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Iron Mountain Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 1, 2009 01:21AM
Iron Mountain Inc. (IRM) filed Quarterly Report for the period ended 2009-06-30.
Highlight of Business Operations:
On January 1, 2009, we adopted Statement of Financial Accounting Standard No. 160, "Noncontrolling Interests in Consolidated Financial Statementan Amendment of ARB No. 51" ("SFAS No. 160"). The presentation and disclosure requirements of SFAS No. 160 have been applied to all of our financial statements, notes and other financial data retrospectively for all periods presented. The adoption of SFAS No. 160 resulted in an increase to net income attributable to Iron Mountain Incorporated of $0.5 million, or $0.00 per diluted share, for the three months ended June 30, 2009, and an increase to net income attributable to Iron Mountain Incorporated of $2.9 million, or $0.01 per diluted share, for the six months ended June 30, 2009. SFAS No. 160 includes a prospective requirement allowing losses in excess of a noncontrolling interest\'s equity to go below zero. Excluding the impacts of the adoption of SFAS No. 160, net income attributable to Iron Mountain Incorporated and diluted earnings per share attributable to Iron Mountain Incorporated would have been $87.2 million and $0.43 per share and $113.6 million and $0.56 per share, respectively, for the three and six months ended June 30, 2009.
Due to the declining economic environment in 2008, the current fair market values of vans, trucks and mobile shredding units within our vehicle fleet portfolio, which we lease, have declined. As a result, certain vehicle leases that previously met the requirements to be considered operating leases are classified as capital leases upon renewal, or at lease inception, for new leases. The impact of this change on comparability to the prior period will be to lower vehicle rent expense (a component of transportation costs within cost of sales) by approximately $22.3 million, offset by an increased amount of combined depreciation (by approximately $20.6 million) and interest expense (by approximately $3.3 million) for the year ending December 31, 2009.
Consolidated service revenues decreased $22.4 million, or (6.4%), to $330.2 million and $54.0 million, or (7.7%), to $643.7 million for the three and six months ended June 30, 2009, respectively, from $352.7 million and $697.7 million for the three and six months ended June 30, 2008, respectively. Service revenue internal growth was 1% as a result of solid core revenue internal growth of 5% and 6% in the three and six months ended June 30, 2009, respectively, which was supported by consistent performance across all of our operating segments, offset by an internal growth rate of negative 6% and 11%, in the three and six months ended June 30, 2009, respectively, for our complementary service revenues. As expected, complementary service revenues decreased primarily due to the completion of a large special project in Europe in the third quarter of 2008 and $25.5 million less revenue from the sale of recycled paper revenues resulting from a steep decline in recycled paper pricing. We also experienced softness in the first half of 2009 in the more discretionary revenues such as special project revenues, fulfillment services and technology sales. Core service revenue growth was also constrained by current economic trends. Unfavorable foreign currency exchange rate fluctuations reduced reported service revenues by 8% for the first six months of 2009 compared to the same period in 2008.
For the reasons stated above, our consolidated revenues decreased $22.8 million, or (3.0%), to $746.0 million and $48.9 million, or (3.2%), to $1,469.4 million for the three and six months ended June 30, 2009, respectively, from $768.9 million and $1,518.2 million for the three and six months ended June 30, 2008, respectively. Internal revenue growth was 4% for both the three and six months ended June 30, 2009. We calculate internal revenue growth in local currency for our international operations. For both the three and six months ended June 30, 2009, foreign currency exchange rate fluctuations negatively impacted our reported revenues by (7%), primarily due to the weakening 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.
Chris Davis of Davis Selected Advisers, Ron Baron of Baron Funds, Chuck Akre of Akre Capital Management, LLC, Warren Buffett of Berkshire Hathaway.