How did the Pierce Leahy merger affect Iron Mountain's 2000 results?

The February 1, 2000 stock-for-stock merger with Pierce Leahy Corp. was valued at $1.0 billion and was accounted for as a purchase with Iron Mountain as the acquiring entity. Consolidated storage revenues increased primarily due to the acquisition, and Pierce Leahy's 1999 storage revenues were $190.1 million. The merger also contributed to higher depreciation, goodwill amortization, interest expense and $9.1 million of merger-related expenses.

Is Iron Mountain profitable, and what drove the 2000 net loss?

Iron Mountain reported a 2000 net loss of $27.8 million, or $0.52 per share, although EBITDA from continuing operations was $257.0 million. The filing attributes the losses in part to depreciation expense from storage capacity expansion, goodwill amortization from acquisitions, interest expense on acquisition borrowings, $15.1 million of stock option compensation expense and $9.1 million of merger-related expenses.

Does Iron Mountain pay dividends?

No. The Board of Directors intends to retain future earnings for development of the business and does not anticipate paying cash dividends on the Common Stock in the foreseeable future. Some borrowing agreements limit dividends and stock repurchases.

What is the company's debt position and how is it financed?

Total debt was $1.36 billion at December 31, 2000, with the August 14, 2000 Amended Credit Agreement providing a $750.0 million facility that includes Tranche A and B term loans and a $400.0 million revolver. As of March 1, 2001, the company had approximately $1.4 billion of total debt, of which $1.2 billion had fixed interest rates. Scheduled debt maturities total $40.8 million for 2001 and $302.0 million for 2005.

What legal risks does the company face?

The company faces litigation arising from three arson fires in March 1997 at its South Brunswick Township, New Jersey facilities. Customers, insurers and abutters have filed lawsuits, and Iron Mountain has denied liability. Management believes the outcome will not have a material adverse effect on financial condition or results of operations, but there can be no assurance of that result.

IRM 10-K FY2000 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 23, 2001. Cited figures are marked; the original filing is the authoritative source.

Iron Mountain Incorporated (NYSE: IRM) reported total 2000 revenues of $986.4 million^a, up from $519.5 million in 1999, driven primarily by the February 1, 2000 merger with Pierce Leahy Corp., which was valued at $1.0 billion and structured as a reverse merger in which Iron Mountain was the accounting acquirer.

Internal revenue growth was 12.3% for total revenues. EBITDA from continuing operations rose to $257.0 million^b (26.1% of revenues) from $129.7 million in 1999, but the company posted a 2000 net loss of $27.8 million ($0.52 per share), compared with a $14.2 million net loss in 1999. Net loss was driven by $126.8 million of depreciation and amortization, $118.0 million of interest expense, $15.1 million of stock option compensation expense and $9.1 million of merger-related expenses.

The balance sheet expanded significantly, with total assets of $2.66 billion^c and total debt of $1.36 billion at December 31, 2000, up from $1.32 billion and $612.9 million a year earlier. Goodwill grew to $1.53 billion. Net cash provided by operating activities was $157.6 million, and capital expenditures were $168.7 million.

For 2001, the company estimated capital expenditures of $175 to $200 million^d, excluding acquisitions and digital services, and it expects merger integration to save about $15 million annually within three years. The company stated it does not anticipate paying cash dividends and is shifting its focus from acquisitions toward internal revenue growth.

The filing also discloses litigation from March 1997 arson fires at the South Brunswick Township, New Jersey facilities. Management does not believe the outcome will have a material adverse effect, although it cannot be predicted with certainty.

02—Key points

Key Highlights

Total revenues rose 89.9% to $986.4 million in 2000, with storage revenues at $585.7 million and service and storage material sales at $400.7 million.
EBITDA from continuing operations increased 98.2% to $257.0 million, with the EBITDA margin rising to 26.1% from 25.0%.
Net loss widened to $27.8 million, or $0.52 per share, in 2000 from $14.2 million in 1999, reflecting higher depreciation, interest expense, stock option compensation and merger costs.
Total debt increased to $1.36 billion at year-end 2000 from $612.9 million, after the Pierce Leahy merger and a August 2000 credit refinancing that included $350 million of term loans.
Storage revenues are described as about 60% of total revenues in each of the last five years, and the company reports more than 125,000 customer accounts with no customer exceeding 2% of consolidated revenues.
The company expects 2001 capital expenditures of $175 to $200 million and merger-related cost savings of about $15 million annually within three years.
Arson-related litigation from the March 1997 South Brunswick Township, New Jersey fires remains pending, and management does not expect a material adverse effect.

03—Questions

Frequently Asked Questions

How did the Pierce Leahy merger affect Iron Mountain's 2000 results?
The February 1, 2000 stock-for-stock merger with Pierce Leahy Corp. was valued at $1.0 billion and was accounted for as a purchase with Iron Mountain as the acquiring entity. Consolidated storage revenues increased primarily due to the acquisition, and Pierce Leahy's 1999 storage revenues were $190.1 million. The merger also contributed to higher depreciation, goodwill amortization, interest expense and $9.1 million of merger-related expenses.
Is Iron Mountain profitable, and what drove the 2000 net loss?
Iron Mountain reported a 2000 net loss of $27.8 million, or $0.52 per share, although EBITDA from continuing operations was $257.0 million. The filing attributes the losses in part to depreciation expense from storage capacity expansion, goodwill amortization from acquisitions, interest expense on acquisition borrowings, $15.1 million of stock option compensation expense and $9.1 million of merger-related expenses.
Does Iron Mountain pay dividends?
No. The Board of Directors intends to retain future earnings for development of the business and does not anticipate paying cash dividends on the Common Stock in the foreseeable future. Some borrowing agreements limit dividends and stock repurchases.
What is the company's debt position and how is it financed?
Total debt was $1.36 billion at December 31, 2000, with the August 14, 2000 Amended Credit Agreement providing a $750.0 million facility that includes Tranche A and B term loans and a $400.0 million revolver. As of March 1, 2001, the company had approximately $1.4 billion of total debt, of which $1.2 billion had fixed interest rates. Scheduled debt maturities total $40.8 million for 2001 and $302.0 million for 2005.
What legal risks does the company face?
The company faces litigation arising from three arson fires in March 1997 at its South Brunswick Township, New Jersey facilities. Customers, insurers and abutters have filed lawsuits, and Iron Mountain has denied liability. Management believes the outcome will not have a material adverse effect on financial condition or results of operations, but there can be no assurance of that result.

04—Continue

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