<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
- --------------------------------------------------------------------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 23, 1999
IRON MOUNTAIN INCORPORATED
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
--------------------------------------------------------------
(State or Other Jurisdiction of Incorporation or Organization)
1-14937 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>
ITEM 5. OTHER EVENTS
As previously announced in Iron Mountain Incorporated's Current Report on
Form 8-K dated October 21, 1999, the Company announced the execution of a
definitive agreement to acquire Pierce Leahy Corp. (NYSE:PLH) in a
stock-for-stock merger valued at approximately $1.1 billion including the
assumption of approximately $587 million in outstanding Pierce Leahy debt.
The merger consideration will result in the equivalent of a fixed exchange
ratio of 1.1 shares of Iron Mountain common stock for each share of Pierce
Leahy common stock. The acquisition is structured as a reverse merger where
Pierce Leahy Corp. will be the surviving legal entity and will immediately
change its name to Iron Mountain Incorporated. The proposed transaction is
subject to approval by the shareholders of both companies, the completion of
regulatory review and other customary conditions. The transaction is expected
to be completed in early 2000 and will be accounted for as a purchase.
In connection with the merger, Iron Mountain and Pierce Leahy have prepared
certain pro forma financial information giving effect to: (a) the merger; (b)
acquisitions completed by each company in 1998 and 1999 through October 31,
1999; and (c) debt and equity financing transactions completed by each
company in 1998 and 1999. This pro forma financial information is set forth
below in Item 7(b) of this Current Report on Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
During 1999, the Company acquired several records and information management
businesses. The following represents financial statements of Central File,
Inc., Sistemas de Archivo, Stortext (Holdings) Limited Group and Midtown
Professional Records Centre, Inc., which were acquired directly or indirectly
by the Company effective June 1, 1999, August 1, 1999, September 10, 1999 and
October 1, 1999, respectively. Such financial statements have been included
in this filing in accordance with Rule 3-05 of Regulation S-X so that
financial statements for a substantial majority of businesses acquired by the
Company since the date of the most recent audited balance sheet have been
furnished.
(a) Financial Statements of the Businesses Acquired:
<TABLE>
<S> <C>
Central File, Inc. 3
Audited financial statements as of and for the year
ended December 31, 1998, unaudited balance sheet as
of May 31, 1999, unaudited statements of operations
and retained earnings, and cash flows for the five
months ended May 31, 1998 and 1999.
Sistemas de Archivo 13
Audited combined financial statements as of and for
the year ended December 31, 1998, unaudited combined
balance sheet as of July 31, 1999, unaudited combined
statements of loss and changes in financial position
for the seven months ended July 31, 1998 and 1999.
Stortext (Holdings) Limited Group 26
Audited consolidated financial statements as of and for the
year ended March 31, 1999.
Midtown Professional Records Centre, Inc. 43
Audited combined financial statements as of and for the year
ended December 31, 1998, unaudited combined balance sheet as
of September 30, 1999, unaudited combined statements of
operations, stockholders' equity and cash flows for the nine
months ended September 30, 1999.
</TABLE>
(b) Pro Forma Financial Information:
<TABLE>
<CAPTION>
Page
<S> <C>
New Iron Mountain Pro Forma Condensed Consolidated Financial 56
Statements
Unaudited Pro Forma Condensed Consolidated Balance
Sheet as of September 30, 1999, Unaudited Pro Forma
Condensed Consolidated Statements of Operations for
the nine months ended September 30, 1999 and the
year ended December 31, 1998, and Notes to Unaudited Pro
Forma Condensed Consolidated Financial Statements.
Iron Mountain Incorporated Pro Forma Condensed Consolidated 65
Financial Statements
Unaudited Pro Forma Condensed Consolidated Balance
Sheet as of September 30, 1999, Unaudited Pro Forma
Condensed Consolidated Statements of Operations for the
nine months ended September 30, 1999 and the year ended
December 31, 1998, and Notes to Unaudited Pro Forma
Condensed Consolidated Financial Statements.
Pierce Leahy Corp. Pro Forma Condensed Consolidated Financial 76
Statements
Unaudited Pro Forma Condensed Consolidated Balance
Sheet as of September 30, 1999, Unaudited Pro Forma
Condensed Consolidated Statements of Operations for the
nine months ended September 30, 1999 and the year ended
December 31, 1998, and Notes to Unaudited Pro Forma
Condensed Consolidated Financial Statements.
(c) Exhibits
Exhibit 23.1 Consent of Fernandez & Bravo (Central File, Inc.)
Exhibit 23.2 Consent of Arthur Andersen (Sistemas de Archivo)
Exhibit 23.3 Consent of Arthur Andersen (Stortext (Holdings) Limited Group)
Exhibit 23.4 Consent of Arthur Andersen LLP (Midtown Professional Records Centre, Inc.)
</TABLE>
2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
Central File, Inc.
San Juan, Puerto Rico
We have audited the accompanying balance sheet of Central File, Inc. as of
December 31, 1998 and the related statements of operations and retained
earnings, and cash flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
These 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 audit provides 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 Central File, Inc. as of
December 31, 1998 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
As discussed in Note 8 to the financial statements, on June 9, 1999, the Company
entered into an agreement to sell substantially all assets of the Corporation
related to its records management operation.
/s/ Fernandez & Bravo
San Juan, Puerto Rico
February 9, 1999, except for
note 8, as to which date is
November 9, 1999.
3
<PAGE>
CENTRAL FILE, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MAY 31,
1998 1999
----------- -----------
(UNAUDITED)
CURRENT ASSETS:
<S> <C> <C>
Cash $ 77,429 $242,113
Accounts receivable:
Trade 165,518 132,640
Officers and employees 8,527 11,987
Inventory (Note 2) 2,569 226
Prepaid expenses 16,353 9,281
-------- --------
Total current assets 270,396 396,247
PROPERTY, PLANT & EQUIPMENT - NET (Notes 2, 3 and 4) 464,206 535,004
DEPOSITS 3,298 3,298
-------- --------
Total assets $737,900 $934,549
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable (Note 3) $ -- $ 90,000
Current portion of long term debt (Note 4) 18,720 18,720
Rent payable 28,790 13,790
Other accrued expenses 27,528 5,512
Payroll taxes payable 9,278 7,308
Deferred revenue (Note 2) 214,742 283,366
-------- --------
Total current liabilities 299,058 418,696
-------- --------
LONG-TERM DEBT, NET OF CURRENT
PORTION (Note 4) 103,720 95,920
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY:
Common stock, 100 shares authorized, $100
par value each; issued and outstanding 49 shares 4,900 4,900
Retained earnings 330,222 415,033
-------- --------
Total stockholders' equity 335,122 419,933
-------- --------
Total liabilities and stockholders' equity $737,900 $934,549
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
CENTRAL FILE, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS ENDED
DECEMBER 31, MAY 31,
---------------- ---------------------
1998 1998 1999
---------------- ---------------------
(UNAUDITED) (UNAUDITED)
REVENUES:
<S> <C> <C> <C>
Storage rental $1,197,095 $ 497,895 $ 548,749
Other services 39,415 13,123 27,369
---------- ---------- ----------
Total Revenues 1,236,510 511,018 576,118
---------- ---------- ----------
OPERATING EXPENSES:
Cost of sales (excluding depreciation
and amortization) 724,972 232,409 333,352
Selling, general and administrative 221,073 89,448 99,648
Depreciation and amortization 55,312 23,047 21,187
---------- ---------- ----------
Total Operating Expenses 1,001,357 344,904 454,187
---------- ---------- ----------
OPERATING INCOME 235,153 166,114 121,931
INTEREST EXPENSE ( 12,883) ( 5,511) ( 7,402)
---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME
TAXES 222,270 160,603 114,529
PROVISION FOR INCOME TAXES (Note 6) -- -- --
---------- ---------- ----------
NET INCOME 222,270 160,603 114,529
RETAINED EARNINGS, BEGINNING
OF PERIOD 328,410 328,410 330,222
DISTRIBUTION TO STOCKHOLDERS ( 220,458) ( 124,934) ( 29,718)
---------- ---------- ----------
RETAINED EARNINGS, END OF PERIOD $ 330,222 $ 364,079 $ 415,033
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
CENTRAL FILE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS ENDED
DECEMBER 31, MAY 31,
------------------ --------------------------
1998 1998 1999
------------------ --------------------------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Cash received from clients $ 1,137,129 $ 409,321 $ 677,620
Cash paid to suppliers and employees ( 930,520) ( 355,062) ( 462,571)
Interest paid ( 12,883) ( 5,511) ( 7,402)
---------- ---------- ----------
Net cash provided by operating activities 193,726 48,748 207,647
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment ( 36,507) ( 21,219) ( 5,927)
Increase in security deposits ( 450) ( 450)
(Advances to) collections from officers & employee ( 2,924) ( 94) 482
---------- ---------- ----------
Net cash used in investing activities ( 39,881) ( 21,763) ( 5,445)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid ( 220,458) ( 124,934) ( 29,718)
Repayment of long term debt ( 27,316) ( 10,739) ( 7,800)
---------- ---------- ----------
Net cash used in financing activities ( 247,774) ( 135,673) ( 37,518)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH ( 93,929) ( 108,688) 164,684
Beginning of period 171,358 171,358 77,429
---------- ---------- ----------
End of period $ 77,429 $ 62,670 $ 242,113
---------- ---------- ----------
---------- ---------- ----------
SUPPLEMENTAL INFORMATION
Cash paid during the period for:
Interest $ 12,883 $ 5,511 $ 7,402
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
CENTRAL FILE, INC.
STATEMENTS OF CASH FLOWS - (Continued)
<TABLE>
<CAPTION>
YEAR ENDED FIVE MONTHS ENDED
DECEMBER 31, MAY 31,
---------------- ------------------------
1998 1998 1999
---------------- ------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
NET INCOME $ 222,270 $ 160,603 $ 114,529
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Depreciation 55,312 23,047 21,187
Changes in Assets:
Accounts receivable (90,041) (101,697) 32,878
Prepaid expenses (1,548) (14,855) 7,072
Inventory 2,474 385 2,343
Changes in Liabilities:
Accrued expenses 12,006 (18,208) (37,016)
Unearned income (9,341) 68,624
Payroll taxes payable 2,594 (527) (1,970)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 193,726 $ 48,748 $ 207,647
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
CENTRAL FILE, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
The Company was organized in December 27, 1983 under the laws of the
Commonwealth of Puerto Rico. It operates a warehouse facility for the
storage of inactive documents and other properties. During the year ended
December 31, 1998, the Company obtained the approval of the Department of
State to change its former name "Central Dead File Service, Inc." to
"Central File, Inc."
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Cash and Cash Equivalents:
The Company defines cash and cash equivalents to include 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 fair market value.
b) Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
c) Property and Equipment:
Property and equipment are carried at cost less provision for depreciation
and amortization. Depreciation and amortization are provided by the
straight-line method with the following useful lives:
Building 36 years
Racks and equipment 10 years
Leasehold improvements 5 years
Furniture and fixtures 5 years
Motor vehicles 5 years
Property and equipment as of December 31, 1998, consists of the following:
Land and building (Notes 3 and 4) $ 305,686
Racks and equipment 281,763
Leasehold improvements 60,793
Furniture and office equipment 60,877
Motor vehicles 32,400
------------
741,519
Less accumulated depreciation
and amortization ( 277,313)
------------
Property and equipment - net $ 464,206
------------
------------
8
<PAGE>
CENTRAL FILE, INC.
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
c) Property and Equipment (Continued):
Expenditures for maintenance and repairs are charged to expenses as
incurred; whereas expenditures for renewals and betterments, that extend
the useful life of the asset, are generally capitalized. Cost of property
retired or otherwise disposed of and related accumulated depreciation will
be removed from the accounts and any gain or loss included in operations.
d) Concentration of Credit Risk:
The Company occasionally maintains deposits in excess of federally insured
limits. Statement of Financial Accounting Standards No. 105 identifies
these items as a concentration of credit risk requiring disclosure,
regardless of the degree of risk. The risk is managed by maintaining all
deposits in high quality financial institutions.
e) Inventory:
Inventories are stated at the lower of cost or market (determined on a
first in, first out basis) and consist principally of packaging supplies.
f) Deferred Revenues:
The company has the policy of invoicing its clients on an annual basis.
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.
g) Revenues:
The Company's 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 an annual
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.
9
<PAGE>
CENTRAL FILE, INC.
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
h) Unaudited Financial Statements:
The unaudited financial information included herein has been prepared in
accordance with generally accepted accounting prinicples. 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 for the five months ended May 31,
1999 are not necessarily indicative of the results expected for the full
1999 year.
3. NOTES PAYABLE
As of December 31, 1998, notes payable consisted of a revolving credit
facility for $75,000 with interest 1% over the prime rate, (prime rate
as of December 31, 1998 was 8.25%) secured with building and personally
guaranteed by stockholder.
There were no outstanding borrowings as of December 31, 1998.
4. LONG-TERM DEBT
As of December 31, 1998 outstanding long-term debt consisted of the
following:
Mortgage note payable in monthly installments
of $1,560 of principal plus interest on the out-
standing balance at 1% over the prime rate,
secured with first mortgage on land and building.
Due on May 2005. $122,440
Less current portion 18,720
---------
Long-term debt $ 103,720
---------
---------
Principal payments required to be made for the next five years are
summarized as follows:
<TABLE>
<CAPTION>
Year ended
December 31 Amount
----------- --------
<S> <C>
1999 $ 18,720
2000 18,720
2001 18,720
2002 18,720
2003 18,720
Thereafter 28,840
------------
$ 122,440
------------
------------
</TABLE>
10
<PAGE>
CENTRAL FILE, INC.
NOTES TO FINANCIAL STATEMENTS
5. COMMITMENTS AND CONTENGENCIES
a) Leases:
The Company operates in leased facilities located at Valencia Building, Rio
Piedras, Puerto Rico. Total leased space amounts to approximately 87,042
square feet covered by lease agreements expiring on June 30, 2001.
In addition to the minimum lease payments, the Company must pay a share of
insurance and property taxes. Minimum lease payments through the expiration
date:
<TABLE>
<CAPTION>
Year ending
December 31, Amount
----------- --------
<S> <C>
1999 $ 261,126
2000 261,126
2001 130,563
</TABLE>
Rent expense charged to operations for the year ended December 31, 1998
amounted to $243,250.
b) Unasserted Claims:
The Company is a defendant in an administrative procedure before the Puerto
Rico State Insurance Fund regarding a workers' compensation insurance
claim brought by a former employee for which the agency claims it is not
insured. The Company intends to vigorously defend itself against the claim.
At this moment, it is not possible to determine the final outcome of this
claim. No provision has been made in the financial statements related to
these claims.
6. INCOME TAX
During the period ended December 31, 1997 the Corporation was granted the
option to operate under the provisions of Sub-Chapter N, or Corporation of
Individuals, of the Puerto Rico Internal Revenue Code of 1994, as amended.
In accordance with such sub-chapter the Corporation is not taxable as such,
rather each stockholder reports its distributive share of the Corporation's
profit or loss for a particular year, whether or not distributed, in his
personal income tax return.
7) RELATED PARTIES
One of the Company stockholders' provides consulting services for which the
Company pays a management fee. Such services are included as part of the
selling, general and administrative expenses and amounted $27,400, for the
year ended December 31, 1998.
11
<PAGE>
CENTRAL FILE, INC.
NOTES TO FINANCIAL STATEMENTS
8) SUBSEQUENT EVENTS
Effective June 9, 1999, the Company sold substantially all assets related to
its records management operation to Iron Mountain Records Management, Inc.
(A Delaware Corporation), a wholly owned subsidiary of Iron Mountain
Incorporated. The assets sold includes racks and equipment, furniture and
office equipment, accounts receivable, prepaid expenses and deposits. The
acquisition was accounted as a sale by the Company.
12
<PAGE>
Report of Independent Public Accountants
To the Stockholders of
Iron Mountain Incorporated:
We have audited the accompanying combined balance sheet of Sistemas de Archivo,
S.A. de C.V. and Sistemas de Archivo Mexico, S.A. de C.V. (collectively Sistemas
de Archivo, or the Company) as of December 31, 1998, and the related combined
statements of loss, stockholders' equity and changes in financial position for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in Mexico, which are substantially the same as those followed in the United
States. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement and that they are prepared in accordance with the accounting
principles generally accepted in Mexico. 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 audit provides a
reasonable basis for our opinion.
Accounting practices used by the Company in preparing the accompanying combined
financial statements conform with accounting principles generally accepted in
Mexico but do not conform with accounting principles generally accepted in the
United States. A description of these differences and a reconciliation of
combined net loss and stockholders' equity to generally accepted accounting
principles in the United States are set forth in Note 10.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Sistemas de
Archivo, S.A. de C.V. and Sistemas de Archivo Mexico, S.A. de C.V. as of
December 31, 1998, and the combined results of their operations, changes in
their stockholders' equity and changes in their financial position for the year
then ended, in accordance with the accounting principles generally accepted in
Mexico.
/S/ Arthur Andersen
October 15, 1999
Mexico City, Mexico, D. F.
13
<PAGE>
SISTEMAS DE ARCHIVO
COMBINED BALANCE SHEETS
(EXPRESSED IN MEXICAN PESOS WITH
PURCHASING POWER AS OF JULY 31, 1999)
<TABLE>
<CAPTION>
Balances as of
--------------------------------------
December 31, 1998 July 31, 1999
(Unaudited)
------------------ -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 889,529 $ 466,723
Trade accounts receivable 248,790 816,886
Recoverable value-added tax 764,023 682,691
Sundry debtors 214,964 1,088,103
Inventories 120,140 479,335
------------------ ------------------
Total current assets 2,237,446 3,533,738
EQUIPMENT, net 6,497,679 9,904,770
OTHER ASSETS 237,382 403,467
------------------ ------------------
Total assets $ 8,972,507 $ 13,841,975
------------------ ------------------
------------------ ------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable to suppliers $ 147,106 $ 85,006
Amounts owed to related parties 210,304 213,000
Other accounts payable 451,807 999,325
Taxes payable 508,242 440,045
------------------ ------------------
Total current liabilities 1,317,459 1,737,376
STOCKHOLDERS' EQUITY:
Capital stock 18,304,000 18,304,000
Unpaid capital stock (4,898,458) --
Restatement of capital stock 3,339,959 3,890,248
Advances for future capital increases 868,570 1,484,990
Accumulated losses (9,959,023) (11,574,639)
------------------ ------------------
Total stockholders' equity 7,655,048 12,104,599
------------------ ------------------
Total liabilities and stockholders' equity $ 8,972,507 $ 13,841,975
------------------ ------------------
------------------ ------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
SISTEMAS DE ARCHIVO
COMBINED STATEMENTS OF LOSS
(EXPRESSED IN MEXICAN PESOS WITH
PURCHASING POWER AS OF JULY 31, 1999)
<TABLE>
<CAPTION>
For the Year
Ended
December 31, For the Seven months Ended July 31,
----------------- -------------------------------------
1998 1998 1999
------------------ ------------------ ------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
REVENUES:
Storage $ 7,122,182 $ 2,767,613 $ 8,781,587
Services 1,306,835 548,577 1,311,870
------------------ ------------------ ------------------
8,429,017 3,316,190 10,093,457
OPERATING EXPENSES:
Storage and services 9,834,803 4,290,441 6,689,787
Selling, general and administrative 3,314,401 1,440,319 4,376,462
Depreciation 1,015,009 414,899 588,515
------------------ ------------------ ------------------
14,164,213 6,145,659 11,654,764
------------------ ------------------ ------------------
Operating loss (5,735,196) (2,829,469) (1,561,307)
COMPREHENSIVE FINANCING COST:
Interest income (expense), net 7,919 (16,185) 11,431
Loss from monetary position (167,399) (129,839) (65,740)
------------------ ------------------ ------------------
(159,480) (146,024) (54,309)
------------------ ------------------ ------------------
Net loss $ (5,894,676) $ (2,975,493) $ (1,615,616)
------------------ ------------------ ------------------
------------------ ------------------ ------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
SISTEMAS DE ARCHIVO
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998
(EXPRESSED IN MEXICAN PESOS
WITH PURCHASING POWER AS OF JULY 31, 1999)
<TABLE>
<CAPTION>
Advances
Capital Stock for Future Total
------------------------------------------ Capital Accumulated Stockholders'
Historical Unpaid Restatement Increases Losses Equity
------------ ------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AS OF DECEMBER 31, 1997 $ 18,304,000 $(13,514,206) $ 2,131,304 $ -- $(4,064,347) $ 2,856,751
Net loss -- -- -- -- (5,894,676) (5,894,676)
Payments to subscribed capital -- 8,615,748 1,208,655 -- -- 9,824,403
Advances for future capital
increases -- -- -- 868,570 -- 868,570
------------ ------------ ------------ ------------ ------------ -----------
BALANCES AS OF DECEMBER 31, 1998 $ 18,304,000 $(4,898,458) $ 3,339,959 $ 868,570 $(9,959,023) $ 7,655,048
------------ ------------ ------------ ------------ ------------ -----------
------------ ------------ ------------ ------------ ------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
SISTEMAS DE ARCHIVO
COMBINED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(EXPRESSED IN MEXICAN PESOS WITH PURCHASING POWER
AS OF JULY 31, 1999)
<TABLE>
<CAPTION>
For the Year
Ended
December 31, For the Seven months Ended July 31,
---------------- -----------------------------------
1998 1998 1999
---------------- --------------- ------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (5,894,676) $ (2,975,493) $ (1,615,616)
Add- Non-cash items-
Depreciation 1,015,009 414,899 588,515
------------ ------------ ------------
Net resources used in results (4,879,667) (2,560,594) (1,027,101)
Net changes in working capital (91,950) (658,316) (1,299,181)
------------ ------------ ------------
Net resources used in operating
activities (4,971,617) (3,218,910) (2,326,282)
FINANCING ACTIVITIES:
Advances for future capital increases 868,570 -- 616,420
Payments to subscribed capital 9,824,403 6,122,353 5,448,747
------------ ------------ ------------
10,692,973 6,122,353 6,065,167
INVESTING ACTIVITIES:
Acquisition of equipment (5,151,140) (2,771,519) (3,995,606)
Decrease (increase) in other assets 70,550 33,120 (166,085)
------------ ------------ ------------
(5,080,590) (2,738,399) (4,161,691)
------------ ------------ ------------
Net increase (decrease) in cash 640,766 165,044 (422,806)
Cash at the beginning of the period 248,763 248,763 889,529
------------ ------------ ------------
Cash at the end of the period $ 889,529 $ 413,807 $ 466,723
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
SISTEMAS DE ARCHIVO
NOTES TO THE COMBINED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998
(EXPRESSED IN MEXICAN PESOS WITH PURCHASING POWER AS OF JULY 31, 1999)
1. BASIS OF PRESENTATION:
These combined financial statements are presented on the basis of the accounting
principles generally accepted in Mexico (Mexican GAAP). Certain accounting
practices applied by Sistemas de Archivo, S.A. de C.V. (SASA) and Sistemas de
Archivo Mexico, S.A. de C.V. (SAMSA) (collectively Sistemas de Archivo, or the
Company) that conform with accounting principles generally accepted in Mexico do
not conform with accounting principles generally accepted in the United States
(U.S. GAAP). A description of the differences between Mexican and U.S. GAAP and
a reconciliation of combined net loss for the year and combined stockholders'
equity to U.S. GAAP are set forth in Note 10.
2. NATURE OF BUSINESS:
The Company is engaged in providing record and information management services
to various companies in Mexico. The Company was incorporated in 1996 and has
operations in Mexico City, Monterrey, Guadalajara, Toluca and Puebla.
3. BASIS OF COMBINATION:
The accompanying combined financial statements include the financial statements
of Sistemas de Archivo, S.A. de C.V. and Sistemas de Archivo Mexico, S.A. de
C.V. The stockholders' equity of each Company has been combined in the
accompanying financial statements, and all significant intercompany balances and
transactions have been eliminated in combination.
18
<PAGE>
4. SIGNIFICANT ACCOUNTING POLICIES:
a. Use of Estimates-
The Company's accounting policies, which are in conformity with the accounting
principles generally accepted in Mexico, require management to make estimates
and use certain assumptions to determine some items included in the financial
statements and make the required disclosures therein. While these estimates and
assumptions used may differ from actual results, management believes that they
are reasonable.
b. Recognition of the effects of inflation in the financial information-
The Company restates all of its financial statements in terms of the purchasing
power of the Mexican peso as of the end of the latest period presented, thereby
comprehensively recognizing the effects of inflation.
To recognize the effects of inflation in terms of Mexican pesos with purchasing
power as of the end of the latest period presented, the procedures were as
follows:
- - BALANCE SHEET:
Inventories are valued at net replacement cost, which does not exceed
realizable value. Inventories are mainly comprised of boxes used for
storage.
Equipment is restated by applying the National Consumer Price Index
(NCPI). Depreciation of equipment is calculated using the straight-line
method based on the estimated useful life of each asset.
Stockholders' equity and other nonmonetary items are restated using a
factor derived from the cumulative NCPI from the date of contribution or
generation, and is equivalent to the amount necessary to maintain the
stockholders' equity in terms of its purchasing power.
- - STATEMENT OF LOSS:
Revenues and expenses that are associated with a monetary item are
restated from the month in which they arise through the end of the latest
period presented, based on factors derived from the NCPI. Costs and
expenses associated with a nonmonetary item are restated as a function of
the restatement of the nonmonetary asset which is being consumed or sold.
The loss from monetary position, which represents the erosion of the
purchasing power of monetary items caused by inflation, is determined by
applying to net monetary assets or liabilities at the beginning of each
month the factor of inflation derived from the NCPI, and is restated
through the end of the latest period presented with the corresponding
factor.
- - OTHER STATEMENTS:
The statements of stockholders' equity and changes in financial position
present the changes in constant Mexican pesos, according to the financial
position at the prior yearend, restated to constant Mexican pesos as of
the end of the latest period presented.
19
<PAGE>
c. Income taxes and employee profit sharing-
The Company recognizes by means of the liability method the future effects of
income taxes and employee profit sharing related to the cumulative temporary
differences between book and taxable income, which arise from specific items
whose turnaround period can be determined and which are not expected to be
replaced by items of a similar nature and amount. Since there are no significant
nonrecurring temporary differences, the Company has not recorded any deferred
income taxes or employee profit sharing.
d. Employee benefits-
Under Mexican labor law, the Company is liable for separation payments and
seniority premiums to employees terminated under certain circumstances.
Indemnity payments to involuntarily terminated employees are charged to results
in the period in which they are made. At December 31, 1998, the Company has not
recorded any seniority premium liability, which effect is not significant given
the current salaries and seniority of employees.
e. Comprehensive financing cost-
The comprehensive financing cost includes all financial revenues and expenses,
such as interest income and expense and the gain or loss from monetary position,
as earned or incurred.
f. Revenue recognition-
Revenues from storage and service contracts are recorded as services are
provided.
g. Unaudited financial information
The unaudited financial information included herein has been prepared in
accordance with generally accepted accounting principles in Mexico. In the
opinion of management the unaudited financial statements include all
adjustments of a normal and recurring which are necessary for a fair
presentation. The results of operations of the seven month periods ended July
31 are not necessarily indicative of the results for the full year.
20
<PAGE>
5. EQUIPMENT:
<TABLE>
<S> <C>
Warehouse equipment $ 255,766
Racking 2,663,554
Transportation equipment 1,573,844
Furniture and fixtures 289,027
Computer hardware and software 1,615,811
Leasehold improvements 201,458
-----------------
6,599,460
Less- Accumulated depreciation (1,569,888)
-----------------
5,029,572
Advances to suppliers 1,468,107
-----------------
$ 6,497,679
=================
</TABLE>
Depreciation of equipment is calculated using the straight-line method
using the following useful lives:
<TABLE>
<S> <C>
Warehouse equipment 10 years
Racking 10 years
Transportation equipment 4 years
Furniture and fixtures 10 years
Computer hardware and software 4 years
Leasehold improvements 20 years
</TABLE>
6. RELATED-PARTY TRANSACTIONS AND BALANCES:
During the year ended December 31, 1998, the Company had the following
transactions with related parties:
<TABLE>
<S> <C>
Revenues-
Storage services $ 78,096
===================
</TABLE>
The Company provided storage services to a related party, Padilla y Perez,
Agentes de Seguros.
At December 31, 1998 accounts payable to related parties are as follows:
<TABLE>
<S> <C>
Padilla y Perez, Agentes de Seguros $ 70,115
Fernando Padilla Villarreal 140,189
------------------
$ 210,304
==================
</TABLE>
The balances relate to the purchase of fixed assets. In the opinion of
management, those transactions were entered into at market prices and terms.
21
<PAGE>
7. TAX ENVIRONMENT:
a. Income and asset tax regulations-
The Company is subject to income and asset taxes. Income taxes are computed
taking into consideration the taxable and deductible effects of inflation, such
as depreciation calculated on restated asset values, which permits the deduction
of current costs. Taxable income is increased or reduced by the effects of
inflation on certain monetary assets and liabilities through the inflationary
component, which is similar to the gain or loss from monetary position.
Beginning in 1999, the income tax rate increased from 34% to 35%, with the
obligation to pay this tax each year at a rate of 30% (transitorily 32% in
1999), with the remainder payable upon distribution of earnings.
Asset tax is computed at an annual rate of 1.8% on the average of the majority
of restated assets less certain liabilities, and the tax is paid only to the
extent that it exceeds the income tax of the period. Any required payment of
asset tax may be offset against the excess of income tax over asset tax of the
following ten years. The asset tax law establishes that taxpayers are exempt
from the payment of asset tax during the initial year of operations and the
three following years. Accordingly, the Company is exempt from the payment of
asset taxes until the year 2000.
b. Employee profit sharing regulations-
Employee profit sharing is determined at the rate of 10% of taxable income,
adjusted as prescribed by the income tax law. Net operating loss carryforwards
are not available for purposes of reducing employee profit sharing. In 1998 the
Company did not generate basis for the payment of employee profit sharing.
The income for purposes of employee profit sharing does not consider the
inflationary component, and depreciation is based on historical rather than
restated values.
c. Net operating loss carryforwards-
At December 31, 1998, the Company has net operating loss carryforwards for
income tax purposes, which will be indexed for inflation through the year
applied, in the following restated amounts:
<TABLE>
<CAPTION>
EXPIRATION DATE SASA SAMSA
<S> <C> <C>
2006 $ 652,176 $ 751,814
2007 1,057,084 585,813
2008 2,242,032 834,545
---------------- ----------------
$ 3,951,292 $ 2,172,172
================ ================
</TABLE>
8. STOCKHOLDERS' EQUITY:
At December 31, 1998, capital stock of the Company consisted of 11,144 (SASA)
and 25,464 (SAMSA) common shares, with a value of 500 Mexican pesos each, of
which 100 (SASA) and 100 (SAMSA) shares are classified as fixed capital and
11,044 (SASA) and 25,364 (SAMSA) shares are classified as variable capital.
The variable portions of capital stock are unlimited.
22
<PAGE>
As of December 31, 1998, 26,811 shares (11,144 (SASA) and 15,667 (SAMSA))
have been subscribed and paid. During 1999, the remaining subscribed shares
were paid.
Advances for future capital increases represent cash received from stockholders
in exchange for stock to be issued at a later date.
Beginning January 1, 1999, dividends paid to individuals or foreign residents
will be subject to income tax withholding at an effective rate ranging from 7.5%
to 7.7%, depending on the year in which the earnings were generated. In
addition, if earnings for which no corporate tax has been paid are distributed,
the tax must be paid upon distribution of dividends.
Capital reductions will be subject to taxes on the excess of the reduction over
the price-level adjusted paid-in capital, in accordance with the formula
prescribed by the income tax law.
As of December 31, 1998, the stockholders' equity is comprised as follows:
<TABLE>
<CAPTION>
SASA SAMSA
<S> <C> <C>
Capital Stock $ 5,572,000 $ 12,732,000
Unpaid capital stock -- (4,898,458)
Restatement of capital stock 1,269,878 2,070,081
Advances for future capital increases 868,570 --
Accumulated losses (3,547,260) (6,411,763)
---------------- ----------------
Total stockholders' equity $ 4,163,188 $ 3,491,860
================ ================
</TABLE>
9. SUBSEQUENT EVENT:
On August 1, 1999, the Company's shares were acquired by Sistemas de Archivo
Corporativo, S. de R.L. de C.V. (Sistemas de Archivo), a joint-venture between
Iron Mountain Mexico, S. de R.L. de C.V. (Iron Mountain Mexico) (50.1%) and
Padilla y Perez Sistemas de Archivos, S.A. de C.V. (49.9%). Iron Mountain Mexico
is a wholly owned subsidiary of Iron Mountain Incorporated. Iron Mountain Mexico
invested USD $3.8 million in Sistemas de Archivo to gain a controlling interest
and infuse capital for growth.
10. COMBINED FINANCIAL INFORMATION UNDER TO U.S. GAAP:
DIFFERENCES BETWEEN MEXICAN AND U.S. GAAP:
The accompanying combined financial statements of the Company are presented on
the basis of Mexican GAAP. Certain accounting practices applied by the Company
that conform with Mexican GAAP do not conform with U.S. GAAP.
A reconciliation of combined net loss for the year and combined stockholders'
equity as presented under Mexican GAAP to U.S. GAAP is presented below. This
reconciliation to U.S. GAAP is presented both with and without the reversal of
the restatement of the financial statements to recognize the effects of
inflation, as required under Mexican GAAP Bulletin B-10, "Recognition of the
Effects of Inflation in the Financial Information", as amended. The application
of Bulletin B-10 represents a comprehensive measure of the effects of price
level changes in the inflationary Mexican economy and, as such, is considered a
more meaningful presentation than historical cost-based financial reporting for
both Mexican and U.S. accounting purposes, consistent with the
23
<PAGE>
methodology described in Statement of Financial Accounting Standards ("SFAS")
No. 89, "Financial Reporting and Changing Prices". The reversal of the effects
of inflation is included solely to present the historical Mexican peso amounts
that would serve as the basis for the translation of the Mexican pesos financial
statements into U.S. dollars for inclusion in the consolidated financial
statements of Iron Mountain Incorporated.
The principal differences between Mexican GAAP and U.S. GAAP are described
below, together with an explanation, where appropriate, of the method used in
the determination of the adjustments that affect combined net loss for the year
and combined stockholders' equity.
DEFERRED INCOME TAXES AND EMPLOYEE PROFIT SHARING-
Under Mexican GAAP deferred taxes are limited to a few specific items. U.S. GAAP
requires income taxes to be accounted for in accordance with SFAS No. 109,
"Accounting for Income Taxes". Under SFAS No. 109, the Company's deferred income
taxes arise principally due to the recognition of the future benefits from net
operating loss carryforwards, net of valuation allowance. A valuation allowance
has been recorded for this deferred tax asset due to the uncertainty of its
realization.
Employee profit sharing is calculated based on taxable income after certain
adjustments, as explained in Note 7 above, and is subject to the future
consequences of temporary differences in the same manner as income taxes, with
the exception of benefits from net operating loss carryforwards. The deferred
employee profit sharing, which is not recorded under Mexican GAAP, is included
in the reconciliation of Mexican to U.S. GAAP.
The tax effect of temporary differences that generated deferred income taxes and
employee profit sharing under SFAS No. 109 is as follows:
<TABLE>
<S> <C>
Deferred income tax asset $ 2,081,977
Deferred employee profit sharing (85,279)
Less: Valuation allowance for deferred income tax asset (2,081,977)
-----------------
Net deferred tax liability $ (85,279)
=================
</TABLE>
RECONCILIATION OF MEXICAN GAAP TO U.S. GAAP:
Combined net loss for the year and stockholders' equity, adjusted to take into
account the significant differences between Mexican GAAP and U.S. GAAP are as
follows:
24
<PAGE>
a. Reconciliation of net loss -
<TABLE>
<S> <C>
Net loss for the year under Mexican GAAP: $ (5,894,676)
U.S. GAAP adjustments:
Deferred employee profit sharing (57,346)
Effects of inflation accounting on
U.S. GAAP adjustments 5,281
------------------
Approximate net loss according to U.S. GAAP,
including the effects of inflation (5,946,741)
Reversal of the effects of inflation 1,110,864
------------------
Approximate net loss according to U.S. GAAP,
excluding the effects of inflation $ (4,835,877)
==================
b. Reconciliation of stockholders' equity-
Stockholders' equity under Mexican GAAP $ 7,655,048
U.S. GAAP adjustments:
Deferred employee profit sharing (85,279)
------------------
Approximate stockholders' equity under
U.S. GAAP, including the effects of inflation 7,569,769
Reversal of the effects of inflation (1,346,261)
------------------
Approximate stockholders' equity under
U.S. GAAP excluding the effects of inflation $ 6,223,508
=================
</TABLE>
11. FUTURE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARD
In 1999, the Mexican Institute of Public Accountants issued Bulletin D-4
"Accounting Treatment for Income and Asset Taxes, and Employee Profit Sharing",
effective for all fiscal years beginning January 1, 2000, although earlier
adoption is recommended.
Bulletin D-4 establishes financial accounting and reporting standards for the
effects of the asset tax (IMPAC), income tax (ISR) and employee profit sharing
(PTU) that result from an enterprise's activities during the current and
preceding years. The adoption of this Bulletin is comparable to SFAS 109 and,
therefore, the expected effect will be similar to that shown in the
reconciliation between Mexican and U.S. GAAP with the exception of the employee
profit sharing. Unlike the income and asset tax, the employee profit sharing
will not be calculated based on the temporary differences between the tax basis
of an asset or liability and its reported amount in the financial statements.
25
<PAGE>
Auditors' report
To the directors of Iron Mountain Europe Limited:
We report in connection with the acquisition by Iron Mountain Europe Limited of
Stortext (Holdings) Limited and subsidiary undertakings (the "Stortext
(Holdings) Limited Group" or "the Group").
The financial statements set out below have been prepared under the historical
cost convention as modified by the valuations of freehold and long leasehold
properties and are based on the consolidated accounts of Stortext (Holdings)
Limited described above adjusted for the exclusion of the trade, assets and
liabilities of its logistics business.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the accounts. It also
includes an assessment of the significant estimates and judgements made by the
directors in the preparation of the accounts and of whether the accounting
policies are appropriate to the circumstances of the company and of the group,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the accounts are free from
material misstatement, whether caused by fraud or other irregularity or error.
In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the accounts.
Without qualifying our opinion, we draw your attention to note 1 which includes
some important information on the basis of preparation of the financial
statements.
OPINION
In our opinion, the financial statements give for the purpose of the transaction
with Iron Mountain Europe Limited, a true and fair view of the state of affairs
of the Group at 31 March 1999 and of the Group's profits and cash flows for the
year ended.
Accounting practices adopted by Stortext (Holdings) Limited Group in preparing
the financial statements conform with generally accepted accounting principles
in the United Kingdom (UK GAAP) but do not conform with accounting principles
generally accepted in the United States (US GAAP). A description of these
differences and a complete reconciliation of consolidated net income and
shareholders' equity to US GAAP, along with selected consolidated financial
information according to US GAAP, are set forth in notes 13 and 14.
/s/ Arthur Andersen
Edinburgh, Scotland
15 November 1999
26
<PAGE>
Consolidated profit and loss account
For the year ended 31 March 1999
<TABLE>
<CAPTION>
Notes 1999
L'000
<S> <C> <C>
TURNOVER 2,736
Cost of sales (1,450)
----------
Gross profit 1,286
Administrative expenses (620)
----------
OPERATING PROFIT 666
Finance charges (net) 3 (67)
----------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 599
Tax on profit on ordinary activities 4 (45)
----------
PROFIT FOR THE FINANCIAL YEAR 554
Dividends (72)
----------
Retained profit for the year 482
----------
</TABLE>
The profit for the financial year equates to the historical cost profit for the
financial year.
The accompanying notes are an integral part of this consolidated profit and loss
account.
27
<PAGE>
Consolidated statement of total recognised gains and losses
For the year ended 31 March 1999
<TABLE>
<CAPTION>
1999
Notes L'000
<S> <C> <C>
Profit for the financial year 554
Unrealised surplus on revaluation of properties 136
Cost of financial support provided to logistics business 1 (481)
-----------
TOTAL RECOGNISED GAINS AND LOSSES RELATING TO THE YEAR 209
-----------
-----------
</TABLE>
28
<PAGE>
Consolidated balance sheet
As at 31 March 1999
<TABLE>
<CAPTION>
Notes 1999
L'000
<S> <C> <C>
FIXED ASSETS
Tangible assets 5 1,758
----------
CURRENT ASSETS
Debtors 6 651
CREDITORS: Amounts falling due within one year 7 (978)
----------
NET CURRENT LIABILITIES (327)
----------
TOTAL ASSETS LESS CURRENT LIABILITIES 1,431
CREDITORS: Amounts falling due after more than one year 8 (700)
PROVISIONS FOR LIABILITIES AND CHARGES - DEFERRED TAXATION (84)
----------
NET ASSETS 647
----------
----------
CAPITAL AND RESERVES
Called-up share capital 1,310
Share premium account 667
Revaluation reserve 136
Goodwill write off reserve (1,477)
Capital redemption reserve 68
Profit and loss account (57)
----------
SHAREHOLDERS' FUNDS 9 647
----------
----------
</TABLE>
The accounts on pages 2 to 17 were approved by the board of directors on 15
November 1999 and signed on its behalf by:
/s/ Peter Mitchell Director
15 November 1999
The accompanying notes are an integral part of this consolidated balance sheet.
29
<PAGE>
Consolidated cash flow statement
For the year ended 31 March 1999
<TABLE>
<CAPTION>
Notes 1999
L'000
<S> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES 10 387
Returns on investments and servicing of finance 11 (67)
Taxation 11 (34)
Capital expenditure and financial investment 11 (236)
Equity dividends paid (75)
----------
CASH OUTFLOW BEFORE MANAGEMENT OF LIQUID RESOURCES AND FINANCING (25)
Financing 11 (63)
----------
DECREASE IN CASH IN THE YEAR 12 (88)
----------
----------
</TABLE>
The accompanying notes are an integral part of this consolidated cash flow
statement.
30
<PAGE>
Notes to accounts
1 NATURE OF BUSINESS AND CORPORATE STATUS
Stortext (Holdings) Limited Group is a full-service records management company,
registered in the United Kingdom, providing storage and related services for all
media in Central Scotland to commercial, professional and financial businesses.
These financial statements reflect the consolidated financial position and
results of Stortext (Holdings) Limited Group, which consolidate the financial
position and results of Stortext (Holdings) Limited, Stortext Limited and JAD
(93) Limited, adjusted for the elimination of the trade, assets and liabilities
of its logistics business, which were transferred out of the Group immediately
prior to its acquisition by Iron Mountain Europe Limited (see note 15). All
intercompany balances have been eliminated on consolidation.
The business acquired has provided financial support to the logistics business
since its inception. The acquisition did not provide for any payment in respect
of the cumulative amount of this support at the date of sale and accordingly no
amounts are shown as recoverable in the 31 March 1999 balance sheet included in
these financial statements. The cost of the financial support provided has been
written off through the Consolidated Statement of Total Recognised Gains and
Losses and amounted to L481,000 in the year ended 31 March 1999.
The financial statements also reflect two adjustments necessary to bring the
accounting policies historically adopted by Stortext (Holdings) Limited into
line with those of Iron Mountain Europe Limited. The adjustments are to spread
the benefit of rent free periods on property leases equally over the life of the
related leases rather than recognising the benefit at the start of the leases,
and to recognise income for billings in advance over the period to which they
relate rather than at the point of billing.
These financial statements are not comparable to the United Kingdom financial
statements of Stortext (Holdings) Limited as they exclude the trade, assets and
liabilities of its logistics business. The full financial statements of Stortext
(Holdings) Limited for the year ended 31 March 1999, which consolidated the
accounts of Stortext (Holdings) Limited, Stortext Limited and JAD (93) Limited
and which carried an unqualified auditors' report, have been filed with the
Registrar of Companies.
31
<PAGE>
Notes to accounts (continued)
1 NATURE OF BUSINESS AND CORPORATE STATUS (CONTINUED)
The financial statements can be reconciled to the audited statutory consolidated
accounts of Stortext (Holdings) Limited as follows:
<TABLE>
<CAPTION>
L'000
<S> <C>
Net assets per audited statutory accounts 862
Elimination of net liabilities directly attributable to the logistics business 11
Recognition of deferred income at 31 March 1999 (144)
Recognition of accrual in respect of rent free occupancy (82)
----------
Net assets per financial statements 647
----------
----------
L'000
Retained profit for the financial year per audited statutory accounts 105
Elimination of retained loss directly attributable to the logistics business and cost of
employees not acquired 660
Net impact of recognition of deferred income at 31 March 1998 and 1999 (22)
Recognition of accrual in respect of rent free occupancy (82)
Recognition of notional management overhead (179)
----------
Retained profit for the year per the financial statements 482
----------
----------
L'000
Other recognised gains and losses per audited statutory accounts 136
Cost of financial support provided to logistics business (481)
----------
Other recognised gains and losses per the financial statements (345)
----------
----------
</TABLE>
32
<PAGE>
Notes to accounts (continued)
2 ACCOUNTING POLICIES
The principal accounting policies are summarised below. They have all been
applied consistently throughout the year.
BASIS OF ACCOUNTING
The accounts have been prepared under the historical cost convention, modified
to include the revaluation of certain fixed assets, and in accordance with
applicable accounting standards in the United Kingdom.
INTANGIBLE ASSETS - GOODWILL
Goodwill arising on the acquisition of businesses, representing any excess of
the fair value of the consideration given over the fair value of the
identifiable assets and liabilities acquired, is fully written off to reserves
in the year of acquisition.
TANGIBLE FIXED ASSETS
Tangible fixed assets are stated at cost or valuation, net of depreciation and
any provision for impairment. Depreciation is provided on all tangible fixed
assets, other than investment properties and freehold land, at rates calculated
to write off the cost or valuation, less estimated residual value, of each asset
on a straight-line basis over its expected useful life, as follows:
<TABLE>
<S> <C>
Heritable property 2.5% per annum
Building improvements 2.5% and 10% per annum
Plant and equipment 10%, 25% and 50% per annum
Motor vehicles 25% per annum
</TABLE>
TAXATION
Corporation tax payable is provided on taxable profits at the current rate.
Advance corporation tax payable on dividends paid or provided for in the year is
written off, except when recoverability against corporation tax payable is
considered to be reasonably assured. Credit is taken for advance corporation tax
written off in previous years when it is recovered against corporation tax
liabilities.
Deferred taxation is provided using the liability method on all timing
differences only to the extent that they are expected to reverse in the future
without being replaced, except that the deferred tax effects of timing
differences arising from pensions and other post-retirement benefits are always
recognised in full.
TURNOVER
Turnover represents amounts receivable for records management services provided
in the normal course of business, net of trade discounts, VAT and other sales
related taxes. Amounts invoiced in advance of services provided are recorded as
deferred income in the balance sheet. Services provided in advance of billings
are recorded as accrued income in the balance sheet.
33
<PAGE>
Notes to accounts (continued)
2 ACCOUNTING POLICIES (CONTINUED)
LEASES
Assets held under finance leases and other similar contracts, which confer
rights and obligations similar to those attached to owned assets, are
capitalised as tangible fixed assets and are depreciated over the shorter of the
lease terms or their useful lives. The capital elements of future lease
obligations are recorded as liabilities, while the interest elements are charged
to the profit and loss account over the period of the leases to produce a
constant rate of charge on the balance of capital repayments outstanding. Hire
purchase transactions are dealt with similarly, except that assets are
depreciated over their useful lives.
Rentals under operating leases are charged on a straight-line basis over the
lease term, even if the payments are not made on such a basis. Benefits received
and receivable as an incentive to sign an operating lease are similarly spread
on a straight-line basis over the lease term, except where the period to the
review date on which the rent is first expected to be adjusted to the prevailing
market rate is shorter than the full lease term, in which case the shorter
period is used.
REVALUATION OF PROPERTIES
Where individual freehold and leasehold properties are revalued the surplus or
deficit on book value is transferred to the revaluation reserve, except that a
deficit which is in excess of any previously recognised surplus over depreciated
cost relating to the same property, or the reversal of such a deficit, is
charged (or credited) to the profit and loss account. Where depreciation charges
are increased following a revaluation, an amount equal to the increase is
transferred annually from the revaluation reserve to the profit and loss account
as a movement on reserves. On disposal or recognition of a provision for
impairment of a revalued fixed asset, any related balance remaining in the
revaluation reserve is also transferred to the profit and loss account as a
movement on reserves.
3 FINANCE CHARGES (NET)
INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
1999
L'000
<S> <C>
Bank loans and overdrafts 49
Finance leases and hire purchase contracts 18
----------
67
----------
----------
</TABLE>
34
<PAGE>
Notes to accounts (continued)
4 TAX ON PROFIT ON ORDINARY ACTIVITIES
The tax charge comprises:
<TABLE>
<CAPTION>
1999
L'000
<S> <C>
Corporation tax at 21% 18
Deferred taxation 27
----------
45
----------
----------
<CAPTION>
5 TANGIBLE FIXED ASSETS
Heritable Building Motor Plant and
Property Improvements vehicles machinery Total
L'000 L'000 L'000 L'000 L'000
<S> <C> <C> <C> <C> <C>
COST OR VALUATION
At 1 April 1998 974 - 68 863 1,905
Additions 49 61 - 328 438
Revaluations (22) - - - (22)
Disposals - - (43) (113) (156)
Transfers (51) 51 - - -
---------- ---------- ---------- ---------- ----------
At 31 March 1999 950 112 25 1,078 2,165
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
DEPRECIATION
At 1 April 1998 120 - 54 331 505
Charge for the year 38 6 12 160 216
Adjustments on revaluations (158) - - - (158)
Disposals - - (43) (113) (156)
---------- ---------- ---------- ---------- ----------
At 31 March 1999 - 6 23 378 407
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
NET BOOK VALUE
At 31 March 1999 950 106 2 700 1,758
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
<CAPTION>
6 DEBTORS
1999
L'000
Amounts falling due within one year:
<S> <C>
Trade debtors 539
Other debtors 20
Prepayments and accrued income 92
----------
651
----------
----------
</TABLE>
35
<PAGE>
Notes to accounts (continued)
7 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1999
L'000
<S> <C>
Obligations under finance leases and hire purchase contracts 102
Bank loans and overdrafts 91
Trade creditors 245
Taxation and social security 97
ACT payable 7
Accruals and deferred income 354
Proposed dividends - equity shareholders 82
----------
978
----------
----------
</TABLE>
The bank loans and overdrafts are secured by a bond and floating charge on all
of the assets of the division and by a standard security over the heritable
property at 10 Chestnut Street, Edinburgh and Traquair Road, Innerleithen.
8 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1999
L'000
<S> <C>
OTHER CREDITORS
Obligations under finance leases and hire purchase contracts 527
Bank loans 173
----------
700
----------
----------
</TABLE>
Bank loans refer to a term loan drawn on 21 September 1998 which is repayable
monthly over 15 years. The borrowing is secured by floating charge and by
standard security over the premises at 10 Chestnut Street, Edinburgh and
Traquair Road, Innerleithen.
9 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
1999
L'000
<S> <C>
Profit for the financial year 554
Other recognised gains and losses relating to the year (net) (345)
----------
209
Dividends paid and proposed on equity and non-equity shares (72)
----------
Net addition to shareholders' funds 137
Opening shareholders' funds 510
----------
Closing shareholders' funds 647
----------
----------
</TABLE>
36
<PAGE>
Notes to accounts (continued)
10 RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS
<TABLE>
<CAPTION>
1999
L'000
<S> <C>
Operating profit 666
Depreciation charges 216
Increase in debtors (218)
Decrease in creditors (277)
----------
NET CASH INFLOW FROM OPERATING ACTIVITIES 387
----------
----------
</TABLE>
11 ANALYSIS OF CASH FLOWS
<TABLE>
<CAPTION>
1999
L'000
<S> <C>
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid (49)
Interest element of finance lease rentals (18)
----------
Net cash outflow (67)
----------
----------
TAXATION
UK corporation tax paid (34)
----------
----------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets (236)
----------
----------
FINANCING
Increase in bank borrowings 27
Capital element of finance lease rental payments (90)
----------
Net cash outflow (63)
----------
----------
</TABLE>
37
<PAGE>
Notes to accounts (continued)
12 ANALYSIS AND RECONCILIATION OF NET DEBT
<TABLE>
<CAPTION>
Other
1 April non-cash 31 March
1998 Cash flow changes 1999
L'000 L'000 L'000 L'000
<S> <C> <C> <C> <C>
Cash in hand, at bank 24 (24) - -
Overdrafts - (64) - (64)
---------- ---------- ---------- ----------
(88)
---------- ---------- ---------- ----------
Debt due after 1 year (495) (32) - (527)
Debt due within 1 year (32) 5 - (27)
Finance leases (163) 90 (202) (275)
----------
63
---------- ---------- ---------- ----------
Net debt (666) (25) (202) (893)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
<CAPTION>
1999
L'000
<S> <C>
Decrease in cash in the year 88
Cash inflow from increase in debt and lease financing (63)
----------
Change in net debt resulting from cash flows 25
New finance leases 202
----------
Movement in net debt in year 227
Net debt at 1 April 1998 666
----------
Net debt at 31 March 1999 893
----------
----------
</TABLE>
38
<PAGE>
Notes to accounts (continued)
13 SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE GROUP
AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The Company's accounting policies comply with UK GAAP. Elements of the Group's
accounting policies which differ significantly from accepted accounting
principles in the United States (US GAAP) are described below:
i) Items affecting net income and shareholders' equity
1. Goodwill of L1,537,000 arising on the acquisition of Stortext (Scotland)
Limited by Stortext (Holdings) Limited in 1994 that had been fully written
off to reserves under UK GAAP, has now been capitalised and amortised over
30 years. Under US GAAP, the goodwill should be $2,478,000.
2. A deferred tax liability of L60,000 is required under US GAAP as part of
the fair value accounting entries recorded in relation to properties as
part of the 1994 acquisition of Stortext (Scotland) Limited. This deferred
tax liability is being released to the Income Statement over the life of
the related property, which is 40 years.
3. The upwards revaluation of properties at 31 March 1999 of L136,000
should be reversed under US GAAP.
ii) Reconciliation of net income and shareholders' equity to US GAAP.
A) NET INCOME
<TABLE>
<CAPTION>
Year ended 31
March 1999
L'000
<S> <C>
Profit for the financial year as reported in the profit and loss account 554
1. amortisation of goodwill (51)
2. release of deferred tax liability relating to fair value 1
----------
Net income according to US GAAP 504
----------
----------
</TABLE>
B) SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
As of 31
March 1999
L'000
<S> <C>
Shareholders' equity as reported in the balance sheet 647
1. recording of goodwill and related amortisation 1,302
2. recording of deferred tax liability relating to fair value (53)
3. reversal of revaluation of properties (136)
----------
Shareholders' equity according to US GAAP 1,760
----------
----------
</TABLE>
39
<PAGE>
Notes to accounts (continued)
14 CONSOLIDATED FINANCIAL INFORMATION ACCORDING TO US GAAP
The Group maintains its accounts in accordance with accounting principles and
practices employed by enterprises in the UK, whereas the following financial
statements reflect certain adjustments not recorded in the Group'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.
A) FOREIGN CURRENCY TRANSLATION
The financial information expressed in U.S. dollars is presented solely for the
convenience of the reader. Assets and liabilities have been translated from UK
pounds to US dollars using the closing exchange rate as of the balance sheet
date. Revenues and expenses have been translated at the average exchange rate
for US dollars. The rates are as follows:
<TABLE>
<CAPTION>
Year ended
31 March 1999
<S> <C>
Average 1.654
Closing 1.612
</TABLE>
40
<PAGE>
Notes to accounts (continued)
14 CONSOLIDATED FINANCIAL INFORMATION ACCORDING TO US GAAP (CONTINUED)
B) CONSOLIDATED BALANCE SHEET ACCORDING TO US GAAP
<TABLE>
<CAPTION>
As of 31
March 1999
$'000
<S> <C>
ASSETS
Cash and cash equivalents $ -
Accounts receivable, net 869
Other receivables 32
Prepaid expenses 148
----------
Total current assets 1,049
----------
Property plant and equipment 3,526
Less accumulated depreciation 911
----------
Net property plant and equipment 2,615
----------
Goodwill, net 2,098
----------
Total assets $5,762
----------
----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current portion of long term debt $ 44
Lines of credit 103
Current portion of obligations held under capital leases 164
Unearned income 144
Accounts payable 395
Accrued expenses 378
Income tax payable 50
Other current liabilities 298
----------
Total current liabilities 1,576
Long term debt, net of current portion 850
Obligations under capital leases, less current portion 278
Deferred income taxes 221
----------
Total liabilities 2,925
----------
Common stock 2,196
Additional paid in capital 1,232
Accumulated deficit (488)
Currency translation adjustment (103)
----------
Total shareholders' equity 2,837
----------
Total liabilities and shareholders' equity $ 5,762
----------
----------
</TABLE>
41
<PAGE>
Notes to accounts (continued)
14 CONSOLIDATED FINANCIAL INFORMATION ACCORDING TO US GAAP (CONTINUED)
C) CONSOLIDATED STATEMENT OF OPERATIONS ACCORDING TO US GAAP
<TABLE>
<CAPTION>
Year ended
31 March 1999
$'000
<S> <C>
Total revenues - storage $ 3,176
- service and storage materials sales 1,349
----------
4,525
Cost of sales 2,398
----------
Gross profit 2,127
----------
Selling, general and administrative expenses 669
Depreciation and amortisation expense 441
----------
Total operating expenses 1,110
----------
Operating income 1,017
Interest expense (111)
----------
Income before provision for income taxes 906
Provision for income taxes (73)
----------
Net income $ 833
----------
----------
</TABLE>
15 SUBSEQUENT EVENTS
On 12 September 1999, the Company acquired the minority interest in its
subsidiary company, Stortext Limited. Immediately following this acquisition,
the entire issued share capital of the company was acquired by Iron Mountain
Europe Limited (formerly Britannia Data Management Limited).
42
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
Iron Mountain Incorporated:
We have audited the accompanying combined balance sheet of Midtown
Professional Records Centre, Inc. (an Ohio Corporation), Piliach Properties,
Inc. (an Ohio Corporation), and 1209 Group Inc. (an Ohio
Corporation)(collectively Midtown Professional Records Centre, Inc. or the
Company) as of December 31, 1998, and the related combined statements of
operations, stockholders' equity and cash flows for the year then ended.
These combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audit.
We conducted our audit 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 audit provides 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 the Company as of December 31,
1998 and the results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Cleveland, Ohio
October 29, 1999
43
<PAGE>
MIDTOWN PROFESSIONAL RECORDS CENTRE, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
1999 December 31,
(Unaudited) 1998
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 93,833 $ 306,343
Accounts receivable, net of allowance or $28,900 and
$0, respectively 555,283 482,146
Prepaid expenses and other 6,616 6,616
---------- ----------
Total current assets 655,732 795,105
---------- ----------
Property, plant and equipment, net (note 2) 2,294,866 2,328,438
Other assets, net 20,153 26,170
---------- ----------
Total assets $2,970,751 $3,149,713
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capital lease obligations $ 43,718 $ 41,861
Current portion of long-term debt 608,604 718,336
Line of credit 85,000 -
Accounts payable 48,541 262,353
Accrued liabilities 33,515 88,730
---------- ----------
Total current liabilities 819,378 1,111,280
---------- ----------
Long-term capital lease obligations, net of
current portion 50,611 84,329
Long-term debt, net of current portion 1,043,246 1,107,620
---------- ----------
Total liabilities 1,913,235 2,303,229
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock $ 81,250 $ 81,250
Treasury stock, common shares at cost (75,000) -
Retained earnings 1,051,266 765,234
---------- ----------
Total stockholders' equity 1,057,516 846,484
---------- ----------
Total liabilities and stockholders' equity $2,970,751 $3,149,713
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
44
<PAGE>
MIDTOWN PROFESSIONAL RECORDS CENTRE, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the nine
months ended For the
September 30, year ended
1999 December 31,
(Unaudited) 1998
----------------- -----------------
<S> <C> <C>
REVENUES:
Storage $ 1,392,034 $1,610,430
Service and storage material sales and other 1,317,235 1,607,654
-------------- -------------
Total revenues 2,709,269 3,218,084
OPERATING EXPENSES:
Cost of sales 1,275,969 1,568,697
Selling, general and administrative 741,064 951,163
Depreciation and amortization 150,863 169,818
-------------- -------------
Total operating expenses 2,167,896 2,689,678
-------------- -------------
OPERATING INCOME 541,373 528,406
INTEREST EXPENSE (116,741) (174,796)
-------------- -------------
NET INCOME $ 424,632 $ 353,610
============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
45
<PAGE>
MIDTOWN PROFESSIONAL RECORDS CENTRE, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Treasury Stock
-------------------------------------- ------------------------
Authorized Issued Retained
Shares Shares Amount Shares Amount Earnings Total
-------------- ---------- ----------- ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1998 2,250 1,600 $81,250 - $ - $ 514,182 $ 595,432
Net income - - - - - 353,610 353,610
Cash dividends - - - - - (102,558) (102,558)
------- ---------- ----------- ----------- ----------- ------------- --------------
BALANCE, DECEMBER 31, 1998 2,250 1,600 $81,250 - - $ 765,234 $ 846,484
Net income (unaudited) - - - - - 424,632 424,632
Cash dividends - - - - - (138,600) (138,600)
Treasury stock purchase - - - (187.5) (75,000) - (75,000)
------- ---------- ----------- ----------- ----------- ------------- --------------
BALANCE, SEPTEMBER 30, 1999
(UNAUDITED) 2,250 1,600 $81,250 (187.5) $(75,000) $ 1,051,266 $ 1,057,516
======= ========== =========== =========== =========== ============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
46
<PAGE>
MIDTOWN PROFESSIONAL RECORDS CENTRE, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
1999 Year Ended
(Unaudited) December 31, 1998
------------------------- ----------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 424,632 $ 353,610
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 150,863 169,818
CHANGES IN ASSETS AND LIABILITIES:
Accounts receivable, net (73,137) (108,248)
Other assets 6,017 (4,860)
Accounts payable (213,812) (28,367)
Accrued liabilities (55,215) 3,341
------------ -------------
Cash flows provided by operating activities 239,348 385,294
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment (117,291) (521,079)
Decrease in loan receivable - 27,530
------------ -------------
Cash flows used in investing activities (117,291) (493,549)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings - 521,984
Proceeds from line of credit 85,000 -
Payments on long-term debt and capital lease
obligations (129,715) (307,367)
Repayment of loans-related party (76,252) (30,855)
Purchase of treasury stock (75,000) -
Dividends paid (138,600) (102,558)
------------ -------------
Cash flows (used in) provided by financing
activities (334,567) 81,204
------------ -------------
Decrease in cash and cash equivalents (212,510) (27,051)
Cash and cash equivalents, beginning of period 306,343 333,394
------------ -------------
Cash and cash equivalents, end of period $ 93,833 $ 306,343
============ =============
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ 115,774 $ 174,289
============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
47
<PAGE>
MIDTOWN PROFESSIONAL RECORDS CENTRE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
The combined financial statements include the accounts of Midtown Professional
Records Centre, Inc. (Midtown), Pillisch Properties, Inc. (Pillisch), and 1209
Group, Inc. (1209), (collectively, Midtown Professional Records Centre, Inc., or
the Company). The companies are owned by the same stockholders. Midtown is a
full service records management company providing storage and related services
to companies primarily located in Northeast Ohio. Pillisch and 1209 are real
estate holding companies that primarily rent their properties to Midtown. The
customer base is comprised mainly of medium to large sized commercial, legal,
banking, healthcare, accounting, insurance, entertainment and government
organizations.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying combined financial statements include the accounts of Midtown,
Pillisch, and 1209. All significant intercompany transactions have been
eliminated in consolidation.
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.
UNAUDITED FINANCIAL INFORMATION
The unaudited financial information included herein has 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 of the nine month period ended September 30, 1999 are not
necessarily indicative of the results for the full year.
REVENUE RECOGNITION
Storage and service revenues are recognized in the month the respective service
is provided. Also included in service and storage material sales revenue is land
lease revenue of $30,360 for the year ended December 31, 1998. Storage material
sales are recognized when shipped to the customer.
48
<PAGE>
CASH AND CASH EQUIVALENTS
The Company defines cash and cash equivalents to include cash on hand and cash
invested in short-term securities that have an original maturity of less than 90
days. Cash and cash equivalents are carried at cost which approximates fair
market value.
LOAN ORIGINATION COSTS
The Company maintains a policy of capitalizing all loan origination costs paid.
These costs are amortized over the duration of the loan. Amortization expense of
$1,237 was recorded in 1998.
INCOME TAXES
The Company has elected to be taxed as an S Corporation. Accordingly, the
Company's profits are taxed directly to the shareholders and the accompanying
combined statements of operations do not reflect a provision for federal income
taxes. Local income taxes and certain state taxes are payable directly by the
Company.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment including assets under capital lease are stated at
cost and depreciated using the straight-line method over estimated useful lives,
as follows:
Buildings 39 years
Furniture, fixtures and equipment 5-10 years
Vehicles 5-10 years
Leasehold improvements Remaining life of lease or life of
asset, whichever is shorter
Software 3 years
Property, plant and equipment consists of the following at December 31, 1998:
Land $ 61,828
Buildings 1,228,745
Furniture, fixtures and equipment 1,440,717
Vehicles 114,055
Leasehold improvements 421,213
-------------
3,266,558
Accumulated depreciation (938,120)
-------------
$ 2,328,438
=============
3. DEBT
LINE OF CREDIT
The Company has a $200,000 line of credit with a bank that is due on demand. The
line of credit is secured by accounts receivable, inventory, and equipment along
with the personal guarantee of the stockholders. Interest is at the prime rate
(7.75% at December 31, 1998). There were no borrowings on the line of credit at
December 31, 1998. The Company was in compliance with the related covenants at
December 31, 1998.
49
<PAGE>
LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
December 31,
1998
----------------
<S> <C>
Note payable to a bank, payable in monthly installments of $12,075
including interest at 7.5%; final payment due October 2003. The note is
secured by accounts receivable, inventory and equipment and the
personal guarantee of one of the stockholders. $ 581,916
Mortgage loan payable to a bank, payable in monthly installments of $2,459
plus interest at approximately 8.23%; final payment due February 2003.
The loan is secured by the associated property. 246,553
Mortgage loan payable to a bank, payable in monthly installments of $3,434
plus interest at 8.07%; final payment due December 1999. The loan is
secured by the associated property. 233,579
Note payable to a bank, payable in monthly installments of $4,025
including interest at 7.5%; final payment due October 2003. The note is
secured by a blanket lien on Company assets and the personal guarantee
of one of the stockholders. 193,972
Mortgage loan payable to a bank, payable in monthly installments of $1,953
plus interest at approximately 8.24%; final payment due December 2000.
The loan is secured by the associated property. 177,021
Mortgage loan payable to a bank, payable in monthly installments of $1,811
plus interest at 9.7%; final payment due May 1999. The loan is secured
by the associated property. 141,252
Note payable to a related party, payable in monthly installments of
$4,689, including interest at approximately 6.34%, through December
2000. The note is unsecured. 107,946
Mortgage loan payable to a bank, payable in monthly installments of $1,432
plus interest at 9.25%; final payment due February 2005. The loan is
secured by the associated property. 72,381
Note payable to a related party, with no specified payment
terms or due date. Outstanding balance accrues interest
at 11%. The note is unsecured. 29,268
50
<PAGE>
Note payable to a financing company, payable in monthly installments of
$614 including interest at 2.9%; final payment due January 2002. 21,155
Note payable to a financing company, payable in monthly installments of
$595 including interest at 9.15%, final payment due October 1999. The
note is secured by a vehicle owned by the Company. 5,711
Note payable to a financing company, payable in monthly installments of
$245 including interest at 6.9%; final payment due October 2000. The
note is secured by the vehicle. 5,293
Unsecured non-interest bearing note payable to a company,
payable in bi-monthly installments of $160 through
March 2000. 4,812
Note payable to the primary owner, payable in January 1999. This note is
unsecured and is non-interest bearing. 3,763
Note payable to a bank, payable in monthly installments of $490 including
interest at 10.25%; final payment due March 1999. The note is secured
by a vehicle owned by the Company. 1,334
------------
1,825,956
Less--Current portion 718,336
------------
Net long-term debt $1,107,620
============
</TABLE>
51
<PAGE>
The aggregate amount of future principal payments at December 31, 1998 is as
follows:
1999 $ 718,336
2000 437,060
2001 240,304
2002 245,745
2003 184,511
----------
$1,825,956
==========
4. CAPITAL LEASE OBLIGATIONS:
The Company leases certain equipment and fixtures under capital leases with
monthly payments totaling $7,139 including interest at rates ranging from 9.5%
to 16.9%. These leases expire at various dates beginning in March, 1999 through
November, 2002. The Company has the option to purchase the equipment and
fixtures for 10% of the initial market value.
Minimum future lease payments under the leases at December 31, 1998 are as
follows:
1999 $ 59,449
2000 50,040
2001 34,270
2002 16,366
--------
Total minimum future payments 160,125
Less- amount representing interest 33,935
--------
Total capital lease obligations $126,190
========
The capital lease obligations included in the combined balance sheet are as
follows:
1998
-----------
Current $ 41,861
Long-Term 84,329
-----------
Total $126,190
===========
52
<PAGE>
The assets under the capital leases included in the combined financial
statements consist of the following:
1998
-----------
Warehouse fixtures $104,134
Office and scanning equipment 52,668
Shop and garage equipment 41,249
-----------
198,051
Less- Accumulated depreciation 41,577
-----------
Net book value $156,474
===========
Depreciation expense $ 23,714
===========
5. OPERATING LEASES:
The Company leases a portion of a building under a five-year operating lease
which requires monthly rental payments of $12,149 through March, 1999 and
$12,844 through March, 2001. Rent expense for 1998 and 1997 was $145,793 and
$145,793, respectively. The lease contains two five-year renewal options and
requires that the lessee pay utilities, maintenance and insurance.
Minimum future rental payments under this lease are as follows:
1999 $152,043
2000 154,128
2001 38,532
-----------
$344,703
===========
The Company also leases automobiles, trucks and equipment under various
operating leases. These lease terms range from one to five years and expire at
various dates through 2001.
Minimum future rental payments under these operating leases are as follows:
1999 $31,190
2000 22,702
2001 5,769
---------
$59,661
=========
Rent expense under these leases totaled $49,205 for the year ended December 31,
1998.
53
<PAGE>
6. RETIREMENT PLAN:
The Company maintains a 401(k) retirement plan for eligible employees. Under the
terms of the plan, employees may elect to defer a portion of their compensation.
The Company may match a portion of each employee's contribution at the
discretion of the Company. Additional employer contributions may also be made at
the discretion of the Company. The Company made a matching contribution of
$1,998 for the year ended December 31, 1998.
7. SUBSEQUENT EVENTS
During July 1999, the Company purchased 187.5 shares of common stock from a
related party which is now being held as treasury stock.
On October 21, 1999 the Company sold substantially all of its assets and certain
liabilities to Iron Mountain Incorporated effective September 30, 1999.
54
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IRON MOUNTAIN INCORPORATED
--------------------------
(Registrant)
November 23, 1999 By: /s/ Jean A. Bua
- ------------------ ------------------------------
(date) Jean A. Bua
Vice President and Corporate Controller
(Principal Accounting Officer)
55
<PAGE>
NEW IRON MOUNTAIN
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet of
New Iron Mountain has been prepared based upon the Iron Mountain and Pierce
Leahy Pro Forma Balance Sheets as of September 30, 1999. The Iron Mountain Pro
Forma Balance Sheet gives effect to Iron Mountain's acquisitions not acquired or
consolidated as of September 30, 1999. The Pierce Leahy Pro Forma Balance Sheet
gives effect to the redemption of Pierce Leahy's redeemable preferred stock on
November 1, 1999. The New Iron Mountain Pro Forma Balance Sheet gives effect to
the merger as if it had occurred as of September 30, 1999.
The following Unaudited Pro Forma Condensed Consolidated Statements of
Operations of New Iron Mountain for the nine months ended September 30, 1999 and
for the year ended December 31, 1998 have been prepared based upon the Iron
Mountain and Pierce Leahy Pro Forma Statements of Operations for these same
periods. The New Iron Mountain Pro Forma Statements of Operations give effect to
the merger as if it had occurred as of January 1, 1998.
The acquisition of Pierce Leahy by Iron Mountain will be effected by merging
Iron Mountain with and into Pierce Leahy, with Pierce Leahy being the surviving
legal entity. Immediately after the merger, Pierce Leahy will change its name to
Iron Mountain Incorporated. As the Iron Mountain stockholders will own
approximately 65% of New Iron Mountain, the merger will be accounted for as a
reverse acquisition, and Iron Mountain will be the acquiring company for
accounting purposes.
The pro forma financial statements do not give effect to estimated annual
net cost savings of $15 million. Management expects to achieve this annual level
of savings within three years after the merger. Further, the pro forma financial
statements do not reflect any costs that may be associated with integrating the
two companies as it is not practicable to quantify these costs at this time.
These costs may be material to New Iron Mountain's results of operations.
Depending upon management's plans and the nature and timing of the costs, the
costs may be accounted for as part of the acquisition accounting, as a
post-combination restructuring charge, as operating expenses in the period
incurred or as capital expenditures.
The New Iron Mountain Pro Forma Statements of Operations do not necessarily
indicate the actual results of operations that we would have reported if the
events described above had occurred as of January 1, 1998, nor do they
necessarily indicate the results of future operations. In the opinion of
management of Iron Mountain and Pierce Leahy, all adjustments and disclosures
necessary to fairly present these pro forma financial statements have been made.
You should read the New Iron Mountain Pro Forma Financial Statements in
conjunction with each of Iron Mountain's and Pierce Leahy's Pro Forma Financial
Statements set forth herein and the information located in the following
documents filed with the SEC:
-Iron Mountain's financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for the year
ended December 31, 1998 located in its Current Report on Form 8-K dated
July 9, 1999
-Iron Mountain's financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for the nine
months ended September 30, 1999 located in its Quarterly Report on Form
10-Q
-Pierce Leahy's financial statements and "Management's Discussion and
Analysis of Financial Conditions and Results of Operations" for the year
ended December 31, 1998 located in its Annual Report on Form 10-K
-Pierce Leahy's financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for the nine
months ended September 30, 1999 located in its Quarterly Report on Form
10-Q.
56
<PAGE>
NEW IRON MOUNTAIN
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA
IRON PIERCE PRO FORMA NEW
MOUNTAIN(1) LEAHY(1)(2) ADJUSTMENTS IRON MOUNTAIN
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets............................... $ 139,704 $ 66,788 $ -- $ 206,492
Property, Plant and Equipment, net........... 386,155 262,576 -- 648,731
Goodwill, net................................ 740,800 353,871 438,378 (A) 1,533,049
Other Long-term Assets....................... 40,129 67,823 (59,587)(A) 48,365
---------- -------- -------- ----------
Total Assets........................... $1,306,788 $751,058 $378,791 $2,436,637
========== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities.......................... $ 118,701 $ 86,107 $ -- $ 204,808
Long-term Debt, net of Current Portion....... 606,703 569,032 3,837 (B) 1,179,572
Other Long-term Liabilities.................. 17,113 -- -- 17,113
Deferred Rent................................ 10,591 6,822 (5,209)(B) 12,204
Deferred Income Taxes........................ 21,168 18,614 (17,084)(B) 22,698
Minority Interest............................ 48,357 -- -- 48,357
Shareholders' Equity......................... 484,155 70,483 397,247 (B) 951,885
---------- -------- -------- ----------
Total Liabilities and Shareholders'
Equity............................... $1,306,788 $751,058 $378,791 $2,436,637
========== ======== ======== ==========
</TABLE>
- ------------------------
(1) Represents the pro forma balance sheets of Iron Mountain and Pierce Leahy as
of September 30, 1999 after giving effect to certain acquisitions and
financing transactions. See the Iron Mountain Pro Forma Balance Sheet and
the Pierce Leahy Pro Forma Balance Sheet.
(2) Certain amounts have been reclassified to conform to Iron Mountain's balance
sheet presentation.
The accompanying notes are an integral part of these pro forma financial
statements.
57
<PAGE>
NEW IRON MOUNTAIN
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA PRO FORMA
IRON PIERCE PRO FORMA NEW IRON
MOUNTAIN(1) LEAHY(1) ADJUSTMENTS MOUNTAIN(2)
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Storage..................................... $250,186 $140,990 $ -- $391,176
Service and Storage Material Sales.......... 155,517 115,036 -- 270,553
-------- -------- -------- --------
Total Revenues............................ 405,703 256,026 -- 661,729
-------- -------- -------- --------
Operating Expenses:
Cost of Sales (excluding depreciation)...... 203,344 145,088 (18,438)(C) 329,994
Selling, General and Administrative......... 101,297 33,724 22,719 (D) 157,740
Depreciation and Amortization............... 50,504 32,430 3,149 (E) 86,083
Foreign Currency Exchange................... -- (5,505) 5,505 (F) --
-------- -------- -------- --------
Total Operating Expenses.................. 355,145 205,737 12,935 573,817
-------- -------- -------- --------
Operating Income................................ 50,558 50,289 (12,935) 87,912
Interest Expense, net........................... 42,625 39,600 (3,475)(G) 78,750
Other Income, net............................... 115 -- 5,505 (H) 5,620
-------- -------- -------- --------
Income from Continuing Operations Before
Provision for Income Taxes and Minority
Interest...................................... 8,048 10,689 (3,955) 14,782
Provision for Income Taxes...................... 8,284 3,091 3,664 (I) 15,039
Minority Interest............................... 854 -- -- 854
-------- -------- -------- --------
Income (Loss) from Continuing Operations........ $ (1,090) $ 7,598 $ (7,619) $ (1,111)
======== ======== ======== ========
Loss from Continuing Operations per Common
Share--Basic and Diluted...................... $ (0.03) $ (0.02)
======== ========
Weighted Average Common Shares Outstanding--
Basic and Diluted............................. 35,400 18,783 (J) 54,183
======== ======== ========
EBITDA from Continuing Operations............... $101,062 $ 77,214 $ (4,281) $173,995
======== ======== ======== ========
</TABLE>
- ------------------------
(1) Represents the pro forma statements of operations of Iron Mountain and
Pierce Leahy for the nine months ended September 30, 1999 after giving
effect to certain acquisitions and financing transactions. See the Iron
Mountain and Pierce Leahy Pro Forma Statements of Operations for the nine
months ended September 30, 1999.
(2) Does not give pro forma effect to certain identified cost savings of
approximately $12.9 million that management of Iron Mountain and Pierce
Leahy believes would have been realized had the merger with Pierce Leahy and
the 1998 and 1999 acquisitions completed by Iron Mountain and Pierce Leahy
through October 31, 1999 been fully integrated as of January 1, 1998. Of the
$12.9 million, $11.3 million of cost savings relate to the merger with
Pierce Leahy and are comprised of: (a) elimination of redundant corporate
expenses; (b) more efficient operations and utilization of real estate; and
(c) reduction of workforce accomplished primarily through attrition.
The accompanying notes are an integral part of these pro forma financial
statements.
58
<PAGE>
NEW IRON MOUNTAIN
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA PRO FORMA NEW
IRON PIERCE PRO FORMA IRON
MOUNTAIN(1) LEAHY(1) ADJUSTMENTS MOUNTAIN(2)
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Storage................................. $308,551 $173,492 $ -- $482,043
Service and Storage Material Sales...... 180,036 132,607 -- 312,643
-------- -------- -------- --------
Total Revenues........................ 488,587 306,099 -- 794,686
-------- -------- -------- --------
Operating Expenses:
Cost of Sales (excluding
depreciation)......................... 244,174 175,929 (20,169)(C) 399,934
Selling, General and Administrative..... 122,368 43,891 25,180 (D) 191,439
Depreciation and Amortization........... 65,331 41,027 5,480 (E) 111,838
Foreign Currency Exchange............... -- 7,907 (7,907)(F) --
-------- -------- -------- --------
Total Operating Expenses.............. 431,873 268,754 2,584 703,211
-------- -------- -------- --------
Operating Income............................ 56,714 37,345 (2,584) 91,475
Interest Expense, net....................... 58,693 50,555 (5,951)(G) 103,297
Other Income (Expense), net................. 1,384 -- (7,907)(H) (6,523)
-------- -------- -------- --------
Loss from Continuing Operations Before
Provision for Income Taxes and Minority
Interest.................................. (595) (13,210) (4,540) (18,345)
Provision for Income Taxes.................. 6,499 4,922 4,319 (I) 15,740
Minority Interest........................... 911 -- -- 911
-------- -------- -------- --------
Loss from Continuing Operations............. $ (8,005) $(18,132) $ (8,859) $(34,996)
======== ======== ======== ========
Loss from Continuing Operations per Common
Share--Basic and Diluted.................. $ (0.23) $ (0.65)
======== ========
Weighted Average Common Shares
Outstanding--Basic and Diluted............ 34,880 18,783 (J) 53,663
======== ======== ========
EBITDA from Continuing Operations........... $122,045 $ 86,279 $ (5,011) $203,313
======== ======== ======== ========
</TABLE>
- ------------------------
(1) Represents the pro forma statements of operations of Iron Mountain and
Pierce Leahy for the year ended December 31, 1998 after giving effect to
certain acquisitions and financing transactions. See the Iron Mountain and
Pierce Leahy Pro Forma Statements of Operations for the year ended
December 31, 1998.
(2) Does not give pro forma effect to certain identified cost savings of
approximately $25.0 million that management of Iron Mountain and Pierce
Leahy believes would have been realized had the merger with Pierce Leahy and
the 1998 and 1999 acquisitions completed by Iron Mountain and Pierce Leahy
through October 31, 1999 been fully integrated as of January 1, 1998. Of the
$25.0 million, $15.0 million of cost savings relate to the merger with
Pierce Leahy and are comprised of: (a) elimination of redundant corporate
expenses; (b) more efficient operations and utilization of real estate; and
(c) reduction of workforce accomplished primarily through attrition.
The accompanying notes are an integral part of these pro forma financial
statements.
59
<PAGE>
NEW IRON MOUNTAIN
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
OVERVIEW
On October 20, 1999, Iron Mountain entered into a merger agreement to
acquire Pierce Leahy for approximately $1.1 billion, consisting of common stock,
options to acquire common stock and the assumption of debt. Pierce Leahy will be
the surviving legal entity and will immediately change its name to Iron Mountain
Incorporated. Although Pierce Leahy is the surviving legal entity, Iron Mountain
is considered the acquirer for accounting purposes.
The merger consideration will result in the equivalent of a fixed exchange
ratio of 1.1 shares of Iron Mountain common stock for each share of Pierce Leahy
common stock. The exchange ratio will be effected by Pierce Leahy paying, prior
to the merger, a stock dividend of one share of Pierce Leahy common stock for
each 10 shares then outstanding. The Pierce Leahy common stock will remain
outstanding after the merger as shares of New Iron Mountain common stock. Each
outstanding share of Iron Mountain common stock will be converted into one share
of New Iron Mountain common stock.
The transaction will be accounted for as a reverse acquisition. The purchase
price of Pierce Leahy is based upon the fair value of Pierce Leahy common stock
and options to acquire Pierce Leahy common stock, the fair value of the assumed
debt on the date that the merger is completed and transaction costs. As the
exchange ratio is fixed, the fair value of Pierce Leahy common stock is based
upon the stock price on the date the merger was announced.
Our estimate of the purchase price is as follows (in millions):
<TABLE>
<S> <C> <C>
Fair Value of Common Stock Issued(1)..................... $ 444.0
Fair Value of Stock Options(2)........................... 24.7
Fair Value of Debt Assumed(3)............................ 587.0
Transaction Costs........................................ 4.0
--------
Total Estimated Purchase Price......................... $1,059.7
========
</TABLE>
(1) Based on 17,075,125 outstanding shares of Pierce Leahy common stock at
September 30, 1999 at a fair value of $26.00 per share.
(2) Based on options to acquire 1,336,246 shares of Pierce Leahy common stock at
September 30, 1999.
(3) Estimated fair value of Pierce Leahy's debt. The fair value of Pierce
Leahy's publicly-traded debt is based on quoted market prices. For purposes
of determining the final purchase price, the actual fair value used will be
based on the quoted market prices when the merger is completed.
A number of Pierce Leahy shareholders are parties to the Pierce Leahy
shareholders' agreement. This agreement restricts the ability of these
shareholders to sell 5.7 million shares of New Iron Mountain common stock (after
giving effect to the stock dividend) for up to five years after the merger. Iron
Mountain will obtain an appraisal to determine the fair value of these
restricted shares. Iron Mountain believes that, due to these restrictions, the
actual fair value of these restricted shares is less than the $26 per share
value used for purposes of calculating the purchase price. Accordingly, Iron
Mountain expects to record a corresponding decrease in equity, goodwill and
goodwill amortization from the amounts used in the accompanying pro forma
financial statements. If the resale restrictions result in a 10% discount to the
fair value of the shares, there would be a reduction of approximately
$13 million of equity and goodwill and $0.5 million of goodwill amortization
annually.
60
<PAGE>
NEW IRON MOUNTAIN
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
The pro forma statements of operations do not reflect estimated transaction
costs of $3.0 million that Pierce Leahy will charge to expense as incurred.
Additionally, Pierce Leahy may record a compensation charge associated with
accelerating the vesting of certain stock options in the period the merger is
completed. Although the amount of the charge is not determinable at this time,
at a price of $30 per share, the charge would be approximately $1.6 million.
BALANCE SHEET
Iron Mountain will pay approximately $1.1 billion in aggregate consideration
to acquire Pierce Leahy. The purchase price will be allocated to tangible and
intangible assets, based on our estimate of the fair value of the net assets
acquired. The following allocation of the aggregate purchase price is
preliminary and subject to adjustment, based on the final determination of the
fair value of the net assets acquired (in millions):
<TABLE>
<S> <C>
Current Assets.............................................. $ 66.8
Property, Plant and Equipment (1)........................... 262.6
Goodwill.................................................... 792.2
Other Long-term Assets...................................... 8.2
Current Liabilities......................................... (67.0)
Deferred Income Taxes....................................... (1.5)
Deferred Rent............................................... (1.6)
--------
Total Purchase Price...................................... $1,059.7
========
</TABLE>
(1) Represents book value at September 30, 1999, as it is not practicable to
estimate the fair value of the real estate and other fixed assets at this
time.
The accompanying New Iron Mountain Pro Forma Balance Sheet as of
September 30, 1999 has been prepared as if the acquisition of Pierce Leahy had
occurred as of September 30, 1999 and reflects the following pro forma
adjustments:
(A) Pro forma adjustments to assets consist of the following (in millions):
<TABLE>
<CAPTION>
OTHER
LONG-TERM
GOODWILL ASSETS
-------- ---------
<S> <C> <C>
Adjust the fair value of other long-term assets consisting
primarily of deferred financing costs and customer
acquisition costs......................................... $ -- $(59.6)
Reverse Pierce Leahy historical goodwill.................... (353.8) --
Record goodwill related to the merger....................... 792.2 --
------ ------
Total Adjustments......................................... $438.4 $(59.6)
====== ======
</TABLE>
61
<PAGE>
NEW IRON MOUNTAIN
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
(B) Pro Forma adjustments to liabilities and shareholders' equity consist of
the following (in millions):
<TABLE>
<CAPTION>
DEFERRED
LONG-TERM DEFERRED INCOME SHAREHOLDERS'
DEBT RENT TAXES EQUITY
--------- -------- -------- -------------
<S> <C> <C> <C> <C>
Reverse equity not assumed........................... $ -- $ -- $ -- $(70.5)
Issuance of common stock and options................. -- -- -- 468.7
Fair value of operating leases....................... -- (5.2) -- --
Tax effect of fair value adjustments................. -- -- (17.1) --
Fair value of debt assumed........................... (4.2) -- -- --
Iron Mountain's estimated transaction costs assumed
to be financed with debt........................... 4.0 -- -- --
Pierce Leahy's estimated transaction costs assumed to
be financed with debt.............................. 3.0 -- -- --
Estimated costs to register common stock assumed to
be financed with debt.............................. 1.0 -- -- (1.0)
----- ----- ------ ------
Total Adjustments.................................. $ 3.8 $(5.2) $(17.1) $397.2
===== ===== ====== ======
</TABLE>
STATEMENTS OF OPERATIONS
The accompanying New Iron Mountain Pro Forma Statements of Operations for
the nine months ended September 30, 1999 and for the year ended December 31,
1998 have been prepared as if the acquisition of Pierce Leahy occurred as of
January 1, 1998 and reflects the following pro forma adjustments (in millions):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------- ------------------
<S> <C> <C>
(C) Costs of Sales (excluding depreciation)
To decrease rent expense for the fair value of
operating leases................................ $ (1.1) $ (0.7)
To conform Pierce Leahy's classification of cost
of sales and selling, general and administrative
expenses to Iron Mountain's classification...... (17.3) (19.5)
------ ------
$(18.4) $(20.2)
====== ======
</TABLE>
62
<PAGE>
NEW IRON MOUNTAIN
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------- ------------------
<S> <C> <C>
(D) Selling, General and Administrative
To conform Pierce Leahy's classification of cost
of sales and selling, general and administrative
expenses to Iron Mountain's classification...... $ 17.3 $ 19.5
To conform Pierce Leahy's accounting for
customer acquisition costs to Iron Mountain's
accounting...................................... 5.4 5.7
------ ------
$ 22.7 $ 25.2
====== ======
(E) Depreciation and Amortization
Amortization of goodwill created in the merger
based on a 30-year life......................... $ 11.0 $ 14.6
To adjust depreciation and amortization for Iron
Mountain's estimation of useful lives of Pierce
Leahy's fixed assets and intangible assets...... (7.9) (9.1)
------ ------
$ 3.1 $ 5.5
====== ======
(F) Foreign Currency Exchange
To conform Pierce Leahy's classification of
foreign currency exchange (gain) loss related to
long-term debt to Iron Mountain's
classification.................................. $ 5.5 $ (7.9)
====== ======
(G) Interest Expense
Reverse amortization of Pierce Leahy's deferred
financing costs in connection with the
adjustment to fair value of debt assumed........ $ (1.2) $ (1.4)
Record the amortization related to fair value
adjustment of debt assumed...................... (1.5) (3.8)
Record interest for borrowings associated with
the transaction costs of the merger as well as
the costs of registration of shares of Pierce
Leahy common stock.............................. 0.4 0.5
Reverse interest on Pierce Leahy's revolving
credit facility................................. (8.9) (6.7)
Record interest on Iron Mountain's revolving
credit facility at 6.69%........................ 7.7 5.4
------ ------
$ (3.5) $ (6.0)
====== ======
</TABLE>
63
<PAGE>
NEW IRON MOUNTAIN
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
The impact of a 1/8% change in the interest rate on pro forma borrowings
under Iron Mountain's revolving credit facility for the nine months ended
September 30, 1999 and the year ended December 31, 1998 is $153,000 and
$204,000, respectively.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------- ------------------
<S> <C> <C>
(H) Other Income (Expense), net
To conform Pierce Leahy's classification of
foreign currency exchange (gain) loss related to
long-term debt to Iron Mountain's
classification.................................. $ 5.5 $ (7.9)
====== ======
(I) Provision for Income Taxes
To adjust the provision for income taxes to a
40% rate on pro forma income before
nondeductible goodwill amortization and other
nondeductible expenses.......................... $ 3.7 $ 4.3
====== ======
</TABLE>
(J) To adjust the pro forma weighted average common shares outstanding as if
the merger with Pierce Leahy had occurred on January 1, 1998, including
the effect of the 10% stock dividend.
64
<PAGE>
IRON MOUNTAIN INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet of
Iron Mountain has been prepared based on the historical condensed consolidated
balance sheets of Iron Mountain and Midtown Professional Records Centre, Inc. as
of September 30, 1999 and the balance sheet of Stortext (Holdings) Limited as of
September 12, 1999. The Iron Mountain Pro Forma Balance Sheet gives effect to
the acquisition of Stortext by Britannia Data Management Limited (Iron
Mountain's 50.1% subsidiary) and Midtown by Iron Mountain as if the two
acquisitions had been completed or consolidated as of September 30, 1999.
The following Unaudited Pro Forma Condensed Consolidated Statements of
Operations of Iron Mountain for the nine months ended September 30, 1999 and for
the year ended December 31, 1998 give effect to each of the following as if each
occurred as of January 1, 1998: (a) Iron Mountain's 1998 and 1999 acquisitions
completed through October 31, 1999; (b) Iron Mountain's sale of 6.0 million
shares of common stock in April 1998; (c) Iron Mountain's issuance of 8 1/4%
Senior Subordinated Notes Due 2011 in April 1999; and (d) Iron Mountain's sale
of 5.8 million shares of common stock in May 1999. The Iron Mountain Pro Forma
Statements of Operations do not include results of operations prior to the date
of acquisition, or pro forma adjustments, for one acquisition completed by Iron
Mountain on October 1, 1999 and one acquisition completed by Britannia Data
Management in September 1999. The impact of these acquisitions is immaterial to
the Iron Mountain Pro Forma Financial Statements. Pro forma adjustments are
described in the accompanying notes.
In June 1999 Iron Mountain decided to sell its information technology
staffing business, Arcus Staffing, which was acquired in January 1998 as part of
the acquisition of Arcus Group, Inc. Iron Mountain completed the sale of
substantially all of the assets of Arcus Staffing effective November 1, 1999.
Iron Mountain has accounted for the sale of Arcus Staffing as a discontinued
operation.
The Iron Mountain Pro Forma Statements of Operations do not necessarily
indicate the actual results of operations that Iron Mountain would have reported
if the events described above had occurred as of January 1, 1998, nor do they
necessarily indicate the results of future operations. Furthermore, the pro
forma results do not give effect to all cost savings or incremental costs that
may occur as a result of the integration and consolidation of the 1998 and 1999
acquisitions. In the opinion of Iron Mountain's management, all adjustments and
disclosures necessary to fairly present these pro forma financial statements
have been made.
Iron Mountain has accounted for its acquisitions and the related real estate
transactions using the purchase method of accounting.
65
<PAGE>
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
IRON RECENT PRO FORMA IRON
MOUNTAIN ACQUISITIONS(1) ADJUSTMENTS MOUNTAIN(2)
---------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets............................ $ 144,988 $2,044 $(7,328)(A) $ 139,704
Property, Plant and Equipment, net........ 379,249 4,906 2,000 (A) 386,155
Goodwill, net............................. 724,578 2,068 14,154 (A) 740,800
Other Long-term Assets.................... 39,109 20 1,000 (A) 40,129
---------- ------ ------- ----------
Total Assets........................ $1,287,924 $9,038 $ 9,826 $1,306,788
========== ====== ======= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities....................... $ 116,468 $2,852 $ (619)(B) $ 118,701
Long-term Debt, net of Current Portion.... 598,493 2,141 6,069 (B) 606,703
Other Long-term Liabilities............... 8,914 -- 8,199 (B) 17,113
Deferred Rent............................. 10,591 -- -- 10,591
Deferred Income Taxes..................... 20,946 222 -- 21,168
Minority Interest......................... 48,357 -- -- 48,357
Stockholders' Equity...................... 484,155 3,823 (3,823)(B) 484,155
---------- ------ ------- ----------
Total Liabilities and Stockholders'
Equity............................ $1,287,924 $9,038 $ 9,826 $1,306,788
========== ====== ======= ==========
</TABLE>
- ------------------------
(1) Consists of Midtown and Stortext acquisitions, which were not included in
the historical Iron Mountain balance sheet as of September 30, 1999.
(2) Includes the assets and liabilities of Arcus Staffing. These assets and
liabilities are not material to Iron Mountain's financial position. Iron
Mountain sold substantially all of Arcus Staffing's assets effective
November 1, 1999.
The accompanying notes are an integral part of these pro forma financial
statements.
66
<PAGE>
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1999 ACQUISITIONS (1)
----------------------------------------------------------------
FIRST
HISTORICAL BRITANNIA AMERICAN
IRON DATA RECORDS PRO FORMA
MOUNTAIN MANAGEMENT MANAGEMENT DATA BASE MEMOGARDE OTHER ADJUSTMENTS
---------- ------------ ------------ --------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Storage................ $229,989 $3,178 $ 1,687 $ 6,781 $1,847 $6,704 $ --
Service and Storage
Material Sales....... 148,054 2,032 1,165 415 902 2,949 --
-------- ------ ------- -------- ------ ------ -------
Total Revenues....... 378,043 5,210 2,852 7,196 2,749 9,653 --
-------- ------ ------- -------- ------ ------ -------
Operating Expenses:
Cost of Sales
(excluding
depreciation)........ 189,828 2,624 1,816 3,254 826 5,034 (38)(C)
Selling, General and
Administrative....... 94,194 1,313 3,258 8,695 719 2,574 (9,456)(D)
Depreciation and
Amortization......... 46,214 608 153 873 271 611 1,774 (E)
-------- ------ ------- -------- ------ ------ -------
Total Operating
Expenses........... 330,236 4,545 5,227 12,822 1,816 8,219 (7,720)
-------- ------ ------- -------- ------ ------ -------
Operating Income
(Loss)................. 47,807 665 (2,375) (5,626) 933 1,434 7,720
Interest Expense, net.... 40,246 200 161 491 151 214 1,162 (F)
Other Income, net........ 115 -- -- -- -- -- --
-------- ------ ------- -------- ------ ------ -------
Income (Loss) Before
Provision (Benefit) for
Income Taxes and
Minority Interest...... 7,676 465 (2,536) (6,117) 782 1,220 6,558
Provision (Benefit) for
Income Taxes........... 7,805 215 -- -- 408 211 (355)(G)
Minority Interest........ 515 -- -- -- -- -- 339 (H)
-------- ------ ------- -------- ------ ------ -------
Income (Loss) from
Continuing
Operations............. $ (644) $ 250 $(2,536) $ (6,117) $ 374 $1,009 $ 6,574
======== ====== ======= ======== ====== ====== =======
Loss from Continuing
Operations per Common
Share--Basic and
Diluted................ $ (0.02)
========
Weighted Average Common
Shares Outstanding--
Basic and Diluted...... 32,641 2,759 (I)
======== =======
EBITDA from Continuing
Operations............. $ 94,021 $1,273 $(2,222) $ (4,753) $1,204 $2,045 $ 9,494
======== ====== ======= ======== ====== ====== =======
<CAPTION>
PRO FORMA
IRON
MOUNTAIN(2)
------------
<S> <C>
Revenues:
Storage................ $250,186
Service and Storage
Material Sales....... 155,517
--------
Total Revenues....... 405,703
--------
Operating Expenses:
Cost of Sales
(excluding
depreciation)........ 203,344
Selling, General and
Administrative....... 101,297
Depreciation and
Amortization......... 50,504
--------
Total Operating
Expenses........... 355,145
--------
Operating Income
(Loss)................. 50,558
Interest Expense, net.... 42,625
Other Income, net........ 115
--------
Income (Loss) Before
Provision (Benefit) for
Income Taxes and
Minority Interest...... 8,048
Provision (Benefit) for
Income Taxes........... 8,284
Minority Interest........ 854
--------
Income (Loss) from
Continuing
Operations............. $ (1,090)
========
Loss from Continuing
Operations per Common
Share--Basic and
Diluted................ $ (0.03)
========
Weighted Average Common
Shares Outstanding--
Basic and Diluted...... 35,400
========
EBITDA from Continuing
Operations............. $101,062
========
</TABLE>
- ------------------------------
(1) Represents historical results of operations for each 1999 acquisition
completed through October 31, 1999 for the period in 1999 prior to the time
it was acquired, unless otherwise noted. See "Overview" in the accompanying
notes.
(2) Does not give pro forma effect to certain identified cost savings of
$1.5 million that Iron Mountain's management believes would have been
realized had the 1999 acquisitions completed through October 31, 1999 been
fully integrated as of January 1, 1998. These cost savings relate to:
(a) termination of specific employees and related net reductions in labor
expenses; (b) closure of identified redundant facilities and related net
reductions in occupancy costs; and (c) elimination of related party
expenses, management fees and compensation expenses in excess of amounts
that Iron Mountain would have incurred.
The accompanying notes are an integral part of these pro forma financial
statements.
67
<PAGE>
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1998 AND 1999 ACQUISITIONS (2)
--------------------------------------------------------------------------------
FIRST
HISTORICAL NATIONAL BRITANNIA AMERICAN
IRON UNDERGROUND DATA RECORDS
MOUNTAIN(1) STORAGE MANAGEMENT MANAGEMENT DATA BASE MEMOGARDE OTHER
------------ ------------ ------------ ------------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Storage.............. $230,702 $4,657 $16,258 $ 6,139 $24,907 $4,301 $21,587
Service and Storage
Material Sales..... 153,259 885 14,062 3,761 1,682 18 6,369
-------- ------ ------- ------- ------- ------ -------
Total Revenues..... 383,961 5,542 30,320 9,900 26,589 4,319 27,956
-------- ------ ------- ------- ------- ------ -------
Operating Expenses:
Cost of Sales
(excluding
depreciation)...... 192,113 2,116 16,511 7,338 11,337 1,165 13,879
Selling, General and
Administrative..... 95,867 1,121 5,580 2,212 6,555 1,049 9,984
Depreciation and
Amortization....... 48,301 713 3,863 572 3,706 465 1,743
-------- ------ ------- ------- ------- ------ -------
Total Operating
Expenses......... 336,281 3,950 25,954 10,122 21,598 2,679 25,606
-------- ------ ------- ------- ------- ------ -------
Operating Income
(Loss)............... 47,680 1,592 4,366 (222) 4,991 1,640 2,350
Interest Expense,
net.................. 45,673 282 1,533 541 1,776 80 721
Other Income, net...... 1,384 -- -- -- -- -- --
-------- ------ ------- ------- ------- ------ -------
Income (Loss) from
Continuing Operations
Before Provision
(Benefit) for Income
Taxes and Minority
Interest............. 3,391 1,310 2,833 (763) 3,215 1,560 1,629
Provision (Benefit) for
Income Taxes......... 6,558 544 1,504 238 -- 632 (99)
Minority Interest...... -- -- -- -- -- -- --
-------- ------ ------- ------- ------- ------ -------
Income (Loss) from
Continuing
Operations........... $ (3,167) $ 766 $ 1,329 $(1,001) $ 3,215 $ 928 $ 1,728
======== ====== ======= ======= ======= ====== =======
Loss from Continuing
Operations per Common
Share--Basic and
Diluted.............. $ (0.12)
========
Weighted Average Common
Shares
Outstanding--Basic
and Diluted.......... 27,470
========
EBITDA from Continuing
Operations........... $ 95,981 $2,305 $ 8,229 $ 350 $ 8,697 $2,105 $ 4,093
======== ====== ======= ======= ======= ====== =======
<CAPTION>
PRO FORMA
PRO FORMA IRON
ADJUSTMENTS MOUNTAIN(3)
------------ ------------
<S> <C> <C>
Revenues:
Storage.............. $ -- $308,551
Service and Storage
Material Sales..... -- 180,036
-------- --------
Total Revenues..... -- 488,587
-------- --------
Operating Expenses:
Cost of Sales
(excluding
depreciation)...... (285)(C) 244,174
Selling, General and
Administrative..... -- 122,368
Depreciation and
Amortization....... 5,968 (E) 65,331
-------- --------
Total Operating
Expenses......... 5,683 431,873
-------- --------
Operating Income
(Loss)............... (5,683) 56,714
Interest Expense,
net.................. 8,087 (F) 58,693
Other Income, net...... -- 1,384
-------- --------
Income (Loss) from
Continuing Operations
Before Provision
(Benefit) for Income
Taxes and Minority
Interest............. (13,770) (595)
Provision (Benefit) for
Income Taxes......... (2,878)(G) 6,499
Minority Interest...... 911 (H) 911
-------- --------
Income (Loss) from
Continuing
Operations........... $(11,803) $ (8,005)
======== ========
Loss from Continuing
Operations per Common
Share--Basic and
Diluted.............. $ (0.23)
========
Weighted Average Common
Shares
Outstanding--Basic
and Diluted.......... 7,410 (I) 34,880
======== ========
EBITDA from Continuing
Operations........... $ 285 $122,045
======== ========
</TABLE>
- ----------------------------------
(1) Represents historical results of operations for Iron Mountain for the year
ended December 31, 1998, after reclassifications to report the results of
operations of Arcus Staffing as a discontinued operation.
(2) Represents historical results of operations for each 1998 acquisition for
the period in 1998 prior to the time it was acquired and each 1999
acquisition completed through October 31, 1999, unless otherwise noted, for
the year ended December 31, 1998. See "Overview" in the accompanying notes.
(3) Does not give pro forma effect to certain identified cost savings of
approximately $7.3 million that Iron Mountain's management believes would
have been realized had the 1998 and 1999 acquisitions completed through
October 31, 1999 been fully integrated as of January 1, 1998. These cost
savings relate to: (a) termination of specific employees and related net
reductions in labor expenses; (b) closure of identified redundant facilities
and related net reductions in occupancy costs; and (c) elimination of
related party expenses, management fees and compensation expenses in excess
of amounts that Iron Mountain would have incurred.
The accompanying notes are an integral part of these pro forma financial
statements.
68
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
OVERVIEW
RECENT ACQUISITIONS
In 1998, Iron Mountain acquired 15 records and information management
services businesses including Arcus Group, Inc. and National Underground
Storage, Inc. Total consideration for Arcus Group was $153.7 million, including
$55.0 million in aggregate fair value of Iron Mountain common stock and options
to acquire Iron Mountain common stock and the balance in cash and assumed debt.
Total consideration for National Underground Storage was $30.1 million in cash
and assumed debt. The aggregate purchase price of the businesses and related
real estate acquired in 1998, excluding Arcus Group and National Underground
Storage, was $74.8 million, including $12.1 million in fair value of Iron
Mountain common stock. In addition, Iron Mountain exchanged certain assets of
Copyright, Inc., one of its subsidiaries, with a fair value of $3.0 million as
partial consideration in its acquisition of Leonard Archives. The Iron Mountain
Pro Forma Statement of Operations for the year ended December 31, 1998 reflects
a reduction of service and storage material sales revenues of $2.6 million and a
reduction of EBITDA of $0.6 million related to the disposition of these assets.
In 1999, through October 31, 1999, Iron Mountain acquired 16 records and
information management services businesses, including Data Base, Inc., First
American Records Management, Inc., Memogarde and a controlling 50.1 percent
interest in Britannia Data Management. Total consideration for the 50.1 percent
interest in Britannia Data Management was $49.3 million, consisting of cash and
the capital stock of Arcus Data Security Limited, Iron Mountain's existing U.K.
subsidiary. Total consideration for Data Base, including related real estate,
was $115.0 million, including $46.0 million in fair value of Iron Mountain
common stock and the balance in cash and assumed debt. Total consideration for
First American Records Management was $41.5 in cash, and total consideration for
Memogarde was $16.9 in cash and assumed debt. The aggregate purchase price of
the businesses and related real estate that Iron Mountain acquired in 1999,
excluding Britannia Data Management, Data Base, First American Records
Management, Inc. and Memogarde, was $44.2 million.
All Iron Mountain 1998 acquisitions and 1999 acquisitions completed through
October 31, 1999 are listed below:
<TABLE>
<S> <C>
COMPLETION
1998 ACQUISITIONS DATE
- ------------------------------------------------------------ --------------
Bekins Records Management (a division of Bekins Van &
Storage, Inc.)........................................ January 1998
Midwest Records Management (a division of I-GO Van &
Storage Co.).......................................... January 1998
Arcus Group, Inc........................................ January 1998
Records Venture One, Inc. (d/b/a Information Management
Consultants of Arizona)............................... January 1998
Sloan Vaults, Inc. (d/b/a The Vault).................... February 1998
InterMation, Inc........................................ April 1998
Records and information management services business of
Bekins Moving & Storage Co............................ June 1998
National Underground Storage, Inc....................... July 1998
Hart Information Services, Inc.......................... July 1998
Rockford Business Interiors, Inc........................ July 1998
Albuquerque Archives, Inc............................... August 1998
Records and Filing Consultants, Inc..................... August 1998
Commercial Archives, Inc................................ October 1998
Leonard Archives Acquisition Corp....................... October 1998
Datavault Corporation................................... November 1998
</TABLE>
69
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<S> <C>
1999 ACQUISITIONS (THROUGH OCTOBER 31, 1999)
- ------------------------------------------------------------
Britannia Data Management Limited (50.1% interest)...... January 1999
Secure Accessible Files Environment, Inc................ February 1999
Confidential Records Center, Inc........................ March 1999
Information Storage Service Center, Inc................. March 1999
First American Records Management, Inc.................. April 1999
Data Base, Inc.......................................... April 1999
Datavault/United States Safe Deposit Corporation........ May 1999
File Management, Inc.................................... May 1999
MAP, S.A. (Memogarde)(1)................................ June 1999
Carter Media Management, Inc............................ June 1999
Central Files, Inc...................................... June 1999
A Jacksonville, Florida records management business..... June 1999
Sistemas de Archivo Corporativo, S. de R.L. de C.V.
(50.1% interest)........................................ August 1999
Stortext (Holdings) Ltd.(1)............................. September 1999
Datavault S.A.(1)....................................... September 1999
Midtown Professional Records Centre, Inc................ October 1999
</TABLE>
- ------------------------
(1) Britannia Data Management acquired each of these businesses.
BRITANNIA DATA MANAGEMENT
On January 4, 1999, Iron Mountain purchased a controlling 50.1 percent
interest in Britannia Data Management for total consideration of $49.3 million,
consisting of cash and the capital stock of Arcus Data Security Limited, an
existing data security services business in London. Iron Mountain acquired
shares of Britannia Data Management from Mentmore Abbey plc and from Abbey
Storage Limited, a wholly owned subsidiary of Mentmore Abbey. In addition, Iron
Mountain acquired newly issued shares from Britannia Data Management in exchange
for cash and the capital stock of Arcus Data Security Limited. Upon completion
of the transactions, Iron Mountain owns 50.1 percent of the outstanding capital
stock of Britannia Data Management and Mentmore Abbey owns the remaining
49.9 percent.
Britannia Data Management has an April 30 fiscal year end. Iron Mountain has
consolidated Britannia Data Management using an October 31 fiscal year end.
Accordingly, the Iron Mountain Pro Forma Statements of Operations for the nine
months ended September 30, 1999 and for the year ended December 31, 1998 include
Britannia Data Management's results for the nine months ended July 31, 1999 and
for the year ended October 31, 1998.
On June 2, 1999, Britannia Data Management acquired Memogarde for aggregate
consideration of $16.9 million. Memogarde had a February 28 fiscal year end. The
Iron Mountain Pro Forma Statement of Operations for the nine months ended
September 30, 1999 includes Memogarde's results for the nine months ended
July 31, 1999 and the Iron Mountain Pro Forma Statement of Operations for the
year ended December 31, 1998 includes Memogarde's results for its fiscal year
ended February 28, 1999.
On September 12, 1999, Britannia Data Management acquired Stortext for
approximately $16.1 million in cash. Stortext had a March 31 fiscal year end.
The Iron Mountain Pro Forma Balance Sheet as of September 30, 1999 includes the
balance sheet of Stortext as of September 12, 1999. The Iron Mountain Pro Forma
Statement of Operations for the nine months ended September 30, 1999
70
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
includes Stortext's results for the nine months ended July 31, 1999 and the Iron
Mountain Pro Forma Statement of Operations for the year ended December 31, 1998
includes Stortext's results for its fiscal year ended March 31, 1999.
The financial statements of Britannia Data Management, Memogarde and
Stortext 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 currencies of Britannia Data Management and
Stortext are Pounds Sterling and the functional currency of Memogarde is French
Francs. The assets and liabilities have been translated into U.S. dollars at the
exchange rate in effect at the end of the period translated. Revenues and
expenses have been translated into U.S. dollars at the average exchange rate in
effect 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 loss as of September 30, 1999 included in stockholders'
equity in the accompanying Iron Mountain Pro Forma Balance Sheet is
$1.9 million.
DATA BASE ACQUISITION
On April 8, 1999, Iron Mountain acquired Data Base and related real estate
for $115.0 million. As part of the total consideration, Iron Mountain issued
1,476,577 shares of common stock with a fair value of $46.0 million. On May 18,
1999, Iron Mountain repurchased all of the shares issued in connection with the
Data Base acquisition from the former shareholders of Data Base for
$39.5 million, with a portion of the net proceeds from Iron Mountain's 1999
equity offering.
71
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
BALANCE SHEET
Iron Mountain paid $525.5 million in aggregate consideration for the 1998
and 1999 acquisitions completed through October 31, 1999. Iron Mountain has
allocated the excess of the purchase price over the book value of the net assets
acquired for each of the acquisitions to tangible and intangible assets, based
on its estimate of the fair value of the net assets acquired. The following
allocation of the aggregate purchase price is preliminary and subject to
adjustment, based on the final determination of the fair value of the net assets
acquired. Iron Mountain's management believes that the final allocation of the
purchase price will not differ materially from the preliminary estimated
amounts.
<TABLE>
<CAPTION>
(in millions)
<S> <C> <C>
1998 ACQUISITIONS:
Current Assets.......................................... $ 28.9
Property, Plant and Equipment........................... 54.2
Goodwill................................................ 202.7
Other Long-term Assets.................................. 1.7
Current Liabilities..................................... (22.7)
Deferred Income Taxes................................... (2.4)
Other Long-term Liabilities............................. (3.8)
------
Purchase Price of 1998 Acquisitions................... 258.6
1999 ACQUISITIONS (COMPLETED THROUGH OCTOBER 31, 1999):
Current Assets.......................................... 33.1
Property, Plant and Equipment........................... 72.4
Goodwill................................................ 246.2
Other Long-term Assets.................................. 2.7
Current Liabilities..................................... (26.9)
Long-term Debt.......................................... (15.2)
Deferred Income Taxes................................... (2.2)
Other Long-term Liabilities............................. (0.1)
Minority Interest....................................... (43.1)
------
Purchase Price of 1999 Acquisitions................... 266.9
------
Total Purchase Price of the 1998 and 1999
Acquisitions........................................ $525.5
======
</TABLE>
72
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
The 1998 and 1999 acquisitions are assumed to be financed as follows (in
millions):
<TABLE>
<S> <C> <C>
1998 ACQUISITIONS:
Fair value of common stock issued....................... $ 51.4
Fair value of options granted........................... 15.7
Net proceeds from Iron Mountain's 1997 debt offering.... 24.5
Net proceeds from Iron Mountain's 1998 equity
offering.............................................. 132.0
Net proceeds from Iron Mountain's 1999 debt offering.... 32.0
Assets of Copyright, Inc................................ 3.0
------
Purchase Price of 1998 Acquisitions................. 258.6
1999 ACQUISITIONS COMPLETED THROUGH OCTOBER 31, 1999:
Fair value of common stock issued....................... $ 46.0
Net proceeds from Iron Mountain's 1999 debt offering.... 145.0
Net proceeds from Iron Mountain's 1999 equity
offering.............................................. 56.5
Borrowings under Britannia Data Management's line of
credit................................................ 13.6
Assumption of Long-term debt............................ 3.3
Capital Stock of Arcus Data Security Limited............ 2.5
------
Purchase Price of 1999 Acquisitions................. 266.9
------
Total Purchase Price of 1998 and 1999
Acquisitions.................................. $525.5
======
</TABLE>
The accompanying Iron Mountain Pro Forma Balance Sheet as of September 30,
1999 has been prepared as if the Stortext and Midtown acquisitions had been
consolidated or completed as of September 30, 1999 and reflects the following
pro forma adjustments:
(A) Pro forma adjustments to assets consist of the following (in millions):
<TABLE>
<CAPTION>
PROPERTY, OTHER
CURRENT PLANT AND LONG-TERM
ASSETS EQUIPMENT GOODWILL ASSETS
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Record use of Britannia Data Management's cash to fund
Stortext acquisition................................. $(14.7) $ -- $ -- $ --
Record Britannia Data Management receivable from
Mentmore Abbey to fund Stortext acquisition.......... 7.5 -- -- --
Reverse assets of acquired companies not purchased..... (0.1) -- -- --
Record estimated fair value in excess of book value of
assets acquired...................................... -- 2.0 -- 1.0
Record goodwill related to acquired companies.......... -- -- 14.2 --
------ ---- ----- ----
Total Adjustments................................ $ (7.3) $2.0 $14.2 $1.0
====== ==== ===== ====
</TABLE>
73
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
(B) Pro forma adjustments to liabilities and stockholders' equity consist of the
following (in millions):
<TABLE>
<CAPTION>
OTHER
LONG-
CURRENT LONG-TERM TERM STOCKHOLDERS'
LIABILITIES DEBT LIABILITIES EQUITY
----------- --------- ----------- -------------
<S> <C> <C> <C> <C>
Reverse liabilities and equity not assumed in
connection with the Stortext and Midtown
acquisitions..................................... $(0.8) $(1.1) $ -- $(3.8)
Record additional debt to finance the Midtown
acquisition...................................... -- 7.2 -- --
Record Britannia Data Management payable to
Mentmore Abbey to finance Stortext acquisition... -- -- 7.5 --
Record deferred portion of purchase price related
to the Midtown acquisition....................... 0.2 -- 0.7 --
----- ----- ---- -----
Total Adjustments............................ $(0.6) $ 6.1 $8.2 $(3.8)
===== ===== ==== =====
</TABLE>
STATEMENTS OF OPERATIONS
The accompanying Iron Mountain Pro Forma Statements of Operations for the
nine months ended September 30, 1999 and the year ended December 31, 1998 have
been prepared as if the 1998 and 1999 acquisitions completed through
October 31, 1999, the 1998 and 1999 equity offerings, and the 1999 debt offering
had occurred on January 1, 1998 and reflect the following pro forma adjustments:
(C) To reduce cost of sales to eliminate rent expense for facilities purchased
as part of certain acquisitions that would not have been incurred had these
acquisitions occurred as of January 1, 1998.
(D) To reverse one-time bonus payments, other non-recurring compensation
expenses and brokers' fees directly attributable to the Data Base, First
American Records Management and Secure Accessible Files Environment, Inc.
acquisitions.
(E) To reflect additional depreciation expense based on the fair value of the
property, plant and equipment acquired and the remaining useful lives and
the amortization of goodwill and other intangible assets. Property, plant
and equipment are depreciated over three to 50 years, goodwill is amortized
over 25 to 30 years, software is amortized over three years and covenants
not-to-compete are amortized over two to five years on a straight-line
basis.
74
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
(F) Pro forma adjustments to interest expense consist of the following (in
millions):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
<S> <C> <C>
ACQUISITION ADJUSTMENTS:
Reverse interest expense on debt of the acquired companies
retired or not assumed.................................... $(0.8) $(3.2)
Record interest expense on the additional debt used to
finance the 1998 and 1999 acquisitions assumed to be
financed under Iron Mountain's revolving credit
facility.................................................. 2.6 14.7
FINANCING ADJUSTMENTS:
Reverse interest expense on Iron Mountain's revolving credit
facility debt assumed to be retired with the net proceeds
from the 1999 debt offering and a portion of the net
proceeds from Iron Mountain's 1999 equity offering........ (4.4) (16.2)
Record interest expense related to Iron Mountain's 1999 debt
offering, including amortization of deferred financing
fees...................................................... 3.8 12.8
----- -----
Total Acquisition and Financing Adjustments........... $ 1.2 $ 8.1
===== =====
</TABLE>
(G) To adjust the provision for income taxes to a 40% rate on domestic pro forma
income before nondeductible goodwill amortization and other nondeductible
expenses, and adjust to foreign statutory rates on foreign pro forma income
before nondeductible goodwill amortization.
(H) To record the 49.9 percent minority interest in the net income of Memogarde,
Stortext, Sistemas de Archivo Corporativo and Britannia Data Management
after giving pro forma effect to Arcus Data Security Limited's 1998 net
income.
(I) To adjust the pro forma weighted average common shares outstanding as if the
1998 and 1999 acquisitions completed through October 31, 1999, and the 1998
and 1999 equity offerings had occurred on January 1, 1998. The number of
shares of common stock issued and repurchased, and the adjustments, are as
follows (in thousands):
<TABLE>
<CAPTION>
TOTAL NUMBER OF NINE MONTHS
SHARES ISSUED ENDED YEAR ENDED
TRANSACTIONS OR REPURCHASED SEPTEMBER 30, 1999 DECEMBER 31, 1998
- ------------ --------------- ------------------ -----------------
<S> <C> <C> <C>
1999 equity offering.......................... 5,750 2,759 5,750
1998 equity offering.......................... 6,038 -- 1,538
Data Base..................................... 1,477 525 1,477
Repurchase of Data Base shares................ (1,477) (525) (1,477)
Other......................................... 489 -- 122
------ ----- ------
Net shares issued........................... 12,277 2,759 7,410
====== ===== ======
</TABLE>
75
<PAGE>
PIERCE LEAHY CORP.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet of
Pierce Leahy Corp. has been prepared based on the historical condensed
consolidated balance sheet of Pierce Leahy as of September 30, 1999. The Pierce
Leahy Pro Forma Balance Sheet gives effect to the redemption of Pierce Leahy's
redeemable preferred stock on November 1, 1999 and its replacement with
additional borrowings under Pierce Leahy's revolving credit facility as if it
had occurred as of September 30, 1999.
The following Unaudited Pro Forma Condensed Consolidated Statements of
Operations of Pierce Leahy for the nine months ended September 30, 1999 and for
the year ended December 31, 1998 give effect to: (a) all of the 1998 and 1999
acquisitions that Pierce Leahy completed through October 31, 1999; and (b) the
issuance of 8 1/8% Senior Notes due 2008 in April 1998, as if each had occurred
as of January 1, 1998. It should be noted that all of the 1999 Pierce Leahy
acquisitions were completed prior to September 30, 1999 and therefore the
historical balance sheet at that date gives effect to those transactions. The
pro forma adjustments are described in the accompanying notes.
The Pierce Leahy Pro Forma Statements of Operations do not necessarily
indicate the actual results of operations that Pierce Leahy would have reported
if the events described above had occurred as of January 1, 1998, nor do they
necessarily indicate the results of future operations. Furthermore, the pro
forma results do not give effect to all cost savings or incremental costs that
may occur as a result of the integration and consolidation of the 1998 and 1999
acquisitions. In the opinion of Pierce Leahy's management, all adjustments and
disclosures necessary to fairly present these pro forma financial statements
have been made.
Pierce Leahy has accounted for its 1998 and 1999 acquisitions using the
purchase method of accounting.
76
<PAGE>
PIERCE LEAHY CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
PIERCE PRO FORMA PIERCE
LEAHY ADJUSTMENTS LEAHY
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current Assets............................................ $ 66,788 $ -- $ 66,788
Property and Equipment, net............................... 262,576 -- 262,576
Intangible Assets, net.................................... 419,119 -- 419,119
Other Long-term Assets.................................... 2,575 -- 2,575
-------- ------- --------
Total Assets............................................ $751,058 $ -- $751,058
======== ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities....................................... $ 86,107 $ -- $ 86,107
Long-term Debt, net of Current Portion.................... 564,105 4,927 (A) 569,032
Deferred Rent............................................. 6,822 -- 6,822
Deferred Income Taxes..................................... 18,614 -- 18,614
Redeemable Preferred Stock................................ 4,927 (4,927 )(A) --
Shareholders' Equity...................................... 70,483 -- 70,483
-------- ------- --------
Total Liabilities and Shareholders' Equity.............. $751,058 $ -- $751,058
======== ======= ========
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements.
77
<PAGE>
PIERCE LEAHY CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
PIERCE 1999 PRO FORMA PRO FORMA
LEAHY ACQUISITIONS (1) ADJUSTMENTS (2) PIERCE LEAHY
---------- ---------------- --------------- ------------
<S> <C> <C> <C> <C>
Revenues:
Storage.................................. $139,856 $1,134 $ -- $140,990
Service and Storage Material Sales....... 113,903 1,133 -- 115,036
-------- ------ ---- --------
Total Revenues......................... 253,759 2,267 -- 256,026
-------- ------ ---- --------
Operating Expenses:
Cost of Sales (excluding depreciation and
amortization).......................... 143,429 1,659 -- 145,088
Selling, General and Administrative...... 33,563 161 -- 33,724
Depreciation and Amortization............ 32,084 74 272 (B) 32,430
Foreign Currency Exchange................ (5,505) -- -- (5,505)
-------- ------ ---- --------
Total Operating Expenses............... 203,571 1,894 272 205,737
-------- ------ ---- --------
Operating Income........................... 50,188 373 (272) 50,289
Interest Expense, net...................... 38,877 5 718 (C) 39,600
-------- ------ ---- --------
Income Before Income Taxes................. 11,311 368 (990) 10,689
Income Taxes............................... 3,482 -- (391)(D) 3,091
-------- ------ ---- --------
Net Income................................. 7,829 368 (599) 7,598
Preferred Stock Dividend................... 648 -- (648)(C) --
-------- ------ ---- --------
Net Income Applicable to Common
Shareholders............................. $ 7,181 $ 368 $ 49 $ 7,598
======== ====== ==== ========
Net Income per Common Share--Basic......... $ 0.42 $ 0.45
======== ========
Net Income per Common Share--Diluted....... $ 0.41 $ 0.43
======== ========
Weighted Average Common Shares
Outstanding--Basic....................... 17,066 17,066
======== ========
Weighted Average Common Shares
Outstanding--Diluted..................... 17,589 17,589
======== ========
EBITDA..................................... $ 76,767 $ 447 $ -- $ 77,214
======== ====== ==== ========
</TABLE>
- ------------------------
(1) Represents historical results of operations for each 1999 acquisition
completed through October 31, 1999 for the period in 1999 prior to the time
it was acquired.
(2) Does not give pro forma effect to certain identified cost savings of
$0.1 million that Pierce Leahy believes would have been realized had the
1999 acquisitions completed through October 31, 1999 been fully integrated
as of January 1, 1998. These cost savings relate to: (a) termination of
specific employees and related net reductions in labor expenses and
(b) reduction of other operating and administrative costs due to economies
of scale.
The accompanying notes are an integral part of these pro forma financial
statements.
78
<PAGE>
PIERCE LEAHY CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL 1998 AND 1999 ACQUISITIONS (1) PRO FORMA
PIERCE ------------------------------ PRO FORMA PIERCE
LEAHY ARCHIVEX KESTREL OTHER ADJUSTMENTS (2) LEAHY
---------- -------- -------- -------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Storage........................ $153,533 $1,825 $3,482 $14,652 $ -- $173,492
Service and Storage Material
Sales........................ 116,767 2,048 2,575 11,217 -- 132,607
-------- ------ ------ ------- -------- --------
Total Revenues............... 270,300 3,873 6,057 25,869 -- 306,099
-------- ------ ------ ------- -------- --------
Operating Expenses:
Cost of Sales (excluding
depreciation and
amortization)................ 154,435 2,182 2,720 16,592 -- 175,929
Selling, General and
Administrative............... 36,994 950 1,929 4,018 -- 43,891
Depreciation and
Amortization................. 35,772 245 510 946 3,554(B) 41,027
Foreign Currency Exchange...... 7,907 -- -- -- -- 7,907
-------- ------ ------ ------- -------- --------
Total Operating Expenses..... 235,108 3,377 5,159 21,556 3,554 268,754
-------- ------ ------ ------- -------- --------
Operating Income................. 35,192 496 898 4,313 (3,554) 37,345
Interest Expense, net............ 42,864 112 428 143 7,008(C) 50,555
-------- ------ ------ ------- -------- --------
Income (loss) before Income
Taxes.......................... (7,672) 384 470 4,170 (10,562) (13,210)
Income Taxes..................... 3,318 115 171 34 1,284(D) 4,922
-------- ------ ------ ------- -------- --------
Net Income (Loss)................ $(10,990) $ 269 $ 299 $ 4,136 $(11,846) $(18,132)
======== ====== ====== ======= ======== ========
Net Loss per Common Share--Basic
and Diluted.................... $ (0.65) $ (1.06)
======== ========
Weighted Average Common Shares
Outstanding--Basic and
Diluted........................ 16,805 221(E) 17,026
======== ======== ========
EBITDA........................... $ 78,871 $ 741 $1,408 $ 5,259 $ -- $ 86,279
======== ====== ====== ======= ======== ========
</TABLE>
- ------------------------
(1) Represents historical results of operations for each 1998 acquisition for
the period in 1998 prior to the time it was acquired and each 1999
acquisition completed through October 31, 1999 for the year ended
December 31, 1998.
(2) Does not give pro forma effect to certain identified cost savings of
$2.7 million that Pierce Leahy's management believes would have been
realized had the 1998 and 1999 acquisitions completed through October 31,
1999 been fully integrated as of January 1, 1998. These cost savings relate
to: (a) termination of specific employees and related net reductions in
labor expenses; (b) closure of identified redundant facilities and related
net reductions in occupancy costs; and (c) reduction of other operating and
administrative costs due to economies of scale.
The accompanying notes are an integral part of these pro forma financial
statements.
79
<PAGE>
PIERCE LEAHY CORP.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
OVERVIEW
ACQUISITIONS
In 1998, Pierce Leahy completed 16 acquisitions for an aggregate purchase
price of $204.1 million, consisting of $186.5 million in net cash, 548,262
shares of Pierce Leahy common stock with a fair value of $14.4 million and
$3.2 million in seller notes. The most significant of these acquisitions were
the acquisitions of Archivex, Inc. for $59.0 million in cash in April 1998, and
Kestrel Holdings, Inc. for $52.0 million in cash in July 1998. During 1998,
Pierce Leahy's principal Canadian subsidiary issued $135.0 principal amount of
8 1/8% Senior Notes due 2008, a portion of which was used to finance the
acquisition of Archivex, Inc. The 8 1/8% Senior Notes due 2008 are guaranteed by
Pierce Leahy on a senior subordinated basis. The remainder of the 1998
acquisitions was financed primarily from borrowings under Pierce Leahy's credit
facility, the issuance of Pierce Leahy common stock and seller notes.
In 1999, through October 31, 1999, Pierce Leahy completed four acquisitions
for an aggregate purchase price of approximately $42.9 million, consisting of
$23.6 million in net cash and $19.3 million in seller notes.
All Pierce Leahy 1998 and 1999 acquisitions are listed below:
<TABLE>
<CAPTION>
1998 ACQUISITIONS COMPLETION DATE
- ----------------- ----------------
<S> <C>
Automated Record Centres Ltd.............................. January 1998
Record Archives Corp...................................... January 1998
DataStor, Inc............................................. January 1998
Off-Site Records Management, Inc.......................... February 1998
DVX. Inc. d/b/a Deliverex of Denver....................... March 1998
Amodio Archives........................................... April 1998
Archivex, Inc............................................. April 1998
All-Safe Archives, Inc.................................... May 1998
The Records Centre........................................ May 1998
Comac Services, Inc....................................... May 1998
Data Protection Services.................................. June 1998
Kestrel Holdings, Inc..................................... July 1998
Bender Records Service.................................... July 1998
Keystone Records Management, Inc.......................... July 1998
Dallas Secured Records Storage, Inc....................... July 1998
Data Management Systems, Ltd.............................. July 1998
1999 ACQUISITIONS (COMPLETED THROUGH OCTOBER 31, 1999)
Allards Record Center..................................... January 1999
Medex Systems Storage, Inc................................ January 1999
Datavault, Ltd............................................ February 1999
Tippet-Richardson, Ltd.................................... July 1999
</TABLE>
BALANCE SHEET
Pierce Leahy paid $247.0 million in aggregate consideration for the 1998 and
1999 acquisitions completed through October 31, 1999. Pierce Leahy has allocated
the excess of the purchase price over the book value of the net assets acquired
for each of the acquisitions to tangible and intangible assets,
80
<PAGE>
based on its estimate of the fair value of the net assets acquired. The
following allocation of the aggregate purchase price is preliminary and subject
to adjustment, based on the final determination of the fair value of the net
assets acquired. Pierce Leahy's management believes that the final allocation of
the purchase price will not differ materially from the preliminary estimated
amounts.
<TABLE>
<CAPTION>
(in millions)
<S> <C> <C>
1998 ACQUISITIONS:
Current Assets............................................ $ 8.1
Property and Equipment.................................... 36.4
Goodwill.................................................. 178.0
Other Long-term Assets.................................... 9.6
Current Liabilities....................................... (13.7)
Deferred Income Taxes..................................... (1.4)
Other Long-term Liabilities............................... (12.9)
------
Purchase Price of 1998 Acquisitions..................... 204.1
1999 ACQUISITIONS COMPLETED THROUGH OCTOBER 31, 1999:
Current Assets............................................ 3.5
Property and Equipment.................................... 4.5
Goodwill.................................................. 40.6
Other Long-term Assets.................................... 1.3
Current Liabilities....................................... (6.1)
Deferred Income Taxes..................................... (0.2)
Other Long-term Liabilities............................... (0.7)
------
Purchase Price of 1999 Acquisitions..................... 42.9
------
Total Purchase Price of the 1998 and 1999
Acquisitions.......................................... $247.0
======
</TABLE>
The 1998 and 1999 acquisitions completed through October 31, 1999 are
assumed to be financed as follows (in millions):
<TABLE>
<S> <C> <C>
1998 ACQUISITIONS:
Seller notes issued....................................... $ 3.2
Fair value of common stock issued......................... 14.4
Net proceeds from 1998 8 1/8% Senior Notes................ 129.0
Net borrowings from revolving credit facility............. 57.5
------
Purchase Price of 1998 Acquisitions..................... 204.1
1999 ACQUISITIONS COMPLETED THROUGH OCTOBER 31, 1999:
Seller notes issued....................................... 19.3
Net borrowings from revolving credit facility............. 23.6
------
Purchase Price of 1999 Acquisitions..................... 42.9
------
Total Purchase Price of 1998 and 1999 Acquisitions.... $247.0
======
</TABLE>
The accompanying Pierce Leahy Pro Forma Balance Sheet as of September 30,
1999 reflects the following pro forma adjustment:
(A) To reflect the redemption of Pierce Leahy's redeemable preferred stock
and its replacement with additional borrowings under Pierce Leahy's
revolving credit facility.
81
<PAGE>
STATEMENTS OF OPERATIONS
The accompanying Pierce Leahy Pro Forma Statements of Operations for the
nine months ended September 30, 1999 and for the year ended December 31, 1998
have been prepared as if the 1998 and 1999 acquisitions completed through
October 31, 1999, and the sale of the 1998 8 1/8% Senior Notes had occurred on
January 1, 1998 and reflect the following pro forma adjustments:
(B) To reflect additional depreciation expense based on the fair value of
the property and equipment acquired and the remaining useful lives and
the amortization of goodwill. Property and equipment are depreciated over
five to 25 years, goodwill is amortized over 30 years and covenants
not-to-compete are amortized over the specific period to be benefited as
specified in the purchase agreement on a straight-line basis.
(C) To record interest expense on the additional debt used to finance the
1998 and 1999 acquisitions. This debt includes the net proceeds from the
1998 8 1/8% Senior Notes and net borrowings under Pierce Leahy's
revolving credit facility. In addition, this adjustment records interest
expense and eliminates preferred stock dividends based on the redemption
of Pierce Leahy's redeemable preferred stock and its replacement with
additional borrowings under Pierce Leahy's revolving credit facility.
(D) To adjust the provision for income taxes to Pierce Leahy's effective
domestic rate on domestic pro forma income before nondeductible goodwill
amortization and other nondeductible expenses, and adjust to foreign
statutory rates on foreign pro forma income before nondeductible goodwill
and interest expense.
(E) To adjust the pro forma weighted average common shares outstanding as if
the 548,262 shares of common stock issued in May 1998 as part of the
aggregate purchase price of Comac Services, Inc. had occurred on
January 1, 1998.
82
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated February 9, 1999, except for note 8, as to which date is
November 9, 1999, on Central File, Inc.'s financial statements as of
December 31, 1998 and for the year then ended, 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/ Fernandez & Bravo
San Juan, Puerto Rico
November 18, 1999
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated October 15, 1999 on the combined financial statements of
Sistemas de Archivo, S.A de C.V. and Sistemas de Archivo Mexico, S.A. de C.V.
(collectively Sistema de Archivo), 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/ Arthur Andersen
Mexico City, Mexico, D.F.
November 18, 1999
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated November 15, 1999 on Stortext (Holdings) Limited Group'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/ Arthur Andersen
Edinburgh, Scotland
November 18, 1999
<PAGE>
Exhibit 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated October 29, 1999 on Midtown Professional Records Centre, 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 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/ Arthur Andersen LLP
Cleveland, Ohio
November 18, 1999
