<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Quarterly Period Ended March 31, 1999
Or
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period from ________ to ___________
Commission file number 1-13045
PIERCE LEAHY CORP.
(Exact Name of Registrant as Specified in its Charter)
PENNSYLVANIA 23-2588479
------------ ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
631 PARK AVENUE, KING OF PRUSSIA, PA 19406
------------------------------------------
(Address of Principal Executive Offices, Including Zip Code)
(610) 992-8200
--------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [_]
As of May 7, 1999, there were 17,063,270 shares of the Registrant's Common
Stock, par value $0.01 per share, outstanding.
-1-
<PAGE>
PIERCE LEAHY CORP.
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Consolidated Balance Sheets at March 31, 1999
and December 31, 1998 3
Consolidated Statements of Operations for the Three
Months Ended March 31, 1999 and 1998 4
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1999 and 1998 5
Notes to Consolidated Financial Statements 6-9
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 10-13
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 14
PART II - OTHER INFORMATION
Item 2 - Changes in Securities and Use of Proceeds 15
Item 6 - Exhibits and Reports on Form 8-K 15
Signatures 15
Exhibit 27 - Financial Data Schedule 16
-2-
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
PIERCE LEAHY CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1999 1998
------- ------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 5,202 $ 2,312
Accounts receivable, net of allowance for doubtful
accounts of $3,543 and $3,650 49,814 43,063
Inventories 1,191 1,056
Prepaid expenses and other 1,977 1,129
Deferred income taxes 4,402 4,402
------------ ------------
Total current assets 62,586 51,962
------------ ------------
PROPERTY AND EQUIPMENT 315,768 297,216
Less-Accumulated depreciation and amortization (72,782) (67,522)
------------ ------------
Net property and equipment 242,986 229,694
------------ ------------
OTHER ASSETS:
Intangible assets, net 420,243 381,515
Other 3,181 3,287
------------ ------------
Total other assets 423,424 384,802
------------ ------------
$ 728,996 $ 666,458
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 22,713 $ 3,583
Accounts payable 9,709 11,663
Accrued expenses 40,590 40,931
Deferred revenues 15,355 11,932
------------ ------------
Total current liabilities 88,367 68,109
LONG-TERM DEBT 548,272 514,362
DEFERRED RENT 6,305 5,856
DEFERRED INCOME TAXES 16,077 15,036
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK 4,688 -
SHAREHOLDERS' EQUITY 65,287 63,095
------------ ------------
$ 728,996 $ 666,458
============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
-3-
<PAGE>
PIERCE LEAHY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
-------------- ------------
(Unaudited)
<S> <C> <C>
REVENUES:
Storage $ 44,174 $ 33,214
Service and storage material sales 36,020 23,076
-------------- ------------
Total revenues 80,194 56,290
-------------- ------------
OPERATING EXPENSES:
Cost of sales, excluding depreciation and amortization 45,595 32,915
Selling, general and administrative 10,578 8,774
Depreciation and amortization 9,943 7,219
Foreign currency exchange (1,815) (62)
-------------- ------------
Total operating expenses 64,301 48,846
-------------- ------------
Operating income 15,893 7,444
INTEREST EXPENSE 12,603 8,300
-------------- ------------
Income (loss) before income taxes 3,290 (856)
INCOME TAXES 886 181
-------------- ------------
NET INCOME (LOSS) 2,404 (1,037)
PREFERRED STOCK DIVIDEND 92 -
-------------- ------------
NET INCOME (LOSS) APPLICABLE TO COMMON SHAREHOLDERS $ 2,312 $ (1,037)
============== ============
Basic net income (loss) per Common share $ 0.14 $ (0.06)
============== ============
Diluted net income (loss) per Common share $ 0.13 $ (0.06)
============== ============
Shares used in computing basic net income (loss) per Common share 17,037 16,478
============== ============
Shares used in computing diluted net income (loss) per Common share 17,589 16,478
============== ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
-4-
<PAGE>
PIERCE LEAHY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,404 $ (1,037)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 9,824 7,227
Loss on sale of property and equipment 119 29
Deferred income tax provision 885 181
Amortization of deferred financing costs 383 293
Change in deferred rent 263 338
Foreign currency adjustment (1,708) 241
Changes in assets and liabilities, excluding the effects from the
purchases of businesses:
(Increase) decrease in -
Accounts receivable, net (3,725) (4,264)
Inventories (84) (39)
Prepaid expenses and other (278) 797
Other assets 117 2,559
Increase (decrease) in -
Accounts payable (2,702) (2,135)
Accrued expenses (2,753) (5,489)
Deferred revenue 1,565 1,758
--------------- ---------------
Net cash provided by operating activities 4,310 459
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for businesses acquired, net of cash acquired (22,434) (40,044)
Capital expenditures (12,575) (12,622)
Client acquisition costs (3,249) (2,054)
Increase in intangible assets (679) (1,044)
Payments on noncompete agreements (95) (55)
Proceeds from sale of property and equipment 50 -
--------------- ---------------
Net cash used in investing activities (38,982) (55,819)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on revolving line of credit 42,551 52,684
Payments on revolving line of credit (11,151) -
Proceeds from issuance of long-term debt 2,325 4,300
Issuance of Redeemable Preferred Stock, net 4,644 -
Payments on long-term debt (143) (834)
Payment of deferred financing costs (664) (87)
--------------- ---------------
Net cash provided by financing activities 37,562 56,063
--------------- ---------------
NET INCREASE IN CASH 2,890 703
CASH, BEGINNING OF PERIOD 2,312 1,782
--------------- ---------------
CASH, END OF PERIOD $ 5,202 $ 2,485
=============== ===============
SUPPLEMENTAL DISCLOSURE-CASH PAID FOR INTEREST $ 15,610 $ 14,558
=============== ===============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
-5-
<PAGE>
PIERCE LEAHY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
1) GENERAL:
The interim consolidated financial statements presented herein have
been prepared by Pierce Leahy Corp. ("Pierce Leahy" or the "Company")
without audit and, in the opinion of management, reflect all
adjustments of a normal recurring nature necessary for a fair
presentation. Interim results are not necessarily indicative of results
for a full year.
The consolidated balance sheet as of December 31, 1998 has been derived
from the Company's consolidated financial statements that have been
audited by the Company's independent public accountants. The unaudited
consolidated financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in the
annual financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to those
rules and regulations. The consolidated financial statements and notes
included herein should be read in conjunction with the consolidated
financial statements and notes for the year ended December 31, 1998,
included in the Company's Annual Report on Form 10-K.
2) ACQUISITIONS:
During 1998, the Company completed 16 acquisitions. For the three
months ended March 31, 1999, three records management businesses were
purchased by the Company. All 1998 and 1999 acquisitions were accounted
for using the purchase method of accounting and, accordingly, the
results of operations for such acquisitions have been included in the
consolidated results of the Company from their respective acquisition
dates. The aggregate purchase price for the 1999 acquisitions exceeded
the underlying estimated fair value of the net assets acquired by
$38,780, which has been assigned to goodwill and is being amortized
over the estimated benefit period of 30 years. For the three months
ended March 31, 1999, the Company paid an aggregate purchase price of
approximately $41,316 for the acquisitions, consisting of $22,434 in
net cash and $18,882 in Seller notes. The most significant of these
acquisitions was Datavault, Limited, a U.K. based records management
company with operations in seven markets throughout England and
Scotland. This acquisition was financed by borrowings under the
Company's credit facility and the issuance of Seller notes. The Company
has historically financed its acquisitions primarily with borrowings
under its credit facilities and with cash flows from existing operating
activities.
In March 1999, the Company signed a letter of intent to form a
strategic partnership with ImageMax, Inc., a digital imaging,
micrographics, and data entry services company. In April 1999, the
Company announced that it would not proceed with this strategic
partnership.
-6-
<PAGE>
3) LONG-TERM DEBT:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------------- -----------------
<S> <C> <C>
11 1/8% Senior Subordinated Notes due 2006 $ 130,000 $ 130,000
9 1/8% Senior Subordinated Notes due 2007 120,000 120,000
8 1/8% Senior Notes due 2008 134,548 134,537
U.S. Revolver 149,400 118,000
Mortgage Notes 7,301 7,368
Seller Notes 22,357 3,475
Other 7,379 4,565
----------------- -----------------
570,985 517,945
Less-Current portion (22,713) (3,583)
----------------- -----------------
$ 548,272 $ 514,362
================= =================
</TABLE>
In February 1999, the Company amended the U.S. portion of its revolving
credit facility to provide for borrowings of up to $175,000. All other
material terms and conditions remained the same.
4) REDEEMABLE PAY-IN-KIND PREFERRED STOCK:
In March 1999, the Company entered into an agreement to issue up to
$15,000 of redeemable pay-in-kind ("PIK") preferred stock. This stock
is redeemable at any time during the ten year term and has an initial
annual dividend rate of 11.36%, subject to increase under certain
circumstances including subsequent issuances of preferred stock
(depending on certain interest rates at such time) and if the preferred
stock is not redeemed prior to six months from its initial issuance. At
its option, the Company may issue additional shares of preferred stock
in lieu of quarterly cash interest payments. The Company issued $5,000
of the redeemable PIK preferred stock in March 1999. The Company
incurred fees, net of amortization, of approximately $312, providing
for net proceeds of approximately $4,688.
-7-
<PAGE>
5) EARNINGS PER SHARE:
The weighted average common and common equivalent shares outstanding
for purposes of calculating net income (loss) per common share are
computed as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------
1999 1998
------------------- ----------------
<S> <C> <C>
Weighted average common shares
outstanding used for basic net
income (loss) per common share 17,037 16,478
Dilutive effect of common stock
options outstanding 552 -
------------------- ----------------
Weighted average common and
common and equivalent shares
used for diluted net income
(loss) per common share 17,589 16,478
=================== ================
</TABLE>
Options to purchase an aggregate of 1,402,083 shares of Common stock at
prices ranging from $5.09 to $25.50 per share were outstanding at March
31, 1999.
6) COMPREHENSIVE INCOME:
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 130, "Reporting Comprehensive
Income," which is effective for financial statements issued for fiscal
years beginning after December 15, 1997. The Company's comprehensive
income includes net income and unrealized gains and losses from foreign
currency translation adjustments. The unrealized foreign currency
translation gains and losses for the three month periods ended March
31, 1999 and 1998 were immaterial.
-8-
<PAGE>
7) SEGMENT AND SUBSIDIARY INFORMATION (UNAUDITED):
The Company stores and services business records for clients throughout
the United States, Canada and the United Kingdom. The following
information is a summary of the operating results and financial
position for the Company's Canadian operations and the Company's U.S.
and other operations:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
1999 1998
------------------ ------------------
(Unaudited)
<S> <C> <C>
Revenues:
United States and other $ 68,958 $ 50,836
Canada 11,236 5,454
================== ==================
Total $ 80,194 $ 56,290
================== ==================
EBITDA:
United States and other $ 21,049 $ 13,410
Canada 2,972 1,191
================== ==================
Total $ 24,021 $ 14,601
================== ==================
Operating income (loss):
United States and other $ 12,949 $ 6,987
Canada 2,944 457
================== ==================
Total $ 15,893 $ 7,444
================== ==================
Net income (loss) applicable to Common
shareholders:
United States and other $ 1,501 $ (850)
Canada 811 (187)
================== ==================
Total $ 2,312 $ (1,037)
================== ==================
</TABLE>
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------------ ------------------
<S> <C> <C>
Current assets:
United States and other $ 51,960 $ 42,896
Canada 10,626 9,066
================== ==================
Total $ 62,586 $ 51,962
================== ==================
Total assets:
United States and other $ 595,643 $ 542,378
Canada 133,353 124,080
================== ==================
Total $ 728,996 $ 666,458
================== ==================
Current liabilities:
United States and other $ 78,181 $ 59,885
Canada 10,186 8,224
================== ==================
Total $ 88,367 $ 68,109
================== ==================
Long-term liabilities:
United States and other $ 433,481 $ 399,739
Canada 137,173 135,515
================== ==================
Total $ 570,654 $ 535,254
================== ==================
</TABLE>
The summarized financial information of the Canadian subsidiaries has
been prepared from the books and records maintained by each subsidiary.
The summarized financial information may not necessarily be indicative
of the results of operations or financial position had the Canadian
subsidiaries operated as independent entities. Certain intercompany
sales and charges, and intercompany loans among the Company and its
Canadian subsidiaries are included in the Canadian subsidiaries'
records and are eliminated in consolidation.
The Company's domestic, wholly-owned subsidiaries are Monarch Box, Inc.
and Advanced Box, Inc. These subsidiaries were established in 1997 to
hold investments and certain intangible assets of the Company. They do
not have any other operations.
There are no restrictions on the ability of any of the subsidiaries to
transfer funds to the Company in the form of loans, advances or
dividends, except as provided by applicable law.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosure About Segments of an Enterprise and Related
Information." This statement establishes additional standards for
segment reporting in the financial statements and is effective for
fiscal years beginning after December 15, 1997. Management has
determined that all of their operations have similar economic
characteristics and may be aggregated into a single segment for
disclosure under SFAS 131. Information concerning the geographic
operations of the Company as prescribed by SFAS 131 is provided above.
-9-
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of the Company's financial condition and
results of operations for the three-month periods ended March 31, 1999 and 1998
should be read in conjunction with the consolidated financial statements and
notes thereto for the three-month periods ended March 31, 1999 and 1998,
included herein, and the consolidated financial statements and notes thereto for
the year ended December 31, 1998, included in the Company's Annual Report on
Form 10-K.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
Total revenues increased from $56.3 million for the three months ended March 31,
1998 to $80.2 million for the three months ended March 31, 1999, an increase of
$23.9 million, or 42.5%. Nineteen acquisitions were completed from January 1998
to March 1999, which accounted for $15.5 million, or 64.8%, of such increase in
total revenues. The balance of the revenue growth ($8.4 million), resulted from
sales to new customers and from net increases in cubic feet stored from existing
customers, a base business revenue growth of 15.0% for the first quarter of 1999
as compared to the first quarter of 1998.
Storage revenues increased from $33.2 million for the three months ended March
31, 1998 to $44.2 million for the three months ended March 31, 1999, an increase
of $11.0 million, or 33.0%. Service and storage material sales revenues
increased from $23.1 million for the three months ended March 31, 1998 to $36.0
million for the three months ended March 31, 1999, an increase of $12.9 million,
or 56.1%, due in part to $3.0 million of service revenues derived from the
marketing literature storage and fulfillment business acquired during 1998.
Cost of sales (excluding depreciation and amortization) increased from $32.9
million in the three months ended March 31, 1998 to $45.6 million in the three
months ended March 31, 1999, an increase of $12.7 million, or 38.5%, but
decreased as a percentage of total revenues from 58.5% in the 1998 period to
56.9% in the 1999 period. The increase in dollars resulted primarily from an
additional number of employees and an increase in facility occupancy costs
resulting from the growth in cubic feet stored from existing customers and
acquisitions. The decrease as a percentage of total revenue was due primarily to
increased operating efficiencies from the conversion of previously acquired
operations into the Company's PLUS(R) system.
Selling, general and administrative expenses increased from $8.8 million for the
three months ended March 31, 1998 to $10.6 million for the three months ended
March 31, 1999, an increase of $1.8 million, or 20.6%, but decreased as a
percentage of total revenues from 15.6% in the 1998 period to 13.2% in the 1999
period. The dollar increase was primarily attributable to increases in staffing,
including increases in sales personnel and administrative staff. The decrease as
a percentage of total revenue was attributable to economies realized from
administrative efficiencies of operating in a centralized manner.
Depreciation and amortization expense increased from $7.2 million for the three
months ended March 31, 1998 to $9.9 million for the three months ended March 31,
1999, an increase of $2.7
-10-
<PAGE>
million, or 37.7%, but decreased as a percentage of revenues from 12.8% for the
three months ended March 31, 1998 to 12.4% for the three months ended March 31,
1999. The dollar increase was primarily attributable to the additional
depreciation and amortization expense related to the 19 acquisitions completed
from January 1998 through March 1999 and to capital expenditures for shelving,
buildings, improvements to records management facilities and information
systems, and to client acquisition costs. The decrease as a percentage of total
revenue was attributable to increase in revenue growth from existing and new
customers from the three months ended March 31, 1998 to the three months ended
March 31, 1999.
The Company had a foreign currency exchange gain for the three months ended
March 31, 1998 of $0.1 million (or 0.1% of revenues) and a gain of $1.8 million
(or 2.3% of revenues) for the three months ended March 31, 1999. The increase in
the foreign currency exchange gain is primarily due to an increase in the value
of the Canadian dollar compared to the U.S. dollar.
Interest expense increased from $8.3 million for the three months ended March
31, 1998 to $12.6 million for the three months ended March 31, 1999, an increase
of $4.3 million, or 51.8%. The increase was primarily attributable to increased
indebtedness incurred to finance acquisitions and capital expenditures.
As a result of the foregoing factors, the Company had a loss before income taxes
of $0.9 million (-1.5% of revenues) for the three months ended March 31, 1998 as
compared to income before income taxes of $3.3 million (4.1% of revenues) for
the three months ended March 31, 1999.
The Company recorded a provision for income taxes of $0.2 million (or 0.3% of
revenues) for the three months ended March 31, 1998 and a provision for income
taxes of $0.9 million (or 1.1% of revenues) for the three months ended March 31,
1999.
In March 1999, the Company entered into an agreement to issue up to $15 million
of redeemable pay-in-kind ("PIK") preferred stock. The Company issued $5 million
of the PIK preferred stock in March 1999. The preferred stock dividend for the
three months ended March 31, 1999 was $0.1 million (or 0.1% of revenues).
As a result of the foregoing items, the net loss applicable to common
shareholders for the three months ended March 31, 1998 was $1.0 million (-1.8%
of revenues) as compared to net income applicable to common shareholders of $2.3
million (2.9% of revenues) for the three months ended March 31, 1999.
Earnings before interest expense, income taxes, depreciation and amortization,
and foreign currency exchange ("EBITDA") increased from $14.6 million for the
three months ended March 31, 1998 to $24.0 million for the three months ended
March 31, 1999, an increase of $9.4 million, or 64.5%. As a percentage of
revenues, EBITDA was 25.9% for the three months ended March 31, 1998 and 30.0%
for the three months ended March 31, 1999. The increase as a percentage of the
total revenues reflected growth in the Company's business, economies of scale,
and increased operating efficiencies.
-11-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has made significant investments, consisting primarily of (a)
acquisitions, (b) capital expenditures for buildings, shelving, improvements to
records management facilities and information systems, and (c) client
acquisition costs. Cash paid for these investments during the three months ended
March 31, 1999 aggregated $22.4 million, $12.6 million and $3.2 million,
respectively. These investments were primarily funded with borrowings under the
Company's credit facility and through the issuance of $5.0 million of redeemable
PIK preferred stock in March 1999.
During the three months ended March 31, 1999, the Company generated $4.3 million
in net cash from operations as compared to net cash provided by operations of
$0.5 million for the three months ended March 31, 1998. The $3.8 million
increase from the three months ended March 31, 1998 to the three months ended
March 31, 1999 primarily resulted from the $9.4 million increase in EBITDA,
offset by a decrease in working capital (excluding accrued interest) of $4.0
million and an increase in cash paid for interest of $1.1 million.
The net cash provided by financing activities for the three months ended March
31, 1999 was $37.6 million, consisting primarily of $42.6 million of borrowings
under the credit facility, $4.6 million of net borrowings on redeemable
preferred stock, and $2.3 million of proceeds from the issuance of long-term
debt, offset by payments of $11.2 million of borrowings under the credit
facility. As of March 31, 1999, the Company had $5.2 million of available cash
and the credit facility providing for $175.0 million of U.S. dollar borrowings
and $40.0 million of Canadian dollar borrowings, subject to certain limitations
and amounts already outstanding. As of March 31, 1999, $149.4 million was
outstanding under the credit facility. In addition, as of March 31, 1999, the
Company could have issued up to $10.0 million of additional redeemable PIK
preferred stock. On the basis of its reported first quarter results, as of March
31, 1999, the Company had available approximately $35.1 million of additional
borrowing capacity under the Credit facility, Senior Subordinated Notes and the
Senior Notes.
YEAR 2000 COMPLIANCE
The Company uses a number of computer software programs and systems in its
operations, including the PLUS(R) system and embedded systems contained in the
Company's buildings, plant, equipment and other infrastructure. The Company has
developed a plan designed to make its systems compliant with the requirements to
process transactions in the year 2000. Review of the Company's core PLUS(R)
system databases and programs has been performed and code modifications and
testing were completed in July 1998. The Company's internal financial accounting
system was upgraded to a vendor certified year 2000 compliant version in
December 1998. The Company is also working with its other internal information
systems, network service providers, and other key vendors with the goal of
overall year 2000 readiness. The Company estimates that its remediation costs
incurred to date in achieving Year 2000 compliance, including the replacement of
non-compliant systems, software modifications and validation, have been
approximately $325,000. In addition, the Company estimates the cost to complete
its Year 2000 evaluation, remediation and validation of all systems will
approximate an additional $25,000. Funding for costs incurred to date has come
from cash flows from operations, and future costs are expected to be funded in a
similar manner. The Company has not deferred any significant system projects due
to its Year 2000 efforts.
-12-
<PAGE>
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended, and is subject to the safe-harbor created by such sections.
Such forward-looking statements concern the Company's operations, economic
performance and financial condition, including in particular its acquisitions
and their integration into the Company's existing operations. Such statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
condition; changes in customer preferences; competition; changes in technology;
the integration of any acquisitions; changes in business strategy; the
indebtedness of the Company; quality of management, business abilities and
judgment of the Company's personnel; the availability, terms and deployment of
capital; and various other factors referenced in this Report. The
forward-looking statements are made as of the date of this Report, and the
Company assumes no obligation to update the forward-looking statements or to
update the reasons why actual results could differ from those projected in the
forward-looking statements.
-13-
<PAGE>
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks relating to the Company's operations result primarily from changes
in interest rates and foreign currency exchange rates. The Company does not
currently utilize any derivative financial instruments that expose the Company
to significant market risk. The Company is exposed to cash flow and fair value
risk due to changes in interest rates with respect to its long-term debt. The
table below presents principal cash flows and related weighted average interest
rates of the Company's long-term debt at March 31, 1999 and December 31, 1998.
Weighted average variable rates are based on implied forward rates in the yield
curve at March 31, 1999 and December 31, 1998. Implied forward rates should not
be considered a predictor of actual future interest rates. The information is
presented in U.S. dollars, the Company's reporting currency.
<TABLE>
<CAPTION>
December 31, March 31, Fair
1998 1999 Value
---------------------- ------------------------ -----------------------
Debt Obligations
- ----------------
<S> <C> <C> <C>
Fixed Rate (US and other) $ 263,172 $ 282,464 $ 294,964
Weighted average interest rate 10.00% 9.82% 9.40%
Fixed Rate (CDN) $ 136,773 (a) $ 139,121 (a) $ 137,103
Weighted average interest rate 8.12% 8.13% 8.25%
Variable Rate (US) $ 118,000 $ 149,400 $ 149,400
Weighted average interest rate 8.43% 7.76% 7.76%
</TABLE>
(a) The principal and interest payments due on the 8 1/8% Senior Notes due
2008, issued by Pierce Leahy Command Company, the Company's principal
Canadian subsidiary, are payable in U.S. Dollars, thus subjecting the
Company to foreign currency risk.
-14-
<PAGE>
PART II - OTHER INFORMATION
Item 2 - Changes in Securities and Use of Proceeds.
(c) On March 1, 1999, the Company sold 5,000 shares of its Series A
Redeemable Senior Pay-In-Kind Preferred Stock to Salomon Brothers
Holding Company Inc., for an aggregate purchase price of $5 million.
The Company paid fees of approximately $300,000 in connection with the
transaction. The issuance of the preferred stock was exempt from
registration under the Securities Act pursuant to Section 4(2)
thereof.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule for the three months
ended March 31, 1999, submitted to the Securities
and Exchange Commission in electronic format
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.
PIERCE LEAHY CORP.
May 7, 1999 By: /s/ Douglas B. Huntley
- ----------- -------------------------
(date) Douglas B. Huntley
Vice President and Chief Financial Officer
(Principal Financial Officer)
-15-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> MAR-31-1999 MAR-31-1998
<CASH> 5,202 2,483
<SECURITIES> 0 0
<RECEIVABLES> 53,357 34,212
<ALLOWANCES> (3,543) (2,887)
<INVENTORY> 1,191 872
<CURRENT-ASSETS> 62,586 38,381
<PP&E> 315,768 231,177
<DEPRECIATION> (72,782) (57,778)
<TOTAL-ASSETS> 728,996 452,585
<CURRENT-LIABILITIES> 88,367 46,152
<BONDS> 570,985 336,636
0 0
0 0
<COMMON> 170 165
<OTHER-SE> 65,117 58,516
<TOTAL-LIABILITY-AND-EQUITY> 728,996 452,585
<SALES> 0 0
<TOTAL-REVENUES> 80,194 56,290
<CGS> 0 0
<TOTAL-COSTS> 45,595 32,915
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 488
<INTEREST-EXPENSE> 12,603 8,300
<INCOME-PRETAX> 3,290 (856)
<INCOME-TAX> 886 181
<INCOME-CONTINUING> 2,404 (1,037)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 92 0
<NET-INCOME> 2,312 (1,037)
<EPS-PRIMARY> 0.14 (0.06)
<EPS-DILUTED> 0.13 (0.06)
</TABLE>
