01—Abstract
Summary
Summary of the 10-K filed February 13, 2020. Cited figures are marked; the original filing is the authoritative source.
Iron Mountain Incorporated, a Delaware corporation that has operated as a REIT since 2014, reported total revenues of $4,262.6 milliona for 2019, up $36.8 million, or 0.9%, from $4,225.8 million in 2018.
Operating income declined to $781.3 millionb from $808.3 million, and net income attributable to Iron Mountain Incorporated was $267.4 million, or $0.93 per diluted share, compared with $353.9 million in 2018. Adjusted EBITDA rose 0.9% to $1,437.6 million, with the Adjusted EBITDA margin unchanged at 33.7%. Consolidated organic revenue growth was 1.1%, and the company's Global Data Center Business was the main driver of acquisition-related growth.
The company launched Project Summit in October 2019 to simplify its global structure, reduce vice president-and-above positions by approximately 45%, and cut about 700 managerial and administrative positions by the end of 2021. Management estimates the program will improve annual Adjusted EBITDA by approximately $200 millionc once fully realized by the end of 2022, with total costs of approximately $240 million. Restructuring charges of $48.6 million were recognized in the fourth quarter of 2019.
The company also reorganized its reporting into three segments: Global RIM Business, Global Data Center Business, and Corporate and Other Business. Leverage remains high, with total long-term debt of approximately $8.8 billiond (carrying amount $8,664.6 million) against stockholders' equity of $1.46 billion at December 31, 2019.
The company stated that it is currently operating above its long-term targeted leverage ratio and expects leverage to decline over time. Dividends declared totaled $703.8 million in 2019, approximately $2.45 per share, and the company stated it expects organic storage rental revenue growth of 1.0% to 3.0% and organic total revenue growth of flat to approximately 2.0% for 2020.
02—Key points
Key Highlights
- Total revenues of $4,262.6 million in 2019, up 0.9% from $4,225.8 million; consolidated organic revenue growth was 1.1%.
- Net income attributable to Iron Mountain Incorporated fell to $267.4 million ($0.93 per diluted share) from $353.9 million in 2018; operating income declined to $781.3 million from $808.3 million.
- Adjusted EBITDA rose 0.9% to $1,437.6 million, with a steady 33.7% Adjusted EBITDA margin.
- Project Summit targets roughly $200 million in annual Adjusted EBITDA improvement by the end of 2022 on approximately $240 million in total costs, with $48.6 million of restructuring charges recorded in Q4 2019.
- Global Data Center Business had 14 operating data centers across 13 global markets, with approximately 86% of capacity leased and 357 megawatts of total potential capacity.
- Total long-term debt was approximately $8.8 billion, and the company stated it is operating above its targeted leverage ratio, with a Bond leverage ratio of 5.9 under its indentures.
- Dividends declared were $703.8 million in 2019, approximately $2.45 per share; the company paid out $704.5 million in cash dividends during the year.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 13, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $4.26B$4.23B | +0.9% |
| SG&A Expenses | $991.66M$1.01B | −1.5% |
| Operating Expenses | $3.48B$3.42B | +1.9% |
| Operating Income | $781.34M$808.27M | −3.3% |
| Net Income | $267.38M$353.93M | −24.5% |
| EPS (Basic) | $0.93$1.24 | −25.0% |
| EPS (Diluted) | $0.93$1.23 | −24.4% |
| Shares Outstanding (Basic) | 286.97M285.91M | +0.4% |
| Shares Outstanding (Diluted) | 287.69M286.65M | +0.4% |
05—Questions
Frequently Asked Questions
How did Iron Mountain's revenue and profitability trend in 2019?
Total revenues rose $36.8 million, or 0.9%, to $4,262.6 million. Operating income fell 3.3% to $781.3 million, largely reflecting $48.6 million of Project Summit restructuring charges and higher depreciation and amortization. Net income attributable to Iron Mountain Incorporated was $267.4 million, or $0.93 per diluted share, down from $353.9 million in 2018, which included a larger gain on property sales.
What is Project Summit and what does it aim to achieve?
Project Summit is a global program announced in October 2019 to simplify the company's structure by combining its core records and information management operations under one global leader. The company expects to reduce vice president-and-above positions by approximately 45% and cut about 700 managerial and administrative positions by the end of 2021. It estimates the program will improve annual Adjusted EBITDA by approximately $200 million, with full benefits realized by the end of 2022, at total costs of approximately $240 million.
How leveraged is Iron Mountain, and what constraints does its debt impose?
As of December 31, 2019, total long-term debt was approximately $8.8 billion and stockholders' equity was approximately $1.5 billion. The Credit Agreement has a maximum net total lease-adjusted leverage ratio of 6.5, and the company's leverage ratio under its indentures was 5.9. The company stated it is currently operating above its long-term targeted leverage ratio and expects that ratio to decline over time.
What guidance did the company give for 2020?
Iron Mountain expects consolidated organic storage rental revenue growth of approximately 1.0% to 3.0% and consolidated organic total revenue growth of flat to approximately 2.0% in 2020. It also expects Project Summit to improve Adjusted EBITDA by approximately $80.0 million in 2020, and estimates 2020 capital expenditures of approximately $200.0 million for its Global Data Center Business.
Why do investors need to watch the company's REIT status and dividend policy?
As a REIT since 2014, Iron Mountain must distribute at least 90% of its REIT taxable income and intends to distribute all or substantially all of it. The filing warns that failing to remain qualified as a REIT would subject the company to corporate income tax, and that the board sets quarterly dividends at its discretion. Dividends declared in 2019 totaled $703.8 million, or about $2.45 per share, and the company stated it is committed to growing its dividend.
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