01—Abstract
Summary
Summary of the 10-K filed February 28, 2014. Cited figures are marked; the original filing is the authoritative source.
Iron Mountain Incorporated (NYSE: IRM) reports that it stores primarily paper documents and data backup media and provides related information management services, with more than 155,000 clients in 36 countries and total revenues of $3,025.9 milliona for 2013, up 0.7% from $3,005.3 million in 2012.
Operating income fell 11.6% to $492.4 millionb, Adjusted OIBDA declined 1.8% to $895.9 million, and net income attributable to Iron Mountain was $97.3 million, or $0.51 per diluted share, versus $171.7 million in 2012. The decline was driven largely by REIT Costs of $82.9 million, restructuring costs of $23.4 million, and a $59.1 million increase in other expenses tied to debt extinguishment and foreign exchange losses. The company began operating in a manner consistent with REIT status effective January 1, 2014, but the IRS has not yet issued favorable private letter rulings.
The IRS was reported as "tentatively adverse" on whether its racking structures qualify as real estate, and the company states it cannot assure a favorable ruling or a conversion effective January 1, 2014. Estimated Conversion Plan costs are $395.0 million to $425.0 millionc, including $210.0 million to $225.0 million in related tax payments.
Balance sheet leverage is significant: total long-term debt was $4.17 billiond and total equity was $1.06 billion at year-end 2013. Management expects 2014 internal revenue growth of approximately 0% to 2%, and the company plans to fund future REIT-related distributions with a mix of cash and common stock, with at least 80% of the E&P Distribution in stock.
02—Key points
Key Highlights
- Total revenues rose 0.7% to $3,025.9 million in 2013, while internal revenue growth was negative 0.2%; storage rental revenue grew 3.0% to $1,784.7 million.
- Operating income decreased 11.6% to $492.4 million, and Adjusted OIBDA decreased 1.8% to $895.9 million (29.6% margin versus 30.4% in 2012).
- Net income attributable to Iron Mountain fell to $97.3 million ($0.51 per diluted share) from $171.7 million in 2012.
- REIT Costs rose to $82.9 million in 2013 from $34.4 million in 2012, and restructuring costs of $23.4 million were recorded in the third quarter.
- The IRS was described as "tentatively adverse" on whether the racking structures are real estate; the company cannot assure a favorable ruling or REIT conversion effective January 1, 2014.
- Total long-term debt was $4.17 billion at December 31, 2013, with a credit agreement net total lease adjusted leverage ratio of 5.0 versus a maximum allowable ratio of 6.5.
- Storage rental revenue grew 3.0% in 2013 to $1,784.7 million, and the company expects 2014 consolidated internal revenue growth of approximately 0% to 2%.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 28, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $3.02B$3.00B | +0.7% |
| SG&A Expenses | $924.03M$850.37M | +8.7% |
| Operating Expenses | $2.54B$2.45B | +3.5% |
| Operating Income | $489.25M$555.47M | −11.9% |
| Interest Expense | $254.17M$242.60M | +4.8% |
| Net Income | $96.46M$170.92M | −43.6% |
| EPS (Basic) | $0.51$0.98 | −48.0% |
| EPS (Diluted) | $0.50$0.98 | −49.0% |
| Shares Outstanding (Basic) | 190.99M173.60M | +10.0% |
| Shares Outstanding (Diluted) | 192.41M174.87M | +10.0% |
05—Questions
Frequently Asked Questions
Will Iron Mountain become a REIT effective January 1, 2014?
The company has not yet determined whether it will be able to convert. It began operating consistent with REIT status on January 1, 2014, but needs favorable private letter rulings from the IRS, and the IRS has been described as tentatively adverse on the racking structures question. If not effective January 1, 2014, the next possible conversion date is January 1, 2015.
What drove the decline in 2013 net income?
The filing attributes the decrease in income from continuing operations mainly to a $48.4 million increase in REIT Costs, restructuring costs of $23.4 million, and a $59.1 million increase in other expenses, primarily debt extinguishment costs and foreign exchange losses, partially offset by a lower income tax provision.
How much debt does Iron Mountain carry and how is it managed?
Total long-term debt was $4.17 billion at December 31, 2013, and the company stated it is highly leveraged. Approximately 84% of total debt was fixed-rate, and the company targets about 75% fixed. Its net total lease adjusted leverage ratio was 5.0 against a 6.5 maximum under the Credit Agreement.
What are the expected costs of the REIT Conversion Plan?
The company estimates operating and capital expenditures through 2014 of $185.0 million to $200.0 million, and total costs to support the Conversion Plan of $395.0 million to $425.0 million, including $210.0 million to $225.0 million of related tax payments. Ongoing REIT compliance costs are expected to be $10.0 million to $15.0 million annually.
What dividends has Iron Mountain paid to shareholders?
The company paid a $700.0 million Special Dividend in November 2012, of which about $140.0 million was cash and $560.0 million was common stock. Quarterly dividends were $0.27 per share in 2013, with dividends declared totaling $1.08 per share for 2013 versus $5.12 per share in 2012.
06—Continue