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TABLE OF CONTENTS
PART IV
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One) | ||
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Fiscal Year Ended December 31, 2014 |
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or |
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to |
Commission File Number 1-13045
IRON MOUNTAIN INCORPORATED
(Exact name of Registrant as Specified in Its Charter)
Delaware
(State or other jurisdiction of incorporation) One Federal Street, Boston, Massachusetts (Address of principal executive offices) |
23-2588479
(I.R.S. Employer Identification No.) 02110 (Zip Code) |
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617-535-4766
(Registrant's telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Name of Exchange on Which Registered | |
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Common Stock, $.01 par value per share | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a small reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ý | Accelerated filer o | |
Non-accelerated filer
o
(Do not check if a smaller reporting company) |
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
As of June 30, 2014, the aggregate market value of the Common Stock of the registrant held by non-affiliates of the registrant was approximately $6.2 billion based on the closing price on the New York Stock Exchange on such date.
Number of shares of the registrant's Common Stock at February 20, 2015: 210,071,985
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required in Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K (the "Annual Report") is incorporated by reference from our definitive Proxy Statement for our 2015 Annual Meeting of Stockholders (our "Proxy Statement") to be filed with the Securities and Exchange Commission (the "SEC") within 120 days after the close of the fiscal year ended December 31, 2014.
IRON MOUNTAIN INCORPORATED
2014 FORM 10-K ANNUAL REPORT
Table of Contents
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References in this Annual Report on Form 10-K to "the Company," "IMI," "Iron Mountain," "we," "us" or "our" include Iron Mountain Incorporated, a Delaware corporation, and its predecessor, as applicable, and its consolidated subsidiaries, unless the context indicates otherwise.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made statements in this Annual Report that constitute "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements concern our operations, economic performance, financial condition, goals, beliefs, future growth strategies, investment objectives, plans and current expectations, such as our (1) commitment to future dividend payments, (2) expected growth in volume of records stored with us from existing customers, (3) expected 2015 consolidated internal revenue growth rate and capital expenditures in 2015, and (4) expected target leverage ratio. These forward-looking statements are subject to various known and unknown risks, uncertainties and other factors. When we use words such as "believes," "expects," "anticipates," "estimates" or similar expressions, we are making forward-looking statements. Although we believe that our forward-looking statements are based on reasonable assumptions, our expected results may not be achieved, and actual results may differ materially from our expectations. In addition, important factors that could cause actual results to differ from expectations include, among others:
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Other risks may adversely impact us, as described more fully under "Item 1A. Risk Factors" of this Annual Report.
You should not rely upon forward-looking statements except as statements of our present intentions and of our present expectations, which may or may not occur. You should read these cautionary statements as being applicable to all forward-looking statements wherever they appear. Except as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers are also urged to carefully review and consider the various disclosures we have made in this document, as well as our other periodic reports filed with the SEC.
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Business Overview
We store records, primarily paper documents and data backup media, and provide information management services that help organizations around the world protect their information, lower storage rental costs, comply with regulations, enable corporate disaster recovery, and better use their information for business advantages, regardless of its format, location or lifecycle stage. We offer comprehensive records and information management services and data management services, along with the expertise and experience to address complex storage and information management challenges such as rising storage rental costs, and increased litigation, regulatory compliance and disaster recovery requirements. Founded in an underground facility near Hudson, New York in 1951, Iron Mountain Incorporated, a Delaware corporation, is a trusted partner to more than 155,000 customers throughout North America, Europe, Latin America and the Asia Pacific region. We have a diversified customer base consisting of commercial, legal, banking, healthcare, accounting, insurance, entertainment and government organizations, including more than 92% of the Fortune 1000. As of December 31, 2014, we operated in 36 countries on five continents and employed over 20,000 people.
Now in our 64th year, we have experienced tremendous growth, particularly since successfully completing the initial public offering of our common stock in February 1996. We have grown from a U.S. business operating fewer than 85 facilities (6 million square feet) with limited storage and information management service offerings and annual revenues of $104.0 million in 1995 into a global enterprise providing storage and a broad range of related records and information management services to customers in markets around the world with approximately 1,100 facilities (67.8 million square feet) as of December 31, 2014 and total revenues of more than $3.1 billion for the year ended December 31, 2014. On January 5, 2009, we were added to the S&P 500 Index. On November 28 2014, we were added to the MSCI REIT index and as of December 31, 2014 we were number 712 on the Fortune 1000.
REIT Conversion
We are committed to delivering stockholder value. To that end, and supported by our strong cash flows, we initiated a stockholder payout program in February 2010 and a dividend policy under which we have paid, and in the future intend to pay, cash dividends on our common stock. In April 2011, we announced a three-year strategic plan to increase stockholder value. A major component of that plan was our commitment to significant stockholder payouts of $2.2 billion through 2013, with $1.2 billion being paid out by May 2012. We fulfilled the commitment to return $1.2 billion of cash to stockholders by May 2012, and in June 2012, we announced our intention to pursue conversion to a REIT. The plan was unanimously approved by our board of directors following a thorough analysis and careful consideration of ways to maximize value through alternative financing, capital and tax strategies. Since May 2012, we have returned $2.1 billion of capital to stockholders including $1.0 billion in cash and $1.1 billion in our common stock.
As part of our plan to convert to a REIT for federal income tax purposes and elect REIT status effective January 1, 2014, we sought private letter rulings ("PLRs") from the United States Internal Revenue Service (the "IRS") relating to numerous technical tax issues, including classification of our steel racking structures as qualified real estate assets. We submitted the PLR requests in the third quarter of 2012, and on June 25, 2014, we announced that we received the favorable PLRs from the IRS necessary for our conversion to a REIT. After receipt of the PLRs, our board of directors unanimously approved our conversion to a REIT for our taxable year beginning January 1, 2014.
In connection with our conversion to a REIT and, in particular, to impose ownership limitations customary for REITs, on January 20, 2015, we completed the merger with our predecessor and all outstanding shares of our predecessor's common stock were converted into a right to receive an equal
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number of shares of our common stock. Accordingly, references herein to our "common stock" refer to our common stock and the common stock of our predecessor, as applicable.
The Durability of Our Business
We believe that the creation of paper-based information will be sustained, not in spite of, but because of, "paperless" technologies such as e-mail and the Internet. These technologies have prompted the creation of hard copies of such electronic information and have also led to increased demand for electronic records services, such as the storage and off-site rotation of backup copies of magnetic media. In addition, we believe that the proliferation of digital information technologies and distributed data networks has created a growing need for efficient, cost-effective, high quality technology solutions for electronic data protection and the management of electronic documents.
We believe that the volume of stored physical and electronic records will continue to increase on a global basis for a number of reasons, including: (1) regulatory requirements; (2) concerns over possible future litigation and the resulting increases in volume and holding periods of records; (3) the continued proliferation of data processing technologies such as personal computers and networks; (4) inexpensive document producing technologies such as desktop publishing software and desktop printing; (5) the high cost of reviewing records and deciding whether to retain or destroy them; (6) the failure of many entities to adopt or follow policies on records destruction; and (7) the need to keep backup copies of certain records in off-site locations for business continuity purposes in the event of disaster.
Business Strategy
Overview
We have transitioned from a growth strategy driven primarily by acquisitions of storage and information management services companies to a strategy that targets multiple sources of revenue growth. Our current strategy is focused on: (1) increasing revenues in developed markets such as the United States, Canada, Australia and western Europe, primarily through improved sales and marketing efforts and attractive fold-in acquisitions; (2) establishing and enhancing leadership positions in high-growth emerging markets such as central and eastern Europe, Latin America and the Asia Pacific region (excluding Australia), primarily through acquisitions; and (3) continuing to identify, incubate and scale emerging business opportunities to support our long-term growth objectives and drive solid returns on invested capital. In our developed markets, we expect continuous improvement initiatives will generate modest profit growth, a portion of which we expect to reinvest in our business. In our existing emerging markets, we expect profits will grow as the local businesses scale, and we will look to reinvest a portion of that improvement to support the growth of these businesses. However, any increases in our international profits will be limited as we seek to make acquisitions in new emerging markets.
Storage rental is the key driver of our economics and allows us to expand our relationships with our customers through value-added services that flow from storage rental. Consistent with our overall strategy, we are focused on increasing incoming volumes on a global basis. There are multiple sources of new volumes available to us, and these sources inform our growth investment strategy. Our investments in sales and marketing support sales to new customers that do not currently outsource some or all of their storage and information management needs, as well as increased volumes from existing customers. We also expect to invest in acquisitions of customer relationships and storage and information management services businesses. In our developed markets, we expect that these acquisitions will primarily be fold-in acquisitions designed to optimize the utilization of existing assets, expand our presence and better serve customers. We also expect to use acquisitions to expand our presence in attractive, higher growth emerging markets. Finally, we continue to pursue new rental streams through emerging business opportunities.
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We offer our customers an integrated value proposition by providing them with secure storage and comprehensive service offerings, including records and information management services and data management services. We have the expertise and experience to address complex storage and information management challenges, such as rising storage rental costs and increased litigation, regulatory compliance and disaster recovery requirements. We expect to maintain a leadership position in the storage and information management services industry around the world by enabling customers to store, protect and better use their informationregardless of its format, location or lifecycle stageso they can optimize their business and ensure proper recovery, compliance and discovery. Our objective is to continue to capitalize on our brand, our expertise in the storage and information management industry and our global network to enhance our customers' experience, thereby increasing our customer retention rates and attracting new customers. Our overall growth strategy will focus on growing our business organically, making strategic customer acquisitions, pursuing acquisitions of storage and information management businesses, and developing ancillary businesses and real estate. We continue to expand our portfolio of products and services. Adding new products and services allows us to strengthen our existing customer relationships and attract new customers in previously untapped markets.
Growth from Existing and New Customers
Our existing customers' storage of physical records contributes to the growth of storage rental and certain records and information management services revenues because, on average, our existing customers generate additional records at a faster rate than old records are destroyed or permanently removed. The growth in new records volume from our existing customers has been consistent in the past three years, and we anticipate this growth will be sustained, although we cannot give any assurance as to whether this growth will continue. In order to maximize growth opportunities from existing customers, we seek to maintain high levels of customer retention by providing premium customer service.
Our sales coverage model is designed to identify and capitalize on incremental revenue opportunities by strategically allocating our sales resources to our customer base and selling additional storage, records and information management services and products in new and existing markets. Our sales force is dedicated to three primary objectives: (1) establishing new customer account relationships; (2) generating additional revenue by expanding existing customer relationships globally; and (3) expanding new and existing customer relationships by effectively selling a wide array of related services and products. In order to accomplish these objectives, our sales forces draw on our United States and international marketing organizations and senior management. We are developing tailored marketing strategies to target customers in the healthcare, financial, insurance, legal, life sciences, energy, business services and federal vertical market segments.
Growth through Acquisitions
The storage and information management services industry is highly fragmented with thousands of competitors in North America and around the world. Between 1995 and 2004 there was significant acquisition activity in the industry. Acquisitions were a fast and efficient way to achieve scale, expand geographically and broaden service offerings. After 2004, acquisition activity was reduced as we focused on integrating these recent transactions and diversifying the business. Beginning again in 2012, we saw opportunities for attractive acquisitions in emerging markets and consolidation opportunities in more developed markets, and resumed acquisition activity. We believe this ongoing acquisition activity is due to opportunities for large providers to achieve economies of scale and meet customer demands for sophisticated, technology-based solutions. Attractive acquisition opportunities, in North America and internationally, many of which are small, continue to exist, and we expect to continue to pursue acquisition of these businesses where we believe they present a good opportunity to create value for our stockholders. Lastly, we have a successful record of acquiring and integrating these businesses.
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We have acquired, and we continue to seek to acquire, storage and information management services businesses in developed markets including the United States, Canada, Australia and western Europe. Given the relatively small size of most attractive acquisition targets in these markets, future acquisitions are expected to be less significant to our overall revenue growth in these markets than in the past. Occasionally, however, we may be presented with the opportunity to acquire one of the larger businesses in these markets and will evaluate each opportunity with a focus on return on invested capital and the creation of stockholder value. Such was the case with our acquisition in October 2013 of Cornerstone Records Management, LLC and its affiliates.
We expect to continue to make acquisitions and investments in storage and information management services businesses in targeted emerging markets outside the United States, Canada, Australia and western Europe. We have acquired and invested in, and seek to acquire and invest in, storage and information management services companies in certain countries, and, more specifically, certain markets within such countries, where we believe there is potential for significant growth. We expect that future acquisitions and investments will focus primarily on expanding priority markets in central and eastern Europe, Latin America and the Asia Pacific region.
The experience, depth and strength of local management are particularly important in our emerging market acquisition strategy. Since beginning our international expansion program in January 1999, we have, directly and through joint ventures, expanded our operations into 35 countries. These transactions have taken, and may continue to take, the form of acquisitions of an entire business or controlling or minority investments with a long-term goal of full ownership. We believe a joint venture strategy, rather than an outright acquisition, may, in certain markets, better position us to expand the existing business. The local partners benefit from our expertise in the storage and information management services industry, our multinational customer relationships, our access to capital and our technology, while we benefit from our local partners' knowledge of the market, relationships with local customers and their presence in the community. In addition to the criteria we use to evaluate developed market acquisition candidates, when looking at an emerging market acquisition we also evaluate risks uniquely associated with an international investment, including those risks described below. Our long-term goal is to acquire full ownership of each business in which we make a joint venture investment. We now own more than 98% of our international operations, measured as a percentage of consolidated revenues.
Our international investments are subject to risks and uncertainties relating to the indigenous political, social, regulatory, tax and economic structures of other countries, as well as fluctuations in currency valuation, exchange controls, expropriation and governmental policies limiting returns to foreign investors.
Business Characteristics.
We generate our revenues by renting storage space to a large and diverse customer base in approximately 1,100 facilities representing 67.8 million square feet of real estate as of December 31, 2014 around the globe and providing to our customers an expanding menu of related and ancillary products and services. Providing outsourced storage is the mainstay of our customer relationships and serves as the foundation for all our revenue growth. Services are a vital part of a comprehensive records management program and consist primarily of the handling and transportation of stored records and information, shredding, document management solutions ("DMS"), data restoration projects, fulfillment services, consulting services, technology services, product sales (including specially designed storage containers and related supplies), and recurring project revenues. Shredding consists primarily of the scheduled collection and shredding of records and documents generated by business operations and the sale of recycled paper resulting from shredding services.
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Secure Storage
Our storage operations consist of providing non-dedicated storage rental space to our customers. Non-dedicated space allows our customers to increase or decrease the volume of their physical storage over the life of the contract based on their storage needs, while also reducing their risk of loss in the event of natural disaster. Given this non-dedicated space dynamic, the large portfolio of customer contracts, and the fact that no customer accounted for more than 2% of our consolidated revenues as of the year ended December 31, 2014, we assess the performance of our storage rental business predominantly by analyzing trends in segment level storage rental volume and storage rental revenue.
Renting secure space to customers for the purpose of storing paper records and data backup media is our largest source of revenue. Records storage consists primarily of the archival storage of records for long periods of time according to applicable laws, regulations and industry best practices. The secure off-site storage of data backup media is a key component of a company's disaster recovery and business continuity programs, and storage rental charges are generally billed monthly on a per storage unit basis.
Hard copy business records are typically stored for long periods of time with limited activity in cartons packed by the customer. For some customers we store individual files on an open shelf basis, and these files are typically more active. Storage rental charges are generally billed monthly on a per storage unit basis, usually per cubic foot of records, and include the provision of space, racking systems, computerized inventory and activity tracking, and physical security.
Physical records may also include critical or irreplaceable data such as master audio and video recordings, film and other highly proprietary information, such as energy data. We continue to identify additional areas of physical storage that fit with our core competencies in security and transportation, seeking to provide enterprise storage to businesses in much the same manner that self-storage companies serve consumers. Physical records may require special facilities, either because of the data they contain or the media on which they are recorded. Accordingly, our charges for providing enhanced security and special climate-controlled environments for these vital records are higher than for typical storage rental.
Physical Records
Physical records may be broadly divided into two categories: active and inactive. Active records relate to ongoing and recently completed activities or contain information that is frequently referenced. Active records are usually stored and managed on-site by their owners to ensure ready availability. Inactive physical records are the principal focus of the storage and information management services industry and consist of those records that are not needed for immediate access but which must be retained for legal, regulatory and compliance reasons or for occasional reference in support of ongoing business operations.
Physical data management services consist of the rotation of backup computer media as part of corporate disaster recovery and business continuity plans. Computer tapes, cartridges and disk packs are transported off-site by our courier operations on a scheduled basis to secure, climate-controlled facilities, where they are available to customers 24 hours a day, 365 days a year, to facilitate data recovery in the event of a disaster. Frequently, backup tapes are rotated from our facilities back to our customers' data centers. We also manage tape library relocations and support disaster recovery testing and execution.
Electronic Records
Electronic records management focuses on the storage of, and related services for, computer media that is either a backup copy of recently processed data or archival in nature. We believe the issues encountered by customers trying to manage their electronic records are similar to the ones they
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face in their physical records management programs and consist primarily of: (1) storage capacity and the preservation of data; (2) access to and control over the data in a secure environment; and (3) the need to retain electronic records due to regulatory requirements or for litigation support. Customer needs for data backup and recovery and archiving are distinctively different. Backup data exists because of the need of many businesses to be able to recover the data in the event of a system failure, casualty loss or other disaster. It is customary (and a best practice) for data processing groups to rotate backup tapes to offsite locations on a regular basis and to store multiple copies of such information at multiple sites. In addition to the physical storage and rotation of backup data that we provide, we offer online backup services through partnerships as an alternative way for businesses to store and access data. Online backup is an Internet-based service that automatically backs up computer data from servers or directly from desktop and laptop computers over the Internet and stores it in secure data centers.
Service Offerings
Central to any records management program is the handling and transportation and the eventual destruction of records upon the expiration of retention periods. These activities are accomplished through our extensive service and courier operations. Service charges are generally assessed for each activity on a per unit basis. Courier operations consist primarily of the pickup and delivery of records upon customer request. Charges for courier services are based on urgency of delivery, volume and location and are billed monthly. As of December 31, 2014, our courier fleet consisted of approximately 3,600 owned or leased vehicles. Our other services include secure shredding, DMS, Compliant Records Management and Consulting Services, Health Information Storage and Management Solutions, Entertainment Services, Energy Data Services, Discovery Services and other ancillary services.
Our information destruction services consist primarily of physical secure shredding operations and typically include the scheduled pick-up of loose office records that customers accumulate in specially designed secure containers we provide. In addition, secure shredding is a natural extension of our hard copy records management services by completing the lifecycle of a record and involves the shredding of sensitive documents for customers that, in many cases, store their records with us. Complementary to our shredding operations is the sale of the resultant waste paper to third-party recyclers. Through a combination of plant-based shredding operations and mobile shredding units consisting of custom built trucks, we are able to offer secure shredding services to our customers throughout the United States, Canada and Latin America. In December 2014, we sold our secure shredding businesses in the United Kingdom, Ireland and Australia, which were much smaller than our operation in North America, because we did not benefit from scale in these markets.
The focus of our DMS business is to develop, implement and support comprehensive storage and information management solutions for the complete lifecycle of our customers' information. We seek to develop solutions that solve our customers' document management challenges by integrating the management of physical records, document conversion and digital storage. Our DMS services complement our service offerings and enhance our existing customer relationships. We differentiate our offerings from our competitors by providing solutions that complement and expand our existing portfolio of products and services. The trend towards increased usage of Electronic Document Management ("EDM") systems represents another opportunity for us to manage active records. Our DMS services provide the bridge between customers' physical documents and their EDM solutions.
We offer records and information management services that have been tailored for specific industries, such as healthcare, or to address the needs of customers with more specific requirements based on the critical nature of their records. For example, medical records tend to be more active in nature and are typically stored on specialized open shelving systems that provide easier access to individual files. In addition to storing medical records, we provide health care information services, which include the handling, filing, processing and retrieval of medical records used by hospitals, private practitioners and other medical institutions, as well as recurring project work and ancillary services.
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Recurring project work involves the on-site removal of aged patient files and related computerized file indexing. Ancillary healthcare information services include release of information (medical record copying and delivery), temporary staffing, contract coding, facilities management and imaging. We offer a variety of additional services which customers may request or contract for on an individual basis. These services include conducting records inventories, packing records into cartons or other containers, and creating computerized indices of files and individual documents. We also provide services for the management of active records programs. We can provide these services, which generally include document and file processing and storage, both offsite at our own facilities and by supplying our own personnel to perform management functions on-site at a customer's premises. Other services that we provide include fulfillment, professional consulting services, and technology escrow services.
Business Segments
Our North American Records and Information Management Business, North American Data Management Business, and our International Business segments offer storage and the information management services discussed above, in their respective geographies. The amount of revenues derived from our North American Records and Information Management Business, North American Data Management Business, International Business, and Corporate and Other segments and other relevant data, including financial information about geographic areas and product and service lines, for fiscal years 2012, 2013 and 2014 are set forth in Note 9 to Notes to Consolidated Financial Statements included in this Annual Report.
North American Records and Information Management Business
Our North American Records and Information Management Business segment consists of storage and information management services throughout the United States and Canada, including the storage of paper documents, as well as other media such as microfilm and microfiche, master audio and videotapes, film, X-rays and blueprints, including healthcare information services, vital records services, service and courier operations, and the collection, handling and disposal of sensitive documents for corporate customers ("Records Management"); information destruction services ("Destruction"); DMS; fulfillment services; and technology escrow services that protect and manage source code.
North American Data Management Business
Our North American Data Management Business segment consists of the storage and rotation of backup computer media as part of corporate disaster recovery plans throughout the United States and Canada, including service and courier operations ("Data Protection & Recovery"), server and computer backup services, digital content repository systems to house, distribute, and archive key media assets, and storage, safeguarding and electronic or physical delivery of physical media of all types, primarily for entertainment and media industry clients.
International Business
Our International Business segment consists of storage and information management services throughout Europe, Latin America and Asia Pacific, including Records Management, Data Protection & Recovery and DMS. Our European operations provide Records Management, Data Protection & Recovery and DMS throughout Europe. Our Latin America operations provide Records Management, Data Protection & Recovery and DMS throughout Argentina, Brazil, Chile, Colombia, Mexico and Peru. Our Asia Pacific operations provide Records Management, Data Protection & Recovery and DMS throughout Australia, with Records Management and Data Protection & Recovery also provided in certain cities in India, Singapore, Hong Kong-SAR and China. Prior to December 2014, our International Business segment offered Destruction in the United Kingdom, Ireland and Australia.
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Corporate and Other
Our Corporate and Other segment consists of our data center business in the United States as well as costs related to executive and staff functions, including finance, human resources and information technology, which benefit the enterprise as a whole. These costs are primarily related to the general management of these functions on a corporate level and the design and development of programs, policies and procedures that are then implemented in the individual segments, with each segment bearing its own cost of implementation. Our Corporate and Other segment also includes stock-based employee compensation expense associated with all stock options, restricted stock, restricted stock units, performance units and shares of stock issued under our employee stock purchase plans.
Emerging Business Opportunities ("EBOs") are prospective business lines that we consider investing in to grow and diversify our business. We are seeking businesses with long-term, recurring revenue, preferably with storage rental attributes, which are consistent with and will enhance our REIT structure. Our management team is focused on identifying and evaluating these opportunities. We have established an innovation process so we cautiously and effectively develop opportunities to leverage our capabilities. After we have demonstrated success and met return thresholds, we may potentially acquire businesses to further accelerate our growth in the relevant opportunity. Importantly, the EBO process includes financial hurdles and decision gates to help us evaluate whether we scale or scrap these opportunities, consistent with our disciplined approach to capital allocation.
Currently, our data center business is one example of an EBO where we are assessing the potential for additional investment. The growth rate of critical digital information is accelerating, driven in part by the use of the Internet as a distribution and transaction medium. The rising cost and increasing importance of storing and managing digital information, coupled with the increasing availability of telecommunications bandwidth at lower costs, may create meaningful opportunities for us to provide solutions to our customers with respect to their digital records storage and management challenges.
Our Business Fundamentals
Our business fundamentals are based on the recurring nature of our various revenue streams. We generate attractive returns from our differentiated storage rental business model because our occupancy costs, whether in a leased or owned building, are incurred per square foot while our storage revenue is generally earned per cubic foot. The historical predictability of our revenues and the resulting profitability allows us to operate with a high degree of financial leverage. Our business fundamentals consist of:
A customer is allocated a certain amount of storage space in our storage facilities but is not allocated a dedicated building or space in a particular building. In practice, we can, and sometimes will, for a variety of reasons, move records from one facility and into another facility. In order to track net move-in and move-out activity of customer materials, as well as to assess the optimization of our real estate portfolio, we regularly assess the utilization of our overall real estate portfolio. On a per building basis, we compare the amount of racking that is being used to store customer materials to the capacity of the entire building assuming it was fully
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racked ("Total Building Utilization"). Additionally, we compare the amount of racking that is being used to store customer materials to the capacity of the racking that has been installed ("Total Racking Utilization"). As of December 31, 2014, our Total Building Utilization and Total Racking Utilization were approximately 83% and 91%, respectively, for our records management business and our Total Building Utilization and Total Racking Utilization were approximately 68% and 81%, respectively, for our data management business.
We regularly offer concessions to our customers in order to generate new business opportunities. Such concessions most commonly come in the form of providing free intake costs to transport a customer's records to one of our facilities, including labor and transportation costs ("Move Costs"), or payments that are made to a customer's current records management vendor in order to terminate the customer's existing contract with that vendor ("Permanent Withdrawal Fees"). We capitalize Move Costs and Permanent Withdrawal Fees as customer acquisition costs.
Real Estate:
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Non-Real Estate:
The following table presents our capital spend for 2012, 2013 and 2014 organized by the type of the spending as described above:
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Year Ended December 31, | |||||||||
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Nature of Capital Spend (dollars in thousands)
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2012(1) | 2013(1) | 2014(1) | |||||||
Real Estate: |
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Investment |
$ | 113,577 | $ | 135,708 | $ | 199,663 | ||||
Maintenance |
47,013 | 61,863 | 57,574 | |||||||
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160,590 | 197,571 | 257,237 | |||||||
| | | | | | | | | | |
Non-Real Estate: |
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Investment |
63,722 | 91,792 | 55,991 | |||||||
Maintenance |
24,915 | 22,644 | 19,527 | |||||||
| | | | | | | | | | |
|
88,637 | 114,436 | 75,518 | |||||||
| | | | | | | | | | |
Total |
$ | 249,227 | $ | 312,007 | $ | 332,755 | ||||
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Competition
We are a global leader in the physical storage and information management services industry with operations in 36 countries. We compete with our current and potential customers' internal storage and information management services capabilities. We can provide no assurance that these organizations will begin or continue to use us for their future storage and information management services.
We also compete with numerous storage and information management services providers in every geographic area where we operate. The physical storage and information management services industry is highly competitive and includes thousands of competitors in North America and around the world. We believe that competition for customers is based on price, reputation for reliability, quality and security of storage, quality of service and scope and scale of technology, and we believe we generally compete effectively in each of these areas.
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Alternative Technologies
We derive most of our revenues from rental fees for the storage of paper documents and computer backup tapes and from storage related services. Alternative storage technologies exist, many of which require significantly less space than paper documents and tapes, and as alternative technologies are adopted, storage related services may decline as the physical records or tapes we store become less active and more archived. To date, none of the alternative technologies has replaced paper documents as the primary means for storing information. However, we can provide no assurance that our customers will continue to store most or a portion of their records as paper documents or in tape format. We continue to provide, primarily through partnerships, additional services such as online backup, designed to address our customers' need for efficient, cost-effective, high-quality solutions for electronic records and storage and information management.
Employees
As of December 31, 2014, we employed more than 7,500 employees in the United States and more than 12,500 employees outside of the United States. At December 31, 2014, an aggregate of 528 employees were represented by unions in California, Georgia and three provinces in Canada.
All union and non-union employees are generally eligible to participate in our benefit programs, which include medical, dental, life, short and long-term disability, retirement/401(k) and accidental death and dismemberment plans. Certain unionized employees in California receive these types of benefits through their unions and are not eligible to participate in our benefit programs. In addition to base compensation and other usual benefits, all full-time employees participate in some form of incentive-based compensation program that provides payments based on revenues, profits, collections or attainment of specified objectives for the unit in which they work. Management believes that we have good relationships with our employees and unions. All union employees are currently under renewed labor agreements or operating under an extension agreement.
Insurance
For strategic risk transfer purposes, we maintain a comprehensive insurance program with insurers that we believe to be reputable and that have adequate capitalization in amounts that we believe to be appropriate. Property insurance is purchased on a comprehensive basis, including flood and earthquake (including excess coverage), subject to certain policy conditions, sublimits and deductibles. Property is insured based upon the replacement cost of real and personal property, including leasehold improvements, business income loss and extra expense. Other types of insurance that we carry, which are also subject to certain policy conditions, sublimits and deductibles, include medical, workers' compensation, general liability, umbrella, automobile, professional, warehouse legal liability and directors' and officers' liability policies.
Our customer contracts usually contain provisions limiting our liability for damages with respect to loss or destruction of, or damage to, records or information stored with us. Our liability under physical storage contracts is often limited to a nominal fixed amount per item or unit of storage, such as per cubic foot. Our liability under our DMS services and other service contracts is often limited to a percentage of annual revenue under the contract. We can provide no assurance that where we have limitation of liability provisions that they will be enforceable in all instances or would otherwise protect us from liability. Also, some of our contracts with large volume accounts and some of the contracts assumed in our acquisitions contain no such limits or contain higher limits. In addition to provisions limiting our liability, our standard storage rental and service contracts include a schedule setting forth the majority of the customer-specific terms, including storage rental and service pricing and service delivery terms. Our customers may dispute the interpretation of various provisions in their contracts. While we have had relatively few disputes with our customers with regard to the terms of their
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customer contracts, and most disputes to date have not been material, we can give no assurance that we will not have material disputes in the future.
Environmental Matters
Some of our current and formerly owned or leased properties were previously used by entities other than us for industrial or other purposes, or were affected by waste generated from nearby properties, that involved the use, storage, generation and/or disposal of hazardous substances and wastes, including petroleum products. In some instances this prior use involved the operation of underground storage tanks or the presence of asbestos-containing materials. Where we are aware of environmental conditions that require remediation, we undertake appropriate activity, in accordance with all legal requirements. Although we have from time to time conducted limited environmental investigations and remedial activities at some of our former and current facilities, we have not undertaken an in-depth environmental review of all of our properties. We therefore may be potentially liable for environmental costs and may be unable to sell, rent, mortgage or use contaminated real estate owned or leased by us. Under various federal, state and local environmental laws, we may be liable for environmental compliance and remediation costs to address contamination, if any, located at owned and leased properties as well as damages arising from such contamination, whether or not we know of, or were responsible for, the contamination, or the contamination occurred while we owned or leased the property. Environmental conditions for which we might be liable may also exist at properties that we may acquire in the future. In addition, future regulatory action and environmental laws may impose costs for environmental compliance that do not exist today.
We transfer a portion of our risk of financial loss due to currently undetected environmental matters by purchasing an environmental impairment liability insurance policy, which covers all owned and leased locations. Coverage is provided for both liability and remediation costs.
Corporate Responsibility
We are committed to transparent reporting on sustainability and corporate responsibility efforts in accordance with the guidelines of the Global Reporting Initiative. Our corporate responsibility report highlights our progress against key measures of success for our efforts in the community, our environment, and for our people. We are a trusted partner to more than 92% of the Fortune 1000 companies. Iron Mountain is also a member of the Fortune 1000, ranked at 712 as of December 31, 2014, as well as a member of the FTSE4 Good Index, MSCI World ESG Index, MSCI ACWI ESG Index and MSCI USA IMI ESG Index in which include companies that meet globally recognized corporate responsibility standards. A copy of our corporate responsibility report is available on the "Company" section of our website, www.ironmountain.com , under the heading "Corporate Responsibility."
Internet Website
Our Internet address is www.ironmountain.com . Under the "For Investors" section on our Internet website, we make available free of charge, our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") as soon as reasonably practicable after such forms are filed with or furnished to the SEC. We are not including the information contained on or available through our website as a part of, or incorporating such information by reference into, this Annual Report. Copies of our corporate governance guidelines, code of ethics and the charters of our audit, compensation, and nominating and governance committees are available on the "For Investors" section of our website, www.ironmountain.com , under the heading "Corporate Governance."
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We face many risks. If any of the events or circumstances described below actually occur, we and our businesses, financial condition or results of operations could suffer, and the trading price of our debt or equity securities could decline. Our current and potential investors should consider the following risks and the information contained under the heading "Cautionary Note Regarding Forward-Looking Statements" before deciding to invest in our securities.
Risks Related to Operating as a REIT
If we fail to remain qualified as a REIT, we will be subject to tax at corporate income tax rates and will not be able to deduct distributions to stockholders when computing our taxable income.
We began operating as a REIT for federal income tax purposes effective for the taxable year beginning January 1, 2014; however, we can provide no assurance that we will remain qualified as a REIT. If we fail to remain qualified as a REIT, we will be taxed at corporate income tax rates unless certain relief provisions apply.
REIT qualification involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as amended (the "Code"), which provisions may change from time to time, to our operations as well as various factual determinations concerning matters and circumstances not entirely within our control. There are limited judicial or administrative interpretations of these provisions.
If, in any taxable year, we fail to remain qualified for taxation as a REIT and are not entitled to relief under the Code:
Any such corporate tax liability could be substantial and would reduce the amount of cash available for other purposes.
If we fail to remain qualified for taxation as a REIT, we may need to borrow additional funds or liquidate some investments to pay any additional tax liability. Accordingly, funds available for investment and distributions to stockholders could be reduced.
As a REIT, failure to make required distributions would subject us to federal corporate income tax.
We expect to continue paying regular quarterly distributions, and, to achieve maximum tax efficiency and retain cash to allow us to make selective discretionary investments, we currently anticipate our typical regular quarterly distributions will be based on a payment of approximately 100% of our REIT taxable income; however, the amount, timing and form of our regular quarterly distributions will be determined, and will be subject to adjustment, by our board of directors. To remain qualified and be taxed as a REIT, we are generally required to distribute at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding net capital gain) each year to our stockholders. Generally, we expect to distribute all or substantially all of our REIT taxable income. If our cash available for distribution falls short of our estimates, we may be unable to maintain distributions that approximate our REIT taxable income and may fail to remain qualified for taxation as a REIT. In addition, our cash flows from operations may be insufficient to
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fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for federal income tax purposes, or the effect of nondeductible expenditures, such as capital expenditures, payments of compensation for which Section 162(m) of the Code denies a deduction, the creation of reserves or required debt service or amortization payments.
To the extent that we satisfy the 90% distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our stockholders for a calendar year is less than the minimum amount specified under the Code.
We may be required to borrow funds, sell assets or raise equity to satisfy REIT distribution requirements, to comply with asset ownership tests or to fund capital expenditures, future growth and expansion initiatives.
In order to meet the REIT distribution requirements and maintain our qualification and taxation as a REIT, or to fund capital expenditures, future growth and expansion initiatives, we may need to borrow funds, sell assets or raise equity, even if the then-prevailing market conditions are not favorable for these borrowings, sales or offerings. Any insufficiency of our cash flows to cover our REIT distribution requirements could adversely impact our ability to raise short- and long-term debt, to sell assets, or to offer equity securities in order to fund distributions required to maintain our qualification and taxation as a REIT. Furthermore, the REIT distribution requirements may increase the financing we need to fund capital expenditures, future growth and expansion initiatives. This would increase our indebtedness. An increase in our outstanding debt could lead to a downgrade of our credit rating. A downgrade of our credit rating could negatively impact our ability to access credit markets. Further, certain of our current debt instruments limit the amount of indebtedness we and our subsidiaries may incur. Additional financing, therefore, may be unavailable, more expensive or restricted by the terms of our outstanding indebtedness. For a discussion of risks related to our substantial level of indebtedness, see "Risks Relating to Our Indebtedness."
Whether we issue equity, at what price and the amount and other terms of any such issuances will depend on many factors, including alternative sources of capital, our then-existing leverage, our need for additional capital, market conditions and other factors beyond our control. If we raise additional funds through the issuance of equity securities or debt convertible into equity securities, the percentage of stock ownership by our existing stockholders may be reduced. In addition, new equity securities or convertible debt securities could have rights, preferences and privileges senior to those of our current stockholders, which could substantially decrease the value of our securities owned by them. Depending on the share price we are able to obtain, we may have to sell a significant number of shares in order to raise the capital we deem necessary to execute our long-term strategy, and our stockholders may experience dilution in the value of their shares as a result.
In addition, if we fail to comply with specified asset ownership tests applicable to REITs as measured at the end of any calendar quarter, we must correct such failure within 30 days after the end of the applicable calendar quarter or qualify for statutory relief provisions to avoid losing our REIT qualification. As a result, we may be required to liquidate otherwise attractive investments. These actions may reduce our income and amounts available for distribution to our stockholders.
Legislative or other actions affecting REITs could have a negative effect on us or our stockholders.
At any time, the federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. Federal and state tax laws are constantly under review by persons involved in the legislative process, the IRS, the United States Department of the Treasury and state taxing authorities. Changes to the tax laws, regulations and administrative interpretations, which may have retroactive application, could adversely affect us. In addition, some of these changes could have a more
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significant impact on us as compared to other REITs due to the nature of our business and our substantial use of taxable REIT subsidiaries ("TRSs"). We cannot predict with certainty whether, when, in what forms, or with what effective dates, the tax laws, regulations and administrative interpretations applicable to us may be changed.
Complying with REIT requirements may limit our flexibility or cause us to forgo otherwise attractive opportunities.
To remain qualified as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets and the amounts we distribute to our stockholders. Thus, compliance with these tests may require us to refrain from certain activities and may hinder our ability to make certain attractive investments, including the purchase of non-REIT qualifying operations or assets, the expansion of non-real estate activities, and investments in the businesses to be conducted by our TRSs, and to that extent limit our opportunities and our flexibility to change our business strategy. Furthermore, acquisition opportunities in domestic and international markets may be adversely affected if we need or require the target company to comply with some REIT requirements prior to closing.
We conduct a significant portion of our business activities, including our information management services businesses and several of our international operations, through domestic and foreign TRSs. Under the Code, no more than 25% of the value of the assets of a REIT may be represented by securities of one or more TRSs and other nonqualifying assets. This limitation may affect our ability to make additional investments in non-REIT qualifying operations or assets or in international operations through TRSs.
As a REIT, we are limited in our ability to fund distribution payments using cash generated through our TRSs.
Our ability to receive distributions from our TRSs is limited by the rules with which we must comply to maintain our status as a REIT. In particular, at least 75% of our gross income for each taxable year as a REIT must be derived from real estate, which principally includes gross income from providing customers with secure storage space. Consequently, no more than 25% of our gross income may consist of dividend income from our TRSs and other nonqualifying types of income. Thus, our ability to receive distributions from our TRSs may be limited, and may impact our ability to fund distributions to our stockholders using cash flows from our TRSs. Specifically, if our TRSs become highly profitable, we might become limited in our ability to receive net income from our TRSs in an amount required to fund distributions to our stockholders commensurate with that profitability.
In addition, a significant amount of our income and cash flows from our TRSs is generated from our international operations. In many cases, there are local withholding taxes and currency controls that may impact our ability or willingness to repatriate funds to the United States to help satisfy REIT distribution requirements.
Our extensive use of TRSs, including for certain of our international operations, may cause us to fail to remain qualified as a REIT.
The net income of our TRSs is not required to be distributed to us, and income that is not distributed to us generally is not subject to the REIT income distribution requirement. However, there may be limitations on our ability to accumulate earnings in our TRSs and the accumulation or reinvestment of significant earnings in our TRSs could result in adverse tax treatment. In particular, if the accumulation of cash in our TRSs causes the fair market value of our securities in our TRSs and other nonqualifying assets to exceed 25% of the fair market value of our assets, we will fail to remain qualified as a REIT.
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Our cash distributions are not guaranteed and may fluctuate.
A REIT generally is required to distribute at least 90% of its REIT taxable income to its stockholders.
Our board of directors, in its sole discretion, will determine on a quarterly basis the amount of cash to be distributed to our stockholders based on a number of factors including, but not limited to, our results of operations, cash flow and capital requirements, economic conditions, tax considerations, borrowing capacity and other factors, including debt covenant restrictions that may impose limitations on cash payments, future acquisitions and divestitures, any stock repurchase program and general market demand for our space and services. Consequently, our distribution levels may fluctuate.
Even if we remain qualified as a REIT, some of our business activities are subject to corporate level income tax and foreign taxes, which will reduce our cash flows, and we will have potential deferred and contingent tax liabilities.
Even if we remain qualified for taxation as a REIT, we may be subject to some federal, state, local and foreign taxes on our income and assets, including alternative minimum taxes, taxes on any undistributed income, and state, local or foreign income, franchise, property and transfer taxes. In addition, we could in certain circumstances be required to pay an excise or penalty tax, which could be significant in amount, in order to utilize one or more relief provisions under the Code to maintain qualification for taxation as a REIT.
Our information management services businesses are conducted through wholly owned TRSs because these activities could generate nonqualifying REIT income as currently structured and operated. The income of our domestic TRSs will continue to be subject to federal and state corporate income taxes. In addition, our international assets and operations will continue to be subject to taxation in the foreign jurisdictions where those assets are held or those operations are conducted. Any of these taxes would decrease our earnings and our available cash.
We will also be subject to a federal corporate level tax at the highest regular corporate tax rate (currently 35%) on gain recognized from a sale of assets occurring within a specified period (generally ten years) after the effective date of our REIT election, that is, January 1, 2014, to the extent of the built-in-gain based on the fair market value of those assets on the effective date of the REIT election in excess of our then tax basis. In addition, depreciation recapture income that we recognized in our 2014 taxable year and will recognize in subsequent taxable years, as a result of accounting method changes that were effective prior to January 1, 2014, has been and will be fully subject to this 35% tax.
In addition, the IRS and any state or local tax authority may successfully assert liabilities against us for corporate income taxes for our pre-REIT period, in which case we will owe these taxes plus applicable interest and penalties, if any. Moreover, any increase in taxable income for these pre-REIT periods will likely result in an increase in pre-REIT accumulated earnings and profits, which could cause us to pay an additional taxable distribution to our stockholders after the relevant determination.
Complying with REIT requirements may limit our ability to hedge effectively and increase the cost of our hedging and may cause us to incur tax liabilities.
The REIT provisions of the Code limit our ability to hedge liabilities. Generally, income from hedging transactions that we enter into to manage risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets and income from certain currency hedging transactions related to our non-U.S. operations do not constitute "gross income" for purposes of the REIT gross income tests. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as nonqualifying income for purposes of the REIT gross income tests. As a result of these rules, we may need to limit our use of advantageous
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hedging techniques or implement those hedges through our TRSs. This could increase the cost of our hedging activities because our TRSs would be subject to tax on income or gains resulting from hedges entered into by them or expose us to greater risks associated with changes in interest rates or exchange rates than we would otherwise want to bear. In addition, hedging losses in any of our TRSs generally will not provide any tax benefit, except for being carried forward for possible use against future taxable income in the TRSs.
We have limited experience operating as a REIT, which may adversely affect our financial condition, results of operations, cash flow, per share trading price of our common stock, ability to forecast dividends and ability to satisfy debt service obligations.
We began operating as a REIT on January 1, 2014 and, as such, have limited operating history as a REIT. In addition, prior to January 1, 2014 our senior management team had no prior experience operating a REIT. We can provide no assurance that our past experience has sufficiently prepared us to operate successfully as a REIT. Our inability to operate successfully as a REIT, including the failure to maintain REIT status, could adversely affect our business, financial condition and results of operations.
Distributions payable by REITs generally do not qualify for preferential tax rates.
Qualifying distributions payable by corporations to individuals, trusts and estates that are United States stockholders are currently eligible for federal income tax at preferential rates. Distributions payable by REITs, in contrast, generally are not eligible for the preferential rates. The preferential rates applicable to regular corporate distributions could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stock of non-REIT corporations that pay distributions, which could adversely affect the value of the stock of REITs, including our common stock.
The ownership and transfer restrictions contained in our certificate of incorporation may not protect our status as a REIT, could have unintended antitakeover effects and may prevent our stockholders from receiving a takeover premium.
In order for us to remain qualified as a REIT, no more than 50% of the value of outstanding shares of our capital stock may be owned, beneficially or constructively, by five or fewer individuals at any time during the last half of each taxable year other than the first year for which we elect to be taxed as a REIT. In addition, rents from "affiliated tenants" will not qualify as qualifying REIT income if we own 10% or more by vote or value of the customer, whether directly or after application of attribution rules under the Code. Subject to certain exceptions, our certificate of incorporation prohibits any stockholder from owning, beneficially or constructively, more than (i) 9.8% in value of the outstanding shares of all classes or series of our capital stock or (ii) 9.8% in value or number, whichever is more restrictive, of the outstanding shares of any class or series of our capital stock. We refer to these restrictions collectively as the "ownership limits" and we included them in our certificate of incorporation to facilitate our compliance with REIT tax rules. The constructive ownership rules under the Code are complex and may cause the outstanding stock owned by a group of related individuals or entities to be deemed to be constructively owned by one individual or entity. As a result, the acquisition of less than 9.8% of our outstanding common stock (or the outstanding shares of any class or series of our capital stock) by an individual or entity could cause that individual or entity or another individual or entity to own constructively in excess of the relevant ownership limits. Any attempt to own or transfer shares of our common stock or of any of our other capital stock in violation of these restrictions may result in the shares being automatically transferred to a charitable trust or may be void. Even though our certificate of incorporation contains the ownership limits, there can be no assurance that these provisions will be effective to prevent our REIT status from being jeopardized, including under the affiliated tenant rule. Furthermore, there can be no assurance that we will be able
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to monitor and enforce the ownership limits. If the restrictions in our certificate of incorporation are not effective and as a result we fail to satisfy the REIT tax rules described above, then absent an applicable relief provision, we will fail to remain qualified as a REIT.
In addition, the ownership and transfer restrictions could delay, defer or prevent a transaction or a change in control that might involve a premium price for our stock or otherwise be in the best interest of our stockholders. As a result, the overall effect of the ownership and transfer restrictions may be to render more difficult or discourage any attempt to acquire us, even if such acquisition may be favorable to the interests of our stockholders.
The ability of our board of directors to change our major policies without the consent of stockholders may not be in the interest of our stockholders.
Our board of directors determines our major policies, including policies and guidelines relating to our investments, acquisitions, leverage, financing, growth, operations and distributions to our stockholders. Our board of directors may amend or revise these and other policies and guidelines from time to time without the vote or consent of our stockholders. Accordingly, our stockholders will have limited control over changes in our policies, and any such changes could adversely affect our financial condition, results of operations, the market price of our common stock and our ability to make distributions to our stockholders.
Operational Risks
Our customers may shift from paper and tape storage to alternative technologies that require less physical space.
We derive most of our revenues from rental fees for the storage of paper documents and computer backup tapes and from storage related services. Alternative storage technologies exist, many of which require significantly less space than paper documents and tapes, and as alternative technologies are adopted, storage related services may decline as the physical records or tapes we store become less active and more archived. We can provide no assurance that our customers will continue to store most or a portion of their records as paper documents or in tape format. The adoption of alternative technologies may also result in decreased demand for services related to the paper documents and tapes we store. A significant shift by our customers to storage of data through non-paper or tape-based technologies, whether now existing or developed in the future, could adversely affect our businesses.
As stored records become less active our service revenue growth and profitability may decline.
Our records management service revenue growth is being negatively impacted by declining activity rates as stored records are becoming less active. The amount of information available to customers through the Internet or their own information systems has been steadily increasing in recent years. As a result, while we continue to experience growth in storage rental, our customers are less likely than they have been in the past to retrieve records, thereby reducing their service activity levels. At the same time many of our costs related to records related services remain fixed. In addition, our reputation for providing secure information storage is critical to our success, and actions to manage cost structure, such as outsourcing certain transportation, security or other functions, could negatively impact our reputation and adversely affect our business. Ultimately, if we are unable to appropriately align our cost structure with decreased levels of service revenue, our operating results could be adversely affected.
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Changes in customer behavior with respect to document destruction and pricing could adversely affect our business, financial condition and results of operations.
We have experienced pricing pressure in recent years as some customers have become more cost conscious with respect to their information management expenditures. Some customers have taken actions designed to reduce costs associated with the retention of documents, including reducing the volume of documents they store and adopting more aggressive destruction practices. If we are unable to increase pricing over time, or if rates of destruction of documents stored with us increase substantially, particularly in our developed and slower growing markets, our financial condition and results of operations would be adversely affected.
Governmental and customer focus on data security could increase our costs of operations. We may not be able to fully offset these costs through increases in our rates. Incidents in which we fail to protect our customers' information against security breaches could result in monetary damages against us and could otherwise damage our reputation, harm our businesses and adversely impact our results of operations. In addition, if we fail to protect our own information, including information about our employees, we could experience significant costs and expenses as well as damage to our reputation.
In reaction to publicized incidents in which electronically stored information has been lost, illegally accessed or stolen, almost all states in the United States have adopted breach of data security statutes or regulations that require notification to consumers if the security of their personal information is breached. In addition, certain federal laws and regulations affecting financial institutions, health care providers and plans and others impose requirements regarding the privacy and security of information maintained by those institutions as well as notification to persons whose personal information is accessed by an unauthorized third party. Some of these laws and regulations provide for civil fines in certain circumstances and require the adoption and maintenance of privacy and information security programs; our failure to be in compliance with any such programs may adversely affect our business. Some states in the United States have adopted regulations requiring every company that maintains or stores personal information to adopt a comprehensive written information security program. The European Commission has proposed a regulation and directive that will, if adopted, supersede Directive 95/46/EC, which has governed the processing of personal data since 1995. It is anticipated that the proposed regulation and directive will significantly alter the security and privacy obligations of entities, such as Iron Mountain, that process data of residents of members of the European Union and substantially increase penalties for violations. If adopted, we would be directly subject to some of these laws, and our customers, pursuant to agreements, would require us to comply with others.
Continued governmental focus on data security may lead to additional legislative action in the United States. For example, the recently completed 113 th Congress considered legislation that would expand the federal data breach notification requirement beyond the financial and medical fields, and it is anticipated that the 114 th Congress will also consider such issues. Also, an increasing number of countries have introduced and/or increased enforcement of comprehensive privacy laws, or are expected to do so. The continued emphasis on information security as well as increasing concerns about government surveillance may lead customers to request that we take additional measures to enhance security and assume higher liability under our contracts. While we have experienced incidents in which customers' backup tapes or other records have been lost, and we have been informed by customers that some of the incidents involved the loss of personal information, resulting in monetary costs to those customers for which we have provided reimbursement. As a result of legislative initiatives and client demands, we may have to modify our operations with the goal of further improving data security. Any such modifications may result in increased expenses and operating complexity, and we may be unable to increase the rates we charge for our services sufficiently to offset any increased expenses.
In addition to increases in the costs of operations or potential liability that may result from a heightened focus on data security or losses of information, our reputation may be damaged by any
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compromise of security, accidental loss or theft of our own records, or information that we maintain with respect to our employees, as well as customer data in our possession. We believe that establishing and maintaining a good reputation is critical to attracting and retaining customers. If our reputation is damaged, we may become less competitive, which could negatively impact our businesses, financial condition or results of operations.
Changing fire and safety standards may result in significant expense in certain jurisdictions.
As of December 31, 2014, we operated 977 records management and off-site data protection facilities worldwide, including 561 in the United States. Many of these facilities were built and outfitted by third parties and added to our real estate portfolio as part of acquisitions. Some of these facilities contain fire suppression and safety features that are different from our current specifications and current standards for new facilities although we believe all of our facilities were constructed, in all material respects, in compliance with laws and regulations in effect at the time of their construction or outfitting. In some instances local authorities having jurisdiction may take the position that our fire suppression and safety features in a particular facility are insufficient and require additional measures that may involve considerable expense to us. In addition, where we determine that the fire suppression and safety features of a facility require improvement, we will develop and implement a plan to remediate the issue, although implementation may require an extended period to complete. If additional fire safety and suppression measures beyond our current operating plan were required at a large number of our facilities, the expense required for compliance could negatively impact our business, financial condition or results of operations.
Our customer contracts may not always limit our liability and may sometimes contain terms that could lead to disputes in contract interpretation.
Our customer contracts typically contain provisions limiting our liability with respect to loss or destruction of, or damage to, records or information stored with us. Our liability under physical storage contracts is often limited to a nominal fixed amount per item or unit of storage, such as per cubic foot and our liability under our DMS and other service contracts is often limited to a percentage of annual revenue under the contract; however, some of our contracts with large volume accounts and some of the contracts assumed in our acquisitions contain no such limits or contain higher limits. We cannot provide assurance that where we have limitation of liability provisions they will be enforceable in all instances or, if enforceable, that they would otherwise protect us from liability. In addition to provisions limiting our liability, our standard storage rental and service contracts include a schedule setting forth the majority of the customer-specific terms, including storage rental and service pricing and service delivery terms. Our customers may dispute the interpretation of various provisions in their contracts. In the past, we have had relatively few disputes with our customers with regard to the terms of their customer contracts, and most disputes to date have not been material, but we can provide no assurance that we will not have material disputes in the future. Although we maintain a comprehensive insurance program, we can provide no assurance that we will be able to maintain insurance policies on acceptable terms in order to cover losses to us in connection with customer contract disputes.
Failure to comply with certain regulatory and contractual requirements under our United States Government contracts could adversely affect our revenues, operating results and financial position.
Selling our services to the United States Government subjects us to certain regulatory and contractual requirements. Failure to comply with these requirements could subject us to investigations, price reductions, up to treble damages, and civil penalties. Noncompliance with certain regulatory and contractual requirements could also result in us being suspended or barred from future United States Government contracting. We may also face private derivative securities claims as a result of adverse
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government actions. Any of these outcomes could have a material adverse effect on our revenues, operating results, financial position and reputation.
International operations may pose unique risks.
As of December 31, 2014, we provided services in 35 countries outside the United States. As part of our growth strategy, we expect to continue to acquire or invest in storage and information management services businesses in select foreign markets, including countries where we do not currently operate. International operations are subject to numerous risks, including:
In particular, our net income can be significantly affected by fluctuations in currencies associated with certain intercompany balances of our foreign subsidiaries owed to us and between our foreign subsidiaries.
We have operations in multiple foreign countries and, as a result, are subject to foreign exchange translation risk, which could have an adverse effect on our financial results.
We conduct business operations in several foreign countries through our foreign subsidiaries or affiliates, which operate in their respective local currencies. Those local currencies are translated into United States dollars at the applicable exchange rates for inclusion in our consolidated financial statements. The results of operations of, and certain of our intercompany balances associated with, our international storage and information management services businesses are exposed to foreign exchange rate fluctuations, and as we have expanded our international operations, our exposure to exchange rate fluctuations has increased. Upon translation, operating results may differ materially from expectations, and significant shifts in foreign currencies can impact our short-term results, as well as our long-term forecasts and targets. In addition, because we intend to distribute 100% of our REIT taxable income to our stockholders, and any exchange rate fluctuations may negatively impact our REIT taxable income, our distribution amounts may fluctuate as a result of exchange rate fluctuations.
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We may be subject to certain costs and potential liabilities associated with the real estate required for our business.
Because our business is heavily dependent on real estate, we face special risks attributable to the real estate we own or lease. Such risks include:
Some of our current and formerly owned or leased properties were previously used by entities other than us for industrial or other purposes, or were affected by waste generated from nearby properties, that involved the use, storage, generation and/or disposal of hazardous substances and wastes, including petroleum products. In some instances this prior use involved the operation of underground storage tanks or the presence of asbestos-containing materials. Where we are aware of environmental conditions that require remediation, we undertake appropriate activity, in accordance with all legal requirements. Although we have from time to time conducted limited environmental investigations and remedial activities at some of our former and current facilities, we have not undertaken an in-depth environmental review of all of our properties. We therefore may be potentially liable for environmental costs like those discussed above and may be unable to sell, rent, mortgage or use contaminated real estate owned or leased by us. Environmental conditions for which we might be liable may also exist at properties that we may acquire in the future. In addition, future regulatory action and environmental laws may impose costs for environmental compliance that do not exist today.
Unexpected events could disrupt our operations and adversely affect our reputation and results of operations.
Unexpected events, including fires or explosions at our facilities, natural disasters such as hurricanes and earthquakes, war or terrorist activities, unplanned power outages, supply disruptions and failure of equipment or systems, could adversely affect our reputation and results of operations. Our customers rely on us to securely store and timely retrieve their critical information, and these events could result in customer service disruption, physical damage to one or more key operating facilities and the information stored in those facilities, the temporary closure of one or more key operating facilities or the temporary disruption of information systems, each of which could negatively impact our reputation and results of operations. During the past several years we have seen an increase in severe storms and hurricanes and our key facilities in Florida and other coastal areas in particular are subject to this inherent risk.
Damage to our reputation could adversely affect our business, financial condition and results of operations.
Our reputation for providing highly secure information storage to customers is critical to the success of our business. Our reputation or brand, and specifically, the trust our customers place in us, could be negatively impacted in the event of perceived or actual failures by us to store information securely. For example, events such as fires, natural disasters, attacks on our information technology
22
systems or security breaches involving Iron Mountain could negatively impact our reputation, particularly if such incidents result in adverse publicity, governmental investigations or litigation. Damage to our reputation could make us less competitive, which could negatively impact our business, financial condition and results of operations.
Fluctuations in commodity prices may affect our operating revenues and results of operations.
Our operating revenues and results of operations are impacted by significant changes in commodity prices. In particular, our secure shredding operations generate revenue from the sale of shredded paper to recyclers. We generate additional revenue through a customer surcharge when the price of diesel fuel rises above certain predetermined rates. As a result, significant declines in paper and diesel fuel prices may negatively impact our revenues and results of operations, and increases in other commodity prices, including steel, may negatively impact our results of operations.
Attacks on our internal information technology systems could damage our reputation, harm our businesses and adversely impact our results of operations.
Our reputation for providing secure information storage to customers is critical to the success of our business. We have previously faced attempts by unauthorized users to gain access to our information technology systems and expect to continue to face such attempts. Although we seek to prevent, detect and investigate these security incidents and have taken steps to prevent such security breaches, our information technology and network infrastructure may be vulnerable to attacks by hackers or breaches due to employee error, malfeasance or other disruptions. A successful breach of the security of our information technology systems could lead to theft or misuse of our customers' proprietary or confidential information and result in third party claims against us and reputational harm. If our reputation is damaged, we may become less competitive, which could negatively impact our businesses, financial condition or results of operations.
We may be subject to claims that our technology violates the intellectual property rights of a third party.
Third parties may have legal rights (including ownership of patents, trade secrets, trademarks and copyrights) to ideas, materials, processes, names or original works that are the same or similar to those we use. Third parties have in the past, and may in the future, bring claims, or threaten to bring claims, against us that allege that their intellectual property rights are being infringed or violated by our use of intellectual property. Litigation or threatened litigation could be costly and distract our senior management from operating our business. Further, if we cannot establish our right or obtain the right to use the intellectual property on reasonable terms, we may be required to develop alternative intellectual property at our expense to mitigate potential harm.
We face competition for customers.
We compete with multiple storage and information management services providers in all geographic areas where we operate; our current or potential customers may choose to use those competitors instead of us. We also compete, in some of our business lines, with our current and potential customers' internal storage and information management services capabilities. These organizations may not begin or continue to use us for their future storage and information management service needs.
23
Risks Related to Our Indebtedness
Our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations under our various debt instruments.
We have a significant amount of indebtedness. As of December 31, 2014, our total long-term debt was approximately $4.66 billion. Our substantial indebtedness could have important consequences to our current and potential investors. These risks include:
Restrictive debt covenants may limit our ability to pursue our growth strategy.
Our credit facility and our indentures contain covenants restricting or limiting our ability to, among other things:
These restrictions may adversely affect our ability to pursue our acquisition and other growth strategies.
We may not have the ability to raise the funds necessary to finance the repurchase of outstanding senior or senior subordinated notes upon a change of control event as required by our indentures.
Upon the occurrence of a "change of control", we will be required to offer to repurchase all outstanding senior or senior subordinated notes. However, it is possible that we will not have sufficient
24
funds at the time of the change of control to make the required repurchase of the notes or that restrictions in our revolving credit facility will not allow such repurchases. Certain important corporate events, however, such as leveraged recapitalizations that would increase the level of our indebtedness, would not constitute a "change of control" under our indentures.
Iron Mountain is a holding company, and, therefore, our ability to make payments on our various debt obligations depends in part on the operations of our subsidiaries.
Iron Mountain is a holding company; substantially all of our assets consist of the stock of our subsidiaries, and substantially all of our operations are conducted by our direct and indirect wholly owned subsidiaries. As a result, our ability to make payments on our various debt obligations will be dependent upon the receipt of sufficient funds from our subsidiaries. However, our various debt obligations are guaranteed, on a joint and several and full and unconditional basis, by most, but not all, of our direct and indirect wholly owned United States subsidiaries.
Acquisition and Expansion Risks
Elements of our strategic growth plan involve inherent risks.
As part of our strategic growth plan, we expect to invest in new business strategies, products, services, technologies and geographies and we may selectively divest certain businesses. These initiatives may involve significant risks and uncertainties, including distraction of management from current operations, insufficient revenues to offset expenses and liabilities associated with new investments, inadequate return of capital on these investments and the inability to attract, develop and retain skilled employees to lead and support new initiatives. For example, in 2013 we expanded our entry into the data center market by leasing wholesale and retail colocation space in our underground facility in Pennsylvania, and in 2014 we opened our first regional data center in Massachusetts, each of which required a significant capital commitment. Many of these new ventures are inherently risky and we can provide no assurance that such strategies and offerings will be successful in achieving the desired returns within a reasonable timeframe, if at all, and that they will not adversely affect our business, reputation, financial condition, and operating results.
Failure to manage our growth may impact operating results.
If we succeed in expanding our existing businesses, or in moving into new areas of business, that expansion may place increased demands on our management, operating systems, internal controls and financial and physical resources. If not managed effectively, these increased demands may adversely affect the services we provide to customers. In addition, our personnel, systems, procedures and controls may be inadequate to support future operations, particularly with respect to operations in countries outside of the United States or in new lines of business. Consequently, in order to manage growth effectively, we may be required to increase expenditures to increase our physical resources, expand, train and manage our employee base, improve management, financial and information systems and controls, or make other capital expenditures. Our results of operations and financial condition could be harmed if we encounter difficulties in effectively managing the budgeting, forecasting and other process control issues presented by future growth.
Failure to successfully integrate acquired operations could negatively impact our balance sheet and results of operations.
Strategic acquisitions are an important element of our growth strategy and the success of any acquisition we make depends in part on our ability to integrate the acquired company and realize anticipated synergies. The process of integrating acquired businesses, particularly in new markets, may involve unforeseen difficulties and may require a disproportionate amount of our management's
25
attention and our financial and other resources. We can give no assurance that we will ultimately be able to effectively integrate and manage the operations of any acquired business or realize anticipated synergies. The failure to successfully integrate the cultures, operating systems, procedures and information technologies of an acquired business could have a material adverse effect on our balance sheet and results of operations.
We may be unable to continue our international expansion.
An important part of our growth strategy involves expanding operations in international markets, including in markets where we currently do not operate, and we expect to continue this expansion. Europe, Latin America and Australia have been our primary areas of focus for international expansion, and we have expanded into the Asia Pacific region to a lesser extent. We have entered into joint ventures and have acquired all or a majority of the equity in storage and information management services businesses operating in these areas and may acquire other storage and information management services businesses in the future, including in new countries/markets where we currently do not operate.
This growth strategy involves risks. We may be unable to pursue this strategy in the future at the desired pace or at all. For example, we may be unable to:
We also compete with other storage and information management services providers for companies to acquire. Some of our competitors may possess substantial financial and other resources. If any such competitor were to devote additional resources to pursue such acquisition candidates or focus its strategy on our international markets, the purchase price for potential acquisitions or investments could rise, competition in international markets could increase and our results of operations could be adversely affected.
Item 1B. Unresolved Staff Comments.
None.
As of December 31, 2014, we conducted operations through 839 leased facilities and 255 facilities that we own. Our facilities are divided among our reportable segments as follows: North American Records and Information Management Business (614), North American Data Management Business (58), International Business (421) and Corporate and Other (1). These facilities contain a total of 67.8 million square feet of space.
26
A breakdown of owned and leased facilities by country (and by state within the United States) is listed below:
|
Leased | Owned | Total | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Country/State
|
Number | Square Feet | Number | Square Feet | Number | Square Feet | |||||||||||||
North America |
|||||||||||||||||||
United States (Including Puerto Rico) |
|||||||||||||||||||
Alabama |
3 | 312,473 | 1 | 12,621 | 4 | 325,094 | |||||||||||||
Arizona |
12 | 535,921 | 4 | 239,110 | 16 | 775,031 | |||||||||||||
California |
59 | 3,404,346 | 15 | 1,964,572 | 74 | 5,368,918 | |||||||||||||
Colorado |
13 | 543,590 | 5 | 338,009 | 18 | 881,599 | |||||||||||||
Connecticut |
4 | 209,183 | 6 | 665,013 | 10 | 874,196 | |||||||||||||
Delaware |
3 | 267,267 | 1 | 120,921 | 4 | 388,188 | |||||||||||||
Florida |
37 | 2,426,077 | 4 | 194,090 | 41 | 2,620,167 | |||||||||||||
Georgia |
12 | 910,820 | 4 | 229,719 | 16 | 1,140,539 | |||||||||||||
Illinois |
13 | 1,128,817 | 6 | 1,281,947 | 19 | 2,410,764 | |||||||||||||
Indiana |
3 | 154,080 | 1 | 131,506 | 4 | 285,586 | |||||||||||||
Iowa |
3 | 118,658 | 1 | 14,200 | 4 | 132,858 | |||||||||||||
Kansas |
1 | 131,764 | | | 1 | 131,764 | |||||||||||||
Kentucky |
2 | 64,000 | 4 | 418,760 | 6 | 482,760 | |||||||||||||
Louisiana |
3 | 210,350 | 2 | 214,625 | 5 | 424,975 | |||||||||||||
Maine |
1 | 95,000 | | | 1 | 95,000 | |||||||||||||
Maryland |
13 | 1,220,692 | 3 | 327,258 | 16 | 1,547,950 | |||||||||||||
Massachusetts |
5 | 396,656 | 8 | 1,171,438 | 13 | 1,568,094 | |||||||||||||
Michigan |
18 | 1,011,868 | 5 | 217,936 | 23 | 1,229,804 | |||||||||||||
Minnesota |
11 | 841,567 | | | 11 | 841,567 | |||||||||||||
Mississippi |
2 | 157,386 | | | 2 | 157,386 | |||||||||||||
Missouri |
11 | 1,182,324 | 1 | 25,120 | 12 | 1,207,444 | |||||||||||||
Nebraska |
1 | 34,560 | 3 | 316,970 | 4 | 351,530 | |||||||||||||
Nevada |
6 | 220,276 | 1 | 107,041 | 7 | 327,317 | |||||||||||||
New Hampshire |
| | 1 | 146,467 | 1 | 146,467 | |||||||||||||
New Jersey |
27 | 1,903,574 | 8 | 1,628,945 | 35 | 3,532,519 | |||||||||||||
New Mexico |
| | 2 | 109,473 | 2 | 109,473 | |||||||||||||
New York |
17 | 789,817 | 13 | 1,186,266 | 30 | 1,976,083 | |||||||||||||
North Carolina |
19 | 1,019,486 | 1 | 13,624 | 20 | 1,033,110 | |||||||||||||
Ohio |
13 | 859,305 | 6 | 603,878 | 19 | 1,463,183 | |||||||||||||
Oklahoma |
5 | 227,883 | | | 5 | 227,883 | |||||||||||||
Oregon |
11 | 360,475 | 1 | 55,621 | 12 | 416,096 | |||||||||||||
Pennsylvania |
18 | 1,661,118 | 8 | 2,577,883 | 26 | 4,239,001 | |||||||||||||
Puerto Rico |
3 | 178,449 | 1 | 54,352 | 4 | 232,801 | |||||||||||||
Rhode Island |
2 | 70,159 | 1 | 12,748 | 3 | 82,907 | |||||||||||||
South Carolina |
10 | 521,005 | | | 10 | 521,005 | |||||||||||||
Tennessee |
4 | 166,993 | 5 | 153,659 | 9 | 320,652 | |||||||||||||
Texas |
47 | 2,231,997 | 28 | 2,484,082 | 75 | 4,716,079 | |||||||||||||
Utah |
2 | 78,148 | 1 | 90,553 | 3 | 168,701 | |||||||||||||
Vermont |
2 | 55,200 | | | 2 | 55,200 | |||||||||||||
Virginia |
15 | 749,745 | 5 | 437,021 | 20 | 1,186,766 | |||||||||||||
Washington |
6 | 312,763 | 5 | 432,896 | 11 | 745,659 | |||||||||||||
West Virginia |
2 | 167,055 | | | 2 | 167,055 | |||||||||||||
Wisconsin |
7 | 428,068 | 1 | 10,655 | 8 | 438,723 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
|
446 | 27,358,915 | 162 | 17,988,979 | 608 | 45,347,894 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Canada |
49 | 2,906,882 | 15 | 1,749,664 | 64 | 4,656,546 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
|
495 | 30,265,797 | 177 | 19,738,643 | 672 | 50,004,440 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
27
|
Leased | Owned | Total | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Country/State
|
Number | Square Feet | Number | Square Feet | Number | Square Feet | |||||||||||||
International |
|||||||||||||||||||
Argentina |
5 | 491,545 | 5 | 469,748 | 10 | 961,293 | |||||||||||||
Australia |
22 | 1,343,068 | 1 | 30,615 | 23 | 1,373,683 | |||||||||||||
Austria |
| | 1 | 30,000 | 1 | 30,000 | |||||||||||||
Belgium |
4 | 135,456 | 1 | 104,391 | 5 | 239,847 | |||||||||||||
Brazil |
31 | 1,957,275 | 3 | 190,076 | 34 | 2,147,351 | |||||||||||||
Chile |
10 | 409,643 | 5 | 212,010 | 15 | 621,653 | |||||||||||||
China |
19 | 253,302 | 1 | 20,721 | 20 | 274,023 | |||||||||||||
Columbia |
16 | 511,932 | | | 16 | 511,932 | |||||||||||||
Czech Republic |
8 | 256,300 | | | 8 | 256,300 | |||||||||||||
Denmark |
1 | 66,942 | | | 1 | 66,942 | |||||||||||||
France |
17 | 704,656 | 4 | 217,919 | 21 | 922,575 | |||||||||||||
Germany |
15 | 658,212 | 1 | 58,329 | 16 | 716,541 | |||||||||||||
Greece |
2 | 73,947 | | | 2 | 73,947 | |||||||||||||
Hong Kong |
3 | 138,498 | | | 3 | 138,498 | |||||||||||||
Hungary |
5 | 304,161 | | | 5 | 304,161 | |||||||||||||
India |
24 | 396,420 | | | 24 | 396,420 | |||||||||||||
Mexico |
9 | 257,883 | 6 | 419,188 | 15 | 677,071 | |||||||||||||
Netherlands |
8 | 466,347 | | | 8 | 466,347 | |||||||||||||
Northern Ireland |
2 | 66,876 | | | 2 | 66,876 | |||||||||||||
Norway |
3 | 104,937 | | | 3 | 104,937 | |||||||||||||
Peru |
2 | 41,878 | 8 | 259,903 | 10 | 301,781 | |||||||||||||
Poland |
21 | 731,250 | | | 21 | 731,250 | |||||||||||||
Republic of Ireland |
6 | 56,525 | 3 | 158,558 | 9 | 215,083 | |||||||||||||
Romania |
3 | 232,368 | | | 3 | 232,368 | |||||||||||||
Russia |
25 | 612,083 | | | 25 | 612,083 | |||||||||||||
Scotland |
7 | 196,298 | 4 | 375,294 | 11 | 571,592 | |||||||||||||
Serbia |
2 | 23,681 | | | 2 | 23,681 | |||||||||||||
Singapore |
1 | 33,700 | | | 1 | 33,700 | |||||||||||||
Slovakia |
3 | 104,846 | | | 3 | 104,846 | |||||||||||||
Spain |
7 | 165,935 | 6 | 203,000 | 13 | 368,935 | |||||||||||||
Switzerland |
4 | 85,357 | | | 4 | 85,357 | |||||||||||||
Turkey |
12 | 624,383 | | | 12 | 624,383 | |||||||||||||
Ukraine |
1 | 48,438 | | | 1 | 48,438 | |||||||||||||
United Kingdom |
45 | 1,942,306 | 29 | 1,377,324 | 74 | 3,319,630 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
|
343 | 13,496,448 | 78 | 4,127,076 | 421 | 17,623,524 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Corporate and Other |
|||||||||||||||||||
Corporate headquarters (Boston, Massachusetts) |
1 | 132,860 | | | 1 | 132,860 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total |
839 | 43,895,105 | 255 | 23,865,719 | 1,094 | 67,760,824 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
The leased facilities typically have initial lease terms of five to ten years with one or more five-year renewal options. In addition, some of the leases contain either a purchase option or a right of first refusal upon the sale of the property. We believe that the space available in our facilities is adequate to meet our current needs, although future growth may require that we lease or purchase additional real property.
28
See Note 10 to the Notes to the Consolidated Financial Statements included in this Annual Report for information regarding our minimum annual lease commitments.
See Schedule IIISchedule of Real Estate and Accumulated Depreciation in this Annual Report for information regarding the cost, accumulated depreciation and encumbrances associated with our owned real estate.
We are involved in litigation from time to time in the ordinary course of business. A portion of the defense and/or settlement costs associated with such litigation is covered by various commercial liability insurance policies purchased by us and, in limited cases, indemnification from third parties. In the opinion of management, no material legal proceedings are pending to which we, or any of our properties, are subject.
Item 4. Mine Safety Disclosures.
None.
29
Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock is traded on the New York Stock Exchange (the "NYSE") under the symbol "IRM." The following table sets forth the high and low sale prices on the NYSE, for the years 2013 and 2014:
|
Sale Prices | ||||||
---|---|---|---|---|---|---|---|
|
High | Low | |||||
2013 |
|||||||
First Quarter |
$ | 36.67 | $ | 31.45 | |||
Second Quarter |
39.71 | 25.91 | |||||
Third Quarter |
29.12 | 25.53 | |||||
Fourth Quarter |
30.80 | 25.03 | |||||
2014 |
|||||||
First Quarter |
$ | 30.48 | $ | 25.74 | |||
Second Quarter |
31.15 | 25.95 | |||||
Third Quarter |
37.10 | 31.17 | |||||
Fourth Quarter |
40.41 | 31.11 |
The closing price of our common stock on the NYSE on February 20, 2015 was $36.71. As of February 20, 2015, there were 439 holders of record of our common stock.
On September 15, 2014, we announced the declaration by our board of directors of a special distribution of $700.0 million (the "Special Distribution"), payable to stockholders of record as of September 30, 2014 (the "Record Date"). The Special Distribution represented the remaining amount of our undistributed earnings and profits attributable to all taxable periods ending on or prior to December 31, 2013, which in accordance with tax rules applicable to REIT conversions, we were required to pay to our stockholders on or before December 31, 2014 in connection with our conversion to a REIT. The Special Distribution also included certain items of taxable income that we recognized in 2014, such as depreciation recapture in respect of accounting method changes commenced in our pre-REIT period as well as foreign earnings and profits recognized as dividend income. The Special Distribution followed an initial special distribution of $700.0 million paid to stockholders in November 2012.
The Special Distribution was paid on November 4, 2014 (the "Payment Date") to stockholders of record as of the Record Date in a combination of common stock and cash. Stockholders had the right to elect to be paid their pro rata portion of the Special Distribution in all common stock or all cash, with the total cash payment to stockholders limited to no more than $140.0 million, or 20% of the total Special Distribution, not including cash paid in lieu of fractional shares. Based on stockholder elections, we paid $140.0 million of the Special Distribution in cash, not including cash paid in lieu of fractional shares, with the balance paid in the form of common stock. Our shares of common stock were valued for purposes of the Special Distribution based upon the average closing price on the three trading days following October 24, 2014, or $35.55 per share, and as such, we issued approximately 15.8 million shares of common stock in the Special Distribution. These shares impact weighted average shares outstanding from the date of issuance, and thus impact our earnings per share data prospectively from the Payment Date.
In November 2014, our board of directors declared a distribution of $0.255 per share (the "Catch-Up Distribution") payable on December 15, 2014 to stockholders of record on November 28, 2014. Our board of directors declared the Catch-Up Distribution because our cash distributions paid from January 2014 through July 2014 were declared and paid before our board of directors had
30
determined that we would elect REIT status effective January 1, 2014 and were lower than they otherwise would have been if the final determination to elect REIT status effective January 1, 2014 had been prior to such distributions.
In February 2010, our board of directors adopted a dividend policy under which we have paid, and in the future intend to pay, quarterly cash dividends on our common stock. Declaration and payment of future quarterly dividends is at the discretion of our board of directors. In 2013 and 2014, our board of directors declared the following dividends:
Declaration Date
|
Dividend
Per Share |
Record Date |
Total
Amount (in thousands) |
Payment Date | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
March 14, 2013 |
$ | 0.2700 | March 25, 2013 | $ | 51,460 | April 15, 2013 | |||||||
June 6, 2013 |
0.2700 | June 25, 2013 | 51,597 | July 15, 2013 | |||||||||
September 11, 2013 |
0.2700 | September 25, 2013 | 51,625 | October 15, 2013 | |||||||||
December 16, 2013 |
0.2700 | December 27, 2013 | 51,683 | January 15, 2014 | |||||||||
March 14, 2014 |
0.2700 | March 25, 2014 | 51,812 | April 15, 2014 | |||||||||
May 28, 2014 |
0.2700 | June 25, 2014 | 52,033 | July 15, 2014 | |||||||||
September 15, 2014 |
0.4750 | September 25, 2014 | 91,993 | October 15, 2014 | |||||||||
September 15, 2014(1) |
3.6144 | September 30, 2014 | 700,000 | November 4, 2014 | |||||||||
November 17, 2014(2) |
0.2550 | November 28, 2014 | 53,450 | December 15, 2014 | |||||||||
November 17, 2014 |
0.4750 | December 5, 2014 | 99,617 | December 22, 2014 |
During the years ended December 31, 2012, 2013 and 2014, we declared distributions to our stockholders of $886.9 million, $206.4 million and $1,048.9 million, respectively. These distributions represent approximately $5.12 per share, $1.08 per share and $5.37 per share for the years ended December 31, 2012, 2013 and 2014, respectively, based on the weighted average number of common shares outstanding during each respective year. For each of 2012 and 2014, total amounts distributed included Special Distributions (as described above) of $700.0 million, or $4.07 and $3.61 per share, respectively, associated with the Company's conversion to a REIT.
For federal income tax purposes, distributions to our stockholders are generally treated as nonqualified ordinary dividends, qualified ordinary dividends or return of capital. The IRS requires historical C corporation earnings and profits to be distributed prior to any REIT distributions, which may affect the character of each distribution to our stockholders, including whether and to what extent each distribution is characterized as a qualified or nonqualified ordinary dividend. For the years ended December 31, 2012, 2013 and 2014, the dividends we paid on our common shares were classified as follows:
|
Year Ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2013 | 2014 | |||||||
Nonqualified ordinary dividends |
0.0 | % | 0.0 | % | 26.4 | % | ||||
Qualified ordinary dividends |
100.0 | % | 100.0 | % | 56.4 | % | ||||
Return of capital |
0.0 | % | 0.0 | % | 17.2 | % | ||||
| | | | | | | | | | |
|
100.0 | % | 100.0 | % | 100.0 | % | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
In December 2013, our board of directors approved, and we entered into, a REIT Status Protection Rights Agreement (the "Rights Agreement") which provided for a dividend of one preferred stock purchase right (a "Right") for each share of our common stock outstanding on December 20,
31
2013. On November 18, 2014, we entered into the First Amendment to the Rights Agreement to extend the expiration of the Rights Agreement from December 9, 2014 to February 28, 2015. On January 20, 2015, in connection with the merger with our predecessor, the Rights Agreement was terminated.
Unregistered Sales of Equity Securities and Use of Proceeds
We did not sell any unregistered securities during the three months ended December 31, 2014, nor did we repurchase any shares of our common stock during the three months ended December 31, 2014.
32
Item 6. Selected Financial Data.
The following selected consolidated statements of operations, balance sheet and other data have been derived from our audited consolidated financial statements. The selected consolidated financial and operating information set forth below should be read in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and our Consolidated Financial Statements and the Notes thereto included elsewhere in this Annual Report.
33
|
Year Ended December 31, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2010(1) | 2011(1) | 2012(1) | 2013(1) | 2014 | |||||||||||
|
(In thousands)
|
|||||||||||||||
Other Data: |
||||||||||||||||
Adjusted OIBDA(4) |
$ | 925,476 | $ | 949,339 | $ | 910,917 | $ | 894,581 | $ | 925,797 | ||||||
Adjusted OIBDA Margin(4) |
32.0 | % | 31.5 | % | 30.3 | % | 29.6 | % | 29.7 | % | ||||||
Ratio of Earnings to Fixed Charges |
2.2x | 2.2x | 1.9x | 1.5x | 1.7x | |||||||||||
(footnotes follow) |
|
|
|
|
|
|
As of December 31, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2010(1) | 2011(1) | 2012(1) | 2013(1) | 2014 | |||||||||||
|
(in thousands)
|
|||||||||||||||
Consolidated Balance Sheet Data: |
||||||||||||||||
Cash and Cash Equivalents |
$ | 258,693 | $ | 179,845 | $ | 243,415 | $ | 120,526 | $ | 125,933 | ||||||
Total Assets |
6,416,393 | 6,041,258 | 6,358,339 | 6,653,005 | 6,570,342 | |||||||||||
Total Long-Term Debt (including Current Portion of Long-Term Debt) |
3,008,207 | 3,353,588 | 3,825,003 | 4,171,722 | 4,663,531 | |||||||||||
Total Equity |
1,949,022 | 1,249,742 | 1,157,148 | 1,051,734 | 869,955 | |||||||||||
(footnotes follow) |
|
|
|
|
|
34
as defined below, for the years ended December 31, 2010, 2011, 2012 and 2013 have been restated to reflect a reduction in revenues of $1.2 million, $1.1 million, $1.3 million and $1.3 million, respectively, to correct billing the billing inaccuracies. The remaining overstated amount of $5.1 million relates to the periods prior to 2010. The impact to income from continuing operations and net income is a reduction of $0.7 million, $0.7 million, $0.8 million and $0.8 million, respectively, for the after tax impact of the contract billing inaccuracies for the years ended December 31, 2010, 2011, 2012 and 2013, respectively. Earnings (loss) per sharebasic and earnings (loss) per sharediluted have also been restated to reflect the restatement. In addition, total equity at December 31, 2010, 2011, 2012 and 2013 has been reduced by $3.8 million, $4.5 million, $5.3 million and $6.1 million, respectively, to account for the contract billing inaccuracies.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with "Item 6. Selected Financial Data" and the Consolidated Financial Statements and Notes thereto and the other financial and operating information included elsewhere in this Annual Report.
This discussion contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995 and in other securities laws. See "Cautionary Note Regarding Forward-Looking Statements" on page iii of this Annual Report and "Item 1A. Risk Factors" beginning on page 13 of this Annual Report.
35
Overview
REIT Conversion
We previously disclosed that, as part of our plan to convert to a REIT for federal income tax purposes and elect REIT status effective January 1, 2014 (the "Conversion Plan"), we sought PLRs from the IRS relating to numerous technical tax issues, including classification of our steel racking structures as qualified real estate assets. We submitted the PLR requests in the third quarter of 2012, and on June 25, 2014, we announced that we received the favorable PLRs from the IRS necessary for our conversion to a REIT. After receipt of the PLRs, our board of directors unanimously approved our conversion to a REIT for our taxable year beginning January 1, 2014.
In connection with the Conversion Plan, and, in particular, to impose ownership limitations customary for REITs, on January 20, 2015, we completed the merger with our predecessor and all outstanding shares of our predecessor's common stock were converted into a right to receive an equal number of shares of our common stock.
Total operating and capital expenditures associated with the Conversion Plan through the end of 2014 were approximately $180.7 million. Of these amounts, approximately $47.0 million was incurred in 2012, including approximately $12.5 million of capital expenditures. Additionally, approximately $106.3 million was incurred in 2013, including approximately $23.4 million of capital expenditures. Also, we incurred approximately $27.4 million in 2014, including approximately $5.1 million of capital expenditures.
Discontinued Operations
On April 27, 2012, we sold our records management operations in Italy. The financial position, operating results and cash flows of our Italian operations, including the loss on the sale of our Italian operations, for all periods presented, have been reported as discontinued operations for financial reporting purposes. See Note 14 to Notes to Consolidated Financial Statements included in this Annual Report.
In December 2014, we divested our secure shredding operations in Australia, Ireland and the United Kingdom (the "International Shredding Operations") in a stock transaction for approximately $26.2 million of cash at closing, including $1.5 million being held in escrow. The assets sold primarily consisted of customer contracts and certain long-lived assets. We have concluded that this divestiture is not a discontinued operation and, therefore, have recorded a pretax gain on sale in other (income) expense, net of approximately $6.9 million ($10.2 million, inclusive of a tax benefit) in our Consolidated Statement of Operations for the year ended December 31, 2014. Revenues from our International Shredding Operations in 2014 represent less than 1% of our consolidated revenues. The International Shredding Operations were previously included in our International Business segment.
Restructuring
In the third quarter of 2013, we implemented a plan that called for certain organizational realignments to advance our growth strategy and reduce operating costs, which was completed in 2014. As a result, we recorded restructuring costs of approximately $23.4 million and $3.5 million for the years ended December 31, 2013 and 2014, respectively, primarily related to employee severance and associated benefits. Of the total restructuring costs incurred in 2013, $12.6 million, $2.1 million, $3.7 million and $5.0 million are reflected in the North American Records and Information Management Business, North American Data Management Business, International Business and Corporate and Other segments, respectively. Of the total restructuring costs incurred in 2014, $1.6 million, $0.3 million and $1.5 million are reflected in the North American Records and Information Management Business, North American Data Management Business and Corporate and
36
Other segments, respectively. In our Consolidated Statements of Operations for the year ended December 31, 2013, $20.0 million and $3.4 million of these restructuring costs are recorded in selling, general and administrative expenses and cost of sales, respectively. In our Consolidated Statements of Operations for the year ended December 31, 2014, $2.2 million and $1.2 million of these restructuring costs are recorded in selling, general and administrative expenses and cost of sales, respectively.
General
As a result of certain organizational realignments effective January 1, 2014, we evaluated changes to our internal financial reporting to better align our internal reporting to how we will manage our business going forward. This evaluation resulted in changes to our reportable segments effective January 1, 2014 and, as a result, we have restated previously reported segment information. As a result of the changes to our reportable segments, the former North American Business segment was separated into two unique reportable segments, which we refer to as (1) North American Records and Information Management Business segment and (2) North American Data Management Business segment. In addition, the Emerging Businesses segment, which was previously reported as a component of the former North American Business segment, is now reported as a component of the Corporate and Other segment.
Our revenues consist of storage rental revenues as well as service revenues and are reflected net of sales and value added taxes. Storage rental revenues, which are considered a key driver of financial performance for the storage and information management services industry, consist primarily of recurring periodic rental charges related to the storage of materials or data (generally on a per unit basis) that are typically retained by customers for many years. Service revenues include charges for related service activities, which include: (1) the handling of records, including the addition of new records, temporary removal of records from storage, refiling of removed records and the destruction of records; (2) courier operations, consisting primarily of the pickup and delivery of records upon customer request; (3) secure shredding of sensitive documents and the related sale of recycled paper, the price of which can fluctuate from period to period; (4) other services, including DMS, which relate to physical and digital records, and project revenues; (5) customer termination and permanent withdrawal fees; (6) data restoration projects; (7) special project work; (8) fulfillment services; (9) consulting services; and (10) technology escrow services that protect and manage source code ("Intellectual Property Management") and other technology services and product sales (including specially designed storage containers and related supplies). Our service revenue growth has been negatively impacted by declining activity rates as stored records are becoming less active. While customers continue to store their records with us, they are less likely than they have been in the past to retrieve records for research purposes, thereby reducing service activity levels.
Cost of sales (excluding depreciation and amortization) consists primarily of wages and benefits for field personnel, facility occupancy costs (including rent and utilities), transportation expenses (including vehicle leases and fuel), other product cost of sales and other equipment costs and supplies. Of these, wages and benefits and facility occupancy costs are the most significant. Selling, general and administrative expenses consist primarily of wages and benefits for management, administrative, information technology, sales, account management and marketing personnel, as well as expenses related to communications and data processing, travel, professional fees, bad debts, training, office equipment and supplies. Trends in facility occupancy costs are impacted by the total number of facilities we occupy, the mix of properties we own versus properties we occupy under operating leases, fluctuations in per square foot occupancy costs, and the levels of utilization of these properties. Trends in total wages and benefits in dollars and as a percentage of total consolidated revenue are influenced by changes in headcount and compensation levels, achievement of incentive compensation targets, workforce productivity and variability in costs associated with medical insurance and workers' compensation.
37
The expansion of our international businesses has impacted the major cost of sales components and selling, general and administrative expenses. Our international operations are more labor intensive than our operations in North America and, therefore, labor costs are a higher percentage of segment revenue. In addition, the overhead structure of our expanding international operations has not achieved the same level of overhead leverage as our North American segments, which may result in an increase in selling, general and administrative expenses, as a percentage of consolidated revenue, as our international operations become a more meaningful percentage of our consolidated results.
Our depreciation and amortization charges result primarily from the capital-intensive nature of our business. The principal components of depreciation relate to storage systems, which include racking structures, building and leasehold improvements, computer systems hardware and software and buildings. Amortization relates primarily to customer relationship acquisition costs and is impacted by the nature and timing of acquisitions.
Our consolidated revenues and expenses are subject to variations caused by the net effect of foreign currency translation on revenues and expenses incurred by our entities outside the United States. It is difficult to predict the future fluctuations of foreign currency exchange rates and how those fluctuations will impact our Consolidated Statements of Operations. Due to the expansion of our international operations, some of these fluctuations have become material on individual balances. However, because both the revenues and expenses are denominated in the local currency of the country in which they are derived or incurred, the impact of currency fluctuations on our operating income and operating margin is partially mitigated. In order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency fluctuations, we compare the percentage change in the results from one period to another period in this report using constant currency presentation. The constant currency growth rates are calculated by translating the 2012 results at the 2013 average exchange rates and the 2013 results at the 2014 average exchange rates.
The following table is a comparison of underlying average exchange rates of the foreign currencies that had the most significant impact on our United States dollar-reported revenues and expenses:
|
Average Exchange
Rates for the Year Ended December 31, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Percentage
Strengthening / (Weakening) of Foreign Currency |
|||||||||
|
2013 | 2014 | ||||||||
Australian dollar |
$ | 0.968 | $ | 0.902 | (6.8 | )% | ||||
Brazilian real |
$ | 0.465 | $ | 0.426 | (8.4 | )% | ||||
British pound sterling |
$ | 1.565 | $ | 1.648 | 5.3 | % | ||||
Canadian dollar |
$ | 0.971 | $ | 0.906 | (6.7 | )% | ||||
Euro |
$ | 1.328 | $ | 1.329 | 0.1 | % |
|
Average Exchange
Rates for the Year Ended December 31, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Percentage
Strengthening / (Weakening) of Foreign Currency |
|||||||||
|
2012 | 2013 | ||||||||
Australian dollar |
$ | 1.036 | $ | 0.968 | (6.6 | )% | ||||
Brazilian real |
$ | 0.514 | $ | 0.465 | (9.5 | )% | ||||
British pound sterling |
$ | 1.585 | $ | 1.565 | (1.3 | )% | ||||
Canadian dollar |
$ | 1.000 | $ | 0.971 | (2.9 | )% | ||||
Euro |
$ | 1.286 | $ | 1.328 | 3.3 | % |
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Non-GAAP Measures
Adjusted Operating Income Before Depreciation, Amortization, Intangible Impairments, (Gain) Loss on Disposal/Write-Down of Property, Plant and Equipment (Excluding Real Estate), Net and REIT Costs ("Adjusted OIBDA")
Adjusted OIBDA is defined as operating income before depreciation, amortization, intangible impairments, (gain) loss on disposal/write-down of property, plant and equipment (excluding real estate), net and REIT Costs (as defined below). Adjusted OIBDA Margin is calculated by dividing Adjusted OIBDA by total revenues. We use multiples of current or projected Adjusted OIBDA in conjunction with our discounted cash flow models to determine our overall enterprise valuation and to evaluate acquisition targets. We believe Adjusted OIBDA and Adjusted OIBDA Margin provide our current and potential investors with relevant and useful information regarding our ability to generate cash flow to support business investment. These measures are an integral part of the internal reporting system we use to assess and evaluate the operating performance of our business. Adjusted OIBDA does not include certain items that we believe are not indicative of our core operating results, specifically: (1) (gain) loss on disposal/write-down of property, plant and equipment (excluding real estate), net; (2) (gain) loss on sale of real estate, net of tax; (3) intangible impairments; (4) REIT Costs; (5) other expense (income), net; (6) income (loss) from discontinued operations, net of tax; (7) gain (loss) on sale of discontinued operations, net of tax; and (8) net income (loss) attributable to noncontrolling interests.
Adjusted OIBDA also does not include interest expense, net and the provision (benefit) for income taxes. These expenses are associated with our capitalization and tax structures, which we do not consider when evaluating the operating profitability of our core operations. Finally, Adjusted OIBDA does not include depreciation and amortization expenses, in order to eliminate the impact of capital investments, which we evaluate by comparing capital expenditures to incremental revenue generated and as a percentage of total revenues. Adjusted OIBDA and Adjusted OIBDA Margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with accounting principles generally accepted in the United States of America ("GAAP"), such as operating or net income (loss) or cash flows from operating activities from continuing operations (as determined in accordance with GAAP).
Reconciliation of Operating Income to Adjusted OIBDA (in thousands):
|
Year Ended December 31, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2010 | 2011 | 2012 | 2013 | 2014 | |||||||||||
Operating Income |
$ | 545,268 | $ | 566,818 | $ | 555,466 | $ | 489,247 | $ | 549,277 | ||||||
Add: Depreciation and Amortization |
304,205 | 319,499 | 316,344 | 322,037 | 353,143 | |||||||||||
Intangible Impairments |
85,909 | 46,500 | | | | |||||||||||
(Gain) Loss on Disposal/Write-Down of Property, Plant and Equipment (Excluding Real Estate), Net |
(9,906 | ) | 995 | 4,661 | 430 | 1,065 | ||||||||||
REIT Costs(1) |
| 15,527 | 34,446 | 82,867 | 22,312 | |||||||||||
| | | | | | | | | | | | | | | | |
Adjusted OIBDA |
$ | 925,476 | $ | 949,339 | $ | 910,917 | $ | 894,581 | $ | 925,797 | ||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
39
Adjusted Earnings per Share from Continuing Operations ("Adjusted EPS")
Adjusted EPS is defined as reported earnings per share from continuing operations excluding: (1) (gain) loss on disposal/write-down of property, plant and equipment (excluding real estate), net; (2) (gain) loss on sale of real estate, net of tax; (3) intangible impairments; (4) REIT Costs; (5) other expense (income), net; and (6) the tax impact of reconciling items and discrete tax items. We do not believe these excluded items to be indicative of our ongoing operating results, and they are not considered when we are forecasting our future results. We believe Adjusted EPS is of value to our current and potential investors when comparing our results from past, present and future periods.
Reconciliation of Reported EPSFully Diluted from Continuing Operations to Adjusted EPSFully Diluted from Continuing Operations:
|
Year Ended December 31, | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2010 | 2011 | 2012 | 2013 | 2014 | |||||||||||
Reported EPSFully Diluted from Continuing Operations |
$ | 0.82 | $ | 1.25 | $ | 1.04 | $ | 0.52 | $ | 1.67 | ||||||
Add: (Gain) Loss on Disposal/Write-down of Property, Plant and Equipment (Excluding Real Estate), Net |
(0.05 | ) | 0.01 | 0.03 | | 0.01 | ||||||||||
Intangible Impairments |
0.43 | 0.24 | | | | |||||||||||
Gain on Sale of Real Estate, Net of Tax |
| (0.01 | ) | | (0.01 | ) | (0.04 | ) | ||||||||
Other Expense (Income), Net |
0.04 | 0.07 | 0.09 | 0.39 | 0.33 | |||||||||||
REIT Costs |
| 0.08 | 0.20 | 0.43 | 0.11 | |||||||||||
Tax Impact of Reconciling Items and Discrete Tax Items(1) |
0.52 | 0.21 | 0.35 | 0.07 | (0.72 | ) | ||||||||||
| | | | | | | | | | | | | | | | |
Adjusted EPSFully Diluted from Continuing Operations |
$ | 1.76 | $ | 1.85 | $ | 1.71 | $ | 1.40 | $ | 1.36 | ||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements and for the period then ended. On an ongoing basis, we evaluate the estimates used. We base our estimates on historical experience, actuarial estimates, current conditions and various other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities and are not readily apparent from other sources. Actual results may differ from these estimates. Our critical accounting policies include the following, which are listed in no particular order:
Revenue Recognition
Our revenues consist of storage rental revenues as well as service revenues and are reflected net of sales and value added taxes. Storage rental revenues, which are considered a key driver of financial performance for the storage and information management services industry, consist primarily of recurring periodic rental charges related to the storage of materials or data (generally on a per unit
40
basis). Service revenues include charges for related service activities, which include: (1) the handling of records, including the addition of new records, temporary removal of records from storage, refiling of removed records and the destruction of records; (2) courier operations, consisting primarily of the pickup and delivery of records upon customer request; (3) secure shredding of sensitive documents and the related sale of recycled paper, the price of which can fluctuate from period to period; (4) other services, including DMS, which relate to physical and digital records, and project revenues; (5) customer termination and permanent withdrawal fees; (6) data restoration projects; (7) special project work; (8) fulfillment services; (9) consulting services; and (10) Intellectual Property Management and other technology services and product sales (including specially designed storage containers and related supplies).
We recognize revenue when the following criteria are met: persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable and collectability of the resulting receivable is reasonably assured. Storage rental and service revenues are recognized in the month the respective storage rental or service is provided, and customers are generally billed on a monthly basis on contractually agreed-upon terms. Amounts related to future storage rental or prepaid service contracts for customers where storage rental fees or services are billed in advance are accounted for as deferred revenue and recognized ratably over the period the applicable storage rental or service is provided or performed. Revenues from the sales of products, which are included as a component of service revenues, are recognized when products are shipped and title has passed to the customer. Revenues from the sales of products have historically not been significant.
Accounting for Acquisitions
Part of our growth strategy has included the acquisition by us of numerous businesses. The purchase price of each acquisition has been determined after due diligence of the target business, market research, strategic planning and the forecasting of expected future results and synergies. Estimated future results and expected synergies are subject to revisions as we integrate each acquisition and attempt to leverage resources.
Each acquisition has been accounted for using the acquisition method of accounting as defined under the applicable accounting standards at the date of each acquisition. Accounting for these acquisitions has resulted in the capitalization of the cost in excess of fair value of the net assets acquired in each of these acquisitions as goodwill. We estimated the fair values of the assets acquired in each acquisition as of the date of acquisition and these estimates are subject to adjustment based on the final assessments of the fair value of intangible assets (primarily customer relationship intangible assets), property, plant and equipment (primarily racking structures), operating leases, contingencies and income taxes (primarily deferred income taxes). We complete these assessments within one year of the date of acquisition. See Note 6 to Notes to Consolidated Financial Statements included in this Annual Report for a description of recent acquisitions.
Determining the fair values of the net assets acquired requires management's judgment and often involves the use of assumptions with respect to future cash inflows and outflows, discount rates and market data, among other items. Due to the inherent uncertainty of future events, actual values of net assets acquired could be different from our estimated fair values and could have a material impact on our financial statements.
Of the net assets acquired in our acquisitions, the fair value of owned buildings, customer relationship intangible assets, racking structures and operating leases are generally the most common and most significant. For significant acquisitions or acquisitions involving new markets or new products, we generally use third party appraisals of the fair value of owned buildings, customer relationship intangible assets and market rental rates for acquired operating leases. For acquisitions that are not significant or do not involve new markets or new products, we generally use third party appraisals of
41
fair value for acquired owned buildings and market rental rates for acquired operating leases. When not using third party appraisals of the fair value of acquired net assets, the fair value of acquired customer relationship intangible assets and acquired racking structures is determined internally. The fair value of acquired racking structures is determined internally by taking current replacement cost at the date of acquisition for the quantity of racking structures acquired, discounted to take into account the quality (e.g. age, material and type) of the racking structures. Additionally, we use discounted cash flow models to determine the fair value of customer relationship intangible assets, which requires a significant amount of judgment by management, including estimating expected lives of the relationships, expected future cash flows and discount rates.
Of the key assumptions that impact the estimated fair values of customer relationship intangible assets, the expected future cash flows and discount rate are among the most sensitive and are considered to be critical assumptions. To illustrate the sensitivity of changes in key assumptions used in determining the fair value of customer relationship intangible assets acquired in our most significant acquisitions in fiscal year 2014 (Keepers Brasil Ltda and Securit Records Management), a hypothetical increase of 10% in the expected annual future cash flows attributable to these two acquisitions, with all other assumptions unchanged, would have increased the calculated fair value of the acquired customer relationship intangible assets in the aggregate for both of these acquisitions combined by $2.6 million, with an offsetting decrease to goodwill. A hypothetical decrease of 100 basis points in the discount rate, with all other assumptions unchanged, would have increased the fair value of the acquired customer relationship intangible assets in the aggregate for both of these acquisitions combined by $1.7 million, with an offsetting decrease to goodwill.
Our estimates of fair value are based upon assumptions believed to be reasonable at that time but which are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur, which may affect the accuracy of such assumptions.
Impairment of Tangible and Intangible Assets
Assets subject to depreciation or amortization: We review long-lived assets and all amortizable intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. Examples of events or circumstances that may be indicative of impairment include, but are not limited to:
Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to their carrying amount. The operations are generally distinguished by the business segment and geographic region in which they operate. If the operation is determined to be unable to recover the carrying amount of its assets, the long-lived assets are written down, on a pro rata basis, to fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets.
42
Goodwill and intangible assets not subject to amortization: Goodwill and intangible assets with indefinite lives are not amortized but are reviewed annually for impairment or more frequently if impairment indicators arise. Other than goodwill, we currently have no intangible assets that have indefinite lives and which are not amortized.
We have selected October 1 as our annual goodwill impairment review date. We performed our annual goodwill impairment review as of October 1, 2012, 2013 and 2014 and concluded that goodwill was not impaired as of those dates. Based on our goodwill impairment assessment, all of our reporting units with goodwill had estimated fair values as of October 1, 2014 that exceeded their carrying values by greater than 15%. As of December 31, 2014, no factors were identified that would alter our October 1, 2014 goodwill assessment. In making this assessment, we relied on a number of factors including operating results, business plans, anticipated future cash flows, transactions and marketplace data. There are inherent uncertainties related to these factors and our judgment in applying them to the analysis of goodwill impairment. When changes occur in the composition of one or more reporting units, the goodwill is reassigned to the reporting units affected based on their relative fair values.
Our reporting units at which level we performed our goodwill impairment analysis as of October 1, 2013 were as follows: (1) North America; (2) United Kingdom, Ireland, Norway, Belgium, France, Germany, Luxembourg, Netherlands and Spain ("Western Europe"); (3) the remaining countries in Europe in which we operate, excluding Russia and Ukraine ("Emerging Markets"); (4) Latin America; (5) Australia, China, Hong Kong and Singapore ("Asia Pacific"); and (6) India, Russia and Ukraine ("Emerging Market Joint Ventures"). The carrying value of goodwill, net for each of these reporting units as of December 31, 2013 is as follows (in thousands):
|
Carrying Value as of
December 31, 2013 |
|||
---|---|---|---|---|
North America |
$ | 1,849,440 | ||
Western Europe |
375,954 | |||
Emerging Markets |
88,599 | |||
Latin America |
93,149 | |||
Asia Pacific |
56,210 | |||
Emerging Market Joint Ventures |
| |||
| | | | |
Total |
$ | 2,463,352 | ||
| | | | |
| | | | |
| | | | |
Beginning January 1, 2014, as a result of the changes in our reportable segments associated with our reorganization (see Note 9 to Notes to Consolidated Financial Statements included in this Annual Report for a description of our reportable operating segments), we now have 12 reporting units. Our North American Records and Information Management Business segment includes the following three reporting units: (1) North American Records and Information Management; (2) Intellectual Property Management; and (3) Fulfillment Services. The North American Data Management Business segment is a separate reporting unit. The Emerging Businesses reporting unit (which primarily relates to our data center business in the United States and which is a component of Corporate and Other) is also a reporting unit. Additionally, the International Business segment consists of the following seven reporting units: (1) United Kingdom, Ireland, Norway, Austria, Belgium, France, Germany, Luxembourg, Netherlands, Spain and Switzerland ("New Western Europe"); (2) the remaining countries in Europe in which we operate, excluding Russia, Ukraine and Denmark ("New Emerging Markets"); (3) Latin America; (4) Australia and Singapore; (5) China and Hong Kong ("Greater China"); (6) India; and (7) Russia, Ukraine and Denmark. We have reassigned goodwill associated with the reporting units impacted by the reorganization among the new reporting units on a relative fair value basis. The fair value of each of our new reporting units was determined based on the application of a combined weighted average approach of fair value multiples of revenue and earnings and discounted cash flow techniques.
43
As a result of the change in the composition of our reporting units noted above, we concluded that we had an interim triggering event, and, therefore, we performed an interim goodwill impairment test as of January 1, 2014 on the basis of these new reporting units during the first quarter of 2014. We concluded that the goodwill for each of our new reporting units was not impaired as of such date. The carrying value of goodwill, net for each of these reporting units as of December 31, 2014 is as follows (in thousands):
|
Carrying Value as of
December 31, 2014 |
|||
---|---|---|---|---|
North American Records and Information Management |
$ | 1,397,484 | ||
Intellectual Property Management |
38,491 | |||
Fulfillment Services |
3,247 | |||
North American Data Management |
375,957 | |||
Emerging Businesses |
| |||
New Western Europe |
354,049 | |||
New Emerging Markets |
87,408 | |||
Latin America |
107,240 | |||
Australia and Singapore |
55,779 | |||
Greater China |
3,500 | |||
India |
| |||
Russia, Ukraine and Denmark |
628 | |||
| | | | |
Total |
$ | 2,423,783 | ||
| | | | |
| | | | |
| | | | |
Reporting unit valuations have been determined using a combined approach based on the present value of future cash flows and market multiples of revenues and earnings. The income approach incorporates many assumptions including future growth rates, discount factors, expected capital expenditures and income tax cash flows. Changes in economic and operating conditions impacting these assumptions could result in goodwill impairments in future periods. In conjunction with our annual goodwill impairment reviews, we reconcile the sum of the valuations of all of our reporting units to our market capitalization as of such dates.
Although we believe we have sufficient historical and projected information available to us to test for impairment, it is possible that actual results could differ from the estimates used in our impairment tests. Of the key assumptions that impact the goodwill impairment test, the expected future cash flows and discount rate are among the most sensitive and are considered to be critical assumptions, as changes to these estimates could have an effect on the estimated fair value of each of our reporting units. As a measure of sensitivity, we have grouped each of our reporting units according to the amount by which each reporting unit's fair value exceeded its carrying value in the goodwill impairment test. A hypothetical decrease of 10% in the expected annual future cash flows, with all other assumptions unchanged, would have decreased the fair value of our reporting units as of October 1, 2014 by a range of approximately 9.1% to 10.4% but would not, however, have resulted in the carrying value of any of our reporting units with goodwill exceeding their fair value. A hypothetical increase of 100 basis points in the discount rate, with all other assumptions unchanged, would have decreased the fair value of our reporting units as of October 1, 2014 by a range of approximately 3.9% to 11.6% but would not, however, have resulted in the carrying value of any of our reporting units with goodwill exceeding their fair value.
Income Taxes
As a REIT, we are generally permitted to deduct from our federal taxable income the dividends we pay to our stockholders. The income represented by such dividends is not subject to federal taxation at the entity level but is taxed, if at all, at the stockholder level. The income of our domestic TRSs,
44
which hold our domestic operations that may not be REIT-compliant as currently operated and structured, is subject, as applicable, to federal and state corporate income tax. In addition, we and our subsidiaries continue to be subject to foreign income taxes in jurisdictions in which they hold assets or conduct operations, regardless of whether held or conducted through subsidiaries disregarded for federal tax purposes or TRSs. We will also be subject to a separate corporate income tax on any gains recognized during a specified period (generally ten years) following the REIT conversion that are attributable to "built-in" gains with respect to the assets that we owned on January 1, 2014; this built-in gains tax will also be imposed on our depreciation recapture recognized into income in 2014 and subsequent taxable years as a result of accounting method changes commenced in our pre-REIT period. If we fail to remain qualified for taxation as a REIT, we will be subject to federal income tax at regular corporate tax rates. Even if we remain qualified for taxation as a REIT, we may be subject to some federal, state, local and foreign taxes on our income and property in addition to taxes owed with respect to our TRS operations. In particular, while state income tax regimes often parallel the federal income tax regime for REITs, many states do not completely follow federal rules and some do not follow them at all.
Accounting for income taxes requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the tax and financial reporting bases of assets and liabilities and for loss and credit carryforwards. Valuation allowances are provided when recovery of deferred tax assets does not meet the more likely than not standards as defined in GAAP.
We have federal net operating loss carryforwards, which expire in 2021 through 2033, of $88.1 million ($0, tax effected) at December 31, 2014 to reduce future federal taxable income, on which no federal tax benefit is expected to be realized. We have state net operating loss carryforwards, which expire in 2015 through 2033, of $74.4 million ($0.1 million, tax effected) at December 31, 2014 to reduce future state taxable income, on which an insignificant state tax benefit is expected to be realized. We have assets for foreign net operating losses of $64.6 million, with various expiration dates (and in some cases no expiration date), subject to a valuation allowance of approximately 62%. If actual results differ unfavorably from certain of our estimates used, we may not be able to realize all or part of our net deferred income tax assets, and additional valuation allowances may be required. Although we believe our estimates are reasonable, no assurance can be given that our estimates reflected in the tax provisions and accruals will equal our actual results. These differences could have a material impact on our income tax provision and operating results in the period in which such determination is made.
The evaluation of an uncertain tax position is a two-step process. The first step is a recognition process whereby we determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The second step is a measurement process whereby a tax position that meets the more likely than not recognition threshold is calculated to determine the amount of benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.
We are subject to income taxes in the United States and numerous foreign jurisdictions. We are subject to examination by various tax authorities in jurisdictions in which we have business operations or a taxable presence. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. As of December 31, 2013 and 2014, we had approximately $51.1 million and $56.0 million, respectively, of reserves related to uncertain tax positions. The reversal of these reserves will be recorded as a reduction of our income tax provision if sustained. Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in changes in our estimates.
45
We had not previously provided incremental federal and certain state income taxes on net tax over book outside basis differences related to the earnings of our foreign subsidiaries because our intent, prior to our conversion to a REIT, was to reinvest our current and future undistributed earnings of certain foreign subsidiaries indefinitely outside the United States. As a result of our conversion to a REIT, it is no longer our intent to indefinitely reinvest our current and future undistributed foreign earnings outside the United States, and, therefore, during 2014, we recognized an increase in our tax provision from continuing operations in the amount of $46.4 million, representing incremental federal and state income taxes and foreign withholding taxes on such foreign earnings. As a REIT, future repatriation of incremental undistributed earnings of our foreign subsidiaries will not be subject to federal or state income tax, with the exception of foreign withholding taxes in limited instances; however, such future repatriations will require distribution in accordance with REIT distribution rules, and any such distribution may then be taxable, as appropriate, at the stockholder level.
Recent Accounting Pronouncements
In April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) ("ASU 2014-08"). ASU 2014-08 changes the criteria for a disposal to qualify as a discontinued operation and requires additional disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. ASU 2014-08 is effective for annual periods beginning on or after December 15, 2014. Under this guidance, we expect fewer dispositions to qualify as discontinued operations. Early adoption is permitted, but only for disposals that have not been reported in the financial statements previously issued. We adopted ASU 2014-08 effective April 1, 2014.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). ASU 2014-09 provides additional guidance for management to reassess revenue recognition as it relates to: (1) transfer of control, (2) variable consideration, (3) allocation of transaction price based on relative standalone selling price, (3) licenses, (4) time value of money and (5) contract costs. Further disclosures will be required to provide a better understanding of revenue that has been recognized and revenue that is expected to be recognized in the future from existing contracts. ASU 2014-09 is effective for us on January 1, 2017, with no early adoption permitted. We are currently evaluating the impact ASU 2014-09 will have on our consolidated financial statements.
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements Going Concern (Subtopic 205-40) ("ASU 2014-15"). ASU 2014-15 requires management to assess an entity's ability to continue as a going concern by incorporating and expanding upon certain principles of current United States auditing standards. Specifically, the amendments (1) provide a definition of the term "substantial doubt", (2) require an evaluation every reporting period, including interim periods, (3) provide principles for considering the mitigating effect of management's plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management's plans, (5) require an express statement and other disclosures when substantial doubt is still present, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). ASU 2014-15 is effective for us on January 1, 2017, with early adoption permitted. We do not believe that this pronouncement will have an impact on our consolidated financial statements.
In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis ("ASU 2015-02"). ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 is effective for us on January 1, 2016, with early adoption permitted. We do not believe that this pronouncement will have an impact on our consolidated financial statements.
46
Results of Operations
Comparison of Year Ended December 31, 2014 to Year Ended December 31, 2013 and Comparison of Year Ended December 31, 2013 to Year Ended December 31, 2012
|
Year Ended December 31, |
|
|
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Dollar
Change |
Percentage
Change |
|||||||||||
|
2013 | 2014 | |||||||||||
Revenues |
$ | 3,024,623 | $ | 3,117,693 | $ | 93,070 | 3.1 | % | |||||
Operating Expenses |
2,535,376 | 2,568,416 | 33,040 | 1.3 | % | ||||||||
Operating Income |
489,247 | 549,277 | 60,030 | 12.3 | % | ||||||||
Other Expenses, Net |
390,086 | 220,322 | (169,764 | ) | (43.5 | )% | |||||||
Income from Continuing Operations |
99,161 | 328,955 | 229,794 | 231.7 | % | ||||||||
Income (Loss) from Discontinued Operations, Net of Tax |
831 | (209 | ) | (1,040 | ) | (125.2 | )% | ||||||
Net Income |
99,992 | 328,746 | 228,754 | 228.8 | % | ||||||||
Net Income Attributable to Noncontrolling Interests |
3,530 | 2,627 | (903 | ) | 25.6 | % | |||||||
Net Income Attributable to Iron Mountain Incorporated |
$ | 96,462 | $ | 326,119 | $ | 229,657 | 238.1 | % | |||||
Adjusted OIBDA(1) |
$ | 894,581 | $ | 925,797 | $ | 31,216 | 3.5 | % | |||||
Adjusted OIBDA Margin(1) |
29.6 | % | 29.7 | % |
|
Year Ended December 31, |
|
|
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Dollar
Change |
Percentage
Change |
|||||||||||
|
2012 | 2013 | |||||||||||
Revenues |
$ | 3,003,955 | $ | 3,024,623 | $ | 20,668 | 0.7 | % | |||||
Operating Expenses |
2,448,489 | 2,535,376 | 86,887 | 3.5 | % | ||||||||
Operating Income |
555,466 | 489,247 | (66,219 | ) | (11.9 | )% | |||||||
Other Expenses, Net |
372,759 | 390,086 | 17,327 | 4.6 | % | ||||||||
Income from Continuing Operations |
182,707 | 99,161 | (83,546 | ) | (45.7 | )% | |||||||
(Loss) Income from Discontinued Operations, Net of Tax |
(6,774 | ) | 831 | 7,605 | 112.3 | % | |||||||
Loss on Sale of Discontinued Operations, Net of Tax |
(1,885 | ) | | 1,885 | 100.0 | % | |||||||
Net Income |
174,048 | 99,992 | (74,056 | ) | (42.5 | )% | |||||||
Net Income Attributable to Noncontrolling Interests |
3,126 | 3,530 | 404 | (12.9 | )% | ||||||||
Net Income Attributable to Iron Mountain Incorporated |
$ | 170,922 | $ | 96,462 | $ | (74,460 | ) | (43.6 | )% | ||||
Adjusted OIBDA(1) |
$ | 910,917 | $ | 894,581 | $ | (16,336 | ) | (1.8 | )% | ||||
Adjusted OIBDA Margin(1) |
30.3 | % | 29.6 | % |
47
REVENUES
|
|
|
|
Percentage Change |
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Year Ended December 31, |
|
|
||||||||||||||||
|
Dollar
Change |
|
Constant
Currency(1) |
Internal
Growth(2) |
|||||||||||||||
|
2013 | 2014 | Actual | ||||||||||||||||
Storage Rental |
$ | 1,784,721 | $ | 1,860,243 | $ | 75,522 | 4.2 | % | 5.4 | % | 2.2 | % | |||||||
Service |
1,239,902 | 1,257,450 | 17,548 | 1.4 | % | 2.8 | % | (0.7 | )% | ||||||||||
Total Revenues |
$ | 3,024,623 | $ | 3,117,693 | $ | 93,070 | 3.1 | % | 4.3 | % | 1.0 | % | |||||||
|
|
|
|
Percentage Change |
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Year Ended December 31, |
|
|
||||||||||||||||
|
Dollar
Change |
|
Constant
Currency(1) |
Internal
Growth(2) |
|||||||||||||||
|
2012 | 2013 | Actual | ||||||||||||||||
Storage Rental |
$ | 1,733,138 | $ | 1,784,721 | $ | 51,583 | 3.0 | % | 3.6 | % | 2.1 | % | |||||||
Service |
1,270,817 | 1,239,902 | (30,915 | ) | (2.4 | )% | (1.6 | )% | (3.4 | )% | |||||||||
Total Revenues |
$ | 3,003,955 | $ | 3,024,623 | $ | 20,668 | 0.7 | % | 1.4 | % | (0.2 | )% | |||||||
Consolidated storage rental revenues increased $75.5 million, or 4.2%, to $1,860.2 million for the year ended December 31, 2014 and $51.6 million, or 3.0%, to $1,784.7 million for the year ended December 31, 2013, in comparison to the years ended December 31, 2013 and 2012, respectively. The growth rate for the year ended December 31, 2014 consists primarily of internal revenue growth of 2.2%. Net acquisitions/divestitures contributed 3.2% of the increase in reported storage rental revenues in 2014 over 2013. Foreign currency exchange rate fluctuations decreased our reported storage rental revenue growth rate for the year ended December 31, 2014 by approximately 1.2%. Our consolidated storage rental revenue growth in 2014 was driven by sustained storage rental internal growth of 0.3%, 2.3% and 6.3% in our North American Records and Information Management Business, North American Data Management Business and International Business segments, respectively. Global records management net volumes in 2014 increased by 3.6% over the ending volume at December 31, 2013, supported by 12.3% volume increases in our International Business segment, which was driven by growth from both emerging and developed markets as well as recent acquisitions. The growth rate for the year ended December 31, 2013 consists primarily of internal revenue growth of 2.1%. Net acquisitions/divestitures contributed 1.5% of the increase in reported storage rental revenues in 2013 over 2012. Foreign currency exchange rate fluctuations decreased our reported storage rental revenue growth rate for the year ended December 31, 2013 by approximately 0.6%. Our consolidated storage rental revenue growth in 2013 was driven by sustained storage rental internal growth of 0.4%, 1.5% and 6.2% in our North American Records and Information Management Business, North American Data Management Business and International Business segments, respectively.
Consolidated service revenues increased $17.5 million, or 1.4%, to $1,257.5 million for the year ended December 31, 2014 from $1,239.9 million for the year ended December 31, 2013. Service revenue internal growth was negative 0.7% for the year ended December 31, 2014. The negative service revenue internal growth for 2014 reflects a trend toward reduced retrieval/re-file activity and a related decrease in transportation revenues within our North American Records and Information Management Business segment, as well as continued declines in service revenue activity levels in our North American
48
Data Management Business segment as the storage business becomes more archival in nature. Foreign currency exchange rate fluctuations decreased our reported total service revenues by 1.4% in 2014 over 2013. Net acquisitions/divestitures contributed 3.5% of the increase of reported service revenues in 2014. Consolidated service revenues decreased $30.9 million, or 2.4%, to $1,239.9 million for the year ended December 31, 2013 from $1,270.8 million for the year ended December 31, 2012. Service revenue internal growth was negative 3.4% for the year ended December 31, 2013. The negative service revenue internal growth for 2013 reflects a trend toward reduced retrieval/re-file activity and a related decrease in transportation revenues within our North American Records and Information Management Business segment, as well as continued declines in service revenue activity levels in our North American Data Management Business segment as the storage business becomes more archival in nature. Foreign currency exchange rate fluctuations decreased reported service revenues by 0.8% in 2013 over 2012. Net acquisitions/divestitures partially offset the decrease in reported consolidated service revenues and contributed an increase of 1.8% of reported service revenues in 2013.
For the reasons stated above, our consolidated revenues increased $93.1 million, or 3.1%, to $3,117.7 million for the year ended December 31, 2014 from $3,024.6 million for the year ended December 31, 2013. Internal revenue growth was 1.0% for 2014. For the year ended December 31, 2014, foreign currency exchange rate fluctuations decreased our reported consolidated revenues by 1.2% primarily due to the weakening of the Australian dollar, Brazilian real and Canadian dollar against the United States dollar, partially offset by a strengthening of the British pound sterling and the Euro against the United States dollar, based on an analysis of weighted average rates for the comparable periods. Net acquisitions/divestitures contributed an increase of 3.3% of total reported revenues in 2014 over the same period in 2013. Our consolidated revenues increased $20.7 million, or 0.7%, to $3,024.6 million for the year ended December 31, 2013 from $3,004.0 million for the year ended December 31, 2012. Internal revenue growth was negative 0.2% for 2013. For the year ended December 31, 2013, foreign currency exchange rate fluctuations decreased our consolidated revenues by 0.7% primarily due to the weakening of the Australian dollar, Brazilian real, British pound sterling and Canadian dollar, offset by an increase of the Euro against the United States dollar, based on an analysis of weighted average rates for the comparable periods. Net acquisitions/divestitures partially offset the decrease in reported consolidated revenues and contributed an increase of 1.6% of total reported revenues in 2013 over the same period in 2012.
Internal GrowthEight-Quarter Trend
|
2013 | 2014 | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
First
Quarter |
Second
Quarter |
Third
Quarter |
Fourth
Quarter |
First
Quarter |
Second
Quarter |
Third
Quarter |
Fourth
Quarter |
|||||||||||||||||
Storage Rental Revenue |
2.5 | % | 2.3 | % | 2.3 | % | 1.3 | % | 1.4 | % | 1.6 | % | 2.2 | % | 3.5 | % | |||||||||
Service Revenue |
(6.5 | )% | (1.9 | )% | (0.9 | )% | (4.4 | )% | (0.7 | )% | (1.9 | )% | (2.7 | )% | 2.3 | % | |||||||||
Total Revenue |
(1.4 | )% | 0.5 | % | 1.0 | % | (1.1 | )% | 0.5 | % | 0.1 | % | 0.2 | % | 3.0 | % |
We expect our consolidated internal revenue growth rate for 2015 to be approximately 0% to 2%. During the past eight quarters our storage rental revenue internal growth rate has ranged between 1.3% and 3.5%. Storage rental revenue internal growth rates have been relatively stable over the past eight quarters, averaging between 2.1% and 2.2% for full-year 2013 and 2014. At various points in the economic cycle, storage rental internal growth may be influenced by changes in pricing and volume. Recently, we initiated sales force programs focused on increasing volume through new sales and improved customer retention. In addition, we are working on enhancing our pricing strategy through implementing a statistically based approach, which enables customized pricing based on customer profiles and needs. Within our International Business segment, the developed markets are generating consistent low-to-mid single-digit storage rental revenue growth, and the emerging markets are producing strong double-digit storage rental revenue growth by capturing the first-time outsourcing
49
trends for physical records storage and management in those markets. The internal revenue growth rate for service revenue is inherently more volatile than the storage rental revenue internal growth rate due to the more discretionary nature of certain services we offer, such as large special projects, and, as a commodity, the volatility of pricing for recycled paper. These revenues, which are often event-driven and impacted to a greater extent by economic downturns as customers defer or cancel the purchase of certain services as a way to reduce their short-term costs, may be difficult to replicate in future periods. The internal growth rate for total service revenues reflects the following: (1) consistent pressures on activity-based service revenues related to the handling and transportation of items in storage in the North American Records and Information Management Business and the North American Data Management Business segments and secure shredding revenues; and (2) softness in some of our other service lines, such as fulfillment services.
OPERATING EXPENSES
Cost of Sales
Consolidated cost of sales (excluding depreciation and amortization) consists of the following expenses (in thousands):
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|
|
|
Percentage
Change |
|
|
|
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
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|
|
|
% of
Consolidated Revenues |
|
||||||||||||||||||||
|
Year Ended December 31, |
|
Percentage
Change (Favorable)/ Unfavorable |
||||||||||||||||||||||
|
Dollar
Change |
|
Constant
Currency |
||||||||||||||||||||||
|
2013 | 2014 | Actual | 2013 | 2014 | ||||||||||||||||||||
Labor |
$ | 638,403 | $ | 674,658 | $ | 36,255 | 5.7 | % | 7.7 | % | 21.1 | % | 21.6 | % | 0.5 | % | |||||||||
Facilities |
413,675 | 440,408 | 26,733 | 6.5 | % | 7.5 | % | 13.7 | % | 14.1 | % | 0.4 | % | ||||||||||||
Transportation |
123,179 | 118,027 | (5,152 | ) | (4.2 | )% | (2.6 | )% | 4.1 | % | 3.8 | % | (0.3 | )% | |||||||||||
Product Cost of Sales and Other |
113,621 | 111,543 | (2,078 | ) | (1.8 | )% | 0.0 | % | 3.8 | % | 3.6 | % | (0.2 | )% | |||||||||||
|
$ | 1,288,878 | $ | 1,344,636 | $ | 55,758 | 4.3 | % | 6.0 | % | 42.6 | % | 43.1 | % | 0.5 | % | |||||||||
|
|
|
|
Percentage
Change |
|
|
|
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
|
% of
Consolidated Revenues |
|
||||||||||||||||||||
|
Year Ended December 31, |
|
Percentage
Change (Favorable)/ Unfavorable |
||||||||||||||||||||||
|
Dollar
Change |
|
Constant
Currency |
||||||||||||||||||||||
|
2012 | 2013 | Actual | 2012 | 2013 | ||||||||||||||||||||
Labor |
$ | 625,922 | $ | 638,403 | $ | 12,481 | 2.0 | % | 3.1 | % | 20.8 | % | 21.1 | % | 0.3 | % | |||||||||
Facilities |
421,098 | 413,675 | (7,423 | ) | (1.8 | )% | (0.9 | )% | 14.0 | % | 13.7 | % | (0.3 | )% | |||||||||||
Transportation |
126,023 | 123,179 | (2,844 | ) | (2.3 | )% | (1.1 | )% | 4.2 | % | 4.1 | % | (0.1 | )% | |||||||||||
Product Cost of Sales and Other |
104,070 | 113,621 | 9,551 | 9.2 | % | 10.2 | % | 3.5 | % | 3.8 | % | 0.3 | % | ||||||||||||
|
$ | 1,277,113 | $ | 1,288,878 | $ | 11,765 | 0.9 | % | 1.9 | % | 42.5 | % | 42.6 | % | 0.1 | % | |||||||||
Labor
Labor expense increased to 21.6% of consolidated revenues for the year ended December 31, 2014 compared to 21.1% for the year ended December 31, 2013. Labor expense for the year ended December 31, 2014 increased by 7.7% on a constant dollar basis compared to the year ended December 31, 2013 primarily due to incremental labor costs associated with acquisitions completed during fiscal year 2014 and the fourth quarter of 2013, as well as merit increases, partially offset by a $2.2 million decrease in restructuring costs. Labor costs were favorably impacted by 2.0 percentage points due to currency rate changes during the year ended December 31, 2014.
50
Labor expense increased to 21.1% of consolidated revenues for the year ended December 31, 2013 compared to 20.8% for the year ended December 31, 2012. Labor expense for the year ended December 31, 2013 increased by 3.1% on a constant dollar basis compared to the year ended December 31, 2012 primarily due to $10.7 million of incremental labor costs associated with fiscal year 2013 acquisitions, as well as $3.4 million of restructuring costs that were incurred in 2013. Labor costs were favorably impacted by 1.1 percentage points due to currency rate changes during the year ended December 31, 2013.
Facilities
Facilities costs increased to 14.1% of consolidated revenues for the year ended December 31, 2014, compared to 13.7% for the year ended December 31, 2013. Rent expense, which, on a constant dollar basis, increased by $10.9 million for the year ended December 31, 2014 compared to the year ended December 31, 2013, primarily due to the impact of acquisitions completed during fiscal year 2014 and the fourth quarter of 2013. Other facilities costs increased by $19.9 million on a constant dollar basis for the year ended December 31, 2014 compared to the year ended December 31, 2013, primarily due to higher utilities of $4.0 million and building maintenance costs of $6.5 million, as well as higher insurance costs of $3.5 million associated with a fire at one of our facilities in Buenos Aires, Argentina on February 5, 2014 (described at Note 10.g. to Notes to Consolidated Financial Statements included in this Annual Report). Facilities costs were favorably impacted by 1.0 percentage points due to currency rate changes during the year ended December 31, 2014.
Facilities costs decreased to 13.7% of consolidated revenues for the year ended December 31, 2013, compared to 14.0% for the year ended December 31, 2012. The largest component of our facilities cost is rent expense, which, on a constant dollar basis, decreased by $6.0 million for the year ended December 31, 2013 compared to the year ended December 31, 2012 as a result of our ongoing facility consolidation efforts. This decrease was partially offset by $4.8 million of costs associated with 2013 acquisitions. Facilities costs were favorably impacted by 0.9 percentage points due to currency rate changes during the year ended December 31, 2013.
Transportation
Transportation expenses decreased by $3.2 million on a constant dollar basis during the year ended December 31, 2014 compared to the year ended December 31, 2013 primarily as a result of decreased fuel and maintenance costs of $1.3 million and $0.9 million, respectively. Transportation expenses were favorably impacted by 1.6 percentage points due to currency rate changes during the year ended December 31, 2014.
Transportation expenses decreased by $1.4 million on a constant dollar basis during the year ended December 31, 2013 compared to the year ended December 31, 2012 as a result of a decrease in vehicle lease expense, primarily associated with our United Kingdom operations, due to the capitalization of leased vehicles upon renewal. Although the aggregate lease cost has not changed, the categorization of charges did change, resulting in the cost being allocated to depreciation and interest. Transportation expenses were favorably impacted by 1.2 percentage points due to currency rate changes during the year ended December 31, 2013.
Product Cost of Sales and Other
Product cost of sales and other, which includes cartons, media and other service, storage and supply costs, is highly correlated to service revenue streams, particularly project revenues. For the year ended December 31, 2014, product cost of sales and other decreased by $2.1 million compared to the year ended December 31, 2013 on an actual basis, primarily due to a reduction in costs associated with
51
special projects. These costs were favorably impacted by 1.8 percentage points due to currency rate changes during the year ended December 31, 2014.
For the year ended December 31, 2013, product cost of sales and other increased by $9.6 million compared to the year ended December 31, 2012 on an actual basis, primarily as a result of higher move costs associated with facility consolidations, as well as $1.5 million of incremental costs incurred associated with 2013 acquisitions. These costs were favorably impacted by 1.0 percentage points due to currency rate changes during the year ended December 31, 2013.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consists of the following expenses (in thousands):
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|
|
|
Percentage
Change |
|
|
|
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
|
% of
Consolidated Revenues |
|
||||||||||||||||||||
|
Year Ended December 31, |
|
Percentage
Change (Favorable)/ Unfavorable |
||||||||||||||||||||||
|
Dollar
Change |
|
Constant
Currency |
||||||||||||||||||||||
|
2013 | 2014 | Actual | 2013 | 2014 | ||||||||||||||||||||
General and Administrative |
$ | 595,699 | $ | 538,657 | $ | (57,042 | ) | (9.6 | )% | (8.8 | )% | 19.7 | % | 17.3 | % | (2.4 | )% | ||||||||
Sales, Marketing & Account Management |
219,143 | 213,532 | (5,611 | ) | (2.6 | )% | (1.8 | )% | 7.2 | % | 6.8 | % | (0.4 | )% | |||||||||||
Information Technology |
97,868 | 103,174 | 5,306 | 5.4 | % | 6.1 | % | 3.2 | % | 3.3 | % | 0.1 | % | ||||||||||||
Bad Debt Expense |
11,321 | 14,209 | 2,888 | 25.5 | % | 27.4 | % | 0.4 | % | 0.5 | % | 0.1 | % | ||||||||||||
|
$ | 924,031 | $ | 869,572 | $ | (54,459 | ) | (5.9 | )% | (5.1 | )% | 30.6 | % | 27.9 | % | (2.7 | )% | ||||||||
|
|
|
|
Percentage
Change |
|
|
|
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
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|
|
|
% of
Consolidated Revenues |
|
||||||||||||||||||||
|
Year Ended December 31, |
|
Percentage
Change (Favorable)/ Unfavorable |
||||||||||||||||||||||
|
Dollar
Change |
|
Constant
Currency |
||||||||||||||||||||||
|
2012 | 2013 | Actual | 2012 | 2013 | ||||||||||||||||||||
General and Administrative |
$ | 508,365 | $ | 595,699 | $ | 87,334 | 17.2 | % | 18.0 | % | 16.9 | % | 19.7 | % | 2.8 | % | |||||||||
Sales, Marketing & Account Management |
235,449 | 219,143 | (16,306 | ) | (6.9 | )% | (6.3 | )% | 7.8 | % | 7.2 | % | (0.6 | )% | |||||||||||
Information Technology |
98,234 | 97,868 | (366 | ) | (0.4 | )% | 0.4 | % | 3.3 | % | 3.2 | % | (0.1 | )% | |||||||||||
Bad Debt Expense |
8,323 | 11,321 | 2,998 | 36.0 | % | 38.7 | % | 0.3 | % | 0.4 | % | 0.1 | % | ||||||||||||
|
$ | 850,371 | $ | 924,031 | $ | 73,660 | 8.7 | % | 9.4 | % | 28.3 | % | 30.6 | % | 2.3 | % | |||||||||
General and Administrative
General and administrative expenses decreased to 17.3% of consolidated revenues during the year ended December 31, 2014 compared to 19.7% in the year ended December 31, 2013. On a constant dollar basis, general and administrative expenses decreased by $52.0 million during the year ended December 31, 2014 compared to the year ended December 31, 2013, primarily driven by a $60.6 million decrease in REIT Costs and a $15.3 million decrease in restructuring costs. These decreases were partially offset by increased compensation costs of $15.1 million, primarily associated with merit increases, higher incentive compensation and the associated payroll taxes, as well as $7.2 million of incremental general and administrative expenses associated with international acquisitions completed during fiscal year 2014 and the fourth quarter of 2013. General and administrative expenses were favorably impacted by 0.8 percentage points due to currency rate changes during the year ended December 31, 2014.
General and administrative expenses increased to 19.7% of consolidated revenues during the year ended December 31, 2013 compared to 16.9% in the year ended December 31, 2012. On a constant dollar basis, general and administrative expenses increased by $91.0 million during the year ended
52
December 31, 2013 compared to the year ended December 31, 2012. Included in general and administrative expenses for the year ended December 31, 2013 were $82.9 million of REIT Costs compared to $34.4 million for the year ended December 31, 2012. The increase during the year ended December 31, 2013 compared to the year ended December 31, 2012 also included a $31.7 million increase in compensation expenses, primarily associated with restructuring costs, $5.1 million of incremental costs associated with 2013 acquisitions and a $4.8 million increase in software license fees. General and administrative expenses were favorably impacted by 0.8 percentage points due to currency rate changes during the year ended December 31, 2013.
Sales, Marketing & Account Management
Sales, marketing and account management expenses decreased to 6.8% of consolidated revenues during the year ended December 31, 2014 compared to 7.2% in 2013. On a constant dollar basis, the decrease of $4.0 million during the year ended December 31, 2014 compared to the year ended December 31, 2013 is primarily due to a decrease in compensation expense of $3.5 million as a result of the organizational restructuring initiated in 2013 and completed in 2014. Sales, marketing and account management expenses were favorably impacted by 0.8 percentage points due to currency rate changes during the year ended December 31, 2014.
Sales, marketing and account management expenses decreased to 7.2% of consolidated revenues during the year ended December 31, 2013 compared to 7.8% for the year ended December 31, 2012. On a constant dollar basis, the decrease of $14.8 million during the year ended December 31, 2013 compared to the year ended December 31, 2012 is primarily due to a decrease of $15.4 million in compensation expense within our North American Records and Information Management Business segment and $3.1 million in compensation expense within our North American Data Management Business segment as a result of restructuring in the fourth quarter of 2012. This decrease was partially offset by $1.1 million of incremental costs incurred associated with 2013 acquisitions. Sales, marketing and account management expenses were favorably impacted by 0.6 percentage points due to currency rate changes during the year ended December 31, 2013.
Information Technology
On a constant dollar basis, information technology expenses increased $6.0 million during the year ended December 31, 2014 compared to the year ended December 31, 2013 primarily due to increased professional fees of $2.4 million and software license fees of $1.0 million, as well as an increase in compensation expenses of $2.9 million related to the mix of project work year over year performed by internal personnel associated with capital versus maintenance initiatives. Information technology expenses were favorably impacted by 0.7 percentage points due to currency rate changes during the year ended December 31, 2014.
On a constant dollar basis, information technology expenses increased $0.4 million during the year ended December 31, 2013 compared to the year ended December 31, 2012 primarily due to incremental costs associated with 2013 acquisitions. Information technology expenses were favorably impacted by 0.8 percentage points due to currency rate changes during the year ended December 31, 2013.
Bad Debt Expense
Consolidated bad debt expense for the year ended December 31, 2014 increased $2.9 million to $14.2 million (0.5% of consolidated revenues) from $11.3 million (0.4% of consolidated revenues) for the year ended December 31, 2013. We maintain an allowance for doubtful accounts that is calculated based on our past loss experience, current and prior trends in our aged receivables, current economic conditions, and specific circumstances of individual receivable balances. We continue to monitor our
53
customers' payment activity and make adjustments based on their financial condition and in light of historical and expected trends.
Consolidated bad debt expense for the year ended December 31, 2013 increased $3.0 million to $11.3 million (0.4% of consolidated revenues) from $8.3 million (0.3% of consolidated revenues) for the year ended December 31, 2012.
Depreciation, Amortization, and (Gain) Loss on Disposal/Write-down of Property, Plant and Equipment (Excluding Real Estate), Net
Depreciation expense increased $21.7 million and $2.3 million for the years ended December 31, 2014 and 2013, respectively, compared to the years ended December 31, 2013 and 2012, respectively, primarily due to the increased depreciation of property, plant and equipment acquired through business combinations.
Amortization expense increased $9.4 million and $3.4 million for the years ended December 31, 2014 and 2013, respectively, compared to the years ended December 31, 2013 and 2012, respectively, primarily due to the increased amortization of customer relationship intangible assets acquired through business combinations.
As a result of our conversion to a REIT and in accordance with SEC rules applicable to REITs, we no longer report (gain) loss on sale of real estate as a component of operating income, but we will continue to report it as a component of income (loss) from continuing operations. We will continue to report the (gain) loss on sale of property, plant and equipment (excluding real estate), along with any impairment, write-downs or involuntary conversions related to real estate, as a component of operating income. Previously reported amounts have been reclassified to conform to this presentation.
Consolidated loss on disposal/write-down of property, plant and equipment (excluding real estate), net was $1.1 million for the year ended December 31, 2014 and consisted primarily of losses associated with the write-off of certain software associated with our North American Records and Information Management Business segment. Consolidated loss on disposal/write-down of property, plant and equipment (excluding real estate), net was $0.4 million for the year ended December 31, 2013 and consisted of $1.7 million of asset write-offs in our North American Records and Information Management Business segment, approximately $0.3 million of asset write-offs in our Corporate and Other segment and approximately $0.9 million of asset write-offs associated with our European operations, partially offset by gains of approximately $2.5 million on the retirement of leased vehicles accounted for as capital lease assets primarily associated with our North American Records and Information Management Business segment. Consolidated loss on disposal/write-down of property, plant and equipment (excluding real estate), net was $4.7 million for the year ended December 31, 2012 and consisted primarily of approximately $5.8 million, $0.7 million, $1.1 million and $0.5 million of asset write-offs in Europe, North American Records and Information Management Business, Emerging Businesses and Latin America, respectively, partially offset by approximately $3.5 million of gains associated with the retirement of leased vehicles accounted for as capital lease assets associated with our North American Records and Information Management Business segment.
OPERATING INCOME and ADJUSTED OIBDA
As a result of the foregoing factors, consolidated operating income increased $60.0 million, or 12.3%, to $549.3 million (17.6% of consolidated revenues) for the year ended December 31, 2014 from $489.2 million (16.2% of consolidated revenues) for the year ended December 31, 2013, and consolidated Adjusted OIBDA increased $31.2 million, or 3.5%, to $925.8 million (29.7% of consolidated revenues) for the year ended December 31, 2014 from $894.6 million (29.6% of consolidated revenues) for the year ended December 31, 2013.
54
As a result of the foregoing factors, consolidated operating income decreased $66.2 million, or 11.9%, to $489.2 million (16.2% of consolidated revenues) for the year ended December 31, 2013 from $555.5 million (18.5% of consolidated revenues) for the year ended December 31, 2012, and consolidated Adjusted OIBDA decreased $16.3 million, or 1.8%, to $894.6 million (29.6% of consolidated revenues) for the year ended December 31, 2013 from $910.9 million (30.3% of consolidated revenues) for the year ended December 31, 2012.
OTHER EXPENSES, NET
Interest Expense, Net
Consolidated interest expense, net increased $6.5 million to $260.7 million (8.4% of consolidated revenues) for the year ended December 31, 2014 from $254.2 million (8.4% of consolidated revenues) for the year ended December 31, 2013 primarily due to the issuance in August 2013 of (i) $600.0 million in aggregate principal of the 6% Senior Notes due 2023 (the "6% Notes") by IMI and (ii) 200.0 million CAD in aggregate principal of the 6 1 / 8 % Senior Notes due 2021 (the "CAD Notes") by Iron Mountain Canada Operations ULC ("Canada Company"), as well as the issuance in September 2014 of 400.0 million British pounds sterling in aggregate principal of the 6 1 / 8 % Senior Notes due 2022 (the "GBP Notes") by Iron Mountain Europe PLC ("IME"). This increase was partially offset by (1) the early retirement in August 2013 of (i) 175.0 million CAD of the 7 1 / 2 % CAD Senior Subordinated Notes due 2017 (the "7 1 / 2 % Notes"), (ii) $50.0 million of the 8% Senior Subordinated Notes due 2018 (the "8% Notes"), (iii) $300.0 million of the 8% Senior Subordinated Notes due 2020 (the "8% Notes due 2020") and (iv) $137.5 million of the 8 3 / 8 % Senior Subordinated Notes due 2021 (the "8 3 / 8 % Notes") as well as (2) the redemption in January 2014 of 150.0 million British pounds sterling of the 7 1 / 4 % GBP Senior Subordinated Notes due 2014 (the "7 1 / 4 % Notes"). Our weighted average interest rate was 5.6% at December 31, 2014 and 6.2% at December 31, 2013.
Consolidated interest expense, net increased $11.6 million to $254.2 million (8.4% of consolidated revenues) for the year ended December 31, 2013 from $242.6 million (8.1% of consolidated revenues) for the year ended December 31, 2012 primarily due to the issuance of the 6% Notes, the CAD Notes and the issuance of $1.0 billion in aggregate principal of the 5 3 / 4 % Senior Subordinated Notes due 2024 in August 2012. This increase was partially offset by the early retirement in August 2013 of the (i) 7 1 / 2 % Notes, (ii) the 8% Notes , (iii) the 8% Notes due 2020 and (iv) $137.5 million of our 8 3 / 8 % Notes as well as the early retirement in August 2012 of $320.0 million of our 6 5 / 8 % Senior Subordinated Notes due 2016 (the "6 5 / 8 Notes") and $200.0 million of our 8 3 / 4 % Senior Subordinated Notes due 2018 (the "8 3 / 4 Notes").
Other Expense (Income), Net (in thousands)
|
Year Ended
December 31, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Dollar
Change |
|||||||||
|
2013 | 2014 | ||||||||
Foreign currency transaction losses, net |
$ | 36,201 | $ | 58,316 | $ | 22,115 | ||||
Debt extinguishment expense, net |
43,724 | 16,495 | (27,229 | ) | ||||||
Other, net |
(4,723 | ) | (9,624 | ) | (4,901 | ) | ||||
| | | | | | | | | | |
|
$ | 75,202 | $ | 65,187 | $ | (10,015 | ) | |||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
|
Year Ended
December 31, |
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Dollar
Change |
|||||||||
|
2012 | 2013 | ||||||||
Foreign currency transaction losses, net |
$ | 10,223 | $ | 36,201 | $ | 25,978 | ||||
Debt extinguishment expense, net |
10,628 | 43,724 | 33,096 | |||||||
Other, net |
(4,789 | ) | (4,723 | ) | 66 | |||||
| | | | | | | | | | |
|
$ | 16,062 | $ | 75,202 | $ | 59,140 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
55
Net foreign currency transaction losses of $58.3 million, based on period-end exchange rates, were recorded in the year ended December 31, 2014. Losses resulted primarily from changes in the exchange rate of each of the Argentine peso, Brazilian real, British pound sterling, Euro, Russian ruble and Ukrainian hryvnia against the United States dollar compared to December 31, 2013, as these currencies relate to our intercompany balances with and between our Latin American and European subsidiaries, as well as Euro forward contracts. These losses were partially offset by gains primarily from British pound sterling borrowings on our revolving credit facility, Australian dollar and British pound sterling forward contracts, and Euro denominated bonds issued by IMI.
Net foreign currency transaction losses of $36.2 million, based on period-end exchange rates, were recorded in the year ended December 31, 2013. Losses resulted primarily from changes in the exchange rate of each of the Australian dollar, Brazilian real, Russian ruble and Euro against the United States dollar compared to December 31, 2012, as these currencies relate to our intercompany balances with and between our European, Australian and Brazilian subsidiaries as well as British pound sterling debt and forward currency contracts, which were partially offset by gains as a result of an Australian forward currency contract, as well as changes in the exchange rate of the British pound sterling against the United States dollar compared to December 31, 2012 as it relates to our intercompany balances with and between our United Kingdom subsidiaries.
Net foreign currency transaction losses of $10.2 million, based on period-end exchange rates, were recorded in the year ended December 31, 2012. Losses were primarily a result of changes in the exchange rate of the Brazilian real, as this currency relates to our intercompany balances with and between our Brazilian subsidiaries, as well as additional losses associated with our British pound sterling and Euro denominated debt and forward foreign currency swap contracts denominated in British pounds sterling and Australian dollars. These losses were partially offset by gains resulting primarily from the change in the exchange rate of the British pound sterling, Euro and Australian dollar against the United States dollar compared to December 31, 2011, as it relates to our intercompany balances with and between our European and Australian subsidiaries.
In December 2014, we recorded a debt extinguishment charge of $16.5 million related to the early redemption of $306.0 million in aggregate principal of the 8 3 / 8 % Notes at 104.188% of par. This charge consists of call premiums, original issue discounts and deferred financing costs related to the 8 3 / 8 % Notes. During the year ended December 31, 2013, we recorded a charge of $43.7 million related to the amendment of our former credit agreement in the third quarter of 2013, representing a write-off of deferred financing costs, and the early extinguishment of the 7 1 / 2 % Notes, the 8% Notes, the 8% Notes due 2020 and a portion of the 8 3 / 8 % Notes. This charge consists of call premiums, original issue discounts and deferred financing costs related to this debt. During the year ended December 31, 2012, we recorded a charge of approximately $10.6 million related to the early extinguishment of $320.0 million of the 6 5 / 8 % Notes and $200.0 million of the 8 3 / 4 % Notes in the third quarter of 2012. This charge consists of the call premium associated with the 8 3 / 4 % Notes and original issue discounts and deferred financing costs related to the 6 5 / 8 % Notes and 8 3 / 4 % Notes.
Other, net in the year ended December 31, 2014 included income of $9.6 million. In December 2014, we divested our secure shredding operations in Australia, Ireland and the United Kingdom in a stock transaction and recorded a pretax gain of approximately $6.9 million (see Note 16 to Notes to Consolidated Financial Statements included in this Annual Report). Also included in other, net in the year ended December 31, 2014 was approximately $0.9 million of royalty income and $1.1 million of gains associated with a deferred compensation plan we sponsor. Other, net in the year ended December 31, 2013 consists primarily of $3.7 million of royalty income. Other, net in the year ended December 31, 2012 consists primarily of $2.7 million of royalty income, $1.5 million of gains associated with our acquisition of equity interests that we previously held associated with our Turkish and Swiss joint ventures and $1.3 million of gains associated with a deferred compensation plan we sponsor.
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Provision for Income Taxes
Our effective tax rates for the years ended December 31, 2012, 2013 and 2014 were 38.5%, 38.9% and (43.5)%, respectively. The primary reconciling items between the federal statutory rate of 35% and our overall effective tax rate for the year ended December 31, 2012 were differences in the rates of tax at which our foreign earnings are subject, including foreign exchange gains and losses in different jurisdictions with different tax rates and state income taxes (net of federal tax benefit). During the year ended December 31, 2012, foreign currency gains were recorded in lower tax jurisdictions associated with our marking-to-market of intercompany loan positions while foreign currency losses were recorded in higher tax jurisdictions associated with our marking-to-market of debt and derivative instruments, which lowered our 2012 effective tax rate by 2.2%. The primary reconciling items between the federal statutory rate of 35% and our overall effective tax rate for the year ended December 31, 2013 were the impact from the repatriation discussed below, which increased our 2013 effective tax rate by 13.1%, and state income taxes (net of federal tax benefit). These expenses were partially offset by a favorable impact provided by the recognition of certain previously unrecognized tax benefits due to expirations of statute of limitation periods and settlements with tax authorities in various jurisdictions and differences in the rates of tax at which our foreign earnings are subject, including foreign exchange gains and losses in different jurisdictions with different tax rates.
During 2013, we completed a plan to utilize both current and carryforward foreign tax credits by repatriating approximately $252.7 million (approximately $65.2 million of which was previously subject to United States taxes) from our foreign earnings. Due to uncertainty in our ability to fully utilize foreign tax credit carryforwards, we previously did not recognize a full benefit for such foreign tax credit carryforwards in our tax provision. As a result, we recorded an increase in our tax provision from continuing operations in the amount of $63.5 million in 2013. This increase was offset by decreases of $18.8 million from current year foreign tax credits and $23.3 million reversal of valuation allowances related to foreign tax credit carryforwards, resulting in a net increase of $21.5 million in our tax provision from continuing operations.
As a result of our REIT conversion, we recorded a net tax benefit of $212.2 million during the year ended December 31, 2014 for the revaluation of certain deferred tax assets and liabilities associated with the REIT conversion. In 2014, we recorded an increase to the tax provision of $29.3 million associated with tax accounting method changes consistent with our REIT conversion, primarily affected through the filing of amended tax returns. The primary other reconciling items between the federal statutory rate of 35% and our overall effective tax rate during the year ended December 31, 2014 was an increase of $46.4 million in our tax provision from the repatriation discussed below and other net tax adjustments related to the REIT conversion, including a tax benefit of $63.3 million primarily related to the dividends paid deduction. As a REIT, we are entitled to a deduction for dividends paid, resulting in a substantial reduction of federal income tax expense. As a REIT, substantially all of our income tax expense will be incurred based on the earnings generated by our foreign subsidiaries and our domestic TRSs.
We had not previously provided incremental federal and certain state income taxes on net tax over book outside basis differences related to the earnings of our foreign subsidiaries because our intent, prior to our conversion to a REIT, was to reinvest our current and future undistributed earnings of certain foreign subsidiaries indefinitely outside the United States. As a result of our conversion to a REIT, it is no longer our intent to indefinitely reinvest our current and future undistributed foreign earnings outside the United States, and, therefore, during 2014, we recognized an increase in our tax provision from continuing operations in the amount of $46.4 million, representing incremental federal and state income taxes and foreign withholding taxes on such foreign earnings. As a REIT, future repatriation of incremental undistributed earnings of our foreign subsidiaries will not be subject to federal or state income tax, with the exception of foreign withholding taxes in limited instances;
57
however, such future repatriations will require distribution in accordance with REIT distribution rules, and any such distribution may then be taxable, as appropriate, at the stockholder level.
Our effective tax rate is subject to variability in the future due to, among other items: (1) changes in the mix of income between our qualified REIT subsidiaries and our TRSs; (2) tax law changes; (3) volatility in foreign exchange gains (losses); (4) the timing of the establishment and reversal of tax reserves; and (5) our ability to utilize foreign tax credits and net operating losses that we generate. We are subject to income taxes in the United States and numerous foreign jurisdictions. We are subject to examination by various tax authorities in jurisdictions in which we have business operations or a taxable presence. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in changes in our estimates.
Gain on Sale of Real Estate, Net of Tax
Consolidated gain on sale of real estate for the year ended December 31, 2014 was $8.3 million, net of tax of $2.2 million associated with the sale of two buildings in the United Kingdom and a building in Canada. Consolidated gain on sale of real estate for the year ended December 31, 2013 was $1.4 million, net of tax of $0.4 million associated with the sale of a building in the United Kingdom. Consolidated gain on sale of real estate for the year ended December 31, 2012 was $0.2 million, net of tax of $0.1 million associated with the sale of a building in the United Kingdom.
INCOME FROM CONTINUING OPERATIONS
As a result of the foregoing factors, consolidated income from continuing operations for the year ended December 31, 2014 increased $229.8 million, or 231.7%, to $329.0 million (10.6% of consolidated revenues) from income from continuing operations of $99.2 million (3.3% of consolidated revenues) for the year ended December 31, 2013. The increase in income from continuing operations is primarily due to a $159.4 million decrease in our provision for income taxes as a result of our REIT conversion and a $60.6 million decrease in REIT Costs in 2014 compared to 2013.
As a result of the foregoing factors, consolidated income from continuing operations for the year ended December 31, 2013 decreased $83.5 million, or 45.7%, to $99.2 million (3.3% of consolidated revenues) from income from continuing operations of $182.7 million (6.1% of consolidated revenues) for the year ended December 31, 2012. The decrease in income from continuing operations is primarily due to a $48.4 million increase in REIT Costs year over year, restructuring costs of $23.4 million and a $59.1 million increase in other expenses primarily associated with debt extinguishment costs and foreign exchange losses, partially offset by a lower income tax provision in 2013 compared to 2012.
INCOME (LOSS) FROM DISCONTINUED OPERATIONS AND GAIN (LOSS) ON SALE OF DISCONTINUED OPERATIONS, NET OF TAX
Loss from discontinued operations, net of tax was $0.2 million for the year ended December 31, 2014, primarily related to legal reserves, offset by the recovery of insurance proceeds in excess of carrying value. Income from discontinued operations, net of tax was $0.8 million for the year ended December 31, 2013, which primarily represents the recovery of insurance proceeds in excess of carrying value. Loss from discontinued operations, net of tax was $6.8 million for the year ended December 31, 2012, primarily due to losses related to our Italian operations which we sold on April 27, 2012.
We recorded a loss on sale of discontinued operations in the amount of $1.9 million ($1.9 million, net of tax) during the year ended December 31, 2012 as a result of the sale of our Italian operations.
58
NONCONTROLLING INTERESTS
Net income attributable to noncontrolling interests resulted in a decrease in net income attributable to Iron Mountain Incorporated of $2.6 million, $3.5 million and $3.1 million for the years ended December 31, 2014, 2013 and 2012, respectively. These amounts represent our noncontrolling partners' share of earnings/losses in our majority-owned international subsidiaries that are consolidated in our operating results.
Segment Analysis (in thousands)
As a result of certain organizational realignments effective January 1, 2014, we evaluated changes to our internal financial reporting to better align our internal reporting to how we will manage our business going forward. This evaluation resulted in changes to our reportable segments effective January 1, 2014. As a result of the changes to our reportable segments, the former North American Business segment was separated into two unique reportable segments, which we refer to as (1) North American Records and Information Management Business segment and (2) North American Data Management Business segment. In addition, the Emerging Businesses segment, which was previously reported as a component of the former North American Business segment, is now reported as a component of the Corporate and Other segment. As a result, we have restated previously reported segment information.
Our reportable operating segments are North American Records and Information Management Business, North American Data Management Business, International Business and Corporate and Other. See Note 9 to Notes to Consolidated Financial Statements included in this Annual Report. Our North American Records and Information Management Business segment offers storage and information management services throughout the United States and Canada, including Records Management; Destruction; DMS; Fulfillment Services; and Intellectual Property Management. Our North American Data Management Business segment offers storage and rotation of backup computer media as part of corporate disaster recovery plans throughout the United States and Canada, including Data Protection & Recovery, server and computer backup services, digital content repository systems to house, distribute, and archive key media assets, and storage, safeguarding and electronic or physical delivery of physical media of all types, primarily for entertainment and media industry clients. Our International Business segment offers storage and information management services throughout Europe, Latin America and Asia Pacific, including Records Management, Data Protection & Recovery and DMS. Our European operations provide Records Management, Data Protection & Recovery and DMS throughout Europe. Our Latin America operations provide Records Management, Data Protection & Recovery and DMS throughout Argentina, Brazil, Chile, Colombia, Mexico and Peru. Our Asia Pacific operations provide Records Management, Data Protection & Recovery and DMS throughout Australia, with Records Management and Data Protection & Recovery also provided in certain cities in India, Singapore, Hong Kong-SAR and China. Prior to December 2014, our International Business segment offered Destruction in the United Kingdom, Ireland and Australia. See Note 16 to Notes to Consolidated Financial Statements included in this Annual Report for further disclosure related to the divestiture of these secure shredding operations in December 2014. Corporate and Other consists of our data center business in the United States, the primary product offering of our Emerging Businesses segment, as well as costs related to executive and staff functions, including finance, human resources and information technology, which benefit the enterprise as a whole. These costs are primarily related to the general management of these functions on a corporate level and the design and development of programs, policies and procedures that are then implemented in the individual segments, with each segment bearing its own cost of implementation. Our Corporate and Other segment also includes stock-based employee compensation expense associated with all stock options, restricted stock, restricted stock units, performance units and shares of stock issued under our employee stock purchase plan.
59
North American Records and Information Management Business
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Percentage
Change |
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Year Ended December 31, |
|
|
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Dollar
Change |
|
Constant
Currency |
Internal
Growth |
|||||||||||||||
|
2013 | 2014 | Actual | ||||||||||||||||
Storage Rental |
$ | 1,057,126 | $ | 1,080,013 | $ | 22,887 | 2.2 | % | 2.9 | % | 0.3 | % | |||||||
Service |
712,107 | 715,348 | 3,241 | 0.5 | % | 1.4 | % | (0.5 | )% | ||||||||||
| | | | | | | | | | | | | | | | | | | |
Segment Revenue |
$ | 1,769,233 | $ | 1,795,361 | $ | 26,128 | 1.5 | % | 2.3 | % | 0.0 | % | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Segment Adjusted OIBDA(1) |
$ | 645,575 | $ | 690,419 | $ | 44,844 | |||||||||||||
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| | | | | | | | | | | | | | | | | | | |
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Segment Adjusted OIBDA(1) as a Percentage of Segment Revenue |
36.5 | % | 38.5 | % |
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Percentage
Change |
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Year Ended December 31, |
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Dollar
Change |
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Constant
Currency |
Internal
Growth |
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2012 | 2013 | Actual | ||||||||||||||||
Storage Rental |
$ | 1,045,161 | $ | 1,057,126 | $ | 11,965 | 1.1 | % | 0.4 | % | 0.4 | % | |||||||
Service |
735,138 | 712,107 | (23,031 | ) | (3.1 | )% | (1.0 | )% | (3.9 | )% | |||||||||
| | | | | | | | | | | | | | | | | | | |
Segment Revenue |
$ | 1,780,299 | $ | 1,769,233 | $ | (11,066 | ) | (0.6 | )% | (0.2 | )% | (1.4 | )% | ||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Segment Adjusted OIBDA(1) |
$ | 665,655 | $ | 645,575 | $ | (20,080 | ) | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Segment Adjusted OIBDA(1) as a Percentage of Segment Revenue |
37.4 | % | 36.5 | % |
During the year ended December 31, 2014, reported revenue in our North American Records and Information Management Business segment increased 1.5% compared to the year ended December 31, 2013. This increase is primarily attributable to the impact of acquisitions of 2.3% in the year ended December 31, 2014 compared to the year ended December 31, 2013. Flat total internal growth was primarily the result of negative service internal growth of 0.5%, resulting from a trend toward reduced retrieval/re-file activity and a related decrease in transportation revenues, partially offset by storage rental revenue internal growth of 0.3% in the year ended December 31, 2014, primarily related to net price increases. For the year ended December 31, 2014, foreign currency exchange rate fluctuations decreased our reported revenues for the North American Records and Information Management Business segment by 0.8% compared to the year ended December 31, 2013 due to the weakening of the Canadian dollar against the United States dollar. Adjusted OIBDA as a percentage of segment revenue increased 200 basis points in the year ended December 31, 2014 compared to 2013, primarily due to decreases in restructuring charges and compensation expense as a result of the organizational restructuring initiated in the fourth quarter of 2013.
During the year ended December 31, 2013, reported revenue in our North American Records and Information Management Business segment decreased 0.6% compared to the year ended December 31, 2012, primarily due to negative internal growth of 1.4%. For the year ended December 31, 2013, the negative internal growth was primarily driven by negative consolidated service internal growth of 3.9%, which was the result of a trend toward reduced retrieval/re-file activity and a related decrease in transportation revenues, partially offset by storage rental revenue internal growth of 0.4% in the year
60
ended December 31, 2013 primarily related to net price increases. Adjusted OIBDA as a percentage of segment revenue declined 90 basis points in the year ended December 31, 2013 compared to the year ended December 31, 2012, primarily due to restructuring charges, partially offset by a decrease in compensation expense as a result of restructuring in sales, marketing and account management during the fourth quarter of 2012.
North American Data Management Business
|
|
|
|
Percentage
Change |
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Year Ended
December 31, |
|
|
||||||||||||||||
|
Dollar
Change |
|
Constant
Currency |
Internal
Growth |
|||||||||||||||
|
2013 | 2014 | Actual | ||||||||||||||||
Storage Rental |
$ | 241,772 | $ | 247,017 | $ | 5,245 | 2.2 | % | 2.6 | % | 2.3 | % | |||||||
Service |
154,747 | 143,190 | (11,557 | ) | (7.5 | )% | (7.0 | )% | (7.5 | )% | |||||||||
| | | | | | | | | | | | | | | | | | | |
Segment Revenue |
$ | 396,519 | $ | 390,207 | $ | (6,312 | ) | (1.6 | )% | (1.1 | )% | (1.5 | )% | ||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Segment Adjusted OIBDA(1) |
$ | 235,380 | $ | 224,696 | $ | (10,684 | ) | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Segment Adjusted OIBDA(1) as a Percentage of Segment Revenue |
59.4 | % | 57.6 | % |
|
|
|
|
Percentage
Change |
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Year Ended
December 31, |
|
|
||||||||||||||||
|
Dollar
Change |
|
Constant
Currency |
Internal
Growth |
|||||||||||||||
|
2012 | 2013 | Actual | ||||||||||||||||
Storage Rental |
$ | 237,947 | $ | 241,772 | $ | 3,825 | 1.6 | % | 1.4 | % | 1.5 | % | |||||||
Service |
166,306 | 154,747 | (11,559 | ) | (7.0 | )% | (6.3 | )% | (7.0 | )% | |||||||||
| | | | | | | | | | | | | | | | | | | |
Segment Revenue |
$ | 404,253 | $ | 396,519 | $ | (7,734 | ) | (1.9 | )% | (1.7 | )% | (2.0 | )% | ||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Segment Adjusted OIBDA(1) |
$ | 243,908 | $ | 235,380 | $ | (8,528 | ) | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Segment Adjusted OIBDA(1) as a Percentage of Segment Revenue |
60.3 | % | 59.4 | % |
During the year ended December 31, 2014, reported revenue in our North American Data Management Business segment decreased 1.6% compared to the year ended December 31, 2013, primarily due to negative internal growth of 1.5%. The negative internal growth was primarily attributable to negative service internal growth of 7.5%, which was due to declines in service revenue activity levels as the storage business becomes more archival in nature, partially offset by storage rental revenue internal growth of 2.3% in the year ended December 31, 2014, primarily related to net price increases. For the year ended December 31, 2014, foreign currency exchange rate fluctuations decreased our reported revenues for the North American Data Management Business segment by 0.5% compared to the year ended December 31, 2013 due to the weakening of the Canadian dollar against the United States dollar. Adjusted OIBDA as a percentage of segment revenue declined 180 basis points in the year ended December 31, 2014 compared to the year ended December 31, 2013, primarily due to the aforementioned negative internal growth, as well as costs not decreasing in proportion to the decline in revenue.
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During the year ended December 31, 2013, reported revenue in our North American Data Management Business segment decreased 1.9% compared to the year ended December 31, 2012, primarily due to negative internal growth of 2.0%. For the year ended December 31, 2013, the negative internal growth was primarily attributable to negative consolidated service internal growth of 7.0%, which was due to declines in service revenue activity levels as the storage business becomes more archival in nature, partially offset by storage rental revenue internal growth of 1.5% in the year ended December 31, 2013 primarily related to net price increases. Adjusted OIBDA as a percentage of segment revenue declined 90 basis points in the year ended December 31, 2013 compared to the year ended December 31, 2012, primarily due to restructuring charges, partially offset by a decrease in compensation expense as a result of restructuring in sales, marketing and account management in the fourth quarter of 2012.
International Business
|
|
|
|
Percentage Change |
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Year Ended December 31, |
|
|
||||||||||||||||
|
Dollar
Change |
|
Constant
Currency |
Internal
Growth |
|||||||||||||||
|
2013 | 2014 | Actual | ||||||||||||||||
Storage Rental |
$ | 473,723 | $ | 521,127 | $ | 47,404 | 10.0 | % | 12.7 | % | 6.3 | % | |||||||
Service |
371,876 | 397,418 | 25,542 | 6.9 | % | 9.5 | % | 2.0 | % | ||||||||||
| | | | | | | | | | | | | | | | | | | |
Segment Revenue |
$ | 845,599 | $ | 918,545 | $ | 72,946 | 8.6 | % | 11.3 | % | 4.5 | % | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Segment Adjusted OIBDA(1) |
$ | 206,003 | $ | 214,891 | $ | 8,888 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Segment Adjusted OIBDA(1) as a Percentage of Segment Revenue |
24.4 | % | 23.4 | % |
|
|
|
|
Percentage Change |
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Year Ended December 31, |
|
|
||||||||||||||||
|
Dollar
Change |
|
Constant
Currency |
Internal
Growth |
|||||||||||||||
|
2012 | 2013 | Actual | ||||||||||||||||
Storage Rental |
$ | 440,077 | $ | 473,723 | $ | 33,646 | 7.6 | % | 9.5 | % | 6.2 | % | |||||||
Service |
366,615 | 371,876 | 5,261 | 1.4 | % | 3.5 | % | (0.5 | )% | ||||||||||
| | | | | | | | | | | | | | | | | | | |
Segment Revenue |
$ | 806,692 | $ | 845,599 | $ | 38,907 | 4.8 | % | 6.8 | % | 3.2 | % | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Segment Adjusted OIBDA(1) |
$ | 173,620 | $ | 206,003 | $ | 32,383 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Segment Adjusted OIBDA(1) as a Percentage of Segment Revenue |
21.5 | % | 24.4 | % |
Reported revenues in our International Business segment increased 8.6% during the year ended December 31, 2014 compared to the year ended December 31, 2013. Internal growth for the year ended December 31, 2014 was 4.5%, supported by 6.3% storage rental internal growth. Net acquisitions/divestitures contributed 6.8% of the increase in total reported revenue growth in the year ended December 31, 2014. Foreign currency fluctuations in 2014 resulted in decreased revenue in the year ended December 31, 2014, as measured in United States dollars, of approximately 2.7% as compared to the year ended December 31, 2013, primarily due to the weakening of the Australian dollar and Brazilian real against the United States dollar, partially offset by a strengthening of the British pound sterling and the Euro against the United States dollar. Adjusted OIBDA as a percentage
62
of segment revenue decreased on a portfolio basis in the year ended December 31, 2014 compared to the year ended December 31, 2013 primarily due to the impact associated with a fire at one of our facilities in Buenos Aires, Argentina on February 5, 2014 (described at Note 10.g. to Notes to Consolidated Financial Statements included in this Annual Report), as well as integration costs associated with recent international acquisitions.
Reported revenues in our International Business segment increased 4.8% during the year ended December 31, 2013 compared to the year ended December 31, 2012. Internal growth for the year ended December 31, 2013 was 3.2%, supported by 6.2% storage rental internal growth, partially offset by negative total service internal growth of 0.5% as a result of lower shredding revenues. Acquisitions contributed 3.6% to total reported revenue growth in the year ended December 31, 2013. Foreign currency fluctuations in 2013, primarily in Europe, resulted in decreased revenue in the year ended December 31, 2013, as measured in United States dollars, of approximately 2.0% as compared to the year ended December 31, 2012. Adjusted OIBDA as a percentage of segment revenue increased in the year ended December 31, 2013 compared to the year ended December 31, 2012 primarily due to increased operating income from productivity gains, pricing actions and disciplined cost management.
Corporate and Other
|
|
|
|
Percentage
Change |
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Year Ended December 31, |
|
|
||||||||||||||||
|
Dollar
Change |
|
Constant
Currency |
Internal
Growth |
|||||||||||||||
|
2013 | 2014 | Actual | ||||||||||||||||
Storage Rental |
$ | 12,100 | $ | 12,086 | $ | (14 | ) | (0.1 | )% | (0.1 | )% | (0.1 | )% | ||||||
Service |
1,172 | 1,494 | 322 | 27.5 | % | 27.5 | % | 27.5 | % | ||||||||||
| | | | | | | | | | | | | | | | | | | |
Segment Revenue |
$ | 13,272 | $ | 13,580 | $ | 308 | 2.3 | % | 2.3 | % | 2.3 | % | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Segment Adjusted OIBDA(1) |
$ | (192,377 | ) | $ | (204,209 | ) | $ | (11,832 | ) | ||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Segment Adjusted OIBDA(1) as a Percentage of Consolidated Revenue |
(6.4 | )% | (6.6 | )% |
|
|
|
|
Percentage
Change |
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Year Ended December 31, |
|
|
||||||||||||||||
|
Dollar
Change |
|
Constant
Currency |
Internal
Growth |
|||||||||||||||
|
2012 | 2013 | Actual | ||||||||||||||||
Storage Rental |
$ | 9,954 | $ | 12,100 | $ | 2,146 | 21.6 | % | 21.6 | % | 21.6 | % | |||||||
Service |
2,757 | 1,172 | (1,585 | ) | (57.5 | )% | (57.5 | )% | (57.5 | )% | |||||||||
| | | | | | | | | | | | | | | | | | | |
Segment Revenue |
$ | 12,711 | $ | 13,272 | $ | 561 | 4.4 | % | 4.4 | % | 4.4 | % | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Segment Adjusted OIBDA(1) |
$ | (172,266 | ) | $ | (192,377 | ) | $ | (20,111 | ) | ||||||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Segment Adjusted OIBDA(1) as a Percentage of Consolidated Revenue |
(5.7 | )% | (6.4 | )% |
During the year ended December 31, 2014, Adjusted OIBDA in the Corporate and Other segment as a percentage of consolidated revenue decreased by 20 basis points compared to the year ended
63
December 31, 2013, primarily due to increased insurance costs of $3.5 million associated with a fire at one of our facilities in Buenos Aires, Argentina on February 5, 2014 (described at Note 10.g. to Notes to Consolidated Financial Statements included in this Annual Report), higher professional fees of $2.6 million, restructuring costs of $1.5 million and REIT compliance costs.
During the year ended December 31, 2013, Adjusted OIBDA in the Corporate and Other segment as a percentage of consolidated revenue decreased by 70 basis points compared to the year ended December 31, 2012, primarily due to an $11.7 million increase in compensation costs, primarily associated with employee compensation and restructuring costs, an $8.7 million increase in professional fees and legal reserves, and the costs associated with the decision to discontinue work on a data archiving solution recorded in 2013.
Liquidity and Capital Resources
The following is a summary of our cash balances and cash flows (in thousands) as of and for the years ended December 31,
|
2012 | 2013 | 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Cash flows from operating activitiescontinuing operations |
$ | 443,652 | $ | 506,593 | $ | 472,948 | ||||
Cash flows from investing activitiescontinuing operations |
(394,064 | ) | (632,750 | ) | (479,978 | ) | ||||
Cash flows from financing activitiescontinuing operations |
28,269 | 18,564 | 19,857 | |||||||
Cash and cash equivalents at the end of year |
243,415 | 120,526 | 125,933 |
Net cash provided by operating activities from continuing operations was $472.9 million for the year ended December 31, 2014 compared to $506.6 million for the year ended December 31, 2013. The 6.6% year-over-year decrease resulted primarily from an increase in cash used in working capital of $74.7 million primarily related to the timing and payments of certain accrued expenses and deferred revenue liabilities, offset by an increase in net income, including non-cash charges and realized foreign exchange losses, of $41.1 million.
Our business requires capital expenditures to support our expected revenue growth and ongoing operations as well as new products and services and increased profitability. These expenditures are included in the cash flows from investing activities from continuing operations. The nature of our capital expenditures has evolved over time along with the nature of our business. We make capital expenditures to support a number of different objectives. The majority of our capital goes to support business-line growth and our ongoing operations, but we also expend capital to support the development and improvement of products and services and projects designed to increase our profitability. These expenditures are generally small and discretionary in nature. Cash paid for our capital expenditures, cash paid for acquisitions (net of cash acquired) and additions to customer acquisition costs during the year ended December 31, 2014 amounted to $361.9 million, $128.1 million and $34.4 million, respectively. For the year ended December 31, 2014, these expenditures were funded with cash flows provided by operating activities from continuing operations, cash equivalents on hand, borrowings under the Credit Agreement, proceeds from the sale of property, plant and equipment and the divestiture of our International Shredding Operations. Excluding potential future acquisitions and additional real estate purchases above our plan, we expect our capital expenditures to be approximately $330.0 million to $360.0 million in the year ending December 31, 2015 (inclusive of approximately $25.0 million in planned real estate purchases).
64
Net cash provided by financing activities from continuing operations was $19.9 million for the year ended December 31, 2014. During 2014, we received $642.4 million in net proceeds from the issuance of the GBP Notes, net receipts of $460.5 million of other debt (primarily associated with our Credit Agreement, defined below) and $44.3 million from proceeds from the exercise of stock options and the employee stock purchase plan. We used the proceeds from these transactions for the retirement of $247.3 million of the 7 1 / 4 % Notes, the early redemption of $306.0 million of our 8 3 / 8 % Notes for approximately $319.1 million (inclusive of call premium payment), for payment of dividends in the amount of $542.3 million on our common stock and net payments of $14.8 million associated with our noncontrolling interest holders.
Dividends
See "Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities" of this Annual Report for information on dividends.
Financial Instruments and Debt
Financial instruments that potentially subject us to credit risk consist principally of cash and cash equivalents (including money market funds and time deposits), restricted cash (primarily United States Treasuries) and accounts receivable. The only significant concentrations of liquid investments as of December 31, 2014 relate to cash and cash equivalents and restricted cash held on deposit with three global banks and two "Triple A" rated money market funds, all of which we consider to be large, highly-rated investment-grade institutions. As per our risk management investment policy, we limit exposure to concentration of credit risk by limiting the amount invested in any one mutual fund to a maximum of $50.0 million or in any one financial institution to a maximum of $75.0 million. As of December 31, 2014, our cash and cash equivalents and restricted cash balance was $159.8 million, including money market funds and time deposits amounting to $53.0 million. The money market funds are invested substantially in United States Treasuries.
Our consolidated debt as of December 31, 2014 comprised the following (in thousands):
Revolving Credit Facility(1) |
$ | 883,428 | ||
Term Loan(1) |
249,375 | |||
6 3 / 4 % Euro Senior Subordinated Notes due 2018 (the "6 3 / 4 % Notes")(2) |
308,616 | |||
7 3 / 4 % Senior Subordinated Notes due 2019 (the "7 3 / 4 % Notes ")(2) |
400,000 | |||
8 3 / 8 % Senior Subordinated Notes due 2021 (the "8 3 / 8 % Notes")(2) |
106,030 | |||
CAD Notes(3) |
172,420 | |||
GBP Notes(4) |
622,960 | |||
6% Notes due 2023 (the "6% Notes")(2) |
600,000 | |||
5 3 / 4 % Senior Subordinated Notes due 2024 (the "5 3 / 4 % Notes")(2) |
1,000,000 | |||
Real Estate Mortgages, Capital Leases and Other(5) |
320,702 | |||
| | | | |
Total Long-term Debt |
4,663,531 | |||
Less Current Portion |
(52,095 | ) | ||
| | | | |
Long-term Debt, Net of Current Portion |
$ | 4,611,436 | ||
| | | | |
| | | | |
| | | | |
65
obligations (including promissory notes) owed to or held by it, to secure the Canadian dollar subfacility under the Revolving Credit Facility.
On August 7, 2013, we amended our existing credit agreement. The revolving credit facilities (the "Revolving Credit Facility") under our credit agreement, as amended (the "Credit Agreement"), allow IMI and certain of its United States and foreign subsidiaries to borrow in United States dollars and (subject to sublimits) a variety of other currencies (including Canadian dollars, British pounds sterling, Euros, Brazilian reais and Australian dollars, among other currencies) in an aggregate outstanding amount not to exceed $1.5 billion. Additionally, the Credit Agreement included an option to allow us to request additional commitments of up to $500.0 million, in the form of term loans or through increased commitments under the Revolving Credit Facility. On September 24, 2014, we borrowed an additional $250.0 million in the form of a term loan under the Credit Agreement (the "Term Loan"). Commencing on December 31, 2014, the Term Loan will begin amortizing in quarterly installments in an amount equal to $0.6 million per quarter, with the remaining balance due on June 27, 2016. The Term Loan may be prepaid without penalty or premium, in whole or in part, at any time. The Credit Agreement continues to include an option to allow us to request additional commitments of up to $250.0 million, in the form of term loans or through increased commitments under the Revolving Credit Facility.
The Credit Agreement terminates on June 27, 2016, at which point all obligations become due. IMI and the Guarantors guarantee all obligations under the Credit Agreement, and have pledged the capital stock or other equity interests of most of their United States subsidiaries, up to 66% of the capital stock or other equity interests of their first-tier foreign subsidiaries, and all intercompany obligations (including promissory notes) owed to or held by them to secure the Credit Agreement. In addition, Canada Company has pledged 66% of the capital stock of its subsidiaries, and all intercompany obligations (including promissory notes) owed to or held by it to secure the Canadian dollar subfacility under the Revolving Credit Facility. The interest rate on borrowings under the Credit Agreement varies depending on our choice of interest rate and currency options, plus an applicable margin, which varies based on our consolidated leverage ratio. Additionally, the Credit Agreement requires the payment of a commitment fee on the unused portion of the Revolving Credit Facility, which fee ranges from between 0.3% to 0.5% based on certain financial ratios and fees associated with outstanding letters of credit. As of December 31, 2014, we had $883.4 million and $249.4 million of outstanding borrowings under the Revolving Credit Facility and the Term Loan, respectively. Of the $883.4 million of outstanding borrowings under the Revolving Credit Facility, $680.2 million was
66
denominated in United States dollars, 77.2 million was denominated in Canadian dollars, 64.3 million was denominated in Euros and 71.6 million was denominated in Australian dollars. In addition, we also had various outstanding letters of credit totaling $10.4 million. The remaining amount available for borrowing under the Revolving Credit Facility as of December 31, 2014, based on IMI's leverage ratio, the last 12 months' earnings before interest, taxes, depreciation and amortization and rent expense ("EBITDAR"), other adjustments as defined in the Credit Agreement and current external debt, was $606.2 million (which amount represents the maximum availability as of such date). The average interest rate in effect under the Credit Agreement was 2.7% as of December 31, 2014. The average interest rate in effect under the Revolving Credit Facility was 2.8% and ranged from 2.3% to 5.1% as of December 31, 2014 and the interest rate in effect under the Term Loan as of December 31, 2014 was 2.4%. For the years ended December 31, 2012, 2013 and 2014, we recorded commitment fees and letters of credit fees of $2.3 million, $3.2 million and $3.3 million, respectively, based on the unused balances under our revolving credit facilities and outstanding letters of credit. We recorded a charge of $5.5 million to other expense (income), net in the third quarter of 2013 related to an amendment of our revolving credit and term loan facilities, representing a write-off of deferred financing costs.
The Credit Agreement, our indentures and other agreements governing our indebtedness contain certain restrictive financial and operating covenants, including covenants that restrict our ability to complete acquisitions, pay cash dividends, incur indebtedness, make investments, sell assets and take certain other corporate actions. The covenants do not contain a rating trigger. Therefore, a change in our debt rating would not trigger a default under the Credit Agreement, our indentures or other agreements governing our indebtedness. The Credit Agreement uses EBITDAR-based calculations as the primary measures of financial performance, including leverage and fixed charge coverage ratios. IMI's Credit Agreement net total lease adjusted leverage ratio was 5.0 and 5.4 as of December 31, 2013 and 2014, respectively, compared to a maximum allowable ratio of 6.5, and its net secured debt lease adjusted leverage ratio was 2.2 and 2.6 as of December 31, 2013 and 2014, respectively, compared to a maximum allowable ratio of 4.0. IMI's bond leverage ratio (which is not lease adjusted), per the indentures, was 5.1 and 5.7 as of December 31, 2013 and 2014, respectively, compared to a maximum allowable ratio of 6.5. IMI's Credit Agreement fixed charge coverage ratio was 2.5 at both December 31, 2013 and 2014 compared to a minimum allowable ratio of 1.5 under the Credit Agreement. Noncompliance with these leverage and fixed charge coverage ratios would have a material adverse effect on our financial condition and liquidity.
In August 2013, IMI completed an underwritten public offering of $600.0 million in aggregate principal amount of 6% Notes, and Canada Company completed an underwritten public offering of 200.0 million CAD in aggregate principal amount of CAD Notes, both of which were issued at 100% of par. The net proceeds to IMI and Canada Company of $782.3 million, after paying the underwriters' discounts and commissions, were used to redeem (1) all of the outstanding 7 1 / 2 % Notes, (2) all of the outstanding 8% Notes due 2018, (3) all of the outstanding 8% Notes due 2020, and (4) $137.5 million in principal amount of the 8 3 / 8 % Notes. The remaining net proceeds were used to repay indebtedness under our Revolving Credit Facility. We recorded a charge to other expense (income), net of $38.1 million in the third quarter of 2013 related to the early extinguishment of this debt. This charge consists of call and tender premiums, original issue discounts and deferred financing costs related to this debt.
In January 2014, we redeemed the 150.0 million British pounds sterling (approximately $248.0 million) in aggregate principal amount of the 7 1 / 4 % Notes at 100% of par, plus accrued and unpaid interest, utilizing borrowings under our Revolving Credit Facility and cash on-hand.
In September 2014, IME completed a private offering of 400.0 million British pounds sterling in aggregate principal amount of the GBP Notes, which were issued at 100% of par. The net proceeds to IME of 394.0 million British pounds sterling (approximately $642.0 million based on an exchange rate
67
of 1.63), after paying the initial purchasers' commissions and expenses, were used to repay amounts outstanding under our Revolving Credit Facility and for general corporate purposes.
In December 2014, we redeemed $306.0 million aggregate principal outstanding of our 8 3 / 8 % Notes at 104.188% of par, plus accrued and unpaid interest, utilizing borrowings under our Revolving Credit Facility. We recorded a charge to other expense (income), net of $16.5 million related to the early extinguishment of this debt in the fourth quarter of 2014 representing the call premium associated with the early redemption, as well as a write-off of original issue discounts and deferred financing costs related to this debt.
Our ability to pay interest on or to refinance our indebtedness depends on our future performance, working capital levels and capital structure, which are subject to general economic, financial, competitive, legislative, regulatory and other factors which may be beyond our control. There can be no assurance that we will generate sufficient cash flow from our operations or that future financings will be available on acceptable terms or in amounts sufficient to enable us to service or refinance our indebtedness or to make necessary capital expenditures.
Acquisitions
In January 2014, in order to enhance our existing operations in Australia, we acquired the stock of Tape Management Services Pty Ltd, a storage and data management company with operations in Australia, for approximately $15.3 million.
In February 2014, in order to enhance our existing operations in Turkey, we acquired the stock of RM Arşiv Yönetim Hizmetleri Ticaret Anonim Şirketi, a storage rental and records management business with operations in Turkey, for approximately $21.2 million, of which $16.8 million was paid in the first quarter of 2014, with the remainder paid in the first quarter of 2015.
In April 2014, in order to enhance our existing operations in Poland, we acquired the stock of OSG Polska sp. z.o.o., a storage rental and records management business with operations in Poland, for approximately $13.7 million.
In September 2014, we purchased our joint venture partners' noncontrolling interests in the businesses we operate in Russia, Ukraine and Denmark, which we had previously consolidated. The purchase price of approximately $24.5 million is comprised of $17.9 million paid at closing, $2.1 million payable in 2017 and $4.5 million payable in 2020. Of the $17.9 million paid at closing, approximately $12.0 million was associated with the underlying shares owned by our joint venture partners and approximately $6.0 million was associated with the payment of outstanding loans between the joint venture and the joint venture partners.
In October 2014, in order to enhance our existing operations in Brazil, we acquired the stock of Keepers Brasil Ltda, a storage rental and data management business in Sao Paulo, Brazil, for approximately $46.2 million. The purchase price includes $5.4 million held in escrow to secure indemnification obligations of the former owners of the business to us.
In December 2014, in order to enhance our North American records management operations, we acquired the stock of Canadian-based Securit Records Management for approximately $29.5 million. Included in the purchase price is approximately $1.3 million held in escrow to secure indemnification obligations and certain working capital adjustments.
Divestitures
In December 2014, we divested our International Shredding Operations in a stock transaction for approximately $26.2 million in cash at closing, including $1.5 million being held in escrow. The assets sold primarily consisted of customer contracts and certain long-lived assets.
68
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2014 and the anticipated effect of these obligations on our liquidity in future years (in thousands):
|
Payments Due by Period | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Total |
Less than
1 Year |
13 Years | 35 Years |
More than
5 Years |
|||||||||||
Capital Lease Obligations |
$ | 241,866 | $ | 38,761 | $ | 70,155 | $ | 42,828 | $ | 90,122 | ||||||
Long-Term Debt Obligations (excluding Capital Lease Obligations) |
4,422,903 | 13,334 | 1,180,746 | 720,798 | 2,508,025 | |||||||||||
Interest Payments(1) |
1,797,236 | 253,065 | 441,346 | 404,234 | 698,591 | |||||||||||
Operating Lease Obligations(2) |
2,229,941 | 227,771 | 419,419 | 367,544 | 1,215,207 | |||||||||||
Purchase and Asset Retirement Obligations |
94,672 | 43,908 | 31,558 | 3,999 | 15,207 | |||||||||||
| | | | | | | | | | | | | | | | |
Total(3) |
$ | 8,786,618 | $ | 576,839 | $ | 2,143,224 | $ | 1,539,403 | $ | 4,527,152 | ||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
We expect to meet our cash flow requirements for the next twelve months from cash generated from operations, existing cash, cash equivalents, borrowings under the Credit Agreement and other financings, which may include senior or senior subordinated notes, secured credit facilities, securitizations and mortgage or capital lease financings, and the issuance of equity. We expect to meet our long-term cash flow requirements using the same means described above. We are highly leveraged. While we expect to continue to be highly leveraged for the foreseeable future, as a REIT we expect our long-term capital allocation strategy will naturally shift toward increased use of equity to support lower leverage, though our leverage has increased, in the short-term, to fund the costs of the Conversion Plan.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements as defined in Regulation S-K Item 303(a)(4)(ii).
Net Operating Losses
We have federal net operating loss carryforwards, which expire in 2021 through 2033, of $88.1 million ($0, tax effected) at December 31, 2014 to reduce future federal taxable income, on which no federal tax benefit is expected to be realized. We have state net operating loss carryforwards, which expire in 2015 through 2033, of $74.4 million ($0.1 million, tax effected) at December 31, 2014 to reduce future state taxable income, on which an insignificant state tax benefit is expected to be realized. We have assets for foreign net operating losses of $64.6 million, with various expiration dates (and in some cases no expiration date), subject to a valuation allowance of approximately 62%.
69
Inflation
Certain of our expenses, such as wages and benefits, insurance, occupancy costs and equipment repair and replacement, are subject to normal inflationary pressures. Although to date we have been able to offset inflationary cost increases through increased operating efficiencies, the negotiation of favorable long-term real estate leases and customer contracts which contain provisions for inflationary price escalators, we can give no assurance that we will be able to offset any future inflationary cost increases through similar efficiencies, leases or increased storage rental or service charges.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Credit Risk
Financial instruments that potentially subject us to credit risk consist principally of cash and cash equivalents (including money market funds and time deposits), restricted cash (primarily United States Treasuries) and accounts receivable. The only significant concentrations of liquid investments as of December 31, 2014 relate to cash and cash equivalents and restricted cash held on deposit with three global banks and two "Triple A" rated money market funds, all of which we consider to be large, highly-rated investment-grade institutions. As per our risk management investment policy, we limit exposure to concentration of credit risk by limiting the amount invested in any one mutual fund to a maximum of $50.0 million or in any one financial institution to a maximum of $75.0 million. As of December 31, 2014, our cash and cash equivalents and restricted cash balance was $159.8 million, including money market funds and time deposits amounting to $53.0 million. The money market funds are invested substantially in United States Treasuries.
Interest Rate Risk
Given the recurring nature of our revenues and the long-term nature of our asset base, we have the ability and the preference to use long-term, fixed interest rate debt to finance our business at attractive rates, thereby helping to preserve our long-term returns on invested capital. We target approximately 75% of our debt portfolio to be fixed with respect to interest rates. Occasionally, we will use interest rate swaps as a tool to maintain our targeted level of fixed rate debt. See Notes 3 and 4 to Notes to Consolidated Financial Statements included in this Annual Report.
As of December 31, 2014, we had $1,134.6 million of variable rate debt outstanding with a weighted average variable interest rate of approximately 2.7%, and $3,528.9 million of fixed rate debt outstanding. As of December 31, 2014, approximately 76% of our total debt outstanding was fixed. If the weighted average variable interest rate on our variable rate debt had increased by 1%, our net income for the year ended December 31, 2014 would have been reduced by approximately $3.7 million. See Note 4 to Notes to Consolidated Financial Statements included in this Annual Report for a discussion of our long-term indebtedness, including the fair values of such indebtedness as of December 31, 2014.
Currency Risk
Our investments in IME, Canada Company, Iron Mountain Mexico, SA de RL de CV, Iron Mountain South America, Ltd., Iron Mountain Australia Pty Ltd., Iron Mountain CIS and our other international investments may be subject to risks and uncertainties related to fluctuations in currency valuation. Our reporting currency is the United States dollar. However, our international revenues and expenses are generated in the currencies of the countries in which we operate, primarily the British pound sterling, Euro, Canadian dollar, Brazilian real, Australian dollar and the Russian ruble. Declines in the value of the local currencies in which we are paid relative to the United States dollar will cause revenues in United States dollar terms to decrease and dollar-denominated liabilities to increase in local currency.
70
The impact of currency fluctuations on our earnings is mitigated significantly by the fact that most operating and other expenses are also incurred and paid in the local currency. We also have several intercompany obligations between our foreign subsidiaries and IMI and our United States-based subsidiaries. In addition, our treasury centers in Switzerland, our foreign subsidiaries and IME also have intercompany obligations between them. These intercompany obligations are primarily denominated in the local currency of the foreign subsidiary.
We have adopted and implemented a number of strategies to mitigate the risks associated with fluctuations in currency valuations. One strategy is to finance certain of our international subsidiaries with debt that is denominated in local currencies, thereby providing a natural hedge. In determining the amount of any such financing, we take into account local tax considerations, among other factors. Another strategy we utilize is for IMI or Iron Mountain Information Management, LLC, a wholly-owned subsidiary of IMI, to borrow in foreign currencies to hedge our intercompany financing activities. In addition, on occasion, we enter into currency swaps to temporarily or permanently hedge an overseas investment, such as a major acquisition, to lock in certain transaction economics. We have implemented these strategies for our foreign investments in the United Kingdom, Canada and Continental Europe. IME has financed its capital needs through direct borrowings in British pounds sterling under the GBP Notes. Similarly, Canada Company has financed its capital needs through direct borrowings in Canadian dollars under the Credit Agreement and the CAD Notes. This creates a tax efficient natural currency hedge. Specifically, through our 255.0 million 6 3 / 4 % Notes, we effectively hedge our outstanding intercompany loans denominated in Euros. We designated a portion of our 6 3 / 4 % Notes issued by IMI as a hedge of net investment of certain of our Euro denominated subsidiaries. As a result, we recorded $6.4 million ($6.3 million, net of tax) of foreign exchange gains related to the "marking-to-market" of such debt to currency translation adjustments which is a component of accumulated other comprehensive items, net included in stockholders' equity for the year ended December 31, 2014. As of December 31, 2014, cumulative net gains of $13.8 million, net of tax are recorded in accumulated other comprehensive items, net associated with this net investment hedge.
We have also entered into a number of separate forward contracts to hedge our exposures in Euros, British pounds sterling and Australian dollars. As of December 31, 2014, we had outstanding forward contracts to purchase 206.0 million Euros and sell $252.7 million United States dollars to hedge our intercompany exposures with our European operations. At the maturity of the forward contracts, we may enter into new forward contracts to hedge movements in the underlying currencies. At the time of settlement, we either pay or receive the net settlement amount from the forward contract and recognize this amount in other expense (income), net in the accompanying statements of operations as a realized foreign exchange gain or loss. At the end of each month, we mark the outstanding forward contracts to market and record an unrealized foreign exchange gain or loss for the mark-to-market valuation. We have not designated forward contracts as hedges. During the year ended December 31, 2014, there was $21.1 million in net cash payments included in cash from operating activities from continuing operations related to settlements associated with foreign currency forward contracts. We recorded net losses in connection with forward contracts of $18.0 million, including an unrealized foreign exchange loss of $2.4 million related to the Euro forward contracts in other expense (income), net in the accompanying statement of operations as of December 31, 2014. As of December 31, 2014, except as noted above, our currency exposures to intercompany balances are not hedged.
The impact of devaluation or depreciating currency on an entity depends on the residual effect on the local economy and the ability of an entity to raise prices and/or reduce expenses. Due to our constantly changing currency exposure and the potential substantial volatility of currency exchange rates, we cannot predict the effect of exchange fluctuations on our business. The effect of a change in foreign exchange rates on our net investment in foreign subsidiaries is reflected in the "Accumulated Other Comprehensive Items, net" component of equity. A 10% depreciation in year-end 2014
71
functional currencies, relative to the United States dollar, would result in a reduction in our equity of approximately $70.4 million.
Item 8. Financial Statements and Supplementary Data.
The information required by this item is included in Item 15(a) of this Annual Report.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. These rules refer to the controls and other procedures of a company that are designed to ensure that information is recorded, processed, summarized and communicated to management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding what is required to be disclosed by a company in the reports that it files under the Exchange Act. As of December 31, 2014 (the "Evaluation Date"), we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures. Based upon that evaluation, our chief executive officer and chief financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective.
Management's Report on Internal Control over Financial Reporting
Our management, with the participation of our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system is designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements. Due to their inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with policies or procedures may deteriorate. Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal ControlIntegrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2014.
The effectiveness of our internal control over financial reporting has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included in this Annual Report.
72
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of Iron Mountain Incorporated
Boston, Massachusetts
We have audited the internal control over financial reporting of Iron Mountain Incorporated and subsidiaries (the "Company") as of December 31, 2014, based on criteria established in Internal ControlIntegrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the criteria established in Internal ControlIntegrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2014 of the Company and our report dated February 27, 2015 expressed an unqualified opinion on those financial statements and financial statement schedule.
/s/ DELOITTE & TOUCHE LLP
Boston,
Massachusetts
February 27, 2015
73
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Act of 1934) during the quarter ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
None.
74
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by Item 10 is incorporated by reference to our Proxy Statement.
Item 11. Executive Compensation.
The information required by Item 11 is incorporated by reference to our Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by Item 12 is incorporated by reference to our Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by Item 13 is incorporated by reference to our Proxy Statement.
Item 14. Principal Accountant Fees and Services.
The information required by Item 14 is incorporated by reference to our Proxy Statement.
Item 15. Exhibits and Financial Statements.
75
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of Iron Mountain Incorporated
Boston, Massachusetts
We have audited the accompanying consolidated balance sheets of Iron Mountain Incorporated and subsidiaries (the "Company") as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the three years in the period ended December 31, 2014. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Iron Mountain Incorporated and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2014, based on the criteria established in Internal ControlIntegrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 27, 2015 expressed an unqualified opinion on the Company's internal control over financial reporting
/s/ DELOITTE & TOUCHE LLP
Boston,
Massachusetts
February 27, 2015
76
IRON MOUNTAIN INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
The accompanying notes are an integral part of these consolidated financial statements.
77
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
The accompanying notes are an integral part of these consolidated financial statements.
78
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
|
Year Ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2013 | 2014 | |||||||
Net Income (Loss) |
$ | 174,048 | $ | 99,992 | $ | 328,746 | ||||
Other Comprehensive Income (Loss): |
||||||||||
Foreign Currency Translation Adjustments |
23,186 | (31,532 | ) | (66,867 | ) | |||||
Market Value Adjustments for Securities |
| 926 | 53 | |||||||
| | | | | | | | | | |
Total Other Comprehensive Income (Loss) |
23,186 | (30,606 | ) | (66,814 | ) | |||||
| | | | | | | | | | |
Comprehensive Income (Loss) |
197,234 | 69,386 | 261,932 | |||||||
Comprehensive Income (Loss) Attributable to Noncontrolling Interests |
3,795 | 1,898 | 2,184 | |||||||
| | | | | | | | | | |
Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated |
$ | 193,439 | $ | 67,488 | $ | 259,748 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
79
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except share data)
|
|
Iron Mountain Incorporated Stockholders' Equity |
|
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
|
|
Earnings in
Excess of Distributions (Distributions in Excess of Earnings) |
|
|
|||||||||||||||
|
|
Common Stock |
|
Accumulated
Other Comprehensive Items, Net |
|
|||||||||||||||||
|
|
Additional
Paid-in Capital |
Noncontrolling
Interests |
|||||||||||||||||||
|
Total | Shares | Amounts | |||||||||||||||||||
Balance, December 31, 2011 |
$ | 1,249,742 | 172,140,966 | $ | 1,721 | $ | 343,603 | $ | 898,053 | $ | (2,203 | ) | $ | 8,568 | ||||||||
Issuance of shares under employee stock purchase plan and option plans and stock-based compensation, including tax benefit of $1,045 |
73,453 | 1,958,690 | 20 | 73,433 | | | | |||||||||||||||
Special distribution in connection with conversion to REIT (see Note 13) |
| 17,009,281 | 170 | 559,840 | (560,010 | ) | | | ||||||||||||||
Stock repurchases |
(34,688 | ) | (1,103,149 | ) | (11 | ) | (34,677 | ) | | | | |||||||||||
Parent cash dividends declared |
(328,707 | ) | | | | (328,707 | ) | | | |||||||||||||
Currency translation adjustment |
23,186 | | | | | 22,517 | 669 | |||||||||||||||
Net income (loss) |
174,048 | | | | 170,922 | | 3,126 | |||||||||||||||
Noncontrolling interests equity contributions |
836 | | | | | | 836 | |||||||||||||||
Noncontrolling interests dividends |
(1,722 | ) | | | | | | (1,722 | ) | |||||||||||||
Purchase of noncontrolling interests |
1,000 | | | | | | 1,000 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2012 |
1,157,148 | 190,005,788 | 1,900 | 942,199 | 180,258 | 20,314 | 12,477 | |||||||||||||||
Issuance of shares under employee stock purchase plan and option plans and stock-based compensation, including tax benefit of $2,389 |
50,479 | 1,421,132 | 14 | 50,465 | | | | |||||||||||||||
Parent cash dividends declared |
(208,900 | ) | | | | (208,900 | ) | | | |||||||||||||
Currency translation adjustment |
(31,532 | ) | | | | | (29,900 | ) | (1,632 | ) | ||||||||||||
Market value adjustments for securities, net of tax |
926 | | | | | 926 | | |||||||||||||||
Net income (loss) |
99,992 | | | | 96,462 | | 3,530 | |||||||||||||||
Noncontrolling interests equity contributions |
743 | | | | | | 743 | |||||||||||||||
Noncontrolling interests dividends |
(2,270 | ) | | | | | | (2,270 | ) | |||||||||||||
Purchase of noncontrolling interests |
(14,852 | ) | | | (12,500 | ) | | | (2,352 | ) | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2013 |
1,051,734 | 191,426,920 | 1,914 | 980,164 | 67,820 | (8,660 | ) | 10,496 | ||||||||||||||
Issuance of shares under employee stock purchase plan and option plans and stock-based compensation, including tax deficiency of $60 |
64,473 | 2,638,554 | 26 | 64,447 | | | | |||||||||||||||
Parent cash dividends declared |
(493,513 | ) | | | | (493,513 | ) | | | |||||||||||||
Special distribution in connection with conversion to REIT (see Note 13) |
| 15,753,338 | 158 | 559,821 | (559,979 | ) | | | ||||||||||||||
Currency translation adjustment |
(66,867 | ) | | | | | (66,424 | ) | (443 | ) | ||||||||||||
Market value adjustments for securities, net of tax |
53 | | | | | 53 | | |||||||||||||||
Net income (loss) |
328,746 | | | | 326,119 | | 2,627 | |||||||||||||||
Noncontrolling interests equity contributions |
1,800 | | | | | | 1,800 | |||||||||||||||
Noncontrolling interests dividends |
(1,613 | ) | | | | | | (1,613 | ) | |||||||||||||
Purchase of noncontrolling interests |
(20,416 | ) | | | (17,693 | ) | | | (2,723 | ) | ||||||||||||
Divestiture of noncontrolling interests |
5,558 | | | 2,102 | | | 3,456 | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2014 |
$ | 869,955 | 209,818,812 | $ | 2,098 | $ | 1,588,841 | $ | (659,553 | ) | $ | (75,031 | ) | $ | 13,600 | |||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
80
IRON MOUNTAIN INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
Year Ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2013 | 2014 | |||||||
Cash Flows from Operating Activities: |
||||||||||
Net Income (Loss) |
$ | 174,048 | $ | 99,992 | $ | 328,746 | ||||
Loss (Income) from discontinued operations |
6,774 | (831 | ) | 209 | ||||||
Loss (Gain) on sale of discontinued operations |
1,885 | | | |||||||
Adjustments to reconcile net income (loss) to cash flows from operating activities: |
||||||||||
Depreciation |
280,598 | 282,856 | 304,557 | |||||||
Amortization (includes deferred financing costs and bond discount of $6,948, $7,258 and $8,009 in 2012, 2013 and 2014, respectively) |
42,694 | 46,439 | 56,595 | |||||||
Stock-based compensation expense |
30,360 | 30,354 | 29,624 | |||||||
(Benefit) provision for deferred income taxes |
(77,201 | ) | (99,432 | ) | (270,790 | ) | ||||
Loss on early extinguishment of debt, net |
10,628 | 43,318 | 16,495 | |||||||
Loss (Gain) on disposal/write-down of property, plant and equipment, net (including real estate) |
4,400 | (1,417 | ) | (9,447 | ) | |||||
Foreign currency transactions and other, net |
11,764 | 63,648 | 50,011 | |||||||
Changes in Assets and Liabilities (exclusive of acquisitions): |
||||||||||
Accounts receivable |
(17,964 | ) | (33,181 | ) | 113 | |||||
Prepaid expenses and other |
(58,400 | ) | 48,302 | 48,941 | ||||||
Accounts payable |
(706 | ) | 24,168 | 16,870 | ||||||
Accrued expenses and deferred revenue |
36,295 | (5,120 | ) | (101,427 | ) | |||||
Other assets and long-term liabilities |
(1,523 | ) | 7,497 | 2,451 | ||||||
| | | | | | | | | | |
Cash Flows from Operating Activities-Continuing Operations |
443,652 | 506,593 | 472,948 | |||||||
Cash Flows from Operating Activities-Discontinued Operations |
(10,916 | ) | 953 | | ||||||
| | | | | | | | | | |
Cash Flows from Operating Activities |
432,736 | 507,546 | 472,948 | |||||||
Cash Flows from Investing Activities: |
||||||||||
Capital expenditures |
(240,683 | ) | (287,295 | ) | (361,924 | ) | ||||
Cash paid for acquisitions, net of cash acquired |
(125,134 | ) | (317,100 | ) | (128,093 | ) | ||||
Investment in restricted cash |
1,498 | (248 | ) | | ||||||
Additions to customer relationship and acquisition costs |
(28,872 | ) | (30,191 | ) | (34,447 | ) | ||||
Investment in joint ventures |
(2,330 | ) | | | ||||||
Proceeds from sales of property and equipment and other, net (including real estate) |
1,457 | 2,084 | 44,486 | |||||||
| | | | | | | | | | |
Cash Flows from Investing Activities-Continuing Operations |
(394,064 | ) | (632,750 | ) | (479,978 | ) | ||||
Cash Flows from Investing Activities-Discontinued Operations |
(6,136 | ) | (4,937 | ) | | |||||
| | | | | | | | | | |
Cash Flows from Investing Activities |
(400,200 | ) | (637,687 | ) | (479,978 | ) | ||||
Cash Flows from Financing Activities: |
||||||||||
Repayment of revolving credit and term loan facilities and other debt |
(2,844,693 | ) | (5,526,672 | ) | (8,824,711 | ) | ||||
Proceeds from revolving credit and term loan facilities and other debt |
2,731,185 | 5,661,750 | 9,285,187 | |||||||
Early retirement of senior subordinated notes |
(525,834 | ) | (685,134 | ) | (566,352 | ) | ||||
Net proceeds from sales of senior subordinated notes |
985,000 | | | |||||||
Net proceeds from sales of senior notes |
| 782,307 | 642,417 | |||||||
Debt financing (repayment to) and equity contribution from (distribution to) noncontrolling interests, net |
480 | (18,236 | ) | (14,770 | ) | |||||
Stock repurchases |
(38,052 | ) | | | ||||||
Parent cash dividends |
(318,845 | ) | (206,798 | ) | (542,298 | ) | ||||
Proceeds from exercise of stock options and employee stock purchase plan |
40,244 | 17,664 | 44,290 | |||||||
Excess tax benefits (deficiency) from stock-based compensation |
1,045 | 2,389 | (60 | ) | ||||||
Payment of debt financing and stock issuance costs |
(2,261 | ) | (8,706 | ) | (3,846 | ) | ||||
| | | | | | | | | | |
Cash Flows from Financing Activities-Continuing Operations |
28,269 | 18,564 | 19,857 | |||||||
Cash Flows from Financing Activities-Discontinued Operations |
(39 | ) | | | ||||||
| | | | | | | | | | |
Cash Flows from Financing Activities |
28,230 | 18,564 | 19,857 | |||||||
Effect of Exchange Rates on Cash and Cash Equivalents |
2,804 | (11,312 | ) | (7,420 | ) | |||||
| | | | | | | | | | |
Increase (Decrease) in Cash and Cash Equivalents |
63,570 | (122,889 | ) | 5,407 | ||||||
Cash and Cash Equivalents, Beginning of Year |
179,845 | 243,415 | 120,526 | |||||||
| | | | | | | | | | |
Cash and Cash Equivalents, End of Year |
$ | 243,415 | $ | 120,526 | $ | 125,933 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Supplemental Information: |
||||||||||
Cash Paid for Interest |
$ | 231,936 | $ | 243,380 | $ | 257,599 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Cash Paid for Income Taxes |
$ | 228,607 | $ | 125,624 | $ | 167,448 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Non-Cash Investing and Financing Activities: |
||||||||||
Capital Leases |
$ | 54,518 | $ | 48,488 | $ | 24,106 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Accrued Capital Expenditures |
$ | 51,114 | $ | 79,153 | $ | 47,529 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Dividends Payable |
$ | 53,042 | $ | 55,142 | $ | 6,182 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
81
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014
(In thousands, except share and per share data)
1. Nature of Business
The accompanying financial statements represent the consolidated accounts of Iron Mountain Incorporated, a Delaware corporation ("IMI") and its subsidiaries ("we" or "us"). We store records, primarily paper documents and data backup media, and provide information management services in various locations throughout North America, Europe, Latin America and Asia Pacific. We have a diversified customer base consisting of commercial, legal, banking, healthcare, accounting, insurance, entertainment and government organizations.
We previously disclosed that, as part of our plan to convert to a real estate investment trust ("REIT") for federal income tax purposes and elect REIT status effective January 1, 2014 (the "Conversion Plan"), we sought private letter rulings ("PLRs") from the United States Internal Revenue Service (the "IRS") relating to numerous technical tax issues, including classification of our steel racking structures as qualified real estate assets. We submitted the PLR requests in the third quarter of 2012, and on June 25, 2014, we announced that we received the favorable PLRs from the IRS necessary for our conversion to a REIT. After receipt of the PLRs, our board of directors unanimously approved our conversion to a REIT for our taxable year beginning January 1, 2014.
In connection with the Conversion Plan, and, in particular, to impose ownership limitations customary for REITs, on January 20, 2015, we completed the merger with our predecessor and all outstanding shares of our predecessor's common stock were converted into a right to receive an equal number of shares of our common stock. Accordingly, references herein to our "common stock" refer to our common stock and the common stock of our predecessor, as applicable.
On June 2, 2011, we sold (the "Digital Sale") our online backup and recovery, digital archiving and eDiscovery solutions businesses of our digital business (the "Digital Business") to Autonomy Corporation plc, a corporation formed under the laws of England and Wales ("Autonomy"), pursuant to a purchase and sale agreement dated as of May 15, 2011 among IMI, certain subsidiaries of IMI and Autonomy (the "Digital Sale Agreement"). Additionally, on October 3, 2011, we sold our records management operations in New Zealand. Also, on April 27, 2012, we sold our records management operations in Italy. The financial position, operating results and cash flows of the Digital Business, our New Zealand operations and our Italian operations, including the gain on the sale of the Digital Business and our New Zealand operations and the loss on the sale of our Italian operations, for all periods presented, have been reported as discontinued operations for financial reporting purposes. See Note 14 for a further discussion of these events.
2. Summary of Significant Accounting Policies
The accompanying financial statements reflect our financial position, results of operations, comprehensive income (loss), equity and cash flows on a consolidated basis. All intercompany transactions and account balances have been eliminated.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires us to make estimates, judgments and assumptions
82
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements and for the period then ended. On an ongoing basis, we evaluate the estimates used. We base our estimates on historical experience, actuarial estimates, current conditions and various other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities and are not readily apparent from other sources. Actual results may differ from these estimates.
Cash and cash equivalents include cash on hand and cash invested in highly liquid short-term securities, which have remaining maturities at the date of purchase of less than 90 days. Cash and cash equivalents are carried at cost, which approximates fair value.
We have restricted cash associated with a collateral trust agreement with our insurance carrier related to our workers' compensation self-insurance program. The restricted cash subject to this agreement was $33,860 as of both December 31, 2013 and 2014, and is included in current assets on our Consolidated Balance Sheets. Restricted cash consists primarily of United States Treasuries.
Local currencies are the functional currencies for our operations outside the United States, with the exception of certain foreign holding companies and our financing centers in Switzerland, whose functional currency is the United States dollar. In those instances where the local currency is the functional currency, assets and liabilities are translated at period-end exchange rates, and revenues and expenses are translated at average exchange rates for the applicable period. Resulting translation adjustments are reflected in the accumulated other comprehensive items, net component of Iron Mountain Incorporated Stockholders' Equity and Noncontrolling Interests in the accompanying Consolidated Balance Sheets. The gain or loss on foreign currency transactions, calculated as the difference between the historical exchange rate and the exchange rate at the applicable measurement date, including those related to (1) our previously outstanding 7 1 / 4 % GBP Senior Subordinated Notes due 2014 (the "7 1 / 4 % Notes"), (2) our 6 3 / 4 % Euro Senior Subordinated Notes due 2018 (the "6 3 / 4 % Notes"), (3) the borrowings in certain foreign currencies under our revolving credit facility and (4) certain foreign currency denominated intercompany obligations of our foreign subsidiaries to us and between our foreign subsidiaries, which are not considered permanently invested, are included in other expense (income), net, in the accompanying Consolidated Statements of Operations. The total loss on foreign currency transactions amounted to $10,223, $36,201 and $58,316 for the years ended December 31, 2012, 2013 and 2014, respectively.
Every derivative instrument is required to be recorded in the balance sheet as either an asset or a liability measured at its fair value. Periodically, we acquire derivative instruments that are intended to hedge either cash flows or values that are subject to foreign exchange or other market price risk and not for trading purposes. We have formally documented our hedging relationships, including identification of the hedging instruments and the hedged items, as well as our risk management
83
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
objectives and strategies for undertaking each hedge transaction. Given the recurring nature of our revenues and the long-term nature of our asset base, we have the ability and the preference to use long-term, fixed interest rate debt to finance our business, thereby preserving our long-term returns on invested capital. We target approximately 75% of our debt portfolio to be fixed with respect to interest rates. Occasionally, we may use interest rate swaps as a tool to maintain our targeted level of fixed rate debt. In addition, we may use borrowings in foreign currencies, either obtained in the United States or by our foreign subsidiaries, to hedge foreign currency risk associated with our international investments. Sometimes we enter into currency swaps to temporarily hedge an overseas investment, such as a major acquisition, while we arrange permanent financing or to hedge our exposure due to foreign currency exchange movements related to our intercompany accounts with and between our foreign subsidiaries. As of December 31, 2013 and 2014, none of our derivative instruments contained credit-risk related contingent features.
Property, plant and equipment are stated at cost and depreciated using the straight-line method with the following useful lives (in years):
|
Range | |
---|---|---|
Buildings and building improvements |
5 to 40 | |
Leasehold improvements |
5 to 10 or life of the lease (whichever is shorter) | |
Racking |
1 to 20 or life of the lease (whichever is shorter) | |
Warehouse equipment/vehicles |
1 to 10 | |
Furniture and fixtures |
3 to 10 | |
Computer hardware and software |
2 to 5 |
Property, plant and equipment (including capital leases in the respective category), at cost, consist of the following:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2013 | 2014 | |||||
Land |
$ | 203,423 | $ | 205,463 | |||
Buildings and building improvements |
1,283,458 | 1,409,330 | |||||
Leasehold improvements |
499,906 | 467,176 | |||||
Racking |
1,536,212 | 1,559,383 | |||||
Warehouse equipment/vehicles |
365,171 | 341,393 | |||||
Furniture and fixtures |
53,590 | 53,189 | |||||
Computer hardware and software |
511,927 | 501,882 | |||||
Construction in progress |
177,380 | 130,889 | |||||
| | | | | | | |
|
$ | 4,631,067 | $ | 4,668,705 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
84
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Minor maintenance costs are expensed as incurred. Major improvements which extend the life, increase the capacity or improve the safety or the efficiency of property owned are capitalized. Major improvements to leased buildings are capitalized as leasehold improvements and depreciated.
We develop various software applications for internal use. Computer software costs associated with internal use software are expensed as incurred until certain capitalization criteria are met. Payroll and related costs for employees directly associated with, and devoting time to, the development of internal use computer software projects (to the extent time is spent directly on the project) are capitalized. During the years ended December 31, 2012, 2013 and 2014, we capitalized $26,755, $39,487 and $19,419 of costs, respectively, associated with the development of internal use computer software projects. Capitalization begins when the design stage of the application has been completed and it is probable that the project will be completed and used to perform the function intended. Capitalization ends when the asset is ready for its intended use. Depreciation begins when the software is placed in service. Computer software costs that are capitalized are periodically evaluated for impairment.
We wrote off previously deferred software costs associated with internal use software development projects that were discontinued after implementation, which resulted in a loss on disposal/write-down of property, plant and equipment (excluding real estate), net in the accompanying Consolidated Statements of Operations, by segment as follows:
|
Year Ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2013 | 2014 | |||||||
North American Records and Information Management Business |
$ | | $ | 800 | $ | 1,000 | ||||
North American Data Management Business |
| | | |||||||
International Business |
| | 300 | |||||||
Corporate and Other |
1,110 | 300 | | |||||||
| | | | | | | | | | |
|
$ | 1,110 | $ | 1,100 | $ | 1,300 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Entities are required to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. Asset retirement obligations represent the costs to replace or remove tangible long-lived assets required by law, regulatory rule or contractual agreement. When the liability is initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset, which is then depreciated over the useful life of the related asset. The liability is increased over time through accretion expense (included in depreciation expense) such that the liability will equate to the future cost to retire the long-lived asset at the expected retirement date. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or realizes a gain or loss upon settlement. Our obligations are primarily the result of requirements under our facility lease agreements which generally have "return to original condition" clauses which would require us to remove or restore items such as shred pits, vaults, demising walls and office build-outs, among others. The significant assumptions used in estimating our aggregate asset retirement obligation are the timing of removals, the probability of a requirement to perform, estimated cost and associated expected inflation rates that are consistent with historical rates and credit-adjusted risk-free rates that approximate our incremental borrowing rate.
85
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
A reconciliation of liabilities for asset retirement obligations (included in other long-term liabilities) is as follows:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2013 | 2014 | |||||
Asset Retirement Obligations, beginning of the year |
$ | 10,982 | $ | 11,809 | |||
Liabilities Incurred |
480 | 1,366 | |||||
Liabilities Settled |
(687 | ) | (1,199 | ) | |||
Accretion Expense |
1,123 | 1,121 | |||||
Foreign Currency Exchange Movement |
(89 | ) | (200 | ) | |||
| | | | | | | |
Asset Retirement Obligations, end of the year |
$ | 11,809 | $ | 12,897 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Goodwill and intangible assets with indefinite lives are not amortized but are reviewed annually for impairment or more frequently if impairment indicators arise. Other than goodwill, we currently have no intangible assets that have indefinite lives and which are not amortized. Separable intangible assets that are not deemed to have indefinite lives are amortized over their useful lives. We annually, or more frequently if events or circumstances warrant, assess whether a change in the lives over which our intangible assets are amortized is necessary.
We have selected October 1 as our annual goodwill impairment review date. We performed our annual goodwill impairment review as of October 1, 2012, 2013 and 2014 and concluded that goodwill was not impaired as of those dates. As of December 31, 2014, no factors were identified that would alter our October 1, 2014 goodwill assessment. In making this assessment, we relied on a number of factors including operating results, business plans, anticipated future cash flows, transactions and marketplace data. There are inherent uncertainties related to these factors and our judgment in applying them to the analysis of goodwill impairment. When changes occur in the composition of one or more reporting units, the goodwill is reassigned to the reporting units affected based on their relative fair values.
Our reporting units at which level we performed our goodwill impairment analysis as of October 1, 2013 were as follows: (1) North America; (2) United Kingdom, Ireland, Norway, Belgium, France, Germany, Luxembourg, Netherlands and Spain ("Western Europe"); (3) the remaining countries in Europe in which we operate, excluding Russia and Ukraine ("Emerging Markets"); (4) Latin America; (5) Australia, China, Hong Kong and Singapore ("Asia Pacific"); and (6) India, Russia and Ukraine
86
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
("Emerging Market Joint Ventures"). The carrying value of goodwill, net for each of these reporting units as of December 31, 2013 is as follows:
|
Carrying Value as of December 31, 2013 | |||
---|---|---|---|---|
North America |
$ | 1,849,440 | ||
Western Europe |
375,954 | |||
Emerging Markets |
88,599 | |||
Latin America |
93,149 | |||
Asia Pacific |
56,210 | |||
Emerging Market Joint Ventures |
| |||
| | | | |
Total |
$ | 2,463,352 | ||
| | | | |
| | | | |
| | | | |
Beginning January 1, 2014, as a result of the changes in our reportable segments associated with our reorganization (see Note 9 for a description of our reportable operating segments), we now have 12 reporting units. Our North American Records and Information Management Business segment includes the following three reporting units: (1) North American Records and Information Management; (2) Intellectual Property Management; and (3) Fulfillment Services. The North American Data Management Business segment is a separate reporting unit. The Emerging Businesses reporting unit (which primarily relates to our data center business in the United States and which is a component of Corporate and Other) is also a reporting unit. Additionally, the International Business segment consists of the following seven reporting units: (1) United Kingdom, Ireland, Norway, Austria, Belgium, France, Germany, Luxembourg, Netherlands, Spain and Switzerland ("New Western Europe"); (2) the remaining countries in Europe in which we operate, excluding Russia, Ukraine and Denmark ("New Emerging Markets"); (3) Latin America; (4) Australia and Singapore; (5) China and Hong Kong ("Greater China"); (6) India; and (7) Russia, Ukraine and Denmark. We have reassigned goodwill associated with the reporting units impacted by the reorganization among the new reporting units on a relative fair value basis. The fair value of each of our new reporting units was determined based on the application of a combined weighted average approach of fair value multiples of revenue and earnings and discounted cash flow techniques.
As a result of the change in the composition of our reporting units noted above, we concluded that we had an interim triggering event, and, therefore, we performed an interim goodwill impairment test as of January 1, 2014 on the basis of these new reporting units during the first quarter of 2014. We
87
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
concluded that the goodwill for each of our new reporting units was not impaired as of such date. The carrying value of goodwill, net for each of these reporting units as of December 31, 2014 is as follows:
|
Carrying Value as of
December 31, 2014 |
|||
---|---|---|---|---|
North American Records and Information Management |
$ | 1,397,484 | ||
Intellectual Property Management |
38,491 | |||
Fulfillment Services |
3,247 | |||
North American Data Management |
375,957 | |||
Emerging Businesses |
| |||
New Western Europe |
354,049 | |||
New Emerging Markets |
87,408 | |||
Latin America |
107,240 | |||
Australia and Singapore |
55,779 | |||
Greater China |
3,500 | |||
India |
| |||
Russia, Ukraine and Denmark |
628 | |||
| | | | |
Total |
$ | 2,423,783 | ||
| | | | |
| | | | |
| | | | |
Reporting unit valuations have been determined using a combined approach based on the present value of future cash flows and market multiples of revenues and earnings. The income approach incorporates many assumptions including future growth rates, discount factors, expected capital expenditures and income tax cash flows. Changes in economic and operating conditions impacting these assumptions could result in goodwill impairments in future periods. In conjunction with our annual goodwill impairment reviews, we reconcile the sum of the valuations of all of our reporting units to our market capitalization as of such dates.
88
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
The changes in the carrying value of goodwill attributable to each reportable operating segment for the years ended December 31, 2013 and 2014 is as follows:
|
North American
Records and Information Management Business |
North American
Data Management Business |
International
Business |
Total
Consolidated |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Gross Balance as of December 31, 2012 |
$ | 1,602,824 | $ | 421,147 | $ | 631,528 | $ | 2,655,499 | |||||
Deductible goodwill acquired during the year |
40,046 | 10,011 | 13,983 | 64,040 | |||||||||
Non-deductible goodwill acquired during the year |
34,066 | 8,517 | 35,129 | 77,712 | |||||||||
Fair value and other adjustments(1) |
7,144 | 1,786 | (408 | ) | 8,522 | ||||||||
Currency effects |
(12,153 | ) | (3,038 | ) | (6,897 | ) | (22,088 | ) | |||||
| | | | | | | | | | | | | |
Gross Balance as of December 31, 2013 |
1,671,927 | 438,423 | 673,335 | 2,783,685 | |||||||||
Deductible goodwill acquired during the year |
7,745 | 1,936 | 30,117 | 39,798 | |||||||||
Non-deductible goodwill acquired during the year |
7,045 | | 37,274 | 44,319 | |||||||||
Allocated to divestiture (see Note 16) |
| | (7,750 | ) | (7,750 | ) | |||||||
Fair value and other adjustments(2) |
(26,898 | ) | (6,724 | ) | (386 | ) | (34,008 | ) | |||||
Currency effects |
(14,610 | ) | (3,653 | ) | (65,562 | ) | (83,825 | ) | |||||
| | | | | | | | | | | | | |
Gross Balance as of December 31, 2014 |
$ | 1,645,209 | $ | 429,982 | $ | 667,028 | $ | 2,742,219 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Accumulated Amortization Balance as of December 31, 2012 |
$ | 207,309 | $ | 54,355 | $ | 59,076 | $ | 320,740 | |||||
Currency effects |
(603 | ) | (151 | ) | 347 | (407 | ) | ||||||
| | | | | | | | | | | | | |
Accumulated Amortization Balance as of December 31, 2013 |
206,706 | 54,204 | 59,423 | 320,333 | |||||||||
Currency effects |
(719 | ) | (179 | ) | (999 | ) | (1,897 | ) | |||||
| | | | | | | | | | | | | |
Accumulated Amortization Balance as of December 31, 2014 |
$ | 205,987 | $ | 54,025 | $ | 58,424 | $ | 318,436 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Net Balance as of December 31, 2013 |
$ | 1,465,221 | $ | 384,219 | $ | 613,912 | $ | 2,463,352 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Net Balance as of December 31, 2014 |
$ | 1,439,222 | $ | 375,957 | $ | 608,604 | $ | 2,423,783 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Accumulated Goodwill Impairment Balance as of December 31, 2013 |
$ | 85,909 | $ | | $ | 46,500 | $ | 132,409 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Accumulated Goodwill Impairment Balance as of December 31, 2014 |
$ | 85,909 | $ | | $ | 46,500 | $ | 132,409 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
89
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
We review long-lived assets and all amortizable intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to their carrying amount. The operations are generally distinguished by the business segment and geographic region in which they operate. If the operation is determined to be unable to recover the carrying amount of its assets, the long-lived assets are written down, on a pro rata basis, to fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets.
As a result of our conversion to a REIT and in accordance with Securities and Exchange Commission ("SEC") rules applicable to REITs, we no longer report (gain) loss on sale of real estate as a component of operating income, but we will continue to report it as a component of income (loss) from continuing operations. We will continue to report the (gain) loss on sale of property, plant and equipment (excluding real estate), along with any impairment, write-downs or involuntary conversions related to real estate, as a component of operating income. Previously reported amounts have been reclassified to conform to this presentation.
Consolidated loss on disposal/write-down of property, plant and equipment (excluding real estate), net was $4,661 for the year ended December 31, 2012 and consisted primarily of approximately $5,800, $700, $1,100 and $500 of asset write-offs in Europe, North American Records and Information Management Business, Emerging Businesses and Latin America, respectively, partially offset by approximately $3,500 of gains associated with the retirement of leased vehicles accounted for as capital lease assets associated with our North American Records and Information Management Business segment. Consolidated loss on disposal/write-down of property, plant and equipment (excluding real estate), net was $430 for the year ended December 31, 2013 and consisted of $1,700 of asset write-offs in our North American Records and Information Management Business segment, approximately $300 of asset write-offs in our Corporate and Other segment and approximately $900 of asset write-offs associated with our European operations, offset by gains of approximately $2,500 on the retirement of leased vehicles accounted for as capital lease assets primarily associated with our North American Records and Information Management Business segment. Consolidated loss on disposal/write-down of property, plant and equipment (excluding real estate), net was $1,065 for the year ended December 31, 2014 and consisted primarily of losses associated with the write-off of certain software associated with our North American Records and Information Management Business segment.
Gain on sale of real estate, net of tax, which consists primarily of the sale of buildings in the United Kingdom, for the years ended December 31, 2012, 2013 and 2014 is as follows:
|
Year Ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2013 | 2014 | |||||||
Gain on sale of real estate |
$ | 261 | $ | 1,847 | $ | 10,512 | ||||
Tax effect on gain on sale of real estate |
(55 | ) | (430 | ) | (2,205 | ) | ||||
| | | | | | | | | | |
Gain on sale of real estate, net of tax |
$ | 206 | $ | 1,417 | $ | 8,307 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
90
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Costs related to the acquisition of large volume accounts are capitalized. Initial costs incurred to transport boxes to one of our facilities, which include labor and transportation charges, are amortized over periods ranging from one to 30 years (weighted average of 25 years at December 31, 2014), and are included in depreciation and amortization in the accompanying Consolidated Statements of Operations. Payments to a customer's current records management vendor or direct payments to a customer are amortized over periods ranging from one to 15 years (weighted average of six years at December 31, 2014) to the storage and service revenue line items in the accompanying Consolidated Statements of Operations. If the customer terminates its relationship with us, the unamortized cost is charged to expense or revenue. However, in the event of such termination, we generally collect, and record as income, permanent removal fees that generally equal or exceed the amount of the unamortized costs. Customer relationship intangible assets acquired through business combinations, which represents the majority of the balance, are amortized over periods ranging from 10 to 30 years (weighted average of 20 years at December 31, 2014). Amounts allocated in purchase accounting to customer relationship intangible assets are calculated based upon estimates of their fair value utilizing an income approach based on the present value of expected future cash flows. Other intangible assets, including noncompetition agreements, acquired core technology and trademarks, are capitalized and amortized over periods ranging from five to 10 years (weighted average of six years at December 31, 2014).
The gross carrying amount and accumulated amortization are as follows:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
Gross Carrying Amount
|
2013 | 2014 | |||||
Customer relationship and acquisition costs |
$ | 879,378 | $ | 904,866 | |||
Other intangible assets (included in other assets, net) |
9,475 | 10,630 | |||||
Accumulated Amortization
|
|
||||||
Customer relationship and acquisition costs |
$ |
273,894 |
$ |
297,029 |
|||
Other intangible assets (included in other assets, net) |
7,305 | 8,608 |
The amortization expense for the years ended December 31, 2012, 2013 and 2014 is as follows:
|
Year Ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2013 | 2014 | |||||||
Customer relationship and acquisition costs: |
||||||||||
Amortization expense included in depreciation and amortization |
$ | 34,806 | $ | 37,725 | $ | 46,733 | ||||
Amortization expense offsetting revenues |
10,784 | 11,788 | 11,715 | |||||||
Other intangible assets: |
|
|
|
|||||||
Amortization expense included in depreciation and amortization |
940 | 1,456 | 1,853 |
91
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Estimated amortization expense for existing intangible assets (excluding deferred financing costs, as disclosed in Note 2.j.) is as follows:
|
Estimated Amortization | ||||||
---|---|---|---|---|---|---|---|
|
Included in Depreciation
and Amortization |
Charged to Revenues | |||||
2015 |
$ | 48,230 | $ | 7,748 | |||
2016 |
48,040 | 6,073 | |||||
2017 |
47,192 | 4,280 | |||||
2018 |
46,389 | 2,838 | |||||
2019 |
45,189 | 1,554 |
Deferred financing costs are amortized over the life of the related debt using the effective interest rate method. If debt is retired early, the related unamortized deferred financing costs are written off in the period the debt is retired to other expense (income), net. As of December 31, 2013 and 2014, gross carrying amount of deferred financing costs was $62,418 and $63,033, respectively, and accumulated amortization of those costs was $16,811 and $15,956, respectively, and was recorded in other assets, net in the accompanying Consolidated Balance Sheets.
Estimated amortization expense for deferred financing costs, which are amortized as a component of interest expense, is as follows:
|
Estimated Amortization of
Deferred Financing Costs |
|||
---|---|---|---|---|
2015 |
$ | 7,702 | ||
2016 |
6,874 | |||
2017 |
5,714 | |||
2018 |
5,683 | |||
2019 |
4,966 |
Prepaid expenses and accrued expenses with items greater than 5% of total current assets and liabilities shown separately, respectively, consist of the followin g :
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2013 | 2014 | |||||
Income tax receivable |
$ | 31,915 | $ | 41,559 | |||
Other |
112,886 | 97,910 | |||||
| | | | | | | |
Prepaid expenses |
$ | 144,801 | $ | 139,469 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
92
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2013 | 2014 | |||||
Interest |
$ | 71,971 | $ | 69,525 | |||
Payroll and vacation |
91,519 | 75,050 | |||||
Incentive compensation |
58,562 | 66,552 | |||||
Dividend |
55,142 | 6,182 | |||||
Self-insured liabilities (Note 10.b.) |
32,850 | 33,381 | |||||
Other |
151,294 | 153,795 | |||||
| | | | | | | |
Accrued expenses |
$ | 461,338 | $ | 404,485 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Our revenues consist of storage rental revenues as well as service revenues and are reflected net of sales and value added taxes. Storage rental revenues, which are considered a key driver of financial performance for the storage and information management services industry, consist primarily of recurring periodic rental charges related to the storage of materials or data (generally on a per unit basis). Service revenues include charges for related service activities, which include: (1) the handling of records, including the addition of new records, temporary removal of records from storage, refiling of removed records and the destruction of records; (2) courier operations, consisting primarily of the pickup and delivery of records upon customer request; (3) secure shredding of sensitive documents and the related sale of recycled paper, the price of which can fluctuate from period to period; (4) other services, including the scanning, imaging and document conversion services of active and inactive records, or Document Management Solutions ("DMS"), which relate to physical and digital records, and project revenues; (5) customer termination and permanent withdrawal fees; (6) data restoration projects; (7) special project work; (8) the storage, assembly, and detailed reporting of customer marketing literature and delivery to sales offices, trade shows and prospective customers' sites based on current and prospective customer orders ("Fulfillment Services"); (9) consulting services; and (10) technology escrow services that protect and manage source code ("Intellectual Property Management") and other technology services and product sales (including specially designed storage containers and related supplies).
We recognize revenue when the following criteria are met: persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable and collectability of the resulting receivable is reasonably assured. Storage rental and service revenues are recognized in the month the respective storage rental or service is provided, and customers are generally billed on a monthly basis on contractually agreed-upon terms. Amounts related to future storage rental or prepaid service contracts for customers where storage rental fees or services are billed in advance are accounted for as deferred revenue and recognized ratably over the period the applicable storage rental or service is provided or performed. Revenues from the sales of products, which are included as a component of service revenues, are recognized when products are shipped and title has passed to the customer. Revenues from the sales of products have historically not been significant.
93
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
We have entered into various leases for buildings that expire over various terms. Certain leases have fixed escalation clauses (excluding those tied to the consumer price index or other inflation-based indices) or other features (including return to original condition, primarily in the United Kingdom) which require normalization of the rental expense over the life of the lease, resulting in deferred rent being reflected as a liability in the accompanying Consolidated Balance Sheets. In addition, we have assumed various above and below market leases in connection with certain of our acquisitions. The difference between the present value of these lease obligations and the market rate at the date of the acquisition was recorded as a deferred rent liability or other long-term asset and is being amortized to rent expense over the remaining lives of the respective leases.
We record stock-based compensation expense, utilizing the straight-line method, for the cost of stock options, restricted stock, restricted stock units ("RSUs"), performance units ("PUs") and shares of stock issued under our employee stock purchase plan ("ESPP") (together, "Employee Stock-Based Awards").
Stock-based compensation expense for Employee Stock-Based Awards included in the accompanying Consolidated Statements of Operations for the years ended December 31, 2012, 2013 and 2014 was $30,360 ($23,437 after tax or $0.14 per basic and $0.13 per diluted share), $30,354 ($22,085 after tax or $0.12 per basic and $0.11 per diluted share) and $29,624 ($21,886 after tax or $0.11 per basic and diluted share), respectively.
Stock-based compensation expense for Employee Stock-Based Awards included in the accompanying Consolidated Statements of Operations related to continuing operations is as follows:
|
Year Ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2013 | 2014 | |||||||
Cost of sales (excluding depreciation and amortization) |
$ | 1,392 | $ | 293 | $ | 680 | ||||
Selling, general and administrative expenses |
28,968 | 30,061 | 28,944 | |||||||
| | | | | | | | | | |
Total stock-based compensation |
$ | 30,360 | $ | 30,354 | $ | 29,624 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
The benefits associated with the tax deductions in excess of recognized compensation cost are required to be reported as financing activities in the accompanying Consolidated Statements of Cash Flows. This requirement reduces reported operating cash flows and increases reported financing cash flows. As a result, net financing cash flows from continuing operations included $1,045, $2,389 and $(60) for the years ended December 31, 2012, 2013 and 2014, respectively, from the benefits (deficiency) of tax deductions compared to recognized compensation cost. The tax benefit of any resulting excess tax deduction increases the Additional Paid-in Capital ("APIC") pool. Any resulting tax deficiency is deducted from the APIC pool.
94
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Stock Options
Under our various stock option plans, options are generally granted with exercise prices equal to the market price of the stock on the date of grant; however, in certain limited instances, options are granted at prices greater than the market price of the stock on the date of grant. The majority of our options become exercisable ratably over a period of five years from the date of grant and generally have a contractual life of ten years from the date of grant, unless the holder's employment is terminated sooner. Certain of the options we issue become exercisable ratably over a period of ten years from the date of grant and have a contractual life of 12 years from the date of grant, unless the holder's employment is terminated sooner. As of December 31, 2014, ten-year vesting options represented 8.0% of total outstanding options. Certain of the options we issue become exercisable ratably over a period of three years from the date of grant and have a contractual life of ten years from the date of grant, unless the holder's employment is terminated sooner. As of December 31, 2014, three-year vesting options represented 34.3% of total outstanding options. Our non-employee directors are considered employees for purposes of our stock option plans and stock option reporting. Options granted to our non-employee directors generally become exercisable one year from the date of grant.
Our equity compensation plans generally provide that any unvested options and other awards granted thereunder shall vest immediately if an employee is terminated by the Company, or terminates his or her own employment for good reason (as defined in each plan), in connection with a vesting change in control (as defined in each plan). On January 20, 2015, our stockholders approved the adoption of the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan (the "2014 Plan"). Under the 2014 Plan, the total amount of shares of common stock reserved and available for issuance pursuant to awards granted under the 2014 Plan is 7,750,000. The 2014 Plan permits the Company to continue to grant awards through January 20, 2025.
A total of 43,253,839 shares of common stock have been reserved for grants of options and other rights under our various stock incentive plans, including the 2014 Plan. The number of shares available for grant under our various stock incentive plans, not including the 2014 Plan, at December 31, 2014 was 4,581,754.
The weighted average fair value of options granted in 2012, 2013 and 2014 was $7.00, $7.69 and $5.70 per share, respectively. These values were estimated on the date of grant using the Black-Scholes option pricing model. The following table summarizes the weighted average assumptions used for grants in the year ended December 31:
Weighted Average Assumptions
|
2012 | 2013 | 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Expected volatility |
33.8% | 33.8% | 34.0% | |||||||
Risk-free interest rate |
1.24% | 1.13% | 2.04% | |||||||
Expected dividend yield |
3% | 3% | 4% | |||||||
Expected life |
6.3 years | 6.3 years | 6.7 years |
Expected volatility is calculated utilizing daily historical volatility over a period that equates to the expected life of the option. The risk-free interest rate was based on the United States Treasury interest rates whose term is consistent with the expected life of the stock options. Expected dividend yield is
95
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
considered in the option pricing model and represents our current annualized expected per share dividends over the current trade price of our common stock. The expected life (estimated period of time outstanding) of the stock options granted is estimated using the historical exercise behavior of employees.
A summary of option activity for the year ended December 31, 2014 is as follows:
|
Options |
Weighted
Average Exercise Price |
Weighted
Average Remaining Contractual Term (Years) |
Aggregate
Intrinsic Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Outstanding at December 31, 2013 |
5,145,739 | $ | 24.09 | ||||||||||
Granted |
576,174 | 31.00 | |||||||||||
Adjustment associated with special dividend |
360,814 | N/A | |||||||||||
Exercised |
(2,223,012 | ) | 23.15 | ||||||||||
Forfeited |
(180,335 | ) | 24.13 | ||||||||||
Expired |
(1,134 | ) | 30.13 | ||||||||||
| | | | | | | | | | | | | |
Outstanding at December 31, 2014 |
3,678,246 | $ | 23.37 | 5.17 | $ | 56,248 | |||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Options exercisable at December 31, 2014 |
2,643,384 | $ | 21.97 | 4.08 | $ | 44,116 | |||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Options expected to vest |
986,850 | $ | 26.90 | 7.94 | $ | 11,603 | |||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
The following table provides the aggregate intrinsic value of stock options exercised for the years ended December 31, 2012, 2013 and 2014:
|
Year Ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2013 | 2014 | |||||||
Aggregate intrinsic value of stock options exercised |
$ | 15,859 | $ | 11,024 | $ | 23,178 |
Restricted Stock and Restricted Stock Units
Under our various equity compensation plans, we may also grant restricted stock or RSUs. Our restricted stock and RSUs generally have a vesting period of between three and five years from the date of grant. All RSUs accrue dividend equivalents associated with the underlying stock as we declare dividends. Dividends will generally be paid to holders of RSUs in cash upon the vesting date of the associated RSU and will be forfeited if the RSU does not vest. We accrued approximately $1,378, $1,854 and $3,698 of cash dividends on RSUs for the years ended December 31, 2012, 2013 and 2014, respectively. We paid approximately $58, $820 and $1,377 of cash dividends on RSUs for the years ended December 31, 2012, 2013 and 2014, respectively. The fair value of restricted stock and RSUs is the excess of the market price of our common stock at the date of grant over the purchase price (which is typically zero).
96
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
A summary of restricted stock and RSU activity for the year ended December 31, 2014 is as follows:
|
Restricted
Stock and RSUs |
Weighted-
Average Grant-Date Fair Value |
|||||
---|---|---|---|---|---|---|---|
Non-vested at December 31, 2013 |
1,435,230 | $ | 29.76 | ||||
Granted |
902,702 | 29.73 | |||||
Vested |
(721,533 | ) | 31.24 | ||||
Forfeited |
(210,830 | ) | 31.14 | ||||
| | | | | | | |
Non-vested at December 31, 2014 |
1,405,569 | $ | 28.78 | ||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
The total fair value of restricted stock vested for each of the years ended December 31, 2012, 2013 and 2014 was $1. The total fair value of RSUs vested for the years ended December 31, 2012, 2013 and 2014 was $8,296, $16,638 and $22,535, respectively.
Performance Units
Under our various equity compensation plans, we may also make awards of PUs. For the majority of PUs, the number of PUs earned is determined based on our performance against predefined targets of revenue or revenue growth and return on invested capital ("ROIC"). The number of PUs earned may range from 0% to 150% (for PUs granted prior to 2014) and 0% to 200% (for PUs granted in 2014) of the initial award. The number of PUs earned is determined based on our actual performance as compared to the targets at the end of either the one-year performance period (for PUs granted prior to 2014) or the three-year performance period (for PUs granted in 2014). Certain PUs granted in 2013 and 2014 will be earned based on a market condition associated with the total return on our common stock in relation to a subset of the S&P 500 rather than the revenue growth and ROIC targets noted above. The number of PUs earned based on this market condition may range from 0% to 200% of the initial award. All of our PUs will be settled in shares of our common stock and are subject to cliff vesting three years from the date of the original PU grant. For those PUs subject to a one-year performance period, employees who subsequently terminate their employment after the end of the one-year performance period and on or after attaining age 55 and completing 10 years of qualifying service (the "retirement criteria") shall immediately and completely vest in any PUs earned based on the actual achievement against the predefined targets as discussed above (but delivery of the shares remains deferred). As a result, PUs subject to a one-year performance period are generally expensed over the shorter of (1) the vesting period, (2) achievement of the retirement criteria, which may occur as early as January 1 of the year following the year of grant or (3) a maximum of three years. Outstanding PUs accrue dividend equivalents associated with the underlying stock as we declare dividends. Dividends will generally be paid to holders of PUs in cash upon the settlement date of the associated PU and will be forfeited if the PU does not vest. We accrued approximately $369, $681 and $1,341 of cash dividends on PUs for the years ended December 31, 2012, 2013 and 2014, respectively. There were no cash dividends paid on PUs for the years ended December 31, 2012 and 2013. We paid approximately $312 of cash dividends on PUs for the year ended December 31, 2014.
97
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
In 2012, 2013 and 2014, we issued 221,781, 198,869 and 225,429 PUs, respectively. Our PUs are earned based on our performance against revenue or revenue growth and ROIC targets during their applicable performance period; therefore, we forecast the likelihood of achieving the predefined revenue, revenue growth and ROIC targets in order to calculate the expected PUs to be earned. We record a compensation charge based on either the forecasted PUs to be earned (during the applicable performance period) or the actual PUs earned (at the one-year anniversary date for PUs granted prior to 2014, and at the three-year anniversary date for PUs granted in 2014) over the vesting period for each of the awards. For the 2013 and 2014 PUs that will be earned based on a market condition, we utilized a Monte Carlo simulation to fair value these awards at the date of grant, and such fair value will be expensed over the three-year performance period. The total fair value of earned PUs that vested during the years ended December 31, 2012, 2013 and 2014 was $4,285, $2,962 and $1,216, respectively. As of December 31, 2014, we expected 60% achievement of the predefined revenue, revenue growth and ROIC targets associated with the awards of PUs made in 2014.
A summary of PU activity for the year ended December 31, 2014 is as follows:
|
Original
PU Awards |
PU Adjustment(1) |
Total
PU Awards |
Weighted-
Average Grant-Date Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Non-vested at December 31, 2013 |
334,548 | (23,732 | ) | 310,816 | $ | 33.18 | |||||||
Granted |
225,429 | (49,776 | ) | 175,653 | 26.82 | ||||||||
Vested |
(68,389 | ) | (9,101 | ) | (77,490 | ) | 31.85 | ||||||
Forfeited |
(29,922 | ) | | (29,922 | ) | 29.44 | |||||||
| | | | | | | | | | | | | |
Non-vested at December 31, 2014 |
461,666 | (82,609 | ) | 379,057 | $ | 30.80 | |||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Employee Stock Purchase Plan
We offer an ESPP in which participation is available to substantially all United States and Canadian employees who meet certain service eligibility requirements. The ESPP provides a way for our eligible employees to become stockholders on favorable terms. The ESPP provides for the purchase of our common stock by eligible employees through successive offering periods. We have historically had two six-month offering periods per year, the first of which generally runs from June 1 through November 30 and the second of which generally runs from December 1 through May 31. During each offering period, participating employees accumulate after-tax payroll contributions, up to a maximum of 15% of their compensation, to pay the purchase price at the end of the offering. Participating employees may withdraw from an offering before the purchase date and obtain a refund of the amounts withheld as payroll deductions. At the end of the offering period, outstanding options under the ESPP are exercised, and each employee's accumulated contributions are used to purchase our
98
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
common stock. The price for shares purchased under the ESPP is 95% of the fair market price at the end of the offering period, without a look-back feature. As a result, we do not recognize compensation expense for the ESPP shares purchased. For the years ended December 31, 2012, 2013 and 2014, there were 151,285 shares, 144,432 shares and 115,046 shares, respectively, purchased under the ESPP. As of December 31, 2014, we have 960,638 shares available under the ESPP.
As of December 31, 2014, unrecognized compensation cost related to the unvested portion of our Employee Stock-Based Awards was $35,467 and is expected to be recognized over a weighted-average period of 1.9 years.
We generally issue shares of our common stock for the exercises of stock options, restricted stock, RSUs, PUs and shares of our common stock under our ESPP from unissued reserved shares.
Accounting for income taxes requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the tax and financial reporting bases of assets and liabilities and for loss and credit carryforwards. Valuation allowances are provided when recovery of deferred tax assets does not meet the more likely than not standard as defined in GAAP. We have elected to recognize interest and penalties associated with uncertain tax positions as a component of the provision (benefit) for income taxes in the accompanying Consolidated Statements of Operations.
Basic income (loss) per common share is calculated by dividing income (loss) by the weighted average number of common shares outstanding. The calculation of diluted income (loss) per share is consistent with that of basic income (loss) per share but gives effect to all potential common shares (that is, securities such as options, warrants or convertible securities) that were outstanding during the period, unless the effect is antidilutive.
99
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
The following table presents the calculation of basic and diluted income (loss) per share:
We maintain an allowance for doubtful accounts and credit memos for estimated losses resulting from the potential inability of our customers to make required payments and potential disputes regarding billing and service issues. When calculating the allowance, we consider our past loss experience, current and prior trends in our aged receivables and credit memo activity, current economic conditions and specific circumstances of individual receivable balances. If the financial condition of our customers were to significantly change, resulting in a significant improvement or impairment of their
100
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
ability to make payments, an adjustment of the allowance may be required. We charge-off uncollectible balances as circumstances warrant, generally, no later than one year past due.
Rollforward of allowance for doubtful accounts and credit memo reserves is as follows:
Year Ended December 31,
|
Balance at
Beginning of the Year |
Credit Memos
Charged to Revenue |
Allowance for
Bad Debts Charged to Expense |
Other(1) | Deductions(2) |
Balance at
End of the Year |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2012 |
$ | 23,277 | $ | 39,723 | $ | 8,323 | $ | 977 | $ | (47,091 | ) | $ | 25,209 | ||||||
2013 |
25,209 | 49,483 | 11,321 | 3,612 | (54,980 | ) | 34,645 | ||||||||||||
2014 |
34,645 | 47,137 | 14,209 | (572 | ) | (63,278 | ) | 32,141 |
Financial instruments that potentially subject us to credit risk consist principally of cash and cash equivalents (including money market funds and time deposits), restricted cash (primarily United States Treasuries) and accounts receivable. The only significant concentrations of liquid investments as of both December 31, 2013 and 2014 relate to cash and cash equivalents and restricted cash held on deposit with one global bank and one "Triple A" rated money market fund, and three global banks and two "Triple A" rated money market funds, respectively, all of which we consider to be large, highly-rated investment-grade institutions. As per our risk management investment policy, we limit exposure to concentration of credit risk by limiting the amount invested in any one mutual fund to a maximum of $50,000 or in any one financial institution to a maximum of $75,000. As of December 31, 2013 and 2014, our cash and cash equivalents and restricted cash balance was $154,386 and $159,793, respectively, including money market funds and time deposits amounting to $36,613 and $53,032 respectively. The money market funds are invested substantially in United States Treasuries.
Entities are permitted under GAAP to elect to measure many financial instruments and certain other items at either fair value or cost. We did not elect the fair value measurement option.
Our financial assets or liabilities that are carried at fair value are required to be measured using inputs from the three levels of the fair value hierarchy. A financial asset or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
The three levels of the fair value hierarchy are as follows:
Level 1Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.
101
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Level 2Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.
The following tables provide the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2013 and 2014, respectively:
|
|
Fair Value Measurements at
December 31, 2013 Using |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Description
|
Total Carrying
Value at December 31, 2013 |
Quoted prices
in active markets (Level 1) |
Significant other
observable inputs (Level 2) |
Significant
unobservable inputs (Level 3) |
|||||||||
Money Market Funds(1) |
$ | 33,860 | $ | | $ | 33,860 | $ | | |||||
Time Deposits(1) |
2,753 | | 2,753 | | |||||||||
Trading Securities |
13,386 | 12,785 | (2) | 601 | (1) | | |||||||
Derivative Assets(3) |
72 | | 72 | | |||||||||
Derivative Liabilities(3) |
5,592 | | 5,592 | |
|
|
Fair Value Measurements at
December 31, 2014 Using |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Description
|
Total Carrying
Value at December 31, 2014 |
Quoted prices
in active markets (Level 1) |
Significant other
observable inputs (Level 2) |
Significant
unobservable inputs (Level 3) |
|||||||||
Money Market Funds(1) |
$ | 36,828 | $ | | $ | 36,828 | $ | | |||||
Time Deposits(1) |
16,204 | | 16,204 | | |||||||||
Trading Securities |
13,172 | 12,428 | (2) | 744 | (1) | | |||||||
Derivative Liabilities(3) |
2,411 | | 2,411 | |
Disclosures are required in the financial statements for items measured at fair value on a non-recurring basis. We did not have any material items that are measured at fair value on a
102
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
non-recurring basis for the years ended December 31, 2012, 2013 and 2014, except goodwill calculated based on Level 3 inputs, as more fully disclosed in Note 2.g.
We have one trust that holds marketable securities. Marketable securities are classified as available-for-sale or trading. As of December 31, 2013 and 2014, the fair value of the money market and mutual funds included in this trust amounted to $13,386 and $13,172 respectively, and were included in prepaid expenses and other in the accompanying Consolidated Balance Sheets. We classified these marketable securities included in the trust as trading, and included in other expense (income), net in the accompanying Consolidated Statements of Operations are realized and unrealized net gains (losses) of $1,292, $2,283 and $1,112 for the years ended December 31, 2012, 2013 and 2014, respectively, related to these marketable securities.
As of December 31, 2014, we had a 4% investment in Crossroads Systems, Inc. Its carrying value as of December 31, 2013 and 2014 was $1,404 and $1,457, respectively, and is included in other assets in the accompanying Consolidated Balance Sheets. This investment, which is publicly traded, is carried at fair value with corresponding changes to fair value recorded in accumulated other comprehensive items, net.
The changes in accumulated other comprehensive items, net for the years ended December 31, 2013 and 2014 is as follows:
|
Foreign Currency
Translation Adjustments |
Market Value
Adjustments for Securities |
Total | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Balance as of December 31, 2012 |
$ | 20,314 | $ | | $ | 20,314 | ||||
Other comprehensive (loss) income: |
||||||||||
Foreign currency translation adjustments |
(29,900 | ) | | (29,900 | ) | |||||
Market value adjustments for securities |
| 926 | 926 | |||||||
| | | | | | | | | | |
Total other comprehensive (loss) income |
(29,900 | ) | 926 | (28,974 | ) | |||||
| | | | | | | | | | |
Balance as of December 31, 2013 |
$ | (9,586 | ) | $ | 926 | $ | (8,660 | ) | ||
Other comprehensive (loss) income: |
||||||||||
Foreign currency translation adjustments |
(66,424 | ) | | (66,424 | ) | |||||
Market value adjustments for securities |
| 53 | 53 | |||||||
| | | | | | | | | | |
Total other comprehensive (loss) income |
(66,424 | ) | 53 | (66,371 | ) | |||||
| | | | | | | | | | |
Balance as of December 31, 2014 |
$ | (76,010 | ) | $ | 979 | $ | (75,031 | ) | ||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
103
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
Other expense (income), net consists of the following:
|
Year Ended
December 31, |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2013 | 2014 | |||||||
Foreign currency transaction losses (gains), net |
$ | 10,223 | $ | 36,201 | $ | 58,316 | ||||
Debt extinguishment expense, net |
10,628 | 43,724 | 16,495 | |||||||
Other, net |
(4,789 | ) | (4,723 | ) | (9,624 | ) | ||||
| | | | | | | | | | |
|
$ | 16,062 | $ | 75,202 | $ | 65,187 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
In April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) ("ASU 2014-08"). ASU 2014-08 changes the criteria for a disposal to qualify as a discontinued operation and requires additional disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. ASU 2014-08 is effective for annual periods beginning on or after December 15, 2014. Under this guidance, we expect fewer dispositions to qualify as discontinued operations. Early adoption is permitted, but only for disposals that have not been reported in the financial statements previously issued. We adopted ASU 2014-08 effective April 1, 2014.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). ASU 2014-09 provides additional guidance for management to reassess revenue recognition as it relates to: (1) transfer of control, (2) variable consideration, (3) allocation of transaction price based on relative standalone selling price, (3) licenses, (4) time value of money and (5) contract costs. Further disclosures will be required to provide a better understanding of revenue that has been recognized and revenue that is expected to be recognized in the future from existing contracts. ASU 2014-09 is effective for us on January 1, 2017, with no early adoption permitted. We are currently evaluating the impact ASU 2014-09 will have on our consolidated financial statements.
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements Going Concern (Subtopic 205-40) ("ASU 2014-15"). ASU 2014-15 requires management to assess an entity's ability to continue as a going concern by incorporating and expanding upon certain principles of current United States auditing standards. Specifically, the amendments (1) provide a definition of the term "substantial doubt", (2) require an evaluation every reporting period, including interim periods, (3) provide principles for considering the mitigating effect of management's plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management's plans, (5) require an express statement and other disclosures when substantial doubt is still present, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). ASU 2014-15 is effective for us on January 1, 2017, with early adoption permitted. We do not believe that this pronouncement will have an impact on our consolidated financial statements.
104
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis ("ASU 2015-02"). ASU 2015-02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 is effective for us on January 1, 2016, with early adoption permitted. We do not believe that this pronouncement will have an impact on our consolidated financial statements.
During the second quarter of 2014, we identified contract billing inaccuracies arising from a single location which occurred over numerous years that resulted in an overstatement of our prior years' reported revenue by $10,000 in the aggregate. Of this amount, $1,300 relates to the year ended December 31, 2013, $1,300 relates to the year ended December 31, 2012 and the remaining $7,400 relates to the periods prior to December 31, 2011. We have determined that no prior period financial statement was materially misstated as a result of these billing inaccuracies. As a result, we have restated beginning retained earnings as of December 31, 2011 for the cumulative impact of these billing inaccuracies, net of tax, prior to December 31, 2011 in the amount of $4,514.
Additionally, we have restated the following: (1) our 2013 Consolidated Balance Sheet, (2) our 2012 and 2013 Consolidated Statements of Operations, (3) our 2012 and 2013 Consolidated Statements of Comprehensive Income (Loss), (4) our 2012 and 2013 Consolidated Statements of Equity and (5) our 2012 and 2013 Consolidated Statements of Cash Flows to reflect the impact of these billing inaccuracies in those particular periods. There was no change to the following lines of the Consolidated Statement of Cash Flows for the years ended December 31, 2012 and 2013: (1) cash flows from operating activities, (2) cash flows from investing activities and (3) cash flows from financing activities. Also, we restated the 2013 quarterly data presented in Note 8.
105
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
2. Summary of Significant Accounting Policies (Continued)
The following table sets forth the effect of the immaterial restatement to certain line items of our Consolidated Statements of Operations for the years ended December 31, 2012 and 2013:
The following table sets forth the effect of the immaterial restatement to certain line items of our Consolidated Balance Sheet as of December 31, 2013:
|
December 31, 2013 | |||
---|---|---|---|---|
Deferred Revenue |
$ | 10,000 | ||
| | | | |
| | | | |
| | | | |
Total Current Liabilities |
$ | 10,000 | ||
| | | | |
| | | | |
| | | | |
Deferred Income Tax Liabilities |
$ | (3,900 | ) | |
| | | | |
| | | | |
| | | | |
Earnings in excess of distributions (Distributions in excess of earnings) |
$ | (6,100 | ) | |
| | | | |
| | | | |
| | | | |
Total Iron Mountain Incorporated Stockholders' Equity |
$ | (6,100 | ) | |
| | | | |
| | | | |
| | | | |
Total Equity |
$ | (6,100 | ) | |
| | | | |
| | | | |
| | | | |
106
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
3. Derivative Instruments and Hedging Activities
We have entered into a number of separate forward contracts to hedge our exposures in Euros, British pounds sterling and Australian dollars. As of December 31, 2014, we had outstanding forward contracts to purchase 206,000 Euros and sell $252,745 United States dollars to hedge our intercompany exposures with our European operations. At the maturity of the forward contracts, we may enter into new forward contracts to hedge movements in the underlying currencies. At the time of settlement, we either pay or receive the net settlement amount from the forward contract and recognize this amount in other expense (income), net in the Consolidated Statements of Operations as a realized foreign exchange gain or loss. At the end of each month, we mark the outstanding forward contracts to market and record an unrealized foreign exchange gain or loss for the mark-to-market valuation. We have not designated forward contracts as hedges. During the years ended December 31, 2012, 2013 and 2014, there was $9,116 in net cash payments, $6,954 in net cash receipts and $21,125 in net cash payments, respectively, included in cash from operating activities from continuing operations related to settlements associated with foreign currency forward contracts.
Our policy is to record the fair value of each derivative instrument on a gross basis. The following table provides the fair value of our derivative instruments as of December 31, 2013 and 2014 and their gains and losses for the years ended December 31, 2012, 2013 and 2014:
|
Asset Derivatives | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
December 31, | ||||||||||
|
2013 | 2014 | |||||||||
Derivatives Not Designated as
Hedging Instruments |
Balance Sheet
Location |
Fair
Value |
Balance Sheet
Location |
Fair
Value |
|||||||
Foreign exchange contracts |
Prepaid expenses and other | $ | 72 | Prepaid expenses and other | $ | | |||||
| | | | | | | | | | | |
Total |
$ | 72 | $ | | |||||||
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
|
Liability Derivatives | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
December 31, | ||||||||||
|
2013 | 2014 | |||||||||
Derivatives Not Designated as Hedging Instruments
|
Balance Sheet
Location |
Fair
Value |
Balance Sheet
Location |
Fair
Value |
|||||||
Foreign exchange contracts |
Accrued expenses | $ | 5,592 | Accrued expenses | $ | 2,411 | |||||
| | | | | | | | | | | |
Total |
$ | 5,592 | $ | 2,411 | |||||||
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
107
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
3. Derivative Instruments and Hedging Activities (Continued)
We have designated a portion of our 6 3 / 4 % Notes as a hedge of net investment of certain of our Euro denominated subsidiaries. For the years ended December 31, 2012, 2013 and 2014, we designated on average 101,167, 106,525 and 47,730 Euros, respectively, of the 6 3 / 4 % Notes as a hedge of net investment of certain of our Euro denominated subsidiaries. As a result, we recorded the following foreign exchange (losses) gains, net of tax, related to the change in fair value of such debt due to the currency translation adjustments, which is a component of accumulated other comprehensive items, net:
|
Year Ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2013 | 2014 | |||||||
Foreign exchange (losses) gains |
$ | (4,408 | ) | $ | (5,311 | ) | $ | 6,385 | ||
Tax benefit (expense) on foreign exchange (losses) gains |
1,740 | 2,073 | (57 | ) | ||||||
| | | | | | | | | | |
Foreign exchange (losses) gains, net of tax |
$ | (2,668 | ) | $ | (3,238 | ) | $ | 6,328 | ||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
As of December 31, 2014, cumulative net gains of $13,812, net of tax are recorded in accumulated other comprehensive items, net associated with this net investment hedge.
108
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
4. Debt
Long-term debt comprised the following:
|
December 31, 2013 | December 31, 2014 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Carrying
Amount |
Fair
Value |
Carrying
Amount |
Fair
Value |
|||||||||
Revolving Credit Facility(1) |
$ | 675,717 | $ | 675,717 | $ | 883,428 | $ | 883,428 | |||||
Term Loan(1) |
| | 249,375 | 249,375 | |||||||||
7 1 / 4 % GBP Senior Subordinated Notes due 2014 (the "7 1 / 4 % Notes")(2)(3) |
247,808 | 248,117 | | | |||||||||
6 3 / 4 % Euro Senior Subordinated Notes due 2018 (the "6 3 / 4 % Notes")(2)(3) |
350,272 | 355,071 | 308,616 | 309,634 | |||||||||
7 3 / 4 % Senior Subordinated Notes due 2019 (the "7 3 / 4 % Notes")(2)(3) |
400,000 | 446,000 | 400,000 | 429,000 | |||||||||
8 3 / 8 % Senior Subordinated Notes due 2021 (the "8 3 / 8 % Notes")(2)(3) |
411,518 | 444,470 | 106,030 | 110,500 | |||||||||
6 1 / 8 % CAD Senior Notes due 2021 (the "CAD Notes")(2)(4) |
187,960 | 187,960 | 172,420 | 175,437 | |||||||||
6 1 / 8 % GBP Senior Notes due 2022 (the "GBP Notes")(2)(5) |
| | 622,960 | 639,282 | |||||||||
6% Senior Notes due 2023 (the "6% Notes")(2)(3) |
600,000 | 614,820 | 600,000 | 625,500 | |||||||||
5 3 / 4 % Senior Subordinated Notes due 2024 (the "5 3 / 4 % Notes")(2)(3) |
1,000,000 | 930,000 | 1,000,000 | 1,005,000 | |||||||||
Real Estate Mortgages, Capital Leases and Other(6) |
298,447 | 298,447 | 320,702 | 320,702 | |||||||||
| | | | | | | | | | | | | |
Total Long-term Debt |
4,171,722 | 4,663,531 | |||||||||||
Less Current Portion |
(52,583 | ) | (52,095 | ) | |||||||||
| | | | | | | | | | | | | |
Long-term Debt, Net of Current Portion |
$ | 4,119,139 | $ | 4,611,436 | |||||||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
109
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
4. Debt (Continued)
On August 7, 2013, we amended our existing credit agreement. The revolving credit facilities (the "Revolving Credit Facility") under our credit agreement, as amended (the "Credit Agreement"), allow IMI and certain of its United States and foreign subsidiaries to borrow in United States dollars and (subject to sublimits) a variety of other currencies (including Canadian dollars, British pounds sterling, Euros, Brazilian reais and Australian dollars, among other currencies) in an aggregate outstanding amount not to exceed $1,500,000. Additionally, the Credit Agreement included an option to allow us to request additional commitments of up to $500,000, in the form of term loans or through increased commitments under the Revolving Credit Facility. On September 24, 2014, we borrowed an additional $250,000 in the form of a term loan under the Credit Agreement (the "Term Loan"). Commencing on December 31, 2014, the Term Loan will begin amortizing in quarterly installments in an amount equal to $625 per quarter, with the remaining balance due on June 27, 2016. The Term Loan may be prepaid without penalty or premium, in whole or in part, at any time. The Credit Agreement continues to include an option to allow us to request additional commitments of up to $250,000, in the form of term loans or through increased commitments under the Revolving Credit Facility.
The Credit Agreement terminates on June 27, 2016, at which point all obligations become due. IMI and the Guarantors guarantee all obligations under the Credit Agreement, and have pledged the capital stock or other equity interests of most of their United States subsidiaries, up to 66% of the capital stock or other equity interests of their first-tier foreign subsidiaries, and all intercompany
110
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
4. Debt (Continued)
obligations (including promissory notes) owed to or held by them to secure the Credit Agreement. In addition, Canada Company has pledged 66% of the capital stock of its subsidiaries, and all intercompany obligations (including promissory notes) owed to or held by it to secure the Canadian dollar subfacility under the Revolving Credit Facility. The interest rate on borrowings under the Credit Agreement varies depending on our choice of interest rate and currency options, plus an applicable margin, which varies based on our consolidated leverage ratio. Additionally, the Credit Agreement requires the payment of a commitment fee on the unused portion of the Revolving Credit Facility, which fee ranges from between 0.3% to 0.5% based on certain financial ratios and fees associated with outstanding letters of credit. As of December 31, 2014, we had $883,428 and $249,375 of outstanding borrowings under the Revolving Credit Facility and the Term Loan, respectively. Of the $883,428 of outstanding borrowings under the Revolving Credit Facility, $680,150 was denominated in United States dollars, 77,200 was denominated in Canadian dollars, 64,250 was denominated in Euros and 71,600 was denominated in Australian dollars. In addition, we also had various outstanding letters of credit totaling $10,403. The remaining amount available for borrowing under the Revolving Credit Facility as of December 31, 2014, based on IMI's leverage ratio, the last 12 months' earnings before interest, taxes, depreciation and amortization and rent expense ("EBITDAR"), other adjustments as defined in the Credit Agreement and current external debt, was $606,169 (which amount represents the maximum availability as of such date). The average interest rate in effect under the Credit Agreement was 2.7% as of December 31, 2014. The average interest rate in effect under the Revolving Credit Facility was 2.8% and ranged from 2.3% to 5.1% as of December 31, 2014 and the interest rate in effect under the Term Loan as of December 31, 2014 was 2.4%. For the years ended December 31, 2012, 2013 and 2014, we recorded commitment fees and letter of credit fees of $2,306, $3,167 and $3,322, respectively, based on the unused balances under our revolving credit facilities and outstanding letters of credit. We recorded a charge of $5,544 to other expense (income), net in the third quarter of 2013 related to an amendment of our revolving credit and term loan facilities, representing a write-off of deferred financing costs.
The Credit Agreement, our indentures and other agreements governing our indebtedness contain certain restrictive financial and operating covenants, including covenants that restrict our ability to complete acquisitions, pay cash dividends, incur indebtedness, make investments, sell assets and take certain other corporate actions. The covenants do not contain a rating trigger. Therefore, a change in our debt rating would not trigger a default under the Credit Agreement, our indentures or other agreements governing our indebtedness. The Credit Agreement uses EBITDAR-based calculations as the primary measures of financial performance, including leverage and fixed charge coverage ratios. IMI's Credit Agreement net total lease adjusted leverage ratio was 5.0 and 5.4 as of December 31, 2013 and 2014, respectively, compared to a maximum allowable ratio of 6.5, and its net secured debt lease adjusted leverage ratio was 2.2 and 2.6 as of December 31, 2013 and 2014, respectively, compared to a maximum allowable ratio of 4.0. IMI's bond leverage ratio (which is not lease adjusted), per the indentures, was 5.1 and 5.7 as of December 31, 2013 and 2014, respectively, compared to a maximum allowable ratio of 6.5. IMI's Credit Agreement fixed charge coverage ratio was 2.5 at both December 31, 2013 and 2014 compared to a minimum allowable ratio of 1.5 under the Credit Agreement. Noncompliance with these leverage and fixed charge coverage ratios would have a material adverse effect on our financial condition and liquidity.
111
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
4. Debt (Continued)
As of December 31, 2014, we had seven series of senior subordinated or senior notes issued under various indentures, five of which are direct obligations of the parent company, IMI; one (the CAD Notes) is a direct obligation of Canada Company; one (the GBP Notes) is a direct obligation of IME; and all are subordinated to debt outstanding under the Credit Agreement, except the 6% Notes, the CAD Notes and the GBP Notes which are pari passu with the Credit Agreement:
The Parent Notes, the CAD Notes and the GBP Notes are fully and unconditionally guaranteed, on a senior or senior subordinated basis, as the case may be, by the Guarantors. These guarantees are joint and several obligations of the Guarantors. The remainder of our subsidiaries do not guarantee the Parent Notes, the CAD Notes or the GBP Notes. Additionally, IMI guarantees the CAD Notes and the GBP Notes. Canada Company and IME do not guarantee the Parent Notes.
In August 2012, we redeemed (1) the $320,000 aggregate principal amount outstanding of the 6 5 / 8 % Senior Subordinated Notes due 2016 at 100% of par, plus accrued and unpaid interest, and (2) the $200,000 aggregate principal amount outstanding of the 8 3 / 4 % Senior Subordinated Notes due 2018 at 102.9% of par, plus accrued and unpaid interest. We recorded a charge to other expense (income), net of $10,628 related to the early extinguishment of this debt in the third quarter of 2012. This charge consists of the call premium, original issue discounts and deferred financing costs related to this debt.
In August 2013, IMI completed an underwritten public offering of $600,000 in aggregate principal amount of 6% Notes, and Canada Company completed an underwritten public offering of 200,000 CAD in aggregate principal amount of the CAD Notes, both of which were issued at 100% of par (together, the "August 2013 Offerings"). The net proceeds to IMI and Canada Company of $782,307,
112
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
4. Debt (Continued)
after paying the underwriters' discounts and commissions, were used to redeem (1) all of the outstanding 7 1 / 2 % CAD Senior Subordinated Notes due 2017, (2) all of the outstanding 8% Senior Subordinated Notes due 2018, (3) all of the outstanding 8% Senior Subordinated Notes due 2020, and (4) $137,500 in principal amount of the 8 3 / 8 % Notes. The remaining net proceeds were used to repay indebtedness under our Revolving Credit Facility. We recorded a charge to other expense (income), net of $38,118 in the third quarter of 2013 related to the early extinguishment of this debt. This charge consists of call and tender premiums, original issue discounts and deferred financing costs related to this debt.
In January 2014, we redeemed the 150,000 British pounds sterling (approximately $248,000) in aggregate principal amount of the 7 1 / 4 % Notes at 100% of par, plus accrued and unpaid interest, utilizing borrowings under our Revolving Credit Facility and cash on-hand.
In September 2014, IME completed a private offering of 400,000 British pounds sterling in aggregate principal amount of the GBP Notes, which were issued at 100% of par. The net proceeds to IME of 394,000 British pounds sterling (approximately $642,000 based on an exchange rate of 1.63), after paying the initial purchasers' commissions and expenses, were used to repay amounts outstanding under our Revolving Credit Facility and for general corporate purposes.
In December 2014, we redeemed $306,000 aggregate principal outstanding of our 8 3 / 8 % Notes at 104.188% of par, plus accrued and unpaid interest, utilizing borrowings under our Revolving Credit Facility. We recorded a charge to other expense (income), net of $16,495 related to the early extinguishment of this debt in the fourth quarter of 2014 representing the call premium associated with the early redemption, as well as a write-off of original issue discounts and deferred financing costs related to this debt.
Each of the indentures for the notes provides that we may redeem the outstanding notes, in whole or in part, upon satisfaction of certain terms and conditions. In any redemption, we are also required to pay all accrued but unpaid interest on the outstanding notes.
The following table presents the various redemption dates and prices of the senior or senior subordinated notes. The redemption dates reflect the date at or after which the notes may be
113
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
4. Debt (Continued)
redeemed at our option at a premium redemption price. After these dates, the notes may be redeemed at 100% of face value:
Redemption Date
|
6
3
/
4
% Notes
October 15, |
7
3
/
4
% Notes
October 1, |
8
3
/
8
% Notes
August 15, |
CAD Notes
August 15, |
GBP Notes
September 15, |
6% Notes
August 15, |
5
3
/
4
% Notes
August 15, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2014 |
100.000 | % | | 104.188 | % | | | | | |||||||||||||
2015 |
100.000 | % | 103.875% | (1) | 102.792 | % | | | | | ||||||||||||
2016 |
100.000 | % | 101.938 | % | 101.396 | % | | | | | ||||||||||||
2017 |
100.000 | % | 100.000 | % | 100.000 | % | 103.063% | (1) | 104.594% | (1) | | 102.875 | %(1) | |||||||||
2018 |
100.000 | % | 100.000 | % | 100.000 | % | 101.531 | % | 103.063 | % | 103.000% | (1) | 101.917 | % | ||||||||
2019 |
| 100.000 | % | 100.000 | % | 100.000 | % | 101.531 | % | 102.000 | % | 100.958 | % | |||||||||
2020 |
| | 100.000 | % | 100.000 | % | 100.000 | % | 101.000 | % | 100.000 | % | ||||||||||
2021 |
| | 100.000 | % | 100.000 | % | 100.000 | % | 100.000 | % | 100.000 | % | ||||||||||
2022 |
| | | | 100.000 | % | 100.000 | % | 100.000 | % | ||||||||||||
2023 |
| | | | | 100.000 | % | 100.000 | % | |||||||||||||
2024 |
| | | | | | 100.000 | % |
Each of the indentures for the notes provides that we must repurchase, at the option of the holders, the notes at 101% of their principal amount, plus accrued and unpaid interest, upon the occurrence of a "Change of Control," which is defined in each respective indenture. Except for required repurchases upon the occurrence of a Change of Control or in the event of certain asset sales, each as described in the respective indenture, we are not required to make sinking fund or redemption payments with respect to any of the notes.
Maturities of long-term debt are as follows:
Year
|
Amount | |||
---|---|---|---|---|
2015 |
$ | 52,095 | ||
2016 |
1,178,272 | |||
2017 |
72,629 | |||
2018 |
340,823 | |||
2019 |
422,803 | |||
Thereafter |
2,598,147 | |||
| | | | |
|
4,664,769 | |||
Net Premiums (Discounts) |
(1,238 | ) | ||
| | | | |
Total Long-term Debt (including current portion) |
$ | 4,663,531 | ||
| | | | |
| | | | |
| | | | |
114
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors
The following data summarizes the consolidating results of IMI on the equity method of accounting as of December 31, 2013 and 2014 and for the years ended December 31, 2012, 2013 and 2014 and are prepared on the same basis as the consolidated financial statements.
The Parent Notes, CAD Notes and GBP Notes are guaranteed by the subsidiaries referred to below as the Guarantors. These subsidiaries are 100% owned by IMI. The guarantees are full and unconditional, as well as joint and several.
Additionally, IMI and the Guarantors guarantee the CAD Notes, which were issued by Canada Company, and the GBP Notes, which were issued by IME. Canada Company and IME do not guarantee the Parent Notes. The subsidiaries that do not guarantee the Parent Notes, the CAD Notes and the GBP Notes, including IME but excluding Canada Company, are referred to below as the Non-Guarantors.
In the normal course of business we periodically change the ownership structure of our subsidiaries to meet the requirements of our business. In the event of such changes, we recast the prior period financial information within this footnote to conform to the current period presentation in the period such changes occur. Generally, these changes do not alter the designation of the underlying subsidiaries as Guarantors or Non-Guarantors. However, they may change whether the underlying subsidiary is owned by the Parent, a Guarantor, Canada Company or a Non-Guarantor. If such a change occurs, the amount of investment in subsidiaries in the below balance sheets and equity in the earnings (losses) of subsidiaries, net of tax in the below statements of operations with respect to the relevant Parent, Guarantors, Canada Company, Non-Guarantors and Eliminations columns also would change.
115
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)
|
December 31, 2013 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Parent | Guarantors |
Canada
Company |
Non-
Guarantors |
Eliminations | Consolidated | |||||||||||||
Assets |
|||||||||||||||||||
Current Assets: |
|||||||||||||||||||
Cash and Cash Equivalents |
$ | 1,243 | $ | 10,366 | $ | 1,094 | $ | 107,823 | $ | | $ | 120,526 | |||||||
Restricted Cash |
33,860 | | | | | 33,860 | |||||||||||||
Accounts Receivable |
| 358,118 | 38,928 | 219,751 | | 616,797 | |||||||||||||
Intercompany Receivable |
761,501 | | 1,607 | | (763,108 | ) | | ||||||||||||
Other Current Assets |
1,120 | 98,717 | 5,995 | 56,622 | (30 | ) | 162,424 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total Current Assets |
797,724 | 467,201 | 47,624 | 384,196 | (763,138 | ) | 933,607 | ||||||||||||
Property, Plant and Equipment, Net |
1,019 | 1,569,248 | 172,246 | 835,747 | | 2,578,260 | |||||||||||||
Other Assets, Net: |
|||||||||||||||||||
Long-term Notes Receivable from Affiliates and Intercompany Receivable |
1,775,570 | 1,000 | 2,672 | | (1,779,242 | ) | | ||||||||||||
Investment in Subsidiaries |
1,564,405 | 1,313,835 | 31,130 | 70,788 | (2,980,158 | ) | | ||||||||||||
Goodwill |
| 1,638,534 | 187,259 | 637,559 | | 2,463,352 | |||||||||||||
Other |
38,862 | 376,939 | 11,257 | 250,842 | (114 | ) | 677,786 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total Other Assets, Net |
3,378,837 | 3,330,308 | 232,318 | 959,189 | (4,759,514 | ) | 3,141,138 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total Assets |
$ | 4,177,580 | $ | 5,366,757 | $ | 452,188 | $ | 2,179,132 | $ | (5,522,652 | ) | $ | 6,653,005 | ||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Liabilities and Equity |
|||||||||||||||||||
Intercompany Payable |
$ | | $ | 581,029 | $ | | $ | 182,079 | $ | (763,108 | ) | $ | | ||||||
Current Portion of Long-term Debt |
| 30,236 | | 22,377 | (30 | ) | 52,583 | ||||||||||||
Total Other Current Liabilities |
125,705 | 540,169 | 29,513 | 221,131 | | 916,518 | |||||||||||||
Long-term Debt, Net of Current Portion |
3,009,597 | 508,382 | 289,105 | 312,055 | | 4,119,139 | |||||||||||||
Long-term Notes Payable to Affiliates and Intercompany Payable |
1,000 | 1,772,144 | | 6,098 | (1,779,242 | ) | | ||||||||||||
Other Long-term Liabilities |
40 | 388,645 | 31,652 | 92,808 | (114 | ) | 513,031 | ||||||||||||
Commitments and Contingencies (See Note 10) |
|||||||||||||||||||
Total Iron Mountain Incorporated Stockholders' Equity |
1,041,238 | 1,546,152 | 101,918 | 1,332,088 | (2,980,158 | ) | 1,041,238 | ||||||||||||
Noncontrolling Interests |
| | | 10,496 | | 10,496 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total Equity |
1,041,238 | 1,546,152 | 101,918 | 1,342,584 | (2,980,158 | ) | 1,051,734 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total Liabilities and Equity |
$ | 4,177,580 | $ | 5,366,757 | $ | 452,188 | $ | 2,179,132 | $ | (5,522,652 | ) | $ | 6,653,005 | ||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
116
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)
CONSOLIDATED BALANCE SHEETS (Continued)
|
December 31, 2014 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Parent | Guarantors |
Canada
Company |
Non-
Guarantors |
Eliminations | Consolidated | |||||||||||||
Assets |
|||||||||||||||||||
Current Assets: |
|||||||||||||||||||
Cash and Cash Equivalents |
$ | 2,399 | $ | 4,713 | $ | 4,979 | $ | 113,842 | $ | | $ | 125,933 | |||||||
Restricted Cash |
33,860 | | | | | 33,860 | |||||||||||||
Accounts Receivable |
| 361,330 | 37,137 | 205,798 | | 604,265 | |||||||||||||
Intercompany Receivable |
| 586,725 | | | (586,725 | ) | | ||||||||||||
Other Current Assets |
153 | 88,709 | 2,925 | 61,908 | (34 | ) | 153,661 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total Current Assets |
36,412 | 1,041,477 | 45,041 | 381,548 | (586,759 | ) | 917,719 | ||||||||||||
Property, Plant and Equipment, Net |
840 | 1,580,337 | 160,977 | 808,573 | | 2,550,727 | |||||||||||||
Other Assets, Net: |
|||||||||||||||||||
Long-term Notes Receivable from Affiliates and Intercompany Receivable |
2,851,651 | 245 | 2,448 | | (2,854,344 | ) | | ||||||||||||
Investment in Subsidiaries |
917,170 | 656,877 | 30,751 | 93,355 | (1,698,153 | ) | | ||||||||||||
Goodwill |
| 1,611,957 | 180,342 | 631,484 | | 2,423,783 | |||||||||||||
Other |
31,108 | 375,082 | 26,672 | 245,251 | | 678,113 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total Other Assets, Net |
3,799,929 | 2,644,161 | 240,213 | 970,090 | (4,552,497 | ) | 3,101,896 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total Assets |
$ | 3,837,181 | $ | 5,265,975 | $ | 446,231 | $ | 2,160,211 | $ | (5,139,256 | ) | $ | 6,570,342 | ||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Liabilities and Equity |
|||||||||||||||||||
Intercompany Payable |
$ | 505,083 | $ | | $ | 3,564 | $ | 78,078 | $ | (586,725 | ) | $ | | ||||||
Current Portion of Long-term Debt |
| 24,955 | | 27,174 | (34 | ) | 52,095 | ||||||||||||
Total Other Current Liabilities |
60,097 | 470,122 | 35,142 | 239,280 | | 804,641 | |||||||||||||
Long-term Debt, Net of Current Portion |
2,414,646 | 908,431 | 245,861 | 1,042,498 | | 4,611,436 | |||||||||||||
Long-term Notes Payable to Affiliates and Intercompany Payable |
1,000 | 2,851,384 | | 1,960 | (2,854,344 | ) | | ||||||||||||
Other Long-term Liabilities |
| 115,789 | 37,558 | 78,868 | | 232,215 | |||||||||||||
Commitments and Contingencies (See Note 10) |
|||||||||||||||||||
Total Iron Mountain Incorporated Stockholders' Equity |
856,355 | 895,294 | 124,106 | 678,753 | (1,698,153 | ) | 856,355 | ||||||||||||
Noncontrolling Interests |
| | | 13,600 | | 13,600 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total Equity |
856,355 | 895,294 | 124,106 | 692,353 | (1,698,153 | ) | 869,955 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total Liabilities and Equity |
$ | 3,837,181 | $ | 5,265,975 | $ | 446,231 | $ | 2,160,211 | $ | (5,139,256 | ) | $ | 6,570,342 | ||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
117
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)
CONSOLIDATED STATEMENTS OF OPERATIONS
|
Year Ended December 31, 2012 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Parent | Guarantors |
Canada
Company |
Non-
Guarantors |
Eliminations | Consolidated | |||||||||||||
Revenues: |
|||||||||||||||||||
Storage Rental |
$ | | $ | 1,156,681 | $ | 130,825 | $ | 445,632 | $ | | $ | 1,733,138 | |||||||
Service |
| 782,768 | | 488,049 | | 1,270,817 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total Revenues |
| 1,939,449 | 130,825 | 933,681 | | 3,003,955 | |||||||||||||
Operating Expenses: |
|||||||||||||||||||
Cost of sales (excluding depreciation and amortization) |
| 761,092 | 27,881 | 488,140 | | 1,277,113 | |||||||||||||
Selling, general and administrative |
220 | 591,092 | 17,741 | 241,318 | | 850,371 | |||||||||||||
Depreciation and amortization |
320 | 192,304 | 12,797 | 110,923 | | 316,344 | |||||||||||||
(Gain) Loss on disposal/write-down of property, plant and equipment (excluding real estate), net |
| (1,030 | ) | 84 | 5,607 | | 4,661 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total Operating Expenses |
540 | 1,543,458 | 58,503 | 845,988 | | 2,448,489 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Operating (Loss) Income |
(540 | ) | 395,991 | 72,322 | 87,693 | | 555,466 | ||||||||||||
Interest Expense (Income), Net |
196,423 | (17,117 | ) | 36,114 | 27,179 | | 242,599 | ||||||||||||
Other Expense (Income), Net |
32,161 | (3,842 | ) | (37 | ) | (12,220 | ) | | 16,062 | ||||||||||
| | | | | | | | | | | | | | | | | | | |
(Loss) Income from Continuing Operations Before Provision (Benefit) for Income Taxes and (Gain) Loss on Sale of Real Estate |
(229,124 | ) | 416,950 | 36,245 | 72,734 | | 296,805 | ||||||||||||
Provision (Benefit) for Income Taxes |
| 86,060 | 12,768 | 15,476 | | 114,304 | |||||||||||||
Loss (Gain) on Sale of Real Estate, Net of Tax |
| 39 | | (245 | ) | | (206 | ) | |||||||||||
Equity in the (Earnings) Losses of Subsidiaries, Net of Tax |
(400,046 | ) | (73,625 | ) | (5,273 | ) | (23,477 | ) | 502,421 | | |||||||||
| | | | | | | | | | | | | | | | | | | |
Income (Loss) from Continuing Operations |
170,922 | 404,476 | 28,750 | 80,980 | (502,421 | ) | 182,707 | ||||||||||||
Income (Loss) from Discontinued Operations, Net of Tax |
| 430 | | (7,204 | ) | | (6,774 | ) | |||||||||||
(Loss) Gain on Sale of Discontinued Operations, Net of Tax |
| | | (1,885 | ) | | (1,885 | ) | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Net Income (Loss) |
170,922 | 404,906 | 28,750 | 71,891 | (502,421 | ) | 174,048 | ||||||||||||
Less: Net Income (Loss) Attributable to Noncontrolling Interests |
| | | 3,126 | | 3,126 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Net Income (Loss) Attributable to Iron Mountain Incorporated |
$ | 170,922 | $ | 404,906 | $ | 28,750 | $ | 68,765 | $ | (502,421 | ) | $ | 170,922 | ||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Net Income (Loss) |
$ | 170,922 | $ | 404,906 | $ | 28,750 | $ | 71,891 | $ | (502,421 | ) | $ | 174,048 | ||||||
Other Comprehensive Income (Loss): |
|||||||||||||||||||
Foreign Currency Translation Adjustments |
(2,668 | ) | (212 | ) | 8,012 | 18,054 | | 23,186 | |||||||||||
Equity in Other Comprehensive Income (Loss) of Subsidiaries |
25,185 | 25,421 | | 8,012 | (58,618 | ) | | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total Other Comprehensive Income (Loss) |
22,517 | 25,209 | 8,012 | 26,066 | (58,618 | ) | 23,186 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Comprehensive Income (Loss) |
193,439 | 430,115 | 36,762 | 97,957 | (561,039 | ) | 197,234 | ||||||||||||
Comprehensive Income (Loss) Attributable to Noncontrolling Interests |
| | | 3,795 | | 3,795 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated |
$ | 193,439 | $ | 430,115 | $ | 36,762 | $ | 94,162 | $ | (561,039 | ) | $ | 193,439 | ||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
118
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
|
Year Ended December 31, 2013 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Parent | Guarantors |
Canada
Company |
Non-
Guarantors |
Eliminations | Consolidated | |||||||||||||
Revenues: |
|||||||||||||||||||
Storage Rental |
$ | | $ | 1,174,978 | $ | 129,987 | $ | 479,756 | $ | | $ | 1,784,721 | |||||||
Service |
| 754,090 | 35,119 | 450,693 | | 1,239,902 | |||||||||||||
Intercompany service |
| | | 32,810 | (32,810 | ) | | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total Revenues |
| 1,929,068 | 165,106 | 963,259 | (32,810 | ) | 3,024,623 | ||||||||||||
Operating Expenses: |
|||||||||||||||||||
Cost of sales (excluding depreciation and amortization) |
| 771,271 | 27,354 | 490,253 | | 1,288,878 | |||||||||||||
Intercompany service cost of sales |
| | 32,810 | | (32,810 | ) | | ||||||||||||
Selling, general and administrative |
227 | 655,052 | 15,792 | 252,960 | | 924,031 | |||||||||||||
Depreciation and amortization |
319 | 195,794 | 12,383 | 113,541 | | 322,037 | |||||||||||||
Loss (Gain) on disposal/write-down of property, plant and equipment (excluding real estate), net |
5 | (100 | ) | 21 | 504 | | 430 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total Operating Expenses |
551 | 1,622,017 | 88,360 | 857,258 | (32,810 | ) | 2,535,376 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Operating (Loss) Income |
(551 | ) | 307,051 | 76,746 | 106,001 | | 489,247 | ||||||||||||
Interest Expense (Income), Net |
206,682 | (19,731 | ) | 40,537 | 26,686 | | 254,174 | ||||||||||||
Other Expense (Income), Net |
54,144 | 1,283 | 5,410 | 14,365 | | 75,202 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
(Loss) Income from Continuing Operations Before Provision (Benefit) for Income Taxes and (Gain) Loss on Sale of Real Estate |
(261,377 | ) | 325,499 | 30,799 | 64,950 | | 159,871 | ||||||||||||
(Benefit) Provision for Income Taxes |
(16 | ) | 33,767 | 12,361 | 16,015 | | 62,127 | ||||||||||||
(Gain) Loss on Sale of Real Estate, Net of Tax |
| | | (1,417 | ) | | (1,417 | ) | |||||||||||
Equity in the (Earnings) Losses of Subsidiaries, Net of Tax |
(357,823 | ) | (63,775 | ) | (5,681 | ) | (18,438 | ) | 445,717 | | |||||||||
| | | | | | | | | | | | | | | | | | | |
Income (Loss) from Continuing Operations |
96,462 | 355,507 | 24,119 | 68,790 | (445,717 | ) | 99,161 | ||||||||||||
(Loss) Income from Discontinued Operations, Net of Tax |
| (529 | ) | | 1,360 | | 831 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Net Income (Loss) |
96,462 | 354,978 | 24,119 | 70,150 | (445,717 | ) | 99,992 | ||||||||||||
Less: Net Income (Loss) Attributable to Noncontrolling Interests |
| | | 3,530 | | 3,530 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Net Income (Loss) Attributable to Iron Mountain Incorporated |
$ | 96,462 | $ | 354,978 | $ | 24,119 | $ | 66,620 | $ | (445,717 | ) | $ | 96,462 | ||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Net Income (Loss) |
$ | 96,462 | $ | 354,978 | $ | 24,119 | $ | 70,150 | $ | (445,717 | ) | $ | 99,992 | ||||||
Other Comprehensive Income (Loss): |
|||||||||||||||||||
Foreign Currency Translation Adjustments |
(3,237 | ) | 1,177 | (11,096 | ) | (18,376 | ) | | (31,532 | ) | |||||||||
Market Value Adjustments for Securities |
| 926 | | | | 926 | |||||||||||||
Equity in Other Comprehensive Income (Loss) of Subsidiaries |
(25,737 | ) | (26,862 | ) | (4,037 | ) | (11,096 | ) | 67,732 | | |||||||||
| | | | | | | | | | | | | | | | | | | |
Total Other Comprehensive (Loss) Income |
(28,974 | ) | (24,759 | ) | (15,133 | ) | (29,472 | ) | 67,732 | (30,606 | ) | ||||||||
| | | | | | | | | | | | | | | | | | | |
Comprehensive Income (Loss) |
67,488 | 330,219 | 8,986 | 40,678 | (377,985 | ) | 69,386 | ||||||||||||
Comprehensive Income (Loss) Attributable to Noncontrolling Interests |
| | | 1,898 | | 1,898 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated |
$ | 67,488 | $ | 330,219 | $ | 8,986 | $ | 38,780 | $ | (377,985 | ) | $ | 67,488 | ||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
119
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
|
Year Ended December 31, 2014 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Parent | Guarantors |
Canada
Company |
Non-
Guarantors |
Eliminations | Consolidated | |||||||||||||
Revenues: |
|||||||||||||||||||
Storage Rental |
$ | | $ | 1,208,380 | $ | 124,551 | $ | 527,312 | $ | | $ | 1,860,243 | |||||||
Service |
| 749,711 | 68,669 | 439,070 | | 1,257,450 | |||||||||||||
Intercompany service |
| | | 64,794 | (64,794 | ) | | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total Revenues |
| 1,958,091 | 193,220 | 1,031,176 | (64,794 | ) | 3,117,693 | ||||||||||||
Operating Expenses: |
|||||||||||||||||||
Cost of sales (excluding depreciation and amortization) |
| 793,274 | 23,040 | 528,322 | | 1,344,636 | |||||||||||||
Intercompany service cost of sales |
| | 64,794 | | (64,794 | ) | | ||||||||||||
Selling, general and administrative |
1,182 | 580,568 | 13,304 | 274,518 | | 869,572 | |||||||||||||
Depreciation and amortization |
225 | 214,341 | 11,797 | 126,780 | | 353,143 | |||||||||||||
Loss (Gain) on disposal/write-down of property, plant and equipment (excluding real estate), net |
| 829 | 173 | 63 | | 1,065 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Total Operating Expenses |
1,407 | 1,589,012 | 113,108 | 929,683 | (64,794 | ) | 2,568,416 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Operating (Loss) Income |
(1,407 | ) | 369,079 | 80,112 | 101,493 | | 549,277 | ||||||||||||
Interest Expense (Income), Net |
187,650 | (23,295 | ) | 36,946 | 59,416 | | 260,717 | ||||||||||||
Other Expense (Income), Net |
78 | (203,380 | ) | (91 | ) | 268,580 | | 65,187 | |||||||||||
| | | | | | | | | | | | | | | | | | | |
(Loss) Income from Continuing Operations Before Provision (Benefit) for Income Taxes and (Gain) on Sale of Real Estate |
(189,135 | ) | 595,754 | 43,257 | (226,503 | ) | | 223,373 | |||||||||||
(Benefit) Provision for Income Taxes |
| (114,947 | ) | 12,876 | 4,796 | | (97,275 | ) | |||||||||||
(Gain) on Sale of Real Estate |
| (196 | ) | (832 | ) | (7,279 | ) | | (8,307 | ) | |||||||||
Equity in the (Earnings) Losses of Subsidiaries, Net of Tax |
(515,254 | ) | 196,310 | (992 | ) | (31,215 | ) | 351,151 | | ||||||||||
| | | | | | | | | | | | | | | | | | | |
Income (Loss) from Continuing Operations |
326,119 | 514,587 | 32,205 | (192,805 | ) | (351,151 | ) | 328,955 | |||||||||||
(Loss) Income from Discontinued Operations, Net of Tax |
| (937 | ) | | 728 | | (209 | ) | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Net Income (Loss) |
326,119 | 513,650 | 32,205 | (192,077 | ) | (351,151 | ) | 328,746 | |||||||||||
Less: Net Income (Loss) Attributable to Noncontrolling Interests |
| | | 2,627 | | 2,627 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Net Income (Loss) Attributable to Iron Mountain Incorporated |
$ | 326,119 | $ | 513,650 | $ | 32,205 | $ | (194,704 | ) | $ | (351,151 | ) | $ | 326,119 | |||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Net Income (Loss) |
$ | 326,119 | $ | 513,650 | $ | 32,205 | $ | (192,077 | ) | $ | (351,151 | ) | $ | 328,746 | |||||
Other Comprehensive Income (Loss): |
|||||||||||||||||||
Foreign Currency Translation Adjustments |
6,328 | 47 | (10,306 | ) | (62,936 | ) | | (66,867 | ) | ||||||||||
Market Value Adjustments for Securities |
| 53 | | | | 53 | |||||||||||||
Equity in Other Comprehensive Income (Loss) of Subsidiaries |
(72,662 | ) | (73,696 | ) | 288 | (10,306 | ) | 156,376 | | ||||||||||
| | | | | | | | | | | | | | | | | | | |
Total Other Comprehensive Income (Loss) |
(66,334 | ) | (73,596 | ) | (10,018 | ) | (73,242 | ) | 156,376 | (66,814 | ) | ||||||||
| | | | | | | | | | | | | | | | | | | |
Comprehensive Income (Loss) |
259,785 | 440,054 | 22,187 | (265,319 | ) | (194,775 | ) | 261,932 | |||||||||||
Comprehensive Income (Loss) Attributable to Noncontrolling Interests |
| | | 2,184 | | 2,184 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated |
$ | 259,785 | $ | 440,054 | $ | 22,187 | $ | (267,503 | ) | $ | (194,775 | ) | $ | 259,748 | |||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
120
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Year Ended December 31, 2012 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Parent | Guarantors |
Canada
Company |
Non-
Guarantors |
Eliminations | Consolidated | |||||||||||||
Cash Flows from Operating Activities: |
|||||||||||||||||||
Cash Flows from Operating Activities-Continuing Operations |
$ | (195,478 | ) | $ | 496,542 | $ | 37,299 | $ | 105,289 | $ | | $ | 443,652 | ||||||
Cash Flows from Operating Activities-Discontinued Operations |
| (8,814 | ) | | (2,102 | ) | | (10,916 | ) | ||||||||||
| | | | | | | | | | | | | | | | | | | |
Cash Flows from Operating Activities |
(195,478 | ) | 487,728 | 37,299 | 103,187 | | 432,736 | ||||||||||||
Cash Flows from Investing Activities: |
|||||||||||||||||||
Capital expenditures |
| (134,852 | ) | (8,454 | ) | (97,377 | ) | | (240,683 | ) | |||||||||
Cash paid for acquisitions, net of cash acquired |
| (28,126 | ) | | (97,008 | ) | | (125,134 | ) | ||||||||||
Intercompany loans to subsidiaries |
88,376 | (110,142 | ) | | | 21,766 | | ||||||||||||
Investment in subsidiaries |
(37,572 | ) | (37,572 | ) | | | 75,144 | | |||||||||||
Investment in restricted cash |
1,498 | | | | | 1,498 | |||||||||||||
Additions to customer relationship and acquisition costs |
| (23,543 | ) | (2,132 | ) | (3,197 | ) | | (28,872 | ) | |||||||||
Investment in joint ventures |
(2,330 | ) | | | | | (2,330 | ) | |||||||||||
Proceeds from sales of property and equipment and other, net (including real estate) |
| (1,739 | ) | 5 | 3,191 | | 1,457 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Cash Flows from Investing Activities-Continuing Operations |
49,972 | (335,974 | ) | (10,581 | ) | (194,391 | ) | 96,910 | (394,064 | ) | |||||||||
Cash Flows from Investing Activities-Discontinued Operations |
| (1,982 | ) | | (4,154 | ) | | (6,136 | ) | ||||||||||
| | | | | | | | | | | | | | | | | | | |
Cash Flows from Investing Activities |
49,972 | (337,956 | ) | (10,581 | ) | (198,545 | ) | 96,910 | (400,200 | ) | |||||||||
Cash Flows from Financing Activities: |
|||||||||||||||||||
Repayment of revolving credit and term loan facilities and other debt |
| (2,774,070 | ) | (58 | ) | (70,565 | ) | | (2,844,693 | ) | |||||||||
Proceeds from revolving credit and term loan facilities and other debt |
| 2,680,107 | | 51,078 | | 2,731,185 | |||||||||||||
Early retirement of senior subordinated notes |
(525,834 | ) | | | | | (525,834 | ) | |||||||||||
Net proceeds from sales of senior subordinated notes |
985,000 | | | | | 985,000 | |||||||||||||
Debt financing (repayment to) and equity contribution from (distribution to) noncontrolling interests, net |
| | | 480 | | 480 | |||||||||||||
Intercompany loans from parent |
| (89,878 | ) | 4,861 | 106,783 | (21,766 | ) | | |||||||||||
Equity contribution from parent |
| 37,572 | | 37,572 | (75,144 | ) | | ||||||||||||
Stock repurchases |
(38,052 | ) | | | | | (38,052 | ) | |||||||||||
Parent cash dividends |
(318,845 | ) | | | | | (318,845 | ) | |||||||||||
Proceeds from exercise of stock options and employee stock purchase plan |
40,244 | | | | | 40,244 | |||||||||||||
Excess tax benefits (deficiency) from stock-based compensation |
1,045 | | | | | 1,045 | |||||||||||||
Payment of debt financing and stock issuance costs |
(1,480 | ) | (781 | ) | | | | (2,261 | ) | ||||||||||
| | | | | | | | | | | | | | | | | | | |
Cash Flows from Financing Activities-Continuing Operations |
142,078 | (147,050 | ) | 4,803 | 125,348 | (96,910 | ) | 28,269 | |||||||||||
Cash Flows from Financing Activities-Discontinued Operations |
| | | (39 | ) | | (39 | ) | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Cash Flows from Financing Activities |
142,078 | (147,050 | ) | 4,803 | 125,309 | (96,910 | ) | 28,230 | |||||||||||
Effect of exchange rates on cash and cash equivalents |
| | 1,880 | 924 | | 2,804 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
(Decrease) Increase in cash and cash equivalents |
(3,428 | ) | 2,722 | 33,401 | 30,875 | | 63,570 | ||||||||||||
Cash and cash equivalents, beginning of year |
3,428 | 10,750 | 69,945 | 95,722 | | 179,845 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents, end of year |
$ | | $ | 13,472 | $ | 103,346 | $ | 126,597 | $ | | $ | 243,415 | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
121
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
|
Year Ended December 31, 2013 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Parent | Guarantors |
Canada
Company |
Non-
Guarantors |
Eliminations | Consolidated | |||||||||||||
Cash Flows from Operating Activities: |
|||||||||||||||||||
Cash Flows from Operating Activities-Continuing Operations |
$ | (195,786 | ) | $ | 528,011 | $ | 28,580 | $ | 145,788 | $ | | $ | 506,593 | ||||||
Cash Flows from Operating Activities-Discontinued Operations |
| (129 | ) | | 1,082 | | 953 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Cash Flows from Operating Activities |
(195,786 | ) | 527,882 | 28,580 | 146,870 | | 507,546 | ||||||||||||
Cash Flows from Investing Activities: |
|||||||||||||||||||
Capital expenditures |
| (180,047 | ) | (6,534 | ) | (100,714 | ) | | (287,295 | ) | |||||||||
Cash paid for acquisitions, net of cash acquired |
| (212,042 | ) | | (105,058 | ) | | (317,100 | ) | ||||||||||
Intercompany loans to subsidiaries |
387,299 | 398,299 | | | (785,598 | ) | | ||||||||||||
Investment in subsidiaries |
(63,149 | ) | (63,149 | ) | | | 126,298 | | |||||||||||
Investment in restricted cash |
(248 | ) | | | | | (248 | ) | |||||||||||
Additions to customer relationship and acquisition costs |
| (18,083 | ) | (498 | ) | (11,610 | ) | | (30,191 | ) | |||||||||
Proceeds from sales of property and equipment and other, net (including real estate) |
| 54 | (3,175 | ) | 5,205 | | 2,084 | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
Cash Flows from Investing Activities-Continuing Operations |
323,902 | (74,968 | ) | (10,207 | ) | (212,177 | ) | (659,300 | ) | (632,750 | ) | ||||||||
Cash Flows from Investing Activities-Discontinued Operations |
| (4,937 | ) | | | | (4,937 | ) | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Cash Flows from Investing Activities |
323,902 | (79,905 | ) | (10,207 | ) | (212,177 | ) | (659,300 | ) | (637,687 | ) | ||||||||
Cash Flows from Financing Activities: |
|||||||||||||||||||
Repayment of revolving credit and term loan facilities and other debt |
| (5,077,356 | ) | (341,336 | ) | (107,980 | ) | | (5,526,672 | ) | |||||||||
Proceeds from revolving credit and term loan facilities and other debt |
| 4,948,691 | 438,188 | 274,871 | | 5,661,750 | |||||||||||||
Early retirement of senior subordinated notes |
(514,239 | ) | | (170,895 | ) | | | (685,134 | ) | ||||||||||
Net proceeds from sales of senior notes |
591,000 | | 191,307 | | | 782,307 | |||||||||||||
Debt financing (repayment to) and equity contribution from (distribution to) noncontrolling interests, net |
(14,852 | ) | | | (3,384 | ) | | (18,236 | ) | ||||||||||
Intercompany loans from parent |
| (379,910 | ) | (232,436 | ) | (173,252 | ) | 785,598 | | ||||||||||
Equity contribution from parent |
| 63,149 | | 63,149 | (126,298 | ) | | ||||||||||||
Parent cash dividends |
(206,798 | ) | | | | | (206,798 | ) | |||||||||||
Proceeds from exercise of stock options and employee stock purchase plan |
17,664 | | | | | 17,664 | |||||||||||||
Excess tax benefits (deficiency) from stock-based compensation |
2,389 | | | | | 2,389 | |||||||||||||
Payment of debt financing and stock issuance costs |
(2,037 | ) | (5,657 | ) | (750 | ) | (262 | ) | | (8,706 | ) | ||||||||
| | | | | | | | | | | | | | | | | | | |
Cash Flows from Financing Activities-Continuing Operations |
(126,873 | ) | (451,083 | ) | (115,922 | ) | 53,142 | 659,300 | 18,564 | ||||||||||
Cash Flows from Financing Activities-Discontinued Operations |
| | | | | | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Cash Flows from Financing Activities |
(126,873 | ) | (451,083 | ) | (115,922 | ) | 53,142 | 659,300 | 18,564 | ||||||||||
Effect of exchange rates on cash and cash equivalents |
| | (4,703 | ) | (6,609 | ) | | (11,312 | ) | ||||||||||
| | | | | | | | | | | | | | | | | | | |
Increase (Decrease) in cash and cash equivalents |
1,243 | (3,106 | ) | (102,252 | ) | (18,774 | ) | | (122,889 | ) | |||||||||
Cash and cash equivalents, beginning of year |
| 13,472 | 103,346 | 126,597 | | 243,415 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents, end of year |
$ | 1,243 | $ | 10,366 | $ | 1,094 | $ | 107,823 | $ | | $ | 120,526 | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
122
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
5. Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
|
Year Ended December 31, 2014 | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Parent | Guarantors |
Canada
Company |
Non-
Guarantors |
Eliminations | Consolidated | |||||||||||||
Cash Flows from Operating Activities: |
|||||||||||||||||||
Cash Flows from Operating Activities-Continuing Operations |
$ | (192,058 | ) | $ | 452,577 | $ | 55,538 | $ | 156,891 | $ | | $ | 472,948 | ||||||
Cash Flows from Operating Activities-Discontinued Operations |
| | | | | | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Cash Flows from Operating Activities |
(192,058 | ) | 452,577 | 55,538 | 156,891 | | 472,948 | ||||||||||||
Cash Flows from Investing Activities: |
|||||||||||||||||||
Capital expenditures |
| (217,924 | ) | (6,877 | ) | (137,123 | ) | | (361,924 | ) | |||||||||
Cash paid for acquisitions, net of cash acquired |
| (3,371 | ) | (29,016 | ) | (95,706 | ) | | (128,093 | ) | |||||||||
Intercompany loans to subsidiaries |
1,307,133 | 112,845 | | | (1,419,978 | ) | | ||||||||||||
Investment in subsidiaries |
(48,203 | ) | (48,203 | ) | | | 96,406 | | |||||||||||
Additions to customer relationship and acquisition costs |
| (26,788 | ) | (2,140 | ) | (5,519 | ) | | (34,447 | ) | |||||||||
Proceeds from sales of property and equipment and other, net (including real estate) |
| 2,641 | 1,871 | 39,974 | | 44,486 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Cash Flows from Investing Activities-Continuing Operations |
1,258,930 | (180,800 | ) | (36,162 | ) | (198,374 | ) | (1,323,572 | ) | (479,978 | ) | ||||||||
Cash Flows from Investing Activities-Discontinued Operations |
| | | | | | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Cash Flows from Investing Activities |
1,258,930 | (180,800 | ) | (36,162 | ) | (198,374 | ) | (1,323,572 | ) | (479,978 | ) | ||||||||
Cash Flows from Financing Activities: |
|||||||||||||||||||
Repayment of revolving credit and term loan facilities and other debt |
| (7,949,523 | ) | (667,505 | ) | (207,683 | ) | | (8,824,711 | ) | |||||||||
Proceeds from revolving credit and term loan facilities and other debt |
| 8,327,608 | 645,848 | 311,731 | | 9,285,187 | |||||||||||||
Early retirement of senior subordinated notes |
(566,352 | ) | | | | | (566,352 | ) | |||||||||||
Net proceeds from sales of senior notes |
| | | 642,417 | | 642,417 | |||||||||||||
Debt financing (repayment to) and equity contribution from (distribution to) noncontrolling interests, net |
| 5,716 | | (20,486 | ) | | (14,770 | ) | |||||||||||
Intercompany loans from parent |
| (708,935 | ) | 5,866 | (716,909 | ) | 1,419,978 | | |||||||||||
Equity contribution from parent |
| 48,203 | | 48,203 | (96,406 | ) | | ||||||||||||
Parent cash dividends |
(542,298 | ) | | | | | (542,298 | ) | |||||||||||
Proceeds from exercise of stock options and employee stock purchase plan |
44,290 | | | | | 44,290 | |||||||||||||
Excess tax deficiency from stock-based compensation |
(60 | ) | | | | | (60 | ) | |||||||||||
Payment of debt financing costs and stock issuance costs |
(1,296 | ) | (499 | ) | (12 | ) | (2,039 | ) | | (3,846 | ) | ||||||||
| | | | | | | | | | | | | | | | | | | |
Cash Flows from Financing Activities-Continuing Operations |
(1,065,716 | ) | (277,430 | ) | (15,803 | ) | 55,234 | 1,323,572 | 19,857 | ||||||||||
Cash Flows from Financing Activities-Discontinued Operations |
| | | | | | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Cash Flows from Financing Activities |
(1,065,716 | ) | (277,430 | ) | (15,803 | ) | 55,234 | 1,323,572 | 19,857 | ||||||||||
Effect of exchange rates on cash and cash equivalents |
| | 312 | (7,732 | ) | | (7,420 | ) | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Increase (Decrease) in cash and cash equivalents |
1,156 | (5,653 | ) | 3,885 | 6,019 | | 5,407 | ||||||||||||
Cash and cash equivalents, beginning of year |
1,243 | 10,366 | 1,094 | 107,823 | | 120,526 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents, end of year |
$ | 2,399 | $ | 4,713 | $ | 4,979 | $ | 113,842 | $ | | $ | 125,933 | |||||||
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
123
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
6. Acquisitions
We account for acquisitions using the acquisition method of accounting, and, accordingly, the assets and liabilities acquired were recorded at their estimated fair values and the results of operations for each acquisition have been included in our consolidated results from their respective acquisition dates. Cash consideration for our various acquisitions was primarily provided through borrowings under our credit facilities and cash equivalents on-hand. The unaudited pro forma results of operations (including revenue and earnings) for the current and prior periods are not presented due to the insignificant impact of the 2012, 2013 and 2014 acquisitions on our consolidated results of operations. Noteworthy acquisitions are as follows:
In April 2012, in order to enhance our existing operations in Brazil, we acquired the stock of Grupo Store, a storage rental and records management and data protection business in Brazil with locations in Sao Paulo, Rio de Janeiro, Porto Alegre and Recife, for a purchase price of approximately $79,000 ($75,000, net of cash acquired). Included in the purchase price is approximately $8,000 held in escrow to secure a working capital adjustment and the indemnification obligations of the former owners of the business ("Sellers") to IMI. In 2013, approximately $1,500 of the escrow funds were released to the Sellers in connection with the final working capital adjustment. Unless paid to us in accordance with the terms of the agreement, all amounts remaining in escrow after any indemnification payments are paid to the Sellers in four annual installments, commencing in April 2014.
In May 2012, we acquired a controlling interest of our joint venture in Switzerland (Sispace AG), which provides storage rental and records and information management services, in a stock transaction for a cash purchase price of approximately $21,600. The carrying value of the 15% interest that we previously held and accounted for under the equity method of accounting amounted to approximately $1,700 as of the date of acquisition, and the fair value on the date of the acquisition of such interest was approximately $2,700. This resulted in a gain being recorded to other income (expense), net of approximately $1,000 in the second quarter of 2012. The fair value of our previously held equity interest was derived by reducing the total estimated consideration for the controlling interest purchased by 30%, which represents management's estimate of the control premium paid, in order to derive the fair value of $2,700 for the 15% noncontrolling equity interest which we previously held. We determined the 30% control premium was appropriate after considering the size and location of the business acquired, the potential future profits expected to be generated by the Swiss entity and other publicly available market data.
In May 2013, in order to enhance our existing operations in the United States, we acquired a storage rental and records management business in Texas with locations in Michigan, Texas and Florida, in a cash transaction for a purchase price of approximately $25,000.
In June 2013, in order to enhance our existing operations in Brazil, we acquired the stock of Archivum Comercial Ltda. and AMG Comercial Ltda., storage rental and records management businesses in Sao Paulo, Brazil, in a single transaction for an aggregate purchase price of approximately $29,000. Included in the purchase price is approximately $2,900 held in escrow to secure a post-closing working capital adjustment and the indemnification obligations of the former owners of the businesses to us, to be released in annual installments through 2017.
124
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
6. Acquisitions (Continued)
In September 2013, in order to enhance our existing operations in Latin America, we acquired certain entities with operations in Colombia and Peru. We acquired the stock of G4S Secure Data Solutions Colombia S.A.S. and G4S Document Delivery S.A.S (collectively, "G4S"). G4S, a storage rental and records management business with operations in Bogota, Cali, Medellin and Pereira, Colombia, was acquired in a single transaction for an aggregate purchase price of approximately $54,000. We also acquired the stock of File Service S.A., a storage rental and records management business in Peru, for a purchase price of approximately $16,000.
In October 2013, in order to enhance our existing operations in the United States, we acquired Cornerstone Records Management, LLC and its affiliates, a national, full solution records and information-management company, in a cash transaction for a purchase price of approximately $191,000. Included in the purchase price is approximately $9,000 held in escrow to secure indemnification obligations and certain working capital adjustments.
In January 2014, in order to enhance our existing operations in Australia, we acquired the stock of Tape Management Services Pty Ltd, a storage and data management company with operations in Australia, for approximately $15,300.
In February 2014, in order to enhance our existing operations in Turkey, we acquired the stock of RM Arşiv Yönetim Hizmetleri Ticaret Anonim Şirketi, a storage rental and records management business with operations in Turkey, for approximately $21,200, of which $16,750 was paid in the first quarter of 2014, with the remainder paid in the first quarter of 2015.
In April 2014, in order to enhance our existing operations in Poland, we acquired the stock of OSG Polska sp. z.o.o., a storage rental and records management business with operations in Poland, for approximately $13,700.
In October 2014, in order to enhance our existing operations in Brazil, we acquired the stock of Keepers Brasil Ltda, a storage rental and data management business with operations in Sao Paulo, Brazil, for approximately $46,200. The purchase price includes $5,425 held in escrow to secure indemnification obligations of the former owners of the business to us.
In December 2014, in order to enhance our North American records management operations, we acquired the stock of Canadian-based Securit Records Management for approximately $29,500. Included in the purchase price is approximately $1,300 held in escrow to secure indemnification obligations and certain working capital adjustments.
125
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
6. Acquisitions (Continued)
A summary of the cumulative consideration paid and the allocation of the purchase price paid of all of the acquisitions in each respective year is as follows:
|
2012 | 2013 | 2014 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Cash Paid (gross of cash acquired) |
$ | 131,972 | $ | 321,121 | (1) | $ | 134,301 | (1) | ||
Fair Value of Previously Held Equity Interest |
4,265 | | 794 | |||||||
Fair Value of Noncontrolling Interest |
1,000 | | | |||||||
| | | | | | | | | | |
Total Consideration |
137,237 | 321,121 | 135,095 | |||||||
Fair Value of Identifiable Assets Acquired: |
||||||||||
Cash, Accounts Receivable, Prepaid Expenses, |
||||||||||
Deferred Income Taxes and Other |
18,998 | 28,532 | 15,098 | |||||||
Property, Plant and Equipment(2) |
11,794 | 44,681 | 23,269 | |||||||
Customer Relationship Intangible Assets(3) |
59,479 | 173,733 | 60,172 | |||||||
Other Assets |
4,620 | 68 | 3,342 | |||||||
Liabilities Assumed and Deferred Income Taxes(4) |
(15,947 | ) | (67,645 | ) | (50,903 | ) | ||||
| | | | | | | | | | |
Total Fair Value of Identifiable Net Assets Acquired |
78,944 | 179,369 | 50,978 | |||||||
| | | | | | | | | | |
Goodwill Initially Recorded |
$ | 58,293 | $ | 141,752 | $ | 84,117 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Allocations of the purchase price paid for certain acquisitions made in 2014 were based on estimates of the fair value of net assets acquired and are subject to adjustment as additional information becomes available to us. We are not aware of any information that would indicate that the final purchase price allocations for these 2014 acquisitions will differ meaningfully from preliminary estimates. The purchase price allocations of these 2014 acquisitions are subject to finalization of the assessment of the fair value of intangible assets (primarily customer relationship intangible assets), property, plant and equipment (primarily racking structures), operating leases, contingencies and income taxes (primarily deferred income taxes).
In September 2014, we purchased our joint venture partners' noncontrolling interests in the businesses we operate in Russia, Ukraine and Denmark, which we had previously consolidated. The
126
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
6. Acquisitions (Continued)
purchase price of approximately $24,500 is comprised of $17,900 paid at closing, $2,100 payable in 2017 and $4,500 payable in 2020. The components of the purchase price payable in 2017 and 2020 are reflected as non-cash items within our Consolidated Statement of Cash Flows for the year ended December 31, 2014. Of the $17,900 paid at closing, approximately $11,950 was associated with the underlying shares owned by our joint venture partners and approximately $5,950 was associated with the payment of outstanding loans between the joint venture and the joint venture partners.
7. Income Taxes
As noted previously, on June 25, 2014, we announced that we received the favorable PLRs from the IRS necessary for our conversion to a REIT. In the PLRs, the IRS addressed and favorably ruled on our assets and revenue model, including regarding our steel racking structures as real estate for REIT purposes under the Internal Revenue Code of 1986, as amended (the "Code"), our global operations and our transition plans from a C corporation to a REIT. The PLRs are subject to certain qualifications and are based upon certain representations and statements made by us. If such representations and statements are untrue or incomplete in any material respect (including as a result of a material change in relevant facts), we may not be able to rely on the PLRs. After receipt of the PLRs, our board of directors unanimously approved our conversion to a REIT for our taxable year beginning January 1, 2014.
As a REIT, we are generally permitted to deduct from our federal taxable income the dividends we pay to our stockholders. The income represented by such dividends is not subject to federal taxation at the entity level but is taxed, if at all, at the stockholder level. The income of our domestic taxable REIT subsidiaries ("TRSs"), which hold our domestic operations that may not be REIT-compliant as currently operated and structured, is subject, as applicable, to federal and state corporate income tax. In addition, we and our subsidiaries continue to be subject to foreign income taxes in jurisdictions in which they hold assets or conduct operations, regardless of whether held or conducted through subsidiaries disregarded for federal tax purposes or TRSs. We will also be subject to a separate corporate income tax on any gains recognized during a specified period (generally ten years) following the REIT conversion that are attributable to "built-in" gains with respect to the assets that we owned on January 1, 2014; this built-in gains tax will also be imposed on our depreciation recapture recognized into income in 2014 and subsequent taxable years as a result of accounting method changes commenced in our pre-REIT period. If we fail to remain qualified for taxation as a REIT, we will be subject to federal income tax at regular corporate tax rates. Even if we remain qualified for taxation as a REIT, we may be subject to some federal, state, local and foreign taxes on our income and property in addition to taxes owed with respect to our TRS operations. In particular, while state income tax regimes often parallel the federal income tax regime for REITs, many states do not completely follow federal rules and some do not follow them at all.
127
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
7. Income Taxes (Continued)
The significant components of the deferred tax assets and deferred tax liabilities are presented below:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2013 | 2014 | |||||
Deferred Tax Assets: |
|||||||
Accrued liabilities |
$ | 75,731 | $ | 22,236 | |||
Deferred rent |
25,624 | 3,144 | |||||
Net operating loss carryforwards |
81,124 | 64,718 | |||||
Foreign tax credits |
10,229 | | |||||
Stock compensation |
16,745 | | |||||
Federal benefit of unrecognized tax benefits |
20,263 | 14,859 | |||||
Foreign currency and other adjustments |
23,938 | 8,620 | |||||
Valuation allowance |
(40,278 | ) | (40,182 | ) | |||
| | | | | | | |
|
213,376 | 73,395 | |||||
Deferred Tax Liabilities: |
|||||||
Other assets, principally due to differences in amortization |
(367,936 | ) | (74,782 | ) | |||
Plant and equipment, principally due to differences in depreciation |
(168,385 | ) | (39,079 | ) | |||
| | | | | | | |
|
(536,321 | ) | (113,861 | ) | |||
| | | | | | | |
Net deferred tax liability |
$ | (322,945 | ) | $ | (40,466 | ) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
The current and noncurrent deferred tax assets (liabilities) are presented below:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2013 | 2014 | |||||
Deferred tax assets |
$ | 65,332 | $ | 16,655 | |||
Deferred tax liabilities |
(47,709 | ) | (2,463 | ) | |||
| | | | | | | |
Current deferred tax assets, net |
$ | 17,623 | $ | 14,192 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Deferred tax assets |
$ | 148,044 | $ | 56,740 | |||
Deferred tax liabilities |
(488,612 | ) | (111,398 | ) | |||
| | | | | | | |
Noncurrent deferred tax liabilities, net |
$ | (340,568 | ) | $ | (54,658 | ) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
The tax basis of REIT assets, excluding investments in TRSs, is less than the amounts reported for such assets in the accompanying Consolidated Balance Sheet by approximately $486,000 at December 31, 2014.
As of December 31, 2013, we have reclassified approximately $26,916 of long-term deferred income tax liabilities to current deferred income taxes (included within accrued expenses within current liabilities) and prepaid and other assets (included within current assets) in the accompanying Consolidated Balance Sheets related to the depreciation recapture associated with our characterization
128
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
7. Income Taxes (Continued)
of certain racking structures as real estate rather than personal property and amortization associated with other intangible assets in conjunction with our conversion to a REIT.
We have federal net operating loss carryforwards, which expire in 2021 through 2033, of $88,090 ($0, tax effected) at December 31, 2014 to reduce future federal taxable income, on which no federal tax benefit is expected to be realized. We have state net operating loss carryforwards, which expire in 2015 through 2033, of $74,439 ($112, tax effected) at December 31, 2014 to reduce future state taxable income, on which an insignificant state tax benefit is expected to be realized. We have assets for foreign net operating losses of $64,606, with various expiration dates (and in some cases no expiration date), subject to a valuation allowance of approximately 62%.
Rollforward of the valuation allowance is as follows:
Year Ended December 31,
|
Balance at
Beginning of the Year |
Charged
(Credited) to Expense |
Other
Additions |
Other
Deductions |
Balance at
End of the Year |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2012 |
$ | 72,239 | $ | 2,274 | $ | 1,537 | $ | | $ | 76,050 | ||||||
2013 |
76,050 | (27,186 | ) | | (8,586 | ) | 40,278 | |||||||||
2014 |
40,278 | 9,404 | | (9,500 | ) | 40,182 |
We receive a tax deduction upon the exercise of non-qualified stock options or upon the disqualifying disposition by employees of incentive stock options and certain shares acquired under our ESPP for the difference between the exercise price and the market price of the underlying common stock on the date of exercise or disqualifying disposition. The tax benefit for non-qualified stock options associated with our TRSs is included in the consolidated financial statements in the period in which compensation expense is recorded. The tax benefit associated with compensation expense recorded in the consolidated financial statements related to incentive stock options associated with our TRSs is recorded in the period the disqualifying disposition occurs. Incremental tax benefits (deficiencies) in excess of compensation expense recorded in the consolidated financial statements are credited (charged) directly to equity and amounted to $1,045, $2,389 and $(60) for the years ended December 31, 2012, 2013 and 2014, respectively.
The components of income (loss) from continuing operations before provision (benefit) for income taxes and (gain) loss on sale of real estate are:
|
Year Ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2013 | 2014 | |||||||
United States |
$ | 189,939 | $ | 63,930 | $ | 202,067 | ||||
Canada |
44,358 | 39,038 | 46,191 | |||||||
Other Foreign |
62,508 | 56,903 | (24,885 | ) | ||||||
| | | | | | | | | | |
|
$ | 296,805 | $ | 159,871 | $ | 223,373 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
129
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
7. Income Taxes (Continued)
The provision (benefit) for income taxes consists of the following components:
|
Year Ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2013 | 2014 | |||||||
Federalcurrent |
$ | 133,824 | $ | 92,237 | $ | 118,314 | ||||
Federaldeferred |
(57,166 | ) | (64,441 | ) | (214,132 | ) | ||||
Statecurrent |
25,384 | 10,152 | 28,034 | |||||||
Statedeferred |
(15,134 | ) | (8,056 | ) | (47,814 | ) | ||||
Foreigncurrent |
32,297 | 59,170 | 27,167 | |||||||
Foreigndeferred |
(4,901 | ) | (26,935 | ) | (8,844 | ) | ||||
| | | | | | | | | | |
|
$ | 114,304 | $ | 62,127 | $ | (97,275 | ) | |||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
A reconciliation of total income tax expense and the amount computed by applying the federal income tax rate of 35% to income from continuing operations before provision (benefit) for income taxes and (gain) loss on sale of real estate for the years ended December 31, 2012, 2013 and 2014, respectively, is as follows:
|
Year Ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2013 | 2014 | |||||||
Computed "expected" tax provision |
$ | 103,882 | $ | 55,955 | $ | 78,181 | ||||
Changes in income taxes resulting from: |
||||||||||
Tax adjustment relating to REIT |
| | (63,333 | ) | ||||||
Deferred tax adjustment and other taxes due to REIT conversion |
| | (182,853 | ) | ||||||
State taxes (net of federal tax benefit) |
6,923 | 4,384 | 2,207 | |||||||
Increase in valuation allowance (net operating losses) |
9,045 | 2,832 | 9,404 | |||||||
Decrease in valuation allowance (foreign tax credits) |
(6,771 | ) | (30,018 | ) | | |||||
Foreign repatriation |
| 44,751 | 46,356 | |||||||
Foreign restructuring |
| 17,691 | | |||||||
Impairment of assets and other transaction costs |
3,045 | 6,576 | 2,869 | |||||||
Reserve accrual (reversal) and audit settlements (net of federal tax benefit) |
8,266 | (16,322 | ) | 3,175 | ||||||
Foreign tax rate differential |
(30,798 | ) | (33,852 | ) | (9,496 | ) | ||||
Disallowed foreign interest, Subpart F income, and other foreign taxes |
15,242 | 9,708 | 12,502 | |||||||
Other, net |
5,470 | 422 | 3,713 | |||||||
| | | | | | | | | | |
Provision (Benefit) for Income Taxes |
$ | 114,304 | $ | 62,127 | $ | (97,275 | ) | |||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Our effective tax rates for the years ended December 31, 2012, 2013 and 2014 were 38.5%, 38.9% and (43.5)%, respectively. Our effective tax rate is subject to variability in the future due to, among other items: (1) changes in the mix of income between our qualified REIT subsidiaries and our TRSs; (2) tax law changes; (3) volatility in foreign exchange gains (losses); (4) the timing of the establishment
130
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
7. Income Taxes (Continued)
and reversal of tax reserves; and (5) our ability to utilize foreign tax credits and net operating losses that we generate.
The primary reconciling items between the federal statutory rate of 35% and our overall effective tax rate for the year ended December 31, 2012 were differences in the rates of tax at which our foreign earnings are subject, including foreign exchange gains and losses in different jurisdictions with different tax rates and state income taxes (net of federal tax benefit). During the year ended December 31, 2012, foreign currency gains were recorded in lower tax jurisdictions associated with our marking-to-market of intercompany loan positions while foreign currency losses were recorded in higher tax jurisdictions associated with our marking-to-market of debt and derivative instruments, which lowered our 2012 effective tax rate by 2.2%. The primary reconciling items between the federal statutory rate of 35% and our overall effective tax rate for the year ended December 31, 2013 were the impact from the repatriation discussed below, which increased our 2013 effective tax rate by 13.1%, and state income taxes (net of federal tax benefit). These expenses were partially offset by a favorable impact provided by the recognition of certain previously unrecognized tax benefits due to expirations of statute of limitation periods and settlements with tax authorities in various jurisdictions and differences in the rates of tax at which our foreign earnings are subject, including foreign exchange gains and losses in different jurisdictions with different tax rates.
During 2013, we completed a plan to utilize both current and carryforward foreign tax credits by repatriating approximately $252,700 (approximately $65,200 of which was previously subject to United States taxes) from our foreign earnings. Due to uncertainty in our ability to fully utilize foreign tax credit carryforwards, we previously did not recognize a full benefit for such foreign tax credit carryforwards in our tax provision. As a result, we recorded an increase in our tax provision from continuing operations in the amount of $63,504 in 2013. This increase was offset by decreases of $18,753 from current year foreign tax credits and $23,301 reversal of valuation allowances related to foreign tax credit carryforwards, resulting in a net increase of $21,450 in our tax provision from continuing operations.
On September 13, 2013, the United States Department of the Treasury and the IRS released final tangible property regulations under Sections 162(a) and 263(a) of the Code regarding the deduction and capitalization of expenditures related to tangible property. In addition, proposed regulations under Section 168 of the Code regarding dispositions of tangible property have also been released. These final and proposed regulations are generally effective for our tax year beginning on January 1, 2014. Early adoption was available, and we adopted the regulations in 2013. The impact from these regulations did not have a material impact on our consolidated results of operations, cash flows and financial position.
As a result of our REIT conversion, we recorded a net tax benefit of $212,151 during the year ended December 31, 2014 for the revaluation of certain deferred tax assets and liabilities associated with the REIT conversion. In 2014, we recorded an increase to the tax provision of $29,298 associated with tax accounting method changes consistent with our REIT conversion, primarily affected through the filing of amended tax returns. The primary other reconciling items between the federal statutory rate of 35% and our overall effective tax rate during the year ended December 31, 2014 was an increase of $46,356 in our tax provision from the repatriation discussed below and other net tax adjustments related to the REIT conversion, including a tax benefit of $63,333 primarily related to the
131
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
7. Income Taxes (Continued)
dividends paid deduction. As a REIT, we are entitled to a deduction for dividends paid, resulting in a substantial reduction of federal income tax expense. As a REIT, substantially all of our income tax expense will be incurred based on the earnings generated by our foreign subsidiaries and our domestic TRSs.
The following table presents a reconciliation of significant components of deferred tax assets and liabilities from December 31, 2013 to December 31, 2014:
|
December 31,
2013 |
Revaluation Associated
with REIT Conversion |
Current Year
Activity(1) |
December 31,
2014 |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Deferred Tax Assets |
|||||||||||||
Accrued liabilities |
$ | 75,731 | $ | (48,087 | ) | $ | (5,408 | ) | $ | 22,236 | |||
Deferred rent |
25,624 | (25,749 | ) | 3,269 | 3,144 | ||||||||
Net operating loss carryforwards |
81,124 | (34,912 | ) | 18,506 | 64,718 | ||||||||
Foreign tax credits |
10,229 | (9,207 | ) | (1,022 | ) | | |||||||
Stock compensation |
16,745 | (17,942 | ) | 1,197 | | ||||||||
Federal benefit of unrecognized tax benefits |
20,263 | | (5,404 | ) | 14,859 | ||||||||
Unrealized foreign currency and other foreign adjustments |
23,938 | (34,552 | ) | 19,234 | 8,620 | ||||||||
Valuation allowance |
(40,278 | ) | | 96 | (40,182 | ) | |||||||
| | | | | | | | | | | | | |
|
213,376 | (170,449 | ) | 30,468 | 73,395 | ||||||||
| | | | | | | | | | | | | |
Deferred Tax Liabilities |
|||||||||||||
Other assets, principally due to differences in amortization |
(367,936 | ) | 273,268 | 19,886 | (74,782 | ) | |||||||
Plant and equipment, principally due to differences in depreciation |
(168,385 | ) | 109,332 | 19,974 | (39,079 | ) | |||||||
| | | | | | | | | | | | | |
|
(536,321 | ) | 382,600 | 39,860 | (113,861 | ) | |||||||
| | | | | | | | | | | | | |
Net Deferred Tax Asset (Liability) |
$ | (322,945 | ) | $ | 212,151 | $ | 70,328 | $ | (40,466 | ) | |||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
132
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
7. Income Taxes (Continued)
We had not previously provided incremental federal and certain state income taxes on net tax over book outside basis differences related to the earnings of our foreign subsidiaries because our intent, prior to our conversion to a REIT, was to reinvest our current and future undistributed earnings of certain foreign subsidiaries indefinitely outside the United States. As a result of our conversion to a REIT, it is no longer our intent to indefinitely reinvest our current and future undistributed foreign earnings outside the United States, and, therefore, during 2014, we recognized an increase in our tax provision from continuing operations in the amount of $46,356, representing incremental federal and state income taxes and foreign withholding taxes on such foreign earnings. As a REIT, future repatriation of incremental undistributed earnings of our foreign subsidiaries will not be subject to federal or state income tax, with the exception of foreign withholding taxes in limited instances; however, such future repatriations will require distribution in accordance with REIT distribution rules, and any such distribution may then be taxable, as appropriate, at the stockholder level.
The evaluation of an uncertain tax position is a two-step process. The first step is a recognition process whereby we determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The second step is a measurement process whereby a tax position that meets the more likely than not recognition threshold is calculated to determine the amount of benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.
We have elected to recognize interest and penalties associated with uncertain tax positions as a component of the provision (benefit) for income taxes in the accompanying Consolidated Statements of Operations. We recorded an increase of $1,257, $1,459 and $1,462 for gross interest and penalties for the years ended December 31, 2012, 2013 and 2014, respectively. We had $4,874 and $5,884 accrued for the payment of interest and penalties as of December 31, 2013 and 2014, respectively.
A summary of tax years that remain subject to examination by major tax jurisdictions is as follows:
Tax Years
|
Tax Jurisdiction | |
---|---|---|
See Below |
United StatesFederal and State | |
2007 to present |
Canada | |
2009 to present |
United Kingdom |
The normal statute of limitations for United States federal tax purposes is three years from the date the tax return is filed. The 2011, 2012 and 2013 tax years remain subject to examination for United States federal tax purposes as well as net operating loss carryforwards utilized in these years. We utilized net operating losses from 2000, 2001 and 2008 in our federal income tax returns for these tax years. The normal statute of limitations for state purposes is between three to five years. However, certain of our state statute of limitations remain open for periods longer than this when audits are in progress.
We are subject to income taxes in the United States and numerous foreign jurisdictions. We are subject to examination by various tax authorities in jurisdictions in which we have business operations or a taxable presence. We regularly assess the likelihood of additional assessments by tax authorities
133
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
7. Income Taxes (Continued)
and provide for these matters as appropriate. As of December 31, 2013, we had $51,146 of reserves related to uncertain tax positions included in other long-term liabilities in the accompanying Consolidated Balance Sheet. As of December 31, 2014, we had $55,951 of reserves related to uncertain tax positions, of which $53,078 and $2,873 is included in other long-term liabilities and deferred income taxes, respectively, in the accompanying Consolidated Balance Sheet. Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in changes in our estimates.
A reconciliation of unrecognized tax benefits is as follows:
Gross tax contingenciesDecember 31, 2011 |
$ | 31,408 | ||
Gross additions based on tax positions related to the current year |
6,598 | |||
Gross additions for tax positions of prior years |
3,912 | |||
Gross reductions for tax positions of prior years |
(427 | ) | ||
Lapses of statutes |
(2,829 | ) | ||
Settlements |
(1,099 | ) | ||
| | | | |
Gross tax contingenciesDecember 31, 2012 |
$ | 37,563 | ||
Gross additions based on tax positions related to the current year |
5,985 | |||
Gross additions for tax positions of prior years |
20,275 | |||
Gross reductions for tax positions of prior years |
(1,370 | ) | ||
Lapses of statutes |
(1,312 | ) | ||
Settlements |
(9,995 | ) | ||
| | | | |
Gross tax contingenciesDecember 31, 2013 |
$ | 51,146 | ||
Gross additions based on tax positions related to the current year |
3,984 | |||
Gross additions for tax positions of prior years |
13,717 | |||
Gross reductions for tax positions of prior years |
(2,699 | ) | ||
Lapses of statutes |
(5,350 | ) | ||
Settlements |
(4,847 | ) | ||
| | | | |
Gross tax contingenciesDecember 31, 2014 |
$ | 55,951 | ||
| | | | |
| | | | |
| | | | |
The reversal of these reserves of $55,951 ($41,990 net of federal tax benefit) as of December 31, 2014 will be recorded as a reduction of our income tax provision if sustained. We believe that it is reasonably possible that an amount up to approximately $6,560 of our unrecognized tax positions may be recognized by the end of 2015 as a result of a lapse of statute of limitations or upon closing and settling significant audits in various worldwide jurisdictions.
134
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
8. Quarterly Results of Operations (Unaudited)
Quarter Ended
|
March 31 | June 30 | Sept. 30 | Dec. 31 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
|||||||||||||
Total revenues |
$ | 746,706 | $ | 754,396 | $ | 755,314 | $ | 768,207 | |||||
Operating income (loss) |
122,517 | 129,697 | 139,958 | 97,075 | |||||||||
Income (loss) from continuing operations |
18,152 | 27,340 | 5,330 | 48,339 | |||||||||
Total income (loss) from discontinued operations |
2,184 | (98 | ) | (571 | ) | (684 | ) | ||||||
Net income (loss) |
20,336 | 27,242 | 4,759 | 47,655 | |||||||||
Net income (loss) attributable to Iron Mountain Incorporated |
19,188 | 26,366 | 3,849 | 47,059 | (1) | ||||||||
Earnings (losses) per Share-Basic |
|||||||||||||
Income (loss) per share from continuing operations |
0.10 | 0.14 | 0.03 | 0.25 | |||||||||
Total income (loss) per share from discontinued operations |
0.01 | | | | |||||||||
Net income (loss) per share attributable to Iron Mountain |
|||||||||||||
Incorporated |
0.10 | 0.14 | 0.02 | 0.25 | |||||||||
Earnings (losses) per Share-Diluted |
|||||||||||||
Income (loss) per share from continuing operations |
0.09 | 0.14 | 0.03 | 0.25 | |||||||||
Total income (loss) per share from discontinued operations |
0.01 | | | | |||||||||
Net income (loss) per share attributable to Iron Mountain |
|||||||||||||
Incorporated |
0.10 | 0.14 | 0.02 | 0.24 | |||||||||
2014 |
|||||||||||||
Total revenues |
$ | 770,126 | $ | 786,892 | $ | 782,697 | $ | 777,978 | |||||
Operating income (loss) |
132,616 | 147,290 | 141,476 | 127,895 | |||||||||
Income (loss) from continuing operations |
42,721 | 272,702 | 858 | 12,674 | |||||||||
Total (loss) income from discontinued operations |
(612 | ) | (326 | ) | | 729 | |||||||
Net income (loss) |
42,109 | 272,376 | 858 | 13,403 | |||||||||
Net income (loss) attributable to Iron Mountain Incorporated |
41,667 | 271,637 | 66 | 12,749 | (2) | ||||||||
Earnings (losses) per Share-Basic |
|||||||||||||
Income (loss) per share from continuing operations |
0.22 | 1.42 | | 0.06 | |||||||||
Total (loss) income per share from discontinued operations |
| | | | |||||||||
Net income (loss) per share attributable to Iron Mountain |
|||||||||||||
Incorporated |
0.22 | 1.41 | | 0.06 | |||||||||
Earnings (losses) per Share-Diluted |
|||||||||||||
Income (loss) per share from continuing operations |
0.22 | 1.41 | | 0.06 | |||||||||
Total (loss) income per share from discontinued operations |
| | | | |||||||||
Net income (loss) per share attributable to Iron Mountain Incorporated |
0.22 | 1.40 | | 0.06 |
135
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
8. Quarterly Results of Operations (Unaudited) (Continued)
by an increase in foreign exchange transaction losses of approximately $11,000. Offsetting these benefits was a decrease in operating income of approximately $42,900. The decrease in operating income is primarily attributable to: (1) $18,700 of restructuring costs associated with our organizational realignment, (2) $11,200 of facilities costs primarily associated with facility consolidation, (3) $8,100 of other cost increases, including costs associated with recent acquisitions and executing our strategy, (4) $3,600 of increased depreciation and amortization, primarily related to business acquisitions, (5) $3,000 in sales, marketing and account management costs within our North American Records and Information Management Business and North American Data Management segments (primarily associated with sales commissions), (6) $2,200 of increased bad debt expense and (7) $2,000 of charitable contributions, partially offset by a $7,100 decrease in REIT Costs (defined at Note 9) incurred in the fourth quarter compared to the third quarter of 2013.
9. Segment Information
As a result of certain organizational realignments effective January 1, 2014, we evaluated changes to our internal financial reporting to better align our internal reporting to how we will manage our business going forward. This evaluation resulted in changes to our reportable segments effective January 1, 2014. As a result of the changes to our reportable segments, the former North American Business segment was separated into two unique reportable segments, which we refer to as (1) North American Records and Information Management Business segment and (2) North American Data Management Business segment. In addition, the Emerging Businesses segment, which was previously reported as a component of the former North American Business segment, is now reported as a component of the Corporate and Other segment. As a result, we have restated previously reported segment information.
Our four reportable operating segments are described as follows:
136
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
9. Segment Information (Continued)
documents for corporate customers ("Records Management"); information destruction services ("Destruction"); DMS; Fulfillment Services; and Intellectual Property Management.
137
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
9. Segment Information (Continued)
An analysis of our business segment information and reconciliation to the accompanying Consolidated Financial Statements is as follows:
|
North
American Records & Information Management Business |
North
American Data Management Business |
International
Business |
Corporate &
Other |
Total
Consolidated |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2012 |
||||||||||||||||
Total Revenues |
$ | 1,780,299 | $ | 404,253 | $ | 806,692 | $ | 12,711 | $ | 3,003,955 | ||||||
Depreciation and Amortization |
163,375 | 17,841 | 103,393 | 31,735 | 316,344 | |||||||||||
Depreciation |
151,471 | 17,034 | 80,493 | 31,600 | 280,598 | |||||||||||
Amortization |
11,904 | 807 | 22,900 | 135 | 35,746 | |||||||||||
Adjusted OIBDA |
665,655 | 243,908 | 173,620 | (172,266 | ) | 910,917 | ||||||||||
Total Assets(1) |
3,543,166 | 644,952 | 1,854,050 | 316,171 | 6,358,339 | |||||||||||
Expenditures for Segment Assets |
138,837 | 26,243 | 191,360 | 38,249 | 394,689 | |||||||||||
Capital Expenditures |
98,169 | 13,106 | 91,159 | 38,249 | 240,683 | |||||||||||
Cash Paid for Acquisitions, Net of Cash Acquired |
21,770 | 6,356 | 97,008 | | 125,134 | |||||||||||
Additions to Customer Relationship and Acquisition Costs |
18,898 | 6,781 | 3,193 | | 28,872 | |||||||||||
2013 |
||||||||||||||||
Total Revenues |
1,769,233 | 396,519 | 845,599 | 13,272 | 3,024,623 | |||||||||||
Depreciation and Amortization |
165,097 | 19,956 | 105,485 | 31,499 | 322,037 | |||||||||||
Depreciation |
150,557 | 19,652 | 81,279 | 31,368 | 282,856 | |||||||||||
Amortization |
14,540 | 304 | 24,206 | 131 | 39,181 | |||||||||||
Adjusted OIBDA |
645,575 | 235,380 | 206,003 | (192,377 | ) | 894,581 | ||||||||||
Total Assets(1) |
3,687,865 | 690,507 | 2,015,412 | 259,221 | 6,653,005 | |||||||||||
Expenditures for Segment Assets |
319,419 | 20,678 | 218,903 | 75,586 | 634,586 | |||||||||||
Capital Expenditures |
96,545 | 12,929 | 102,235 | 75,586 | 287,295 | |||||||||||
Cash Paid for Acquisitions, Net of Cash Acquired |
205,251 | 6,791 | 105,058 | | 317,100 | |||||||||||
Additions to Customer Relationship and Acquisition Costs |
17,623 | 958 | 11,610 | | 30,191 | |||||||||||
2014 |
||||||||||||||||
Total Revenues |
1,795,361 | 390,207 | 918,545 | 13,580 | 3,117,693 | |||||||||||
Depreciation and Amortization |
177,097 | 21,770 | 119,685 | 34,591 | 353,143 | |||||||||||
Depreciation |
158,122 | 21,458 | 90,404 | 34,573 | 304,557 | |||||||||||
Amortization |
18,975 | 312 | 29,281 | 18 | 48,586 | |||||||||||
Adjusted OIBDA |
690,419 | 224,696 | 214,891 | (204,209 | ) | 925,797 | ||||||||||
Total Assets(1) |
3,657,366 | 653,275 | 1,989,642 | 270,059 | 6,570,342 | |||||||||||
Expenditures for Segment Assets |
198,651 | 24,387 | 233,767 | 67,659 | 524,464 | |||||||||||
Capital Expenditures |
145,199 | 18,076 | 132,468 | 66,181 | 361,924 | |||||||||||
Cash Paid for Acquisitions, Net of Cash Acquired |
26,450 | 5,863 | 95,780 | | 128,093 | |||||||||||
Additions to Customer Relationship and Acquisition Costs |
27,002 | 448 | 5,519 | 1,478 | 34,447 |
The accounting policies of the reportable segments are the same as those described in Note 2. Adjusted OIBDA for each segment is defined as operating income before depreciation, amortization, intangible impairments, (gain) loss on disposal/write-down of property, plant and equipment, net (excluding real estate) and REIT Costs (defined below) directly attributable to the segment. Internally, we use Adjusted OIBDA as the basis for evaluating the performance of, and allocating resources to, our operating segments.
138
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
9. Segment Information (Continued)
A reconciliation of Adjusted OIBDA to income (loss) from continuing operations before provision (benefit) for income taxes and (gain) loss on sale of real estate on a consolidated basis is as follows:
|
Year Ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2013 | 2014 | |||||||
Adjusted OIBDA |
$ | 910,917 | $ | 894,581 | $ | 925,797 | ||||
Less: Depreciation and Amortization |
316,344 | 322,037 | 353,143 | |||||||
(Gain) Loss on Disposal/Write-down of Property, Plant and Equipment (Excluding Real Estate), Net |
4,661 | 430 | 1,065 | |||||||
REIT Costs(1) |
34,446 | 82,867 | 22,312 | |||||||
Interest Expense, Net |
242,599 | 254,174 | 260,717 | |||||||
Other Expense (Income), Net |
16,062 | 75,202 | 65,187 | |||||||
| | | | | | | | | | |
Income (loss) from Continuing Operations before Provision (Benefit) for Income Taxes and (Gain) Loss on Sale of Real Estate |
$ | 296,805 | $ | 159,871 | $ | 223,373 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Information as to our operations in different geographical areas is as follows:
|
Year Ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2013 | 2014 | |||||||
Revenues: |
||||||||||
United States |
$ | 1,948,679 | $ | 1,938,307 | $ | 1,967,169 | ||||
United Kingdom |
290,044 | 275,343 | 280,020 | |||||||
Canada |
248,583 | 240,716 | 231,979 | |||||||
Other International |
516,649 | 570,257 | 638,525 | |||||||
| | | | | | | | | | |
Total Revenues |
$ | 3,003,955 | $ | 3,024,623 | $ | 3,117,693 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Long-lived Assets: |
||||||||||
United States |
$ | 3,359,560 | $ | 3,645,211 | $ | 3,619,396 | ||||
United Kingdom |
529,336 | 520,255 | 474,748 | |||||||
Canada |
445,699 | 413,821 | 409,278 | |||||||
Other International |
999,652 | 1,140,111 | 1,149,201 | |||||||
| | | | | | | | | | |
Total Long-lived Assets |
$ | 5,334,247 | $ | 5,719,398 | $ | 5,652,623 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
139
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
9. Segment Information (Continued)
Information as to our revenues by product and service lines is as follows:
|
Year Ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2013 | 2014 | |||||||
Revenues: |
||||||||||
Records Management(1)(2) |
$ | 2,211,101 | $ | 2,244,494 | $ | 2,329,546 | ||||
Data Management(1)(3) |
524,627 | 527,091 | 531,516 | |||||||
Information Destruction(1)(4) |
268,227 | 253,038 | 256,631 | |||||||
| | | | | | | | | | |
Total Revenues |
$ | 3,003,955 | $ | 3,024,623 | $ | 3,117,693 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
10. Commitments and Contingencies
Most of our leased facilities are leased under various operating leases that typically have initial lease terms of five to ten years. A majority of these leases have renewal options with one or more five-year options to extend and may have fixed or Consumer Price Index escalation clauses. We also lease equipment under operating leases (primarily computers) which have an average lease life of three years. Vehicles and office equipment are also leased and have remaining lease lives ranging from one to seven years. Total rent expense under all of our operating leases was $250,986, $244,390 and $255,193 for the years ended December 31, 2012, 2013 and 2014, respectively.
Estimated minimum future lease payments (excluding common area maintenance charges) include payments for certain renewal periods at our option because failure to renew results in an economic disincentive due to significant capital expenditure costs (e.g., racking structures), thereby making it
140
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
10. Commitments and Contingencies (Continued)
reasonably assured that we will renew the lease. Such payments in effect at December 31, are as follows:
Year
|
Operating Lease
Payment |
Sublease
Income |
Capital
Leases |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
2015 |
$ | 233,428 | $ | (5,657 | ) | $ | 52,531 | |||
2016 |
220,328 | (4,458 | ) | 52,685 | ||||||
2017 |
207,027 | (3,478 | ) | 40,539 | ||||||
2018 |
190,906 | (1,361 | ) | 34,414 | ||||||
2019 |
178,728 | (729 | ) | 25,827 | ||||||
Thereafter |
1,216,193 | (986 | ) | 152,799 | ||||||
| | | | | | | | | | |
Total minimum lease payments |
$ | 2,246,610 | $ | (16,669 | ) | 358,795 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Less amounts representing interest |
(116,929 | ) | ||||||||
| | | | | | | | | | |
Present value of capital lease obligations |
$ | 241,866 | ||||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
In addition, we have certain contractual obligations related to purchase commitments which require minimum payments as follows:
Year
|
Purchase
Commitments |
|||
---|---|---|---|---|
2015 |
$ | 43,908 | ||
2016 |
19,615 | |||
2017 |
11,943 | |||
2018 |
2,188 | |||
2019 |
1,811 | |||
Thereafter |
2,310 | |||
| | | | |
|
$ | 81,775 | ||
| | | | |
| | | | |
| | | | |
We are self-insured up to certain limits for costs associated with workers' compensation claims, vehicle accidents, property and general business liabilities, and benefits paid under employee healthcare and short-term disability programs. At December 31, 2013 and 2014 there were $32,850 and $33,381, respectively, of self-insurance accruals reflected in accrued expenses of our Consolidated Balance Sheets. The measurement of these costs requires the consideration of historical cost experience and judgments about the present and expected levels of cost per claim. We account for these costs primarily through actuarial methods, which develop estimates of the undiscounted liability for claims incurred, including those claims incurred but not reported. These methods provide estimates of future ultimate claim costs based on claims incurred as of the balance sheet date.
141
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
10. Commitments and Contingencies (Continued)
We are involved in litigation from time to time in the ordinary course of business. A portion of the defense and/or settlement costs associated with such litigation is covered by various commercial liability insurance policies purchased by us and, in limited cases, indemnification from third parties. Our policy is to establish reserves for loss contingencies when the losses are both probable and reasonably estimable. We record legal costs associated with loss contingencies as expenses in the period in which they are incurred. The matters described below represent our significant loss contingencies. We have evaluated each matter and, if both probable and estimable, accrued an amount that represents our estimate of any probable loss associated with such matter. In addition, we have estimated a reasonably possible range for all loss contingencies including those described below. We believe it is reasonably possible that we could incur aggregate losses in addition to amounts currently accrued for all matters up to an additional $4,500 over the next several years, of which certain amounts would be covered by insurance or indemnity arrangements.
Since October 2001, we have provided services to the United States Government under several General Services Administration ("GSA") multiple award schedule contracts (the "Schedules"). The Schedules contain a price reductions clause ("Price Reductions Clause") that requires us to offer to reduce the prices billed under the Schedules to correspond to the prices billed to certain benchmark commercial customers. In 2011, we initiated an internal review covering the contract period commencing in October 2006, and we discovered potential non-compliance with the Price Reductions Clause. We voluntarily disclosed the potential non-compliance for that period to the GSA and its Office of Inspector General ("OIG") in June 2011.
In April 2012, the United States Government sent us a subpoena seeking information that substantially overlapped with the subjects that were covered by the voluntary disclosure process that we initiated with the GSA and OIG in June 2011, except that the subpoena sought information dating back to 2000, and sought information about non-GSA federal and state and local customers. In June 2014, we learned that the government subpoena and investigation were the result of a pending, sealed qui tam lawsuit brought against us on behalf of the United States and the State of California. In December 2014, we settled the lawsuit. As a result of the settlement, we paid the United States Government and the State of California $44,500 and $1,250, respectively, in the fourth quarter of 2014. There was no material impact to our consolidated statement of operations in 2014 as a result of the settlement as we had previously accrued and maintained a deferred revenue liability related to this matter.
During the third quarter of 2012, we applied for an abatement of assessments from the Commonwealth of Massachusetts. The assessments, issued in the second quarter of 2012, related to a corporate excise audit of the 2004 through 2006 tax years in the aggregate amount of $8,191, including tax, interest and penalties through the assessment date. The applications for abatement were denied during the third quarter of 2012. On October 19, 2012 we filed petitions with the Massachusetts Appellate Tax Board challenging the assessments. In addition, during the second quarter of 2013,
142
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
10. Commitments and Contingencies (Continued)
Massachusetts assessed tax for the 2007 and 2008 tax years in the aggregate amount of $4,120, including tax, interest and penalties through the assessment date. The assessment is for issues consistent with those assessed in the earlier years. In the third quarter of 2013, we filed an application for abatement for the 2007 and 2008 tax years, which Massachusetts denied on October 15, 2013. On December 13, 2013, we filed a petition with the Massachusetts Appellate Tax Board to challenge the assessment for the 2007 and 2008 tax years. In February 2015, we reached a settlement agreement with the Commonwealth of Massachusetts, under which we paid $6,000 to settle the assessments related to the 2004 through 2008 tax years. Additionally, following a corporate excise audit for the 2009 through 2011 tax years, Massachusetts has issued Notices of Intention to Assess dated December 27, 2014 which set forth proposed corporate excise assessments in the aggregate amount of $1,503, including tax, interest and penalties. We intend to defend this matter vigorously at the Massachusetts Appellate Tax Board.
On November 4, 2011, we experienced a fire at a facility we leased in Aprilia, Italy. The facility primarily stored archival and inactive business records for local area businesses. Despite quick response by local fire authorities, damage to the building was extensive, and the building and its contents were a total loss. Although our warehouse legal liability insurer has reserved its rights to contest coverage related to certain types of potential claims, we believe we carry adequate insurance. We have been sued by four customers, of which three of those matters have been settled. We have also received correspondence from other customers, under various theories of liabilities. We deny any liability with respect to the fire and we have referred these claims to our warehouse legal liability insurer for an appropriate response. We do not expect that this event will have a material impact on our consolidated financial condition, results of operations or cash flows. As discussed in Note 14, we sold our Italian operations on April 27, 2012, and we indemnified the buyers related to certain obligations and contingencies associated with the fire.
Our policy related to business interruption insurance recoveries is to record gains within other (income) expense, net in our Consolidated Statements of Operations and proceeds received within cash flows from operating activities in our Consolidated Statements of Cash Flows. Such amounts are recorded in the period the cash is received. Our policy with respect to involuntary conversion of property, plant and equipment is to record any gain or loss within (gain) loss on disposal/write-down of property, plant and equipment (excluding real estate), net within operating income in our Consolidated Statements of Operations and proceeds received within cash flows from investing activities within our Consolidated Statements of Cash Flows. Losses are recorded when incurred and gains are recorded in the period when the cash received exceeds the carrying value of the related property, plant and equipment. As a result of the sale of the Italian operations, statements of operations and cash flows related to the fire are reflected as discontinued operations.
143
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
10. Commitments and Contingencies (Continued)
On February 5, 2014, we experienced a fire at a facility we own in Buenos Aires, Argentina. As a result of the quick response by local fire authorities, the fire was contained before the entire facility was destroyed and all employees were safely evacuated; however, a number of first responders lost their lives, or in some cases, were severely injured. The cause of the fire is currently being investigated. We believe we carry adequate insurance and do not expect that this event will have a material impact to our consolidated financial condition, results of operations or cash flows. Revenues from our operations at this facility represent less than 0.5% of our consolidated revenues.
11. Related Party Transactions
Paul F. Deninger, one of our directors, is a senior managing director at Evercore Group L.L.C. ("Evercore"). In May 2013, we entered into an agreement with Evercore, which was amended and restated in August 2013 (the "Evercore Engagement"), pursuant to which Evercore agreed to provide financial advisory services to us in exchange for an aggregate fee of up to $3,000. In connection with the Evercore Engagement, Mr. Deninger agreed, and Evercore represented, that Mr. Deninger would not be involved with the Evercore Engagement and would not receive any fees or direct compensation in connection with the Evercore Engagement. The Evercore Engagement was approved by the audit committee of our board of directors in accordance with our Related Persons Transaction Policy. For the years ended December 31, 2013 and 2014, we have incurred fees associated with the Evercore Engagement, including fees associated with the amendment of our Credit Agreement in August 2013 and discounts and commissions attributable to Evercore's participation as one of the underwriters in the August 2013 Offerings, as well as monthly retention fees, of $2,750 and $250, respectively.
12. 401(k) Plans
We have a defined contribution plan, which generally covers all non-union United States employees meeting certain service requirements. Eligible employees may elect to defer from 1% to 25% of compensation per pay period up to the amount allowed by the Code. In addition, IME operates a defined contribution plan, which is similar to our United States 401(k) Plan. We make matching contributions based on the amount of an employee's contribution in accordance with the plan documents. We have expensed $18,026, $19,999 and $18,306 for the years ended December 31, 2012, 2013 and 2014, respectively.
13. Stockholders' Equity Matters
On September 15, 2014, we announced the declaration by our board of directors of a special distribution of $700,000 (the "Special Distribution"), payable to stockholders of record as of September 30, 2014 (the "Record Date"). The Special Distribution represented the remaining amount of our undistributed earnings and profits attributable to all taxable periods ending on or prior to December 31, 2013, which in accordance with tax rules applicable to REIT conversions, we were required to pay to our stockholders on or before December 31, 2014 in connection with our conversion to a REIT. The Special Distribution also included certain items of taxable income that we recognized in 2014, such as depreciation recapture in respect of accounting method changes commenced in our
144
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
13. Stockholders' Equity Matters (Continued)
pre-REIT period as well as foreign earnings and profits recognized as dividend income. The Special Distribution followed an initial special distribution of $700,000 paid to stockholders in November 2012.
The Special Distribution was paid on November 4, 2014 (the "Payment Date") to stockholders of record as of the Record Date in a combination of common stock and cash. Stockholders had the right to elect to be paid their pro rata portion of the Special Distribution in all common stock or all cash, with the total cash payment to stockholders limited to no more than $140,000, or 20% of the total Special Distribution, not including cash paid in lieu of fractional shares. Based on stockholder elections, we paid $140,000 of the Special Distribution in cash, not including cash paid in lieu of fractional shares, with the balance paid in the form of common stock. Our shares of common stock were valued for purposes of the Special Distribution based upon the average closing price on the three trading days following October 24, 2014, or $35.55 per share, and as such, we issued approximately 15,750,000 shares of common stock in the Special Distribution. These shares impact weighted average shares outstanding from the date of issuance, and thus impact our earnings per share data prospectively from the Payment Date.
In November 2014, our board of directors declared a distribution of $0.255 per share (the "Catch-Up Distribution") payable on December 15, 2014 to stockholders of record on November 28, 2014. Our board of directors declared the Catch-Up Distribution because our cash distributions paid from January 2014 through July 2014 were declared and paid before our board of directors had determined that we would elect REIT status effective January 1, 2014 and were lower than they otherwise would have been if the final determination to elect REIT status effective January 1, 2014 had been prior to such distributions.
In February 2010, our board of directors adopted a dividend policy under which we have paid, and in the future intend to pay, quarterly cash dividends on our common stock. Declaration and payment of future quarterly dividends is at the discretion of our board of directors. In 2013 and 2014, our board of directors declared the following dividends:
Declaration Date
|
Dividend
Per Share |
Record Date |
Total
Amount |
Payment
Date |
||||||
---|---|---|---|---|---|---|---|---|---|---|
March 14, 2013 |
$ | 0.2700 | March 25, 2013 | $ | 51,460 | April 15, 2013 | ||||
June 6, 2013 |
0.2700 | June 25, 2013 | 51,597 | July 15, 2013 | ||||||
September 11, 2013 |
0.2700 | September 25, 2013 | 51,625 | October 15, 2013 | ||||||
December 16, 2013 |
0.2700 | December 27, 2013 | 51,683 | January 15, 2014 | ||||||
March 14, 2014 |
0.2700 | March 25, 2014 | 51,812 | April 15, 2014 | ||||||
May 28, 2014 |
0.2700 | June 25, 2014 | 52,033 | July 15, 2014 | ||||||
September 15, 2014 |
0.4750 | September 25, 2014 | 91,993 | October 15, 2014 | ||||||
September 15, 2014(1) |
3.6144 | September 30, 2014 | 700,000 | November 4, 2014 | ||||||
November 17, 2014(2) |
0.2550 | November 28, 2014 | 53,450 | December 15, 2014 | ||||||
November 17, 2014 |
0.4750 | December 5, 2014 | 99,617 | December 22, 2014 |
145
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
13. Stockholders' Equity Matters (Continued)
During the years ended December 31, 2012, 2013 and 2014, we declared distributions to our stockholders of $886,896, $206,365 and $1,048,905, respectively. These distributions represent approximately $5.12 per share, $1.08 per share and $5.37 per share for the years ended December 31, 2012, 2013 and 2014, respectively, based on the weighted average number of common shares outstanding during each respective year. For each of 2012 and 2014, total amounts distributed included Special Distributions (as described above) of $700,000, or $4.07 and $3.61 per share, respectively, associated with the Company's conversion to a REIT.
For federal income tax purposes, distributions to our stockholders are generally treated as nonqualified ordinary dividends, qualified ordinary dividends or return of capital. The IRS requires historical C corporation earnings and profits to be distributed prior to any REIT distributions, which may affect the character of each distribution to our stockholders, including whether and to what extent each distribution is characterized as a qualified or nonqualified ordinary dividend. For the years ended December 31, 2012, 2013 and 2014, the dividends we paid on our common shares were classified as follows:
|
Year Ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2013 | 2014 | |||||||
Nonqualified ordinary dividends |
0.0 | % | 0.0 | % | 26.4 | % | ||||
Qualified ordinary dividends |
100.0 | % | 100.0 | % | 56.4 | % | ||||
Return of capital |
0.0 | % | 0.0 | % | 17.2 | % | ||||
| | | | | | | | | | |
|
100.0 | % | 100.0 | % | 100.0 | % | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
In December 2013, our board of directors approved, and we entered into, a REIT Status Protection Rights Agreement (the "Rights Agreement") which provided for a dividend of one preferred stock purchase right (a "Right") for each share of our common stock outstanding on December 20, 2013. On November 18, 2014, we entered into the First Amendment to the Rights Agreement to extend the expiration of the Rights Agreement from December 9, 2014 to February 28, 2015. On January 20, 2015, in connection with the merger with our predecessor, the Rights Agreement was terminated.
14. Discontinued Operations
Digital Operations
On June 2, 2011, we sold the Digital Business to Autonomy pursuant to the Digital Sale Agreement. In the Digital Sale, Autonomy purchased (1) the shares of certain of IMI's subsidiaries through which we conducted the Digital Business and (2) certain assets of IMI and its subsidiaries relating to the Digital Business. The Digital Sale qualified as discontinued operations and, as a result, the financial position, operating results and cash flows of the Digital Business, for all periods presented, have been reported as discontinued operations for financial reporting purposes.
146
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
14. Discontinued Operations (Continued)
The table below summarizes certain results of operations of the Digital Business:
|
Year Ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2013 | 2014 | |||||||
(Loss) Income Before (Benefit) Provision for Income Taxes of Discontinued Operations |
$ | (75 | ) | $ | (958 | ) | $ | (960 | ) | |
(Benefit) Provision for Income Taxes |
(505 | ) | (429 | ) | | |||||
| | | | | | | | | | |
Income (Loss) from Discontinued Operations, Net of Tax |
$ | 430 | $ | (529 | ) | $ | (960 | ) | ||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
During the year ended December 31, 2013, we recognized a loss before provision of income taxes of discontinued operations of $958 primarily related to the write-off of certain software costs. During the year ended December 31, 2014, we recognized a loss before provision for income taxes of discontinued operations of $960, primarily related to settlements of legal matters directly related to the disposed business.
New Zealand Operations
We completed the sale of our New Zealand operations on October 3, 2011. Our New Zealand operations were previously included within the International Business segment. For all periods presented the financial position, operating results and cash flows of our New Zealand operations, including the gain on the sale, have been reported as discontinued operations for financial reporting purposes.
The table below summarizes certain results of our New Zealand operations:
|
Year Ended
December 31, |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012 | 2013 | 2014 | |||||||
(Loss) Income Before (Benefit) Provision for Income Taxes of Discontinued Operations |
$ | (88 | ) | $ | | $ | | |||
(Benefit) Provision for Income Taxes |
(34 | ) | | | ||||||
| | | | | | | | | | |
(Loss) Income from Discontinued Operations, Net of Tax |
$ | (54 | ) | $ | | $ | | |||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Italian Operations
We sold our Italian operations on April 27, 2012, and we agreed to indemnify the buyers of our Italian operations for certain possible obligations and contingencies associated with the fire in Italy discussed more fully in Note 10.f. Our Italian operations were previously included within the International Business segment. For all periods presented, the financial position, operating results and cash flows of our Italian operations, including the loss on the sale, have been reported as discontinued operations for financial reporting purposes.
147
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
14. Discontinued Operations (Continued)
The table below summarizes certain results of our Italian operations:
|
Year Ended December 31, | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
2012(1) | 2013(2) | 2014(2) | |||||||
Total Revenue |
$ | 2,138 | $ | | $ | | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
(Loss) Income Before (Benefit) Provison for Income Taxes of Discontinued Operations |
$ | (8,692 | ) | $ | 2,290 | $ | 751 | |||
(Benefit) Provision for Income Taxes |
(1,542 | ) | 930 | | ||||||
| | | | | | | | | | |
(Loss) Income from Discontinued Operations, Net of Tax |
(7,150 | ) | 1,360 | 751 | ||||||
Loss on Sale of Discontinued Operations, Net of Tax |
(1,885 | ) | | | ||||||
| | | | | | | | | | |
Total (Loss) Income from Discontinued Operations and Sale, Net of Tax |
$ | (9,035 | ) | $ | 1,360 | $ | 751 | |||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
15. Restructuring
In the third quarter of 2013, we implemented a plan that called for certain organizational realignments to advance our growth strategy and reduce operating costs, which was completed in 2014. As a result, we recorded restructuring costs of approximately $23,400 and $3,475 for the years ended December 31, 2013 and 2014, respectively, primarily related to employee severance and associated benefits.
Restructuring costs included in the accompanying Consolidated Statements of Operations related to continuing operations is as follows:
|
Year Ended
December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2013 | 2014 | |||||
Cost of sales (excluding depreciation and amortization) |
$ | 3,400 | $ | 1,228 | |||
Selling, general and administrative expenses |
20,000 | 2,247 | |||||
| | | | | | | |
Total restructuring costs |
$ | 23,400 | $ | 3,475 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
148
IRON MOUNTAIN INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2014
(In thousands, except share and per share data)
15. Restructuring (Continued)
Restructuring costs recorded by segment are as follows:
|
Year Ended
December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2013 | 2014 | |||||
North American Records and Information Management Business |
$ | 12,600 | $ | 1,560 | |||
North American Data Management Business |
2,100 | 340 | |||||
International Business |
3,700 | 33 | |||||
Corporate and Other |
5,000 | 1,542 | |||||
| | | | | | | |
Total restructuring costs |
$ | 23,400 | $ | 3,475 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
16. Divestitures
In December 2014, we divested our secure shredding operations in Australia, Ireland and the United Kingdom (the "International Shredding Operations") in a stock transaction for approximately $26,200 in cash at closing, including $1,500 being held in escrow. The assets sold primarily consisted of customer contracts and certain long-lived assets. We have concluded that this divestiture is not a discontinued operation under the guidance in ASU 2014-08 described in Note 2.x. and, therefore, have recorded a pretax gain on sale in other (income) expense, net of approximately $6,900 ($10,200, inclusive of a tax benefit) in our Consolidated Statement of Operations for the year ended December 31, 2014. Revenues from our International Shredding Operations in 2014 represent less than 1% of our consolidated revenues. Approximately $7,750 of goodwill was allocated to the International Shredding Operations, utilizing a relative fair value approach. The International Shredding Operations were previously included in our International Business segment.
149
IRON MOUNTAIN INCORPORATED
SCHEDULE IIISCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2014
(Dollars in thousands)
(A)
|
|
(B)
|
(C)
|
(D)
|
(E)
|
(F)
|
|
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Region/Country/State/Campus Address
|
Facilities(1) | Encumbrances |
Initial cost
to Company |
Cost capitalized
subsequent to acquisition |
Gross amount
carried at close of current period(1)(2) |
Accumulated
depreciation at close of current period(1)(2) |
Date of
construction or acquired(3) |
Life on which
depreciation in latest income statement is computed |
||||||||||||||
North America |
||||||||||||||||||||||
United States (Including Puerto Rico) |
||||||||||||||||||||||
140 Oxmoor Ct, Birmingham, Alabama |
1 | $ | | $ | 1,322 | $ | 800 | $ | 2,122 | $ | 737 | 2001 | Up to 40 years | |||||||||
1420 North Fiesta Blvd, Gilbert, Arizona |
1 | | 1,637 | 2,539 | 4,176 | 1,082 | 2001 | Up to 40 years | ||||||||||||||
2955 S. 18th Place, Phoenix, Arizona |
1 | | 12,178 | 2,546 | 14,724 | 2,762 | 2007 | Up to 40 years | ||||||||||||||
4449 South 36th St, Phoenix, Arizona |
1 | | 7,305 | 514 | 7,819 | 3,774 | 2012 | Up to 40 years | ||||||||||||||
3381 East Global Loop, Tucson, Arizona |
1 | | 1,622 | 3,322 | 4,944 | 1,993 | 2000 | Up to 40 years | ||||||||||||||
200 Madrone Way, Felton, California |
1 | | 760 | 633 | 1,393 | 471 | 1997 | Up to 40 years | ||||||||||||||
13379 Jurupa Ave, Fontana, California |
1 | | 10,472 | 7,200 | 17,672 | 6,604 | 2002 | Up to 40 years | ||||||||||||||
600 Burning Tree Rd, Fullerton, California |
1 | | 4,762 | 1,558 | 6,320 | 2,183 | 2002 | Up to 40 years | ||||||||||||||
5086 4th St, Irwindale, California |
1 | | 6,800 | 2,091 | 8,891 | 2,470 | 2002 | Up to 40 years | ||||||||||||||
6933 Preston Ave, Livermore, California |
1 | | 14,585 | 12,497 | 27,082 | 5,694 | 2002 | Up to 40 years | ||||||||||||||
1006 North Mansfield, Los Angeles, California |
1 | | 749 | | 749 | 16 | 2014 | Up to 40 years | ||||||||||||||
1025 North Highland Ave, Los Angeles, California |
1 | | 10,168 | 17,842 | 28,010 | 9,174 | 1988 | Up to 40 years | ||||||||||||||
1350 West Grand Ave, Oakland, California |
1 | | 15,172 | 4,629 | 19,801 | 12,476 | 1997 | Up to 40 years | ||||||||||||||
1760 North Saint Thomas Circle, Orange, California |
1 | | 4,576 | | 4,576 | 1,286 | 2002 | Up to 40 years | ||||||||||||||
8700 Mercury Lane, Pico Rivera, California |
1 | | 27,957 | 67 | 28,024 | 5,811 | 2012 | Up to 40 years | ||||||||||||||
8661 Kerns St, San Diego, California |
1 | | 10,512 | 6,641 | 17,153 | 4,747 | 2002 | Up to 40 years | ||||||||||||||
1915 South Grand Ave, Santa Ana, California |
1 | | 3,420 | 1,095 | 4,515 | 1,459 | 2001 | Up to 40 years | ||||||||||||||
2680 Sequoia Dr, South Gate, California |
1 | | 6,329 | 2,104 | 8,433 | 3,222 | 2002 | Up to 40 years | ||||||||||||||
111 Uranium Drive, Sunnyvale, California |
1 | | 9,645 | 4,919 | 14,564 | 3,102 | 2002 | Up to 40 years | ||||||||||||||
25250 South Schulte Rd, Tracy, California |
1 | | 3,049 | 1,615 | 4,664 | 1,354 | 2001 | Up to 40 years | ||||||||||||||
3576 N. Moline, Aurora, Colorado |
1 | | 1,583 | 1,827 | 3,410 | 1,066 | 2001 | Up to 40 years | ||||||||||||||
North Stone Ave, Colorado Springs, Colorado |
2 | | 761 | 2,671 | 3,432 | 1,174 | 2001 | Up to 40 years | ||||||||||||||
11333 E 53rd Ave, Denver, Colorado |
1 | | 7,403 | 9,807 | 17,210 | 6,187 | 2001 | Up to 40 years | ||||||||||||||
5151 E. 46th Ave, Denver, Coloardo |
1 | | 6,312 | | 6,312 | 569 | 2014 | Up to 40 years | ||||||||||||||
20 Eastern Park Rd, East Hartford, Connecticut |
1 | | 7,417 | 1,180 | 8,597 | 5,044 | 2002 | Up to 40 years | ||||||||||||||
Bennett Rd, Suffield, Connecticut |
2 | | 1,768 | 672 | 2,440 | 967 | 2000 | Up to 40 years | ||||||||||||||
Kennedy Road, Windsor, Connecticut |
2 | | 10,447 | 29,062 | 39,509 | 12,790 | 2001 | Up to 40 years | ||||||||||||||
293 Ella Grasso Rd, Windsor Locks, Connecticut |
1 | | 4,021 | 1,274 | 5,295 | 2,120 | 2002 | Up to 40 years | ||||||||||||||
150-200 Todds Ln, Wilmington, Delaware |
1 | | 7,226 | 843 | 8,069 | 4,157 | 2002 | Up to 40 years | ||||||||||||||
13280 Vantage Way, Jacksonville, Florida |
1 | | 1,853 | 192 | 2,045 | 619 | 2001 | Up to 40 years | ||||||||||||||
12855 Starkey Rd, Largo, Florida |
1 | | 3,293 | 2,392 | 5,685 | 2,192 | 2001 | Up to 40 years | ||||||||||||||
10002 Satellite Blvd, Orlando, Florida |
1 | | 1,927 | 245 | 2,172 | 631 | 2001 | Up to 40 years | ||||||||||||||
3501 Electronics Way, West Palm Beach, Florida |
1 | | 4,201 | 12,708 | 16,909 | 3,978 | 2001 | Up to 40 years | ||||||||||||||
1890 MacArthur Blvd, Atlanta Georgia |
1 | | 1,786 | 620 | 2,406 | 778 | 2002 | Up to 40 years | ||||||||||||||
3881 Old Gordon Rd, Atlanta, Georgia |
1 | | 1,185 | 291 | 1,476 | 677 | 2001 | Up to 40 years | ||||||||||||||
5319 Tulane Drive SW, Atlanta, Georgia |
1 | | 2,808 | 3,131 | 5,939 | 1,846 | 2002 | Up to 40 years |
150
IRON MOUNTAIN INCORPORATED
SCHEDULE IIISCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2014
(Dollars in thousands)
(A)
|
|
(B)
|
(C)
|
(D)
|
(E)
|
(F)
|
|
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Region/Country/State/Campus Address
|
Facilities(1) | Encumbrances |
Initial cost
to Company |
Cost capitalized
subsequent to acquisition |
Gross amount
carried at close of current period(1)(2) |
Accumulated
depreciation at close of current period(1)(2) |
Date of
construction or acquired(3) |
Life on which
depreciation in latest income statement is computed |
||||||||||||||
3150 Nifda Dr, Smyrna, Georgia |
1 | $ | | $ | 463 | $ | 640 | $ | 1,103 | $ | 551 | 1990 | Up to 40 years | |||||||||
1301 S. Rockwell St, Chicago, Illinois |
1 | | 7,947 | 18,461 | 26,408 | 11,484 | 1999 | Up to 40 years | ||||||||||||||
2211 W. Pershing Rd, Chicago, Illinois |
1 | | 4,264 | 12,850 | 17,114 | 5,639 | 2001 | Up to 40 years | ||||||||||||||
2425 South Halsted St, Chicago, Illinois |
1 | | 7,470 | 925 | 8,395 | 3,098 | 2006 | Up to 40 years | ||||||||||||||
2604 West 13th St, Chicago, Illinois |
1 | | 404 | 2,670 | 3,074 | 2,111 | 2001 | Up to 40 years | ||||||||||||||
2255 Pratt Blvd, Elk Grove, Illinois |
1 | | 1,989 | 3,622 | 5,611 | 741 | 2000 | Up to 40 years | ||||||||||||||
4175 Chandler Dr Opus No. Corp, Hanover Park, Illinois |
1 | | 22,048 | 17 | 22,065 | 5,838 | 2014 | Up to 40 years | ||||||||||||||
6120 Churchman Bypass, Indianapolis, Indiana |
1 | | 4,827 | 7,761 | 12,588 | 4,013 | 2002 | Up to 40 years | ||||||||||||||
6090 NE 14th Street, Des Moines, Iowa |
1 | | 622 | 313 | 935 | 247 | 2003 | Up to 40 years | ||||||||||||||
South 7th St, Louisville, Kentucky |
4 | | 709 | 8,166 | 8,875 | 2,760 | Various | Up to 40 years | ||||||||||||||
900 Distributors Row, New Orleans, Louisiana |
1 | | 7,607 | 816 | 8,423 | 4,794 | 2002 | Up to 40 years | ||||||||||||||
1274 Commercial Drive, Port Allen, Louisiana |
1 | | 2,680 | 3,133 | 5,813 | 1,866 | 2003 | Up to 40 years | ||||||||||||||
8928 McGaw Ct, Columbia, Maryland |
1 | | 2,198 | 5,511 | 7,709 | 2,130 | 1999 | Up to 40 years | ||||||||||||||
10641 Iron Bridge Rd, Jessup, Maryland |
1 | | 3,782 | 689 | 4,471 | 1,831 | 2000 | Up to 40 years | ||||||||||||||
8275 Patuxent Range Rd, Jessup, Maryland |
1 | | 10,105 | 7,181 | 17,286 | 7,003 | 2001 | Up to 40 years | ||||||||||||||
96 High St, Billerica, Massachusetts |
1 | | 3,221 | 3,776 | 6,997 | 2,705 | 1998 | Up to 40 years | ||||||||||||||
120 Hampden St, Boston, Massachusetts |
1 | | 164 | 420 | 584 | 388 | 2002 | Up to 40 years | ||||||||||||||
32 George St, Boston, Massachusetts |
1 | | 1,820 | 5,067 | 6,887 | 4,451 | 1991 | Up to 40 years | ||||||||||||||
3435 Sharps Lot Rd, Dighton, Massachusetts |
1 | | 1,911 | 514 | 2,425 | 1,728 | 1999 | Up to 40 years | ||||||||||||||
77 Constitution Boulevard, Franklin, Massachusetts |
1 | | 5,413 | 48 | 5,461 | 43 | 2014 | Up to 40 years | ||||||||||||||
216 Canal St, Lawrence, Massachusetts |
1 | | 1,298 | 975 | 2,273 | 902 | 2001 | Up to 40 years | ||||||||||||||
Bearfoot Road, Northboro, Massachusetts |
2 | | 55,923 | 18,343 | 74,266 | 27,786 | Various | Up to 40 years | ||||||||||||||
6601 Sterling Dr South, Sterling Heights, Michigan |
1 | | 1,294 | 1,048 | 2,342 | 925 | 2002 | Up to 40 years | ||||||||||||||
1985 Bart Ave, Warren, Michigan |
1 | | 1,802 | 314 | 2,116 | 784 | 2000 | Up to 40 years | ||||||||||||||
Wahl Court, Warren, Michigan |
2 | | 3,426 | 2,253 | 5,679 | 2,876 | Various | Up to 40 years | ||||||||||||||
31155 Wixom Rd, Wixom, Michigan |
1 | | 4,000 | 1,142 | 5,142 | 1,906 | 2001 | Up to 40 years | ||||||||||||||
3140 Ryder Trail South, Earth City, Missouri |
1 | | 3,072 | 2,796 | 5,868 | 1,414 | 2004 | Up to 40 years | ||||||||||||||
Leavenworth St/18th St, Omaha, Nebraska |
3 | | 2,924 | 10,273 | 13,197 | 3,945 | Various | Up to 40 years | ||||||||||||||
4105 North Lamb Blvd, Las Vegas, Nevada |
1 | | 3,430 | 8,614 | 12,044 | 3,773 | 2002 | Up to 40 years | ||||||||||||||
17 Hydro Plant Rd, Milton, New Hampshire |
1 | | 6,179 | 4,015 | 10,194 | 4,739 | 2001 | Up to 40 years | ||||||||||||||
Kimberly Rd, East Brunsick, New Jersey |
3 | | 22,105 | 5,094 | 27,199 | 10,184 | Various | Up to 40 years | ||||||||||||||
1189 Magnolia Ave, Elizabeth, New Jersey |
1 | | 1,278 | 2,102 | 3,380 | 1,310 | 2000 | Up to 40 years | ||||||||||||||
811 Route 33, Freehold, New Jersey |
3 | | 38,697 | 49,849 | 88,546 | 34,649 | Various | Up to 40 years | ||||||||||||||
650 Howard Avenue, Somerset, New Jersey |
1 | | 3,585 | 11,303 | 14,888 | 3,291 | 2006 | Up to 40 years | ||||||||||||||
555 Gallatin Place, Alburquerque, New Mexico |
1 | | 4,083 | 377 | 4,460 | 1,773 | 2001 | Up to 40 years | ||||||||||||||
7500 Los Volcanes Rd NW, Albuquerque, New Mexico |
1 | | 2,801 | 1,791 | 4,592 | 1,944 | 1999 | Up to 40 years |
151
IRON MOUNTAIN INCORPORATED
SCHEDULE IIISCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2014
(Dollars in thousands)
(A)
|
|
(B)
|
(C)
|
(D)
|
(E)
|
(F)
|
|
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Region/Country/State/Campus Address
|
Facilities(1) | Encumbrances |
Initial cost
to Company |
Cost capitalized
subsequent to acquisition |
Gross amount
carried at close of current period(1)(2) |
Accumulated
depreciation at close of current period(1)(2) |
Date of
construction or acquired(3) |
Life on which
depreciation in latest income statement is computed |
||||||||||||||
100 Bailey Ave, Buffalo, New York |
1 | $ | | $ | 1,324 | $ | 9,528 | $ | 10,852 | $ | 4,252 | 1998 | Up to 40 years | |||||||||
64 Leone Ln, Chester, New York |
1 | | 5,086 | 1,047 | 6,133 | 2,771 | 2000 | Up to 40 years | ||||||||||||||
1368 County Rd 8, Farmington, New York |
1 | | 2,611 | 4,411 | 7,022 | 3,240 | 1998 | Up to 40 years | ||||||||||||||
County Rd 10, Linlithgo, New York |
2 | | 102 | 2,878 | 2,980 | 899 | 2001 | Up to 40 years | ||||||||||||||
77 Seaview Blvd, N. Hempstead New York |
1 | | 5,719 | 1,294 | 7,013 | 1,648 | 2006 | Up to 40 years | ||||||||||||||
37 Hurds Corner Road, Pawling, New York |
1 | | 4,323 | 443 | 4,766 | 1,383 | 2005 | Up to 40 years | ||||||||||||||
Ulster Ave/Route 9W, Port Ewen, New York |
3 | | 23,137 | 7,222 | 30,359 | 17,537 | 2001 | Up to 40 years | ||||||||||||||
Binnewater Rd, Rosendale, New York |
2 | | 5,142 | 9,291 | 14,433 | 3,861 | Various | Up to 40 years | ||||||||||||||
220 Wavel St, Syracuse, New York |
1 | | 2,929 | 1,983 | 4,912 | 2,153 | 1997 | Up to 40 years | ||||||||||||||
14500 Weston Pkwy, Cary, North Carolina |
1 | | 1,880 | 1,619 | 3,499 | 1,205 | 1999 | Up to 40 years | ||||||||||||||
1034 Hulbert Ave, Cincinnati, Ohio |
1 | | 786 | 794 | 1,580 | 659 | 2000 | Up to 40 years | ||||||||||||||
1275 East 40th, Cleveland, Ohio |
1 | | 3,129 | 354 | 3,483 | 1,487 | 1999 | Up to 40 years | ||||||||||||||
7208 Euclid Avenue, Cleveland, Ohio |
1 | | 3,336 | 2,404 | 5,740 | 2,002 | 2001 | Up to 40 years | ||||||||||||||
4260 Tuller Ridge Rd, Dublin, Ohio |
1 | | 1,030 | 1,538 | 2,568 | 1,123 | 1999 | Up to 40 years | ||||||||||||||
2120 Buzick Drive, Obetz, Ohio |
1 | | 4,317 | 12,715 | 17,032 | 4,534 | 2003 | Up to 40 years | ||||||||||||||
302 South Byrne Rd, Toledo, Ohio |
1 | | 602 | 804 | 1,406 | 431 | 2001 | Up to 40 years | ||||||||||||||
7530 N. Leadbetter Road, Portland, Oregon |
1 | | 5,187 | 1,813 | 7,000 | 3,214 | 2002 | Up to 40 years | ||||||||||||||
Branchton Rd, Boyers, Pennsylvania |
2 | | 21,166 | 122,202 | 143,368 | 26,668 | Various | Up to 40 years | ||||||||||||||
1201 Freedom Rd, Cranberry Township, Pennsylvania |
1 | | 1,057 | 11,953 | 13,010 | 4,698 | 2001 | Up to 40 years | ||||||||||||||
800 Carpenters Crossings, Folcroft, Pennsylvania |
1 | | 2,457 | 853 | 3,310 | 1,513 | 2000 | Up to 40 years | ||||||||||||||
36 Great Valley Pkwy, Malvern, Pennsylvania |
1 | | 2,397 | 6,421 | 8,818 | 2,641 | 1999 | Up to 40 years | ||||||||||||||
Henderson Dr/Elmwood Ave, Sharon Hill, Pennsylvania |
3 | | 24,153 | 9,562 | 33,715 | 12,690 | Various | Up to 40 years | ||||||||||||||
Las Flores Industrial Park, Rio Grande, Puerto Rico |
1 | | 4,185 | 3,225 | 7,410 | 2,986 | 2001 | Up to 40 years | ||||||||||||||
24 Snake Hill Road, Chepachet, Rhode Island |
1 | | 2,659 | 1,995 | 4,654 | 1,955 | 2001 | Up to 40 years | ||||||||||||||
Mitchell Street, Knoxville, Tennessee |
2 | | 718 | 3,752 | 4,470 | 1,053 | Various | Up to 40 years | ||||||||||||||
415 Brick Church Park Dr, Nashville, Tennessee |
1 | | 2,312 | 3,681 | 5,993 | 2,691 | 2000 | Up to 40 years | ||||||||||||||
6005 Dana Way, Nashville, Tennessee |
2 | | 1,827 | 1,802 | 3,629 | 1,142 | 2000 | Up to 40 years | ||||||||||||||
11406 Metric Blvd, Austin, Texas |
1 | | 5,489 | 1,725 | 7,214 | 3,025 | 2002 | Up to 40 years | ||||||||||||||
6600 Metropolis Drive, Austin, Texas |
1 | | 4,519 | 242 | 4,761 | 531 | 2011 | Up to 40 years | ||||||||||||||
1800 Columbian Club Dr, Carrollton, Texas |
1 | | 19,673 | 64 | 19,737 | 6,020 | 2013 | Up to 40 years | ||||||||||||||
1905 John Connally Dr, Carrolton, Texas |
1 | | 2,174 | 394 | 2,568 | 960 | 2000 | Up to 40 years | ||||||||||||||
Alma St, Dallas, Texas |
2 | | 3,431 | 1,297 | 4,728 | 2,020 | 2000 | Up to 40 years | ||||||||||||||
13425 Branchview Ln, Dallas, Texas |
1 | | 3,518 | 3,237 | 6,755 | 3,099 | 2001 | Up to 40 years | ||||||||||||||
Cockrell Ave, Dallas, Texas |
2 | | 3,950 | 1,914 | 5,864 | 2,652 | 2000 | Up to 40 years | ||||||||||||||
1819 S. Lamar St, Dallas, Texas |
1 | | 3,215 | 596 | 3,811 | 1,849 | 2000 | Up to 40 years | ||||||||||||||
2000 Robotics Place Suite B, Fort Worth, Texas |
1 | | 5,328 | 450 | 5,778 | 2,051 | 2002 | Up to 40 years |
152
IRON MOUNTAIN INCORPORATED
SCHEDULE IIISCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2014
(Dollars in thousands)
(A)
|
|
(B)
|
(C)
|
(D)
|
(E)
|
(F)
|
|
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Region/Country/State/Campus Address
|
Facilities(1) | Encumbrances |
Initial cost
to Company |
Cost capitalized
subsequent to acquisition |
Gross amount
carried at close of current period(1)(2) |
Accumulated
depreciation at close of current period(1)(2) |
Date of
construction or acquired(3) |
Life on which
depreciation in latest income statement is computed |
||||||||||||||
1202 Ave R, Grand Prairie, Texas |
1 | $ | | $ | 8,354 | $ | 1,660 | $ | 10,014 | $ | 4,245 | 2003 | Up to 40 years | |||||||||
15333 Hempstead Hwy, Houston, Texas |
3 | | 6,327 | 33,410 | 39,737 | 5,615 | 2004 | Up to 40 years | ||||||||||||||
2600 Center Street, Houston, Texas |
1 | | 2,840 | 1,335 | 4,175 | 1,870 | 2000 | Up to 40 years | ||||||||||||||
3502 Bissonnet St, Houston, Texas |
1 | | 7,687 | 178 | 7,865 | 5,062 | 2002 | Up to 40 years | ||||||||||||||
5249 Glenmont Ave, Houston, Texas |
1 | | 3,467 | 1,775 | 5,242 | 1,786 | 2000 | Up to 40 years | ||||||||||||||
5707 Chimney Rock, Houston, Texas |
1 | | 1,032 | 916 | 1,948 | 746 | 2002 | Up to 40 years | ||||||||||||||
5757 Royalton Dr, Houston, Texas |
1 | | 1,795 | 863 | 2,658 | 864 | 2000 | Up to 40 years | ||||||||||||||
6203 Bingle Rd, Houston, Texas |
1 | | 3,188 | 10,845 | 14,033 | 6,609 | 2001 | Up to 40 years | ||||||||||||||
9601 West Tidwell, Houston, Texas |
1 | | 1,680 | 486 | 2,166 | 756 | 2001 | Up to 40 years | ||||||||||||||
1235 North Union Bower, Irving, Texas |
1 | | 1,574 | 960 | 2,534 | 944 | 2001 | Up to 40 years | ||||||||||||||
15300 FM 1825, Pflugerville, Texas |
2 | | 3,811 | 7,381 | 11,192 | 2,991 | 2001 | Up to 40 years | ||||||||||||||
929 South Medina St, San Antonio, Texas |
1 | | 3,883 | 1,079 | 4,962 | 1,901 | 2002 | Up to 40 years | ||||||||||||||
930 Avenue B, San Antonio, Texas |
1 | | 393 | 171 | 564 | 153 | 1998 | Up to 40 years | ||||||||||||||
931 North Broadway, San Antonio, Texas |
1 | | 3,526 | 759 | 4,285 | 2,142 | 1999 | Up to 40 years | ||||||||||||||
1665 S. 5350 West, Salt Lake City, Utah |
1 | | 6,239 | 2,361 | 8,600 | 3,524 | 2002 | Up to 40 years | ||||||||||||||
11052 Lakeridge Pkwy, Ashland, Virginia |
1 | | 1,709 | 1,813 | 3,522 | 1,197 | 1999 | Up to 40 years | ||||||||||||||
4555 Progress Road, Norfolk, Virginia |
1 | | 6,527 | 209 | 6,736 | 1,922 | 2011 | Up to 40 years | ||||||||||||||
7700-7730 Southern Dr, Springfield, Virginia |
1 | | 14,167 | 1,813 | 15,980 | 7,835 | 2002 | Up to 40 years | ||||||||||||||
8001 Research Way, Springfield, Virginia |
1 | | 5,230 | 2,309 | 7,539 | 2,119 | 2002 | Up to 40 years | ||||||||||||||
22445 Randolph Dr, Sterling, Virginia |
1 | | 7,598 | 3,647 | 11,245 | 4,324 | 2005 | Up to 40 years | ||||||||||||||
307 South 140th St, Burien, Washington |
1 | | 2,078 | 2,062 | 4,140 | 1,653 | 1999 | Up to 40 years | ||||||||||||||
8908 W. Hallett Rd, Cheney, Washington |
1 | | 510 | 3,915 | 4,425 | 1,177 | 1999 | Up to 40 years | ||||||||||||||
6600 Hardeson Rd, Everett, Washington |
1 | | 5,399 | 3,190 | 8,589 | 2,428 | 2002 | Up to 40 years | ||||||||||||||
19826 Russell Rd South, Kent, Washington |
1 | | 14,793 | 8,047 | 22,840 | 7,270 | 2002 | Up to 40 years | ||||||||||||||
1201 N. 96th St, Seattle, Washington |
1 | | 4,496 | 1,122 | 5,618 | 2,557 | 2001 | Up to 40 years | ||||||||||||||
12021 West Bluemound Rd, Wauwatosa, Wisconsin |
1 | | 1,307 | 2,040 | 3,347 | 942 | 1999 | Up to 40 years | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
|
162 | | 767,030 | 672,245 | 1,439,275 | 486,109 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
153
IRON MOUNTAIN INCORPORATED
SCHEDULE IIISCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2014
(Dollars in thousands)
(A)
|
|
(B)
|
(C)
|
(D)
|
(E)
|
(F)
|
|
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Region/Country/State/Campus Address
|
Facilities(1) | Encumbrances |
Initial cost
to Company |
Cost capitalized
subsequent to acquisition |
Gross amount
carried at close of current period(1)(2) |
Accumulated
depreciation at close of current period(1)(2) |
Date of
construction or acquired(3) |
Life on which
depreciation in latest income statement is computed |
||||||||||||||
Canada |
||||||||||||||||||||||
One Command Court, Bedford |
1 | $ | | $ | 3,847 | $ | 4,809 | $ | 8,656 | $ | 2,941 | 2000 | Up to 40 years | |||||||||
195 Summerlea Road, Brampton |
1 | | 5,403 | 5,737 | 11,140 | 3,878 | 2000 | Up to 40 years | ||||||||||||||
10 Tilbury Court, Brampton |
1 | | 5,007 | 16,195 | 21,202 | 4,284 | 2000 | Up to 40 years | ||||||||||||||
8825 Northbrook Court, Burnaby |
1 | | 8,091 | 1,448 | 9,539 | 3,560 | 2001 | Up to 40 years | ||||||||||||||
8088 Glenwood Drive, Burnaby |
1 | | 4,326 | 8,040 | 12,366 | 3,170 | 2005 | Up to 40 years | ||||||||||||||
5811 26th Street S.E., Calgary |
1 | | 14,658 | 10,383 | 25,041 | 8,384 | 2000 | Up to 40 years | ||||||||||||||
3905-101 Street, Edmonton |
1 | | 2,020 | 829 | 2,849 | 1,223 | 2000 | Up to 40 years | ||||||||||||||
3005 Boul. Jean-Baptiste Deschamps, Lachine |
1 | | 2,751 | 453 | 3,204 | 1,097 | 2000 | Up to 40 years | ||||||||||||||
1655 Fleetwood, Laval |
1 | | 8,196 | 16,495 | 24,691 | 9,062 | 2000 | Up to 40 years | ||||||||||||||
4005 Richelieu, Montreal |
1 | | 1,800 | 1,343 | 3,143 | 1,183 | 2000 | Up to 40 years | ||||||||||||||
1209 Algoma Rd, Ottawa |
1 | | 1,059 | 6,759 | 7,818 | 2,836 | 2000 | Up to 40 years | ||||||||||||||
1650 Comstock Rd, Ottawa |
1 | | 7,691 | 2,697 | 10,388 | 2,113 | 2003 | Up to 40 years | ||||||||||||||
235 Edson Street, Saskatoon |
1 | | 829 | 1,562 | 2,391 | 549 | 2008 | Up to 40 years | ||||||||||||||
640 Coronation Drive, Scarborough |
1 | | 1,853 | 1,023 | 2,876 | 964 | 2000 | Up to 40 years | ||||||||||||||
610 Sprucewood Ave, Windsor |
1 | | 1,243 | 537 | 1,780 | 416 | 2007 | Up to 40 years | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
|
15 | | 68,774 | 78,310 | 147,084 | 45,660 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
|
177 | | 835,804 | 750,555 | 1,586,359 | 531,769 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
154
IRON MOUNTAIN INCORPORATED
SCHEDULE IIISCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2014
(Dollars in thousands)
(A)
|
|
(B)
|
(C)
|
(D)
|
(E)
|
(F)
|
|
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Region/Country/State/Campus Address
|
Facilities(1) | Encumbrances |
Initial cost to
Company |
Cost capitalized
subsequent to acquisition |
Gross amount
carried at close of current period(1)(2) |
Accumulated
depreciation at close of current period(1)(2) |
Date of
construction or acquired(3) |
Life on which
depreciation in latest income statement is computed |
||||||||||||||
Europe |
Up to 40 years | |||||||||||||||||||||
Gewerbeparkstr. 3, Vienna, Austria |
1 | $ | | $ | 6,542 | $ | 1,777 | $ | 8,319 | $ | 1,260 | 2010 | Up to 40 years | |||||||||
Woluwelaan 147, Diegem, Belgium |
1 | | 2,541 | 4,975 | 7,516 | 2,504 | 2003 | Up to 40 years | ||||||||||||||
Jeumont-Schneider, Champagne Sur Seine, France |
3 | | 1,750 | 1,551 | 3,301 | 1,231 | 2003 | Up to 40 years | ||||||||||||||
ZI des Sables, Morangis, France |
1 | 2,235 | 12,407 | | 12,407 | 5,830 | 2004 | Up to 40 years | ||||||||||||||
Brommer Weg 1, Wipshausen, Germany |
1 | | 3,220 | | 3,220 | 1,697 | 2006 | Up to 40 years | ||||||||||||||
Warehouse and Offices 4 Springhill, Cork, Ireland |
1 | | 9,040 | 1,653 | 10,693 | 2,754 | 2014 | Up to 40 years | ||||||||||||||
17 Crag Terrace, Dublin, Ireland |
1 | | 2,818 | 996 | 3,814 | 960 | 2001 | Up to 40 years | ||||||||||||||
Damastown Industrial Park, Dublin, Ireland |
1 | | 16,034 | 5,781 | 21,815 | 4,210 | 2012 | Up to 40 years | ||||||||||||||
Howemoss Drive, Aberdeen, Scotland |
2 | | 6,970 | 7,559 | 14,529 | 3,084 | Various | Up to 40 years | ||||||||||||||
Traquair Road, Innerleithen, Scotland |
1 | | 113 | 2,497 | 2,610 | 794 | 2004 | Up to 40 years | ||||||||||||||
Nettlehill Road, Houston Industrial Estate, Livingston, Scotland |
1 | | 11,517 | 29,434 | 40,951 | 14,604 | 2001 | Up to 40 years | ||||||||||||||
Av Madrid s/n Poligono Industrial Matillas, Alcala de Henares, Spain |
1 | | 186 | | 186 | | 2014 | Up to 40 years | ||||||||||||||
Calle Bronce, 37, Chiloeches, Spain |
1 | | 11,011 | 2,808 | 13,819 | 1,552 | 2010 | Up to 40 years | ||||||||||||||
Ctra M.118 , Km.3 Parcela 3, Madrid, Spain |
1 | | 3,981 | 6,054 | 10,035 | 4,703 | 2001 | Up to 40 years | ||||||||||||||
Fundicion 8, Rivas-Vaciamadrid, Spain |
1 | | 1,022 | 2,594 | 3,616 | 1,221 | 2002 | Up to 40 years | ||||||||||||||
Abanto Ciervava, Spain |
2 | | 1,053 | | 1,053 | 412 | Various | Up to 40 years | ||||||||||||||
628 Western Avenue, Acton, United Kingdom |
1 | | 2,070 | 87 | 2,157 | 766 | 2003 | Up to 40 years | ||||||||||||||
65 Egerton Road, Birmingham, United Kingdom |
1 | | 6,980 | 2,897 | 9,877 | 4,355 | 2003 | Up to 40 years | ||||||||||||||
Otterham Quay Lane, Gillingham, United Kingdom |
13 | | 7,418 | 4,874 | 12,292 | 4,730 | 2003 | Up to 40 years | ||||||||||||||
Pennine Way, Hemel Hempstead, United Kingdom |
1 | | 10,847 | 7,482 | 18,329 | 6,356 | 2004 | Up to 40 years | ||||||||||||||
Kemble Industrial Park, Kemble, United Kingdom |
2 | | 5,277 | 8,926 | 14,203 | 8,157 | 2004 | Up to 40 years | ||||||||||||||
Gayton Road, Kings Lynn, United Kingdom |
3 | | 3,119 | 1,872 | 4,991 | 2,783 | 2003 | Up to 40 years | ||||||||||||||
24/26 Gillender Street, London, United Kingdom |
1 | | 4,666 | 2,910 | 7,576 | 2,390 | 2003 | Up to 40 years | ||||||||||||||
Cody Road, London, United Kingdom |
2 | | 20,307 | 9,204 | 29,511 | 9,212 | 2003 | Up to 40 years | ||||||||||||||
Unit 10 High Cross Centre, London, United Kingdom |
1 | | 3,598 | 1,104 | 4,702 | 1,153 | 2003 | Up to 40 years | ||||||||||||||
Old Poplar Bus Garage, London, United Kingdom |
1 | | 4,639 | 2,923 | 7,562 | 3,237 | 2003 | Up to 40 years | ||||||||||||||
17 Broadgate, Oldham, United Kingdom |
1 | | 4,039 | 1,076 | 5,115 | 2,074 | 2008 | Up to 40 years | ||||||||||||||
Harpway Lane, Sopley, United Kingdom |
1 | | 681 | 1,781 | 2,462 | 1,208 | 2004 | Up to 40 years | ||||||||||||||
Unit 1A Broadmoor Road, Swindom, United Kingdom |
1 | | 2,636 | 1,042 | 3,678 | 860 | 2006 | Up to 40 years | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
|
49 | 2,235 | 166,482 | 113,857 | 280,339 | 94,097 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
155
IRON MOUNTAIN INCORPORATED
SCHEDULE IIISCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2014
(Dollars in thousands)
(A)
|
|
(B)
|
(C)
|
(D)
|
(E)
|
(F)
|
|
|
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Region/Country/State/Campus Address
|
Facilities(1) | Encumbrances |
Initial cost
to Company |
Cost
capitalized subsequent to acquisition |
Gross amount
carried at close of current period(1)(2) |
Accumulated
depreciation at close of current period(1)(2) |
Date of
construction or acquired(3) |
Life on which
depreciation in latest income statement is computed |
||||||||||||||
Latin America |
||||||||||||||||||||||
Amancio Alcorta 2396, Buenos Aires, Argentina |
2 | $ | | $ | 655 | $ | 2,113 | $ | 2,768 | $ | 813 | Various | Up to 40 years | |||||||||
Azara 1245, Buenos Aires, Argentina |
1 | | 166 | 168 | 334 | 113 | 1998 | Up to 40 years | ||||||||||||||
Saraza 6135, Buenos Aires, Argentina |
1 | | 144 | 272 | 416 | 118 | 1995 | Up to 40 years | ||||||||||||||
Spegazzini, Ezeiza Buenos Aires, Argentina |
1 | | 12,773 | 5,020 | 17,793 | 2,483 | 2012 | Up to 40 years | ||||||||||||||
Francisco de Souza e Melo, Rio de Janerio, Brazil |
2 | | 1,868 | 563 | 2,431 | 83 | Various | Up to 40 years | ||||||||||||||
Hortolandia, Sao Paulo, Brazil |
1 | | 24,078 | 5,518 | 29,596 | 1,160 | 2014 | Up to 40 years | ||||||||||||||
El Taqueral 99, Santiago, Chile |
1 | | 2,629 | 35,628 | 38,257 | 7,834 | 2006 | Up to 40 years | ||||||||||||||
Panamericana Norte 18900, Santiago, Chile |
4 | | 4,001 | 10,507 | 14,508 | 1,588 | 2004 | Up to 40 years | ||||||||||||||
Avenida Prolongacion del Colli 1104, Guadalajara, Mexico |
1 | | 374 | 139 | 513 | 79 | 2002 | Up to 40 years | ||||||||||||||
Privada Las Flores No. 25 (G3), Guadalajara, Mexico |
1 | | 905 | 333 | 1,238 | 194 | 2004 | Up to 40 years | ||||||||||||||
Carretera Pesqueria Km2.5(M3), Monterrey, Mexico |
2 | | 3,537 | 1,085 | 4,622 | 831 | 2004 | Up to 40 years | ||||||||||||||
Lote 2, Manzana A, (T2& T3), Toluca, Mexico |
1 | | 2,204 | 707 | 2,911 | 507 | 2002 | Up to 40 years | ||||||||||||||
Prolongacion de la Calle 7 (T4), Toluca, Mexico |
1 | | 7,544 | 2,580 | 10,124 | 1,692 | 2007 | Up to 40 years | ||||||||||||||
Panamericana Sur, KM 57.5, Lima, Peru |
5 | 2,589 | 1,549 | 947 | 2,496 | 402 | 2013 | Up to 40 years | ||||||||||||||
Av. Elmer Faucett 3462, Lima, Peru |
2 | | 4,112 | 2,296 | 6,408 | 1,212 | Various | Up to 40 years | ||||||||||||||
Calle Los Claveles-Seccion 3, Lima, Peru |
1 | | 8,179 | 3,614 | 11,793 | 3,048 | 2010 | Up to 40 years | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
|
27 | 2,589 | 74,718 | 71,490 | 146,208 | 22,157 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Asia Pacific |
||||||||||||||||||||||
8 Whitestone Drive, Austins Ferry, Australia |
1 | | 681 | 3,438 | 4,119 | 619 | 2012 | Up to 40 years | ||||||||||||||
Warehouse No 4, Shanghai, China |
1 | | 1,530 | 1,030 | 2,560 | 92 | 2013 | Up to 40 years | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
|
2 | | 2,211 | 4,468 | 6,679 | 711 | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Total |
255 | $ | 4,824 | $ | 1,079,215 | $ | 940,370 | $ | 2,019,585 | $ | 648,734 | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
156
IRON MOUNTAIN INCORPORATED
SCHEDULE IIISCHEDULE OF REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 2014
(Dollars in thousands)
The change in gross carrying amount of real estate owned for the year ended December 31, 2014 is as follows:
Gross amount at beginning of period |
$ | 1,949,073 | ||
Additions during period: |
||||
Acquisitions(1) |
| |||
Discretionary capital projects |
119,654 | |||
Other(2) |
(36,324 | ) | ||
| | | | |
|
83,330 | |||
| | | | |
Deductions during period: |
||||
Cost of real estate sold or disposed |
(12,818 | ) | ||
| | | | |
Gross amount at end of period |
$ | 2,019,585 | ||
| | | | |
| | | | |
| | | | |
The aggregate cost for Federal tax purposes at December 31, 2014 of our real estate assets was approximately $1,848,000 (unaudited).
The change in accumulated depreciation amount of real estate owned for the year ended December 31, 2014 is as follows:
Gross amount of accumulated depreciation at beginning of period |
$ | 592,329 | ||
Additions during period: |
||||
Depreciation |
66,617 | |||
Other(1) |
(6,547 | ) | ||
| | | | |
|
60,070 | |||
| | | | |
Deductions during period: |
||||
Amount of accumulated depreciation for real estate assets sold or disposed |
(3,665 | ) | ||
| | | | |
Gross amount of end of period |
$ | 648,734 | ||
| | | | |
| | | | |
| | | | |
157
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
IRON MOUNTAIN INCORPORATED | ||||
|
|
By: |
|
/s/ RODERICK DAY Roderick Day Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
Dated: February 27, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name
|
Title
|
Date
|
||
---|---|---|---|---|
|
|
|
|
|
/s/ WILLIAM L. MEANEY
William L. Meaney |
President and Chief Executive Officer and Director (Principal Executive Officer) | February 27, 2015 | ||
/s/ RODERICK DAY Roderick Day |
|
Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |
|
February 27, 2015 |
/s/ JENNIFER M. ALLERTON Jennifer M. Allerton |
|
Director |
|
February 27, 2015 |
/s/ TED R. ANTENUCCI Ted R. Antenucci |
|
Director |
|
February 27, 2015 |
/s/ PAMELA M. ARWAY Pamela M. Arway |
|
Director |
|
February 27, 2015 |
/s/ CLARKE H. BAILEY Clarke H. Bailey |
|
Director |
|
February 27, 2015 |
/s/ KENT P. DAUTEN Kent P. Dauten |
|
Director |
|
February 27, 2015 |
/s/ PAUL F. DENINGER Paul F. Deninger |
|
Director |
|
February 27, 2015 |
158
Name
|
Title
|
Date
|
||
---|---|---|---|---|
|
|
|
|
|
/s/ PER-KRISTIAN HALVORSEN
Per-Kristian Halvorsen |
Director | February 27, 2015 | ||
/s/ MICHAEL LAMACH Michael Lamach |
|
Director |
|
February 27, 2015 |
/s/ WALTER C. RAKOWICH Walter. C. Rakowich |
|
Director |
|
February 27, 2015 |
/s/ ALFRED J. VERRECCHIA Alfred J. Verrecchia |
|
Director |
|
February 27, 2015 |
159
Certain exhibits indicated below are incorporated by reference to documents we have filed with the SEC. Each exhibit marked by a pound sign (#) is a management contract or compensatory plan.
Exhibit | Item | ||
---|---|---|---|
2.1 | Purchase and Sale Agreement, among Autonomy Corporation plc, the Company and certain of its subsidiaries, dated as of May 15, 2011. (Incorporated by reference to the Company's Current Report on Form 8-K dated June 8, 2011.) | ||
|
2.2 |
|
Agreement and Plan of Merger, dated as of November 12, 2014, between Iron Mountain Incorporated and Iron Mountain REIT, Inc. (Incorporated by reference to the Company's Current Report on Form 8-K dated November 18, 2014.) |
|
3.1 |
|
Certificate of Incorporation of the Company, as filed with the Secretary of State of the State of Delaware on June 26, 2014, as corrected by the Certificate of Correction of the Company filed with the Secretary of State of the State of Delaware on June 30, 2014. (Incorporated by reference to Annex B-1 to the Iron Mountain Incorporated Proxy Statement for the Special Meeting of Stockholders, filed with the SEC on December 23, 2014, File No. 001-13045.) |
|
3.2 |
|
Certificate of Merger, filed by the Company, effective as of January 20, 2015. (Incorporated by reference to the Company's Current Report on Form 8-K12b dated January 21, 2015.) |
|
3.3 |
|
Bylaws of the Company. (Filed herewith.) |
|
4.1 |
|
Senior Subordinated Indenture, dated as of December 30, 2002, among the Company, the Guarantors named therein and The Bank of New York, as trustee. (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File Number 001-13045.) |
|
4.2 |
|
Fourth Supplemental Indenture, dated as of October 16, 2006, among the Company, the Guarantors named therein and The Bank of New York Trust Company, N.A., as trustee, relating to the 8% Senior Subordinated Notes due 2018 and the 6 3 / 4 % Euro Senior Subordinated Notes due 2018. (Incorporated by reference to the Company's Current Report on Form 8-K dated October 17, 2006, File Number 001-13045.) |
|
4.3 |
|
Fifth Supplemental Indenture, dated as of January 19, 2007, among the Company, the Guarantors named therein and The Bank of New York Trust Company, N.A., as trustee, relating to the 6 3 / 4 % Euro Senior Subordinated Notes due 2018. (Incorporated by reference to the Company's Current Report on Form 8-K dated January 24, 2007, File Number 001-13045.) |
|
4.4 |
|
Amendment No. 1 to Fifth Supplemental Indenture, dated as of February 23, 2007, among the Company, the Guarantors named therein and The Bank of New York Trust Company, N.A., as trustee. (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2006, File Number 001-13045.) |
|
4.5 |
|
Eighth Supplemental Indenture, dated as of August 10, 2009, among the Company, the Guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the 8 3 / 8 % Senior Subordinated Notes due 2021. (Incorporated by reference to the Company's Current Report on Form 8-K dated August 11, 2009, File Number 001-13045.) |
|
4.6 |
|
Ninth Supplemental Indenture, dated as of January 20, 2015, to Senior Subordinated Indenture, dated as of December 30, 2002, among the Company, the Company's predecessor immediately prior to its conversion to a REIT (the "Predecessor Registrant") and The Bank of New York Trust Company, N.A, as trustee. (Incorporated by reference to the Company's Current Report on Form 8-K12b dated January 21, 2015.) |
160
Exhibit | Item | ||
---|---|---|---|
4.7 | Senior Subordinated Indenture, dated as of September 23, 2011, among the Company, the Guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee. (Incorporated by reference to the Company's Current Report on Form 8-K dated September 29, 2011.) | ||
|
4.8 |
|
First Supplemental Indenture, dated as of September 23, 2011, among the Company, the Guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the 7 3 / 4 % Senior Subordinated Notes due 2019. (Incorporated by reference to the Company's Current Report on Form 8-K dated September 29, 2011.) |
|
4.9 |
|
Second Supplemental Indenture, dated as of August 10, 2012, among the Company, the Guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the 5 3 / 4 % Senior Subordinated Notes due 2024. (Incorporated by reference to the Company's Current Report on Form 8-K dated August 10, 2012.) |
|
4.10 |
|
Third Supplemental Indenture, dated as of January 20, 2015, to Senior Subordinated Indenture, dated as of September 23, 2011, among the Company, the Predecessor Registrant and The Bank of New York Trust Company, N.A., as trustee. (Incorporated by reference to the Company's Current Report on Form 8-K12b dated January 21, 2015.) |
|
4.11 |
|
Senior Indenture, dated as of August 13, 2013, among the Company, the Guarantors named therein and Wells Fargo Bank, National Association, as trustee. (Incorporated by reference to the Company's Current Report on Form 8- K dated August 13, 2013.) |
|
4.12 |
|
First Supplemental Indenture, dated as of August 13, 2013, among the Company, the Guarantors named therein and Wells Fargo Bank, National Association, as trustee, relating to the 6% Senior Notes due 2023. (Incorporated by reference to the Company's Current Report on Form 8-K dated August 13, 2013.) |
|
4.13 |
|
Second Supplemental Indenture, dated as of January 20, 2015, to Senior Indenture, dated as of August 13, 2013, among the Company, the Predecessor Registrant and Wells Fargo Bank, National Association, as trustee. (Incorporated by reference to the Company's Current Report on Form 8-K12b dated January 21, 2015.) |
|
4.14 |
|
Senior Indenture, dated as of August 13, 2013, among Iron Mountain Canada Operations ULC, the Company, the Guarantors named therein and Wells Fargo Bank, National Association, as trustee. (Incorporated by reference to the Company's Current Report on Form 8-K dated August 13, 2013.) |
|
4.15 |
|
First Supplemental Indenture, dated as of August 13, 2013, among Iron Mountain Canada Operations ULC, the Guarantors named therein and Wells Fargo Bank, National Association, as trustee, relating to the 6.125% CAD Senior Notes due 2021. (Incorporated by reference to the Company's Current Report on Form 8-K dated August 13, 2013.) |
|
4.16 |
|
Second Supplemental Indenture, dated as of January 20, 2015, to Senior Indenture, dated as of August 13, 2013, among the Company, the Predecessor Registrant, Iron Mountain Canada Operations ULC and Wells Fargo Bank, National Association, as trustee. (Incorporated by reference to the Company's Current Report on Form 8-K12b dated January 21, 2015.) |
|
4.17 |
|
Senior Indenture, dated as of September 18, 2014, among Iron Mountain Europe PLC, the Company, the Subsidiary Guarantors, Wells Fargo Bank, National Association, as trustee, and Société Générale Bank & Trust, as paying agent, registrar and transfer agent. (Incorporated by reference to the Company's Current Report on Form 8-K dated September 22, 2014.) |
161
Exhibit | Item | ||
---|---|---|---|
4.18 | First Supplemental Indenture, dated as of January 20, 2015, to Senior Indenture, dated as of September 18, 2014, among the Company, the Predecessor Registrant, Iron Mountain Europe PLC, Wells Fargo Bank, National Association, as trustee, and Société Générale Bank & Trust, as Paying Agent, Registrar and Transfer Agent. (Incorporated by reference to the Company's Current Report on Form 8-K12b dated January 21, 2015.) | ||
|
4.20 |
|
Form of Stock Certificate representing shares of Common Stock, $0.01 par value per share, of the Company. (Incorporated by reference to the Company's Current Report on Form 8-K12b dated January 21, 2015.) |
|
4.21 |
|
REIT Status Protection Rights Agreement, dated as of December 9, 2013, between the Company and Computershare Inc. (Incorporated by reference to the Company's Current Report on Form 8-K dated December 9, 2013.) |
|
4.22 |
|
First Amendment to REIT Status Protection Agreement, dated as of November 18, 2014, between Iron Mountain Incorporated and Computershare Inc. (Incorporated by reference to the Company's Current Report on Form 8-K dated November 18, 2014.) |
|
4.23 |
|
Second Amendment to REIT Status Protection Rights Agreement, dated as of January 20, 2015, between the Predecessor Registrant and Computershare Inc. (Incorporated by reference to the Company's Current Report on Form 8-K12b dated January 21, 2015.) |
|
10.1 |
|
2008 Restatement of the Iron Mountain Incorporated Executive Deferred Compensation Plan. (#) (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2007, File Number 001-13045.) |
|
10.2 |
|
First Amendment to 2008 Restatement of the Iron Mountain Incorporated Executive Deferred Compensation Plan. (#) (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2008, File Number 001-13045.) |
|
10.3 |
|
Third Amendment to 2008 Restatement of the Iron Mountain Incorporated Executive Deferred Compensation Plan. (#) (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.) |
|
10.4 |
|
Fourth Amendment to 2008 Restatement of the Iron Mountain Incorporated Executive Deferred Compensation Plan. (#) (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2012.) |
|
10.5 |
|
Iron Mountain Incorporated 1997 Stock Option Plan, as amended. (#) (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, File Number 001-13045.) |
|
10.6 |
|
Amendment to Iron Mountain Incorporated 1997 Stock Option Plan, as amended. (#) (Incorporated by reference to the Company's Current Report on Form 8-K dated December 10, 2008, File Number 001-13045.) |
|
10.7 |
|
Iron Mountain Incorporated 1995 Stock Incentive Plan, as amended. (#) (Incorporated by reference to Iron Mountain /DE's Current Report on Form 8-K dated April 16, 1999, File Number 001-13045.) |
|
10.8 |
|
Iron Mountain Incorporated 2002 Stock Incentive Plan. (#) (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, File Number 001-13045.) |
162
Exhibit | Item | ||
---|---|---|---|
10.9 | Third Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#) (Incorporated by reference to Appendix A of the Company's Proxy Statement for the 2008 Annual Meeting of Stockholders, filed with the SEC on April 21, 2008, File Number 001-13045.) | ||
|
10.10 |
|
Fourth Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#) (Incorporated by reference to the Company's Current Report on Form 8-K dated December 10, 2008, File Number 001-13045.) |
|
10.11 |
|
Fifth Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#) (Incorporated by reference to the Company's Current Report on Form 8-K dated June 4, 2010.) |
|
10.12 |
|
Sixth Amendment to the Iron Mountain Incorporated 2002 Stock Incentive Plan. (#) (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011.) |
|
10.13 |
|
Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan. (#) (Incorporated by reference to Annex C to the Iron Mountain REIT, Inc. Registration Statement on Form S-4, filed with the SEC on November 12, 2014, File No. 333-197819.) |
|
10.14 |
|
Form of Iron Mountain Incorporated Amended and Restated Non-Qualified Stock Option Agreement. (#) (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, File Number 001-13045.) |
|
10.15 |
|
Form of Iron Mountain Incorporated Incentive Stock Option Agreement. (#) (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, File Number 001-13045.) |
|
10.16 |
|
Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Non-Qualified Stock Option Agreement. (#) (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, File Number 001-13045.) |
|
10.17 |
|
Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Amended and Restated Iron Mountain Non-Qualified Stock Option Agreement. (#) (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, File Number 001-13045.) |
|
10.18 |
|
Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Incentive Stock Option Agreement. (#) (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, File Number 001-13045.) |
|
10.19 |
|
Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Non-Qualified Stock Option Agreement. (#) (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, File Number 001-13045.) |
|
10.20 |
|
Form of Iron Mountain Incorporated 1997 Stock Option Plan Stock Option Agreement (version 1). (#) (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, File Number 001-13045.) |
|
10.21 |
|
Form of Iron Mountain Incorporated 1997 Stock Option Plan Stock Option Agreement (version 2). (#) (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, File Number 001-13045.) |
|
10.22 |
|
Form of Iron Mountain Incorporated 2002 Stock Incentive Plan Stock Option Agreement (version 2B). (#) (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2013.) |
163
Exhibit | Item | ||
---|---|---|---|
10.23 | Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2002 Stock Incentive Plan (version 3). (#) (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013.) | ||
|
10.24 |
|
Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2002 Stock Incentive Plan (version 20). (#) (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013.) |
|
10.25 |
|
Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2002 Stock Incentive Plan (version 21). (#) (Incorporated by reference to the Company's Current Report on Form 8-K dated March 19, 2014.) |
|
10.26 |
|
Form of Restricted Stock Unit Agreement pursuant to the Iron Mountain Incorporated 2002 Stock Incentive Plan (version 3). (#) (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.) |
|
10.27 |
|
Form of Restricted Stock Unit Agreement pursuant to the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan (version 1). (#) (Filed herewith.) |
|
10.28 |
|
Form of Stock Option Agreement pursuant to the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan (version 1). (#) (Filed herewith.) |
|
10.29 |
|
Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan (version 1). (#) (Filed herewith.) |
|
10.30 |
|
Form of Performance Unit Agreement pursuant to the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan (version 2). (#) (Filed herewith.) |
|
10.31 |
|
Change in Control Agreement, dated September 8, 2008, between the Company and Ernest W. Cloutier. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2014.) |
|
10.32 |
|
Iron Mountain Incorporated 2003 Senior Executive Incentive Program. (#) (Incorporated by reference to the Company's Current Report on Form 8-K dated April 5, 2005, File Number 001-13045.) |
|
10.33 |
|
Amendment to the Iron Mountain Incorporated 2003 Senior Executive Incentive Program. (#) (Incorporated by reference to the Company's Current Report on Form 8-K dated June 4, 2010.) |
|
10.34 |
|
Iron Mountain Incorporated 2006 Senior Executive Incentive Program. (#) (Incorporated by reference to the Company's Current Report on Form 8-K dated June 1, 2006, File Number 001-13045.) |
|
10.35 |
|
Amendment to the Iron Mountain Incorporated 2006 Senior Executive Incentive Program. (#) (Incorporated by reference to the Company's Current Report on Form 8-K dated June 4, 2010.) |
|
10.36 |
|
Contract of Employment with Iron Mountain, between Iron Mountain Belgium NV and Marc Duale. (#) (Incorporated by reference to the Company's Current Report on Form 8-K dated December 30, 2009, File Number 001-13045.) |
164
Exhibit | Item | ||
---|---|---|---|
10.37 | Addendum, dated March 19, 2012, to the Contract of Employment between Iron Mountain BPM International Sarl and Marc Duale, dated September 29, 2011, together with the Contract of Employment between Iron Mountain BPM International Sarl and Marc Duale, dated September 29, 2011, the Agreement Regarding the Suspension of the Employment Contract, effective September 30, 2011, and the Terms and Conditions for the Office of Director (Gerant) between Iron Mountain BPM SPRL and Marc Duale, dated October 1, 2011. (#) (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012.) | ||
|
10.38 |
|
Employment Offer Letter, dated November 30, 2012, from the Company to William L. Meaney. (#) (Incorporated by reference to the Company's Current Report on Form 8-K dated December 3, 2012.) |
|
10.39 |
|
Employment Offer Letter, dated April 10, 2014, from the Company to Roderick Day. (#) (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2014.) |
|
10.40 |
|
Contract of Employment with Iron Mountain, between Roderick Day and Iron Mountain (UK) Ltd., dated as of November 1, 2009. (#) (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2013.) |
|
10.41 |
|
Restated Compensation Plan for Non-Employee Directors. (#) (Filed herewith.) |
|
10.42 |
|
Iron Mountain Incorporated Director Deferred Compensation Plan. (#) (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2007, File Number 001-13045.) |
|
10.43 |
|
The Iron Mountain Companies Severance Plan. (#) (Incorporated by reference to the Company's Current Report on Form 8-K, dated March 13, 2012.) |
|
10.44 |
|
Amended and Restated Severance Plan Severance Program No. 1. (#) (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2012.) |
|
10.45 |
|
First Amendment to Amended and Restated Severance Plan Severance Program No. 1. (#) (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2012.) |
|
10.46 |
|
Second Amendment to The Iron Mountain Companies Severance Plan Severance Program No. 1. (#) (Incorporated by reference to the Company's Current Report on Form 8-K dated December 19, 2014.) |
|
10.47 |
|
Severance Program No. 2. (#) (Incorporated by reference to the Company's Current Report on Form 8-K dated December 3, 2012.) |
|
10.48 |
|
Amended and Restated Registration Rights Agreement, dated as of June 12, 1997, among the Company and certain stockholders of the Company. (#) (Incorporated by reference to Iron Mountain/DE's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, File Number 001-13045.) |
165
Exhibit | Item | ||
---|---|---|---|
10.49 | Credit Agreement, dated as of June 27, 2011, among the Company, Iron Mountain Information Management, Inc., Iron Mountain Canada Corporation, Iron Mountain Switzerland GmbH, Iron Mountain Europe Limited, Iron Mountain Australia Pty Ltd., Iron Mountain Information Management (Luxembourg) S.C.S., Iron Mountain Luxembourg S.a r.l., the lenders and other financial institutions party thereto, JPMorgan Chase Bank, Toronto Branch, as Canadian Administrative Agent, and JPMorgan Chase Bank, N.A., as Administrative Agent. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011.) | ||
|
10.50 |
|
Amendment to Credit Agreement, dated as of August 15, 2012, among the Company, Iron Mountain Information Management, Inc., Iron Mountain Canada Corporation, Iron Mountain Switzerland GmbH, Iron Mountain Europe Limited, Iron Mountain Australia Pty Ltd., Iron Mountain Information Management (Luxembourg) S.C.S., Iron Mountain Luxembourg S.a r.l., the lenders and other financial institutions party thereto, JPMorgan Chase Bank, Toronto Branch, as Canadian Administrative Agent, and JPMorgan Chase Bank, N.A., as Administrative Agent. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012.) |
|
10.51 |
|
Second Amendment to Credit Agreement, dated as of January 31, 2013, among the Company, Iron Mountain Information Management, LLC (f/k/a Iron Mountain Information Management, Inc.), Iron Mountain Canada Corporation, Iron Mountain Switzerland GmbH, Iron Mountain Europe Limited, Iron Mountain Australia Pty Ltd., Iron Mountain Luxembourg S.a r.l., the lenders and other financial institutions party thereto, JPMorgan Chase Bank, Toronto Branch, as Canadian Administrative Agent, and JPMorgan Chase Bank, N.A., as Administrative Agent. (Incorporated by reference to the Company's Current Report on Form 8-K dated February 4, 2013.) |
|
10.52 |
|
Third Amendment to Credit Agreement, dated as of August 7, 2013, among the Company, Iron Mountain Information Management, LLC (f/k/a Iron Mountain Information Management, Inc.), Iron Mountain Holdings Group, Inc., Iron Mountain US Holdings, Inc., Iron Mountain Global Holdings, Inc., Iron Mountain Global LLC, Iron Mountain Fulfillment Services, Inc., Iron Mountain Intellectual Property Management, Inc., Iron Mountain Secure Shredding, Inc., Iron Mountain Information Management Services, Inc., Iron Mountain Canada Operations ULC, Iron Mountain do Brasil Ltda., Iron Mountain Switzerland GmbH, Iron Mountain Europe Limited, Iron Mountain Holdings (Europe) Limited, Iron Mountain (UK) Limited, Iron Mountain Australia Pty Ltd, the lenders and other financial institutions party thereto, JPMorgan Chase Bank, Toronto Branch, as Canadian Administrative Agent, and JPMorgan Chase Bank, N.A., as Administrative Agent. (Incorporated by reference to the Company's Current Report on Form 8-K dated August 8, 2013.) |
|
10.53 |
|
Fourth Amendment to Credit Agreement, dated as of June 19, 2014, among the Company, Iron Mountain Information Management, LLC, Iron Mountain Holdings Group, Inc., Iron Mountain US Holdings, Inc., Iron Mountain Global Holdings, Inc., Iron Mountain Global LLC, Iron Mountain Fulfillment Services, Inc., Iron Mountain Intellectual Property Management, Inc., Iron Mountain Secure Shredding, Inc., Iron Mountain Information Management Services, Inc., Iron Mountain Canada Operations ULC, Iron Mountain do Brasil Ltda., Iron Mountain Switzerland GmbH, Iron Mountain Europe Limited, Iron Mountain Holdings (Europe) Limited, Iron Mountain (UK) Limited, Iron Mountain Australia Pty Ltd, the lenders and other financial institutions party thereto, JPMorgan Chase Bank, Toronto Branch, as Canadian Administrative Agent, and JPMorgan Chase Bank, N.A., as Administrative Agent. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.) |
166
Exhibit | Item | ||
---|---|---|---|
10.54 | Incremental Term Loan Activation Notice, dated August 25, 2014, between Iron Mountain Information Management, LLC and the lenders party thereto. (Incorporated by reference to the Company's Current Report on Form 8-K dated August 26, 2014.) | ||
|
10.55 |
|
Assumption and Affirmation Agreement, dated as of January 20, 2015, among the Company, the Predecessor Registrant, Iron Mountain Information Management, LLC, Iron Mountain Holdings Group, Inc., Iron Mountain US Holdings, Inc., Iron Mountain Global Holdings, Inc., Iron Mountain Global LLC, Iron Mountain Fulfillment Services, Inc., Iron Mountain Intellectual Property Management, Inc., Iron Mountain Secure Shredding, Inc., Iron Mountain Information Management Services, Inc., Iron Mountain Canada Operations ULC, Iron Mountain Secure Shredding Canada, Inc., Iron Mountain Information Management Services Canada, Inc., Mountain Reserve III, Inc., Nettlebed Acquisition Corp., Iron Mountain do Brasil Ltda., Iron Mountain Switzerland GmbH, Iron Mountain Europe PLC, Iron Mountain Holdings (Europe) Limited, Iron Mountain (UK) Limited, Iron Mountain Australia Pty Ltd, Iron Mountain Australia Services Pty Ltd, Iron Mountain Australia Holdings Pty Ltd, Iron Mountain Austria Archivierung GmbH, Iron Mountain Luxembourg Services S.a.r.l., Luxembourg, Schaffhausen Branch and Iron Mountain International Holdings B.V. (Incorporated by reference to the Company's Current Report on Form 8-K12b dated January 21, 2015.) |
|
12 |
|
Statement re: Computation of Ratios. (Filed herewith.) |
|
21.1 |
|
Subsidiaries of the Company. (Filed herewith.) |
|
23.1 |
|
Consent of Deloitte & Touche LLP (Iron Mountain Incorporated, Delaware). (Filed herewith.) |
|
31.1 |
|
Rule 13a-14(a) Certification of Chief Executive Officer. (Filed herewith.) |
|
31.2 |
|
Rule 13a-14(a) Certification of Chief Financial Officer. (Filed herewith.) |
|
32.1 |
|
Section 1350 Certification of Chief Executive Officer. (Furnished herewith.) |
|
32.2 |
|
Section 1350 Certification of Chief Financial Officer. (Furnished herewith.) |
|
101.1 |
|
The following materials from Iron Mountain Incorporated's Annual Report on Form 10-K for the year ended December 31, 2014 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Equity, (iv) Consolidated Statements of Comprehensive Income (Loss), (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and in detail. (Filed herewith.) |
167
Exhibit 3.3
BYLAWS
OF
IRON MOUNTAIN INCORPORATED
ARTICLE I. OFFICE
Section 1.1. Registered Office. The registered office of the Corporation shall be located in the City of Wilmington, County of New Castle, State of Delaware and the name of the resident agent in charge thereof shall be Corporation Service Company.
Section 1.2. Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors (hereinafter referred to as the Board of Directors or the Board) may from time to time appoint or the business of the Corporation may require.
Section 1.3. Books. The books of the Corporation may be kept within or without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.
ARTICLE II. MEETINGS OF STOCKHOLDERS
Section 2.1. Time and Place of Meetings. All meetings of stockholders shall be held at such place, if any, either within or without the State of Delaware, on such date and at such time as the Board of Directors (or the Chairman in the absence of a designation by the Board of Directors) may designate from time to time.
Section 2.2. Annual Meeting. The annual meeting of stockholders shall be held for the election of directors on such date and at such time as the Board of Directors may designate from time to time. Any other proper business may be transacted at the annual meeting. The Board of Directors may postpone, reschedule or cancel any annual meeting of stockholders scheduled by the Board of Directors.
Section 2.3. Special Meetings. Special meetings of the stockholders for any purpose or purposes may be called only by a majority of the Board of Directors. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. The Board of Directors may postpone, reschedule or cancel any special meeting of stockholders scheduled by the Board of Directors.
Section 2.4. Introduction of Business At a Meeting of Stockholders. At an annual or special meeting of stockholders, only such business shall be conducted, and only such proposals shall be acted upon, as shall have been properly brought before such annual or special meeting of stockholders. To be properly brought before an annual or special meeting of stockholders, business must be (i) in the case of a special meeting, specified in the notice of the special meeting (or any supplement thereto) or (ii) in the case of an annual meeting, specified in the notice of the annual meeting (or any supplement thereto) given by or at the direction of the Board of Directors or otherwise properly brought before the meeting by or at the direction of the Board of Directors, or otherwise properly brought before the annual meeting by a stockholder
who shall have been a stockholder of record on the record date for such meeting and shall continue to be entitled to vote thereat (including through any adjournment or postponement thereof) and shall have complied with the notice procedures set forth in this Section 2.4. Stockholders shall not be permitted to propose business to be brought before a special meeting of the stockholders, and the only matters that may be brought before a special meeting are the matters specified in the notice of meeting given by or at the direction of the person calling the meeting pursuant to Section 2.3 of these Bylaws. Stockholders seeking to nominate persons for election to the Board of Directors must comply with Section 3.2 and Section 3.3 of these Bylaws and this Section 2.4 shall not be applicable to nominations except as expressly provided in Section 3.2. For business (other than the nomination of a person for election as a director, which is governed by Section 3.2 of these Bylaws) to be properly brought before an annual meeting of stockholders by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and any such proposed business must constitute a proper matter for stockholder action. To be timely, a stockholder notice must be delivered to, or mailed and received at, the principal executive offices of the Corporation (A) in the case of an annual meeting that is called for a date that is within 30 days before or after the anniversary date of the immediately preceding annual meeting of stockholders, not less than 90 nor more than 120 days prior to the first anniversary of the date on which the previous years annual meeting of stockholders was held (the Anniversary), and (B) in the case of an annual meeting that is called for a date that is not within 30 days before or after the anniversary date of the immediately preceding annual meeting, not later than the later of (x) the 120th day prior to such annual meeting or (y) the close of business on the tenth day following the day on which public disclosure of the date of the meeting was first made by the Corporation. For purposes of these Bylaws (including Section 3.2), public disclosure shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act). In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a stockholders notice as described above.
In order to be effective, a stockholders notice to the Secretary shall set forth:
(i) as to each matter the stockholder proposes to bring before an annual meeting of stockholders, a brief description of the business desired to be brought before the annual meeting, the reasons for conducting such business at the annual meeting and, if a specific action is to be proposed, the text of the proposed business (including the text of any resolution(s) which the proposing stockholder proposes that the stockholders adopt and in the event such business includes a proposal to amend the bylaws of the Corporation, the language of the proposed amendment); and
(ii) as to the stockholder proposing the matter and the beneficial owner, if any, on whose behalf the proposal is made (a) a representation that the stockholder is a holder of record of the stock of the Corporation entitled to vote at such meeting, including the class or series and number of shares of such stock that are owned beneficially and of record by such stockholder, and intends to appear in person or by proxy at the meeting to bring the business specified in the notice before the meeting, (b) the name and address, as they appear on the Corporations books, of the stockholder proposing such business and the of the beneficial owner, if any, and any other
stockholders known by such stockholder or beneficial owner to be supporting such proposal, (c) the class or series and number of shares of the Corporation which are beneficially owned by such beneficial owner, if any, and by any stockholders known by the proposing stockholder or the beneficial owner to be supporting such proposal on the date of such stockholders notice, (d) a description of any agreement, arrangement or understanding with respect to such business between or among the stockholder and/or the beneficial owner and/or any of such stockholders or such beneficial owners affiliates or associates, and any others (including their names) acting in concert with any of the foregoing, and a representation that the stockholder will notify the Corporation in writing of any such agreement, arrangement or understanding in effect as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed, (e) any (1) derivative, swap or other transaction or series of transactions engaged in, directly or indirectly, by the stockholder, the purpose or effect of which is to give the stockholder and/or the beneficial owner economic risk similar to ownership of shares of any class or series of the Corporation, including due to the fact that the value of such derivative, swap or other transactions are determined by reference to the price, value or volatility of any shares of any class or series of the Corporation, or which derivative, swap or other transactions provide, directly or indirectly, the opportunity to profit from any increase in the price or value of shares of any class or series of the Corporation (Synthetic Equity Interests), which Synthetic Equity Interests shall be disclosed without regard to whether (x) the derivative, swap or other transactions convey any voting rights in such shares to the stockholder, (y) the derivative, swap or other transactions are required to be, or are capable of being, settled through delivery of such shares or (z) the stockholder and/or the beneficial owner may have entered into other transactions that hedge or mitigate the economic effect of such derivative, swap or other transactions, (2) any proxy (other than a revocable proxy or consent given in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Exchange Act by way of a solicitation statement filed on Schedule 14A), agreement, arrangement, understanding or relationship pursuant to which the stockholder and/or the beneficial owner has or shares a right to vote any shares of any class or series of the Corporation, (3) any agreement, arrangement, understanding or relationship, including any repurchase or similar so-called stock borrowing agreement or arrangement, engaged in, directly or indirectly, by the stockholder and/or the beneficial owner, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of shares of any class or series of the Corporation by, manage the risk of share price changes for, or increase or decrease the voting power of, the stockholder and/or the beneficial owner with respect to the shares of any class or series of the Corporation, or which provides, directly or indirectly, the opportunity to profit from any decrease in the price or value of the shares of any class or series of the Corporation (Short Interests), (4) any rights to dividends on the shares of any class or series of the Corporation owned beneficially by the stockholder and/or the beneficial owner that are separated or separable from the underlying shares of the Corporation, (5) any performance related fees (other than an asset based fee) that the stockholder and/or the beneficial owner is entitled to based on any increase or decrease in the price or value of shares of any class or series of the Corporation, or any Synthetic Equity Interests or Short Interests, if any, (6) any other information relating to the stockholder and/or the beneficial owner that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by the stockholder in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act (the disclosures to be made pursuant to the
foregoing clauses (d) and (e)(1) through (6), the Disclosable Interests); and a representation that the stockholder will notify the Corporation in writing of any such Disclosable Interests in effect as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed; provided, however, that Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is proposing business solely as a result of being the stockholder directed to prepare and submit the notice required by these Bylaws on behalf of a beneficial owner; (f) whether such stockholder and/or such beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the percentage of the Corporations voting shares required under these Bylaws and applicable law to carry the proposal (an affirmative statement of such intent, a Solicitation Notice), and (g) any material interest of the stockholder and/or the beneficial owner in such proposal.
If the stockholder has provided the Corporation with a Solicitation Notice, such stockholder must have delivered a proxy statement and form of proxy to holders of at least the percentage of the Corporations voting shares required under applicable law to carry such proposal. If no Solicitation Notice relating thereto has been timely provided pursuant to this Section, the stockholder proposing such business must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section.
Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at a meeting of stockholders except in accordance with the procedures set forth in this Section 2.4 (and with respect to nominations of directors, Sections 3.2 and 3.3) of these Bylaws. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that any item of proposed business was not properly brought before the meeting in accordance with the procedures prescribed by these Bylaws, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.
The foregoing requirements shall be the exclusive means to submit business proposed to be brought before any annual meeting of stockholders (other than the nomination of a person for election as a director, which is governed by Section 3.2 of these Bylaws), other than any proposal brought properly under and in compliance with to Rule 14a-8 under the Exchange Act and included in the Corporations notice of meeting given by or at the direction of the Board of Directors. In addition to the foregoing requirements with respect to any business proposed to be brought before an annual meeting, each stockholder shall comply with all applicable requirements of the Exchange Act with respect to any such business. Nothing in this Section 2.4 shall be deemed to affect the rights of stockholders to request the inclusion of proposals in, or the right of the Corporation to omit a proposal from, the Corporations proxy statement pursuant to Rule 14a-8 under the Exchange Act.
Section 2.5. Notice of Meetings; Waiver of Notice. (i) Notice of every meeting of stockholders, annual or special, stating the hour, date and place, if any, thereof, the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called shall, not less than ten (10) days, or such longer period
as shall be provided by law, the Certificate of Incorporation, these Bylaws, or otherwise, and not more than sixty (60) days before such meeting, be given to each stockholder entitled to vote thereat, at the address of such stockholder as it appears upon the stock records of the Corporation or, if such stockholder shall have filed with the Secretary of the Corporation a written request that notices be mailed to some other address, then to the address designated in such request.
(ii) A waiver of any such notice given by the person entitled thereto, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not validly called or convened. Neither the business to be transacted at nor the purpose of any annual or special meeting of stockholders need be specified in a waiver of notice.
Section 2.6. Notice by Electronic Transmission . Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the General Corporation Law of the State of Delaware (the Delaware Law), the Certificate of Incorporation or these Bylaws, any notice to stockholders given by the Corporation under any provision of the Delaware Law, the Certificate of Incorporation or these Bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if: (i) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent; and (ii) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice. However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Any notice given pursuant to the preceding paragraph shall be deemed given: (i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (iv) if by any other form of electronic transmission, when directed to the stockholder. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
Section 2.7. Definition of Electronic Transmission . An electronic transmission means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.
Section 2.8. Quorum and Adjournments. Except as otherwise provided by law or by the Certificate of Incorporation, or these Bylaws and subject to the Delaware Law, the presence, in person or by proxy, at any meeting of stockholders of the holders of a majority of the voting power of the shares of the capital stock of the Corporation issued, outstanding and entitled to vote thereat shall be requisite and shall constitute a quorum. If one or more classes of stock are
entitled to vote as separate classes upon any question, then, in the case of such class, a quorum for the consideration of such question shall, except as otherwise provided by law or by the Certificate of Incorporation, consist of a majority of the voting power of all stock of that class issued, outstanding and entitled to vote. If a quorum shall not be represented at any meeting of the stockholders regularly called, the holders of a majority of the voting power of the shares present or represented by proxy and entitled to vote thereat shall have power to adjourn the meeting to another time, or to another time and place, without notice other than announcement of the time and place thereof at the meeting, and there may be successive adjournments for like cause and in like manner until the requisite amount of shares entitled to vote at such meeting shall be represented; provided, however, that if the adjournment is for more than thirty (30) days, notice of the hour, date and place of the adjourned meeting shall be given to each stockholder entitled to vote thereat. At the adjourned meeting, any business may be transacted which might have been transacted at the meeting as originally noticed.
Section 2.9. Votes; Proxies. Except as otherwise provided in the Certificate of Incorporation, and subject to the Delaware Law, at each meeting of stockholders, every stockholder of record at the closing of the transfer books, if closed, or on the date set by the Board of Directors for the determination of stockholders entitled to vote at such meeting, shall be entitled to one vote for each share of stock entitled to vote which is registered in such stockholders name on the books of the Corporation on such date.
At each such meeting every stockholder entitled to vote shall be entitled to do so in person, or by proxy appointed by an instrument in writing or as otherwise permitted by law subscribed by such stockholder and bearing a date not more than three (3) years prior to the meeting in question, unless said instrument provides for a longer period during which it is to remain in force. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or any interest in the Corporation generally. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing with the Secretary of the Corporation an instrument in writing or as otherwise permitted by law revoking the proxy or another duly executed proxy bearing a later date.
Voting at meetings of stockholders need not be by written ballot and, except as otherwise provided by law, need not be conducted by inspectors of election unless so determined by the Chairman of the meeting or by the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote thereon which are present in person or represented by proxy at such meeting. If it is required or determined that inspectors of election be appointed, the Chairman shall appoint one or more inspectors of election, who shall first take and sign an oath faithfully to execute the duties of inspectors at such meeting with strict impartiality and according to the best of their ability. The inspector(s) so appointed shall (i) ascertain the number of shares of capital stock of the corporation outstanding and the voting power of each such share, (ii) determine the shares of capital stock of the corporation represented at the meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and (v) certify their
determination of the number of shares of capital stock of the corporation represented at the meeting and such inspectors count of all votes and ballots. No director or candidate for the office of director shall be appointed as such inspector for such election.
At any meeting at which a quorum is present, a majority of the votes cast by the shares present in person or represented by proxy at the meeting and entitled to vote thereat shall decide any question (other than the election of directors) brought before such meeting, except in any case where a larger vote is required by the Delaware Law, the Certificate of Incorporation, these Bylaws or otherwise. The vote required for the election of directors shall be as set forth in Section 3.1 of these Bylaws.
Section 2.10. Organization. The Chairman of the Board, if there be one, or in his or her absence the Vice Chairman, or in the absence of a Vice Chairman, the Chief Executive Officer, if there be one, or in the absence of the Chief Executive Officer, the President, or in the absence of the President, a Vice President, shall call meetings of the stockholders to order and shall act as chairman thereof. The Secretary of the Corporation, if present, shall act as secretary of all meetings of stockholders, and, in his or her absence, the presiding officer may appoint a secretary.
ARTICLE III. DIRECTORS
Section 3.1. General Powers; Number; Term of Office and Election. The business and affairs of the Corporation shall be conducted and managed by a Board of Directors. Directors need not be stockholders. Except as otherwise provided by the Delaware Law, the Certificate of Incorporation or these Bylaws, the number of directors shall be fixed by the Board of Directors (and not by the stockholders) from time to time provided that the number of directors shall not be less than three. No decrease in the number of directors shall affect the term of any director then in office.
In an uncontested election of directors at a meeting at which a quorum is present, each director of the Corporation shall be elected by a majority of the votes cast with respect to that directors election. In a contested election, the directors shall be elected by a plurality of the votes cast. For purposes of this Section 3.1: (i) an uncontested election is an election in which the number of nominees for director is not greater than the number to be elected; (ii) a contested election is an election in which the number of nominees for director is greater than the number to be elected and (iii) a majority of the votes cast means that the number of shares voted for a director nominee must exceed the number of votes cast against that director nominee. Abstentions and broker non-votes are not considered votes cast for purposes of this Section 3.1 and, therefore, are not included in the calculations regarding a majority of votes cast.
Each director shall hold office until such directors successor is elected and qualified or until such directors earlier resignation or removal. Following any uncontested election, any incumbent director who was a nominee and who did not receive a majority of the votes cast shall promptly tender, to the extent not already tendered pursuant to Section 3.2 of these Bylaws, his or her resignation to the Chairman of the Board of Directors for consideration by the Board of Directors contingent on acceptance of such resignation by the Board of Directors. A recommendation on whether to accept such resignation or whether other action should be taken
shall be made by the Nominating and Governance Committee. In determining whether or not to recommend that the Board of Directors accept any resignation offer, the Nominating and Governance Committee shall be entitled to consider all factors believed relevant by such Committees members.
The Board of Directors shall act on such resignation, taking into account the Nominating and Governance Committees recommendation, within 90 days following the date of the certification of the election results and shall publicly disclose its decision and, if applicable, the reasons for rejecting the resignation in a filing with the Securities and Exchange Commission. An incumbent director whose resignation is being considered shall not participate in the Nominating and Governance Committees or the Board of Directors recommendation or decision, or any deliberations related thereto.
If any directors resignation offer is not accepted by the Board of Directors, such director shall continue to serve until the next annual meeting of stockholders and his or her successor is duly elected and qualified, or until the directors earlier death, resignation, or removal. If a directors resignation is accepted by the Board of Directors pursuant to this Section 3.1, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board of Directors, in its sole discretion, may fill any resulting vacancy pursuant to the provisions of Section 3.5 of these Bylaws or may decrease the size of the Board of Directors pursuant to this Section 3.1.
The Board of Directors shall not nominate for election as director any candidate who has not agreed to tender, promptly following the annual meeting at which he or she is elected as director, an irrevocable resignation that will be effective upon (a) the failure to receive the required number of votes for reelection at the next annual meeting of stockholders at which he or she faces reelection, and (b) acceptance of such resignation by the Board of Directors. In addition, the Board of Directors shall not fill a director vacancy or newly created directorship with any candidate who has not agreed to tender, promptly following his or her appointment to the board, the same form of resignation.
Section 3.2. Nomination of Directors. Only persons nominated in accordance with the procedures set forth in this Section 3.2 shall be eligible for election as directors. Nominations of persons for election to the Board of Directors may be made at a meeting of stockholders (i) by or at the direction of the Board of Directors or a committee of Directors appointed by the Board, or (ii) by any stockholder of the Corporation who shall have been a stockholder of record on the record date for such meeting and shall continue to be entitled to vote thereat (including through any adjournment or postponement thereof) who complies with the notice procedures set forth in this Section 3.2. Such nominations, other than those made by or at the direction of the Board or a committee thereof, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholders notice must be delivered to, or mailed and received at, the principal executive offices of the Corporation (i) in the case of an annual meeting that is called for a date that is within 30 days before or after the anniversary date of the immediately preceding annual meeting of stockholders, not less than 90 days nor more than 120 days prior to the Anniversary, and (ii) in the case of an annual meeting that is called for a date that is not within 30 days before or after the Anniversary, or in the case of a special meeting of stockholders called for the purpose of electing Directors, not later than the later of (x) the 120th day prior to
such meeting or (y) the close of business on the tenth day following the day on which public disclosure of the date of the meeting was first made by the Corporation. In no event shall any adjournment or postponement of a meeting or the announcement thereof commence a new time period for the giving of a stockholders notice as described above. Notwithstanding anything in these Bylaws to the contrary, in the event that the number of directors to be elected to the Board of Directors at an annual meeting of the stockholders is increased effective after the time period for which nominations would otherwise due under this Section 3.1 and there is no public announcement by the Corporation naming the nominees for the additional directorships or specifying the size of the increased Board of Directors at least 100 days prior to the Anniversary (or, if the annual meeting is held more than 30 days before or after such Anniversary, at least 100 days prior to such annual meeting), a stockholders notice required by this Section 3.2 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive office of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.
In order to be effective, a stockholders notice to the Secretary shall set forth:
(i) as to each person whom the stockholder proposes to nominate for election or reelection as a director (a) the name, age, business address and residence address of such person, (b) the principal occupation or employment of such person, (c) the class or series and number of shares of the Corporation which are beneficially owned by such person on the date of such stockholders notice, (d) any information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including without limitation such persons written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (e) all Disclosable Interests of such person; (f) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such stockholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the registrant for purposes of such rule and the nominee were a director or executive officer of such registrant; and (g) a completed and signed questionnaire, representation and agreement required by Section 3.3 and
(ii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made, (a) a representation that the stockholder is a holder of record of shares of the Corporation entitled to vote at such meeting, including the class or series and number of shares of such stock that are owned beneficially and of record by such stockholder, and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (b) the name and address, as they appear on the Corporations books, of such stockholder and any other stockholders known by such stockholder to be supporting such nominee(s) and the name and address of such beneficial owner, if any, (c) the class or series and
number of shares of the Corporation which are beneficially owned by such beneficial owner and any other stockholders known by such stockholder to be supporting such nominee(s) on the date of such stockholders notice, (d) all Disclosable Interests of such stockholder and such beneficial owner and (e) a Solicitation Notice or a statement that the stockholder and/or the beneficial owner does not intend to deliver a proxy statement and form of proxy to holders of a sufficient number of holders of the Corporations voting shares to elect such nominee or nominees. The Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable stockholders understanding of the independence, or lack thereof, of such nominee.
If the stockholder has provided the Corporation with a Solicitation Notice, such stockholder must, at least fifteen days prior to the date of such meeting, have delivered a proxy statement and form of proxy to holders of a percentage of the Corporations voting shares reasonably believed by such stockholder to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder. If no Solicitation Notice relating thereto has been timely provided pursuant to this Section 3.2, the stockholder proposing such nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section 3.2.
The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the Bylaws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded.
The foregoing requirements shall be the exclusive means for a stockholder to make any nomination of a person or persons for election to the Board of Directors at an annual meeting of stockholders. In addition to the foregoing requirements, with respect to any nominations to be made at an annual meeting, each nominating stockholder shall comply with all applicable requirements of the Exchange Act with respect to any such nominations.
Section 3.3. Submission of Questionnaire; Representation and Agreement. To be eligible to be a nominee for election or reelection as a director of the Corporation, except if nominated by the Board of Directors, a person must deliver (in accordance with the time periods prescribed for delivery of notice under Section 3.2 of these Bylaws) to the Secretary of the Corporation at the principal executive offices of the Corporation a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request) and a written representation and agreement (in the form provided by the Secretary upon written request) that such person (i) agrees to tender, promptly following the annual meeting at which he or she is elected as director, an irrevocable resignation that will be effective upon (A) the failure to receive the required number of votes for reelection at the next annual meeting of stockholders at which he or she faces reelection, and (B) acceptance of such resignation by the Board of Directors, (ii) is not and will not become a party to (A) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a Voting Commitment) that has
not been disclosed to the Corporation or (B) any Voting Commitment that could limit or interfere with such persons ability to comply, if elected as a director of the Corporation, with such persons fiduciary duties under applicable law, (iii) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein, and (iv) in such persons individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply with, applicable law and all applicable publicly disclosed corporate governance, conflict of interest, corporate opportunities, confidentiality and stock ownership and trading policies and guidelines of the Corporation.
Section 3.4. Removal. Subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional directors under specified circumstances, any director may be removed from office by the stockholders in the manner provided in this Section 3.4. At any special meeting of the stockholders of the Corporation, the notice of which by the Board of Directors shall state that the removal of a director or directors is among the purposes of the meeting, the affirmative vote of the holders of a majority of the voting power of the outstanding shares of capital stock of the Corporation entitled to vote in the election of directors generally, voting together as a single class, may remove such director or directors with or without cause.
Section 3.5. Vacancies. If any vacancy shall occur among the directors, or if the number of directors shall at any time be increased, such vacancy shall be filled only by the directors then in office, although less than a quorum, by a majority vote of the directors then in office or by the sole remaining director, or, only if no directors then remain, by the stockholders of the Corporation.
Section 3.6. Meetings. Regular meetings of the Board of Directors shall be held at such time and place, within or without the State of Delaware, as may from time to time be fixed by the Board of Directors or by the Chairman of the Board, if there be one. Special meetings may be held at any time and place, within or without the State of Delaware, upon the call of the Chairman of the Board, if there be one, by the Chief Executive Officer, if there be one, or the President or a majority of the directors in office by personal oral communication, telephonic oral communication, telecopy or electronic transmission, or written notice, duly served or sent or mailed to each director not less than twenty-four (24) hours before such meeting, except that, if mailed, not less than seventy-two (72) hours before such meeting.
Meetings may be held at any time and place without notice if all the directors are present and do not object, at the beginning of the meeting, to the holding of such meeting for lack of proper notice or if those not present shall, in writing or by telecopy or electronic transmission, waive notice thereof before or after the meeting. A regular meeting of the Board may be held without notice immediately following the annual meeting of stockholders at the place where such meeting is held. Regular meetings of the Board may also be held without notice at such time and place as shall from time to time be determined by resolution of the Board. Except as otherwise provided by the Delaware Law, the Certificate of Incorporation or otherwise, neither the business
to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors or any committee thereof need be specified in any written waiver of notice.
Section 3.7. Telephone Meetings. Members of the Board of Directors, or any committee thereof, may participate in a meeting of such Board of Directors, or any committee, by means of video conference, telephone conference or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting pursuant to the foregoing provisions shall constitute presence in person at the meeting.
Section 3.8. Votes. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.
Section 3.9. Quorum and Adjournment. Except as otherwise provided by the Delaware Law, the Certificate of Incorporation or these Bylaws, a majority of the directors shall constitute a quorum for the transaction of business. If at any meeting of the Board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time without notice other than announcement of the adjournment at the meeting, and at such adjourned meeting at which a quorum is present any business may be transacted which might have been transacted at the meeting as originally noticed.
Section 3.10. Compensation. Directors may receive compensation for their services, as such, and for service on any committee of the Board of Directors, as fixed by resolution of the Board of Directors and for expenses of attendance at each regular or special meeting of the Board or any committee thereof. Nothing in this Section shall be construed to preclude a director from serving the Corporation in any other capacity and receiving compensation therefor.
Section 3.11. Action by Consent of Directors. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Such consent shall be treated as a vote adopted at a meeting for all purposes. Such consents may be executed in one or more counterparts and not every Director or committee member need sign the same counterpart.
Section 3.12. Resignation. Any director may resign at any time by giving notice in writing or by electronic transmission to the Board of Directors or to the Secretary. The resignation of any director shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
ARTICLE IV. COMMITTEES OF DIRECTORS
Section 4.1. Establishment and Powers. The Board of Directors of the Corporation may establish one or more committees to consist of one or more Directors of the Corporation. Any committee, to the extent provided in the resolution of the Board of Directors or in the Bylaws, shall have and may exercise all of the powers and authority of the Board of Directors, except that a committee shall not have any power or authority as to the following:
(i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the Delaware Law to be submitted to stockholders for approval; or
(ii) adopting, amending or repealing of the Bylaws.
Section 4.2. Alternate Members. The Board of Directors may designate one or more Directors as alternate members of any committee who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member and alternate member or members of a committee, the member or members thereof present at a meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another Director to act at the meeting in the place of the absent or disqualified member.
Section 4.3. Term. Each committee of the Board of Directors shall serve at the pleasure of the Board of Directors.
Section 4.4. Status of Committee Action. The term Board of Directors or Board, when used in any provision of these Bylaws relating to the organization or procedures of or the manner of taking action by the Board of Directors, shall be construed to include and refer to any executive or other committee of the Board of Directors. Any provision of these Bylaws relating or referring to action to be taken by the Board of Directors or the procedure required therefor shall be satisfied by the taking of corresponding action by a committee of the Board of Directors to the extent authority to take the action is permitted by applicable law and has been delegated to the committee pursuant to this Section, except to the extent provided in Section 4.1 of these Bylaws.
ARTICLE V. OFFICERS
Section 5.1. Office. The Board of Directors shall elect a President, a Secretary and a Treasurer, and, in their discretion, may elect a Chairman of the Board, a Vice Chairman of the Board, a Chief Executive Officer, a Controller, and one or more Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, Assistant Secretaries, Assistant Treasurers and Assistant Controllers and such other officers as deemed necessary or appropriate. Such officers shall be elected annually by the Board of Directors at its first meeting following the annual meeting of stockholders (or at such other meeting as the Board of Directors determines), and each shall hold office for the term provided by the vote of the Board and until such persons successor shall have been duly chosen and qualified or until such persons earlier death, disqualification, resignation or removal in the discretion of the Board as provided herein. The powers and duties of more than one office may be exercised and performed by the same person.
Section 5.2. Vacancies. Any vacancy in any office may be filled for the unexpired portion of the term by the Board of Directors.
Section 5.3. Chairman of the Board . The Chairman of the Board, if any, shall preside at all meetings of stockholders and of the Board of Directors. The Chairman of the Board, including any Executive Chairman of the Board, will perform such other duties and exercise such other powers as may be assigned to him or her from time to time by these Bylaws or the Board of Directors.
Section 5.4. Chief Executive Officer. Unless the Board shall determine otherwise, the Chief Executive Officer, if any, shall have, subject to the direction of the Board of Directors, general charge of the management and direction of the business, affairs and property of the Corporation, and general supervision over its other officers and agents. The Chief Executive Officer shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time.
Section 5.5. President. The President shall, in general, perform all duties incident to the office of President and shall see that all orders and resolutions of the Board of Directors and, if there be one, orders of the Chief Executive Officer are carried into effect and shall perform such other executive, supervisory and management functions and duties as may be assigned to him from time to time by the Board of Directors, the Chairman of the Board or the Chief Executive Officer.
Section 5.6. Vice Presidents. Each Executive Vice President, Senior Vice President and Vice President shall have and exercise such powers and shall perform such duties as from time to time may be assigned to him or to her by the Board of Directors, the Chairman, the Chief Executive Officer or the President.
Section 5.7. Secretary. The Secretary shall keep the minutes of all meetings of the stockholders and of the Board of Directors and committees of the Board in books provided for the purpose and shall see that all notices are duly given in accordance with the provisions of law and these Bylaws. The Secretary shall be custodian of the records and of the corporate seal or seals of the Corporation and shall see that the corporate seal is affixed to all documents the execution of which, on behalf of the Corporation under its seal, is duly authorized, and, when the seal is so affixed, he or she may attest the same. Without limiting the generality of the foregoing, in general, the Secretary shall perform all duties incident to the office of secretary of a corporation, and such other duties as from time to time may be assigned to him or her by the Board of Directors.
Section 5.8. Assistant Secretaries. The Assistant Secretaries in order of their seniority shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties as the Board of Directors shall prescribe or as from time to time may be assigned by the Secretary.
Section 5.9. Treasurer. The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation, and shall deposit, or cause to be deposited, in the name of the Corporation, all monies or other valuable effects in such banks,
trust companies or other depositaries as shall, from time to time, be selected by the Board of Directors. The Treasurer may endorse for collection on behalf of the Corporation checks, notes and other obligations; may sign receipts and vouchers for payments made to the Corporation and may sign checks of the Corporation, singly or jointly with another person as the Board of Directors may authorize, and pay out and dispose of the proceeds under the direction of the Board. The Treasurer shall render to the President and to the Board of Directors, whenever requested, an account of the financial condition of the Corporation; and in general, shall perform all the duties incident to the office of treasurer of a corporation, and such other duties as from time to time may be assigned by the Board of Directors.
Section 5.10. Assistant Treasurers. The Assistant Treasurers in order of their seniority shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the Board of Directors shall prescribe or as from time to time may be assigned by the Treasurer.
Section 5.11. Controller. The Controller, if elected, shall perform all duties incident to the office of a controller of a corporation, and, in the absence of or disability of the Treasurer or any Assistant Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the Board of Directors shall prescribe or as from time to time may be assigned by the Chairman of the Board, if any, the Chief Executive Officer, if any, the President or the Treasurer.
Section 5.12. Assistant Controllers. The Assistant Controllers in order of their seniority shall, in the absence or disability of the Controller, perform the duties and exercise the powers of the Controller and shall perform such other duties as the Board of Directors shall prescribe or as from time to time may be assigned by the Controller.
Section 5.13. Subordinate Officers. The Board of Directors may appoint such subordinate officers as it may deem desirable. Each such officer shall hold office for such period, have such authority and perform such duties as the Board of Directors may prescribe. The Board of Directors may, from time to time, authorize any officer to appoint and remove subordinate officers and to prescribe the powers and duties thereof.
Section 5.14. Compensation. The Board of Directors, or an authorized committee thereof, shall fix the compensation of all officers of the Corporation. It may authorize any officer, upon whom the power of appointing subordinate officers may have been conferred, to fix the compensation of such subordinate officers.
Section 5.15. Removal. Any officer of the Corporation may be removed, with or without cause, by action of the Board of Directors without prejudice to the rights, if any, of such officer under any contract to which such officer is a party.
Section 5.16. Bonds. The Board of Directors may require any officer of the Corporation to give a bond to the Corporation, conditional upon the faithful performance of his or her duties, with one or more sureties and in such amount as may be satisfactory to the Board of Directors.
Section 5.17. Resignation. Any officer may resign at any time by giving notice in writing or by electronic transmission to the Board of Directors (or to a principal officer to whom
such officer reports) without prejudice to the rights, if any, of such officer under any contract to which such officer is a party. The resignation of any officer shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
ARTICLE VI. CERTIFICATES OF STOCK; UNCERTIFICATED SHARES
Section 6.1. Form and Execution of Certificates. The interest of each stockholder of the Corporation may either be evidenced by a certificate or certificates for shares of stock in such form as the Board of Directors may from time to time prescribe, or may be uncertificated as provided in Section 6.6 below. The certificates of stock of each class shall be consecutively numbered and signed by the Chairman of the Board, if any, the President, or a Vice President and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of the Corporation, and may be countersigned and registered in such manner as the Board of Directors may by resolution prescribe, and shall bear the corporate seal or a printed or engraved facsimile thereof. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates, shall cease to be such officer, transfer agent or registrar, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be issued and delivered by the Corporation as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer, transfer agent or registrar.
In case the corporate seal which has been affixed to, impressed on, or reproduced in any such certificate or certificates shall cease to be the seal of the Corporation before such certificate or certificates have been delivered by the Corporation, such certificate or certificates may nevertheless be issued and delivered by the Corporation as though the seal affixed thereto, impressed thereon or reproduced therein had not ceased to be the seal of the Corporation.
Every certificate for shares of stock which are subject to any restriction on transfer pursuant to law, the Certificate of Incorporation, these Bylaws, or any agreement to which the Corporation is a party, shall have the restriction noted conspicuously on the certificate, and shall also set forth, on the face or back, either the full text of the restriction or a statement of the existence of such restriction and a statement that the Corporation will furnish a copy thereof to the holder of such certificate upon written request and without charge.
If the Corporation is authorized to issue more than one class or series of stock, the powers, designations, preferences and relative and participating, optional or other special rights of each class or series thereof and the qualifications, limitations or restrictions of such preferences or rights shall be set forth or summarized on the face or back of the certificate which the Corporation has issued to represent such class or series, provided that, except as otherwise provided in Section 202 of the Delaware Law, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which shall represent such class or series, a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations preferences and relative and participating, optional or other special rights thereof and the qualifications, limitations or restrictions of such preferences or rights.
Section 6.2. Transfer of Shares. The shares of the stock of the Corporation shall be transferred on the books of the Corporation upon (i) in the case of certificated shares, surrender for cancellation of certificates for the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, with such proof or guaranty of the authenticity of the signature as the Corporation or its agents may reasonably require or (ii) in the case of uncertificated shares, receipt of proper transfer instructions from the holder of record of such shares or such holders attorney lawfully constituted. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, save as expressly provided by law, by the Certificate of Incorporation or these Bylaws. It shall be the duty of each stockholder to notify the Corporation of his or her post office address.
Section 6.3. Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors (but not the stockholders) may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date: (a) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, the Certificate of Incorporation or these Bylaws, not be more than sixty (60) nor less than ten (10) days before the date of such meeting; and (b) in the case of any other action, shall not be more than sixty (60) days prior to such other action. If no record date is fixed: (a) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and (b) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors (but not the stockholders) may fix a new record date for the adjourned meeting.
Section 6.4. Closing of Transfer Books. The stock transfer books of the Corporation may, if deemed appropriate by the Board of Directors, be closed for such length of time not exceeding fifty (50) days as the Board of Directors (but not the stockholders) may determine, preceding the date of any meeting of stockholders or the date for the payment of any dividend or the date for the allotment of rights or the date when any issuance, change, conversion or exchange of capital stock shall go into effect, during which time no transfer of stock on the books of the Corporation may be made.
Section 6.5. Lost or Destroyed Certificates. Unless waived in whole or in part by the Board of Directors or any officer acting pursuant to the direction of the Board of Directors, any person requesting the issuance of a new certificate in lieu of an alleged lost, destroyed, mislaid or wrongfully taken certificate shall (a) give to the Corporation his or her bond of indemnity with an acceptable surety, and (b) satisfy such other requirements as may be imposed by the
Corporation. Thereupon, a new share certificate shall be issued to the registered owner or his or her assigns in lieu of the alleged lost, destroyed, mislaid or wrongfully taken certificate, provided that the request therefor and issuance thereof have been made before the Corporation has notice that such shares have been acquired by a bona fide purchaser.
Section 6.6. Uncertificated Shares. Upon the adoption of a resolution by the Board of Directors permitting it, shares of the Corporations capital stock may be evidenced by registration in the holders name in uncertificated, book-entry form on the books of the Corporation in accordance with a direct registration system approved by the Securities and Exchange Commission and by any securities exchange on which the stock of the Corporation may from time to time be traded.
Section 6.7. Transfer Agents and Registrars; Further Regulations. The Board of Directors may appoint one or more banks, trust companies or corporations doing a corporate trust business, in good standing under the laws of the United States or any state therein, to act as the Corporations transfer agent and/or registrar for shares of one or more classes or series of its stock, and the Board may make such other and further regulations, not inconsistent with applicable law, as it may deem expedient concerning the issue, transfer and registration of the Corporations stock and stock certificates.
ARTICLE VII. EXECUTION OF DOCUMENTS
Section 7.1. Execution of Contracts, Assignments, etc. Unless the Board of Directors shall have otherwise provided generally or in a specific instance, all contracts, agreements, endorsements, assignments, transfers, stock powers, or other instruments shall be signed by the Chairman or Vice Chairman of the Board, if any, the Chief Executive Officer, if any, the President, any Executive Vice President, any Senior Vice President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer or any person designated by any such officer. The Board of Directors may, however, in its discretion, require any or all such instruments to be signed by any two or more of such officers, or may permit any or all of such instruments to be signed by such other officer or officers, agent or agents, as it shall thereunto authorize from time to time.
Section 7.2. Execution of Proxies . The Chairman or Vice Chairman of the Board, if any, the Chief Executive Officer, if any, the President, any Executive Vice President, any Senior Vice President or any Vice President, and the Secretary, the Treasurer, any Assistant Secretary or any Assistant Treasurer, or any other officer designated by the Board of Directors, may sign on behalf of the Corporation proxies to vote upon shares of stock of other companies standing in the name of the Corporation.
ARTICLE VIII. INSPECTION OF BOOKS
Subject to applicable law, the Board of Directors shall determine from time to time whether, and if allowed, to what extent and at what time and places and under what conditions and regulations, the accounts and books of the Corporation or any of them, shall be open to the inspection of the stockholders, and no stockholder shall have any right to inspect any account or book or document of the Corporation, except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors.
ARTICLE IX. FISCAL YEAR
The fiscal year of the Corporation shall be determined from time to time by the Board of Directors.
ARTICLE X. SEAL
The seal of the Corporation shall, subject to alteration by the Board of Directors, consist of a flat-faced circular die with the word Delaware, together with the name of the Corporation and the year of incorporation, cut or engraved thereon.
ARTICLE XI. AMENDMENTS
These Bylaws may be altered, amended, changed or repealed and new Bylaws adopted by the stockholders or by the Board of Directors, in either case at any meeting called for that purpose at which a quorum shall be present. Any Bylaw, whether made, altered, amended, changed or repealed by the stockholders or the Board of Directors, may be repealed, amended, changed, further amended, changed, repealed or reinstated, as the case may be, either by the stockholders or by the Board of Directors as above provided.
ARTICLE XII. LIMITATION OF DIRECTORS LIABILITY AND INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
Section 12.1. Actions, Suits and Proceedings Other than by or in the Right of the Corporation . The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is a party or threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was, a director or officer of the Corporation, or, while a director or officer of the Corporation, is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise or nonprofit entity (including any employee benefit plan) (all such persons being referred to hereafter as an Indemnitee), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by or on behalf of the Indemnitee in connection with such action, suit or proceeding and any appeal therefrom, if the Indemnitee acted in good faith and in a manner which the Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe the Indemnitees conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Indemnitee did not act in good faith and in a manner which the Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, shall not create a presumption that the Indemnitee did not have reasonable cause to believe that his or her conduct was unlawful.
Section 12.2. Actions or Suits by or in the Right of the Corporation . The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any Indemnitee who was or is a party to or threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that the Indemnitee is or was a director or officer of the Corporation, or, while serving as a director officer of the Corporation, is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred by or on behalf of the Indemnitee in connection with such action, suit or proceeding and any appeal therefrom, if the Indemnitee acted in good faith and in a manner which the Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made under this Section 12.2 in respect of any claim, issue or matter as to which the Indemnitee shall have been adjudged to be liable to the Corporation, unless, and only to the extent, that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, the Indemnitee is fairly and reasonably entitled to indemnity for such expenses (including attorneys fees) which the Court of Chancery of Delaware or such other court shall deem proper.
Section 12.3. Definition of Entitlement; Success on the Merits. Any indemnification under Section 12.1 or 12.2 (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the person requesting such is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in Section 12.1 or 12.2, as the case may be. Such determination shall be made (a) by the Board of Directors, by a majority vote of directors who are not parties to such action, suit or proceeding (whether or not a quorum), (b) by a committee of such directors designated by majority vote of such directors (whether or not a quorum), (c) if there are no disinterested directors or if a majority of disinterested directors so directs, by independent legal counsel (who may be regular legal counsel to the corporation) in a written opinion, or (d) by the stockholders. To the extent, however, that any Indemnitee has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to therein or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys fees) actually and reasonably incurred by such Indemnitee in connection therewith.
Section 12.4. Expense Advance. Expenses (including attorneys fees) incurred by an officer or director in defending any pending or threatened civil, criminal, administrative or investigative action, suit or proceeding shall be paid, and in the case of any other Indemnitee may be paid at the discretion of the Board of Directors, by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such officer or director to repay such amount, if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation as authorized in this Article XII.
Section 12.5. Nonexclusively. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article XII shall not be deemed exclusive of any other rights to which any person seeking indemnification or advancement of expenses may be entitled under the Certificate of Incorporation or any statute, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office. The provisions of this Article XII shall not be deemed to preclude the indemnification of any person who is not specified in Section 12.1 or 12.2 but whom the Corporation has the power to indemnify under applicable law or otherwise.
Section 12.6. Insurance. The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, trustee, partner, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or nonprofit entity, against any liability asserted against and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the obligation to indemnify such person against liability under this Article or the power to indemnify such person against such liability under the provisions of Section 145 of the Delaware Law.
Section 12.7. Other Indemnification. The Corporations obligation, if any, to indemnify any person who was or is serving at its request as a director, trustee, partner, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or nonprofit entity shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust or other enterprise or nonprofit entity or from insurance.
Section 12.8. Continuation of Indemnification. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article XII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, trustee, partner, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
Section 12.9. Limitation on Indemnification. Notwithstanding anything contained in this Article XII to the contrary, except for proceedings to enforce rights to indemnification, the Corporation shall not be obligated to indemnify any Indemnitee (or his or her heirs, executors or personal or legal representative) or advance expenses in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to in advance by the Board of Directors.
Section 12.10. Indemnification of Employees and Agents. The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article XII to Directors and officers of the Corporation.
Section 12.11. Other Rights . Nothing contained in this Article XII shall be deemed to prohibit, and the Corporation is specifically authorized to enter into, agreements with officers and directors providing indemnification rights and procedures different from those set forth in this Article XII.
Section 12.12. Amendment. The provisions of this Article XII shall constitute a contract between the Corporation and each of its Directors and officers which may be modified as to any Director or officer in respect of any act or omission occurring prior to the date of any such modification only with that persons consent or as specifically provided in this Section. Notwithstanding any other provision of these Bylaws relating to their amendment generally, any repeal or amendment of this Article XII which is adverse to any Director or officer shall apply to such Director or officer only on a prospective basis, and shall not reduce any limitation on the personal liability of a director of the Corporation, or limit the rights of an Indemnitee to indemnification or to the advancement of expenses with respect to any action or failure to act occurring prior to the time of such repeal or amendment. Notwithstanding any other provision of these Bylaws, no repeal or amendment of these Bylaws shall affect any or all of this Article so as either to reduce the limitation of directors liability or limit indemnification or the advancement of expenses in any manner unless adopted by (a) the unanimous vote of the Directors of the Corporation then serving, or (b) the affirmative vote of stockholders entitled to cast not less than a majority of the votes that all stockholders are entitled to cast in the election of Directors; provided that no such amendment shall have retroactive effect inconsistent with the preceding sentence.
Section 12.13. Savings Clause . If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Indemnitee as to any expenses (including attorneys fees), judgments, fines and amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law.
Section 12.14. Definitions . Terms used herein and defined in Section 145(h) and Section 145(i) of the Delaware Law shall have the respective meanings assigned to such terms in such Section 145(h) and Section 145(i).
ARTICLE XIII. INTERPRETATION OF BYLAWSSEPARABILITY
Section 13.1. Interpretation. All words, terms and provisions of these Bylaws shall be interpreted and defined by and in accordance with the Delaware Law. If any provision of these Bylaws shall be inconsistent with any provision of the Certificate of Incorporation, the provision of the Certificate of Incorporation shall prevail. Where any provision of these Bylaws refers to a
rule or process as set forth in these Bylaws, the reference shall be construed to include and be satisfied by any rule or process on the same subject set forth in the Certificate of Incorporation.
Section 13.2. Separability. The provisions of these Bylaws are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.
ARTICLE XIV. DETERMINATIONS BY THE BOARD
Section 14.1. Effect of Board Determinations. To the fullest extent permitted by law, any determination involving interpretation or application of these Bylaws made in good faith by the Board of Directors shall be final, binding and conclusive on all parties in interest.
ARTICLE XV. FORUM FOR ADJUDICATION OF DISPUTES
Section 15.1. Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (1) any derivative action or proceeding brought on behalf of the Corporation, (2) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporations stockholders, (3) any action asserting a claim arising pursuant to any provision of the Delaware Law, or (4) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 15.1.
Exhibit 10.27
IRON MOUNTAIN INCORPORATED
Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan
Restricted Stock Unit Agreement
This Restricted Stock Unit Agreement and the associated grant award information (the Customizing Information), which Customizing Information is provided in written form or is available in electronic form from the recordkeeper for the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan, as amended and in effect from time to time (the Plan), is made as of the date shown as the Grant Date in the Customizing Information (the Grant Date) by and between Iron Mountain Incorporated, a Delaware corporation (the Company), and the individual identified in the Customizing Information (the Recipient). This instrument and the Customizing Information are collectively referred to as the Restricted Stock Unit Agreement.
WITNESSETH THAT:
WHEREAS, the Company has instituted the Plan; and
WHEREAS, the Compensation Committee (the Committee) has authorized the grant of restricted stock units with respect to the Companys Common Stock (Stock) upon the terms and conditions set forth below and pursuant to the Plan, a copy of which is incorporated herein; and
WHEREAS, the Recipient acknowledges that he or she has carefully read this Restricted Stock Unit Agreement and agrees, as provided in Section 17(a) below, that the terms and conditions of the Restricted Stock Unit Agreement reflect the entire understanding between himself or herself and the Company regarding this restricted stock unit award (and the Recipient has not relied upon any statement or promise other than the terms and conditions of the Restricted Stock Unit Agreement with respect to this restricted stock unit award);
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Recipient agree as follows.
1. Grant . Subject to the terms of the Plan and this Restricted Stock Unit Agreement, the Company hereby grants to the Recipient that number of restricted stock units (RSUs) equal to the corresponding number of shares of the Companys Stock (the Underlying Shares) shown in the Customizing Information under Restricted Stock Units Granted.
2. Vesting . If the Recipient remains in an employment, contractual or other service relationship with the Company (Relationship) as of a Vesting Date, as specified in the Customizing Information, and the Recipient as of such date is not in violation of any confidentiality, inventions and/or non-competition agreement with the Company, all or a portion, as applicable (the Incremental Amount, as specified in the Customizing Information), of the RSUs shall vest on such date. For the avoidance of doubt, except as otherwise provided pursuant to the terms of the Plan, if the Recipients Relationship with the Company is terminated by the Company or by the Recipient for any reason, whether voluntarily or involuntarily, no RSUs
granted pursuant to this Restricted Stock Unit Agreement shall vest under any circumstances on and after the date of such termination.
In the event the Relationship is terminated for any reason (whether voluntary or involuntary), (i) the Recipients right to vest in the RSU will, except as provided in Section 9(c) of the Plan or otherwise explicitly provided by the Committee, terminate as of the date of the termination of the Relationship (and will not be extended by any notice period mandated under local law) and (ii) the Committee shall have the exclusive discretion to determine when the Relationship has terminated for purposes of this RSU (including when the Recipient is no longer considered to be providing active service while on a leave of absence).
For purposes of this Section 2, the term Company refers to the Company as defined in the last sentence of Section 1 of the Plan.
3. Dividends . A Recipient shall be credited with dividend equivalents equal to the dividends the Recipient would have received if the Recipient had been the actual record owner of the Underlying Shares on each dividend record date on or after the Grant Date and through the date the Recipient receives a settlement pursuant to Section 4 below (the Dividend Equivalent). If a dividend on the Stock is payable wholly or partially in Stock, the Dividend Equivalent representing that portion shall be in the form of additional RSUs, credited on a one-for-one basis. If a dividend on the Stock is payable wholly or partially in cash, the Dividend Equivalent representing that portion shall also be in the form of cash and a Recipient shall be treated as being credited with any cash dividends, without earnings, until settlement pursuant to Section 4 below. If a dividend on Stock is payable wholly or partially in other than cash or Stock, the Committee may, in its discretion, provide for such Dividend Equivalents with respect to that portion as it deems appropriate under the circumstances. Dividend Equivalents shall be subject to the same terms and conditions as the RSUs originally awarded pursuant to this Restricted Stock Unit Agreement, and they shall vest (or, if applicable, be forfeited) as if they had been granted at the same time as the original RSU. Dividend Equivalents representing the cash portion of a dividend on Stock shall be settled in cash.
4. Delivery of Underlying Shares or Cash Settlement . With respect to any RSUs that become vested RSUs as of a Vesting Date pursuant to Section 2, the Company shall issue and deliver to the Recipient as soon as practicable following the applicable Vesting Date (a) the number of Underlying Shares equal to the number of RSUs vesting on that date or an amount of cash equal to the Fair Market Value, as defined in the Plan, of such Underlying Shares as of that date (or such later delivery date, if applicable) and (b) the amount (and in the form) due with respect to the Dividend Equivalents applicable to such Underlying Shares. Whether Underlying Shares, or the cash value thereof, shall be issued or paid at settlement shall be determined based on the Form of Settlement specified in the Customizing Information.
Any shares issued pursuant to this Restricted Stock Unit Agreement shall be issued, without issue or transfer tax, by (i) delivering a stock certificate or certificates for such shares out of theretofore authorized but unissued shares or treasury shares of its Stock as the Company may elect or (ii) issuance of shares of its Stock in book entry form; provided, however, that the time of such delivery may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with any applicable requirements of law. Notwithstanding the preceding provisions of this Section 4, delivery of Underlying Shares shall be made, or the
amount of cash equivalent thereto shall be paid, only if the required purchase price designated as the Purchase Price shown in the Customizing Information per underlying RSU is paid to the Company by means of payment acceptable to the Company in accordance with the terms of the Plan. If the Recipient fails to pay for or accept delivery of all of the shares, the right to shares of Stock provided pursuant to this RSU may be terminated by the Company.
5. Withholding Taxes . The Recipient hereby agrees, as a condition of this award, to provide to the Company (or a subsidiary employing the Recipient, as applicable) an amount sufficient to satisfy the Companys and/or subsidiarys obligation to withhold any and all federal, state, local or provincial income tax, social security, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items or statutory withholdings related to the Recipients participation in the Plan (the Withholding Amount), if any, by (a) authorizing the Company and/or any subsidiary employing the Recipient, as applicable, to withhold the Withholding Amount from the Recipients cash compensation or (b) remitting the Withholding Amount to the Company (or a subsidiary employing the Recipient, as applicable) in cash; provided, however, that to the extent that the Withholding Amount is not provided by one or a combination of such methods, the Company may at its election withhold from the Underlying Shares and Dividend Equivalents that would otherwise be delivered that number of shares (and/or cash) having a Fair Market Value on the date of vesting sufficient to eliminate any deficiency in the Withholding Amount; and provided, further, that the Fair Market Value of Stock withheld shall not exceed an amount in excess of the minimum required withholding. Regardless of any action that the Company and/or subsidiary takes with respect to any or all federal, state, local or provincial income tax, social security, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items or statutory withholdings related to the Recipients participation in the Plan, the Recipient acknowledges that he or she, and not the Company and/or any subsidiary, has the ultimate liability for any such items. Further, if the Recipient becomes subject to tax in more than one jurisdiction between the Grant Date and the date of any relevant taxable or tax withholding event, the Recipient acknowledges that the Company and/or subsidiary may be required to withhold or account for such tax-related items in more than one jurisdiction.
6. Non-assignability of RSUs and Dividend Equivalents . RSUs and Dividend Equivalents shall not be assignable or transferable by the Recipient except by will or by the laws of descent and distribution or as permitted by the Committee in its discretion pursuant to the terms of the Plan. During the life of the Recipient, delivery of shares of Stock or payment of cash as settlement of RSUs and Dividend Equivalents shall be made only to the Recipient, to a conservator or guardian duly appointed for the Recipient by reason of the Recipients incapacity or to the person appointed by the Recipient in a durable power of attorney acceptable to the Companys counsel.
7. Compliance with Securities Act; Lock-Up Agreement . The Company shall not be obligated to sell or issue any Underlying Shares or other securities in settlement of RSUs and Dividend Equivalents hereunder unless the shares of Stock or other securities are at that time effectively registered or exempt from registration under the Securities Act and applicable state or provincial securities laws. In the event shares or other securities shall be issued that shall not be so registered, the Recipient hereby represents, warrants and agrees that the Recipient will receive such shares or other securities for investment and not with a view to their resale or distribution, and will execute an appropriate investment letter satisfactory to the Company and its counsel.
The Recipient further hereby agrees that as a condition to the settlement of RSUs and Dividend Equivalents, the Recipient will execute an agreement in a form acceptable to the Company to the effect that the shares shall be subject to any underwriters lock-up agreement in connection with a public offering of any securities of the Company that may from time to time apply to shares held by officers and employees of the Company, and such agreement or a successor agreement must be in full force and effect.
8. Legends . The Recipient hereby acknowledges that the stock certificate or certificates (or entries in the case of book entry form) evidencing shares of Stock or other securities issued pursuant to any settlement of an RSU or Dividend Equivalent hereunder may bear a legend (or provide a restriction) setting forth the restrictions on their transferability described in Section 7 hereof, if such restrictions are then in effect.
9. Rights as Stockholder . The Recipient shall have no rights as a stockholder with respect to any RSUs, Dividend Equivalents or Underlying Shares until the date of issuance of a stock certificate (or appropriate entry is made in the case of book entry form) for Underlying Shares and any Dividend Equivalents. Except as provided by Section 3, no adjustment shall be made for any rights for which the record date is prior to the date such stock certificate is issued (or appropriate entry is made in the case of book entry form), except to the extent the Committee so provides, pursuant to the terms of the Plan and upon such terms and conditions it may establish.
10. Effect Upon Employment and Performance of Services . Nothing in this Restricted Stock Unit Agreement or the Plan shall be construed to impose any obligation upon the Company or any subsidiary to employ or utilize the services of the Recipient or to retain the Recipient in its employ or to engage or retain the services of the Recipient.
11. Time for Acceptance . Unless the Recipient shall evidence acceptance of this Restricted Stock Unit Agreement by electronic or other means prescribed by the Committee within sixty (60) days after its delivery, the RSUs and Dividend Equivalents shall be null and void (unless waived by the Committee).
12. Right of Repayment . In the event that the Recipient accepts employment with or provides services for a competitor of the Company within two (2) years after any settlement of RSUs and Dividend Equivalents hereunder, the Recipient shall pay to the Company an amount equal to the excess of the Fair Market Value of the Underlying Shares as of the date of settlement (whether settled in cash or Stock) over the Purchase Price, if any, paid (or deemed paid) together with the value of any Dividend Equivalents; provided, however, that the Committee in its discretion may release the Recipient from the requirement to make such payment, if the Committee determines that the Recipients acceptance of such employment or performance of such services is not inimical to the best interests of the Company. In accordance with applicable law, the Company may deduct the amount of payment due under the preceding sentence from any compensation or other amount payable by the Company to the Recipient. For purposes of this Section 12, the term Company refers to the Company as defined in the last sentence of Section 1 of the Plan.
13. Section 409A of the Internal Revenue Code . The RSUs and Dividend Equivalents granted hereunder are intended to avoid the potential adverse tax consequences to the Recipient of Section 409A of the Code and the Committee may make such modifications to this Restricted
Stock Unit Agreement as it deems necessary or advisable to avoid such adverse tax consequences.
14. Electronic Delivery . The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Recipient consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
15. Nature of Award . By accepting this RSU, the Recipient acknowledges, understands and agrees that:
(a) the Plan is established voluntarily by the Company, is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan and this Restricted Stock Unit Agreement;
(b) the grant of this RSU is voluntary and occasional and does not create any contractual or other right to receive future awards under the Plan or benefits in lieu of Plan awards, even if RSUs or other Plan awards have been granted in the past;
(c) all decisions with respect to future RSU awards will be at the sole discretion of the Committee;
(d) he or she is voluntarily participating in the Plan;
(e) the future value of the Underlying Shares is unknown and cannot be predicted with certainty;
(f) if the Recipient resides and/or works outside the United States, the following additional provisions shall apply:
(i) this RSU, including any Dividend Equivalents, and the Underlying Shares are not intended to replace any pension rights or compensation;
(ii) this RSU, including any Dividend Equivalents, and the Underlying Shares (including value attributable to each) do not constitute compensation of any kind for services of any kind rendered to the Company and/or any subsidiary thereof and are outside the scope of the Recipients employment contract, if any;
(iii) this RSU, including any Dividend Equivalents, and any Underlying Shares (including the value attributable to each) are not part of normal or expected compensation or salary, including, but not limited to, for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, service awards, pension or retirement or welfare benefits or similar payments unless such other arrangement explicitly provides to the contrary;
(iv) no claim or entitlement to compensation or damages shall arise from forfeiture of the RSU, including any Dividend Equivalents, resulting from
the Recipients termination of the Relationship for any reason, and in consideration of this RSU, including any Dividend Equivalents, the Recipient irrevocably agrees never to institute a claim against the Company and/or subsidiary, waives his or her ability to bring such claim and releases the Company and/or subsidiary from any claim; if, notwithstanding the foregoing, such claim is allowed by a court of competent jurisdiction, then by accepting this RSU, including any Dividend Equivalents, the Recipient is deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claims; and
(g) the Company shall not be liable for any foreign exchange rate fluctuation between the Recipients local currency and the United States dollar that may affect the value of this RSU or any amounts due pursuant to the settlement of the RSU or the subsequent sale of any Underlying Shares acquired upon settlement.
16. Appendix . Notwithstanding any provision in this Restricted Stock Unit Agreement, this RSU shall be subject to any special terms and conditions set forth in any Appendix to this Restricted Stock Unit Agreement for the Recipients country of residence or in which the Recipient works. Moreover, if the Recipient relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to the Recipient, to the extent the Company determines that the application of such terms and conditions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan. The Appendix constitutes part of this Restricted Stock Unit Agreement.
17. General Provisions .
(a) Amendment; Waivers . This Restricted Stock Unit Agreement, including the Plan, contains the full and complete understanding and agreement of the parties hereto as to the subject matter hereof, and except as otherwise permitted by the express terms of the Plan and this Restricted Stock Unit Agreement and applicable law, it may not be modified or amended nor may any provision hereof be waived without a further written agreement duly signed by each of the parties; provided, however, that a modification or amendment that does not materially diminish the rights of the Recipient hereunder, as they may exist immediately before the effective date of the modification or amendment, shall be effective upon written notice of its provisions to the Recipient, to the extent permitted by applicable law. The waiver by either of the parties hereto of any provision hereof in any instance shall not operate as a waiver of any other provision hereof or in any other instance. The Recipient shall have the right to receive, upon request, a written confirmation from the Company of the Customizing Information.
(b) Binding Effect . This Restricted Stock Unit Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, representatives, successors and assigns.
(c) Fractional RSUs, Underlying Shares and Dividend Equivalents . All fractional Underlying Shares and Dividend Equivalents settled in Stock resulting from the application of the Vesting Schedule or the adjustment provisions contained in the Plan shall be rounded down to the nearest whole share. If cash in lieu of Underlying Shares is
delivered at settlement, or Dividend Equivalents are settled in cash, the amount paid shall be rounded down to the nearest penny.
(d) Governing Law . This Restricted Stock Unit Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to the principles of conflicts of law.
(e) Construction . This Restricted Stock Unit Agreement is to be construed in accordance with the terms of the Plan. In case of any conflict between the Plan and this Restricted Stock Unit Agreement, the Plan shall control. The titles of the sections of this Restricted Stock Unit Agreement and of the Plan are included for convenience only and shall not be construed as modifying or affecting their provisions. The masculine gender shall include both sexes; the singular shall include the plural and the plural the singular unless the context otherwise requires. Capitalized terms not defined herein shall have the meanings given to them in the Plan.
(f) Language . If the Recipient receives this Restricted Stock Unit Agreement, or any other document related to this RSU and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
(g) Data Privacy . By entering into this Restricted Stock Unit Agreement and except as otherwise provided in any data transfer agreement entered into by the Company, the Recipient: (i) authorizes the Company, and any agent of the Company administering the Plan or providing Plan recordkeeping services, to disclose to the Company such information and data as the Company shall request in order to facilitate the award of restricted stock units and the administration of the Plan; (ii) waives any data privacy rights the Recipient may have with respect to such information; and (iii) authorizes the Company to store and transmit such information in electronic form. For purposes of this Section 17(g), the term Company refers to the Company as defined in the last sentence of Section 1 of the Plan.
(h) Notices . Any notice in connection with this Restricted Stock Unit Agreement shall be deemed to have been properly delivered if it is delivered in the form specified by the Committee as follows:
Last address provided to the Company |
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To the Company: |
Iron Mountain Incorporated |
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One Federal Street |
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Boston, Massachusetts 02110 |
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Attn: Chief Financial Officer |
(i) Version Number . This document is Version 1 of the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan Stock Restricted Stock Unit Agreement.
IRON MOUNTAIN INCORPORATED
Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan
Restricted Stock Unit Agreement
Appendix
Country-Specific Provisions
Terms and Conditions
This Appendix includes additional, or if so indicated replaces, certain terms and conditions that govern an RSU granted under the Plan if a Recipient resides or works in one of the countries listed below. Capitalized terms used but not defined in this Appendix have the meanings set forth in the Plan and/or the Restricted Stock Unit Agreement.
Notifications
The information contained herein is general in nature and may not apply to each particular Recipients situation and the Company is not in a position to assure a Recipient of any particular result. Accordingly, the Recipient is advised to seek appropriate professional advice as to how the relevant laws in a particular country may apply to his or her situation.
If the Recipient is a citizen or resident of a country other than the one in which the Recipient is currently working, transfers employment or service location after the Grant Date, or is considered a resident of another country for local law purposes, the information contained herein may not apply to the Recipient, and the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall apply.
Belgium
Time for Acceptance . This provision replaces Section 11 of the Restricted Stock Unit Agreement:
Unless the Recipient shall evidence written acceptance of this Restricted Stock Unit Agreement by electronic or other means prescribed by the Committee within sixty (60) days after its delivery, the RSUs and Dividend Equivalents shall be null and void (unless waived by the Committee).
Canada
Vesting . For purposes of Section 2 of the Restricted Stock Unit Agreement, the date of termination of the Relationship will occur on the date active and actual employment or the provision of other services ceases, irrespective of whether such termination of employment or services is wrongful or otherwise, and will not be extended by any period of notice or compensation in lieu thereof.
Time for Acceptance . This provision supplements Section 11 of the Restricted Stock Unit:
The Recipient agrees that his or her acceptance of this award and participation in the Plan is voluntary and has not been induced by the promise of employment or continued employment with the Company or any subsidiary.
Updated as of February 18, 2015
France
Information and Disclaimer . Please be mindful that:
(1) This offer does not require a prospectus to be submitted for approval to the Autorité des Marchés Financiers (AMF);
(2) The Recipient may take part in the offer solely for his or her own account; and
(3) Any financial instruments thus acquired cannot be distributed directly or indirectly to the public otherwise than in accordance with Articles L. 411-1, L. 411-2, L. 412-1 and L. 621-8 to L. 621-8-3 of the Monetary and Financial Code.
The information provided to the Recipient in this Restricted Stock Unit Agreement, the Plan or other documents supplied to the Recipient in connection with the award to the Recipient of a restricted stock unit is provided as factual information only and as such is not intended to induce the Recipient to accept to enter into this Restricted Stock Unit Agreement. Any such information does not give or purport to give any indication of the likely future financial success or performance of the Company and historical financial information gives no indication of future financial performance.
The value of a share of Stock of the Company may go down as well as up and the Recipient must make his or her own decision as to whether he or she wishes to receive shares of Common Stock of the Company in the conditions set forth in the Plan. Should the Recipient be in any doubt as to the contents of the offer of this RSU or what course of action to take in relation to the offer, the Recipient is recommended to seek immediately his or her own personal financial advice from the Recipients stockbroker, bank manager, solicitor, accountant or other independent financial advisor duly authorized by the competent authorities or bodies.
Vesting . This provision replaces the first sentence of Section 2 of the Restricted Stock Unit Agreement:
If the Recipient remains in an employment, contractual or other service relationship with the Company (Relationship) as of a Vesting Date, as specified in the Customizing Information, all or a portion, as applicable (the Incremental Amount, as specified in the Customizing Information), of the RSUs shall vest on such date.
Right of Repayment . Section 12 of the Restricted Stock Unit Agreement shall not apply to the RSU.
Data Privacy . This provision supplements Section 17(g) of the Restricted Stock Unit Agreement:
The Recipient acknowledges that his or her data will be transferred to the Company in the United States, where the Company is registered under Safe Harbour, for the purpose of the administration of the Plan. The Recipient may exercise his or her right of access, opposition and rectification to his or her data by contacting the Reward Director, Iron Mountain International (08445 60 70 80).
Hungary
Grant . Any shares acquired under the Plan are deemed as privately placed under Act No. CXX of 2011 on the Capital Market.
Data Privacy . This provision replaces Section 17(g) of the Restricted Stock Unit Agreement in its entirety:
The Recipient gives his or her consent to the Company for handling his or her personal data in accordance with the provisions of Act CXII of 2012 on the Information Autonomy and Freedom of Information, and to process the personal data only for the purposes of and to the extent it is necessary for fulfilling the Companys rights or obligations deriving from the Recipients participation in the Plan. In connection with this consent, the Company may forward the Recipients personal data to service providers that perform services for the Company in connection with bookkeeping and taxation. The Recipient gives his or her consent that his or her personal data may be transferred abroad for the same purposes. The Company is entitled to forward the personal data of the Recipient to an affiliate of the Company or that provides services to the Company in the scope of exercising the rights and performing the obligations arising from and/or connected to the Recipients participation in the Plan (especially its reporting and recording obligations). The Recipient personal data may be forwarded to countries that do not offer the same level of protection as jurisdictions within the EEA. Recipient, by entering into this Restricted Stock Unit Agreement, gives his or her express consent for the processing and forwarding of his or her data as defined in this Section.
The Netherlands
Effect Upon Employment and Performance of Services . This provision supplements Section 10 of the Restricted Stock Unit Agreement:
RSUs and Dividend Equivalents shall not form part of the employment or services conditions of the Recipient, nor shall they be treated (either at the time when it might apply or in any period prior thereto or any period thereafter) as remuneration for the purpose of pension arrangements nor shall they form any other employment or services related entitlement. RSUs and Dividend Equivalents shall not be included in the calculation of a possible severance payment and the Recipient waives all rights (if any) that he or she may have in this regard.
Poland
Right of Repayment . The right of repayment provided in Section 12 of this Restricted Stock Unit Agreement shall be subject to concluding a non-competition agreement, according to the relevant provisions of Polish law.
Governing Law . This provision supplements Section 17(d) of the Restricted Stock Unit Agreement:
Any disputes resulting from this Restricted Stock Unit Agreement shall be settled exclusively by United States federal courts in the Commonwealth of Massachusetts.
Language . This provision replaces Section 17(f) of the Restricted Stock Unit Agreement:
This Restricted Stock Unit Agreement was executed in two (2) identical counterparts, each in Polish and English versions, and one for each of the Company and the Recipient. In the case of any discrepancy between the Polish and English version, the Polish version will prevail.
United Kingdom
Withholding Taxes . This provision replaces Section 5 of the Restricted Stock Unit Agreement:
If a liability arises in connection with the award, holding, vesting or settlement of RSUs and/or Dividend Equivalents under which the Company or any subsidiary employing the Recipient is obliged to account for the tax and/or primary social security contributions (otherwise known as employees National Insurance Contributions) (Employee Tax Liability), then:
(a) If the RSU and/or Dividend Equivalent is cash settled, the Company or the relevant subsidiary may withhold the Employee Tax Liability from the sum of cash due to the Recipient; or
(b) If the RSU and/or Dividend Equivalent is Stock settled, then unless the Recipient makes a payment of an amount equal to the Employee Tax Liability within seven (7) days of being notified by his or her employer or the Company of the amount of the Employee Tax Liability, the Company may sell sufficient of the shares of Common Stock resulting from the settlement of the RSU and/or Dividend Equivalent on behalf of the Recipient and arrange payment to the subsidiary on which the Employee Tax Liability falls of an amount equal to the Employee Tax Liability out of the proceeds of sale by way of reimbursement to the relevant subsidiary.
Effect Upon Employment and Performance of Services . This provision supplements Section 10 of the Restricted Stock Unit Agreement:
The Recipient shall have no entitlement to compensation or damages in consequence of the termination of his or her employment with the Company or any employing subsidiary for any reason whatsoever and whether or not in breach of contract, in so far as such entitlement arises or may arise from his or her ceasing to have rights under the RSU as a result of such termination or from the loss or diminution in value of the same and, upon grant, the Recipient shall be deemed irrevocably to have waived such entitlement.
IRON MOUNTAIN INCORPORATED 2014 STOCK AND CASH INCENTIVE PLAN
Restricted Stock Unit Schedule
<<Name>>
<<Address>>
<<City>>, <<State>> <Zip>>
In accordance with the Restricted Stock Unit Agreement, of which this Restricted Stock Unit Schedule is a part (which together, constitute the Customizing Information), the Company hereby grants to <<Name>> (the Recipient) the following Restricted Stock Units.
ACCEPTANCE BY RECIPIENT
IN WITNESS WHEREOF, the Company has caused this Restricted Stock Unit Agreement to be issued as of the date set forth above.
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Notice Address: |
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(1) [This would be a phrase like On or after March 9, 2016.]
Exhibit 10.28
IRON MOUNTAIN INCORPORATED
Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan
Stock Option Agreement
This Stock Option Agreement and the associated grant award information (the Customizing Information), which Customizing Information is provided in written form or is available in electronic form from the recordkeeper for the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan, as amended and in effect from time to time (the Plan), made as of the date shown as the Grant Date in the Customizing Information (the Grant Date) by and between Iron Mountain Incorporated, a Delaware corporation (the Company), and the individual identified in the Customizing Information (the Optionee). This instrument and the Customizing Information are collectively referred to as the Option Agreement.
WITNESSETH THAT:
WHEREAS, the Company has instituted the Plan; and
WHEREAS, the Compensation Committee (the Committee) has authorized the grant of a stock option upon the terms and conditions set forth below and pursuant to the Plan, a copy of which is incorporated herein; and
WHEREAS, the Optionee acknowledges that he or she has carefully read this Option Agreement and agrees, as provided in Section 17(a) below, that the terms and conditions of the Option Agreement reflect the entire understanding between himself or herself and the Company regarding this stock option (and the Optionee has not relied upon any statement or promise other than the terms and conditions of the Option Agreement with respect to this stock option);
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Optionee agree as follows.
1. Grant . Subject to the terms of the Plan and this Option Agreement, the Company hereby grants to the Optionee a stock option (the Option) to purchase from the Company the amount of Common Stock (Stock) shown in the Customizing Information under Shares Granted. If so provided in the Grant Type shown in the Customizing Information, this Option is intended to constitute for United States income tax purposes an Incentive Stock Option and to qualify for special United States federal income tax treatment under Section 422 of the Code and upon exercise, the maximum number of shares that can be treated as Incentive Stock Options shall be so treated, and the remainder shall be treated as Nonstautory Stock Options.
2. Grant Price . This Option may be exercised at the Grant Price per share shown in the Customizing Information, subject to adjustment as provided herein and in the Plan.
3. Term and Exercisability of Option . This Option shall expire at 4:00 p.m. Eastern Time on the Expiration Date shown in the Customizing Information, unless the Option expires earlier pursuant to this Section 3 or any provision of the Plan. At any time before its expiration, this Option may be exercised to the extent vested, as shown in the Customizing Information, provided that:
(a) at the time of exercise the Optionee is not in violation of any confidentiality, inventions and/or non-competition agreement with the Company;
(b) the Optionees employment, contractual or other service relationship with the Company (Relationship) must be in effect on a given date in order for any scheduled increment in vesting, as set forth in the Vesting Schedule shown in the Customizing Information, to become effective;
(c) this Option may not be exercised after the sixtieth (60th) day following the date of termination of the Relationship between the Optionee and the Company, except that (i) if the Relationship terminates by reason of the Optionees death or total and permanent disability (as determined by the Board on the basis of medical advice satisfactory to it), the unexercised portion of the Option that is otherwise exercisable on the date of termination of the Relationship shall remain exercisable thereafter for one (1) year and (ii) if the Relationship ends on or after the Optionee has attained age fifty-five (55) and completed ten (10) Years of Credited Service (calculated on the same basis as Years of Credited Service are calculated for purposes of The Iron Mountain Companies 401(k) Plan or any successor thereto), the unexercised portion of the Option that is otherwise exercisable when the Relationship ends shall remain exercisable thereafter for three (3) years; and
(d) in the event the Relationship is terminated for any reason (whether voluntary or involuntary), (i) the Optionees right to vest in the Option will, except as provided in Section 9(c) of the Plan or otherwise explicitly provided by the Committee, terminate as of the date of termination of the Relationship (and such right shall not be extended by any notice period mandated under local law), (ii) the Optionees continuing right (if any) to exercise the Option after termination of the Relationship will be measured from the date of termination of the Relationship (and such right will not be extended by any notice period mandated under local law) and (iii) the Committee shall have the exclusive discretion to determine when the Relationship has terminated for purposes of this Option (including determining when the Optionee is no longer considered to be providing active service while on a leave of absence).
For purposes of this Section 3, the term Company refers to the Company as defined in the last sentence of Section 1 of the Plan.
It is the Optionees responsibility to be aware of the date that the Option expires.
4. Method of Exercise . Prior to its expiration and to the extent that the right to purchase shares of Stock has vested hereunder, this Option may be exercised in whole or in part from time to time by notice provided in a manner consistent with the requirements of Section 5(e) of the Plan, accompanied by payment in full of the Grant Price by means of payment acceptable to the Company in accordance with Section 5(f) of the Plan.
As soon as practicable after its receipt of notice, the Company shall, without transfer or issue tax to the Optionee (or other person entitled to exercise this Option), (i) deliver to the Optionee (or other person entitled to exercise this Option), at the principal executive offices of
the Company or such other place as shall be mutually acceptable, a stock certificate or certificates for such shares out of theretofore authorized but unissued shares or treasury shares of its Stock as the Company may elect or (ii) issue shares of its Stock in book entry form; provided, however, that the time of delivery or issuance may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with any applicable requirements of law; and provided, further, that any shares delivered or issued shall remain subject to any applicable securities law or trading restrictions imposed pursuant to the terms of this Option Agreement and the Plan.
If the Optionee (or other person entitled to exercise this Option) fails to pay for and accept delivery of all of the shares specified in the notice upon tender of delivery thereof, his or her right to exercise this Option with respect to such shares not paid for may be terminated by the Company.
5. Withholding Taxes . The Optionee hereby agrees, as a condition to any exercise of this Option, to provide to the Company (or a subsidiary employing the Optionee, as applicable) an amount sufficient to satisfy the Companys and/or subsidiarys obligation to withhold any and all federal, state, local or provincial income tax, social security, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items or statutory withholdings related to the Optionees participation in the Plan (the Withholding Amount), if any, by (a) authorizing the Company and/or any subsidiary employing the Optionee, as applicable, to withhold the Withholding Amount from the Optionees cash compensation or (b) remitting the Withholding Amount to the Company (or a subsidiary employing the Optionee, as applicable) in cash; provided, however, that to the extent that the Withholding Amount is not provided by one or a combination of such methods, the Company may at its election withhold from the Stock that would otherwise be delivered upon exercise of this Option that number of shares having a Fair Market Value on the date of exercise sufficient to eliminate any deficiency in the Withholding Amount; and provided, further, that the Fair Market Value of Stock withheld shall not exceed an amount in excess of the minimum required withholding. Regardless of any action that the Company and/or subsidiary takes with respect to any or all federal, state, local or provincial income tax, social security, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items or statutory withholdings related to the Optionees participation in the Plan, the Optionee acknowledges that he or she, and not the Company and/or any subsidiary, has the ultimate liability for any such items. Further, if the Optionee becomes subject to tax in more than one jurisdiction between the Grant Date and the date of any relevant taxable or tax withholding event, the Optionee acknowledges that the Company and/or subsidiary may be required to withhold or account for such tax-related items in more than one jurisdiction.
6. Non-assignability of Option . This Option shall not be assignable or transferable by the Optionee except by will or by the laws of descent and distribution or as permitted by the Committee in its discretion pursuant to the terms of the Plan. During the life of the Optionee, this Option shall be exercisable only by him or her, by a conservator or guardian duly appointed for him or her by reason of the Optionees incapacity or by the person appointed by the Optionee in a durable power of attorney acceptable to the Companys counsel.
7. Compliance with Securities Act; Lock-Up Agreement . The Company shall not be obligated to sell or issue any shares of Stock or other securities pursuant to the exercise of this
Option unless the shares of Stock or other securities with respect to which this Option is being exercised are at that time effectively registered or exempt from registration under the Securities Act and applicable state or provincial securities laws. In the event shares or other securities shall be issued that shall not be so registered, the Optionee hereby represents, warrants and agrees that he or she will receive such shares or other securities for investment and not with a view to their resale or distribution, and will execute an appropriate investment letter satisfactory to the Company and its counsel. The Optionee further hereby agrees that as a condition to the purchase of shares upon exercise of this Option, he or she will execute an agreement in a form acceptable to the Company to the effect that the shares shall be subject to any underwriters lock-up agreement in connection with a public offering of any securities of the Company that may from time to time apply to shares held by officers and employees of the Company, and such agreement or a successor agreement must be in full force and effect.
8. Legends . The Optionee hereby acknowledges that the stock certificate or certificates (or entries in the case of book entry form) evidencing shares of Stock or other securities issued pursuant to any exercise of this Option may bear a legend (or provide a restriction) setting forth the restrictions on their transferability described in Section 7 hereof, if such restrictions are then in effect.
9. Rights as Stockholder . The Optionee shall have no rights as a stockholder with respect to any shares covered by this Option until the date of issuance of a stock certificate (or appropriate entry is made in the case of book entry form) to him or her for such shares. No adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued (or appropriate entry is made in the case of book entry form).
10. Effect Upon Employment and Performance of Services . Nothing in this Option or the Plan shall be construed to impose any obligation upon the Company or any subsidiary to employ or utilize the services of the Optionee or to retain the Optionee in its employ or to engage or retain the services of the Optionee.
11. Time for Acceptance . Unless the Optionee shall evidence his or her acceptance of this Option by electronic or other means prescribed by the Committee within sixty (60) days after its delivery, the Option shall be null and void (unless waived by the Committee).
12. Notice of Disqualifying Disposition . If the Grant Type shown in the Customizing Information indicates that the Option is an Incentive Stock Option, the Optionee agrees to notify the Company promptly in the event that he or she sells, transfers, exchanges or otherwise disposes of any shares of Stock issued upon exercise of the Option before the later of (a) the second anniversary of the date of grant of the Option and (b) the first anniversary of the date the shares were issued upon his or her exercise of the Option.
13. Right of Repayment . In the event that the Optionee accepts employment with or provides services for a competitor of the Company within two (2) years after the date of exercise of this Option or any portion of it, the Optionee shall pay to the Company an amount equal to the /excess of the Fair Market Value of the Stock as of the date of exercise over the price paid for such shares; provided, however, that the Committee in its discretion may release the Optionee from the requirement to make such payment, if the Committee determines that the Optionees
acceptance of such employment or performance of such services is not inimical to the best interests of the Company. In accordance with applicable law, the Company may deduct the amount of payment due under the preceding sentence from any compensation or other amount payable by the Company to the Optionee. For purposes of this Section 13, the term Company refers to the Company as defined in the last sentence of Section 1 of the Plan.
14. Electronic Delivery . The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Optionee consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
15. Nature of Award . By accepting this Option, the Optionee acknowledges, understands and agrees that:
(a) the Plan is established voluntarily by the Company, is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan and this Option Agreement;
(b) the grant of this Option is voluntary and occasional and does not create any contractual or other right to receive future awards under the Plan or benefits in lieu of Plan awards, even if Options or other Plan awards have been granted in the past;
(c) all decisions with respect to future Option grants or Plan awards will be at the sole discretion of the Committee;
(d) he or she is voluntarily participating in the Plan;
(e) the future value of shares of Stock underlying the Option is unknown and cannot be predicted with certainty;
(f) if the underlying shares of Stock do not increase in value, the Option, as measured by the difference between the fair market value of the Stock and the Grant Price, will have no value;
(g) if the Optionee exercises the Option and acquires shares of Stock, the value of such shares may increase or decrease in value;
(h) if the Optionee resides and/or works outside the United States, the following additional provisions shall apply:
(i) the Option and any shares of Stock acquired under the Plan do not replace any pension or retirement rights or compensation;
(ii) the Option and any shares of Stock acquired under the Plan (including the value attributable to each) do not constitute compensation of any kind for services of any kind rendered to the Company and/or any subsidiary thereof and are outside the scope of the Optionees employment contract, if any;
(iii) the Option and any shares of Stock acquired under the Plan (including the value attributable to each) are not part of normal or expected compensation or salary, including, but not limited to, for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, service awards, pension or retirement or welfare benefits or similar payments unless such other arrangement explicitly provides to the contrary;
(iv) no claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from a termination of the Relationship for any reason and in consideration of the grant of the Option, the Optionee irrevocably agrees never to institute a claim against the Company and/or any subsidiary, waives his or her ability to bring such claim and releases the Company and/or its subsidiaries from any claim; if, notwithstanding the foregoing, such claim is allowed by a court of competent jurisdiction, then by accepting this Option, the Optionee is deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claims; and
(i) the Company shall not be liable for any foreign exchange rate fluctuation between the Optionees local currency and the United States dollar that may affect the value of the Option or any amounts due pursuant to the exercise of the Option or the subsequent sale of any shares of Stock acquired upon settlement.
16. Appendix . Notwithstanding any provision in this Option Agreement, the Option grant shall be subject to any special terms and conditions set forth in any Appendix to this Option Agreement for the Optionees country of residence or in which the Optionee works. Moreover, if the Optionee relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to the Optionee, to the extent the Company determines that the application of such terms and conditions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan. The Appendix constitutes part of this Option Agreement.
17. General Provisions .
(a) Amendment; Waivers . This Option Agreement, including the Plan, contains the full and complete understanding and agreement of the parties hereto as to the subject matter hereof, and except as otherwise permitted by the express terms of the Plan, this Option Agreement and applicable law, it may not be modified or amended nor may any provision hereof be waived without a further written agreement duly signed by each of the parties; provided, however, that a modification or amendment that does not materially diminish the rights of the Optionee hereunder, as they may exist immediately before the effective date of the modification or amendment, shall be effective upon written notice of its provisions to the Optionee, to the extent permitted by applicable law. The waiver by either of the parties hereto of any provision hereof in any instance shall not operate as a waiver of any other provision hereof or in any other instance. The Optionee shall have the right to receive, upon request, a written confirmation from the Company of the Customizing Information.
(b) Binding Effect . This Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, representatives, successors and assigns.
(c) Governing Law . This Option Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to the principles of conflicts of law.
(d) Construction . This Option Agreement is to be construed in accordance with the terms of the Plan. In case of any conflict between the Plan and this Option Agreement, the Plan shall control. The titles of the sections of this Option Agreement and of the Plan are included for convenience only and shall not be construed as modifying or affecting their provisions. The masculine gender shall include both sexes; the singular shall include the plural and the plural the singular unless the context otherwise requires. Capitalized terms not defined herein shall have the meanings given to them in the Plan.
(e) Language . If the Optionee receives this Option Agreement, or any other document related to the Option and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
(f) Data Privacy . By entering into this Option Agreement and except as otherwise provided in any data transfer agreement entered into by the Company, the Optionee: (i) authorizes the Company, and any agent of the Company administering the Plan or providing Plan recordkeeping services, to disclose to the Company such information and data as the Company shall request in order to facilitate the grant of options and the administration of the Plan; (ii) waives any data privacy rights he or she may have with respect to such information; and (iii) authorizes the Company to store and transmit such information in electronic form. For purposes of this Section 17(f), the term Company refers to the Company as defined in the last sentence of Section 1 of the Plan.
(g) Notices . Any notice in connection with this Option Agreement shall be deemed to have been properly delivered if it is delivered in the form specified by the Committee as follows:
To the Optionee: |
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To his or her last address provided to the Company |
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To the Company: |
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Iron Mountain Incorporated |
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One Federal Street |
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Boston, Massachusetts 02110 |
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Attn: Chief Financial Officer |
(h) Version Number . This document is Version 1 of the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan Stock Option Agreement.
IRON MOUNTAIN INCORPORATED
Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan
Stock Option Agreement
Appendix
Country-Specific Provisions
Terms and Conditions
This Appendix includes additional, or if so indicated replaces certain, terms and conditions that govern an Option granted under the Plan if an Optionee resides or works in one of the countries listed below. Capitalized terms used but not defined in this Appendix have the meanings set forth in the Plan and/or the Option Agreement.
Notifications
The information contained herein is general in nature and may not apply to each particular Optionees situation and the Company is not in a position to assure an Optionee of any particular result. Accordingly, the Optionee is advised to seek appropriate professional advice as to how the relevant laws in a particular country may apply to his or her situation.
If the Optionee is a citizen or resident of a country other than the one in which the Optionee is currently working, transfers employment or service location after the Grant Date or is considered a resident of another country for local law purposes, the information contained herein may not apply to the Optionee, and the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall apply.
Belgium
Time for Acceptance . This provision replaces Section 11 of the Option Agreement:
Unless the Optionee shall evidence his or her written acceptance of this Option by electronic or other means prescribed by the Committee within ninety (90) days after its delivery, the Option shall be null and void (unless waived by the Committee).
Canada
Grant Type . In no event shall the Option be intended to constitute for United States income tax purposes an Incentive Stock Option or to qualify for special United States federal income tax treatment under section 422 of the Code.
Term and Exercisability of Option .
For purposes of Section 3 of the Option Agreement, the date of termination of the Relationship will occur on the date active and actual employment or the provision of other services ceases, irrespective of whether such termination of employment or services
Updated as of February 18, 2015
is wrongful or otherwise, and will not be extended by any period of notice or compensation in lieu thereof.
Time for Acceptance . This provision supplements Section 11 of the Option Agreement:
The Optionee agrees that his acceptance of this Option and participation in the Plan is voluntary and has not been induced by the promise of employment or continued employment with the Company or any subsidiary.
France
Information and Disclaimer . Please be mindful that:
(1) This offer does not require a prospectus to be submitted for approval to the Autorité des Marchés Financiers (AMF);
(2) The Optionee may take part in the offer solely for his or her own account; and
(3) Any financial instruments thus acquired cannot be distributed directly or indirectly to the public otherwise than in accordance with Articles L. 411-1, L. 411-2, L. 412-1 and L. 621-8 to L. 621-8-3 of the Monetary and Financial Code.
The information provided to the Optionee in this Option Agreement, the Plan or other documents supplied to the Optionee in connection with the offer to the Optionee of stock options is provided as factual information only and as such is not intended to induce the Optionee to accept to enter into this Option Agreement. Any such information does not give or purport to give any indication of the likely future financial success or performance of the Company and historical financial information gives no indication of future financial performance.
The value of a share of Stock of the Company may go down as well as up and the Optionee must make his or her own decision as to whether he or she wishes to receive shares of Stock of the Company in the conditions set forth in the Plan. Should the Optionee be in any doubt as to the contents of the offer of this Option award or what course of action to take in relation to the offer, the Optionee is recommended to seek immediately his or her own personal financial advice from his or her stockbroker, bank manager, solicitor, accountant or other independent financial advisor duly authorized by the competent authorities or bodies.
Term and Exercisability of Option . Section 3(a) of the Option Agreement shall not apply to the Option. With respect to Section 3(b) of the Option Agreement, and for the avoidance of doubt, no further vesting shall occur after the date of dismissal, resignation or mutual termination, without regard to the Date of Termination Notification, as defined in Section 3(c) of the Option Agreement, as modified. Section 3(c) of the Option Agreement shall be modified by replacing the phrase this Option may not be exercised after the sixtieth (60th) day following the date of termination of the Relationship between the Optionee and the Company with the phrase this Option may not be exercised after the sixtieth (60th) day following the date of sending the dismissal letter or resignation letter or date of signature reflecting mutual termination (Date of Termination Notification).
Right of Repayment . Section 13 of the Option Agreement shall not apply to the Option.
Data Privacy . This provision supplements Section 17(f) of the Option Agreement:
The Optionee acknowledges that his or her data will be transferred to the Company in the United States, where the Company is registered under Safe Harbour, for the purpose of the grant of Options and the administration of the Plan. The Optionee may exercise his or her right of access, opposition and rectification to his or her data by contacting the Reward Director, Iron Mountain International (08445 60 70 80).
Hungary
Grant . Any shares acquired under the Plan are deemed as privately placed under Act No. CXX of 2011 on the Capital Market.
Data Privacy . This provision replaces Section 17(f) of the Option Agreement in its entirety:
The Optionee gives his or her consent to the Company for handling his or her personal data in accordance with the provisions of Act CXII of 2012 on the Information Autonomy and Freedom of Information, and to process the personal data only for the purposes of and to the extent it is necessary for fulfilling the Companys rights or obligations deriving from the Optionees participation in the Plan. In connection with this consent, the Company may forward the Optionees personal data to service providers that perform services for the Company in connection with bookkeeping and taxation. The Optionee gives his or her consent that his or her personal data may be transferred abroad for the same purposes. The Company is entitled to forward the personal data of the Optionee to an affiliate of the Company or that provides services to the Company in the scope of exercising the rights and performing the obligations arising from and/or connected to the Optionees participation in the Plan (especially its reporting and recording obligations). The Optionee personal data may be forwarded to countries that do not offer the same level of protection as jurisdictions within the EEA. Optionee, by entering into this Option Agreement, gives his or her express consent for the processing and forwarding of his or her data as defined in this Section.
The Netherlands
Effect Upon Employment and Performance of Services . This provision supplements Section 10 of the Option Agreement:
Options shall not form part of the employment or services conditions of the Optionee, nor shall they be treated (either at the time when it might apply or in any period prior thereto or any period thereafter) as remuneration for the purpose of pension arrangements nor shall they form any other employment or services related entitlement. Options shall not be included in the calculation of a possible severance payment and the Optionee waives all rights (if any) that he or she may have in this regard.
Poland
Right of Repayment . The right of repayment provided in Section 13 of this Option Agreement shall be subject to concluding a non-competition agreement, according to the relevant provisions of Polish law.
Governing Law . This provision supplements Section 17(c) of the Option Agreement:
Any disputes resulting from this Option Agreement shall be settled exclusively by United States federal courts in the Commonwealth of Massachusetts.
Language . This provision replaces Section 17(e) of the Option Agreement:
This Option Agreement was executed in two (2) identical counterparts, each in Polish and English versions, and one for each of the Company and the Optionee. In the case of any discrepancy between the Polish and English version, the Polish version will prevail.
United Kingdom
Applicable Sub-Plan . This Option shall be subject to the United Kingdom Appendix for Unapproved Options to the Plan for grants to Optionees resident in the United Kingdom.
Grant Type . In no event shall the Option be intended to constitute for United States income tax purposes an Incentive Stock Option or to qualify for special United States federal income tax treatment under section 422 of the Code, nor is the Option intended to qualify for special tax treatment under Schedule 4 to the Income Tax (Earnings and pensions) Act 2003. Section 12 of the Option Agreement shall be inapplicable.
Term of Option . This provision replaces Section 3(c) of the Option Agreement:
(c) this Option may not be exercised after the sixtieth (60th) day following the date of termination of the Relationship between the Optionee and the Company, except that (i) if the Relationship terminates by reason of the Optionees death or total and permanent disability (as determined by the Board on the basis of medical advice satisfactory to it), the unexercised portion of the Option that is otherwise exercisable on the date of termination of the Relationship shall remain exercisable thereafter for one (1) year and (ii) if the Relationship ends due to retirement on or after the Optionee has attained age fifty-five (55), or an earlier age with the agreement of the Company, and completed ten (10) Years of Credited Service (calculated on the same basis as Years of Credited Service are calculated for purposes of The Iron Mountain Companies 401(k) Plan or any successor thereto), or such shorter period of Credited Service as the Committee may, in its absolute discretion, permit for these purposes, the unexercised portion of the Option that is otherwise exercisable when the Relationship ends shall remain exercisable thereafter for three (3) years.
Withholding Taxes . This provision replaces Section 5 of the Option Agreement:
If a liability arises in connection with the exercise of an Option under which the Company or any subsidiary employing the Optionee is obliged to account for the tax
and/or primary social security contributions (otherwise known as employees National Insurance contributions) (Employee Tax Liability), then unless
(a) the relevant Optionee has indicated in the form of exercise that he or she will make a payment to his or her employer or the Company of an amount equal to the Employee Tax Liability and
(b) the Optionee does, within seven (7) days of being notified by his or her employer or the Company of the amount of the Employee Tax Liability, make such payment to his or her employer or the Company,
the Company may sell sufficient of the shares of Common Stock resulting from the exercise of the Option on behalf of the Optionee and arrange payment to the employing subsidiary on which the Employee Tax Liability falls of an amount equal to the Employee Tax Liability out of the proceeds of sale by way of reimbursement to the relevant subsidiary.
Effect Upon Employment and Performance of Services . This provision supplements Section 10 of the Option Agreement:
The Optionee shall have no entitlement to compensation or damages in consequence of the termination of his or her employment with the Company or any employing subsidiary for any reason whatsoever and whether or not in breach of contract, in so far as such entitlement arises or may arise from his or her ceasing to have rights under or to be entitled to exercise the Option as a result of such termination or from the loss or diminution in value of the same and, upon grant, the Optionee shall be deemed irrevocably to have waived such entitlement.
IRON MOUNTAIN INCORPORATED 2014 STOCK AND CASH INCENTIVE PLAN
Stock Option Schedule
<<Name>>
<<Address>>
<<City>>, <<State>> <Zip>>
In accordance with the Stock Option Agreement, of which this Stock Option Schedule is a part (which together, constitute the Option Agreement), the Company hereby grants to <<Name>> (the Optionee) the following Option to purchase shares of Stock.
Grant Date: |
<<GrantDate>> |
Expiration Date: |
<<ExpirationDate>> |
Shares Granted: |
<<Shares>> |
Grant Price: |
<<GrantPrice>> |
Grant Type: |
<<ISO/NSO>> |
Stock Option Agreement Version: |
<<Version>> |
Vesting Schedule: |
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Percentage of Total Option |
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Shares Subject to Exercise |
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Incremental |
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Cumulative |
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Amount |
<<Vest1>>(1) |
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<<Vest1_I>> |
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<<Vest1_C>> |
<<Vest2>> |
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<<Vest2_I>> |
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<<Vest2_C>> |
<<Vest3>> |
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<<Vest3_I>> |
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<<Vest3_C>> |
<<Vest4>> |
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<<Vest4_I>> |
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<<Vest4_C>> |
<<Vest5>> |
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<<Vest5_I>> |
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<<Vest5_C>> |
ACCEPTANCE BY OPTIONEE
IN WITNESS WHEREOF, the Company has caused this Option Document to be issued as of the date set forth above.
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(Signature of Optionee) |
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Notice Address: |
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(1) [This would be a phrase like On or after February 20, 2016]
Exhibit 10.29
IRON MOUNTAIN INCORPORATED
Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan
Performance Unit Agreement
This Performance Unit Agreement and the associated grant award information (the Customizing Information), which Customizing Information is provided in written form or is available in electronic form from the recordkeeper for the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan, as amended and in effect from time to time (the Plan), is made as of the date shown as the Grant Date in the Customizing Information (the Grant Date) by and between Iron Mountain Incorporated, a Delaware corporation (the Company), and the individual identified in the Customizing Information (the Recipient). This instrument and the Customizing Information are collectively referred to as the Performance Unit Agreement.
WITNESSETH THAT:
WHEREAS, the Company has instituted the Plan; and
WHEREAS, the Compensation Committee (the Committee) has authorized the grant of performance units with respect to the Companys Common Stock (Stock) upon the terms and conditions set forth below and pursuant to the Plan, a copy of which is incorporated herein; and
WHEREAS, the Recipient acknowledges that he or she has carefully read this Performance Unit Agreement and agrees, as provided in Section 18(a) below, that the terms and conditions of the Performance Unit Agreement reflect the entire understanding between himself or herself and the Company regarding this performance unit award (and the Recipient has not relied upon any statement or promise other than the terms and conditions of the Performance Unit Agreement with respect to this performance unit award);
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Recipient agree as follows.
1. Grant . Subject to the terms of the Plan and this Performance Unit Agreement, the Company hereby conditionally grants to the Recipient that number of performance units equal to the corresponding number of shares of the Companys Stock (the Underlying Shares) shown in the Customizing Information under Performance Units Granted.
The grant described in the preceding paragraph is contingent upon the satisfaction of the Performance Measure(s) over the Performance Period, each as shown in the Customizing Information. The Committee shall determine whether such Performance Criteria have been satisfied.
2. Adjustment to Award . The number of Performance Units Granted may be increased or decreased, including to zero, based on the criteria set forth in the Customizing Information. Whether any adjustment is made shall be determined in the sole discretion of the Committee and the Adjusted Performance Units Granted (PUs) in the Customizing Information shall be updated to reflect any such adjustment.
3. Vesting .
(a) In General . If the Recipient remains in an employment, contractual or other service relationship with the Company (Relationship) as of the Vesting Date specified in the Customizing Information, and the Recipient as of such date is not in violation of any confidentiality, inventions and/or non-competition agreement with the Company, the PUs shall vest on such date. For the avoidance of doubt, except as otherwise provided pursuant to the terms of the Plan and Section 3(b), if the Recipients Relationship with the Company is terminated by the Company or by the Recipient for any reason, whether voluntarily or involuntarily, no PUs granted pursuant to this Performance Unit Agreement shall vest under any circumstances on and after the date of such termination.
(b) Retirement Provision . Notwithstanding Section 3(a), if the Recipient terminates employment on or after attaining age fifty-five (55) and completing ten (10) Years of Credited Service, the Recipient shall become vested in his or her PUs in accordance with the following schedule:
Date Relationship Terminates |
|
Vesting Percentage |
|
On or after first (1 st ) anniversary of Grant Date |
|
33.3 |
% |
On or after second (2 nd ) anniversary of Grant Date |
|
66.6 |
% |
On or after third (3 rd ) anniversary of Grant Date |
|
100 |
% |
In the event a Recipient becomes partially or fully vested under this Section 3(b), in no event shall any PUs vested as a result of this Section 3(b) be delivered until the Vesting Date, nor shall any PUs vested as a result of this Section 3(b) be delivered if the Recipient as of the date of delivery is in violation of any confidentiality, inventions and/or non-competition agreement with the Company. For purposes of this Section 3(b), a Recipient shall be treated as having terminated from employment if he satisfies the definition of Termination of Employment under the Iron Mountain Incorporated Executive Deferred Compensation Plan, and Years of Credited Service shall be calculated on the same basis as Years of Credited Service under The Iron Mountain Companies 401(k) Plan or any successor thereto.
(c) Committee Discretion . In the event the Relationship is terminated for any reason and except as otherwise provided in Section 3(b), (i) the Recipients right to vest in any PUs will, except as provided in Section 9(c) of the Plan, terminate as of the date of the termination of the Relationship (and will not be extended by any notice period mandated under local law) and (ii) the Committee shall have the exclusive discretion to determine when the Relationship has terminated for purposes of this PU (including when the Recipient is no longer considered to be providing active service while on a leave of absence).
(d) Special Definition of Company . For purposes of this Section 3, the term Company refers to the Company as defined in the last sentence of Section 1 of the Plan.
4. Dividend Equivalents . A Recipient shall be credited with dividend equivalents equal to the dividends the Recipient would have received if the Recipient had been the actual record owner of the Underlying Shares on each dividend record date on or after the Grant Date and through the date the Recipient receives a settlement pursuant to Section 5 below (the Dividend Equivalent). If a dividend on the Stock is payable wholly or partially in Stock, the Dividend Equivalent representing that portion shall be in the form of additional PUs, credited on a one-for-
one basis. If a dividend on the Stock is payable wholly or partially in cash, the Dividend Equivalent representing that portion shall also be in the form of cash and a Recipient shall be treated as being credited with any cash dividends, without earnings, until settlement pursuant to Section 5 below. If a dividend on Stock is payable wholly or partially in other than cash or Stock, the Committee may, in its discretion, provide for such Dividend Equivalents with respect to that portion as it deems appropriate under the circumstances. Dividend Equivalents shall be subject to the same terms and conditions as the PUs originally awarded pursuant to this Performance Unit Agreement, and they shall vest (or, if applicable, be forfeited) as if they had been granted at the same time as the original PU. Dividend Equivalents representing the cash portion of a dividend on Stock shall be settled in cash.
5. Delivery of Underlying Shares or Cash Settlement . With respect to any PUs that become vested pursuant to Section 3, the Company shall issue and deliver to the Recipient (a) the number of Underlying Shares equal to the number of vested PUs or an amount of cash equal to the Fair Market Value, as defined in the Plan, of such Underlying Shares as of the Vesting Date and (b) the amount (and in the form) due with respect to the Dividend Equivalents applicable to such Underlying Shares. Delivery shall be made to the Recipient as soon as practicable following the Vesting Date but in no event later than the end of the year in which such Vesting Date occurs (or the fifteenth (15 th ) day of the third (3 rd ) month following the Vesting Date, if later). Whether Underlying Shares, or the cash value thereof, shall be issued or paid at settlement shall be determined based on the Form of Settlement specified in the Customizing Information.
Any shares issued pursuant to this Performance Unit Agreement shall be issued, without issue or transfer tax, by (i) delivering a stock certificate or certificates for such shares out of theretofore authorized but unissued shares or treasury shares of its Stock as the Company may elect or (ii) issuance of shares of its Stock in book entry form; provided, however, that the time of such delivery may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with any applicable requirements of law. Notwithstanding the preceding provisions of this Section 5, delivery of Underlying Shares shall be made, or the amount of cash equivalent thereto shall be paid, only if the required purchase price designated as the Purchase Price shown in the Customizing Information per underlying PU is paid to the Company by means of payment acceptable to the Company in accordance with the terms of the Plan. If the Recipient fails to pay for or accept delivery of all of the shares, the right to shares of Stock provided pursuant to this PU may be terminated by the Company.
6. Withholding Taxes . The Recipient hereby agrees, as a condition of this award, to provide to the Company (or a subsidiary employing the Recipient, as applicable) an amount sufficient to satisfy the Companys and/or subsidiarys obligation to withhold any and all federal, state, local or provincial income tax, social security, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items or statutory withholdings related to the Plan (the Withholding Amount), if any, by (a) authorizing the Company and/or any subsidiary employing the Recipient, as applicable, to withhold the Withholding Amount from the Recipients cash compensation or (b) remitting the Withholding Amount to the Company (or a subsidiary employing the Recipient, as applicable) in cash; provided, however, that to the extent that the Withholding Amount is not provided by one or a combination of such methods, the Company may at its election withhold from the Underlying Shares and Dividend Equivalents that would otherwise be delivered that number of shares (and/or cash) having a Fair Market
Value on the date of vesting sufficient to eliminate any deficiency in the Withholding Amount; and provided, further, that the Fair Market Value of Stock withheld shall not exceed an amount in excess of the minimum required withholding. Regardless of any action that the Company and/or subsidiary takes with respect to any or all federal, state, local or provincial income tax, social security, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items or statutory withholdings related to the Recipients participation in the Plan, the Recipient acknowledges that he or she, and not the Company and/or any subsidiary, has the ultimate liability for any such items. Further, if the Recipient becomes subject to tax in more than one jurisdiction between the Grant Date and the date of any relevant taxable or tax withholding event, the Recipient acknowledges that the Company and/or subsidiary may be required to withhold or account for such tax-related items in more than one jurisdiction.
7. Non-assignability of PUs and Dividend Equivalents . PUs and Dividend Equivalents shall not be assignable or transferable by the Recipient except by will or by the laws of descent and distribution or as permitted by the Committee in its discretion pursuant to the terms of the Plan. During the life of the Recipient, delivery of shares of Stock or payment of cash as settlement of PUs and Dividend Equivalents shall be made only to the Recipient, to a conservator or guardian duly appointed for the Recipient by reason of the Recipients incapacity or to the person appointed by the Recipient in a durable power of attorney acceptable to the Companys counsel.
8. Compliance with Securities Act; Lock-Up Agreement . The Company shall not be obligated to sell or issue any Underlying Shares or other securities in settlement of PUs and Dividend Equivalents hereunder unless the shares of Stock or other securities are at that time effectively registered or exempt from registration under the Securities Act and applicable state or provincial securities laws. In the event shares or other securities shall be issued that shall not be so registered, the Recipient hereby represents, warrants and agrees that the Recipient will receive such shares or other securities for investment and not with a view to their resale or distribution, and will execute an appropriate investment letter satisfactory to the Company and its counsel. The Recipient further hereby agrees that as a condition to the settlement of PUs and Dividend Equivalents, the Recipient will execute an agreement in a form acceptable to the Company to the effect that the shares shall be subject to any underwriters lock-up agreement in connection with a public offering of any securities of the Company that may from time to time apply to shares held by officers and employees of the Company, and such agreement or a successor agreement must be in full force and effect.
9. Legends . The Recipient hereby acknowledges that the stock certificate or certificates (or entries in the case of book entry form) evidencing shares of Stock or other securities issued pursuant to any settlement of an PU or Dividend Equivalent hereunder may bear a legend (or provide a restriction) setting forth the restrictions on their transferability described in Section 8 hereof, if such restrictions are then in effect.
10. Rights as Stockholder . The Recipient shall have no rights as a stockholder with respect to any PUs, Dividend Equivalents or Underlying Shares until the date of issuance of a stock certificate (or appropriate entry is made in the case of book entry form) for Underlying Shares and any Dividend Equivalents. Except as provided by Section 4, no adjustment shall be made for any rights for which the record date is prior to the date such stock certificate is issued (or appropriate entry is made in the case of book entry form), except to the extent the Committee
so provides, pursuant to the terms of the Plan and upon such terms and conditions it may establish.
11. Effect Upon Employment and Performance of Services . Nothing in this Performance Unit Agreement or the Plan shall be construed to impose any obligation upon the Company or any subsidiary to employ or utilize the services of the Recipient or to retain the Recipient in its employ or to engage or retain the services of the Recipient.
12. Time for Acceptance . Unless the Recipient shall evidence acceptance of this Performance Unit Agreement by electronic or other means prescribed by the Committee within sixty (60) days after its delivery, the PUs and Dividend Equivalents shall be null and void (unless waived by the Committee).
13. Right of Repayment . In the event that the Recipient accepts employment with or provides services for a competitor of the Company within two (2) years after any settlement of PUs and Dividend Equivalents hereunder, the Recipient shall pay to the Company an amount equal to the excess of the Fair Market Value of the Underlying Shares as of the date of settlement (whether settled in cash or Stock) over the Purchase Price, if any, paid (or deemed paid) together with the value of any Dividend Equivalents; provided, however, that the Committee in its discretion may release the Recipient from the requirement to make such payment, if the Committee determines that the Recipients acceptance of such employment or performance of such services is not inimical to the best interests of the Company. In accordance with applicable law, the Company may deduct the amount of payment due under the preceding sentence from any compensation or other amount payable by the Company to the Recipient. For purposes of this Section 13, the term Company refers to the Company as defined in the last sentence of Section 1 of the Plan.
14. Section 409A of the Internal Revenue Code . The PUs and Dividend Equivalents granted hereunder are intended to avoid the potential adverse tax consequences to the Recipient of Section 409A of the Code, and the Committee may make such modifications to this Performance Unit Agreement as it deems necessary or advisable to avoid such adverse tax consequences.
15. Electronic Delivery . The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Recipient consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
16. Nature of Award . By accepting this PU, the Recipient acknowledges, understands and agrees that:
(a) the Plan is established voluntarily by the Company, is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan and this Performance Unit Agreement;
(b) the grant of this PU is voluntary and occasional and does not create any contractual or other right to receive future awards under the Plan or benefits in lieu of Plan awards, even if PUs or other Plan awards have been granted in the past;
(c) all decisions with respect to future PU awards will be at the sole discretion of the Committee;
(d) he or she is voluntarily participating in the Plan;
(e) the future value of the Underlying Shares is unknown and cannot be predicted with certainty;
(f) if the Recipient resides and/or works outside the United States, the following additional provisions shall apply:
(i) this PU, including any Dividend Equivalents, and the Underlying Shares are not intended to replace any pension rights or compensation;
(ii) this PU, including any Dividend Equivalents, and the Underlying Shares (including value attributable to each) do not constitute compensation of any kind for services of any kind rendered to the Company and/or any subsidiary thereof and are outside the scope of the Recipients employment contract, if any;
(iii) this PU, including any Dividend Equivalents, and any Underlying Shares (including the value attributable to each) are not part of normal or expected compensation or salary, including, but not limited to, for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, service awards, pension or retirement or welfare benefits or similar payments unless such other arrangement explicitly provides to the contrary;
(iv) no claim or entitlement to compensation or damages shall arise from forfeiture of the PU, including any Dividend Equivalents, resulting from the Recipients termination of the Relationship for any reason, and in consideration of this PU, including any Dividend Equivalents, the Recipient irrevocably agrees never to institute a claim against the Company and/or subsidiary, waives his or her ability to bring such claim and releases the Company and/or subsidiary from any claim; if, notwithstanding the foregoing, such claim is allowed by a court of competent jurisdiction, then by accepting this PU, including any Dividend Equivalents, the Recipient is deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claims; and
(g) the Company shall not be liable for any foreign exchange rate fluctuation between the Recipients local currency and the United States dollar that may affect the value of this PU or any amounts due pursuant to the settlement of the PU or the subsequent sale of any Underlying Shares acquired upon settlement.
17. Appendix . Notwithstanding any provision in this Performance Unit Agreement, this PU shall be subject to any special terms and conditions set forth in any Appendix to this Performance Unit Agreement for the Recipients country of residence or in which the Recipient works. Moreover, if the Recipient relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to the Recipient, to the extent the
Company determines that the application of such terms and conditions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan. The Appendix constitutes part of this Performance Unit Agreement.
18. General Provisions .
(a) Amendment; Waivers . This Performance Unit Agreement, including the Plan, contains the full and complete understanding and agreement of the parties hereto as to the subject matter hereof, and except as otherwise permitted by the express terms of the Plan and this Performance Unit Agreement and applicable law, it may not be modified or amended nor may any provision hereof be waived without a further written agreement duly signed by each of the parties; provided, however, that a modification or amendment that does not materially diminish the rights of the Recipient hereunder, as they may exist immediately before the effective date of the modification or amendment, shall be effective upon written notice of its provisions to the Recipient, to the extent permitted by applicable law. The waiver by either of the parties hereto of any provision hereof in any instance shall not operate as a waiver of any other provision hereof or in any other instance. The Recipient shall have the right to receive, upon request, a written confirmation from the Company of the Customizing Information.
(b) Binding Effect . This Performance Unit Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, representatives, successors and assigns.
(c) Fractional PUs, Underlying Shares and Dividend Equivalents . All fractional Underlying Shares and Dividend Equivalents settled in Stock resulting from the whole or partial satisfaction of the Performance Measure(s) or the adjustment provisions contained in the Plan shall be rounded down to the nearest whole share. If cash in lieu of Underlying Shares is delivered at settlement, or Dividend Equivalents are settled in cash, the amount paid shall be rounded down to the nearest penny.
(d) Governing Law . This Performance Unit Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to the principles of conflicts of law.
(e) Construction . This Performance Unit Agreement is to be construed in accordance with the terms of the Plan. In case of any conflict between the Plan and this Performance Unit Agreement, the Plan shall control. The titles of the sections of this Performance Unit Agreement and of the Plan are included for convenience only and shall not be construed as modifying or affecting their provisions. The masculine gender shall include both sexes; the singular shall include the plural and the plural the singular unless the context otherwise requires. Capitalized terms not defined herein shall have the meanings given to them in the Plan.
(f) Language . If the Recipient receives this Performance Unit Agreement, or any other document related to this PU and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
(g) Data Privacy . By entering into this Performance Unit Agreement and except as otherwise provided in any data transfer agreement entered into by the Company, the Recipient: (i) authorizes the Company, and any agent of the Company administering the Plan or providing Plan recordkeeping services, to disclose to the Company such information and data as the Company shall request in order to facilitate the award of performance units and the administration of the Plan; (ii) waives any data privacy rights the Recipient may have with respect to such information; and (iii) authorizes the Company to store and transmit such information in electronic form. For purposes of this Section 18(g), the term Company refers to the Company as defined in the last sentence of Section 1 of the Plan.
(h) Notices . Any notice in connection with this Performance Unit Agreement shall be deemed to have been properly delivered if it is delivered in the form specified by the Committee as follows:
To the Recipient: |
Last address provided to the Company |
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To the Company: |
Iron Mountain Incorporated |
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One Federal Street |
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Boston, Massachusetts 02110 |
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Attn: Chief Financial Officer |
(i) Version Number . This document is Version 1 of the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan Performance Unit Agreement.
IRON MOUNTAIN INCORPORATED
Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan
Performance Unit Agreement (Version 1)
Appendix
Country-Specific Provisions
Terms and Conditions
This Appendix includes additional, or if so indicated replaces, certain terms and conditions that govern a PU granted under the Plan if a Recipient resides or works in one of the countries listed below. Capitalized terms used but not defined in this Appendix have the meanings set forth in the Plan and/or the Performance Unit Agreement.
Notifications
The information contained herein is general in nature and may not apply to each particular Recipients situation and the Company is not in a position to assure a Recipient of any particular result. Accordingly, the Recipient is advised to seek appropriate professional advice as to how the relevant laws in a particular country may apply to his or her situation.
If the Recipient is a citizen or resident of a country other than the one in which the Recipient is currently working, transfers employment or service location after the Grant Date, or is considered a resident of another country for local law purposes, the information contained herein may not apply to the Recipient, and the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall apply.
Belgium
Time for Acceptance . This provision replaces Section 12 of the Performance Unit Agreement:
Unless the Recipient shall evidence written acceptance of this Performance Unit Agreement by electronic or other means prescribed by the Committee within sixty (60) days after its delivery, the PUs and Dividend Equivalents shall be null and void (unless waived by the Committee).
Hungary
Grant . Any shares acquired under the Plan are deemed as privately placed under Act No. CXX of 2011 on the Capital Market.
Data Privacy . This provision replaces Section 18(g) of the Performance Unit Agreement in its entirety:
The Recipient gives his or her consent to the Company for handling his or her personal data in accordance with the provisions of Act CXII of 2012 on the Information Autonomy and Freedom of Information, and to process the personal data only for the purposes of and to the extent it is necessary for fulfilling the Companys rights or obligations deriving from the Recipients participation in the Plan. In connection with this consent, the Company may forward the Recipients personal data to service providers that perform services for the Company in
Updated as of February 18, 2015
connection with bookkeeping and taxation. The Recipient gives his or her consent that his or her personal data may be transferred abroad for the same purposes. The Company is entitled to forward the personal data of the Recipient to an affiliate of the Company or that provides services to the Company in the scope of exercising the rights and performing the obligations arising from and/or connected to the Recipients participation in the Plan (especially its reporting and recording obligations). The Recipient personal data may be forwarded to countries that do not offer the same level of protection as jurisdictions within the EEA. Recipient, by entering into this Performance Unit Agreement, gives his or her express consent for the processing and forwarding of his or her data as defined in this Section.
The Netherlands
Effect Upon Employment and Performance of Services . This provision supplements Section 11 of the Performance Unit Agreement:
PUs and Dividend Equivalents shall not form part of the employment or services conditions of the Recipient, nor shall they be treated (either at the time when it might apply or in any period prior thereto or any period thereafter) as remuneration for the purpose of pension arrangements nor shall they form any other employment or services related entitlement. PUs and Dividend Equivalents shall not be included in the calculation of a possible severance payment and the Recipient waives all rights (if any) that he or she may have in this regard.
Poland
Right of Repayment . The right of repayment provided in Section 13 of this Performance Unit Agreement shall be subject to concluding a non-competition agreement, according to the relevant provisions of Polish law.
Governing Law . This provision supplements Section 18(d) of the Performance Unit Agreement:
Any disputes resulting from this Performance Unit Agreement shall be settled exclusively by United States federal courts in the Commonwealth of Massachusetts.
Language . This provision replaces Section 18(f) of the Performance Unit Agreement:
This Performance Unit Agreement was executed in two (2) identical counterparts, each in Polish and English versions, and one for each of the Company and the Recipient. In the case of any discrepancy between the Polish and English version, the Polish version will prevail.
United Kingdom
Vesting . This provision replaces the first sentence of Section 3(b) of the Performance Unit Agreement:
Notwithstanding Section 3(a), if the Recipient terminates employment due to retirement on or after attaining age fifty-five (55) (or such earlier age with the agreement
of the Company) and after having completed ten (10) Years of Credited Service (or such shorter period of Credited Service as the Committee may, in its absolute discretion, permit for these purposes), the Recipient shall become vested in his or her PUs in accordance with the following schedule:
Date Relationship Terminates |
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Vesting Percentage |
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On or after first (1 st ) anniversary of Grant Date |
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33.3 |
% |
On or after second (2 nd ) anniversary of Grant Date |
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66.6 |
% |
On or after third (3 rd ) anniversary of Grant Date |
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100 |
% |
Withholding Taxes . This provision replaces Section 6 of the Performance Unit Agreement:
If a liability arises in connection with the award, holding, vesting or settlement of PUs and/or Dividend Equivalents under which the Company or any subsidiary employing the Recipient is obliged to account for the tax and/or primary social security contributions (otherwise known as employees National Insurance Contributions) (Employee Tax Liability), then:
(a) If the PU and/or Dividend Equivalent is cash settled, the Company or the relevant subsidiary may withhold the Employee Tax Liability from the sum of cash due to the Recipient; or
(b) If the PU and/or Dividend Equivalent is Stock settled, then unless the Recipient makes a payment of an amount equal to the Employee Tax Liability within seven (7) days of being notified by his or her employer or the Company of the amount of the Employee Tax Liability, the Company may sell sufficient of the shares of Common Stock resulting from the settlement of the PU and/or Dividend Equivalent on behalf of the Recipient and arrange payment to the subsidiary on which the Employee Tax Liability falls of an amount equal to the Employee Tax Liability out of the proceeds of sale by way of reimbursement to the relevant subsidiary.
Effect Upon Employment and Performance of Services . This provision supplements Section 11 of the Performance Unit Agreement:
The Recipient shall have no entitlement to compensation or damages in consequence of the termination of his or her employment with the Company or any employing subsidiary for any reason whatsoever and whether or not in breach of contract, in so far as such entitlement arises or may arise from his or her ceasing to have rights under the PU as a result of such termination or from the loss or diminution in value of the same and, upon grant, the Recipient shall be deemed irrevocably to have waived such entitlement.
IRON MOUNTAIN INCORPORATED 2014 STOCK AND CASH INCENTIVE PLAN
Performance Unit Schedule
<<Name>>
<<Address>>
<<City>>, <<State>> <Zip>>
In accordance with the Performance Unit Agreement, of which this Performance Unit Schedule is a part (which together, constitute the Customizing Information), the Company hereby grants to <<Name>> (the Recipient) the following Performance Units.
Grant Date: |
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<<GrantDate>> |
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Performance Units Granted: |
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<<Number of shares of Stock underlying the equivalent number of performance units granted>> |
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Performance Period: |
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<<Period>>(1) |
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Performance Measure 1: |
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<<Performance Measure 1>> > <<Criteria1>>(2) |
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Performance Measure 2: |
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Actual |
<<Performance Measure 2>> relative to Budgeted <<Performance Measure 2>> |
Actual <<Performance Measure 2>> as a |
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Percentage of Budgeted <<Performance Measure 2>> |
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% of PUs Earned |
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> 110% |
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200 |
% |
> 105% |
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150 |
% |
> 100% |
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100 |
% |
> 95% |
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25 |
% |
< 95% |
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0 |
% |
Linear interpolation to be used for performance between points provided
Adjusted Performance |
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Units Granted: |
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<<Adjusted number of shares of Stock to be issued at settlement>> |
Purchase Price, if any: |
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<<PurchasePricePerUnit>> |
Form of Settlement: |
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[Cash/Stock] |
Performance Unit |
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Agreement Version: |
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1 |
Vesting Date: |
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<<Vest>> |
ACCEPTANCE BY RECIPIENT
IN WITNESS WHEREOF, the Company has caused this Performance Unit Agreement to be issued as of the date set forth above.
Date: |
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(Signature of Recipient) |
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Notice Address: |
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(1) [Example: Calendar Years 2015-2017]
(2) [Example: X%]
Exhibit 10.30
IRON MOUNTAIN INCORPORATED
Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan
Performance Unit Agreement
This Performance Unit Agreement and the associated grant award information (the Customizing Information), which Customizing Information is provided in written form or is available in electronic form from the recordkeeper for the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan, as amended and in effect from time to time (the Plan), is made as of the date shown as the Grant Date in the Customizing Information (the Grant Date) by and between Iron Mountain Incorporated, a Delaware corporation (the Company), and the individual identified in the Customizing Information (the Recipient). This instrument and the Customizing Information are collectively referred to as the Performance Unit Agreement.
WITNESSETH THAT:
WHEREAS, the Company has instituted the Plan; and
WHEREAS, the Compensation Committee (the Committee) has authorized the grant of performance units with respect to the Companys Common Stock (Stock) upon the terms and conditions set forth below and pursuant to the Plan, a copy of which is incorporated herein; and
WHEREAS, the Recipient acknowledges that he or she has carefully read this Performance Unit Agreement and agrees, as provided in Section 18(a) below, that the terms and conditions of the Performance Unit Agreement reflect the entire understanding between himself or herself and the Company regarding this performance unit award (and the Recipient has not relied upon any statement or promise other than the terms and conditions of the Performance Unit Agreement with respect to this performance unit award);
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Recipient agree as follows.
1. Grant . Subject to the terms of the Plan and this Performance Unit Agreement, the Company hereby conditionally grants to the Recipient that number of performance units equal to the corresponding number of shares of the Companys Stock (the Underlying Shares) shown in the Customizing Information under Performance Units Granted.
The grant described in the preceding paragraph is contingent upon the satisfaction of the Performance Criteria over the Performance Period, each as shown in the Customizing Information. The Committee shall determine whether such Performance Criteria have been satisfied.
2. Adjustment to Award . The number of Performance Units Granted may be increased or decreased, including to zero, based on the Performance Matrix shown in the Customizing Information. Whether any adjustment based on the Performance Matrix is made shall be determined in the sole discretion of the Committee and the Adjusted Performance Units Granted (PUs) in the Customizing Information shall be updated to reflect any such adjustment.
3. Vesting .
(a) In General . If the Recipient remains in an employment, contractual or other service relationship with the Company (Relationship) as of the Vesting Date specified in the Customizing Information, and the Recipient as of such date is not in violation of any confidentiality, inventions and/or non-competition agreement with the Company, the PUs shall vest on such date. For the avoidance of doubt, except as otherwise provided pursuant to the terms of the Plan and Section 3(b), if the Recipients Relationship with the Company is terminated by the Company or by the Recipient for any reason, whether voluntarily or involuntarily, no PUs granted pursuant to this Performance Unit Agreement shall vest under any circumstances on and after the date of such termination.
(b) Retirement Provision . Notwithstanding Section 3(a), if the Recipient terminates employment on or after attaining age fifty-five (55) and completing ten (10) Years of Credited Service, the Recipient shall become vested in his or her PUs in accordance with the following schedule:
Date Relationship Terminates |
|
Vesting Percentage |
|
On or after first (1st) anniversary of Grant Date |
|
33.3 |
% |
On or after second (2nd) anniversary of Grant Date |
|
66.6 |
% |
On or after third (3rd) anniversary of Grant Date |
|
100 |
% |
In the event a Recipient becomes partially or fully vested under this Section 3(b), in no event shall any PUs vested as a result of this Section 3(b) be delivered until the Vesting Date, nor shall any PUs vested as a result of this Section 3(b) be delivered if the Recipient as of the date of delivery is in violation of any confidentiality, inventions and/or non-competition agreement with the Company. For purposes of this Section 3(b), a Recipient shall be treated as having terminated from employment if he satisfies the definition of Termination of Employment under the Iron Mountain Incorporated Executive Deferred Compensation Plan, and Years of Credited Service shall be calculated on the same basis as Years of Credited Service under The Iron Mountain Companies 401(k) Plan or any successor thereto.
(c) Committee Discretion . In the event the Relationship is terminated for any reason and except as otherwise provided in Section 3(b), (i) the Recipients right to vest in any PUs will, except as provided in Section 9(c) of the Plan, terminate as of the date of the termination of the Relationship (and will not be extended by any notice period mandated under local law) and (ii) the Committee shall have the exclusive discretion to determine when the Relationship has terminated for purposes of this PU (including when the Recipient is no longer considered to be providing active service while on a leave of absence).
(d) Special Definition of Company . For purposes of this Section 3, the term Company refers to the Company as defined in the last sentence of Section 1 of the Plan.
4. Dividend Equivalents . A Recipient shall be credited with dividend equivalents equal to the dividends the Recipient would have received if the Recipient had been the actual record owner of the Underlying Shares on each dividend record date on or after the Grant Date and through the date the Recipient receives a settlement pursuant to Section 5 below (the Dividend Equivalent). If a dividend on the Stock is payable wholly or partially in Stock, the Dividend Equivalent representing that portion shall be in the form of additional PUs, credited on a one-for-one
basis. If a dividend on the Stock is payable wholly or partially in cash, the Dividend Equivalent representing that portion shall also be in the form of cash and a Recipient shall be treated as being credited with any cash dividends, without earnings, until settlement pursuant to Section 5 below. If a dividend on Stock is payable wholly or partially in other than cash or Stock, the Committee may, in its discretion, provide for such Dividend Equivalents with respect to that portion as it deems appropriate under the circumstances. Dividend Equivalents shall be subject to the same terms and conditions as the PUs originally awarded pursuant to this Performance Unit Agreement, and they shall vest (or, if applicable, be forfeited) as if they had been granted at the same time as the original PU. Dividend Equivalents representing the cash portion of a dividend on Stock shall be settled in cash.
5. Delivery of Underlying Shares or Cash Settlement . With respect to any PUs that become vested pursuant to Section 3, the Company shall issue and deliver to the Recipient (a) the number of Underlying Shares equal to the number of vested PUs or an amount of cash equal to the Fair Market Value, as defined in the Plan, of such Underlying Shares as of the Vesting Date and (b) the amount (and in the form) due with respect to the Dividend Equivalents applicable to such Underlying Shares. Delivery shall be made to the Recipient as soon as practicable following the Vesting Date but in no event later than the end of the year in which such Vesting Date occurs (or the fifteenth (15 th ) day of the third (3 rd ) month following the Vesting Date, if later). Whether Underlying Shares, or the cash value thereof, shall be issued or paid at settlement shall be determined based on the Form of Settlement specified in the Customizing Information.
Any shares issued pursuant to this Performance Unit Agreement shall be issued, without issue or transfer tax, by (i) delivering a stock certificate or certificates for such shares out of theretofore authorized but unissued shares or treasury shares of its Stock as the Company may elect or (ii) issuance of shares of its Stock in book entry form; provided, however, that the time of such delivery may be postponed by the Company for such period as may be required for it with reasonable diligence to comply with any applicable requirements of law. Notwithstanding the preceding provisions of this Section 5, delivery of Underlying Shares shall be made, or the amount of cash equivalent thereto shall be paid, only if the required purchase price designated as the Purchase Price shown in the Customizing Information per underlying PU is paid to the Company by means of payment acceptable to the Company in accordance with the terms of the Plan. If the Recipient fails to pay for or accept delivery of all of the shares, the right to shares of Stock provided pursuant to this PU may be terminated by the Company.
6. Withholding Taxes . The Recipient hereby agrees, as a condition of this award, to provide to the Company (or a subsidiary employing the Recipient, as applicable) an amount sufficient to satisfy the Companys and/or subsidiarys obligation to withhold any and all federal, state, local or provincial income tax, social security, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items or statutory withholdings related to the Plan (the Withholding Amount), if any, by (a) authorizing the Company and/or any subsidiary employing the Recipient, as applicable, to withhold the Withholding Amount from the Recipients cash compensation or (b) remitting the Withholding Amount to the Company (or a subsidiary employing the Recipient, as applicable) in cash; provided, however, that to the extent that the Withholding Amount is not provided by one or a combination of such methods, the Company may at its election withhold from the Underlying Shares and Dividend Equivalents that would otherwise be delivered that number of shares (and/or cash) having a Fair Market
Value on the date of vesting sufficient to eliminate any deficiency in the Withholding Amount; and provided, further, that the Fair Market Value of Stock withheld shall not exceed an amount in excess of the minimum required withholding. Regardless of any action that the Company and/or subsidiary takes with respect to any or all federal, state, local or provincial income tax, social security, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items or statutory withholdings related to the Recipients participation in the Plan, the Recipient acknowledges that he or she, and not the Company and/or any subsidiary, has the ultimate liability for any such items. Further, if the Recipient becomes subject to tax in more than one jurisdiction between the Grant Date and the date of any relevant taxable or tax withholding event, the Recipient acknowledges that the Company and/or subsidiary may be required to withhold or account for such tax-related items in more than one jurisdiction.
7. Non-assignability of PUs and Dividend Equivalents . PUs and Dividend Equivalents shall not be assignable or transferable by the Recipient except by will or by the laws of descent and distribution or as permitted by the Committee in its discretion pursuant to the terms of the Plan. During the life of the Recipient, delivery of shares of Stock or payment of cash as settlement of PUs and Dividend Equivalents shall be made only to the Recipient, to a conservator or guardian duly appointed for the Recipient by reason of the Recipients incapacity or to the person appointed by the Recipient in a durable power of attorney acceptable to the Companys counsel.
8. Compliance with Securities Act; Lock-Up Agreement . The Company shall not be obligated to sell or issue any Underlying Shares or other securities in settlement of PUs and Dividend Equivalents hereunder unless the shares of Stock or other securities are at that time effectively registered or exempt from registration under the Securities Act and applicable state or provincial securities laws. In the event shares or other securities shall be issued that shall not be so registered, the Recipient hereby represents, warrants and agrees that the Recipient will receive such shares or other securities for investment and not with a view to their resale or distribution, and will execute an appropriate investment letter satisfactory to the Company and its counsel. The Recipient further hereby agrees that as a condition to the settlement of PUs and Dividend Equivalents, the Recipient will execute an agreement in a form acceptable to the Company to the effect that the shares shall be subject to any underwriters lock-up agreement in connection with a public offering of any securities of the Company that may from time to time apply to shares held by officers and employees of the Company, and such agreement or a successor agreement must be in full force and effect.
9. Legends . The Recipient hereby acknowledges that the stock certificate or certificates (or entries in the case of book entry form) evidencing shares of Stock or other securities issued pursuant to any settlement of an PU or Dividend Equivalent hereunder may bear a legend (or provide a restriction) setting forth the restrictions on their transferability described in Section 8 hereof, if such restrictions are then in effect.
10. Rights as Stockholder . The Recipient shall have no rights as a stockholder with respect to any PUs, Dividend Equivalents or Underlying Shares until the date of issuance of a stock certificate (or appropriate entry is made in the case of book entry form) for Underlying Shares and any Dividend Equivalents. Except as provided by Section 4, no adjustment shall be made for any rights for which the record date is prior to the date such stock certificate is issued (or appropriate entry is made in the case of book entry form), except to the extent the Committee
so provides, pursuant to the terms of the Plan and upon such terms and conditions it may establish.
11. Effect Upon Employment and Performance of Services . Nothing in this Performance Unit Agreement or the Plan shall be construed to impose any obligation upon the Company or any subsidiary to employ or utilize the services of the Recipient or to retain the Recipient in its employ or to engage or retain the services of the Recipient.
12. Time for Acceptance . Unless the Recipient shall evidence acceptance of this Performance Unit Agreement by electronic or other means prescribed by the Committee within sixty (60) days after its delivery, the PUs and Dividend Equivalents shall be null and void (unless waived by the Committee).
13. Right of Repayment . In the event that the Recipient accepts employment with or provides services for a competitor of the Company within two (2) years after any settlement of PUs and Dividend Equivalents hereunder, the Recipient shall pay to the Company an amount equal to the excess of the Fair Market Value of the Underlying Shares as of the date of settlement (whether settled in cash or Stock) over the Purchase Price, if any, paid (or deemed paid) together with the value of any Dividend Equivalents; provided, however, that the Committee in its discretion may release the Recipient from the requirement to make such payment, if the Committee determines that the Recipients acceptance of such employment or performance of such services is not inimical to the best interests of the Company. In accordance with applicable law, the Company may deduct the amount of payment due under the preceding sentence from any compensation or other amount payable by the Company to the Recipient. For purposes of this Section 13, the term Company refers to the Company as defined in the last sentence of Section 1 of the Plan.
14. Section 409A of the Internal Revenue Code . The PUs and Dividend Equivalents granted hereunder are intended to avoid the potential adverse tax consequences to the Recipient of Section 409A of the Code, and the Committee may make such modifications to this Performance Unit Agreement as it deems necessary or advisable to avoid such adverse tax consequences.
15. Electronic Delivery . The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Recipient consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.
16. Nature of Award . By accepting this PU, the Recipient acknowledges, understands and agrees that:
(a) the Plan is established voluntarily by the Company, is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan and this Performance Unit Agreement;
(b) the grant of this PU is voluntary and occasional and does not create any contractual or other right to receive future awards under the Plan or benefits in lieu of Plan awards, even if PUs or other Plan awards have been granted in the past;
(c) all decisions with respect to future PU awards will be at the sole discretion of the Committee;
(d) he or she is voluntarily participating in the Plan;
(e) the future value of the Underlying Shares is unknown and cannot be predicted with certainty;
(f) if the Recipient resides and/or works outside the United States, the following additional provisions shall apply:
(i) this PU, including any Dividend Equivalents, and the Underlying Shares are not intended to replace any pension rights or compensation;
(ii) this PU, including any Dividend Equivalents, and the Underlying Shares (including value attributable to each) do not constitute compensation of any kind for services of any kind rendered to the Company and/or any subsidiary thereof and are outside the scope of the Recipients employment contract, if any;
(iii) this PU, including any Dividend Equivalents, and any Underlying Shares (including the value attributable to each) are not part of normal or expected compensation or salary, including, but not limited to, for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, service awards, pension or retirement or welfare benefits or similar payments unless such other arrangement explicitly provides to the contrary;
(iv) no claim or entitlement to compensation or damages shall arise from forfeiture of the PU, including any Dividend Equivalents, resulting from the Recipients termination of the Relationship for any reason, and in consideration of this PU, including any Dividend Equivalents, the Recipient irrevocably agrees never to institute a claim against the Company and/or subsidiary, waives his or her ability to bring such claim and releases the Company and/or subsidiary from any claim; if, notwithstanding the foregoing, such claim is allowed by a court of competent jurisdiction, then by accepting this PU, including any Dividend Equivalents, the Recipient is deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claims; and
(g) the Company shall not be liable for any foreign exchange rate fluctuation between the Recipients local currency and the United States dollar that may affect the value of this PU or any amounts due pursuant to the settlement of the PU or the subsequent sale of any Underlying Shares acquired upon settlement.
17. Appendix . Notwithstanding any provision in this Performance Unit Agreement, this PU shall be subject to any special terms and conditions set forth in any Appendix to this Performance Unit Agreement for the Recipients country of residence or in which the Recipient works. Moreover, if the Recipient relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to the Recipient, to the extent the
Company determines that the application of such terms and conditions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan. The Appendix constitutes part of this Performance Unit Agreement.
18. General Provisions .
(a) Amendment; Waivers . This Performance Unit Agreement, including the Plan, contains the full and complete understanding and agreement of the parties hereto as to the subject matter hereof, and except as otherwise permitted by the express terms of the Plan and this Performance Unit Agreement and applicable law, it may not be modified or amended nor may any provision hereof be waived without a further written agreement duly signed by each of the parties; provided, however, that a modification or amendment that does not materially diminish the rights of the Recipient hereunder, as they may exist immediately before the effective date of the modification or amendment, shall be effective upon written notice of its provisions to the Recipient, to the extent permitted by applicable law. The waiver by either of the parties hereto of any provision hereof in any instance shall not operate as a waiver of any other provision hereof or in any other instance. The Recipient shall have the right to receive, upon request, a written confirmation from the Company of the Customizing Information.
(b) Binding Effect . This Performance Unit Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, representatives, successors and assigns.
(c) Fractional PUs, Underlying Shares and Dividend Equivalents . All fractional Underlying Shares and Dividend Equivalents settled in Stock resulting from the application of the Performance Matrix or the adjustment provisions contained in the Plan shall be rounded down to the nearest whole share. If cash in lieu of Underlying Shares is delivered at settlement, or Dividend Equivalents are settled in cash, the amount paid shall be rounded down to the nearest penny.
(d) Governing Law . This Performance Unit Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to the principles of conflicts of law.
(e) Construction . This Performance Unit Agreement is to be construed in accordance with the terms of the Plan. In case of any conflict between the Plan and this Performance Unit Agreement, the Plan shall control. The titles of the sections of this Performance Unit Agreement and of the Plan are included for convenience only and shall not be construed as modifying or affecting their provisions. The masculine gender shall include both sexes; the singular shall include the plural and the plural the singular unless the context otherwise requires. Capitalized terms not defined herein shall have the meanings given to them in the Plan.
(f) Language . If the Recipient receives this Performance Unit Agreement, or any other document related to this PU and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
(g) Data Privacy . By entering into this Performance Unit Agreement and except as otherwise provided in any data transfer agreement entered into by the Company, the Recipient: (i) authorizes the Company, and any agent of the Company administering the Plan or providing Plan recordkeeping services, to disclose to the Company such information and data as the Company shall request in order to facilitate the award of performance units and the administration of the Plan; (ii) waives any data privacy rights the Recipient may have with respect to such information; and (iii) authorizes the Company to store and transmit such information in electronic form. For purposes of this Section 18(g), the term Company refers to the Company as defined in the last sentence of Section 1 of the Plan.
(h) Notices . Any notice in connection with this Performance Unit Agreement shall be deemed to have been properly delivered if it is delivered in the form specified by the Committee as follows:
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To the Recipient: |
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Last address provided to the Company |
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To the Company: |
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Iron Mountain Incorporated |
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One Federal Street |
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Boston, Massachusetts 02110 |
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Attn: Chief Financial Officer |
(i) Version Number . This document is Version 2 of the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan Performance Unit Agreement.
IRON MOUNTAIN INCORPORATED
Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan
Performance Unit Agreement (Version 2)
Appendix
Country-Specific Provisions
Terms and Conditions
This Appendix includes additional, or if so indicated replaces, certain terms and conditions that govern a PU granted under the Plan if a Recipient resides or works in one of the countries listed below. Capitalized terms used but not defined in this Appendix have the meanings set forth in the Plan and/or the Performance Unit Agreement.
Notifications
The information contained herein is general in nature and may not apply to each particular Recipients situation and the Company is not in a position to assure a Recipient of any particular result. Accordingly, the Recipient is advised to seek appropriate professional advice as to how the relevant laws in a particular country may apply to his or her situation.
If the Recipient is a citizen or resident of a country other than the one in which the Recipient is currently working, transfers employment or service location after the Grant Date, or is considered a resident of another country for local law purposes, the information contained herein may not apply to the Recipient, and the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall apply.
Belgium
Time for Acceptance . This provision replaces Section 12 of the Performance Unit Agreement:
Unless the Recipient shall evidence written acceptance of this Performance Unit Agreement by electronic or other means prescribed by the Committee within sixty (60) days after its delivery, the PUs and Dividend Equivalents shall be null and void (unless waived by the Committee).
Hungary
Grant . Any shares acquired under the Plan are deemed as privately placed under Act No. CXX of 2011 on the Capital Market.
Data Privacy . This provision replaces Section 18(g) of the Performance Unit Agreement in its entirety:
The Recipient gives his or her consent to the Company for handling his or her personal data in accordance with the provisions of Act CXII of 2012 on the Information Autonomy and Freedom of Information, and to process the personal data only for the purposes of and to the extent it is necessary for fulfilling the Companys rights or obligations deriving from the Recipients participation in the Plan. In connection with this consent, the Company may forward the Recipients
Updated as of February 18, 2015
personal data to service providers that perform services for the Company in connection with bookkeeping and taxation. The Recipient gives his or her consent that his or her personal data may be transferred abroad for the same purposes. The Company is entitled to forward the personal data of the Recipient to an affiliate of the Company or that provides services to the Company in the scope of exercising the rights and performing the obligations arising from and/or connected to the Recipients participation in the Plan (especially its reporting and recording obligations). The Recipient personal data may be forwarded to countries that do not offer the same level of protection as jurisdictions within the EEA. Recipient, by entering into this Performance Unit Agreement, gives his or her express consent for the processing and forwarding of his or her data as defined in this Section.
The Netherlands
Effect Upon Employment and Performance of Services . This provision supplements Section 11 of the Performance Unit Agreement:
PUs and Dividend Equivalents shall not form part of the employment or services conditions of the Recipient, nor shall they be treated (either at the time when it might apply or in any period prior thereto or any period thereafter) as remuneration for the purpose of pension arrangements nor shall they form any other employment or services related entitlement. PUs and Dividend Equivalents shall not be included in the calculation of a possible severance payment and the Recipient waives all rights (if any) that he or she may have in this regard.
Poland
Right of Repayment . The right of repayment provided in Section 13 of this Performance Unit Agreement shall be subject to concluding a non-competition agreement, according to the relevant provisions of Polish law.
Governing Law . This provision supplements Section 18(d) of the Performance Unit Agreement:
Any disputes resulting from this Performance Unit Agreement shall be settled exclusively by United States federal courts in the Commonwealth of Massachusetts.
Language . This provision replaces Section 18(f) of the Performance Unit Agreement:
This Performance Unit Agreement was executed in two (2) identical counterparts, each in Polish and English versions, and one for each of the Company and the Recipient. In the case of any discrepancy between the Polish and English version, the Polish version will prevail.
United Kingdom
Vesting . This provision replaces the first sentence of Section 3(b) of the Performance Unit Agreement:
Notwithstanding Section 3(a), if the Recipient terminates employment due to retirement on or after attaining age fifty-five (55) (or such earlier age with the agreement of the Company) and after having completed ten (10) Years of Credited Service (or such shorter period of Credited Service as the Committee may, in its absolute discretion, permit for these purposes), the Recipient shall become vested in his or her PUs in accordance with the following schedule:
Date Relationship Terminates |
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Vesting Percentage |
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On or after first (1st) anniversary of Grant Date |
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33.3 |
% |
On or after second (2nd) anniversary of Grant Date |
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66.6 |
% |
On or after third (3rd) anniversary of Grant Date |
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100 |
% |
Withholding Taxes . This provision replaces Section 6 of the Performance Unit Agreement:
If a liability arises in connection with the award, holding, vesting or settlement of PUs and/or Dividend Equivalents under which the Company or any subsidiary employing the Recipient is obliged to account for the tax and/or primary social security contributions (otherwise known as employees National Insurance Contributions) (Employee Tax Liability), then:
(a) If the PU and/or Dividend Equivalent is cash settled, the Company or the relevant subsidiary may withhold the Employee Tax Liability from the sum of cash due to the Recipient; or
(b) If the PU and/or Dividend Equivalent is Stock settled, then unless the Recipient makes a payment of an amount equal to the Employee Tax Liability within seven (7) days of being notified by his or her employer or the Company of the amount of the Employee Tax Liability, the Company may sell sufficient of the shares of Common Stock resulting from the settlement of the PU and/or Dividend Equivalent on behalf of the Recipient and arrange payment to the subsidiary on which the Employee Tax Liability falls of an amount equal to the Employee Tax Liability out of the proceeds of sale by way of reimbursement to the relevant subsidiary.
Effect Upon Employment and Performance of Services . This provision supplements Section 11 of the Performance Unit Agreement:
The Recipient shall have no entitlement to compensation or damages in consequence of the termination of his or her employment with the Company or any employing subsidiary for any reason whatsoever and whether or not in breach of contract, in so far as such entitlement arises or may arise from his or her ceasing to have rights under the PU as a result of such termination or from the loss or diminution in value of the same and, upon grant, the Recipient shall be deemed irrevocably to have waived such entitlement.
IRON MOUNTAIN INCORPORATED 2014 STOCK AND CASH INCENTIVE PLAN
Performance Unit Schedule
<<Name>>
<<Address>>
<<City>>, <<State>> <Zip>>
In accordance with the Performance Unit Agreement, of which this Performance Unit Schedule is a part (which together, constitute the Customizing Information), the Company hereby grants to <<Name>> (the Recipient) the following Performance Units.
Grant Date: |
<<GrantDate>> |
Performance Units Granted: |
<<Number of shares of Stock underlying the |
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equivalent number of performance units granted>> |
Performance Period: |
<<Period>> |
Performance Criteria: |
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IMI Return: total shareholder return of Iron Mountain Incorporated Stock (assuming reinvestment of dividends) with respect to the Performance Period is calculated by dividing (a) the average closing price of the Stock for the last 20 trading days of the applicable Performance Period, less the average closing price of Stock for the 20 trading days immediately preceding the start of the Performance Period, by (b) the average closing price of Stock for the 20 trading days immediately preceding the start of the Performance Period
Benchmark Returns: total shareholder return is calculated with respect to the Performance Period by calculating the total shareholder return of each company (assuming reinvestment of dividends) that is included in the S&P 500 Index at the beginning and end of the Performance Period (other than Iron Mountain Incorporated and any company that is in the financial services industry) on the same basis as total shareholder return is calculated for Iron Mountain Incorporated(1)
PerformanceMeasure1: IMI Return relative to Benchmark Returns
Performance Matrix:
Relative 3-Year Total Return |
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% of PUs Earned |
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> 90 th Percentile |
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200 |
% |
75 th Percentile |
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150 |
% |
50 th Percentile |
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100 |
% |
30 th Percentile |
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50 |
% |
< 30 th Percentile |
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0 |
% |
In calculating the Performance Criteria and in applying the Performance Matrix:
· If IMI Return for the Performance Period is negative, in no event will % of PUs Earned exceed 100%
· Linear interpolation to be used for performance between points provided
(1) A company shall be treated as being in the financial services industry for purposes of this Award if it has, as of the Grant Date, an SIC Code of: 6000-6099; 6100-6199; 6200-6299; or 6300-6399.
Adjusted Performance |
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Units Granted: |
<<Adjusted number of shares of Stock to |
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be issued at settlement>> |
Purchase Price, if any: |
<<PurchasePricePerUnit>> |
Form of Settlement: |
[Cash/Stock] |
Performance Unit |
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Agreement Version: |
2 |
Vesting Date: |
<<Vest>> |
ACCEPTANCE BY RECIPIENT
IN WITNESS WHEREOF, the Company has caused this Performance Unit Agreement to be issued as of the date set forth above.
Date: |
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(Signature of Recipient) |
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Notice Address: |
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Exhibit 10.41
IRON MOUNTAIN INCORPORATED
Compensation Plan for Non-Employee Directors
Restatement Date |
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As of January 1, 2015 |
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Eligibility |
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All non-employee Directors |
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Annual Board Retainer |
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$70,000 per year; paid in advance in quarterly installments |
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Annual Committee Retainers |
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In addition to the Annual Board Retainer, a $10,000 per year retainer for members of the Audit Committee, a $9,000 per year retainer for members of the Compensation Committee, Finance, Nominating and Governance or Risk and Safety Committees; in each case paid in advance in quarterly installments. |
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Annual Chair Retainers |
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In addition to the Annual Board Retainer and any Annual Committee Retainers, a $15,000 per year retainer for acting as Chair of the Audit Committee or Compensation Committee; an $8,000 per year retainer for acting as the Chair of the Finance, Nominating and Governance or Risk and Safety Committees; and a $25,000 per year retainer for acting as the Lead Independent Director or a $100,000 per year retainer for acting as the Independent Chairman of the Board, as the case may be; in each case paid in advance in quarterly installments |
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Pro Rata Portion of Retainers |
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A non-employee Director shall be entitled to retain the portion of the Annual, Committee and Chair Retainers (as applicable) paid with respect to the quarter in which he or she ceases to be a non-employee Director or serve on a Committee or as a Committee Chair or Lead Independent Director or Independent Chairman, but shall not be entitled to any further portion of the Retainer(s) |
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Meeting Expenses |
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Reimbursement for all normal travel expenses to attend meetings; reimbursements due shall be paid promptly after the end of each quarter, subject to timely receipt of each directors expense documentation |
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Group Insurance Benefits |
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Iron Mountains group medical and dental benefits (single or family) are available to non-employee Directors, but they must pay the current employee contribution rate in effect for such coverage; group life, AD&D, STD and LTD coverage are not available to non-employee Directors |
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Amount of Stock Grant |
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A stock grant in the form of restricted stock units will be made of that number of whole shares of Iron Mountain Incorporated common stock determined by dividing $135,000 by the stocks fair market value (as determined under the Iron Mountain Incorporated 2014 Stock and Cash Incentive Plan, or any successor plan) on the date of grant |
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Timing of Stock Grants |
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To be made annually to all non-employee Directors as of the first Board meeting following the annual meeting of stockholders; |
IRON MOUNTAIN INCORPORATED
STATEMENT OF THE CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in thousands)
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Year Ended December 31, | |||||||||||||||
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2010 | 2011 | 2012 | 2013 | 2014 | |||||||||||
Earnings: |
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Income from Continuing Operations before |
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Provision (Benefit) for Income Taxes and |
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Gain on Sale of Real Estate |
$ | 331,941 | $ | 348,519 | $ | 296,805 | $ | 159,871 | $ | 223,373 | ||||||
Add: |
||||||||||||||||
Gain on Sale of Real Estate(1) |
1,081 | 3,281 | 261 | 1,847 | 10,512 | |||||||||||
Fixed Charges |
284,052 | 286,241 | 326,261 | 335,637 | 345,781 | |||||||||||
| | | | | | | | | | | | | | | | |
|
$ | 617,074 | $ | 638,041 | $ | 623,327 | $ | 497,355 | $ | 579,666 | ||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Fixed Charges: |
||||||||||||||||
Interest Expense, Net |
$ | 204,559 | $ | 205,256 | $ | 242,599 | $ | 254,174 | $ | 260,717 | ||||||
Interest Portion of Rent Expense |
79,493 | 80,985 | 83,662 | 81,463 | 85,064 | |||||||||||
| | | | | | | | | | | | | | | | |
|
$ | 284,052 | $ | 286,241 | $ | 326,261 | $ | 335,637 | $ | 345,781 | ||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Ratio of Earnings to Fixed Charges |
2.2x | 2.2x | 1.9x | 1.5x | 1.7x |
Name
|
Jurisdiction |
Names under which Entity
does business |
||
---|---|---|---|---|
Administradora de Informacion Ltda |
Chile | |||
Archivages et Services |
France | |||
Archirex Iratkezelo, Tanácsadó és Szolgáltató Kft |
Hungary | |||
A.L.C.Z a.s |
Czech Republic | |||
Britannia Data Management Limited |
England & Wales | |||
Custodia de Documentos Limitada |
Chile | |||
Custodia S.O.S. SA |
Chile | |||
Docu Guard Holding Limited |
Cyprus | |||
DocuTár Iratrendezo és Tároló Szolgáltató Kft. |
Hungary | |||
European Security and Backup Engineering S.L |
Spain | |||
Fine Paper Recyclers Sydney Pty Ltd |
Australia | Iron Mountain Shredding | ||
Fontis International, Inc. |
Delaware | |||
Fontis International GmbH |
Switzerland | |||
Horanross Limited |
Ireland | Iron Mountain | ||
Keepers Brasil Ltda |
Brasil | |||
IM EES Sp. z.o.o. |
Poland | Iron Mountain | ||
IMSA Peru SRL |
Peru | Iron Mountain | ||
Iron Mountain (Deutschland) Service GmbH |
Germany | |||
Iron Mountain (Espana) Services, S.L |
Spain | |||
Iron Mountain (Gibraltar) Holdings Limited |
Gibraltar | |||
Iron Mountain (Ireland) Services Limited |
Ireland | |||
Iron Mountain (Nederland) Services BV |
Netherlands | |||
Iron Mountain (UK) EES Holdings Limited |
England & Wales | |||
Iron Mountain (UK) Limited |
England & Wales | |||
Iron Mountain (UK) Services Limited |
England & Wales | |||
Iron Mountain A/S. |
Denmark | |||
Iron Mountain Anamnis GDM S.A.S. |
France | |||
Iron Mountain Argentina S.A. |
Argentina | Iron Mountain | ||
Iron Mountain Arsivleme Hizmetleri AS |
Turkey | Iron Mountain | ||
Iron Mountain Asia Pacific Holdings Limited |
Hong Kong | |||
Iron Mountain Australia Holdings Pty Ltd. |
Australia | |||
Iron Mountain Australia Property Holdings Pty Ltd |
Australia | |||
Iron Mountain Australia Pty Ltd |
Australia | Iron Mountain | ||
Iron Mountain Australia Services Pty Ltd |
Australia | |||
Iron Mountain Austria Archivierung Gmbh |
Austria | Iron Mountain | ||
Iron Mountain Belgium NV |
Belgium | Iron Mountain | ||
Iron Mountain BPM International S.a.r.l. |
Grand Duchy of Luxembourg | |||
Iron Mountain BPM SPRL |
Belgium | |||
Iron Mountain Canada Operations ULC |
British Columbia | Iron Mountain |
Subsidiaries of the Company (Continued)
Name
|
Jurisdiction |
Names under which Entity
does business |
||
---|---|---|---|---|
Iron Mountain Cayman Ltd. |
Cayman Islands | |||
Iron Mountain Ceska Republika S.R.O. |
Czech Republic | Iron Mountain | ||
Iron Mountain Chile S.A. |
Chile | Iron Mountain | ||
Iron Mountain Chile Servicios S.A. |
Chile | Iron Mountain | ||
Iron Mountain CIS LLC |
Russian Federation | Iron Mountain | ||
Iron Mountain Colombia Services S.A.S. |
Colombia | |||
Iron Mountain Colombia, S.A.S. |
Colombia | |||
Iron Mountain d.o.o. Beograd |
Serbia | |||
Iron Mountain Deutschland GmbH |
Germany | Iron Mountain | ||
Iron Mountain DIMS Limited |
England & Wales | |||
Iron Mountain do Brasil Ltda |
Brazil | Iron Mountain | ||
Iron Mountain EES Holdings Limited |
Cyprus | |||
Iron Mountain Espana SA |
Spain | Iron Mountain | ||
Iron Mountain Europe (Group) Limited |
England & Wales | |||
Iron Mountain Europe PLC |
England & Wales | |||
Iron Mountain France S.A.S. |
France | Iron Mountain | ||
Iron Mountain Fulfillment Services, Inc. |
Delaware | Iron Mountain Fulfillment Services | ||
Iron Mountain Global Holdings, Inc. |
Delaware | |||
Iron Mountain Global LLC |
Delaware | |||
Iron Mountain Global Luxembourg S.a.r.l. |
Grand Duchy of Luxembourg | |||
Iron Mountain Group (Europe) Limited |
England & Wales | |||
Iron Mountain Hellas SA |
Greece | |||
Iron Mountain Holdings (Europe) Limited |
England & Wales | |||
Iron Mountain Holdings (France) SNC |
France | |||
Iron Mountain Holdings Group, Inc. |
Delaware | |||
Iron Mountain Hong Kong Limited |
Hong Kong | |||
Iron Mountain India Holdings |
Mauritius | |||
Iron Mountain India Private Limited |
India | |||
Iron Mountain Information Management Services Canada, Inc. |
British Columbia | |||
Iron Mountain Information Management Services, Inc. |
Delaware | |||
Iron Mountain Information Management, LLC |
Delaware | |||
Iron Mountain Intellectual Property Management, Inc. |
Delaware | |||
Iron Mountain International (Holdings) Limited |
England & Wales | |||
Iron Mountain International Holdings B.V. |
Netherlands | |||
Iron Mountain Ireland Holdings Limited |
Ireland | |||
Iron Mountain Ireland Limited |
Ireland | |||
Iron Mountain Latin America Holdings, Sociedad Limitada |
Spain | |||
Iron Mountain Luxembourg S.a.r.l |
Grand Duchy of Luxembourg | |||
Iron Mountain Luxembourg Services S.a.r.l. |
Grand Duchy of Luxembourg |
Subsidiaries of the Company (Continued)
Name
|
Jurisdiction |
Names under which Entity
does business |
||
---|---|---|---|---|
Iron Mountain Luxembourg Services S.a.r.l., Luxembourg, Schafhausen branch |
Switzerland | |||
Iron Mountain Magyarország Kereskedelmi és Szolgáltató Kft. |
Hungary | |||
Iron Mountain Management Services GmbH |
Switzerland | |||
Iron Mountain Mayflower Limited |
England & Wales | Iron Mountain | ||
Iron Mountain MDM Limited |
England & Wales | |||
Iron Mountain Mexico Holding S de RL de CV |
Mexico | |||
Iron Mountain Mexico Servicios, S. de R.L. de C.V. |
Mexico | |||
Iron Mountain Mexico, S. de R.L. de C.V. |
Mexico | |||
Iron Mountain Nederland B.V. |
Netherlands | |||
Iron Mountain Nederland Holdings B.V. |
Netherlands | Iron Mountain | ||
Iron Mountain Norge AS |
Norway | Iron Mountain | ||
Iron Mountain Panama, S.A. |
Panama | |||
Iron Mountain Participations S.A. |
France | Iron Mountain | ||
Iron Mountain Peru S.A. |
Peru | |||
Iron Mountain Poland Holdings Limited |
Cyprus | |||
Iron Mountain Polska Sp. z.o.o. |
Poland | |||
Iron Mountain Polska Services Sp. Z.o.o f/k//a Berylis Investments Sp z.o.o |
Poland | |||
Iron Mountain Records Management (Puerto Rico), Inc. |
Puerto Rico | |||
Iron Mountain Records Management (Shanghai) Co Limited f/k/a Databox Records Management (Shanghai) Co., Ltd |
Shanghai | |||
Iron Mountain REIT, Inc. |
Delaware | |||
Iron Mountain Secure Shredding Canada, Inc. |
British Columbia | |||
Iron Mountain Secure Shredding Limited |
England & Wales | |||
Iron Mountain Secure Shredding, Inc. |
Delaware | |||
Iron Mountain Services Private Limited |
India | |||
Iron Mountain Shanghai Co Ltd |
China | |||
Iron Mountain Singapore Pte. Limited |
Singapore | |||
Iron Mountain Slovakia, s.r.o. |
Slovakia | |||
Iron Mountain South America S.à.r.l. f/k/a Iron Mountain South America Ltd. |
Luxembourg | Iron Mountain | ||
Iron Mountain Southeast Asia Holdings Limited |
Hong Kong | |||
Iron Mountain SRL |
Romania | |||
Iron Mountain Switzerland GmbH |
Switzerland | |||
Iron Mountain UK Services (Holdings) Limited |
England & Wales | |||
Iron Mountain Ukraine LLC |
Ukraine | |||
Iron Mountain US Holdings, Inc. |
Delaware |
Subsidiaries of the Company (Continued)
Name
|
Jurisdiction |
Names under which Entity
does business |
||
---|---|---|---|---|
Jin Shan Limited |
Hong Kong | |||
Kestrel Data Services Limited |
England & Wales | |||
Marshgate Morangis S.a.r.l. |
Grand Duchy of Luxembourg | |||
Mountain Reserve III, Inc. |
Delaware | |||
Nettlebed Acquisition Corp. |
Delaware | |||
Record Data Limited |
Ireland | |||
Secure Paper Services Pty Ltd |
Australia | |||
2410664 Ontario Inc. f/k/a Securit Records Management Inc. |
Ontario | |||
Silver Sky Limited |
Jersey | |||
Sispace AG |
Switzerland | Iron Mountain | ||
Storbox SA |
Chile | Iron Mountain | ||
Tape Management Service Pty Ltd |
Australia | |||
The Imaging Centre Pty Ltd |
Australia | |||
Upper Providence Venture I, L.P. |
Pennsylvania | Iron Mountain | ||
Venues Australia Pty Ltd |
Australia |
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statements No. 333-189709 on Form S-3ASR, and Nos. 333-201636, 333-192019, 333-165261, 333-155304, 333-138716, 333-130270, 333-120395, 333-118322, 333-95901, 333-89008, and 333-43787 on Form S-8 of our reports dated February 27, 2015 relating to the consolidated financial statements and financial statement schedule of Iron Mountain Incorporated, and the effectiveness of Iron Mountain Incorporated's internal control over financial reporting, appearing in this Annual Report on Form 10-K of Iron Mountain Incorporated for the year ended December 31, 2014.
/s/ DELOITTE & TOUCHE LLP
Boston,
Massachusetts
February 27, 2015
I, William L. Meaney, certify that:
Date: February 27, 2015 |
/s/ WILLIAM L. MEANEY
William L. Meaney President and Chief Executive Officer |
I, Roderick Day, certify that:
Date: February 27, 2015 |
/s/ RODERICK DAY
Roderick Day Executive Vice President and Chief Financial Officer |
CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the filing of the Annual Report on Form 10-K for the year ended December 31, 2014 (the "Report") by Iron Mountain Incorporated (the "Company"), the undersigned, as the President and Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
Date: February 27, 2015 |
/s/ WILLIAM L. MEANEY
William L. Meaney President and Chief Executive Officer |
CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the filing of the Annual Report on Form 10-K for the year ended December 31, 2014 (the "Report") by Iron Mountain Incorporated (the "Company"), the undersigned, as the Executive Vice President and Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
Date: February 27, 2015 |
/s/ RODERICK DAY
Roderick Day Executive Vice President and Chief Financial Officer |