Iron Mountain Reports Second Quarter 2010 Financial Results

July 29, 2010, 6:00 a.m. EDT

Com­pany deliv­ers strong finan­cial per­for­mance high­lighted by an 8% increase in Adjusted OIBDA; Reported rev­enue growth is 5% for the quarter

BOSTON, Jul 29, 2010 (BUSINESS WIRE) — –Sec­ond quar­ter Adjusted EPS increases 13% to $0.28 per diluted share com­pared to Q2/2009; reported earn­ings are $0.20 per diluted share

–Com­pany main­tains full year 2010 profit growth out­look; adjusts rev­enue out­look to reflect for­eign cur­rency rate changes and con­sis­tent inter­nal growth trends

Iron Moun­tain Incor­po­rated (IRM 24.06, –1.39, –5.46%) , an infor­ma­tion man­age­ment com­pany, today reported its finan­cial results for the sec­ond quar­ter ended June 30, 2010. The Com­pany announced rev­enue, Adjusted OIBDA (defined below) and oper­at­ing income growth of 5%, 8% and 9%, respec­tively, com­pared to the sec­ond quar­ter of 2009 (see Appen­dix B). These results were sup­ported by con­tin­ued ben­e­fits from oper­a­tional improve­ment ini­tia­tives that drove sub­stan­tial gross mar­gin gains. Solid oper­at­ing profit gains and con­trolled cap­i­tal expen­di­tures drove $141 mil­lion of free cash flow before acqui­si­tions and dis­cre­tionary invest­ments (FCF) on a year-to-date basis (See Appen­dix B). The Com­pany main­tained its full-year 2010 out­look for profit growth and adjusted its rev­enue out­look to reflect the impacts of recent for­eign cur­rency exchange rate fluc­tu­a­tions and con­sis­tent inter­nal growth trends.

“Iron Moun­tain con­tin­ued to demon­strate the attrac­tive­ness of its busi­ness model by deliv­er­ing strong profit and cash flow per­for­mance despite macro­eco­nomic fac­tors that are con­strain­ing top line growth,” said Bob Bren­nan, pres­i­dent and CEO. “Oper­a­tionally, the busi­ness is run­ning very well, gen­er­at­ing the nec­es­sary resources to invest in our growth agenda and posi­tion­ing the Com­pany well to deliver con­sid­er­able incre­men­tal value when the econ­omy improves.”

Key Finan­cial High­lights — Q2 2010

Iron Moun­tain reported total con­sol­i­dated rev­enues of $780 mil­lion for the sec­ond quar­ter, a 5% increase over the prior year period, sup­ported by 2% total inter­nal rev­enue growth. Stor­age rev­enue inter­nal growth was con­sis­tent at 3%, with gains mod­er­ated by eco­nomic fac­tors, which have con­strained stor­age vol­ume growth in recent quar­ters. Total ser­vice rev­enues grew 1%, reflect­ing solid growth in com­ple­men­tary ser­vice rev­enues sup­ported by recent increases in recy­cled paper prices. Core ser­vice rev­enue growth was (1)% as a result of lower activ­ity lev­els caused by the weak econ­omy. The year-over-year strength­en­ing of major for­eign cur­ren­cies against the U.S. dol­lar increased the rev­enue growth rates by approx­i­mately 2% com­pared to the sec­ond quar­ter of 2009. This increase was less than orig­i­nally fore­casted due to the recent strength­en­ing of the U.S. dollar.

The Com­pany reported gross prof­its (exclud­ing depre­ci­a­tion and amor­ti­za­tion) of $471 mil­lion with its gross profit mar­gin improv­ing from 58.1% in the sec­ond quar­ter of 2009 to 60.4% in the sec­ond quar­ter of 2010. Sus­tain­able ben­e­fits from pro­duc­tiv­ity improve­ments and pric­ing gains, par­tic­u­larly in the Company’s North Amer­i­can and Inter­na­tional Phys­i­cal Busi­ness seg­ments drove higher stor­age and ser­vice gross margins.

Adjusted oper­at­ing income before depre­ci­a­tion and amor­ti­za­tion (Adjusted OIBDA) for the quar­ter was $236 mil­lion, up 8% on a reported basis com­pared to the sec­ond quar­ter of 2009. Exclud­ing the impacts of for­eign cur­rency rate changes, sec­ond quar­ter Adjusted OIBDA grew 7%. Sell­ing, gen­eral and admin­is­tra­tive costs in the sec­ond quar­ter were up 9% com­pared to the prior year period. Exclud­ing the impacts of the for­eign cur­rency rate changes, these over­head costs increased 8%, dri­ven by busi­ness growth, the acqui­si­tion of Mimosa Sys­tems, Inc. in Feb­ru­ary 2010 and invest­ments against growth ini­tia­tives. These increases were par­tially off­set by lower incen­tive com­pen­sa­tion expense.

Oper­at­ing income for the sec­ond quar­ter of 2010 was $150 mil­lion, up 9% on a reported basis com­pared to the same period in 2009 reflect­ing the Adjusted OIBDA gains described above.

Net income attrib­ut­able to Iron Moun­tain Incor­po­rated for the quar­ter was $41 mil­lion, or $0.20 per diluted share, com­pared to $88 mil­lion, or $0.43 per diluted share, for the sec­ond quar­ter of 2009. The decreased reported earn­ings were impacted by a higher effec­tive tax rate, reflect­ing the impact of dis­crete tax items and a $22 mil­lion decrease in Other Income due to for­eign cur­rency rate changes within the quar­ter, which more than off­set the higher oper­at­ing income in the sec­ond quar­ter of 2010 com­pared to the same prior year period. The struc­tural tax rate for the sec­ond quar­ter was 39%. The impact of dis­crete tax items, pri­mar­ily related to for­eign cur­rency rate changes, added another 15 per­cent­age points to the effec­tive tax rate in the quar­ter. Adjusted EPS for the quar­ter was $0.28 per diluted share, an increase of 13% com­pared to the same prior year period. (See Appen­dix B)

Net income for the sec­ond quar­ter of 2010 included $4 mil­lion of Other Expense com­pared to $18 mil­lion of Other Income included in net income for the sec­ond quar­ter of 2009. Both the $4 mil­lion of Other Expense and $18 mil­lion of Other Income reported in the sec­ond quar­ter of 2010 and 2009, respec­tively, were related to for­eign cur­rency rate changes.

Cap­i­tal expen­di­tures exclud­ing real estate incurred in the first six-months of 2010 totaled $103 mil­lion, or 6.6% of rev­enues. The Com­pany is sus­tain­ing cap­i­tal effi­ciency gains reflect­ing ongo­ing con­trol over spend­ing lev­els and ben­e­fits from mod­er­at­ing growth rates.

The Company’s FCF for the six months ended June 30, 2010 was $141 mil­lion com­pared to $121 mil­lion for the six months ended June 30, 2009. Higher oper­at­ing income in the first half of 2010 com­pared to the same prior year period drove the year-over-year increase in FCF. The Company’s liq­uid­ity posi­tion remains strong. As of June 30, 2010, the Com­pany had nearly $1.1 bil­lion of liq­uid­ity, includ­ing cash of $340 mil­lion and avail­abil­ity under its revolv­ing credit facil­ity of $750 mil­lion. The Company’s con­sol­i­dated lever­age ratio of net debt to EBITDA (as defined by its senior credit facil­ity) was 3.1 times at June 30, 2010. This ratio is well below the covenant lim­i­ta­tion of 5.5 times included in its senior credit facility.

See the appen­dices at the end of this press release for Selected Finan­cial Data, a dis­cus­sion of non-GAAP mea­sures and addi­tional infor­ma­tion regard­ing the Company’s results.

Div­i­dends and Share Repurchases

On June 4, 2010, the Com­pany announced that its board of direc­tors declared a quar­terly div­i­dend of $0.0625 per share for share­hold­ers of record as of June 25, 2010, which was paid on July 15, 2010. For the period April 1, 2010 to June 30, 2010, the Com­pany repur­chased 1.8 mil­lion shares of its com­mon stock for a total aggre­gate pur­chase price of approx­i­mately $44 mil­lion under its $150 mil­lion share repur­chase pro­gram. As of June 30, 2010, the Com­pany has repur­chased an aggre­gate of 2.2 mil­lion shares for a total cost of approx­i­mately $54 mil­lion leav­ing approx­i­mately $96 mil­lion in aggre­gate pur­chase price avail­able under the share repur­chase program.

Acqui­si­tions

Dur­ing the sec­ond quar­ter, as part of Iron Mountain’s efforts to expand its Euro­pean pres­ence, the Com­pany acquired full own­er­ship of its exist­ing minority-owned busi­ness in Greece. Iron Mountain’s acqui­si­tion strat­egy focuses on acquir­ing attrac­tive busi­nesses that pro­vide a solid plat­form for future growth, expand the Company’s geo­graphic foot­print and ser­vice offer­ings and enhance its exist­ing operations.

Finan­cial Per­for­mance Outlook

For 2010, the Com­pany is main­tain­ing its 2010 profit growth out­look. Expec­ta­tions for full year reported Adjusted OIBDA growth of 7% to 11% remain unchanged as do the expec­ta­tions for double-digit Adjusted EPS growth. With respect to rev­enues, the Com­pany adjusted its full year guid­ance to reflect for­eign cur­rency rate changes and con­sis­tent inter­nal growth trends. The recent year-over-year strength­en­ing of the U.S. dol­lar against the major cur­ren­cies is expected to decrease reported results by approx­i­mately 1% in the sec­ond half of 2010. Macro­eco­nomic trends have con­strained top line growth dur­ing the first half of 2010. It is expected that these trends will con­tinue for the bal­ance of the year con­strain­ing inter­nal rev­enue growth below the improved inter­nal growth range of 4% to 6% orig­i­nally tar­geted for 2010. The Com­pany now expects reported rev­enue growth to be in the range of 4% to 5% sup­ported by inter­nal growth of approx­i­mately 3%, con­sis­tent with recent trends, with acqui­si­tion rev­enues and the impact of year-over-year for­eign cur­rency rate changes adding between 1% and 2% to growth based on recent exchange rates. The Com­pany is low­er­ing its expected cap­i­tal expen­di­tures for the year to approx­i­mately $280 mil­lion reflect­ing refine­ments to its cap­i­tal spend­ing plans. The cal­cu­la­tion of Adjusted EPS assumes a 39% struc­tural tax rate and 204 mil­lion shares out­stand­ing. This guid­ance is based on cur­rent expec­ta­tions and does not include the poten­tial impact of any future acqui­si­tions (dol­lars in millions):

Quar­ter End­ing Year End­ing Full Year Out­look
Sep­tem­ber 30, 2010 Decem­ber 31, 2010 % Growth vs. 2009
—————— —————- ———————
Low High Low High As Reported FX Neu­tral
——— ——— ——– ——– ———– ———-
Rev­enues $ 780 $ 800 $3,120 $3,160 4% — 5% 3% — 4%
Oper­at­ing Income 149 159 583 613 6% — 12% 5% — 11%
Depre­ci­a­tion & Amor­ti­za­tion 87 347
Adjusted OIBDA 236 246 930 960 7% — 11% 6% — 10%
Adjusted EPS $1.07 $1.16 10% — 20%
Cap­i­tal Expen­di­tures 280

Iron Mountain’s con­fer­ence call to dis­cuss its sec­ond quar­ter 2010 finan­cial results and third quar­ter and full year 2010 out­look will be held today at 8:30 a.m. East­ern Time. 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.

Read more: http://www.marketwatch.com/story/iron-mountain-reports-second-quarter-2010-financial-results-2010–07-29?reflink=MW_news_stmp

Com­pli­ments of File­Man Research