Iron Mountain: Fiscal 1Q14 Financial Results

Iron Mountain Incorporated announces financial and operating results for the first quarter of 2014.

• Total reported revenues were $770 million, compared with $747 million in 2013. On a constant dollar basis (C$), total revenue growth was 4.7%, reflecting solid storage rental revenue gains of 5.3% and service revenue growth of 3.8%.
• Adjusted OIBDA was $229 million, compared with $227 million in 2013.
• Adjusted EPS was $0.26 per share ($0.22 per share on a GAAP basis), compared with $0.27 per share ($0.10 per share on a GAAP basis), in 2013.

“Our first quarter results reflect the durability of our storage rental business and our continued focus on preserving and extending that durability. During the quarter we closed on acquisitions in both developed and emerging markets, maintained our high profitability and delivered solid financial and operating results in line with our expectations,” said Bill Meaney, Iron Mountain’s president and CEO. “We continued to execute on the key pillars of our strategic plan – getting more from our developed markets, extending our reach into emerging markets and capitalizing on emerging business opportunities – and believe our approach will continue to deliver consistent, long-term growth with low volatility and attractive stockholder returns.“

First quarter C$ total storage rental growth reflected strong increases of 12.7% in the company’s International business and growth in the North American Records and Information Management (RIM) and Data Management (DM) segments of 3.0% and 2.8%, respectively.

“We are pleased with the performance of the business in the first quarter, as we made progress on integration of acquisitions completed in late 2013 and are beginning to see the benefits of our organizational realignment,” Meaney said.

Since the beginning of 2014, the company has invested more than $60 million in five international storage related businesses and acquired the records inventory of five document storage companies in the United States for an additional $5 million. The international transactions include three deals in Turkey and Poland, which enhanced the company’s leadership position in these emerging markets, and the acquisition of a leading provider of offsite storage and data protection services in Australia. “These transactions are consistent with our plan to extend our market leadership, support long-term growth and solid returns, and capture a significant amount of un-vended records storage,” Meaney said.

Operations Review
Operating performance for the quarter was in line with expectations, with consistent C$ storage rental revenue growth of 5.3% and service revenue growth of 3.8%. Internal storage rental growth for the quarter was 1.4%, driven by 5.2% gains in the international business and 2.3% internal growth in the North American DM segment, partially offset by flat internal growth in the North American RIM segment. Foreign currency rate changes reduced reported storage rental revenue growth rates by approximately 1.4% for the quarter.

Global records management volume grew by 6.7% on a year-over-year basis, supported by solid 15.2% volume increases in the international business, driven by strong growth from both emerging and developed markets as well as recent acquisitions. Net pricing in North America increased by 0.8% compared with the year-ago period.

As the company has previously noted, service revenues reflect a trend toward reduced retrieval/re-file activity and related transportation revenues; however, this rate of decline has begun to moderate in recent periods. First quarter internal service revenue declined 0.7% compared with the prior-year period. C$ service revenue growth was 3.8%, driven by recent acquisitions with related new incoming volume and transportation fees, growth in imaging projects and an increase in shredding volume with related growth in revenue from paper recycling, offset somewhat by lower recycled paper pricing when compared with prior year averages.

Financial Review
Adjusted OIBDA margins for the first quarter of 2014 decreased by 80 basis points to 29.7%, compared with the first quarter of 2013, primarily due to the recognition of $2.4 million of charges related to the 2013 organizational realignment and $3.5 million for the insurance deductible charge related to the recent fire in Argentina. First quarter Adjusted OIBDA margins in the North American RIM segment remained strong at 37.5%. North American DM Adjusted OIBDA margins were 56.1%, down from the same period in 2013 due to declines in service activity levels as the business becomes more archival in nature. The International business continued to deliver profitability on a portfolio basis in line with the company’s mid-20% target, with Adjusted OIBDA margins of 26.2% for the first quarter.

Free Cash Flow (FCF) for the first quarter before acquisitions, real estate capital expenditures, operating costs and cash taxes related to the proposed conversion to a REIT was $(20) million, compared with $50 million for the same period in 2013. This change was primarily due to higher cash interest expense and the timing of payables. Capital expenditures in the first quarter (excluding $15 million of real estate and $2 million of REIT-related capital expenditures), totaled $47 million, or 6.1% of revenues. The company’s liquidity position remains strong with availability of $556 million and a net total lease adjusted leverage ratio of 5.1x at quarter end, as compared to a maximum allowable ratio of 6.5x. The calculation for this ratio is net debt including the capitalized value of lease obligations divided by EBITDAR as defined in the company’s credit agreement.

Dividends
On March 14, 2014, Iron Mountain’s board of directors declared a quarterly cash dividend of $0.27 per share for stockholders of record as of March 25, 2014, which was paid on April 15, 2014.