01—Abstract
Summary
Summary of the 10-K filed February 28, 2012. Cited figures are marked; the original filing is the authoritative source.
Iron Mountain Incorporated (NYSE: IRM) reported total revenues of $3,014.7 milliona for 2011, up from $2,892.3 million in 2010, with storage revenues of $1,683.0 million and service revenues of $1,331.7 million.
Operating income rose to $571.2 millionb and Adjusted OIBDA was $934.9 million (31.0% of revenues, versus 32.0% in 2010). Net income attributable to Iron Mountain was $395.5 million, or $2.02 per diluted share, compared with a net loss of $57.6 million in 2010. The 2011 results were lifted by a $200.6 million gain on sale of discontinued operations, principally the $395.4 million sale of the Digital Business to Autonomy, and were offset by goodwill impairment charges of $46.5 million in the Western Europe reporting unit.
The company is pursuing a three-year strategic plan announced in April 2011 that commits to stockholder payouts of approximately $2.2 billionc through 2013, including about $1.2 billion returned by May 2012. As of February 10, 2012, the company had returned approximately $1.15 billion under these commitments. Total long-term debt was $3,353.6 million at year-end, against total equity of $1,254.3 million, and the company said it plans to operate around the midpoint of its 3x-4x target leverage range.
The filing also states that a strategic review, including a possible conversion to a REIT, is ongoing. The filing discloses a material weakness in internal control over financial reporting, related to identifying and monitoring price reduction clauses in certain U.S. government customer contracts, which led management to conclude that internal control was not effective as of December 31, 2011.
Management described an immaterial restatement of prior-period revenues tied to a billing error on a government contract. The company expects 2012 internal revenue growth of approximately (1)% to 2%d, and it expects operating cash flow from continuing operations to decline in 2012 as recycled paper revenues fall and interest costs rise.
02—Key points
Key Highlights
- Total revenues rose 4.2% to $3,014.7 million in 2011, with internal revenue growth of 1.9%.
- Storage revenues of $1,683.0 million grew 5.3%, and storage and core service revenues were approximately 88% of total 2011 revenues.
- Net income attributable to Iron Mountain was $395.5 million ($2.02 diluted EPS), boosted by a $200.6 million gain on sale of discontinued operations, versus a $57.6 million net loss in 2010.
- Adjusted OIBDA was $934.9 million, up 0.9%, with the margin declining to 31.0% from 32.0%.
- Stockholder payout commitments of approximately $2.2 billion through 2013 were announced; about $1.15 billion had been returned as of February 10, 2012.
- Total long-term debt was $3,353.6 million against total equity of $1,254.3 million, a debt-to-equity ratio of 2.67x.
- Management reported a material weakness in internal control over government contract price reduction clauses, and internal control was deemed not effective at year-end 2011.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 28, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $3.01B$2.89B | +4.2% |
| SG&A Expenses | $834.59M$772.81M | +8.0% |
| Operating Expenses | $2.44B$2.34B | +4.2% |
| Operating Income | $571.20M$547.55M | +4.3% |
| Interest Expense | $205.26M$204.56M | +0.3% |
| Net Income | $399.59M-$52.68M | +858.6% |
| EPS (Basic) | $2.03$-0.29 | +800.0% |
| EPS (Diluted) | $2.02$-0.29 | +796.6% |
| Shares Outstanding (Basic) | 194.78M201.99M | −3.6% |
| Shares Outstanding (Diluted) | 195.94M201.99M | −3.0% |
05—Questions
Frequently Asked Questions
What drove the swing from a 2010 net loss to 2011 net income?
The 2010 net loss of $57.6 million reflected a $283.8 million goodwill impairment related to the former worldwide digital business, of which $197.9 million was in discontinued operations. In 2011, net income of $395.5 million included a $200.6 million gain on sale of discontinued operations, mainly from the June 2011 sale of the Digital Business, and income from continuing operations rose to $246.4 million, partly due to a lower tax provision.
How much capital is the company returning to stockholders?
The company committed to approximately $2.2 billion of stockholder payouts through 2013, including about $1.2 billion by May 2012. As of February 10, 2012, it had returned approximately $1.15 billion through share repurchases and dividends. The remaining share repurchase authorization was approximately $66.0 million after 2012 repurchases through February 10.
What is the company's expected growth outlook for 2012?
The company expects consolidated internal revenue growth of approximately (1)% to 2% for 2012. It also expects operating cash flow from continuing operations to decrease, reflecting lower recycled paper revenues and higher interest costs and incentive compensation payouts. Capital expenditures are expected to be approximately $215.0 million, excluding potential acquisitions.
What material weakness did management identify?
Management identified a material weakness in controls for identifying and monitoring price reduction clauses in certain U.S. government customer contracts under GSA Multiple Award Schedule contracts. This led to an immaterial restatement of prior-period revenues. Management described remediation steps, including hiring a government contract compliance specialist, and expects remediation efforts to continue through fiscal 2012.
What risks are associated with the company's debt?
The company has substantial indebtedness, with $3,353.6 million of total long-term debt at year-end 2011. Its credit agreement and indentures restrict dividends, acquisitions, and additional borrowing. As of year-end, the IMI revolving credit and term loan leverage ratio was 3.4 against a maximum allowable 5.5. The company said it expects interest expense to rise in 2012 following its September 2011 issuance of $400.0 million of 7 3/4% notes due 2019.
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