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Iron Mountain Inc. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: February 28, 2012 05:19PM

Iron Mountain Inc. (IRM) filed Annual Report for the period ended 2011-12-31. Iron Mountain has a market cap of $5.84 billion; its shares were traded at around $30.96 with a P/E ratio of 25.2 and P/S ratio of 1.9. The dividend yield of Iron Mountain stocks is 3.2%. Iron Mountain had an annual average earning growth of 12.2% over the past 10 years. GuruFocus rated Iron Mountain the business predictability rank of 4-star.



Highlight of Business Operations:

(1)Revenue and Adjusted OIBDA for the years ended December 31, 2007, 2008, 2009 and 2010 have been restated to reflect a reduction in revenues of $2,183, $3,597, $4,813 and $6,023, respectively, to correct billing errors made in connection with a government contract as more fully described in Notes 2.y. and 10.h. to Notes to Consolidated Financial Statements. The impact to income from continuing operations and net income is a reduction of $1,328, $2,188, $2,927 and $3,686, respectively, for the after tax impact of the revenue errors for the years ended December 31, 2007, 2008, 2009 and 2010, respectively. (2)Prior to January 1, 2010, the financial position and results of operations of the operating subsidiaries of Iron Mountain Europe (Group) Limited (collectively referred to as "IME"), our European business, were consolidated based on IME's fiscal year ended October 31. Effective January 1, 2010, we changed the fiscal year-end (and the reporting period for consolidation purposes) of IME to coincide with Iron Mountain Incorporated's fiscal year-end of December 31. We believe that the change in accounting principle related to the elimination of the two-month reporting lag for IME is preferable because it will result in more contemporaneous reporting of events and results related to IME. In accordance with applicable accounting literature, a change in subsidiary year-end is treated as a change in accounting principle and requires retrospective application. The impact of the change was not material to the results of operations for the previously reported annual and interim periods after January 1, 2007, and, thus, those results have not been revised. There is, however, a charge of $4.7 million recorded to other (income) expense, net in the year ended December 31, 2010 to recognize the immaterial difference arising from the change. There were no significant infrequent or unusual items in the IME two-month period ended December 31, 2008 and 2009. (3)For the year ended December 31, 2010, we recorded a non-cash goodwill impairment charge of $85,909 related to our technology escrow services business, which we continue to own and operate

Our consolidated storage revenues increased $84.3 million, or 5.3%, to $1,683.0 million for the year ended December 31, 2011 and $64.9 million, or 4.2%, to $1,598.7 million for the year ended December 31, 2010, in comparison to the years ended December 31, 2010 and 2009, respectively. The growth rate for the year ended December 31, 2011 is comprised of internal revenue growth of 3.1%. Foreign currency exchange rate fluctuations added approximately 1.4% to our storage revenue growth rate for the year ended December 31, 2011. Net acquisitions/divestitures contributed 0.8% of the increase in reported storage revenues in 2011. Our consolidated storage revenue growth in 2011 was driven by continued solid storage growth in the International Business segment and consistent volume and price increases in our North American Business segment. The growth rate for the year ended December 31, 2010 as compared to 2009 is comprised of internal revenue growth of 3.1%. Foreign currency exchange rate fluctuations added 1.1% to our storage revenue growth rate for the year ended December 31, 2010. Our consolidated storage revenue growth was moderated in 2010 by economic factors, resulting in reduced average net pricing gains in North America due to the low inflationary environment, episodic destructions in the physical data protection business and lower new sales and higher destruction rates in our North American Business segment, which were offset by new sales in international markets.

Consolidated service revenues, consisting of core service and complementary services, increased $38.1 million, or 2.9%, to $1,331.7 million for the year ended December 31, 2011 from $1,293.6 million for the year ended December 31, 2010. Service revenue internal growth was 0.4% driven by complementary service revenue internal growth of 3.7% in 2011, partially offset by negative core service revenue internal growth of 0.8% in 2011. Complementary service revenues increased in 2011 compared to 2010 primarily due to $25.8 million of additional revenue generated from the sale of recycled paper due, in part, to increases in paper prices. Paper prices, however, declined significantly during the fourth quarter of 2011 and into 2012. Should paper prices remain at their current levels throughout 2012, we would expect revenues from the sale of recycled paper to be lower in 2012 than in 2011. Core service revenue internal growth in the year ended December 31, 2011 continued to be constrained by current economic trends and pressures on activity-based service revenues related to the handling and transportation of items in storage. These decreases were partially offset by strong hybrid revenue growth and higher fuel surcharges. Foreign currency exchange rate fluctuations increased reported service revenues by 1.7% in 2011 over the same period in 2010. Net acquisitions/divestitures contributed 0.8% of the increase in reported service revenues in 2011 compared to the same period in 2010. Consolidated service revenues, consisting of core service and complementary services, increased $53.0 million, or 4.3%, to $1,293.6 million for the year ended December 31, 2010 from $1,240.6 million for the year ended December 31, 2009. Service revenue internal growth was 3.0% as complementary service revenue internal growth of 15.6% in 2010 was offset by negative core service revenue internal growth of 0.9% in 2010. Complementary service revenues increased in 2010 primarily due to $36.8 million more revenue resulting from higher recycled paper pricing and gains in hybrid service revenues in the year ended December 31, 2010 compared to 2009. Core service revenue internal growth in the year ended December 31, 2010 was constrained by economic trends and pressures on activity-based service revenues related to the handling and transportation of items in storage. Favorable foreign currency exchange rate fluctuations for the year ended December 31, 2010 compared to the same period in 2009 increased reported service revenues 1.3%.

For the reasons stated above, our consolidated revenues increased $122.4 million, or 4.2%, to $3,014.7 million for the year ended December 31, 2011 from $2,892.3 million for the year ended December 31, 2010. During the years ended December 31, 2011, 2010 and 2009, we recorded reductions to reported revenues of $6.0 million, $6.0 million and $4.8 million, respectively, related to a billing error involving a government contract. See Note 2.y. to Notes to Consolidated Financial Statements. We calculate internal revenue growth in local currency for our international operations. Internal revenue growth was 1.9% for 2011. For the year ended December 31, 2011, foreign currency exchange rate fluctuations increased our consolidated revenues by 1.5% primarily due to the strengthening of the British pound sterling, Canadian dollar and Euro against the U.S. dollar, based on an analysis of weighted average rates for the comparable periods. Net acquisitions/divestitures contributed 0.8% of the increase in total reported revenues in 2011 over the same period in 2010. Our consolidated revenues increased $118.0 million, or 4.3%, to $2,892.3 million for the year ended December 31, 2010 from $2,774.4 million for the year ended December 31, 2009. Internal revenue growth was 3.1% for 2010. For the year ended December 31, 2010, foreign currency exchange rate fluctuations increased our reported revenues by 1.2% primarily due to the strengthening of the British pound sterling and the Canadian dollar against the U.S. dollar, offset by the weakening of the Euro against the U.S. dollar, based on an analysis of weighted average rates for the comparable periods.

Consolidated interest expense, net increased $0.7 million to $205.3 million (6.8% of consolidated revenues) for the year ended December 31, 2011 from $204.6 million (7.1% of consolidated revenues) for the year ended December 31, 2010 primarily due to the issuance of $400.0 million in aggregate principal of our 73/4% Senior Subordinated Notes due 2019 (the "73/4% Notes due 2019") in September 2011, which was partially offset by the early retirement of $431.3 million of our 73/4% Senior Subordinated Notes due 2015 (the "73/4% Notes due 2015") during late 2010 and early 2011. We expect that our interest expense will increase in fiscal year 2012 compared to 2011 as a result of the issuance of our 73/4% Notes due 2019 as part of a planned increase in leverage to the midpoint of our 3x–4x target leverage ratio range. Our weighted average interest rate was 6.9% at both December 31, 2011 and December 31, 2010 and 7.0% at December 31, 2009.

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