Iron Mountain Reports First Quarter 2009 Financial Results
- Company delivers solid OIBDA gains ahead of expectations; results supported by core revenue internal growth of 7%, gross margin gains and overhead cost controls
- Strong cash flows raise liquidity and lower consolidated leverage ratio to 3.6 times net debt to EBITDA
- Earnings are
- Stronger U.S. dollar reduces reported results and drives higher effective tax rate
- Company raises 2009 OIBDA guidance and projects lower capital expenditures for the year
“Iron Mountain’s business is healthy and performing as expected,” said
Iron Mountain reported total internal revenue growth of 4% in the first quarter supported by core revenue internal growth of 7%. Solid core revenue internal growth was reported across all business segments — the North American Physical, International Physical and Worldwide Digital business segments. As expected, complementary service revenues decreased year-over-year, due primarily to the completion of a large special project in
Net income attributable to Iron Mountain Incorporated (see Appendix A below) for the quarter was
Key Financial Highlights – Q1 2009
Iron Mountain reported total consolidated revenues of
The Company reported gross profits of
OIBDA for the quarter was
Operating income for the first quarter of 2009 was
The Company’s effective tax rate before the impact of foreign currency rate changes and other discrete items for the quarter was approximately 39%. The net tax impact of the foreign currency rate fluctuations described above added 13% and other discrete items added another 2% to the effective tax rate in the quarter.
Capital expenditures incurred in the first quarter of 2009 totaled
The Company’s Free Cash Flow before Acquisitions and Discretionary Investments (FCF) for the three months ended
Acquisitions
The Company has not completed any acquisitions since the end of 2008. Iron Mountain’s acquisition strategy focuses on acquiring attractive businesses that provide a strong platform for future growth by expanding the Company’s geographic footprint and service offerings while enhancing its existing operations.
Financial Performance Outlook
For 2009, the Company continues to target solid underlying operating performance supported by solid core revenue growth and sustained progress in the North American Physical business segment through an ongoing focus on execution. The Company is reaffirming its full year outlook for 5%-7% internal revenue growth. Based on strong first quarter 2009 operating performance, the Company is raising its 2009 OIBDA guidance range by $20MM and now expects 11%-16% OIBDA (excluding asset gains and losses) growth before the impact of foreign currency rate fluctuations. The significant strengthening of the U.S. dollar against the major currencies is expected to lower results reported in U.S. dollars by approximately 7% in 2009. The Company’s guidance for the second quarter of 2009 set forth below includes a reduction of about 8% in both revenue growth and OIBDA (excluding asset gains and losses) growth driven by the strengthening U.S. dollar. In 2008, primarily due to a softening vehicle resale market, certain vehicle leases that previously met the requirements to be considered operating leases are now classified as capital leases. As a result, 2009 rent expense is expected to decrease by approximately
Quarter Ending Full Year Ending
June 30, 2009 December 31, 2009 % Growth vs. 2008
Low High Low High FX Neutral As Reported
Revenues $730 $750 $2,975 $3,050 5% - 7% (3)% - 0%
Operating Income 132 142 505 545
Depreciation
& Amortization ~78 ~315
OIBDA (excluding
asset gains
and losses) 210 220 820 860 11% - 16% 4% - 9%
Capital
Expenditures ~380
Iron Mountain’s conference call to discuss its first quarter 2009 financial results and second quarter and full year 2009 outlook will be held today at
About Iron Mountain
Iron Mountain Incorporated (NYSE: IRM) helps organizations around the world reduce the costs and risks associated with information protection and storage. The Company offers comprehensive records management and data protection solutions, along with the expertise and experience to address complex information challenges such as rising storage costs, litigation, regulatory compliance and disaster recovery. Founded in 1951, Iron Mountain is a trusted partner to more than 120,000 corporate clients throughout
Forward Looking Statements
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and federal securities laws, and is subject to the safe-harbor created by such Act. Forward-looking statements include our 2009 financial performance outlook and statements regarding our goals, beliefs, future growth strategies, investments, objectives, plans and current expectations. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from those contemplated in the forward-looking statements. Such factors include, but are not limited to: (i) the cost to comply with current and future legislation, regulations and customer demands relating to privacy issues; (ii) the impact of litigation that may arise in connection with incidents in which we fail to protect the Company’s customers’ information; (iii) changes in the price for the Company’s services relative to the cost of providing such services; (iv) changes in customer preferences and demand for the Company’s services; (v) in the various digital businesses in which the Company is engaged, the cost of capital and technical requirements, demand for the Company’s services or competition for customers; (vi) the Company’s ability or inability to complete acquisitions on satisfactory terms and to integrate acquired companies efficiently; (vii) the cost or potential liabilities associated with real estate necessary for the Company’s business; (viii) the performance of business partners upon whom the Company depends for technical assistance or management and acquisition expertise outside
APPENDIX A
Selected Financial Data:
(dollars in millions,
except per share data) Q1/2008 Q1/2009 Inc (Dec)
Revenues $749 $723 (3)%
Gross Profit (excluding D&A) $402 $406 1%
Gross Margin % 53.6% 56.2%
OIBDA (excluding asset gains and losses) $179 $196 9%
OIBDA $176 $197 12%
OIBDA Margin % 23.5% 27.3%
Operating Income $106 $121 14%
Interest Expense, net $60 $56 (7)%
Provision for income taxes $18 $32 73%
Effective tax rate 34.9% 54.0%
Net Income Attributable to Iron Mountain $33 $29 (14)%
EPS - Diluted $0.16 $0.14
Major Component of Other Income (Expense), net:
Foreign Currency Exchange Gains (Losses) $6 $(7)
Q1/2009
Components of Revenue Growth:
Storage internal growth rate 7%
Core service internal growth rate 7%
Core revenue internal growth rate 7%
Complementary service internal growth rate (15)%
Total internal growth rate 4%
Impact of acquisitions --%
Impact of foreign currency fluctuations (7)%
Total revenue growth (3)%
NOTE: Columns may not foot due to rounding.
The Company’s internal growth rates represent the weighted average, year-over-year growth rates of revenues excluding the effects of foreign currency rate fluctuations and acquisitions.
The Company’s core revenues are comprised of storage revenues plus core service revenues. Included in core service revenues are revenues related to the handling and transportation of items in storage and other recurring revenue streams such as secure shredding service revenues, recurring project revenues and maintenance fees associated with software license sales.
Included in the Company’s complementary revenues are revenues associated with ancillary services, such as special projects, public sector projects and fulfillment services, along with revenues from the sale of recycled paper and other products such as cardboard boxes and software licenses.
New Presentation of Net Income and Minority Interest (millions):
Three Months Ended
March 31,
2008 2009
Income Before Provision for Income Taxes $52 $59
Provision for Income Taxes 18 32
Net Income 34 27
Net Income (Loss) Attributable to
Noncontrolling Interests 1 (2)
Net Income Attributable to Iron Mountain $33 $29
Effective
APPENDIX B
Operating Income Before Depreciation and Amortization
Iron Mountain uses Operating Income Before Depreciation and Amortization (“OIBDA”) as an integral part of its planning and reporting systems, to evaluate the operating performance of the consolidated business. The Company uses multiples of current and projected OIBDA in conjunction with its discounted cash flow models to determine its overall enterprise valuation and to evaluate acquisition targets. The Company believes OIBDA and OIBDA Margin provide current and potential investors with relevant and useful information regarding its ability to generate cash flow to support business investment and its ability to grow revenues faster than operating expenses. OIBDA is not a measurement of financial performance under accounting principles generally accepted in
Following is a reconciliation of OIBDA to operating income and net income attributable to Iron Mountain Incorporated (in millions):
Three Months Ended
March 31,
2008 2009
OIBDA (excluding asset gains and losses) $179 $196
Less: Asset (Gains) Losses, net 4 (2)
OIBDA $176 $197
Less: Depreciation and Amortization 70 76
Operating Income $106 $121
Less: Interest Expense, net 60 56
Other (Income) Expense, net (6) 7
Provision for Income Taxes 18 32
Net Income 34 27
Less: Noncontrolling Interests 1 (2)
Net Income Attributable to Iron
Mountain Incorporated $33 $29
NOTE: Columns may not foot due to rounding.
Constant Currency Growth Rates
Three Months Ended
March 31, 2009
Constant
As Reported Currency
Revenues (3)% 4%
OIBDA (excluding asset gains and losses) 9% 18%
OIBDA 12% 21%
Depreciation and Amortization 10% 17%
Operating Income 14% 24%
Iron Mountain conducts business in 39 countries on five continents. As such, a considerable amount of its revenues and expenses are denominated in foreign currencies. In 2008, the U.S. dollar strengthened significantly against most major foreign currencies. As such, the Company’s international results were reduced when translated into U.S. dollars. The table above shows the growth rates of certain operating statement line items on an as reported basis as well as on a constant currency basis. The constant currency growth rates are calculated by translating the 2008 results at the 2009 average exchange rates.
Free Cash Flows before Acquisitions and Discretionary Investments, or FCF
FCF is defined as Cash Flows from Operating Activities less capital expenditures (excluding real estate), net of proceeds from the sales of property and equipment and other, net, and additions to customer acquisition costs. Our management uses this measure when evaluating the operating performance and profitability of our consolidated business. FCF is a useful measure in determining our ability to generate cash flows in excess of our capital expenditures (both growth and maintenance) and our customer acquisition costs. As such, we believe this measure provides relevant and useful information to our current and potential investors. FCF should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with GAAP, such as cash flows from operating activities (as determined in accordance with GAAP).
Following is a reconciliation of Free Cash Flows before Acquisitions and Discretionary Investments to Cash Flows from Operating Activities (in millions):
Three Months Ended
March 31,
2008 2009
Free Cash Flows Before Acquisitions
and Discretionary Investments $(20) $57
Add: Capital Expenditures
(excluding real estate), net 90 68
Additions to Customer Acquisition Costs 3 2
Cash Flows From Operating Activities $73 $127
NOTE: Columns may not foot due to rounding.
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands except Per Share Data)
(Unaudited)
Three Months Ended
March 31,
2008 2009
Revenues:
Storage $404,317 $409,857
Service 345,067 313,489
Total Revenues 749,384 723,346
Operating Expenses:
Cost of Sales (Excluding
Depreciation and Amortization) 347,751 316,980
Selling, General and Administrative 222,228 210,393
Depreciation and Amortization 69,530 76,280
Loss (Gain) on Disposal / Writedown
of Property, Plant and Equipment, Net 3,545 (1,504)
Total Operating Expenses 643,054 602,149
Operating Income 106,330 121,197
Interest Expense, Net 60,019 55,521
Other (Income) Expense, Net (6,035) 7,155
Income Before Provision for
Income Taxes 52,346 58,521
Provision for Income Taxes 18,272 31,577
Net Income 34,074 26,944
Less: Net Income (Loss)
Attributable to the
Noncontrolling Interests 592 (1,855)
Net Income Attributable to Iron
Mountain Incorporated $33,482 $28,799
Earnings Per Share - Basic and Diluted:
Net Income Attributable to Iron
Mountain Incorporated Per Share - Basic $0.17 $0.14
Net Income Attributable to Iron
Mountain Incorporated Per Share - Diluted $0.16 $0.14
Weighted Average Common Shares
Outstanding - Basic 200,871 202,066
Weighted Average Common Shares
Outstanding - Diluted 203,421 203,312
Operating Income before Depreciation
and Amortization $175,860 $197,477
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
(Unaudited)
December 31, March 31,
2008 2009
ASSETS
Current Assets:
Cash and Cash Equivalents $278,370 $271,831
Accounts Receivable (less allowances
of $19,562 and $20,559, respectively) 552,830 562,656
Other Current Assets 145,192 139,451
Total Current Assets 976,392 973,938
Property, Plant and Equipment:
Property, Plant and Equipment at Cost 3,750,515 3,744,345
Less: Accumulated Depreciation (1,363,761) (1,407,992)
Property, Plant and Equipment, net 2,386,754 2,336,353
Other Assets:
Goodwill, net 2,452,304 2,412,524
Other Non-current Assets, net 541,404 521,749
Total Other Assets 2,993,708 2,934,273
Total Assets $6,356,854 $6,244,564
LIABILITIES AND EQUITY
Current Liabilities:
Current Portion of Long-term Debt $35,751 $30,032
Other Current Liabilities 693,846 633,681
Total Current Liabilities 729,597 663,713
Long-term Debt, Net of Current Portion 3,207,464 3,130,363
Other Long-term Liabilities 613,465 632,450
Total Iron Mountain Incorporated
Stockholders' equity 1,802,780 1,814,596
Noncontrolling interests 3,548 3,442
Total Equity 1,806,328 1,818,038
Total Liabilities and Equity $6,356,854 $6,244,564
Investor Relations Contact:
Stephen P. Golden
Vice President, Investor Relations
sgolden@ironmountain.com
(617) 535-4766
SOURCE Iron Mountain Incorporated