sterling. On the same
date, Britannia Data Management Limited entered into a $10,000 group
working capital bank facility. The effective rate of interest for all
balances within this facility was 1% over the bank's base rate (7.25% at
October 31, 1998).
The above facilities are secured by the assets of the Company and
guaranteed by Mentmore Abbey plc, Abbey Storage Limited, Britannia
Storage Systems Limited and Homewares Brands Limited, all of which are
in the Mentmore Abbey plc group. The facility agreement includes certain
financial and non-financial covenants and restrictions based on net
income and net worth. The Company is in compliance of all covenants at
October 31, 1998. On January 4, 1999, the Company renegotiated its
financing with the result that the guarantees from Mentmore Abbey plc
and the other companies within the Mentmore Abbey plc group were
released.
5. INCOME TAXES
Income taxes have been accounted for in accordance with SFAS No. 109
which requires the recognition of deferred tax assets and liabilities
for the expected tax consequences of temporary differences between the
tax and financial reporting bases of assets and liabilities. The primary
temporary differences are due to timing differences from the
depreciation of property, plant and equipment. The BDM Group had
aggregate gross deferred tax assets of $623 and $374 at October 31, 1997
and 1998, respectively, and aggregate gross deferred tax liabilities of
$1,039 and $1,211 at October 31, 1997 and 1998, respectively.
Britannia Data Management Limited and British Data Management Limited
file individual tax returns. A tax return is filed for Abbey Storage
Limited which includes Abbey Records Management. Taxes for Abbey Records
Management have been provided as if it were a separate company.
The provision for income tax consists of the following components:
<TABLE>
<CAPTION>
October 31,
-------------------
1997 1998
-------------------
<S> <C> <C>
UK Corporation tax - current $ 496 $ 1,088
UK Corporation tax - deferred 450 416
----- ------
$ 946 $1,504
===== ======
</TABLE>
14
<PAGE>
BRITANNIA DATA MANAGEMENT LIMITED
- -------------------------------------------------------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Amounts in thousands)
A reconciliation of total income tax expense and the amount computed by applying
the UK corporation tax rate of 31% to income taxes is as follows:
<TABLE>
<CAPTION>
October 31,
---------------------
1997 1998
---------------------
<S> <C> <C>
Computed "expected" tax provision $325 $ 878
Increase in income taxes resulting from:
Non deductible goodwill amortization 618 625
Other 3 1
---- ------
$946 $1,504
==== ======
</TABLE>
6. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Computer
Equipment hardware Furniture
Land and Leasehold and Motor and and
buildings improvements racking vehicles software fixtures Total
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross fixed assets at
October 31, 1997 $20,600 $337 $13,038 $1,071 $3,129 $5,429 $43,604
======= ==== ======= ====== ====== ====== =======
Gross fixed assets at
October 31, 1998 $21,194 $443 $13,517 $941 $3,698 $6,237 $46,030
======= ==== ======= ====== ====== ====== =======
</TABLE>
Included in operating expenses are amounts of $454 in 1997 and $450 in 1998
representing repairs and maintenance expense.
7. ACCRUED EXPENSES
<TABLE>
<CAPTION>
October 31,
------------------
1997 1998
------------------
<S> <C> <C>
Accrued expenses $2,673 $2,909
Income taxes 20 7
Sales taxes 1,266 998
Accrued payroll taxes 455 424
------ ------
$4,414 $4,338
====== ======
</TABLE>
15
<PAGE>
BRITANNIA DATA MANAGEMENT LIMITED
- -------------------------------------------------------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Amounts in thousands)
8. STOCKHOLDERS' EQUITY
Share Capital
Authorized:
Common stock comprises 32,000 ordinary shares of $.16 nominal value.
<TABLE>
<CAPTION>
October 31,
-----------------
1997 1998
-----------------
<S> <C> <C>
Allotted, issued and fully paid:
Common stock - ordinary shares, $.16 nominal value $4,081 $4,081
====== ======
$529 and $618 were distributed to Abbey Storage Limited in 1997 and 1998, respectively.
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
Capital leases
The present value of the minimum lease payments for capital leases is as
follows:
<TABLE>
<CAPTION>
October 31,
1998
-------------
<S> <C>
1999 $ 989
2000 704
2001 193
-----
Gross payments 1,886
Interest portion (155)
Current portion (877)
-----
Capital leases, net of current portion $ 854
======
</TABLE>
Assets under capital leases consist primarily of equipment and racking.
The gross amount of assets held under capital leases is $4,319 at
October 31, 1997 and $4,078 at October 31, 1998. The accumulated
depreciation on these assets is $477 at October 31, 1997 and $695 at
October 31, 1998. The depreciation on these assets charged in 1997 and
1998 is included within the depreciation expense.
16
<PAGE>
BRITANNIA DATA MANAGEMENT LIMITED
- --------------------------------------------------------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Amounts in thousands)
Operating Leases
The BDM Group leases most of its facilities under various operating
leases. A majority of these leases have an average lease life of between
10 and 20 years and have either fixed or Consumer Price Index
escalation clauses. The BDM Group also leases motor vehicles under
operating leases which have an average lease life of three years. The
amounts paid in respect of operating leases including rent expense were
$2,749 in 1997 and $3,078 in 1998.
The minimum future lease payments for buildings under operating leases
are as follows:
<TABLE>
<CAPTION>
Year October 31,
1998
-----------
<S> <C>
1999 $ 2,584
2000 2,341
2001 2,231
2002 2,154
2003 2,118
2004 and thereafter 17,919
-------
Total minimum lease payments $29,347
=======
</TABLE>
Guarantees
The BDM Group has guaranteed the borrowings of other companies within
the Mentmore Abbey plc group by way of granting security over its
property and assets. The total related debt outstanding at October 31,
1998 amounted to $22,049. On January 4, 1999, Mentmore Abbey plc
renegotiated its financing with the result that the guarantees by the
BDM Group relating to Mentmore Abbey plc and the other companies within
the Mentmore Abbey plc group were released.
Employment Agreements
The BDM Group has severance agreements with certain key officials that
provide for potential additional payments of up to $70 in the event of a
change in control of the entity. The transactions discussed in Note 11
will not result in any payments under these agreements.
10. RELATED PARTY TRANSACTIONS
Amounts due from/owed to other companies in the Mentmore Abbey plc group
The amounts due from/owed to related parties, as set out in the combined
balance sheets, are all in respect of other companies within the
Mentmore Abbey plc group. These balances represent the net of cash
advances and expenses charged by Mentmore Abbey plc.
Transactions with related parties
Certain administrative expenses such as insurances and certain
professional fees have been paid on behalf of and charged to the BDM
Group, at cost by Mentmore Abbey plc. In addition a management fee has
been charged by Mentmore Abbey plc as the BDM Group uses certain
resources and administrative staff of Mentmore Abbey plc. The management
fee is variable and is calculated on the basis of expenditure incurred.
The fee charged for the year ended October 31, 1997, was $171. For the
year ended October 31, 1998 the total management fee
17
<PAGE>
BRITANNIA DATA MANAGEMENT LIMITED
- --------------------------------------------------------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS (continued)
(Amounts in thousands)
charged by Mentmore Abbey plc to the BDM Group was $1,080. This fee
comprised $243 in respect of obtaining an insurance rebate and $837 in
respect of management fees.
11. SUBSEQUENT EVENTS
On January 4, 1999 the following events occurred which resulted in Iron
Mountain Incorporated becoming a 50.1% stockholder of Britannia Data
Management Limited:
o Mentmore Abbey plc and Abbey Storage Limited sold an aggregate of
12,290,505 shares in Britannia Data Management Limited to Iron
Mountain (UK) Limited, a subsidiary of Iron Mountain Incorporated, a
US public company;
o Britannia Data Management Limited acquired the entire issued share
capital of Arcus Data Security Limited, a company wholly owned by
Iron Mountain (UK) Limited, in exchange for 150,000 shares of BDM
common stock;
o Iron Mountain (UK) Limited acquired 400,000 new ordinary shares in
Britannia Data Management Limited;
o Abbey Storage Limited sold Abbey Records Management and its related
assets to British Data Management Limited; and
o Britannia Storage Systems Limited was transferred to Mentmore Abbey
plc.
18
<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 historical condensed consolidated balance sheet
of Iron Mountain as of September 30, 1998 and the historical condensed combined
balance sheet of BDM as of July 31, 1998 and gives effect to the BDM acquisition
as if it had occurred as of September 30, 1998. 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
BDM acquisition and to the acquisitions of Safesite, FileSafe, Allegiance,
Record Masters, Arcus and NUS (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. 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 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 only include results of operations and pro forma adjustments for
acquisitions determined to be individually significant. Accordingly, 14
acquisitions completed in 1997, 13 acquisitions completed in 1998 and three
acquisitions completed in 1999 are not included herein.
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 BDM 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 Iron
Mountain. 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 BDM 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.
19
<PAGE>
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(In thousands)
<TABLE>
<CAPTION>
Historical Pro Forma
Iron Historical Pro Forma Iron
Mountain BDM (1) Adjustments Mountain
-------- ------- ----------- --------
<S> <C> <C> <C> <C>
Assets
Current Assets $ 92,456 $ 11,011 $ 6,630 (A) $ 110,097
Property, Plant and Equipment, net 250,243 30,948 -- 281,191
Goodwill, net 522,184 56,057 10,513 (B) 588,754
Other Long-term Assets 29,823 -- -- 29,823
--------- ------- -------- ----------
Total Assets $ 894,706 $ 98,016 $ 17,143 $1,009,865
========= ======= ======== ==========
Liabilities and Stockholders'
Equity
Current Liabilities $ 80,383 $ 12,568 $ -- $ 92,951
Long-term Debt, net of Current Portion 441,296 15,641 47,330 (C) 504,267
Deferred Rent 9,309 -- -- 9,309
Deferred Income Taxes 13,752 475 -- 14,227
Other Long-term Liabilities 9,506 -- -- 9,506
Minority Interest (2) -- -- 39,145 (D) 39,145
Stockholders' Equity 340,460 69,332 (69,332) (E)(F) 340,460
--------- ------- -------- ----------
Total Liabilities and Stockholders'
Equity $ 894,706 $ 98,016 $ 17,143 $1,009,865
========= ======= ======== ==========
</TABLE>
- -----------------
(1) Represents the historical condensed combined balance sheet of BDM as of
July 31, 1998. See "Overview--BDM Acquisition" in the accompanying Notes.
(2) Minority interest represents 49.9 percent of the total equity of BDM after
giving pro forma effect to the issuance of capital stock to Iron Mountain
in exchange for cash and the net assets of ADS.
The accompanying Notes are an integral
part of these pro forma financial statements.
20
<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)
<TABLE>
<CAPTION>
Pro Forma
Historical For Pro Forma
Iron Historical NUS Historical Iron
Mountain NUS(1) Adjustments(5) Acquisition BDM(2) Adjustments Mountain
-------- ------ ----------- ----------- ------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Storage $168,046 $4,657 $ -- $172,703 $12,845 $ -- $185,548
Service and
Storage Material
Sales 142,461 885 -- 143,346 9,408 -- 152,754
-------- ------ ------- -------- ------- ------- --------
Total Revenues 310,507 5,542 -- 316,049 22,253 -- 338,302
Operating Expenses:
Cost of Sales
(Excluding
Depreciation) 162,609 2,116 -- 164,725 12,519 -- 177,244
Selling, General
and Administrative 76,666 1,121 -- 77,787 4,058 -- 81,845
Depreciation and
Amortization 36,225 713 (87) (G) 36,851 3,026 263 (N) 40,140
-------- ------ ------- -------- ------- ------- --------
Total Operating
Expenses 275,500 3,950 (87) 279,363 19,603 263 299,229
-------- ------ ------- -------- ------- ------- --------
Operating Income 35,007 1,592 87 36,686 2,650 (263) 39,073
Interest Expense, net 34,228 282 (1,732) (H)(K) 32,778 1,195 2,217 (O) 36,190
Other Income (3) 1,700 -- -- 1,700 -- -- 1,700
-------- ------ ------- -------- ------- ------- --------
Income Before Provision
for Income Taxes and
Minority Interest 2,479 1,310 1,819 5,608 1,455 (2,480) 4,583
Provision for
Income Taxes 4,123 544 773 (I)(L) 5,440 771 (887) (P) 5,324
Minority Interest (4) -- -- -- -- -- 400 (Q) 400
-------- ------ ------- -------- ------- ------- --------
Net Income (Loss) $ (1,644) $ 766 $ 1,046 $ 168 $ 684 $(1,993) $ (1,141)
======== ====== ======= ======== ======= ======= ========
Net Income (Loss)
per Common Share
- Basic and Diluted $ (0.06) $ 0.01 $ (0.04)
======= ======== ========
Weighted Average
Common Shares
Outstanding 26,848 2,978 (J)(M) 29,826 (921) (R) 28,905
====== ===== ====== ==== ======
</TABLE>
- -------------------------
(1) Represents historical results of operations for NUS for the period prior to
acquisition by Iron Mountain. See "Overview--Previous Acquisitions" in the
accompanying Notes.
(2) Represents the historical condensed combined statement of operations of
BDM for the nine months ended July 31, 1998, after conversion to U.S.
generally accepted accounting principles. See "Overview--BDM Acquisition" in
the accompanying Notes.
(3) Other income includes a $1.7 million gain resulting from the settlement of
several insurance claims related to the March 1997 fires at Iron Mountain's
South Brunswick Township, New Jersey facilities.
(4) Includes an adjustment of $59 that represents the pro forma effect of the
49.9 percent minority interest in the net income of ADS for the nine months
ended September 30, 1998.
(5) Includes pro forma adjustments for the Equity Offering and the application
of the net proceeds therefrom.
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 YEAR ENDED DECEMBER 31, 1997
(In thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
For Pro Forma
Previous Historical Iron
Acquisitions(1) BDM(2) Adjustments Mountain
--------------- ------ ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Storage $ 216,582 $ 14,958 $ -- $ 231,540
Service and Storage Material
Sales 142,884 13,295 -- 156,179
----------- --------- --------- ---------
Total Revenues 359,466 28,253 -- 387,719
Operating Expenses:
Cost of Sales (Excluding
Depreciation) 185,497 17,298 -- 202,795
Selling, General and
Administrative 92,251 4,337 -- 96,588
Depreciation and Amortization 42,049 3,915 350 (S) 46,314
----------- --------- --------- ---------
Total Operating Expenses 319,797 25,550 350 345,697
----------- --------- --------- ---------
Operating Income 39,669 2,703 (350) 42,022
Interest Expense, net 42,809 1,654 2,956 (T) 47,419
----------- --------- --------- ---------
Income (Loss) Before Provision
for Income Taxes and Minority
Interest (3,140) 1,049 (3,306) (5,397)
Provision for Income Taxes 3,063 946 (1,182) (U) 2,827
Minority Interest (3) -- -- 51 (V) 51
----------- --------- --------- ---------
Net Income (Loss) $ (6,203) $ 103 $ (2,175) $ (8,275)
=========== ========= ========= =========
Net Loss per Common Share -
Basic and Diluted $ (0.22) $ (0.30)
=========== =========
Weighted Average Common
Shares Outstanding - Basic
and Diluted 28,042 28,042
=========== =========
</TABLE>
- -------------------------
(1) See Schedule A for detail of Pro Forma for Previous Acquisitions. Schedule A
also includes pro forma adjustments for the Equity Offering, the sale of the
1997 Notes and the application of the net proceeds therefrom.
(2) Represents the historical condensed combined statement of operations of
BDM for the year ended October 31, 1997, after conversion to U.S. generally
accepted accounting principles. See "Overview--BDM Acquisition" in the
accompanying Notes.
(3) Minority interest does not include any pro forma adjustment for the
acquisition of ADS by BDM, as such adjustment is immaterial.
The accompanying Notes are an integral
part of these pro forma financial statements.
22
<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)
Historical -----------------------------------------------------------------------
Iron Record
Mountain Safesite Filesafe Allegiance Masters(2) Arcus(3)(4)
-------- -------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Storage $ 125,968 $ 4,198 $5,254 $1,625 $18,999 $51,607
Service and Storage
Material Sales 82,797 6,034 3,419 1,132 4,012 43,738
--------- ------- ------ ------ ------- -------
Total Revenues 208,765 10,232 8,673 2,757 23,011 95,345
Operating Expenses:
Cost of Sales (Excluding
Depreciation) 106,879 5,111 3,019 1,378 11,813 53,323
Selling, General and
Administrative 51,668 4,460 1,497 580 5,493 35,396
Depreciation and
Amortization 27,107 397 289 149 2,067 6,017
--------- ------- ------ ------ ------- -------
Total Operating Expenses 185,654 9,968 4,805 2,107 19,373 94,736
--------- ------- ------ ------ ------- -------
Operating Income 23,111 264 3,868 650 3,638 609
Interest (Income) Expense 27,712 26 142 (31) 1,910 3,317
--------- ------- ------ ------ ------- -------
Income (Loss) Before Provision
(Credit) for Income Taxes
and Minority Interest (4,601) 238 3,726 681 1,728 (2,708)
Provision (Credit) for Income Taxes (80) 77 -- 28 1,267 (696)
Taxes
Minority Interest -- -- -- -- -- --
--------- ------- ------ ------ ------- -------
Net Income (Loss) $ (4,521) $ 161 $3,726 $ 653 $ 461 $(2,012)
========= ======= ====== ====== ======= =======
Net Loss per Common Share -
Basic and Diluted $ (0.26)
=========
Weighted Average Common Shares
Outstanding 17,172
=========
</TABLE>
<TABLE>
<CAPTION>
Previous Acquisitions Pro Forma
-------------------- For
Previous
NUS Adjustments(5) Acquisitions
--- -------------- ------------
<S> <C> <C> <C>
Revenues:
Storage $ 8,931 $ -- $216,582
Service and Storage
Material Sales 1,752 -- 142,884
------- -------- ---------
Total Revenues 10,683 -- 359,466
Operating Expenses:
Cost of Sales (Excluding
Depreciation) 4,161 (187) (W) 185,497
Selling, General and
Administrative 2,024 (8,867) (X) 92,251
Depreciation and
Amortization 1,374 4,649 (Y) 42,049
------- -------- --------
Total Operating Expenses 7,559 (4,405) 319,797
------- -------- --------
Operating Income 3,124 4,405 39,669
Interest (Income) Expense 610 9,123 (Z)(BB)(CC) 42,809
------- -------- --------
Income (Loss) Before Provision
(Credit) for Income Taxes
and Minority Interest 2,514 (4,718) (3,140)
Provision (Credit) for Income Taxes 1,024 1,443 (AA)(DD) 3,063
Taxes
Minority Interest -- -- --
------- -------- --------
Net Income (Loss) $ 1,490 $ (6,161) $ (6,203)
======= ======== ========
Net Loss per Common Share -
Basic and Diluted $ (0.22)
========
Weighted Average Common Shares
Outstanding 10,870 (EE) 28,042
======== ========
</TABLE>
- ----------------------
(1) Represents historical results of operations for each Previous Acquisition
for the period in 1997 prior to acquisition by the Company. See
"Overview--Previous 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.
(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.
(5) Includes pro forma adjustments for the Equity Offering, the sale of the
1997 Notes and the application of the net proceeds therefrom.
The accompanying Notes are an integral
part of these pro forma financial statements.
23
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Overview
Previous Acquisitions
In June 1997, Iron Mountain acquired Safesite Records Management
Corporation ("Safesite") and certain related real estate for $62.0 million,
including $45.0 million in aggregate fair value of Common Stock and options to
purchase Common Stock and the balance in cash. In October 1997, Iron Mountain
acquired Records Retention/FileSafe, L.P. ("FileSafe") for total consideration
of $45.1 million in cash and assumed debt and Allegiance Business Archives, Ltd.
("Allegiance") for $8.8 million in cash. In November 1997, Iron Mountain
acquired HIMSCORP, Inc. (d/b/a Record Masters) for $85.4 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.)
In January 1998, Iron Mountain acquired Arcus Group, Inc. ("Arcus") for
$153.7 million, including $55.0 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.) In July 1998, Iron Mountain acquired
National Underground Storage, Inc. ("NUS") for $29.2 million in cash and assumed
debt.
BDM Acquisition
In January 1999, Iron Mountain acquired a 50.1 percent interest in BDM
for total consideration of $49.8 million consisting of $47.3 million in cash and
the balance in the capital stock of ADS. Iron Mountain acquired shares of BDM
from Mentmore Abbey plc ("MA") and from Abbey Storage Limited, a wholly owned
subsidiary of MA. In addition, Iron Mountain acquired newly issued shares from
BDM in exchange for cash and the capital stock of ADS. Upon completion of the
transaction, Iron Mountain owned 50.1 percent of the outstanding capital stock
of BDM and Mentmore Abbey plc owned the remaining 49.9 percent.
BDM has an April 30 fiscal year end. For consolidation purposes, Iron
Mountain has designated October 31 as the fiscal year end for BDM. Accordingly,
the Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30,
1998 includes the unaudited condensed combined balance sheet of BDM as of July
31, 1998 and the Unaudited Pro Forma Condensed Consolidated Statements of
Operations for the nine months ended September 30, 1998 and the year ended
December 31, 1997 include the unaudited condensed combined statements of
operations of BDM for the nine months ended July 31, 1998 and the year ended
October 31, 1997, respectively.
The financial statements of BDM have been prepared in accordance with
U.S. generally accepted accounting principles and have been translated into U.S.
dollars in accordance with Statement of Financial Accounting Standards No. 52,
Foreign Currency Translation. The functional currency of BDM is Pounds Sterling.
Accordingly, assets and liabilities have been translated into U.S.
24
<PAGE>
dollars at the exchange rate on the balance sheet date. Revenues and expenses
have been translated into U.S. dollars at the average exchange rate during the
period translated. Gains and losses that result from translating assets and
liabilities into U.S. dollars are included in stockholders' equity as a
cumulative translation adjustment. The amount of the cumulative translation
adjustment as of July 31, 1998 included in stockholders' equity on the
accompanying Unaudited Condensed Consolidated Balance Sheet was $2.1 million.
Balance Sheet
(1) Purchase Price Allocation
The purchase price of the BDM 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 every asset acquired
and liability assumed in the BDM acquisition; accordingly, the net book value of
such assets and liabilities has been used for pro forma purposes. Any excess
purchase price 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.
<TABLE>
<CAPTION>
Purchase Price:
<S> <C>
Cash Paid $ 47,330
Fair Value of ADS Capital Stock 2,486
---------
Total Purchase Price $ 49,816
=========
Allocation of Purchase Price:
Current Assets $ 17,641
Property, Plant and Equipment 30,948
Goodwill 66,570
Fair Value of ADS Net Assets 2,486
Current Liabilities (12,568)
Long-term Debt, net of Current Portion (15,641)
Deferred Income Taxes (475)
Minority Interest (39,145)
---------
Total Allocation of Purchase Price $ 49,816
=========
</TABLE>
25
<PAGE>
(2) Pro Forma Balance Sheet Adjustments
The pro forma adjustments to the Unaudited Pro Forma Condensed
Consolidated Balance Sheet as of September 30, 1998 consist of the following:
<TABLE>
<CAPTION>
Pro Forma
Adjustments
--------------
<S> <C>
(A) To record cash received by BDM for newly issued shares of stock $ 6,630
(B) To record increase in goodwill equal to the excess of purchase
price over fair value of net assets acquired 10,513
(C) To record additional debt incurred to finance the BDM
acquisition 47,330
(D) To record the minority interest in the net assets of BDM 39,145
(E) To record equity issued by BDM in exchange for cash and the net
assets of ADS 9,116
(F) To reverse the equity of BDM that was not acquired $ (78,448)
</TABLE>
Statement of Operations
(3) Pro Forma Statement of Operations Adjustments
The pro forma adjustments to the Unaudited Pro Forma Condensed
Consolidated Statement of Operations for the Nine Months Ended September 30,
1998 consist of the following:
<TABLE>
<CAPTION>
Pro Forma
Adjustments
--------------
<S> <C>
NUS 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)
(J) To adjust pro forma weighted average common shares
outstanding to give effect to all potentially dilutive
securities required due to pro forma net income 921
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Equity Offering Adjustments:
<S> <C>
(K) To reverse interest expense on Iron Mountain indebtedness
outstanding under the Credit Agreement assumed to be
retired with a portion of the net proceeds from the Equity
Offering $ (1,988)
(L) To adjust the provision for income taxes to a 40% rate on pro
forma income before nondeductible goodwill amortization $ 795
(M) To adjust pro forma weighted average common shares
outstanding as if the Equity Offering had occurred as of
January 1, 1997 2,057
BDM Acquisition Adjustments:
(N) To reflect the amortization of goodwill $ 263
(O) To record interest expense on the additional debt incurred to
finance the BDM acquisition 2,217
(P) To adjust the provision for income taxes to a 40% rate on pro
forma income before nondeductible goodwill amortization (887)
(Q) To record minority interest in the net income of BDM $ 400
(R) To reverse adjustment for all potentially dilutive
securities due to pro forma net loss (921)
</TABLE>
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>
Pro Forma
Adjustments
--------------
<S> <C>
BDM Acquisition Adjustments:
(S) To reflect the amortization of goodwill $ 350
(T) To record interest expense on the additional debt incurred to
finance the BDM acquisition 2,956
(U) To adjust the provision for income taxes to a 40% rate on
pro forma income before nondeductible goodwill amortization (1,182)
(V) To record the minority interest in BDM $ 51
Previous Acquisition Adjustments:
(W) To eliminate rent expense to reflect the purchase of facilities
previously leased $ (187)
</TABLE>
27
<PAGE>
<TABLE>
<S> <C>
(X) To reverse stock compensation charge directly attributable to
the Arcus Merger and to conform the accounting policy of Arcus
to that of Iron Mountain with respect to the capitalization of
costs for software developed for internal use $ (8,867)
(Y) To adjust depreciation expense based on the fair value of assets
acquired and the remaining estimated useful lives and the
amortization of goodwill 4,649
(Z) To reverse interest expense on retired debt and to record
interest expense on the additional debt incurred to finance the
Previous Acquisitions 9,373
(AA) To adjust the provision for income taxes to a 40% rate before
nondeductible goodwill amortization $ 1,143
1997 Notes and Equity Offering Adjustments:
(BB) To reverse interest expense on the Iron Mountain's
indebtedness outstanding under the Credit Agreement assumed
to be retired with a portion of the net proceeds from the
Equity Offering $(18,474)
(CC) To record interest expense on the 1997 Notes as if they had been
issued on January 1, 1997 18,224
(DD) To adjust the provision for income taxes to a 40% rate before
nondeductible goodwill amortization $ 300
(EE) 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 10,870
</TABLE>
28
<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)
March 22, 1999 By: /s/ Jean A. Bua
- -------------- --------------------------------------
(date) Jean A. Bua
Vice President and Corporate Controller
(Principal Accounting Officer)
29
[ROBSON RHODES LETTERHEAD]
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
As independent public accountants, we hereby consent to the incorporation of our
report dated February 9, 1999, on Britannia Data Management Limited'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 Nos. 333-44187 and 333-67765) and S-8 (File Nos.
333-24803, 333-33191, 333-43901, 333-60919, 333-60921 and 333-67499).
/s/ Robson Rhodes
ROBSON RHODES
Birmingham
England
March 22, 1999
