Iron Mountain Reports Second Quarter 2008 Financial Results

- Revenue and OIBDA up 15% for Q2 driven by solid performance across business
segments

BOSTON, July 31 /PRNewswire-FirstCall/ -- Iron Mountain Incorporated
(NYSE: IRM), the global leader in information protection and storage services,
today announced its financial results for the quarter ended June 30, 2008,
reporting strong revenue and operating income before depreciation and
amortization (OIBDA) growth and earnings of $0.18 per diluted share.
Iron Mountain posted strong year-over-year revenue growth of 15% in the
second quarter supported by internal growth of 9%, with acquisitions and
favorable foreign currency changes contributing approximately 6% to total
growth. The Company drove strong revenue gains across its North American
Physical, International Physical and Worldwide Digital business segments.
Total revenue growth was highlighted by continued strength in service revenue
growth, supported by international gains and strong performance in the digital
business. OIBDA of $197 million for the quarter exceeded the Company's
forecasted range reflecting benefits from strong revenue growth and a 17%
year-over-year increase in gross profit. Net income for the quarter was $36
million, or $0.18 per diluted share, and capital expenditures were in line
with Company expectations for the quarter.
"We are pleased with our strong second quarter results and solid first
half performance. We're driving solid growth across our business, reflecting
our team's focus on disciplined execution in servicing our customers," said
Bob Brennan, President and CEO. "We continue to advance our growth strategy,
reflected in solid growth in service revenues, expansion of our international
business and strong performance in our developing digital business."
Key Financial Highlights - Q2 2008
Iron Mountain's total consolidated revenues for the quarter grew 15% over
the prior year period to $769 million driven by solid internal growth of 9%
and augmented by several acquisitions completed in 2007, most notably
ArchivesOne, Inc., RMS Services - USA, Inc. and Stratify, Inc. Storage
internal growth of 8% was as expected. Core service internal revenue growth
of 9% was supported by continued strength in shredding services and strong
performance in the physical data protection business. Complementary service
revenues posted 9% internal growth highlighted by strength in digital
services, physical data protection and recycled paper revenues. See Appendix A
at the end of this press release for a presentation of Selected Financial
Data.
The Company posted a 17% increase in gross profits for the quarter driven
primarily by strong revenue growth combined with real estate and productivity
gains. Gross profit margin improved from 53.9% in the second quarter of 2007
to 54.9% in the second quarter of 2008 due to higher storage gross margins,
increased recycled paper revenues and strength in the digital service
businesses. These benefits more than offset the impact of the shift in
revenue mix, as labor and transportation intensive services such as secure
shredding and Document Management Solutions (DMS) grew faster than storage.
OIBDA for the quarter grew 15% over the prior year period to $197 million,
reflecting the Company's revenue performance and gross margin gains. Selling,
general and administrative costs increased 20% in the quarter, ahead of
revenue gains, reflecting impacts from integration of recent acquisitions and
increased investments in security, new products and infrastructure
enhancements initiated in 2007. The impact of these investments is expected
to moderate later this year. See Appendix B at the end of this press release
for a discussion of OIBDA and the required reconciliation to the appropriate
GAAP measures.
Operating income for the second quarter of 2008 was $124 million, up 11%
compared to the same period in 2007, as OIBDA gains were partially offset by
increased depreciation and amortization expense, driven primarily by higher
levels of capital expenditures in 2007 and acquisitions. Net income for the
quarter was $36 million, or $0.18 per diluted share, including other expense,
net of $4 million, or $0.01 per diluted share. The components of other
expense, net, including the impact of foreign currency fluctuations are
detailed in the table below.
The Company's effective tax rate for the quarter was 41.0%, including
approximately 3% related to the net tax impact of discrete items, including
the interest on its tax reserves. Based on the current view of its 2008
projected tax position, the Company expects its tax rate before the impact of
any foreign currency rate fluctuations and other discrete items for 2008 to be
approximately 38%. Included in the 38% rate for 2008 is approximately 2%
resulting from the unbenefited net operating losses of certain start-up
entities. Beyond 2008, we expect our tax rate before the impact of any
foreign currency rate fluctuations and other discrete items to decrease over
time to approximately 36%.
The Company's Free Cash Flow before Acquisitions and Discretionary
Investments for the six months ended June 30, 2008 was $20 million reflecting
higher capital expenditures as the higher 2007 year end accrual reversed into
the first quarter and higher use of working capital compared to the same
period in 2007. The use of working capital was driven by increased accounts
receivable balances due to sales growth, and reductions in accounts payable
and accrued expense balances due to the payment of annual bonuses, and the
timing of normal payroll and accounts payable cycles relative to quarter end.
See Appendix B at the end of this press release for a discussion of FCF and
the required reconciliation to the appropriate GAAP measures.
Acquisitions
Iron Mountain's acquisition strategy focuses on acquiring attractive
businesses that provide a strong platform for future growth by expanding the
Company's geographic footprint and service offerings while enhancing its
existing operations. Since the end of the first quarter, the Company
completed two acquisitions, a records management business in North America and
a DMS business in France, entered the Swiss market via a minority interest in
a local records management business and acquired the remaining 29% minority
interest in its Brazilian business. In addition, the Company divested itself
of its North American commodity product sales business effective June 1, 2008.
Consistent with its treatment of acquisitions, the Company will eliminate all
revenues associated with its data products business from the calculation of
its internal growth in 2008 and 2009. Adjusting for this divestiture had no
impact on the Company's internal growth rates for its first quarter ended
March 31, 2008.
Financial Performance Outlook
Iron Mountain is issuing its financial performance outlook for the third
quarter ending September 30, 2008 and making positive revisions to its outlook
for the full year ending December 31, 2008. This guidance is based on current
expectations and does not include the potential impact of any future
acquisitions. For the full year, the Company is targeting 12% to 13% revenue
growth and 11% to 14% OIBDA growth, performance consistent with its long-term
financial goals. Please note that targeted OIBDA growth excludes current and
prior year impacts from asset dispositions. The Company's outlook for the
full year ending December 31, 2008 set forth below includes the $3 million
loss on asset write-offs reported year-to-date 2008 (dollars in millions):

Full Year Ending
December 31, 2008
Quarter Ending
September 30, 2008 Previous Current
Low High Low High Low High
Revenues $755 $775 $3,015 $3,080 $3,050 $3,090

Operating Income 119 129 474 499 478 498
Depreciation & Amortization ~75 ~292 ~295

Capital Expenditures 440 480 440 480
Internal Revenue Growth 7% 9% 7% 9%

Iron Mountain's conference call to discuss its second quarter 2008
financial results and third quarter and full year 2008 outlook will be held
today at 11:00 a.m. Eastern Time. In order to further enhance the overall
quality of its investor communications, the Company will simulcast the
conference call on its Web site at www.ironmountain.com, the content of which
is not part of this earnings release. A slide presentation providing summary
financial and statistical information that will be discussed on the conference
call will also be posted to the Web site and available for real-time viewing.
The slide presentation and replays of the conference call will be available on
the Web site for future reference.
About Iron Mountain
Iron Mountain Incorporated (NYSE: IRM) helps organizations around the
world reduce the costs and risks associated with information protection and
storage. The Company offers comprehensive records management and data
protection solutions, along with the expertise and experience to address
complex information challenges such as rising storage costs, litigation,
regulatory compliance and disaster recovery. Founded in 1951, Iron Mountain is
a trusted partner to more than 100,000 corporate clients throughout North
America, Europe, Latin America and Asia Pacific. For more information, visit
the Company's Web site at www.ironmountain.com.
Forward Looking Statements
This press release contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 and federal
securities laws, and is subject to the safe-harbor created by such Act.
Forward-looking statements include our 2008 financial performance outlook and
statements regarding our goals, beliefs, future growth strategies,
investments, objectives, plans and current expectations. These statements
involve known and unknown risks, uncertainties and other factors that may
cause the actual results to be materially different from those contemplated in
the forward-looking statements. Such factors include, but are not limited to:
(i) the cost to comply with current and future legislation, regulations and
customer demands relating to privacy issues; (ii) the impact of litigation
that may arise in connection with incidents in which we fail to protect the
Company's customers' information; (iii) changes in the price for the Company's
services relative to the cost of providing such services; (iv) changes in
customer preferences and demand for the Company's services; (v) in the various
digital businesses in which the Company is engaged, the cost of capital and
technical requirements, demand for the Company's services or competition for
customers; (vi) the Company's ability or inability to complete acquisitions on
satisfactory terms and to integrate acquired companies efficiently; (vii) the
cost or potential liabilities associated with real estate necessary for the
Company's business; (viii) the performance of business partners upon whom the
Company depends for technical assistance or management and acquisition
expertise outside the United States; (ix) changes in the political and
economic environments in the countries in which the Company's international
subsidiaries operate; (x) claims that the Company's technology violates the
intellectual property rights of a third party; (xi) other trends in
competitive or economic conditions affecting Iron Mountain's financial
condition or results of operations not presently contemplated; and (xii) other
risks described more fully in the Company's most recently filed Annual Report
on Form 10-K under "Item 1A. Risk Factors". Except as required by law, Iron
Mountain undertakes 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.
Investor Relations Contact:
Stephen P. Golden
Vice President, Investor Relations
sgolden@ironmountain.com
(617) 535-2994

APPENDIX A

Selected Financial Data:

(dollars in millions, except per share data)
Q2/2007 Q2/2008 Inc (Dec)
Revenues $669 $769 15%

Gross Profit (excluding D&A) $361 $422 17%
Gross Margin % 53.9% 54.9%

OIBDA $172 $197 15%
OIBDA Margin % 25.7% 25.6%

Operating Income $111 $124 11%
Interest Expense, net $61 $60 (2)%

Net Income $39 $36 (8)%
EPS - Diluted $0.19 $0.18

Components of Other Income (Expense), net:

Foreign Currency Exchange Gains (Losses) $ 4 $(4)
Insurance Related Gains 3 --
Debt Extinguishment Charges (4) --

Q2/2008 YTD/2008
Components of Revenue Growth:

Storage internal growth rate 8% 8%
Service internal growth rate 9% 9%

Total internal growth rate 9% 9%

Impact of acquisitions 4% 5%
Impact of foreign currency fluctuations 3% 3%

Total revenue growth 15% 17%
NOTE: Column may not foot due to rounding.

APPENDIX B

Operating Income Before Depreciation and Amortization

Iron Mountain uses Operating Income Before Depreciation and Amortization
("OIBDA"), an integral part of its planning and reporting systems, to evaluate
the operating performance of the consolidated business. The Company uses
multiples of current and projected OIBDA in conjunction with its discounted
cash flow models to determine its overall enterprise valuation and to evaluate
acquisition targets. The Company believes OIBDA and OIBDA Margin provide
current and potential investors with relevant and useful information regarding
its ability to generate cash flow to support business investment and its
ability to grow revenues faster than operating expenses. OIBDA is not a
measurement of financial performance under accounting principles generally
accepted in the United States, or GAAP, and should not be considered as a
substitute for operating or net income or cash flows from operating activities
(as determined in accordance with GAAP).
Following is a reconciliation of operating income before depreciation and
amortization to operating income and net income (in millions):

Three Months Ended Six Months Ended
June 30, June 30,
2007 2008 2007 2008

OIBDA (Operating Income Before
Depreciation and Amortization) $172 $197 $328 $373
Less: Depreciation and
Amortization 60 73 117 142

Operating Income $111 $124 $211 $230

Less: Interest Expense, net 61 60 112 120
Other Income (Expense), net 3 (4) 11 3
Provision for Income Taxes 14 25 36 43
Minority Interest -- -- 1 --

Net Income $39 $36 $74 $69

NOTE: Columns may not foot due to rounding.

Free Cash Flows Before Acquisitions and Discretionary Investments, or FCF
FCF is defined as Cash Flows From Operating Activities less capital
expenditures (excluding real estate), net of proceeds from the sales of
property and equipment and other, net, and additions to customer acquisition
costs. Our management uses this measure when evaluating the operating
performance and profitability of our consolidated business. FCF is a useful
measure in determining our ability to generate cash flows in excess of our
capital expenditures (both growth and maintenance) and our customer
acquisition costs. As such, we believe this measure provides relevant and
useful information to our current and potential investors. FCF should be
considered in addition to, but not as a substitute for, other measures of
financial performance reported in accordance with GAAP, such as cash flows
from operating activities (as determined in accordance with GAAP).

Following is a reconciliation of Free Cash Flows Before Acquisitions and
Discretionary Investments to Cash Flows from Operating Activities (in
millions):

Six Months Ended
June 30,
2007 2008

Free Cash Flows Before Acquisitions
and Discretionary Investments $59 $20
Add: Capital Expenditures
(excluding real estate), net 139 163
Additions to Customer Acquisition Costs 9 7
Cash Flows From Operating Activities $207 $190

NOTE: Columns may not foot due to rounding.

Iron Mountain Incorporated
Condensed Consolidated Statements of Operations
(Amounts in Thousands except Per Share Data)
(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2007 2008 2007 2008
Revenues:
Storage $368,679 $416,195 $720,844 $820,512
Service and Storage
Material Sales 300,010 352,662 580,357 697,729

Total Revenues 668,689 768,857 1,301,201 1,518,241

Operating Expenses:
Cost of Sales (Excluding
Depreciation and
Amortization) 307,963 346,971 602,968 694,722
Selling, General and
Administrative 188,845 225,932 369,350 448,160
Depreciation and
Amortization 60,290 72,907 117,462 142,437
Loss (Gain) on Disposal/
Writedown of Property,
Plant and Equipment, Net 357 (839) 394 2,706

Total Operating Expenses 557,455 644,971 1,090,174 1,288,025

Operating Income 111,234 123,886 211,027 230,216

Interest Expense, Net 61,222 59,757 111,557 119,776
Other (Income) Expense, Net (3,235) 3,532 (10,958) (2,503)

Income Before Provision
for Income Taxes and
Minority Interest 53,247 60,597 110,428 112,943

Provision for Income Taxes 14,024 24,859 36,107 43,131
Minority Interest in Earnings
of Subsidiaries, net 171 (148) 562 444

Net Income $39,052 $35,886 $73,759 $69,368

Net Income Per Share - Basic $ 0.20 $ 0.18 $ 0.37 $ 0.35
Net Income Per Share - Diluted $ 0.19 $ 0.18 $ 0.37 $ 0.34

Weighted Average Common Shares
Outstanding - Basic 199,792 200,855 199,511 200,863
Weighted Average Common Shares
Outstanding - Diluted 201,742 203,038 201,579 203,229

Operating Income before
Depreciation and Amortization $171,524 $196,793 $328,489 $372,653

Iron Mountain Incorporated
Condensed Consolidated Balance Sheets
(Amounts in Thousands)
(Unaudited)

December 31, June 30,
2007 2008
ASSETS

Current Assets:
Cash and Cash Equivalents $125,607 $203,197
Accounts Receivable (less allowances
of $19,246 and $19,954, respectively) 564,049 603,419
Other Current Assets 132,740 148,533
Total Current Assets 822,396 955,149

Property, Plant and Equipment:
Property, Plant and Equipment at Cost 3,522,525 3,672,255
Less: Accumulated Depreciation (1,186,564) (1,300,916)
Property, Plant and Equipment, net 2,335,961 2,371,339

Other Assets:
Goodwill, net 2,574,292 2,583,428
Other Non-current Assets, net 575,272 598,694
Total Other Assets 3,149,564 3,182,122

Total Assets $6,307,921 $6,508,610

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Current Portion of Long-term Debt $33,440 $98,839
Other Current Liabilities 732,237 656,769
Total Current Liabilities 765,677 755,608

Long-term Debt, Net of Current Portion 3,232,848 3,318,950
Other Long-term Liabilities 504,852 529,440

Minority Interests 9,089 4,270

Stockholders' Equity 1,795,455 1,900,342

Total Liabilities and
Stockholders' Equity $6,307,921 $6,508,610

SOURCE Iron Mountain Incorporated

Stephen P. Golden, Vice President, Investor Relations, +1-617-535-2994,
sgolden@ironmountain.com