<PAGE>
UNITED STATES
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, 2000
--------------
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
-------
IRON MOUNTAIN INCORPORATED
(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)
745 Atlantic Avenue, Boston, MA 02111
-------------------------------------
(Address of Principal Executive Offices, Including Zip Code)
(617) 535-4766
--------------
(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
--- ---
Number of shares of the registrant's Common Stock outstanding as of May 5, 2000:
54,586,813
<PAGE>
IRON MOUNTAIN INCORPORATED
INDEX
<TABLE>
<CAPTION>
<S> <C>
Page
----
PART I - FINANCIAL INFORMATION
Item 1 - Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at March 31, 2000 and
December 31, 1999 (Unaudited) 3
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 2000 and 1999 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2000 and 1999 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements
(Unaudited) 6-18
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations 19-21
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 22
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 22
Signature 24
</TABLE>
<PAGE>
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
-------------- --------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 10,104 $ 3,830
Accounts receivable (less allowances of $10,801
and $5,740 respectively) 160,860 104,074
Deferred income taxes 13,695 12,475
Prepaid expenses and other 30,173 23,285
------------ -------------
Total Current Assets 214,832 143,664
Property, Plant and Equipment:
Property, plant and equipment 804,849 497,369
Less: Accumulated depreciation (107,076) (93,630)
------------ -------------
Property, Plant and Equipment, net 697,773 403,739
Other Assets:
Goodwill, net 1,505,066 729,213
Customer acquisition costs, net 19,445 16,742
Deferred financing costs, net 18,662 16,549
Other 13,841 7,305
------------ -------------
Total Other Assets 1,557,014 769,809
------------ -------------
Total Assets $ 2,469,619 $ 1,317,212
------------ -------------
------------ -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 34,657 $ 9,890
Accounts payable 29,904 25,770
Accrued expenses 110,281 68,519
Deferred income 49,116 32,981
Other current liabilities 20,768 13,188
------------ -------------
Total Current Liabilities 244,726 150,348
Long-term Debt, net of current portion 1,183,536 603,057
Other Long-term Liabilities 5,915 5,749
Deferred Rent 11,300 10,819
Deferred Income Taxes 27,615 16,207
Minority Interest 42,367 42,278
Shareholders' Equity:
Common stock 544 369
Additional paid-in capital 991,629 560,620
Accumulated deficit (36,941) (31,558)
Accumulated other comprehensive items (1,072) (1,193)
Treasury stock -- (39,484)
------------ -------------
Total Shareholders' Equity 954,160 488,754
------------ -------------
Total Liabilities and Shareholders' Equity $ 2,469,619 $ 1,317,212
------------ -------------
------------ -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.
3
<PAGE>
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION> Three Months Ended
March 31,
---------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
Revenues:
Storage $ 124,939 $ 67,722
Service and storage material sales 87,198 41,649
----------- ---------
Total Revenues 212,137 109,371
Operating Expenses:
Cost of sales (excluding depreciation) 104,458 54,435
Selling, general and administrative 53,457 27,875
Depreciation and amortization 26,303 13,595
Merger-related expenses 516 --
----------- ---------
Total Operating Expenses 184,734 95,905
----------- ---------
Operating Income 27,403 13,466
Interest Expense 23,783 11,944
Other Expense, net 781 --
----------- ---------
Income from Continuing Operations Before Provision for
Income Taxes Minority Interest 2,839 1,522
Provision for Income Taxes 8,529 1,623
Minority Interests in (Losses) Earnings of Subsidiaries (307) 147
----------- ---------
Loss from Continuing Operations (5,383) (248)
Income from Discontinued Operations -- 99
----------- ---------
Net Loss Applicable to Common Shareholders $ (5,383) $ (149)
=========== =========
Net Loss Per Common Share - Basic and Diluted:
Loss from Continuing Operations $ (0.11) $ (0.01)
Income from Discontinued Operations -- --
----------- ---------
Net Loss Per Common Share - Basic and Diluted $ (0.11) $ (0.01)
=========== =========
Weighted Average Common Shares Outstanding - Basic and Diluted 47,943 29,500
=========== =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.
4
<PAGE>
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------------
2000 1999
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (5,383) $ (149)
Adjustments to Reconcile Net Loss to Loss from Continuing Operations:
Income from Discontinued Operations -- 99
---------- ----------
Loss from Continuing Operations (5,383) (248)
Adjustments to Reconcile Loss from Continuing Operations to Net Cash
Provided by Operating Activities of Continuing Operations:
Minority Interests in (Losses) Earnings of Subsidiaries (307) 147
Depreciation and Amortization 26,303 13,595
Amortization of Deferred Financing Costs 656 454
Provision for Doubtful Accounts 1,196 350
Foreign Currency Loss 781 55
Other, Net 747 --
Changes in Assets and Liabilities (Exclusive of Acquisitions):
Accounts Receivable 1,068 (2,204)
Prepaid Expenses and Other Current Assets 2,025 1,522
Deferred Income Taxes 10,447 1,566
Other Assets 298 (72)
Accounts Payable (12,092) (8,545)
Accrued Expenses (10,261) 2,611
Deferred Income (1,016) 614
Other Current Liabilities 50 --
Deferred Rent 481 340
Other Long-term Liabilities 2,725 (49)
---------- ----------
Cash Flows Provided by Continuing Operations 17,718 10,136
Cash Flows Used in Discontinued Operations -- (752)
---------- ----------
Cash Flows Provided by Operating Activities 17,718 9,384
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash Paid for Acquisitions, net of cash acquired (5,636) (54,489)
Capital Expenditures (27,646) (18,293)
Additions to Customer Acquisition Costs (3,356) (1,643)
Other, Net (435) --
---------- ----------
Cash Flows Used in Continuing Operations (37,073) (74,425)
Cash Flows Used in Discontinued Operations -- (61)
---------- ----------
Cash Flows Used in Investing Activities (37,073) (74,486)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Debt (203,267) (8,171)
Proceeds from Borrowings 223,558 76,100
Debt Financing from Minority Shareholder 7,036 --
Debt Financing Costs (2,769) (238)
Proceeds from Exercise of Stock Options 885 620
Stock Issuance Costs -- (4)
---------- ----------
Cash Flows Provided by Continuing Operations 25,443 68,307
Cash Flows Provided by Discontinued Operations -- --
---------- ----------
Cash Flows Provided by Financing Activities 25,443 68,307
Effect of Exchange Rates on Cash and Cash Equivalents 186 (21)
Increase in Cash and Cash Equivalents 6,274 3,184
Cash and Cash Equivalents, Beginning of Period 3,830 1,715
---------- ----------
Cash and Cash Equivalents, End of Period $ 10,104 $ 4,899
---------- ----------
---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.
5
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Per Share Data)
(Unaudited)
(1) GENERAL
The interim condensed consolidated financial statements presented herein have
been prepared by Iron Mountain Incorporated ("Iron Mountain" 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 condensed consolidated balance sheet presented as of December 31, 1999
has been derived from the consolidated financial statements that have been
audited by the Company's independent public accountants. The unaudited
condensed 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, but the Company believes that the disclosures are adequate to
make the information presented not misleading. The condensed consolidated
financial statements and notes included herein should be read in conjunction
with the consolidated financial statements and notes included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
(2) COMPREHENSIVE INCOME (LOSS)
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," requires presentation of the components of comprehensive income
(loss), including the changes in equity from non-owner sources such as
unrealized gains (losses) on securities and foreign currency translation
adjustments. The Company's total comprehensive income (loss) is as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------
2000 1999
---------------- --------------
<S> <C> <C>
Comprehensive Loss:
Net Loss $ (5,383) $ (149)
Other Comprehensive Loss:
Foreign Currency Translation Adjustment 121 (576)
-------- ----------
Comprehensive Loss $ (5,262) $ (725)
-------- ----------
-------- ----------
</TABLE>
6
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Per Share Data)
(Unaudited)
(Continued)
(3) ACQUISITIONS
On February 1, 2000, the Company completed its acquisition of Pierce Leahy
Corp. ("Pierce Leahy") in a stock-for-stock merger valued at approximately
$1.1 billion. The total consideration for this transaction was comprised of:
(i) approximately 18.8 million shares of the Company's common stock with a
fair value of $444 million; (ii) approximately 1.6 million options to acquire
the Company's common stock with a fair value of $25 million; (iii) assumed
debt with a fair value of $585 million; and (iv) approximately $4 million of
capitalized transaction costs.
In addition, during the three months ended March 31, 2000, the Company
purchased substantially all of the assets, and assumed certain liabilities,
of two other records and information management businesses (including the
acquisition of Pierce Leahy, collectively, the "2000 Acquisitions").
Each of the 2000 Acquisitions and all 17 of the records and information
management businesses acquired during 1999 (the "1999 Acquisitions") were
accounted for using the purchase method of accounting and, accordingly, the
results of operations for each acquisition have been included in the
consolidated results of the Company from their respective acquisition dates.
In connection with certain 1999 and 2000 acquisitions, related real estate
was also purchased. The aggregate purchase price for the 2000 Acquisitions
was comprised of cash, the Company's common stock and stock options and the
assumption of debt, and exceeded the underlying fair value of the net assets
acquired by $787,902, which has been assigned to goodwill and is being
amortized over 25 to 30 years.
A summary of the total consideration and the preliminary allocation of the
aggregate purchase price of the 2000 Acquisitions, as of their acquisition
dates, is as follows:
<TABLE>
<CAPTION>
<S> <C>
Purchase Price:
Cash Paid $ 10,212
Fair Value of Common Stock Issued 443,950
Fair Value of Stock Options 24,967
Fair Value of Debt Assumed 584,906
------------
Total Purchase Price $ 1,064,035
------------
------------
Allocation of Purchase Price:
Current Assets $ 68,331
Property, Plant & Equipment 281,476
Other Assets 16,612
Goodwill 787,902
Liabilities Assumed (88,765)
Minority Interest (1,521)
------------
Total Allocation of Purchase Price $ 1,064,035
------------
------------
</TABLE>
Allocation of the purchase price for these acquisitions was based on
estimates of the fair value of net assets acquired and, for acquisitions
completed in 2000, is subject to adjustment upon finalization of the purchase
price allocation. The purchase price allocation of the Pierce Leahy
transaction is subject to finalization of the
7
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Per Share Data)
(Unaudited)
(Continued)
(3) ACQUISITIONS (CONTINUED)
assessment of the fair value of property, plant and equipment, operating
leases, restricted common stock and deferred income taxes. Except for the
Pierce Leahy acquisition, the Company is not aware of any information that
would indicate that the final purchase price allocations will differ
significantly from preliminary estimates.
The following unaudited pro forma information shows the results of the
Company's operations for the three months ended March 31, 2000 and the year
ended December 31, 1999 as though each of the significant 1999 and 2000
acquisitions had occurred as of January 1, 1999:
<TABLE>
<CAPTION>
Three Months Year
Ended Ended
March 31, December 31,
2000 1999
-------------- --------------
<S> <C> <C>
Revenues $ 242,314 $ 887,927
Loss from Continuing Operations (7,560) (5,197)
Net Loss (7,560) (18,356)
Loss Per Share from Continuing
Operations - Basic and Diluted (0.14) (0.10)
Net Loss Per Share - Basic and Diluted (0.14) (0.34)
</TABLE>
The pro forma results have been prepared for comparative purposes only and
are not necessarily indicative of the actual results of operations had the
acquisitions taken place as of January 1, 1999, or the results that may occur
in the future. Furthermore, the pro forma results do not give effect to all
cost savings or incremental costs which may occur as a result of the
integration and consolidation of the businesses. Certain 1999 and 2000
acquisitions are not included in the pro forma results as their effect was
immaterial.
In connection with the 1999 and 2000 acquisitions, the Company has undertaken
certain restructurings of the acquired businesses. The restructuring
activities include certain reductions in staffing levels, elimination of
duplicate facilities and other costs associated with exiting certain
activities of the acquired businesses. These restructuring activities were
recorded as costs of the acquisitions and were provided in accordance with
Emerging Issues Task Force Issue No. 95-3, "Recognition of Liabilities in
Connection with a Purchase Business Combination." The Company finalizes its
restructuring plans for each business no later than one year from the date of
acquisition. Unresolved matters primarily include completion of planned
abandonments of facilities and severances for certain 1999 and 2000
acquisitions.
8
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Per Share Data)
(Unaudited)
(Continued)
(3) ACQUISITIONS (CONTINUED)
The following is a summary of reserves related to such restructuring
activities:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------- -----------
<S> <C> <C>
Reserves, Beginning Balance................ $ 9,340 $ 10,482
Reserves Established....................... 7,094 4,234
Expenditures............................... (964) (4,843)
Adjustments to Goodwill.................... (86) (533)
--------- ---------
Reserves, Ending Balance................... $ 15,384 $ 9,340
--------- ---------
--------- ---------
</TABLE>
At March 31, 2000 the restructuring reserves related to acquisitions
consisted of lease losses on abandoned facilities ($6.3 million), severance
costs for approximately 59 people ($3.8 million) and other exit costs ($5.3
million). These accruals are expected to be used within one year of the
finalization of the restructuring plans except for lease losses of $4.3
million, which are based on contracts that extend through the expected lease
term date, and long-term severance contracts of approximately $3.6 million
that extend through 2013.
At December 31, 1999 the restructuring reserves related to acquisitions
consisted of lease losses on abandoned facilities ($4.8 million), severance
costs for approximately 12 people ($1.5 million) and other exit costs ($3.0
million). These accruals are expected to be used within one year of the
finalization of the restructuring plans except for lease losses of $4.6
million, which are based on contracts that extend through the expected lease
term date, and long-term severance contracts of approximately $1.1 million
that extend through 2013.
9
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Per Share Data)
(Unaudited)
(Continued)
(4) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31, 1999
-------------------------------- ---------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Revolving Credit Facility $ 206,899 $ 206,899 $ 5,000 $ 5,000
10-1/8% Senior Subordinated Notes
due 2006 (the "1996 Notes") 165,000 160,100 165,000 167,900
8-3/4% Senior Subordinated Notes due
2009 (the "1997 Notes") 249,616 220,600 249,606 237,500
8-1/4% Senior Subordinated Notes due
2011 (the "1999 Notes") 149,501 126,000 149,490 136,100
11-1/8% Senior Subordinated Notes due
2006 (the "1996A Notes") 133,467 135,803 -- --
9-1/8% Senior Subordinated Notes due
2007 (the "1997A Notes") 113,548 104,180 -- --
8-1/8% Senior Subordinated Notes due
2008 (the "1998A Notes") 119,578 101,043 -- --
Real Estate Mortgages 16,040 16,040 2,048 2,048
Seller Notes 17,093 17,093 -- --
Other 47,451 47,451 41,803 41,803
---------- --------
Total Long-term Debt 1,218,193 612,947
Less: Current Portion (34,657) (9,890)
---------- --------
Long-term Debt, Net of Current
Portion $1,183,536 $603,057
---------- --------
---------- --------
</TABLE>
The estimated fair values for the long-term debt are based on the borrowing
rates available to the Company at March 31, 2000 and December 31, 1999 for
loans with similar terms and average maturities. The fair values of the 1996
Notes, 1997 Notes, 1999 Notes, 1996A Notes, 1997A Notes and 1998A Notes are
based on the quoted market prices for those notes on March 31, 2000 and
December 31, 1999.
10
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Per Share Data)
(Unaudited)
(Continued)
(5) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND
NON-GUARANTORS
As of March 31, 2000, the 1996 Notes, the 1997 Notes, the 1999 Notes, the
1996A Notes and the 1997A Notes (the "Parent Notes") were fully and
unconditionally guaranteed, on a senior subordinated basis, by all of the
Company's direct and indirect wholly owned domestic subsidiaries (the
"Subsidiary Guarantors"). These guarantees are joint and several obligations
of the Subsidiary Guarantors. In addition, the 1996A Notes and the 1997A Notes
are secured by a second lien on 65% of the stock of Iron Mountain Canada
Corporation, the Company's principal Canadian operating subsidiary ("Canada
Company"). The remainder of the Company's subsidiaries (the "Non-Guarantors")
do not guarantee the Parent Notes. The Non-Guarantors consist of (i) the
Company's foreign subsidiaries, including without limitation, Canada Company,
Iron Mountain Europe Limited and their respective subsidiaries, (ii) a
majority-owned subsidiary that owns and leases real property to the Company,
and (iii) Iron Mountain Records Management (Puerto Rico), Inc.
The 1998A Notes are general unsecured obligations of Canada Company, ranking
PARI PASSU in right of payment to all of Canada Company's existing and future
senior unsecured indebtedness. As of March 31, 2000, the 1998A Notes were
fully and unconditionally guaranteed, on a senior subordinated basis, by the
Company, the Subsidiary Guarantors and three of the Non-Guarantors that are
organized under the laws of Canadian provinces. As with the Parent Notes,
these guarantees are joint and several.
Summarized financial information for the Company's Canadian subsidiary is as
follows:
<TABLE>
<CAPTION>
Two Months Ended
March 31, 2000
-------------------
<S> <C>
Revenues $ 9,716
EBITDA 2,649
Operating income 742
Net loss applicable to common shareholders (1,362)
March 31, 2000
-------------------
<S> <C>
Current assets $ 10,742
Total assets 145,192
Current liabilities 9,146
Long-term liabilities 126,937
</TABLE>
11
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Per Share Data)
(Unaudited)
(Continued)
(5) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-
GUARANTORS (CONTINUED)
The following financial data summarizes the consolidating Company on the
equity method of accounting as of and for the first quarter of 2000 and 1999:
<TABLE>
<CAPTION>
MARCH 31, 2000
----------------------------------------------------------------------
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------ ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 427 $ 3,611 $ 6,066 $ -- $ 10,104
Accounts Receivable 5,564 128,348 26,948 -- 160,860
Intercompany Receivable 169,413 (127,579) 30,025 (71,859) --
Other Current Assets 463 49,206 13,769 (19,570) 43,868
---------- ---------- --------- ------------ ------------
Total Current Assets 175,867 53,586 76,808 (91,429) 214,832
Property, Plant and Equipment, net 84,907 500,906 111,960 -- 697,773
Other Assets:
Due From Affiliates 415,728 -- -- (415,728) --
Long-term Notes Receivable from Affiliates 557,123 124,100 -- (681,223) --
Investment in Subsidiaries 388,160 53,469 72,372 (514,001) --
Goodwill, net 352,560 936,406 205,501 10,599 1,505,066
Other 18,103 27,721 6,124 -- 51,948
---------- ---------- --------- ------------ ------------
Total Other Assets 1,731,674 1,141,696 283,997 (1,600,353) 1,557,014
---------- ---------- --------- ------------ ------------
Total Assets $1,992,448 $1,696,188 $ 472,765 $(1,691,782) $ 2,469,619
---------- ---------- --------- ------------ ------------
---------- ---------- --------- ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Total Current Liabilities $ 17,254 $ 181,965 $ 136,936 $ (91,429) $ 244,726
Long-term Debt, Net of Current Portion 1,020,575 3,077 159,884 -- 1,183,536
Due to Affiliates -- 415,681 47 (415,728) --
Long-term Notes Payable to Affiliates -- 681,223 -- (681,223) --
Other Long-term Liabilities 459 47,170 (2,799) -- 44,830
Minority Interest -- -- (307) 42,674 42,367
Shareholders' Equity 954,160 367,072 179,004 (546,076) 954,160
---------- ---------- --------- ------------ ------------
Total Liabilities and Shareholders' Equity $1,992,448 $1,696,188 $472,765 $ (1,691,782) $ 2,469,619
---------- ---------- --------- ------------ ------------
---------- ---------- --------- ------------ ------------
</TABLE>
12
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Per Share Data)
(Unaudited)
(Continued)
(5) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-
GUARANTORS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------------------------------------------
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------ ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ -- $ 2,260 $ 1,570 $ -- $ 3,830
Accounts Receivable -- 93,076 10,998 -- 104,074
Other Current Assets -- 42,312 6,718 (13,270) 35,760
---------- ---------- --------- ------------ -------------
Total Current Assets -- 137,648 19,286 (13,270) 143,664
Property, Plant and Equipment, net -- 352,784 50,955 -- 403,739
Other Assets:
Due From Affiliates 224,826 -- -- (224,826) --
Long-term Notes Receivable from Affiliates 557,123 -- -- (557,123) --
Investment in Subsidiaries 276,291 52,971 -- (329,262) --
Goodwill, net -- 623,285 105,928 -- 729,213
Other 15,908 24,036 652 -- 40,596
---------- ---------- --------- ------------ -------------
Total Other Assets 1,074,148 700,292 106,580 (1,111,211) 769,809
---------- ---------- --------- ----------- ------------
---------- ---------- --------- ------------ -------------
Total Assets $1,074,148 $1,190,724 $ 176,821 $(1,124,481) $ 1,317,212
---------- ---------- --------- ------------ -------------
---------- ---------- --------- ------------ -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Total Current Liabilities $ 15,398 $ 100,630 $ 47,590 $ (13,270) $ 150,348
Long-term Debt, Net of Current Portion 569,996 2,942 30,119 -- 603,057
Due to Affiliates -- 224,793 33 (224,826) --
Long-term Notes Payable to Affiliates -- 557,123 -- (557,123) --
Other Long-term Liabilities -- 31,497 1,278 -- 32,775
Minority Interest -- -- 42,278 -- 42,278
Shareholders' Equity 488,754 273,739 55,523 (329,262) 488,754
---------- ---------- --------- ------------ -------------
Total Liabilities and Shareholders' Equity $1,074,148 $1,190,724 $ 176,821 $(1,124,481) $ 1,317,212
---------- ---------- --------- ------------ -------------
---------- ---------- --------- ------------ -------------
</TABLE>
13
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Per Share Data)
(Unaudited)
(Continued)
(5) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-
GUARANTORS (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000
----------------------------------------------------------------------
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------ ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Storage $ 574 $ 111,076 $ 13,289 $ -- $ 124,939
Service and Storage Material Sales 3,249 72,504 11,948 (503) 87,198
--------- --------- -------- --------- ----------
Total Revenues 3,823 183,580 25,237 (503) 212,137
Operating Expenses:
Cost of Sales (Excluding Depreciation) 2,236 89,884 14,206 (1,868) 104,458
Selling, General and Administrative 660 45,922 5,510 1,365 53,457
Depreciation and Amortization 341 22,801 3,161 -- 26,303
Merger-Related Expenses -- 516 -- -- 516
--------- --------- -------- --------- ----------
Total Operating Expenses 3,237 159,123 22,877 (503) 184,734
--------- --------- -------- --------- ----------
Operating Income 586 24,457 2,360 -- 27,403
Interest Income (13,674) -- -- 13,674 --
Interest Expense 20,492 13,510 3,455 (13,674) 23,783
Equity in the (Earnings) Losses of
Subsidiaries 352 (102) -- (250) --
Other Expense (Income) -- (66) 847 -- 781
--------- --------- -------- --------- ----------
Income (Loss) from Continuing Operations
Before Provision (Benefit) for Income
Taxes and Minority Interest Expense (6,584) 11,115 (1,942) 250 2,839
Provision (Benefit) for Income Taxes (1,201) 9,970 (240) -- 8,529
Minority Interests in (Losses) Earnings of
Subsidiaries -- -- (307) -- (307)
--------- --------- -------- --------- ----------
Net Income (Loss) $ (5,383) $ 1,145 $(1,395) $ 250 $ (5,383)
--------- --------- -------- --------- ----------
--------- --------- -------- --------- ----------
</TABLE>
14
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Per Share Data)
(Unaudited)
(Continued)
(5) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-
GUARANTORS (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1999
----------------------------------------------------------------------
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------ ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Storage $ -- $ 66,113 $ 1,609 $ -- $ 67,722
Service and Storage Material Sales -- 40,352 1,297 -- 41,649
--------- --------- -------- --------- ----------
Total Revenues -- 106,465 2,906 -- 109,371
Operating Expenses:
Cost of Sales (Excluding Depreciation) -- 52,778 1,657 -- 54,435
Selling, General and Administrative 124 27,313 438 -- 27,875
Depreciation and Amortization -- 13,242 353 -- 13,595
--------- --------- -------- --------- -----------
Total Operating Expenses 124 93,333 2,448 -- 95,905
--------- --------- -------- --------- -----------
Operating Income (Loss) (124) 13,132 458 -- 13,466
Interest Income (10,360) -- -- 10,360 --
Interest Expense 11,719 10,501 84 (10,360) 11,944
Equity in the Earnings of Subsidiaries (1,334) (20) -- 1,354 --
--------- --------- -------- --------- -----------
Income (Loss) from Continuing Operations
Before Provision for Income Taxes and
Minority Interest Expense (149) 2,651 374 (1,354) 1,522
Provision for Income Taxes -- 1,416 207 -- 1,623
Minority Interests in (Losses) Earnings of
Subsidiaries -- -- 147 -- 147
--------- --------- -------- --------- -----------
Income (Losses) from Continuing
Operations (149) 1,235 20 (1,354) (248)
Income from Discontinued Operations -- 99 -- -- 99
--------- --------- -------- --------- -----------
Net Income (Loss) $ (149) $ 1,334 $ 20 $ (1,354) $ (149)
--------- --------- -------- --------- -----------
--------- --------- -------- --------- -----------
</TABLE>
15
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Per Share Data)
(Unaudited)
(Continued)
(5) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-
GUARANTORS (CONTINUED)
<TABLE>
<CAPTION>
MARCH 31, 2000
----------------------------------------------------------------------
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------ ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Cash Flows Provided by (Used in) Operating
Activities $ (7,077) $ 27,535 $ (2,740) $ -- $ 17,718
Cash Flows from Investing Activities:
Investment in Subsidiaries -- (1,591) -- 1,591 --
Intercompany Loans to Subsidiaries (185,715) (10,527) -- 196,242 --
Cash Paid for Acquisitions, net of Cash Acquired (3,895) (565) (1,176) -- (5,636)
Capital Expenditures (2,471) (19,909) (5,266) -- (27,646)
Additions to Customer Acquisition Costs -- (2,696) (660) -- (3,356)
Other, Net -- 91 (526) -- (435)
--------- --------- -------- --------- -----------
Cash Flows Used in Investing Activities (192,081) (35,197) (7,628) 197,833 (37,073)
Cash Flows from Financing Activities:
Repayment of Debt (28,550) (172,192) (2,525) -- (203,267)
Net Proceeds from Borrowings 220,500 1,885 1,173 -- 223,558
Debt Financing from Minority Shareholder -- -- 7,036 -- 7,036
Intercompany Loans from Parent 9,519 179,320 7,403 (196,242) --
Equity Contribution from Parent -- -- 1,591 (1,591) --
Proceeds from Exercise of Stock Options 885 -- -- -- 885
Debt Financing and Stock Issuance Costs (2,769) -- -- -- (2,769)
--------- --------- -------- --------- -----------
Cash Flows Provided by Financing Activities 199,585 9,013 14,678 (197,833) 25,443
Effect of Exchange Rates on Cash and Cash
Equivalents -- -- 186 -- 186
Increase in Cash and Cash Equivalents 427 1,351 4,496 -- 6,274
Cash and Cash Equivalents, Beginning of Period -- 2,260 1,570 -- 3,830
--------- --------- -------- --------- -----------
Cash and Cash Equivalents, End of Period $ 427 $ 3,611 $ 6,066 $ -- $ 10,104
--------- --------- -------- --------- -----------
--------- --------- -------- --------- -----------
</TABLE>
16
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Per Share Data)
(Unaudited)
(Continued)
(5) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-
GUARANTORS (CONTINUED)
<TABLE>
<CAPTION>
MARCH 31, 1999
----------------------------------------------------------------------
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------ ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Cash Flows Provided by (Used in) Continuing
Operations $ (21,975) $ 31,618 $ 493 $ -- $ 10,136
Cash Flows Used in Discontinued Operations -- (752) -- -- (752)
--------- -------- --------- --------- ---------
Cash Flows Provided by (Used in) Operating
Activities (21,975) 30,866 493 -- 9,384
Cash Flows from Investing Activities:
Investment in Subsidiaries (46,613) (46,643) -- 93,256 --
Cash Paid for Acquisitions, net of Cash Acquired -- (10,656) (43,833) -- (54,489)
Capital Expenditures -- (18,166) (127) -- (18,293)
Additions to Customer Acquisition Costs -- (1,643) -- -- (1,643)
--------- -------- --------- --------- ---------
Cash Flows Used in Continuing Operations (46,613) (77,108) (43,960) 93,256 (74,425)
Cash Flows Used in Discontinued Operations -- (61) -- -- (61)
--------- -------- --------- --------- ---------
Cash Flows Used in Investing Activities (46,613) (77,169) (43,960) 93,256 (74,486)
Cash Flows from Financing Activities:
Repayment of Debt (7,900) (203) (68) -- (8,171)
Net Proceeds from Borrowings 76,100 -- -- -- 76,100
Equity Contribution from Parent -- 46,613 46,643 (93,256) --
Proceeds from Exercise of Stock Options 620 -- -- -- 620
Debt Financing and Stock Issuance Costs (242) -- -- -- (242)
--------- -------- --------- --------- ---------
Cash Flows Provided by Continuing Operations 68,578 46,410 46,575 (93,256) 68,307
Cash Flows Provided by Discontinued
Operations -- -- -- -- --
--------- -------- --------- --------- ---------
Cash Flows Provided by Financing Activities 68,578 46,410 46,575 (93,256) 68,307
Effect of Exchange Rates on Cash and Cash
Equivalents -- -- (21) -- (21)
Increase (Decrease) in Cash and Cash Equivalents (10) 107 3,087 -- 3,184
Cash and Cash Equivalents, Beginning of Period 12 1,703 -- -- 1,715
--------- -------- --------- --------- ---------
Cash and Cash Equivalents, End of Period $ 2 $ 1,810 $ 3,087 $ $ 4,899
--------- -------- --------- --------- ---------
--------- -------- --------- --------- ---------
</TABLE>
17
<PAGE>
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, except Per Share Data)
(Unaudited)
(Continued)
(6) EARNINGS PER SHARE
In accordance with Statement of Financial Accounting Standards No. 128, basic
net loss per common share is calculated by dividing net loss by the weighted
average number of common shares outstanding. The calculation of diluted net
loss per share is consistent with that of basic net loss per share but gives
effect to all potential common shares (that is, securities such as options,
warrants or convertible securities) that were outstanding during the period,
unless the effect is antidilutive. For the quarters ended March 31, 2000 and
1999, 1,239 and 875 potential common shares, respectively, have been excluded
from the calculation of diluted net loss per share, as their effects are
antidilutive.
(7) SUBSEQUENT EVENTS
Effective May 1, 2000, the Company acquired all of the assets of Data Storage
Centers, Inc. ("DSC") of Jacksonville, Florida for $54 million in cash. DSC
operates in 14 markets located primarily in the southeastern United States.
In April and through May 12, 2000, the Company acquired two additional
businesses for aggregate purchase price of $5.8 million. The acquisitions
will be accounted for using the purchase method of accounting.
18
<PAGE>
IRON MOUNTAIN INCORPORATED
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 months ended March 31, 2000 and 1999
should be read in conjunction with the condensed consolidated financial
statements and footnotes for the three months ended March 31, 2000 included
herein, and the year ended December 31, 1999, included in the Company's
Annual Report on Form 10-K filed with the Securities and Exchange Commission
on March 30, 2000.
Overview
The Company's consolidated revenues increased $102.7 million, or 94.0%, to
$212.1 million for the first quarter of 2000 from $109.4 million for the
first quarter of 1999. Internal revenue growth, calculated as if Pierce Leahy
had merged with Iron Mountain on January 1, 1999, was 14.4%.
On February 1, 2000, the Company completed its acquisition of Pierce Leahy in
a stock-for-stock merger valued at approximately $1.1 billion. The
acquisition was structured as a reverse merger with Pierce Leahy being the
surviving legal entity and immediately changing its name to Iron Mountain
Incorporated. Based on the number of shares of Iron Mountain and Pierce Leahy
common stock outstanding immediately prior to the completion of the merger,
immediately after the merger former stockholders of Iron Mountain owned
approximately 65% of the Company's common stock. Because of this share
ownership, Iron Mountain is considered the acquiring entity for accounting
purposes. The total consideration for this transaction was comprised of: (i)
approximately 18.8 million shares of the Company's common stock with a fair
value of $444 million; (ii) approximately 1.6 million options to acquire the
Company's common stock with a fair value of $25 million; (iii) assumed debt
with a fair value of $585 million; and (iv) approximately $4 million of
capitalized transaction costs. Consolidated revenues were $342.3 million for
the year ended December 31, 1999.
During the first quarter of 2000, the Company acquired two additional records
and information management services businesses for total consideration of
$5.3 million. These two acquisitions reported $2.0 million in revenues for
the year ended December 31, 1999.
Results of Operations
Consolidated storage revenues increased $57.2 million, or 84.5%, to $124.9
million for the first quarter of 2000, from $67.7 million for the first
quarter of 1999. Consolidated storage revenues increased primarily due to
acquisitions, particularly the Pierce Leahy acquisition. Internal storage
revenue growth, calculated as if Pierce Leahy had merged with Iron Mountain
on January 1, 1999, was 11.9%. The internal storage revenue growth resulted
primarily from net increases in records and other media stored by existing
customers and from sales to new customers.
Consolidated service and storage material sales revenues increased $45.6
million, or 109.4%, to $87.2 for the first quarter of 2000 from $41.6 million
for the first quarter of 1999. Consolidated service and storage material
sales revenues increased primarily due to acquisitions, particularly the
Pierce Leahy acquisition. Internal service and storage material sales revenue
growth, calculated as if Pierce Leahy had merged with Iron Mountain on
January 1, 1999, was 18.0%. The internal revenue growth resulted from
increases in service and storage material sales to existing customers and the
addition of new customer accounts.
For the reasons discussed above, total consolidated revenues increased $102.7
million, or 94.0%, to $212.1 million for the first quarter of 2000 from
$109.4 million for the first quarter of 1999.
19
<PAGE>
IRON MOUNTAIN INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Consolidated cost of sales (excluding depreciation) increased $50.1 million,
or 91.9%, to $104.5 million (49.2% of consolidated revenues) for the first
quarter of 2000 from $54.4 million (49.8% of consolidated revenues) for the
first quarter of 1999. The dollar increase was primarily attributable to the
acquisition of Pierce Leahy, while the decrease as a percentage of revenues
was primarily attributable to operating efficiencies gained as a result of an
increase in scale.
Consolidated selling, general and administrative expenses increased $25.6
million, or 91.8%, to $53.5 million (25.2% of consolidated revenues) for the
first quarter of 2000 from $27.9 million (25.5% of consolidated revenues) for
the first quarter of 1999. The dollar increase was primarily attributable to
the Pierce Leahy acquisition, while the decrease as a percentage of revenues
was primarily attributable to operating efficiencies gained as a result of an
increase in scale partially offset by the increased spending in information
technology related to the following: (i) the conversion of new systems for
the Company's data security business, (ii) increased staffing in preparation
for systems conversions related to the integration of Pierce Leahy with the
Company and (iii) the Company's efforts to explore new technology-related
service opportunities.
Consolidated depreciation and amortization expense increased $12.7 million,
or 93.5%, to $26.3 million (12.4% of consolidated revenues) for the first
quarter of 2000 from $13.6 million (12.4% of consolidated revenues) for the
first quarter of 1999. The dollar increase was primarily attributable to the
additional depreciation and amortization expense related to the 1999 and 2000
Acquisitions, and capital expenditures including racking systems, information
systems and expansion of storage capacity in existing facilities.
Merger-related expenses are certain expenses directly related to the
Company's merger with Pierce Leahy that cannot be capitalized and include
costs of exiting certain facilities, severance and pay-to-stay payments,
system conversion costs and other transaction-related costs. Merger-related
expenses were $0.5 million, 0.2% of consolidated revenues, for the first
quarter of 2000.
As a result of the foregoing factors, consolidated operating income increased
$13.9 million, or 103.5%, to $27.4 million (12.9% of consolidated revenues)
for the first quarter of 2000 from $13.5 million (12.3% of consolidated
revenues) for the first quarter of 1999.
Consolidated interest expense increased $11.9 million, or 99.1%, to $23.8
million for the first quarter of 2000 from $11.9 million for the first
quarter of 1999. The increase was primarily attributable to increased
indebtedness related to the financing of acquisitions and capital
expenditures as well as debt assumed as a result of the Pierce Leahy
acquisition. Consolidated other income (expense) for the first quarter of
2000 is comprised of a $0.8 million net foreign currency exchange loss
primarily due to a change in the value of the Canadian dollar as compared to
U.S. dollar, as it relates to the 1998A Notes.
As a result of the foregoing factors, consolidated income from continuing
operations before provision for income taxes and minority interests in
(losses) earnings of subsidiaries increased $1.3 million to $2.8 million
(1.3% of consolidated revenues) for the first quarter of 2000 from $1.5
million (1.4% of consolidated revenues) for the first quarter of 1999. The
provision for income taxes was $8.5 million for the first quarter of 2000
compared to $1.6 million for the first quarter of 1999. The Company's
effective tax rate is higher than statutory rates primarily due to the
amortization of the nondeductible portion of goodwill associated with certain
acquisitions (the tax laws generally permit deduction of such expenses for
asset purchases, but
20
<PAGE>
IRON MOUNTAIN INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
not for acquisitions of stock). In connection with the 2000 Acquisitions, the
Company recorded approximately $509 million in nondeductible goodwill.
Consolidated loss from continuing operations increased $5.2 million to $5.4
million (2.5% of consolidated revenues) for the first quarter of 2000 from
$0.2 million (0.2% of consolidated revenues) for the first quarter of 1999.
As a result of the foregoing factors, consolidated earnings before interest,
taxes, depreciation, amortization, extraordinary items, other income and
merger-related expenses ("EBITDA") increased $27.1 million, or 100.4%, to
$54.2 million (25.6% of consolidated revenues) for the first quarter of 2000
from $27.1 million (24.7% of consolidated revenues) for the first quarter of
1999.
Liquidity and Capital Resources
As the Company has sought to increase its EBITDA, it has made significant
capital investments, consisting primarily of: (i) acquisitions; (ii) capital
expenditures, primarily related to growth (including investments in real
estate, racking systems, information systems and expansion of storage
capacity in existing facilities); and (iii) customer acquisition costs. Cash
paid for these investments during the first three months of 2000 amounted to
$5.6 million, $27.6 million and $3.4 million, respectively. These investments
have been primarily funded through cash flows from operations and borrowings
under the Company's revolving credit facility.
Net cash provided by operations was $17.7 million for the first three months
of 2000 compared to $9.4 million for the same period in 1999. The increase
resulted from an increase in EBITDA, which was partially offset by a decrease
in trade accounts payable and accrued expenses accounts.
Net cash provided by financing activities was $25.4 million for the three
months ended March 31, 2000, consisting primarily of the proceeds from
borrowings under the Company's revolving credit facility of $223.6 million,
which were partially offset by repayments of debt of $203.3 million.
Effective February 1, 2000, the Company's revolving credit facility was
amended and restated (the "Amended Credit Agreement") to increase the
aggregate principal amount available to $400.0 million and to include the
ability to borrow in certain foreign currencies. The facility matures on
January 31, 2005. Interest on borrowings under the Amended Credit Agreement
will be paid at the Company's choice of five different variable interest
rates. The Amended Credit Agreement contains certain restrictive covenants.
21
<PAGE>
IRON MOUNTAIN INCORPORATED
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
The Company does not hold any derivative financial instruments or derivative
commodity instruments. Iron Mountain's investment in Iron Mountain Europe
Limited and other international investments may be subject to risks and
uncertainties relating to fluctuations in currency valuation. In addition,
one of the Company's Canadian subsidiaries, Iron Mountain Canada Corporation,
has U.S. dollar denominated debt. Gains and losses due to exchange rate
fluctuations related to this debt are recognized in the Company's
consolidated statements of operations.
The Company engages neither in speculative nor derivative trading activities.
As of March 31, 2000, the Company had $0.2 billion of debt outstanding with a
weighted average variable interest rate of 7.95% and $1.0 billion of fixed
rate debt outstanding. If the weighted average variable interest rate had
increased by 1% to 8.95%, such increase would have had a negative impact on
the Company's net income for the quarter ended March 31, 2000 of
approximately $434,000. See Note 4 to Notes to Condensed Consolidated
Financial Statements for a discussion of the Company's long-term
indebtedness, including the fair values of such indebtedness as of March 31,
2000 and December 31, 1999.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
Listed below are the exhibits which are filed as part of this Form 10-Q
(according to the number assigned to them in Item 601 of Regulation S-K).
<TABLE>
<CAPTION>
Exhibit
No. Description of Document Exhibit File No.
- ------- ----------------------- ----------------
<S> <C> <C>
2.1 Amendment No. 1 to Asset Purchase and Sale
Agreement, dated May 1, 2000, by and among
Iron Mountain Records Management, Inc., Data
Storage Center, Inc., DSC of Florida, Inc.,
DSC of Massachusetts, Inc., Suddath Van Lines,
Inc. and Suddath Family Trust U/A
11/8/79 ...................................... Filed herewith as
Exhibit 2.1
2.2 Asset Purchase and Sale Agreement, dated
February 18, 2000, by and among Iron Mountain
Records Management, Inc., Data Storage Center,
Inc., DSC of Florida, Inc., DSC of
Massachusetts, Inc., and Suddath Van Lines,
Inc. ......................................... Incorporated by
reference to
Exhibit 2.1 from the
Company's Annual
Report on Form 10-K,
filed on March 30,
2000
10.1 Employment Agreement, dated as of February 1,
2000, by and between Pierce Leahy and
J. Peter Pierce .............................. Incorporated by
reference to
Exhibit 10.5 from the
Company's Annual
Report on Form 10-K,
filed on March 30,
2000.
10.2 Third Amended and Restated Credit Agreement,
dated as of January 27, 2000, among the
Company and certain lenders party thereto and
the Chase Manhattan Bank, as Administrative
Agent ........................................ Incorporated by
reference to
Exhibit 10.1 from the
Company's Current
Report on Form 8-K,
filed on February 1,
2000.
10.3 Registration Rights Agreement Joinder, dated
as of February 1, 2000, by and among the
Company and certain shareholders of the
Company ...................................... Incorporated by
reference to
Exhibit 10.21 from the
Company's Annual
Report on Form 10-K,
filed on March 30,
2000.
27 Financial Data Schedule ...................... Filed herewith as
Exhibit 27
</TABLE>
(b) REPORTS ON FORM 8-K.
1. Form 8-K (Items 2 and 7) filed on February 1, 2000.
22
<PAGE>
IRON MOUNTAIN INCORPORATED
CERTAIN IMPORTANT FACTORS
We have made statements in this Quarterly Report on Form 10-Q that constitute
"forward-looking statements" as that term is defined in the federal
securities laws. These forward-looking statements concern the operations,
economic performance and financial condition of Iron Mountain. The
forward-looking statements are subject to various known and unknown risks,
uncertainties and other factors. When we use words such as "believes,"
"expects," "anticipates," "estimates" or similar expressions, we are making
forward-looking statements.
Although we believe that our forward-looking statements are based on
reasonable assumptions, our expected results may not be achieved, and actual
results may differ materially from our expectations. Important factors that
could cause actual results to differ from expectations include, among others,
the following:
- unanticipated costs as a result of Iron Mountain's acquisition of
Pierce Leahy;
- difficulties related to the integration of acquisitions generally
and, more specifically, the integration of the operations of Iron
Mountain and Pierce Leahy;
- our significant indebtedness and the cost and availability of
financing for contemplated growth;
- the cost and availability of appropriate storage facilities;
- changes in customer preferences and demand for our services;
- rapid and significant changes in technology;
- intense competition in the industry; and
- other general economic and business conditions.
These cautionary statements should not be construed by you to be exhaustive,
and they are made only as of the date of this report. You should read these
cautionary statements as being applicable to all forward-looking statements
wherever they appear. We assume no obligation to update or revise the
forward-looking statements or to update the reasons why actual results could
differ from those projected in the forward-looking statements.
23
<PAGE>
IRON MOUNTAIN INCORPORATED
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
May 15, 2000
- ------------ By: /s/ Jean A. Bua
(date) ------------------------------------
Jean A. Bua
Vice President and Corporate Controller
(Principal Accounting Officer)
24
<PAGE>
Exhibit 2.1
AMENDMENT NO. 1 TO
ASSET PURCHASE AND SALE AGREEMENT
THIS AMENDMENT NO. 1, dated as of May 1, 2000 (this "Amendment"), to
the Asset Purchase and Sale Agreement, dated as of February 18, 2000 (the
"Agreement"), by and among Iron Mountain Records Management, Inc., Data Storage
Center, Inc., Data Storage Center of Florida, Inc., Data Storage Centers of
Massachusetts, Inc., and Suddath Van Lines, Inc., is made by and among each of
the undersigned parties to the Agreement and the undersigned Suddath Family
Trust U/A 11/8/79 (the "Suddath Trust"). Capitalized terms used and not
otherwise defined herein have the respective meanings ascribed to them in the
Agreement.
WHEREAS, the undersigned wish to amend the Agreement to join the
Suddath Trust as an additional Seller party thereto and to set forth certain
other agreements; and
NOW THEREFORE, pursuant to Section 12.13 of the Agreement, and in
consideration of the mutual covenants and agreements set forth herein, the
parties hereby agree, and the Agreement is hereby amended, as follows:
1. JOINDER. The Suddath Trust hereby joins in the execution and delivery of the
Agreement and agrees that it shall be deemed to be a Seller for all purposes
under the Agreement. The Suddath Trust hereby agrees to be bound by all terms
and conditions contained in the Agreement as if it were an original Seller party
thereto on the date of the Agreement.
2. AMENDMENT. Effective upon the execution of this Amendment by the parties
hereto,
(a) the initial paragraph of the Agreement shall be amended and
restated in its entirety to read as follows:
"THIS AGREEMENT ("Agreement") is made as of the 18th day of February,
2000 by and among Iron Mountain Records Management, Inc., a Delaware
corporation ("Buyer"), Data Storage Center, Inc., a Florida
corporation, Data Storage Center of Florida, Inc., a Florida
corporation, Data Storage Centers of Massachusetts, Inc., a
Massachusetts corporation, and Suddath Family Trust U/A 11/8/79, a
trust formed under the laws of the State of Florida (collectively,
"Seller"), and Suddath Van Lines, Inc., a Florida corporation d/b/a
Suddath Relocation Systems (the "Stockholder")."
(b) Section 1.23 of the Agreement shall be amended and restated in its
entirety to read as follows:
"Section 1.23. SUBJECT ASSETS. The term "Subject Assets" shall mean all
of those assets and properties of Seller used, useful to or held by
Seller in the operation of the Business including, without limitation,
all racking, shelving, warehouse equipment, owned and leased vehicles,
office equipment, telephone systems, security systems, computers,
computer programs (including data security inventory software),
customer Contracts, deposits, the right to use the name "Data Storage
Center," non-competition and
<PAGE>
confidentiality agreements obtained by Seller for the benefit of the
Business (which, in the case of employee non-competition and
confidentiality agreements, shall mean only such agreements with
Seller Employees employed by Buyer on the Closing Date), accounts
receivable and security deposits; PROVIDED, HOWEVER, that the Subject
Assets (a) shall not include the Excluded Assets and (b) with regard
to the Suddath Family Trust U/A 11/8/79 only, shall consist solely of
its Business related customer Contracts, accounts receivable and
deposits, the right to use the name "Data Storage Center," and any
non-competition and confidentiality agreements obtained by it for the
benefit of the Business (which, in the case of employee
non-competition and confidentiality agreements, shall mean only such
agreements with Seller Employees employed by Buyer on the Closing
Date)."
(c) Section 2.3 of the Agreement shall be amended and restated in its
entirety to read as follows:
"Section 2.3. ALLOCATION. The Purchase Price shall be
allocated among each of the Subject Assets and to the Confidentiality
and Non-Competition Agreements in the manner set forth in a schedule,
which shall be agreed upon by Buyer and Seller no later than the tenth
(10th) business day after the Closing Date."
(d) Immediately following Section 6.5(c) of the Agreement there shall
be inserted a new Section 6.5(d), which shall read in its entirety as follows:
"(d) With regard to each of the Leased Premises as to which
the landlord has not waived its right (if any) under the underlying
Lease to require tenant to remove any tenant improvements and restore
the Leased Premises at the expiration or earlier termination of said
Lease, Seller shall retain responsibility for such removal or
restoration in, on and about the Leased Premises, to the extent that
such tenant improvements or restoration obligations are (i) existing as
of the Closing Date (ii) required to be removed or repaired by the
landlord in accordance with the terms and conditions of the underlying
Lease, and (iii) unrelated to the removal of racking from the Leased
Premises or the repair of the Leased Premises related to racking
attachments and supports. Within thirty (30) days after Closing, Buyer
and Seller shall jointly prepare a schedule which sets forth each
removal and/or restoration obligation described under clauses (i) and
(iii), and if practicable, clause (ii), of this Section 6.5(d)."
(e) Immediately following Section 9.4 of the Agreement there shall be
inserted a new Section 9.5, which shall read in its entirety as follows:
"Section 9.5 MAY LEASE PAYMENTS. Seller agrees to make timely
payment of all amounts due for the month of May, 2000 under each Lease
described under Sections 6.5(a) and 7.6(a) hereof, and each lease of
Owned Premises described under Sections 6.5(b) and 7.6(b) hereof. Buyer
agrees to reimburse Seller at Closing for such payments.
(f) The initial paragraph of Section 11.2(a) of the Agreement shall be
amended and restated in its entirety to read as follows:
<PAGE>
(a) Seller and Stockholder agree, jointly and severally, that
on and after the Closing they shall indemnify and hold harmless Buyer
and its Affiliates, stockholders, directors, officers, employees,
agents and representatives (collectively, the "Buyer Indemnified
Parties") from and against any and all damages, claims, losses,
expenses, costs, obligations, and liabilities including, without
limiting the generality of the foregoing, liabilities for all
reasonable attorneys', accountants' and experts' fees and expenses
actually paid, including those incurred to enforce the terms of this
Agreement or any Collateral Document (excluding consequential damages,
lost profits, lost business opportunities and incidental damages)
(collectively, "Loss and Expense"), suffered by the Buyer Indemnified
Parties by reason of or arising out of (i) any breach of representation
or warranty made by Seller or Stockholder pursuant to this Agreement or
any Collateral Document, (ii) any failure by Seller or Stockholder to
perform or fulfill any of its covenants or agreements set forth in this
Agreement or any Collateral Document, (iii) any Excluded Liability
(including, without limitation, any such Loss and Expense suffered by
the Buyer Indemnified Parties by reason of or arising out of the rack
collapses at Seller's Miami, Florida facilities in 1995 and at Seller's
Dallas, Texas facilities in August 1999, and the computerized inventory
tracking server and backup failure at Seller's Charlotte, North
Carolina facilities in 1997), (iv) for a period of twenty-four (24)
months after the Closing Date, without limiting anything contained in
Section 11.2(a)(iii), any lost, damaged or improperly destroyed records
of customers with which Seller did not, as of the Effective Time, have
a contract which limited Seller's liability in the event of loss,
damage or destruction to $3.00 or less per standard letter legal
carton, if it cannot be determined with reasonable certainty whether
the date of such loss, damage or destruction occurred prior to or after
the Effective Time, provided that, with respect to any loss, damage or
destruction described in this Section 11.2(a)(iv), Seller shall
indemnify Buyer for only fifty percent (50%) of any such Loss and
Expense, (v) any hazardous substance, hazardous material or other
environmental condition existing on, in or under the Owned or Leased
Premises on or before the Effective Time, or (vi) repair costs,
including without limitation any such costs in respect of materials,
supplies, labor costs, required disassembly or re-assembly of racking
and equipment and other expenses and charges, directly arising out of
any subsidence, sagging or other instability of the floor or
substructure, or other resulting structural failure, of the Leased
Premises located at 3029 Bankers Industrial Drive, Doraville, Georgia,
but only to the extent such repair costs were not caused by the use of
such Leased Premises by Buyer after the Closing Date in a manner that
is materially more stressful on the floor, structure or substructure of
such location than Seller's prior use thereof.
3. WAIVERS. Buyer hereby waives Seller's compliance at Closing with the
provisions of:
(a) Section 6.12(a) of the Agreement, PROVIDED, HOWEVER, that (i) at
Closing Seller shall have completed the removal of all cartons and other
materials which constitute Subject Assets from its facilities located at 315
East Bay Street, Jacksonville, Florida, and (ii) Buyer and Seller shall work
together to move any and all cartons and other materials which constitute
Subject Assets from its facilities located at 6414 East Adamo Drive Tampa,
Florida within a reasonable time after Closing, which in no event shall be more
than sixty (60) days (during which time no rental, lease or similar payments
shall be due Seller from Buyer with respect thereto), and
<PAGE>
(b) Section 6.14 of the Agreement, PROVIDED, HOWEVER, that Seller
hereby agrees to complete, within ninety (90) business days of the Closing Date,
at its sole cost and expense, the construction of a permanent demising wall
dividing the portion of the leased space at Seller's Grand Prairie, Texas
location which is to be subleased by Buyer at Closing.
4. MIAMI CONSENT. Nothing contained in the Agreement of Assignment, dated May,
2000, among Data Storage Center, Inc., Buyer and the City of Miami shall be
construed to alter the provisions of Section 2.2(c) of the Agreement, or to
otherwise amend the Agreement.
5. COUNTERPARTS. This Amendment may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument, and
any of the parties hereto may execute this Amendment by signing any such
counterpart.
6. EFFECT ON AGREEMENT. The Agreement is hereby amended only as specifically set
forth herein, and as so amended will remain in full force and effect in
accordance with its terms.
[Remainder of page intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the date and year first set forth above.
DATA STORAGE CENTER, INC. IRON MOUNTAIN RECORDS
MANAGEMENT, INC.
By: /s/ Michael E. Demont By: /s/ Donald P. Richards
------------------------------ ---------------------------
Michael E. Demont Donald P. Richards
Chief Executive Officer Vice President
DSC OF FLORIDA, INC.
By: /s/ Michael E. Demont
------------------------------
Michael E. Demont
Chief Executive Officer
DSC OF MASSACHUSETTS, INC.
By: /s/ Michael E. Demont
-------------------------------
Michael E. Demont
Chief Executive Officer
SUDDATH VAN LINES, INC.
By: /s/ Barry S. Vaughn
--------------------------------
Barry S. Vaughn
Chief Operating Officer
SUDDATH FAMILY TRUST U/A 11/8/79
By: /s/ Barbara S. Strickland
---------------------------------
Barbara S. Strickland
Trustee
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<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
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