01—Abstract
Summary
Summary of the 10-K filed February 26, 2016. Cited figures are marked; the original filing is the authoritative source.
Iron Mountain Incorporated, a Delaware corporation, stores physical records and data backup media and provides related information management services, with more than 170,000 customers in 37 countries as of December 31, 2015.
Total revenues were $3.01 billiona in 2015, down from $3.12 billion in 2014, with storage rental revenue of $1,837.9 million and service revenue of $1,170.1 million. Operating income declined to $524.5 million from $549.3 million, while income from continuing operations fell to $125.2 million from $329.0 million, largely due to $98.6 million of other expense that includes $70.9 million of foreign currency transaction losses. Adjusted OIBDA was $920.0 million, a 30.6% margin, and the company generated $541.8 million of operating cash flow from continuing operations.
Foreign exchange fluctuations reduced reported consolidated revenue growth by 5.6% in 2015, while internal revenue growth was 1.5%. The pending Recall Holdings acquisition, agreed June 8, 2015 via a Scheme of Arrangement, is the dominant near-term item. The filing estimates total purchase price of approximately $1,791.0 millionb at the February 19, 2016 share price, roughly $1,100.0 million total cost to close, and about $380.0 million of combined deal and integration costs, of which $47.1 million was incurred through December 31, 2015.
Completion depends on Recall shareholder approval, the Sydney Federal Court, antitrust clearances in several countries, and NYSE and ASX listings, and the filing discloses reimbursement fees of A$25.5 millionc and A$76.5 million in certain termination scenarios. The company operates as a REIT, having elected REIT status effective January 1, 2014, and paid total declared distributions of $402.6 million in 2015 ($1.91 per share). Total long-term debt was $4.85 billion at year-end 2015, with a weighted average interest rate of 5.3%, and the company reported net income attributable to Iron Mountain of $123.2 million, or $0.58 per diluted share.
02—Key points
Key Highlights
- Total revenues fell 3.5% to $3,007,976 thousand in 2015, with storage rental revenue of $1,837.9 million and service revenue of $1,170.1 million; the filing attributes much of the decline to foreign currency translation, which reduced consolidated revenues by 5.6%.
- Net income attributable to Iron Mountain Incorporated declined to $123.2 million ($0.58 per diluted share) from $326.1 million in 2014, reflecting higher other expense (including $70.9 million of foreign currency transaction losses) and $47.0 million of Recall costs.
- Adjusted OIBDA was $920.0 million with a 30.6% margin in 2015, compared with $925.8 million and 29.7% in 2014.
- The proposed Recall Holdings acquisition is estimated at roughly $1,791.0 million total purchase price, with about $1,100.0 million of total cost to close and about $380.0 million of operating and capital expenditures, of which $47.1 million was incurred through December 31, 2015.
- Total long-term debt was $4.85 billion at December 31, 2015, with a weighted average interest rate of 5.3%, and the company issued $1.0 billion of 6% Senior Notes due 2020 in September 2015 to redeem higher-coupon notes.
- Declared distributions totaled $402.6 million ($1.91 per share) in 2015, and the company reported 2016 consolidated revenue internal growth expectations of approximately 1.5% to 2.5%.
- The Transformation Initiative recorded $10.2 million of charges in 2015, with the company targeting a $125.0 million cost reduction goal and expecting an additional approximately $7.0 million charge in the first quarter of 2016.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 26, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $3.01B$3.12B | −3.5% |
| SG&A Expenses | $844.96M$869.57M | −2.8% |
| Operating Expenses | $2.48B$2.57B | −3.3% |
| Operating Income | $524.53M$549.28M | −4.5% |
| Net Income | $123.24M$326.12M | −62.2% |
| EPS (Basic) | $0.58$1.67 | −65.3% |
| EPS (Diluted) | $0.58$1.66 | −65.1% |
| Shares Outstanding (Basic) | 210.76M195.28M | +7.9% |
| Shares Outstanding (Diluted) | 212.12M196.75M | +7.8% |
05—Questions
Frequently Asked Questions
What is the status and size of the proposed Recall Holdings acquisition?
Iron Mountain entered a Scheme Implementation Deed with Recall Holdings Limited on June 8, 2015. Recall shareholders would receive a Cash Supplement plus either 0.1722 Iron Mountain shares or an Australian dollar cash election capped at 225.0 million Australian dollars. The filing estimates about 50.7 million shares and approximately US$323.0 million in cash would be paid if the cash cap is reached, for a total purchase price of about $1,791.0 million. Completion remains subject to Recall shareholder and Sydney Federal Court approval, antitrust clearances, and listing approvals.
How much could the company owe if the Recall transaction is terminated?
The filing states a reimbursement fee of A$25.5 million applies in certain termination circumstances, and a fee of A$76.5 million applies if the agreement is terminated because the necessary antitrust/competition approvals cannot be obtained. The company could also face litigation related to a failed completion.
How did revenue and profitability change in 2015?
Total revenues decreased 3.5% to $3,008.0 million, driven mainly by foreign currency translation, which reduced revenue growth by 5.6%, while internal revenue growth was 1.5%. Operating income fell 4.5% to $524.5 million, and income from continuing operations declined to $125.2 million from $329.0 million, mainly because other expense rose to $98.6 million.
What is Iron Mountain's REIT status and how much does it distribute?
Iron Mountain has been organized and operating as a REIT effective January 1, 2014, and expects to distribute approximately 100% of REIT taxable income. Distributions declared were $402.6 million in 2015, or $1.91 per share, and the 2014 total included a $700.0 million Special Distribution tied to the REIT conversion. The filing warns that failing to maintain REIT qualification would subject the company to corporate-level tax.
What are the main risks to the business highlighted in the filing?
The filing highlights a shift by customers to alternative storage technologies, declining service activity as stored records become less active, pricing pressure, data security and reputational risks, and exposure to foreign exchange given that a significant share of revenue is generated outside the United States. It also cites a substantial level of indebtedness, with total long-term debt of about $4.90 billion as of December 31, 2015.
06—Continue