Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto and the other financial and operating information included elsewhere in this Annual Report.

This discussion contains “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995 and in other securities laws. See “Cautionary Note Regarding Forward-Looking Statements” on page iii of this Annual Report and “Item 1A. Risk Factors” beginning on page 8 of this Annual Report.


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OVERVIEW



COVID-19 In March 2020, the World Health Organization declared COVID-19 a pandemic. This resulted in U.S. federal, state and local and foreign governments and private entities mandating various restrictions, including travel restrictions, restrictions on public gatherings and stay-at-home orders and advisories. In response, we temporarily closed certain of our offices and facilities across the world and implemented certain travel restrictions for our employees. The preventative and protective actions that governments have ordered, or we or our customers have implemented, have resulted in a period of reduced service operations and business disruption for us, our customers and other third parties with which we do business. While we have broad geographic and customer diversification with operations in 56 countries and no single customer accounting for more than 1% of our revenue during the year ended December 31, 2020, COVID-19 is a global pandemic impacting numerous industries and geographies. While we do not currently believe that the implications of the COVID-19 pandemic have had a material adverse impact on our ability to collect our accounts receivable, global economic conditions related to the COVID-19 pandemic may have a material adverse effect on our customers, which could impact our future ability to collect our accounts receivable. We continue to monitor the credit worthiness of our customers and customer payment trends, as well as the related impact on our liquidity. We have taken certain actions during the year ended December 31, 2020 to manage our costs and capital expenditures, including, but not limited to: (i) the termination of nearly all of our temporary and contract workers; (ii) reductions in our full-time and part-time work forces; (iii) temporary furloughs, reduced hours or other temporary reduction measures; (iv) the deferral of certain previously planned non-essential capital investments; and (v) the implementation of a temporary freeze on future acquisitions. We can provide no assurance that the cost savings measures we have taken, or may take in future periods, will be sufficient to offset any future service level declines, and we continue to evaluate the need for these cost saving measures and additional cost saving measures as additional information regarding the COVID-19 pandemic and the related economic downturn becomes known. We have incurred certain costs due to the COVID-19 pandemic which are direct, incremental and not expected to recur once the pandemic ends, which include the purchase of personal protective equipment for our employees and incremental cleaning costs of our facilities, among other direct costs. We have excluded these costs in calculating our various non-GAAP measures as described below.

PROJECT SUMMIT



Compelling Adjusted EBITDA Benefits			Implementation Details
~$375M Expected annual run-rate benefits realized exiting 2021 $165M Benefits delivered in 2020			•Project Summit began in Q4 2019 and is expected to be substantially completed by the end of 2021 •Cost to implement is estimated to be ~$450M

In October 2019, we announced Project Summit, our global program designed to better position us for future growth and achievement of our strategic objectives. We expanded Project Summit during the first quarter of 2020 to include additional opportunities to streamline our business and operations, as well as accelerated the timing of certain opportunities previously identified. Such opportunities include leveraging new technology solutions to enable us to modernize our service delivery model and more efficiently utilize our fleet, labor and real estate. As a result of the program, we expect to reduce the number of positions at vice president and above by approximately 45%. The total program is expected to reduce our total managerial and administrative workforce by approximately 700 positions by the end of 2021. We have also reduced our services and operations workforce. As of December 31, 2020, we have completed approximately 70% of our planned workforce reductions.


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The activities associated with Project Summit began in the fourth quarter of 2019 and are expected to be substantially complete by the end of 2021. We expect the total program benefits associated with Project Summit to be fully realized exiting 2021. Including the expanded scope of Project Summit, we expect that Project Summit will improve annual Adjusted EBITDA (as defined below) by approximately $375.0 million exiting 2021. We will continue to evaluate our overall operating model, as well as various opportunities and initiatives, including those associated with real estate consolidation, system implementation and process changes, which could result in the identification and implementation of additional actions associated with Project Summit and incremental costs and benefits.


2020						$165 million
Exiting 2021						$375 million (expected)

We estimate that the implementation of Project Summit will result in total operating expenditures ("Restructuring Charges") of approximately $450.0 million that primarily consist of: (1) employee severance costs; (2) internal costs associated with the development and implementation of Project Summit initiatives; (3) professional fees, primarily related to third party consultants who are assisting with the design and execution of various initiatives as well as project management activities and (4) system implementation and data conversion costs. The following table presents (in millions) total Restructuring Charges related to Project Summit primarily related to employee severance costs, internal costs associated with the development and implementation of Project Summit initiatives and professional fees from the inception of Project Summit through December 31, 2020, for the year ended December 31, 2020 and for the year ended December 31, 2019:


From the Inception of Project Summit through December 31, 2020
For the Year Ended December 31, 2020
For the Year Ended December 31, 2019

We have also incurred approximately $10.1 million in capital expenditures related to Project Summit from the inception of Project Summit through December 31, 2020.

DIVESTMENTS

In March 2019, we contributed our customer contracts and certain intellectual property and other assets used by us to operate our consumer storage business in the United States and Canada (the “IM Consumer Storage Assets”) and approximately $20.0 million in cash (gross of certain transaction expenses) (the “Cash Contribution”) to the MakeSpace JV (the “Consumer Storage Transaction”), established by us and MakeSpace. Upon the closing of the Consumer Storage Transaction on March 19, 2019, the MakeSpace JV owned (i) the IM Consumer Storage Assets, (ii) the Cash Contribution and (iii) the customer contracts, intellectual property and certain other assets used by MakeSpace to operate its consumer storage business in the United States. As part of the Consumer Storage Transaction, we received an initial equity interest of approximately 34% in the MakeSpace JV (the “MakeSpace Investment”). In the second quarter of 2020, we committed to participate in a round of equity funding for the MakeSpace JV whereby we agreed to contribute $36.0 million of the $45.0 million being raised in installments beginning in May 2020 through October 2021. At December 31, 2020, we owned approximately 39% of the outstanding equity in the MakeSpace JV.

As described in Note 4 to Notes to Consolidated Financial Statements included in this Annual Report, we have concluded that the divestment of the IM Consumer Storage Assets in the Consumer Storage Transaction does not meet the criteria to be reported as discontinued operations in our consolidated financial statements. In connection with the Consumer Storage Transaction and the MakeSpace Investment, we also entered into a storage and service agreement with the MakeSpace JV to provide certain storage and related services to the MakeSpace JV (the “MakeSpace Agreement”). Revenues and expenses associated with the MakeSpace Agreement are presented as a component of our Global RIM Business segment. During the years ended December 31, 2020 and 2019, we recognized revenue of approximately $33.6 million and $22.5 million, respectively, associated with the MakeSpace Agreement.

As a result of the Consumer Storage Transaction, we recorded a gain on sale of approximately $4.2 million to Other expense (income), net, in the first quarter of 2019, representing the excess of the fair value of the consideration received over the sum of (i) the carrying value of our consumer storage operations and (ii) the Cash Contribution.


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CHANGES IMPACTING COMPARABILITY WITH PRIOR YEAR

During the fourth quarter of 2020, we made changes to the definitions of the following non-GAAP measures: Adjusted EBITDA, Adjusted EPS, FFO (Nareit) and FFO (Normalized) (each as defined below). These changes were implemented to align our definitions more closely with our peers. These changes impacted the results reported for these non-GAAP measures for fiscal years 2019 and 2018. However, these changes did not materially impact the discussion to what was included in previous filings. All prior periods have been recast to conform to these changes. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2019 for a comparison of 2019 to 2018.

GENERAL

RESULTS OF OPERATIONS - KEY TRENDS

In spite of the COVID-19 pandemic, we have experienced relatively steady volume in our Global RIM Business segment, with organic storage rental revenue growth driven primarily by revenue management. We expect organic storage rental revenue growth to benefit from revenue management and volume to be relatively stable in the near term. We expect our total organic storage rental revenue growth rate for 2021 to be approximately 2% to 4%.
Our organic service revenue during 2020 was significantly impacted by the COVID-19 pandemic, with declines primarily due to decreases in our service activity, particularly in regions where governments have imposed restrictions on our customers’ non-essential business operations. The severity of future service level declines is uncertain and is dependent, in part, on the duration and severity of the COVID-19 pandemic, the resulting governmental and business actions and the duration and strength of any ensuing economic recovery that may follow, particularly within the markets in which we operate and among our customers.

Our revenues consist of storage rental revenues as well as service revenues and are reflected net of sales and value-added taxes. Storage rental revenues, which are considered a key driver of financial performance for the storage and information management services industry, consist primarily of recurring periodic rental charges related to the storage of materials or data (generally on a per unit basis) that are typically retained by customers for many years and revenues associated with our data center operations. Service revenues include charges for related service activities, the most significant of which include: (1) the handling of records, including the addition of new records, temporary removal of records from storage, refiling of removed records, customer termination and permanent withdrawal fees, project revenues, and courier operations, consisting primarily of the pickup and delivery of records upon customer request; (2) destruction services, consisting primarily of secure shredding of sensitive documents and the subsequent sale of shredded paper for recycling, the price of which can fluctuate from period to period; and (3) digital solutions, including the scanning, imaging and document conversion services of active and inactive records, and consulting services. Our service revenue growth has been negatively impacted by declining activity rates as stored records are becoming less active. While customers continue to store their records and tapes with us, they are less likely than they have been in the past to retrieve records for research and other purposes, thereby reducing service activity levels.

BREAKDOWN OF REVENUES


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Cost of sales (excluding depreciation and amortization) consists primarily of labor, including wages and benefits for field personnel, facility occupancy costs (including rent and utilities), transportation expenses (including vehicle leases and fuel), other product cost of sales and other equipment costs and supplies. Of these, labor and facility occupancy costs are the most significant. Selling, general and administrative expenses consist primarily of wages and benefits for management, administrative, IT, sales, account management and marketing personnel, as well as expenses related to communications and data processing, travel, professional fees, bad debts, training, office equipment and supplies.

Cost of sales (excluding depreciation and amortization) and Selling, general and administrative expenses for the year ended December 31, 2020 consists of the following:


COST OF SALES						SELLING, GENERAL AND ADMINISTRATIVE EXPENSES



Trends in facility occupancy costs are impacted by: •the total number of facilities we occupy; •the mix of properties we own versus properties we lease; •fluctuations in per square foot occupancy costs; and •the levels of utilization of these properties. Trends in total wages and benefits in dollars and as a percentage of total consolidated revenue are influenced by: •changes in headcount and compensation levels; •achievement of incentive compensation targets; •workforce productivity; and •variability in costs associated with medical insurance and workers’ compensation. The expansion of our international businesses has impacted the major cost of sales components and selling, general and administrative expenses. •Our international operations are more labor intensive relative to revenue than our operations in North America and, therefore, labor costs are a higher percentage of international operational revenue. •The overhead structure of our expanding international operations has generally not achieved the same level of overhead leverage as our North American operations, which may result in an increase in selling, general and administrative expenses as a percentage of consolidated revenue as our international operations become a larger percentage of our consolidated results.

Our depreciation and amortization charges result primarily from depreciation related to storage systems, which include racking structures, buildings, building and leasehold improvements and computer systems hardware and software. Amortization relates primarily to customer relationship intangible assets, contract fulfillment costs and data center lease-based intangible assets. Both depreciation and amortization are impacted by the timing of acquisitions.

Our consolidated revenues and expenses are subject to the net effect of foreign currency translation related to our operations outside the United States. It is difficult to predict the future fluctuations of foreign currency exchange rates and how those fluctuations will impact our Consolidated Statements of Operations. As a result of the relative size of our international operations, these fluctuations may be material on individual balances. Our revenues and expenses from our international operations are generally denominated in the local currency of the country in which they are derived or incurred. Therefore, the impact of currency fluctuations on our operating income and operating margin is partially mitigated. In order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency fluctuations, we compare the percentage change in the results from one period to another period in this report using constant currency presentation. The constant currency growth rates are calculated by translating the 2019 results at the 2020 average exchange rates and the 2018 results at the 2019 average exchange rates. Constant currency growth rates are a non-GAAP measure.


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The following table is a comparison of underlying average exchange rates of the foreign currencies that had the most significant impact on our United States dollar-reported revenues and expenses:


	PERCENTAGE OF UNITED STATES DOLLAR- REPORTED REVENUE FOR THE YEAR ENDED DECEMBER 31,				AVERAGE EXCHANGE RATES FOR THE YEAR ENDED DECEMBER 31,				PERCENTAGE STRENGTHENING / (WEAKENING) OF FOREIGN CURRENCY
	2020		2019		2020		2019
Australian dollar	3.2	%	3.4	%	$	0.690	$	0.695	(0.7)	%
Brazilian real	1.9	%	2.6	%	$	0.196	$	0.254	(22.8)	%
British pound sterling	6.0	%	6.4	%	$	1.283	$	1.277	0.5	%
Canadian dollar	5.4	%	5.7	%	$	0.746	$	0.754	(1.1)	%
Euro	7.5	%	7.4	%	$	1.141	$	1.120	1.9	%


	PERCENTAGE OF UNITED STATES DOLLAR- REPORTED REVENUE FOR THE YEAR ENDED DECEMBER 31,				AVERAGE EXCHANGE RATES FOR THE YEAR ENDED DECEMBER 31,				PERCENTAGE STRENGTHENING / (WEAKENING) OF FOREIGN CURRENCY
	2019		2018		2019		2018
Australian dollar	3.4	%	3.7	%	$	0.695	$	0.748	(7.1)	%
Brazilian real	2.6	%	2.9	%	$	0.254	$	0.276	(8.0)	%
British pound sterling	6.4	%	6.6	%	$	1.277	$	1.335	(4.3)	%
Canadian dollar	5.7	%	5.9	%	$	0.754	$	0.772	(2.3)	%
Euro	7.4	%	7.3	%	$	1.120	$	1.182	(5.2)	%

The percentage of United States dollar-reported revenues for all other foreign currencies was 13.8%, 12.7% and 12.6% for the years ended December 31, 2020, 2019 and 2018, respectively.

NON-GAAP MEASURES

ADJUSTED EBITDA

During the fourth quarter of 2020, we changed our definition of Adjusted EBITDA to (a) exclude stock-based compensation expense and (b) include our share of Adjusted EBITDA from our unconsolidated joint ventures. We now define Adjusted EBITDA as income (loss) from continuing operations before interest expense, net, provision (benefit) for income taxes, depreciation and amortization (inclusive of our share of Adjusted EBITDA from our unconsolidated joint ventures), and excluding certain items we do not believe to be indicative of our core operating results, specifically:



EXCLUDED
•Significant Acquisition Costs •Restructuring Charges •Intangible impairments •(Gain) loss on disposal/write-down of property, plant and equipment, net (including real estate)			•Other expense (income), net •Stock-based compensation expense •COVID-19 Costs (as defined below)

Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by total revenues. We also show Adjusted EBITDA and Adjusted EBITDA Margin for each of our reportable operating segments under “Results of Operations – Segment Analysis” below.


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Adjusted EBITDA excludes both interest expense, net and the provision (benefit) for income taxes. These expenses are associated with our capitalization and tax structures, which we do not consider when evaluating the operating profitability of our core operations. Adjusted EBITDA also does not include depreciation and amortization expenses, in order to eliminate the impact of capital investments, which we evaluate by comparing capital expenditures to incremental revenue generated and as a percentage of total revenues. Adjusted EBITDA and Adjusted EBITDA Margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with accounting principles generally accepted in the United States of America (“GAAP”), such as operating income, income (loss) from continuing operations, net income (loss) or cash flows from operating activities from continuing operations (as determined in accordance with GAAP).

RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED EBITDA (IN THOUSANDS):



	YEAR ENDED DECEMBER 31,
	2020		2019		2018
Income (Loss) from Continuing Operations	$	343,096	$	268,211	$	367,558
Add/(Deduct):
Interest expense, net	418,535		419,298		409,648
Provision (benefit) for income taxes	29,609		59,931		42,753
Depreciation and amortization	652,069		658,201		639,514
Significant Acquisition Costs	—		13,293		50,665
Restructuring Charges	194,396		48,597		—
Intangible impairments	23,000		—		—
(Gain) loss on disposal/write-down of property, plant and equipment, net (including real estate)	(363,537)		(63,824)		(73,622)
Other expense (income), net, excluding our share of losses (gains) from our unconsolidated joint ventures(1)	133,611		25,720		(11,867)
Stock-based compensation expense(2)	34,272		36,194		31,014
COVID-19 Costs(3)	9,285		—		—
Our share of Adjusted EBITDA reconciling items from our unconsolidated joint ventures	1,385		3,388		3,261
Adjusted EBITDA	$	1,475,721	$	1,469,009	$	1,458,924

(1)Includes foreign currency transaction losses (gains), net, debt extinguishment expense and other, net. See Note 2.t. to Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding the components of Other expense (income), net.

(2)Stock-based compensation expense related to Project Summit is included within Restructuring Charges for the years ended December 31, 2020 and 2019.

(3)Costs that are incremental and directly attributable to the COVID-19 pandemic which are not expected to recur once the pandemic ends (“COVID-19 Costs”). These costs include the purchase of personal protective equipment for our employees and incremental cleaning costs of our facilities, among other direct costs.

ADJUSTED EPS

During the fourth quarter of 2020, we changed our definition of Adjusted EPS to (a) exclude stock-based compensation expense and (b) include our share of adjusted losses (gains) from our unconsolidated joint ventures. We now define Adjusted EPS as reported earnings per share fully diluted from continuing operations (inclusive of our share of adjusted losses (gains) from our unconsolidated joint ventures) and excluding certain items, specifically:



EXCLUDED
•Significant Acquisition Costs •Restructuring Charges •Intangible impairments •(Gain) loss on disposal/write-down of property, plant and equipment, net (including real estate)			•Other expense (income), net •Stock-based compensation expense •COVID-19 Costs •Tax impact of reconciling items and discrete tax items

We do not believe these excluded items to be indicative of our ongoing operating results, and they are not considered when we are forecasting our future results. We believe Adjusted EPS is of value to our current and potential investors when comparing our results from past, present and future periods.


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RECONCILIATION OF REPORTED EPS—FULLY DILUTED FROM CONTINUING OPERATIONS TO ADJUSTED EPS—FULLY DILUTED FROM CONTINUING OPERATIONS:



	YEAR ENDED DECEMBER 31,
	2020		2019		2018
Reported EPS—Fully Diluted from Continuing Operations	$	1.19	$	0.93	$	1.28
Add/(Deduct):
Significant Acquisition Costs	—		0.05		0.18
Restructuring Charges	0.67		0.17		—
Intangible impairments	0.08		—		—
(Gain) loss on disposal/write-down of property, plant and equipment, net (including real estate)	(1.26)		(0.22)		(0.25)
Other expense (income), net, excluding our share of losses (gains) from our unconsolidated joint ventures	0.46		0.09		(0.04)
Stock-based compensation expense(1)	0.12		0.13		0.11
COVID-19 Costs(2)	0.03		—		—

Tax impact of reconciling items and discrete tax items(3)	(0.11)		(0.03)		(0.10)

Adjusted EPS—Fully Diluted from Continuing Operations(4)	$	1.19	$	1.11	$	1.16

(1)Stock-based compensation expense related to Project Summit is included within Restructuring Charges for the years ended December 31, 2020 and 2019.

(2)These costs include the purchase of personal protective equipment for our employees and incremental cleaning costs of our facilities, among other direct costs.

(3)The difference between our effective tax rate and our structural tax rate (or adjusted effective tax rate) for the years ended December 31, 2020, 2019, and 2018 is primarily due to (i) the reconciling items above, which impact our reported income (loss) from continuing operations before provision (benefit) for income taxes but have an insignificant impact on our reported provision (benefit) for income taxes and (ii) other discrete tax items. Our structural tax rate for purposes of the calculation of Adjusted EPS for the years ended December 31, 2020, 2019 and 2018 was 15.1%, 17.6%, and 17.9%, respectively.

(4)Columns may not foot due to rounding.

FFO (NAREIT) AND FFO (NORMALIZED)

Funds from operations ("FFO") is defined by the National Association of Real Estate Investment Trusts (“Nareit”) as net income (loss) excluding depreciation on real estate assets, gains on sale of real estate, net of tax, and amortization of data center leased-based intangibles. Consistent with Nareit's definition of FFO, during the fourth quarter of 2020, we began adjusting for our share of reconciling items from our unconsolidated joint ventures from FFO ("FFO (Nareit)"). FFO (Nareit) does not give effect to real estate depreciation because these amounts are computed, under GAAP, to allocate the cost of a property over its useful life. Because values for well-maintained real estate assets have historically increased or decreased based upon prevailing market conditions, we believe that FFO (Nareit) provides investors with a clearer view of our operating performance. Our most directly comparable GAAP measure to FFO (Nareit) is net income (loss).

Although Nareit has published a definition of FFO, we modify FFO (Nareit), as is common among REITs seeking to provide financial measures that most meaningfully reflect their particular business ("FFO (Normalized)"). During the fourth quarter of 2020, we changed our definition of FFO (Normalized) to exclude stock-based compensation expense and adjust for our share of FFO (Normalized) reconciling items from our unconsolidated joint ventures. Our definition of FFO (Normalized) excludes certain items included in FFO (Nareit) that we believe are not indicative of our core operating results, specifically:



EXCLUDED
•Significant Acquisition Costs •Restructuring Charges •Intangible impairments •Loss (gain) on disposal/write-down of property, plant and equipment, net (excluding real estate) •Other expense (income), net			•Stock-based compensation expense •COVID-19 Costs •Real estate financing lease depreciation •Tax impact of reconciling items and discrete tax items •(Income) loss from discontinued operations, net of tax


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RECONCILIATION OF NET INCOME (LOSS) TO FFO (NAREIT) AND FFO (NORMALIZED) (IN THOUSANDS):


	YEAR ENDED DECEMBER 31,
	2020		2019		2018
Net Income (Loss)	$	343,096	$	268,315	$	355,131
Add/(Deduct):
Real estate depreciation(1)	298,943		303,415		284,804
Gain on sale of real estate, net of tax(2)	(365,709)		(99,194)		(55,328)
Data center lease-based intangible assets amortization(3)	42,637		46,696		43,061
Our share of FFO (Nareit) reconciling items from our unconsolidated joint ventures	—		1,284		1,391
FFO (Nareit)	318,967		520,516		629,059
Add/(Deduct):
Significant Acquisition Costs	—		13,293		50,665
Restructuring Charges	194,396		48,597		—
Intangible impairments	23,000		—		—
Loss (gain) on disposal/write-down of property, plant and equipment, net (excluding real estate)	2,523		40,763		(9,818)
Other expense (income), net, excluding our share of losses (gains) from our unconsolidated joint ventures(4)	133,611		25,720		(11,867)
Stock-based compensation expense(5)	34,272		36,194		31,014
COVID-19 Costs(6)	9,285		—		—
Real estate financing lease depreciation	13,801		13,364		13,650
Tax impact of reconciling items and discrete tax items(7)	(31,825)		(13,095)		(38,365)
(Income) loss from discontinued operations, net of tax(8)	—		(104)		12,427
Our share of FFO (Normalized) reconciling items from our unconsolidated joint ventures	(38)		148		248
FFO (Normalized)	$	697,992	$	685,396	$	677,013

(1)Includes depreciation expense related to owned real estate assets (land improvements, buildings, building improvements, leasehold improvements and racking), excluding depreciation related to real estate financing leases.

(2)Tax expense associated with the gain on sale of real estate for the years ended December 31, 2020, 2019, and 2018, was $0.4 million, $5.4 million, and $8.5 million, respectively.

(3)Includes amortization expense for Data Center In-Place Lease Intangible Assets and Data Center Tenant Relationship Intangible Assets as defined in Note 2.l. to Notes to Consolidated Financial Statements included in this Annual Report.

(4)Includes foreign currency transaction losses (gains), net, debt extinguishment expense and other, net. See Note 2.t. to Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding the components of Other expense (income), net.

(5)Stock-based compensation expense related to Project Summit is included within Restructuring Charges for the years ended December 31, 2020 and 2019.

(6)These costs include the purchase of personal protective equipment for our employees and incremental cleaning costs of our facilities, among other direct costs.

(7)Represents the tax impact of (i) the reconciling items above, which impacts our reported income (loss) from continuing operations before provision (benefit) for income taxes but has an insignificant impact on our reported provision (benefit) for income taxes and (ii) other discrete tax items. Discrete tax items resulted in a (benefit) provision for income taxes of $(16.8) million, $(1.5) million and $(27.7) million for the years ended December 31, 2020, 2019 and 2018, respectively.

(8)Net of tax (benefit) provision of $0.0 million, $0.0 million and $(0.1) million for the years ended December 31, 2020, 2019 and 2018, respectively.

CRITICAL ACCOUNTING ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements and for the period then ended. On an ongoing basis, we evaluate the estimates used. We base our estimates on historical experience, actuarial estimates, current conditions and various other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities and are not readily apparent from other sources. Actual results may differ from these estimates. The following should be read in conjunction with Note 2 to Notes to Consolidated Financial Statements included in this Annual Report, which provides a summary of our significant accounting policies. Our critical accounting estimates include the following, which are listed in no particular order:


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REVENUE RECOGNITION

Revenue is recognized when or as control of promised goods or services is transferred to the customer, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. See Note 2.r. to Notes to Consolidated Financial Statements included in this Annual Report for additional details on our revenue recognition policies. Revenue for all our lines of business, with the exception of storage revenues in our Global Data Center Business (which is subject to leasing guidance), is recognized under Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), the application of which requires that we make estimates and judgements that may affect the amount and timing of revenue we recognize.

We have determined that the majority of our contracts contain series performance obligations which qualify to be recognized under a practical expedient available in ASU 2014-09 known as the “right to invoice.” This determination allows variable consideration in such contracts to be allocated to and recognized in the period to which the consideration relates, which is typically the period in which it is billed, rather than requiring estimation of variable consideration at the inception of the contract.

From time to time, we make payments to entities that are also customers under a revenue contract. These payments are comprised of Customer Inducements (as defined in Note 2.l. to Notes to Consolidated Financial Statements included in this Annual Report). Consideration payable to a customer is reviewed as part of the transaction price. If the payment to the customer does not represent payment for a distinct service, revenue is recognized only up to the amount of consideration remaining after customer payment obligations are considered.

Contract Fulfillment Costs are amortized over a three year term, which we have determined is consistent with the transfer of the underlying performance obligations to which the assets relate. Different determinations on term length would result in differences in the amount and timing of amortization expense recognized.

ACCOUNTING FOR ACQUISITIONS

Part of our growth strategy has been to acquire businesses. The purchase price of each acquisition has been determined after due diligence of the target business, market research, strategic planning and the forecasting of expected future results and synergies. Estimated future results and expected synergies are subject to revisions as we integrate each acquisition and attempt to leverage resources.

Accounting for acquisitions of a business has resulted in the capitalization of the cost in excess of the estimated fair value of the net assets acquired in each of these acquisitions as goodwill. We estimate the fair values of the assets acquired in each acquisition as of the date of acquisition and these estimates are subject to adjustment based on the final assessments of the fair value of intangible assets (primarily customer relationship and data center lease-based intangible assets), property, plant and equipment (primarily building, building improvements, leasehold improvements, data center infrastructure and racking structures), operating leases, contingencies and income taxes (primarily deferred income taxes). See Note 3 to Notes to Consolidated Financial Statements included in this Annual Report for a description of recent acquisitions.

Determining the fair values of the net assets acquired requires management’s judgment and often involves the use of assumptions with respect to future cash inflows and outflows, discount rates and market data, among other items. As it relates to our data center acquisitions, the fair values of the net assets acquired requires management’s judgment and often involves the use of assumptions with respect to (i) certain economic costs (as described more fully in Note 2.l. to Notes to Consolidated Financial Statements included in this Annual Report) avoided by acquiring a data center operation with active tenants that would have otherwise been incurred if the data center operation was purchased vacant, (ii) market rental rates and (iii) expectations of lease renewals and extensions. Due to the inherent uncertainty of future events, actual values of net assets acquired could be different from our estimated fair values and could have a material impact on our financial statements.

Of the net assets acquired in our acquisitions, the fair value of owned buildings, including building improvements, customer relationship and data center lease-based intangible assets, racking structures and operating leases are generally the most common and most significant. For significant acquisitions or acquisitions involving new markets or new products, we generally use third parties to assist us in estimating the fair value of owned buildings, including building improvements, customer relationship and lease-based intangible assets and market rental rates for acquired operating leases. For acquisitions that are not significant or do not involve new markets or new products, we generally use third parties to assist us in estimating the fair value of acquired owned buildings, including building improvements, and market rental rates for acquired operating leases. When not using third party appraisals of the fair value of acquired net assets, the fair value of acquired customer relationship intangible assets, above and below market in-place operating leases, and racking structures is determined internally. The fair value of acquired racking structures is determined internally by taking current estimated replacement cost at the date of acquisition for the quantity of racking structures acquired, discounted to take into account the quality (e.g. age, material and type) of the racking structures. We use discounted cash flow models to determine the fair value of customer relationship assets, which requires a significant amount of judgment by management, including estimating expected lives of the relationships, expected future cash flows and discount rates. We determine the fair value of tangible data center assets using an estimated replacement cost at the date of acquisition, then discounting for age, economic and functional obsolescence.


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Our estimates of fair value are based upon assumptions believed to be reasonable at that time but which are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur, which may affect the accuracy of such assumptions. Total property, plant and equipment and intangible assets acquired in our 2020 acquisitions were approximately $52.0 million and $79.1 million, respectively.

IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS

ASSETS SUBJECT TO DEPRECIATION OR AMORTIZATION

We review long-lived assets and all finite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. Examples of events or circumstances that may be indicative of impairment include, but are not limited to:

A significant decrease in the market price of an asset;
A significant change in the extent or manner in which a long-lived asset is being used or in its physical condition;
A significant adverse change in legal factors or in the business climate that could affect the value of the asset;
An accumulation of costs significantly greater than the amount originally expected for the acquisition or construction of an asset;
A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset; and
A current expectation that, more likely than not, an asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.

If events indicate the carrying value of such assets may not be recoverable, recoverability of these assets is determined by comparing the sum of the forecasted undiscounted net cash flows of the operation to which the assets relate to their carrying amount. The operations are generally distinguished by the business segment and geographic region in which they operate. If it is determined that we are unable to recover the carrying amount of the assets, the long-lived assets are written down, on a pro rata basis, to fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets.

GOODWILL AND OTHER INDEFINITE-LIVED INTANGIBLE ASSETS NOT SUBJECT TO AMORTIZATION

Goodwill and intangible assets with indefinite lives are not amortized but are reviewed annually for impairment, or more frequently if impairment indicators arise. Other than goodwill, we currently have no intangible assets that have indefinite lives and which are not amortized. See Note 2.k. to Notes to Consolidated Financial Statements included in this Annual Report for additional details on our goodwill and other indefinite-lived intangible assets policies.

We have selected October 1 as our annual goodwill impairment review date. We have performed our annual goodwill impairment review as of October 1, 2020, 2019 and 2018. We concluded that as of October 1, 2020, 2019 and 2018, goodwill was not impaired.

During the first quarter of 2020, we concluded that we had a triggering event related to our Fine Arts reporting unit, requiring us to perform an interim goodwill impairment test. The primary factor contributing to our conclusion was the expected impact of the COVID-19 pandemic to this particular business and its customers and revenue sources, which caused us to believe it was more likely than not that the carrying value of our Fine Arts reporting unit exceeded its fair value. Therefore, we performed an interim goodwill impairment test for our Fine Arts reporting unit utilizing a discounted cash flow model, with updated assumptions on future revenues, operating expenditures and capital expenditures. We concluded that the fair value of our Fine Arts reporting unit was less than its carrying value, and, therefore, we recorded a $23.0 million impairment charge on the goodwill associated with this reporting unit during the first quarter of 2020. Factors that may impact these assumptions include, but are not limited to: (i) our ability to maintain, or grow, storage rental and service revenues in line with current expectations and (ii) our ability to manage our fixed and variable costs in line with potential future revenue declines.

Our reporting units at which level we performed our goodwill impairment analysis as of October 1, 2020 were as follows:



•North American Records and Information Management reporting unit ("North America RIM") •Europe Records and Information Management reporting unit ("Europe RIM") •Latin America Records and Information Management reporting unit ("Latin America RIM")	•Australia and New Zealand Records and Information Management reporting unit ("ANZ RIM") •Asia Records and Information Management reporting unit ("Asia RIM") •Global Data Center	•Fine Arts •Entertainment Services •Technology Escrow Services


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Part II

See Note 2.k. to Notes to Consolidated Financial Statements included in this Annual Report for a description of our reporting units.

Based on our goodwill impairment analysis as of October 1, 2020, our reporting units that had estimated fair values exceeding their carrying values by greater than 20% represented approximately $4,120.6 million, or 90.4%, of our consolidated goodwill balance at December 31, 2020. Our Global Data Center reporting unit had an estimated fair value that exceeded its carrying value by less than 20%. The reporting unit represented approximately $437.0 million, or 9.6%, of our consolidated goodwill balance at December 31, 2020. The following is a summary of the Global Data Center reporting unit including the goodwill balance (in thousands), percentage by which the fair value of the reporting unit exceeded its carrying value, and certain key assumptions used by us in determining the fair value of the reporting unit as of October 1, 2020:


REPORTING UNIT	GOODWILL BALANCE AT OCTOBER 1, 2020			PERCENTAGE BY WHICH THE FAIR VALUE OF THE REPORTING UNIT EXCEEDED THE REPORTING UNIT CARRYING VALUE AS OF OCTOBER 1, 2020			KEY ASSUMPTIONS IN THE FAIR VALUE OF REPORTING UNIT MEASUREMENT AS OF OCTOBER 1, 2020
			DISCOUNT RATE			AVERAGE ANNUAL CONTRIBUTION MARGIN USED IN DISCOUNTED CASH FLOW			AVERAGE ANNUAL CAPITAL EXPENDITURES AS PERCENTAGE OF REVENUE(1)			TERMINAL GROWTH RATE(2)
Global Data Center	$	430,594		8.5	%		8.0	%		43.7	%		27.8	%	3.0	%

(1)For purposes of our goodwill impairment analysis, the term “capital expenditures” includes both growth investment and recurring capital expenditures.

(2)Terminal growth rates are applied in year 10 of our discounted cash flow analysis.

Reporting unit valuations have generally been determined using a combined approach based on the present value of future cash flows (the “Discounted Cash Flow Model”) and market multiples (the “Market Approach"). There are inherent uncertainties and judgments involved when determining the fair value of the reporting units for purposes of our annual goodwill impairment testing. The following includes supplemental information to the table above for the Global Data Center reporting unit where the estimated fair values exceeded its carrying value by less than 20% as of October 1, 2020. The success of this business and the achievement of certain key assumptions developed by management and used in the Discounted Cash Flow Model are contingent upon various factors including, but not limited to, (i) achieving growth from existing customers, (ii) sales to new customers, (iii) increased market penetration and (iv) accurately timing the capital investments related to expansions.

Our Global Data Center Business footprint spans nine markets in the United States: Denver, Colorado; Kansas City, Missouri; Boston, Massachusetts; Boyers, Pennsylvania; Manassas, Virginia; Edison, New Jersey; Columbus, Ohio; and Phoenix and Scottsdale, Arizona and four international markets: Amsterdam, London, Singapore and, through an unconsolidated joint venture, Frankfurt. We provide mission-critical data centers that are designed and operated to protect and ensure the continued operation of IT infrastructure for our customers. Data centers are highly specialized and secure assets that serve as centralized repositories of server, storage and network equipment. They are capital intensive and designed to provide the space, power, cooling and network connectivity necessary to efficiently operate mission-critical IT equipment. The demand for data center infrastructure is being driven by many factors, but most importantly by significant growth in data as well as an increased demand for outsourcing. In order to attract and retain customers, as well as sustain growth in our existing and new markets, we must have the capability to tailor our facilities and invest capital to meet the customers’ needs. Our estimate of fair value reflects the expected growth in each of our data center markets along with the corresponding capital investments required to meet demand. The business is primarily comprised of acquisitions completed in 2018 and late 2017; therefore, we would expect that the fair value of this reporting unit will closely approximate its carrying value.

Key factors that could reasonably be expected to have a negative impact on the estimated fair value of these reporting units and potentially result in impairment charges include, but are not limited to: (i) a deterioration in general economic conditions, (ii) significant adverse changes in regulatory factors or in the business climate, and (iii) adverse actions or assessment by regulators, all of which could result in adverse changes to the key assumptions used in valuing the reporting units. The inability to meet the assumptions used in the Discounted Cash Flow Model and Market Approach for each of the reporting units, or future adverse market conditions not currently known, could lead to a fair value that is less than the carrying value in any one of our reporting units.

Reporting unit valuations have generally been determined using a combined approach based on the Discounted Cash Flow Model and Market Approach. The Discounted Cash Flow Model incorporates significant assumptions including future revenue growth rates, operating margins, discount rates and capital expenditures. The Market Approach requires us to make assumptions related to Adjusted EBITDA multiples. Changes in economic and operating conditions impacting these assumptions or changes in multiples could result in goodwill impairments in future periods. In conjunction with our annual goodwill impairment reviews, we reconcile the sum of the valuations of all of our reporting units to our market capitalization as of such dates.


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Although we believe we have sufficient historical and projected information available to us to test for goodwill impairment, it is possible that actual results could differ from the estimates used in our impairment tests. Of the key assumptions that impact the goodwill impairment test, the expected future cash flows and discount rate are among the most sensitive and are considered to be critical assumptions, as changes to these estimates could have an effect on the estimated fair value of each of our reporting units. We have assessed the sensitivity of these assumptions on each of our reporting units as of October 1, 2020.



North America RIM, Europe RIM, Latin America RIM, ANZ RIM, Asia RIM, Fine Arts, Entertainment Services and Technology Escrow Services			We noted that, based on the estimated fair value of these reporting units determined as of October 1, 2020: •a hypothetical decrease of 10% in the expected annual future cash flows of these reporting units, with all other assumptions unchanged, would have decreased the estimated fair value of these reporting units as of October 1, 2020 by a range of approximately 9.7% to 10.6% but would not, however, have resulted in the carrying value of any of these reporting units with goodwill exceeding their estimated fair value; •a hypothetical increase of 100 basis points in the discount rate, with all other assumptions unchanged, would have decreased the estimated fair value of these reporting units as of October 1, 2020 by a range of approximately 4.6% to 10.7% but would not, however, have resulted in the carrying value of any of these reporting units with goodwill exceeding their estimated fair value.


Global Data Center			We noted that, as of October 1, 2020, the estimated fair value of the reporting unit: •exceeds its carrying value by less than 20%. Accordingly, any significant negative change in either the expected annual future cash flows of the reporting unit or the discount rate may result in the carrying value of the reporting unit exceeding its estimated fair value.

At December 31, 2020, no factors were identified that would alter the conclusions of our October 1, 2020 goodwill impairment analysis. In making this assessment, we considered a number of factors including operating results, business plans, anticipated future cash flows, transactions and marketplace data. There are inherent uncertainties related to these factors and our judgment in applying them to the analysis of goodwill impairment.

INCOME TAXES

As a REIT, we are generally permitted to deduct from our federal taxable income the dividends we pay to our stockholders. The income represented by such dividends is not subject to federal taxation at the entity level but is taxed, if at all, at the stockholder level. The income of our domestic TRSs, which hold our domestic operations that may not be REIT-compliant as currently operated and structured, is subject, as applicable, to federal and state corporate income tax. In addition, we and our subsidiaries continue to be subject to foreign income taxes in other jurisdictions in which we have business operations or a taxable presence, regardless of whether assets are held or operations are conducted through subsidiaries disregarded for federal income tax purposes or TRSs. We will also be subject to a separate corporate income tax on any gains recognized on the sale or disposition of any asset previously owned by a C corporation during a five-year period after the date we first owned the asset as a REIT asset that are attributable to "built-in gains" with respect to that asset on that date. We will also be subject to a built-in gains tax on our depreciation recapture recognized into income as a result of accounting method changes in connection with our acquisition activities. If we fail to remain qualified for taxation as a REIT, we will be subject to federal income tax at regular corporate income tax rates. Even if we remain qualified for taxation as a REIT, we may be subject to some federal, state, local and foreign taxes on our income and property in addition to taxes owed with respect to our TRS operations. In particular, while state income tax regimes often parallel the federal income tax regime for REITs, many states do not completely follow federal rules and some do not follow them at all. See Note 9 to Notes to Consolidated Financial Statements included in this Annual Report for additional details on our tax policies.

Accounting for income taxes requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the tax and financial reporting bases of assets and liabilities and for loss and credit carryforwards. We measure deferred tax assets and liabilities using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities as a result of a change in tax rates is recognized in income in the period that the change is enacted. Valuation allowances are provided when recovery of deferred tax assets does not meet the more likely than not standard as defined in GAAP. Valuation allowances would be reversed as a reduction to the provision for income taxes if related deferred tax assets are deemed realizable based on changes in facts and circumstances relevant to the recoverability of the asset.


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At December 31, 2020, we have federal and state net operating loss carryforwards of which we are expecting an insignificant tax benefit to be realized. We have assets for foreign net operating losses of $92.1 million, with various expiration dates (and in some cases no expiration date), subject to a valuation allowance of approximately 43%. If actual results differ unfavorably from certain of our estimates used, we may not be able to realize all or part of our net deferred income tax assets and additional valuation allowances may be required. Although we believe our estimates are reasonable, no assurance can be given that our estimates reflected in the tax provisions and accruals will equal our actual results. These differences could have a material impact on our income tax provision and operating results in the period in which such determination is made.

The evaluation of an uncertain tax position is a two-step process. The first step is a recognition process whereby we determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The second step is a measurement process whereby a tax position that meets the more likely than not recognition threshold is calculated to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

We are subject to income taxes in the United States and numerous foreign jurisdictions. We are subject to examination by various tax authorities in jurisdictions in which we have business operations or a taxable presence. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. As of December 31, 2020 and 2019, we had approximately $26.0 million and $35.1 million, respectively, of reserves related to uncertain tax positions. The reversal of these reserves will be recorded as a reduction of our income tax provision if sustained. Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in changes in our estimates.

Following our conversion to a REIT in 2014, we concluded that it was not our intent to reinvest our current and future undistributed earnings of our foreign subsidiaries indefinitely outside the United States. As of December 31, 2016, we concluded that it is our intent to indefinitely reinvest our current and future undistributed earnings of certain of our unconverted foreign TRSs outside the United States. With the exception of certain limited instances, we no longer provide incremental foreign withholding taxes on the retained book earnings of these unconverted foreign TRSs, which was approximately $262.4 million as of December 31, 2020. As a REIT, future repatriation of incremental undistributed earnings of our foreign subsidiaries will not be subject to federal or state income tax, with the exception of foreign withholding taxes in limited instances; however, such future repatriations will require distribution in accordance with REIT distribution rules, and any such distribution may then be taxable, as appropriate, at the stockholder level. We continue, however, to provide for incremental foreign withholding taxes on net book over outside basis differences related to the earnings of our foreign QRSs and certain other foreign TRSs (excluding unconverted foreign TRSs).

RESULTS OF OPERATIONS

COMPARISON OF YEAR ENDED DECEMBER 31, 2020 TO YEAR ENDED DECEMBER 31, 2019 AND COMPARISON OF YEAR ENDED DECEMBER 31, 2019 TO YEAR ENDED DECEMBER 31, 2018

(IN THOUSANDS):


	YEAR ENDED DECEMBER 31,						DOLLAR CHANGE		PERCENTAGE CHANGE
	2020			2019
Revenues	$	4,147,270		$	4,262,584		$	(115,314)	(2.7)	%
Operating Expenses	3,212,485			3,481,246			(268,761)		(7.7)	%
Operating Income	934,785			781,338			153,447		19.6	%
Other Expenses, Net	591,689			513,127			78,562		15.3	%
Income from Continuing Operations	343,096			268,211			74,885		27.9	%
Income (Loss) from Discontinued Operations, Net of Tax	—			104			(104)		(100.0)	%
Net Income	343,096			268,315			74,781		27.9	%
Net Income Attributable to Noncontrolling Interests	403			938			(535)		(57.0)	%
Net Income Attributable to Iron Mountain Incorporated	$	342,693		$	267,377		$	75,316	28.2	%
Adjusted EBITDA(1)	$	1,475,721		$	1,469,009		$	6,712	0.5	%
Adjusted EBITDA Margin(1)	35.6		%	34.5		%


	YEAR ENDED DECEMBER 31,						DOLLAR CHANGE		PERCENTAGE CHANGE
	2019			2018
Revenues	$	4,262,584		$	4,225,761		$	36,823	0.9	%
Operating Expenses	3,481,246			3,417,494			63,752		1.9	%
Operating Income	781,338			808,267			(26,929)		(3.3)	%
Other Expenses, Net	513,127			440,709			72,418		16.4	%
Income from Continuing Operations	268,211			367,558			(99,347)		(27.0)	%
Income (Loss) from Discontinued Operations, Net of Tax	104			(12,427)			12,531		(100.8)	%
Net Income	268,315			355,131			(86,816)		(24.4)	%
Net Income Attributable to Noncontrolling Interests	938			1,198			(260)		(21.7)	%
Net Income Attributable to Iron Mountain Incorporated	$	267,377		$	353,933		$	(86,556)	(24.5)	%
Adjusted EBITDA(1)	$	1,469,009		$	1,458,924		$	10,085	0.7	%
Adjusted EBITDA Margin(1)	34.5		%	34.5		%

(1)See “Non-GAAP Measures—Adjusted EBITDA” in this Annual Report for the definitions of Adjusted EBITDA and Adjusted EBITDA Margin, reconciliation of Adjusted EBITDA to Income (Loss) from Continuing Operations and a discussion of why we believe these non-GAAP measures provide relevant and useful information to our current and potential investors.


			IRON MOUNTAIN 2020 FORM 10-K			38

Part II

REVENUES

Consolidated revenues consist of the following (in thousands):


	YEAR ENDED DECEMBER 31,						PERCENTAGE CHANGE
	2020		2019		DOLLAR CHANGE		ACTUAL		CONSTANT CURRENCY(1)		IMPACT OF ACQUISITIONS		ORGANIC GROWTH(2)
Storage Rental	$	2,754,091	$	2,681,087	$	73,004	2.7	%	3.8	%	1.4	%	2.4	%
Service	1,393,179		1,581,497		(188,318)		(11.9)	%	(11.0)	%	1.8	%	(12.8)	%
Total Revenues	$	4,147,270	$	4,262,584	$	(115,314)	(2.7)	%	(1.7)	%	1.6	%	(3.3)	%


	YEAR ENDED DECEMBER 31,						PERCENTAGE CHANGE
	2019		2018		DOLLAR CHANGE		ACTUAL		CONSTANT CURRENCY(1)		IMPACT OF ACQUISITIONS		ORGANIC GROWTH(2)
Storage Rental	$	2,681,087	$	2,622,455	$	58,632	2.2	%	4.3	%	1.8	%	2.5	%
Service	1,581,497		1,603,306		(21,809)		(1.4)	%	0.9	%	1.9	%	(1.0)	%
Total Revenues	$	4,262,584	$	4,225,761	$	36,823	0.9	%	3.0	%	1.9	%	1.1	%

(1)Constant currency growth rates are calculated by translating the 2019 results at the 2020 average exchange rates and the 2018 results at the 2019 average exchange rates.

(2)Our organic revenue growth rate, which is a non-GAAP measure, represents the year-over-year growth rate of our revenues excluding the impact of business acquisitions, divestitures and foreign currency exchange rate fluctuations, but including the impact of acquisitions of customer relationships.

TOTAL REVENUES

For the year ended December 31, 2020, the decrease in reported consolidated revenue was driven by declines in reported service revenue partially offset by reported storage rental revenue growth. Foreign currency exchange rate fluctuations decreased our reported consolidated revenues by 1.0% in the year ended December 31, 2020 compared to the prior year period.

STORAGE RENTAL REVENUES AND SERVICE REVENUES

Primary factors influencing the change in reported storage rental revenue and reported service revenue for the year ended December 31, 2020 compared to the year ended December 31, 2019 include the following:



STORAGE RENTAL REVENUES			•organic storage rental revenue growth driven by volume growth in faster growing markets and revenue management; •a 2.1% increase in global records management volume due to acquisitions (excluding acquisitions, global records management volume decreased 1.1%); and •a decrease of $29.1 million due to foreign currency exchange rate fluctuations.


SERVICE REVENUES			•a decrease in service activity as a result of the COVID-19 pandemic, particularly in regions where governments have imposed restrictions on our customers' non-essential business operations; •organic service revenue declines reflecting lower service activity levels; and •a decrease of $15.7 million due to foreign currency exchange rate fluctuations.


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OPERATING EXPENSES

COST OF SALES

Consolidated Cost of sales (excluding depreciation and amortization) consists of the following expenses (in thousands):


	YEAR ENDED DECEMBER 31,						PERCENTAGE CHANGE				% OF CONSOLIDATED REVENUES				PERCENTAGE CHANGE (FAVORABLE)/ UNFAVORABLE
	2020		2019		DOLLAR CHANGE		ACTUAL		CONSTANT CURRENCY		2020		2019
Labor	$	738,038	$	814,459	$	(76,421)	(9.4)	%	(7.9)	%	17.8	%	19.1	%	(1.3)	%
Facilities	731,679		697,330		34,349		4.9	%	6.0	%	17.6	%	16.4	%	1.2	%
Transportation	125,591		162,905		(37,314)		(22.9)	%	(22.6)	%	3.0	%	3.8	%	(0.8)	%
Product Cost of Sales and Other	154,386		158,621		(4,235)		(2.7)	%	(1.0)	%	3.7	%	3.7	%	—	%
COVID-19 Costs	7,648		—		7,648		100.0	%	100.0	%	0.2	%	—	%	0.2	%
Total Cost of sales	$	1,757,342	$	1,833,315	$	(75,973)	(4.1)	%	(2.9)	%	42.4	%	43.0	%	(0.6)	%


	YEAR ENDED DECEMBER 31,						PERCENTAGE CHANGE				% OF CONSOLIDATED REVENUES				PERCENTAGE CHANGE (FAVORABLE)/ UNFAVORABLE

	2019		2018		DOLLAR CHANGE		ACTUAL		CONSTANT CURRENCY		2019		2018
Labor	$	814,459	$	818,729	$	(4,270)	(0.5)	%	2.2	%	19.1	%	19.4	%	(0.3)	%
Facilities	697,330		651,114		46,216		7.1	%	9.5	%	16.4	%	15.4	%	1.0	%
Transportation	162,905		158,528		4,377		2.8	%	5.1	%	3.8	%	3.8	%	—	%
Product Cost of Sales and Other	158,621		165,583		(6,962)		(4.2)	%	(1.4)	%	3.7	%	3.9	%	(0.2)	%
Total Cost of sales	$	1,833,315	$	1,793,954	$	39,361	2.2	%	4.8	%	43.0	%	42.5	%	0.5	%

Primary factors influencing the change in reported consolidated Cost of sales for the year ended December 31, 2020 compared to the year ended December 31, 2019 include the following:

a decrease in labor costs driven by cost containment actions taken in response to lower service activity levels due to the COVID-19 pandemic, partially offset by incremental labor costs associated with recent acquisitions;
a decrease in transportation costs primarily driven by lower third party carrier cost and fuel cost reflecting cost containment actions taken in response to lower service activity levels;
an increase in facilities expenses driven by increases in rent expense, in part due to recent acquisitions and the impact from our recent sale-leaseback activity (which we expect to continue in 2021 as we continue to look for future opportunities to monetize a small portion of our owned industrial real estate assets as part of our ongoing capital recycling program); and
a decrease of $23.5 million due to foreign currency exchange rate fluctuations.


			IRON MOUNTAIN 2020 FORM 10-K			40

Part II

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Consolidated Selling, general and administrative expenses consists of the following expenses (in thousands):


	YEAR ENDED DECEMBER 31,						PERCENTAGE CHANGE				% OF CONSOLIDATED REVENUES				PERCENTAGE CHANGE (FAVORABLE)/ UNFAVORABLE
	DOLLAR CHANGE
	2020		2019		ACTUAL		CONSTANT CURRENCY		2020		2019
General and Administrative	$	513,664	$	563,965	$	(50,301)	(8.9)	%	(7.9)	%	12.4	%	13.2	%	(0.8)	%
Sales, Marketing and Account Management	231,365		245,704		(14,339)		(5.8)	%	(5.0)	%	5.6	%	5.8	%	(0.2)	%
Information Technology	168,138		162,606		5,532		3.4	%	4.2	%	4.1	%	3.8	%	0.3	%
Bad Debt Expense	34,411		19,389		15,022		77.5	%	78.9	%	0.8	%	0.5	%	0.3	%
COVID-19 Costs	1,637		—		1,637		100.0	%	100.0	%	—	%	—	%	—	%
Total Selling, general and administrative expenses	$	949,215	$	991,664	$	(42,449)	(4.3)	%	(3.4)	%	22.9	%	23.3	%	(0.4)	%


	YEAR ENDED DECEMBER 31,						PERCENTAGE CHANGE				% OF CONSOLIDATED REVENUES				PERCENTAGE CHANGE (FAVORABLE)/ UNFAVORABLE
	2019		2018		DOLLAR CHANGE		ACTUAL		CONSTANT CURRENCY		2019		2018
General and Administrative	$	563,965	$	577,451	$	(13,486)	(2.3)	%	(0.5)	%	13.2	%	13.7	%	(0.5)	%
Sales, Marketing and Account Management	245,704		257,306		(11,602)		(4.5)	%	(2.8)	%	5.8	%	6.1	%	(0.3)	%
Information Technology	162,606		153,601		9,005		5.9	%	7.1	%	3.8	%	3.6	%	0.2	%
Bad Debt Expense	19,389		18,625		764		4.1	%	6.4	%	0.5	%	0.4	%	0.1	%
Total Selling, general and administrative expenses	$	991,664	$	1,006,983	$	(15,319)	(1.5)	%	0.2	%	23.3	%	23.8	%	(0.5)	%

Primary factors influencing the change in reported consolidated Selling, general and administrative expenses for the year ended December 31, 2020 compared to the year ended December 31, 2019 include the following:

a decrease in general and administrative expenses, driven by decreased wages and benefit expense and other employee related costs, as well as lower professional fees, reflecting benefits from Project Summit and ongoing cost containment measures, partially offset by higher bonus compensation accruals;
a decrease in sales, marketing and account management expenses, driven by decreased compensation expense and other employee related costs, reflecting benefits from Project Summit and ongoing cost containment measures;
higher bad debt expense, primarily driven by increased collectability risk resulting from the COVID-19 pandemic; and
foreign currency exchange rate fluctuations decreased reported consolidated Selling, general and administrative expenses by $9.4 million.

DEPRECIATION AND AMORTIZATION

Depreciation expense decreased $8.8 million, or 1.9%, on a reported dollar basis for the year ended December 31, 2020 compared to the year ended December 31, 2019. See Note 2.h. to Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding the useful lives over which our property, plant and equipment is depreciated.

Amortization expense increased $2.6 million, or 1.3%, on a reported dollar basis for the year ended December 31, 2020 compared to the year ended December 31, 2019.


41			IRON MOUNTAIN 2020 FORM 10-K

Part II

SIGNIFICANT ACQUISITION COSTS

Significant Acquisition Costs for the years ended December 31, 2020, 2019 and 2018 were approximately $0.0 million, $13.3 million and $50.7 million, respectively, and primarily consisted of operating expenditures associated with (1) our acquisition of Recall that we completed on May 2, 2016 (the “Recall Transaction"), including: (i) advisory and professional fees to complete the Recall Transaction; (ii) costs associated with the divestments required in connection with receipt of regulatory approvals (including transitional services); and (iii) costs to integrate Recall with our existing operations, including moving, severance, facility upgrade, REIT integration and system upgrade costs, as well as certain costs associated with our shared service center initiative for our finance, human resources and information technology functions; and (2) the advisory and professional fees to complete the IODC Transaction (collectively, “Significant Acquisition Costs”).

RESTRUCTURING CHARGES

Restructuring Charges for the years ended December 31, 2020 and 2019 were approximately $194.4 million and $48.6 million, respectively, and primarily consisted of employee severance costs and professional fees associated with Project Summit.

INTANGIBLE IMPAIRMENTS

The intangible impairment charge for the year ended December 31, 2020 was $23.0 million and related to the write-down of goodwill associated with our Fine Arts reporting unit in the first quarter of 2020, as discussed above.

GAIN ON DISPOSAL/WRITE-DOWN OF PROPERTY, PLANT AND EQUIPMENT, NET


	YEAR ENDED DECEMBER 31,
	2020	2019
Consolidated gain on disposal/write-down of property, plant and equipment, net	Approximately $363.5 million	Approximately $63.8 million
The gains primarily consisted of:	•Gains associated with sale-leaseback transactions of approximately $342.1 million, of which (i) approximately $265.6 million relates to the sale-leaseback transactions of 14 facilities in the United States during the fourth quarter of 2020 and (ii) approximately $76.4 million relates to the sale-leaseback transactions of two facilities in the United States during the third quarter of 2020, each as part of our program to monetize a small portion of our industrial real estate assets •Gains of approximately $24.1 million associated with the Frankfurt JV Transaction (as defined below)	•Gains associated with sale and sale-leaseback transactions of approximately $67.8 million in the United States •The sale of certain land and buildings of approximately $36.0 million in the United Kingdom Partially offset by losses from: •The impairment charge on the assets associated with the select offerings within our Iron Mountain Iron Cloud ("Iron Cloud") portfolio and loss on the subsequent sale of certain IT infrastructure assets and rights to certain hardware and maintenance contracts used to deliver these Iron Cloud offerings of approximately $25.0 million •The write-down of certain property, plant and equipment of approximately $15.7 million in the United States

OTHER EXPENSES, NET

INTEREST EXPENSE, NET

Consolidated Interest Expense, Net decreased $0.8 million, to $418.5 million for the year ended December 31, 2020 from $419.3 million for the year ended December 31, 2019. The decrease in Interest Expense, Net during the year ended December 31, 2020 compared to the year ended December 31, 2019 was mainly driven by a decrease in the weighted average interest rate on our outstanding debt, partially offset by higher average debt outstanding for the year ended December 31, 2020. Our weighted average interest rate, inclusive of the commitment fee on the unused portion of our Revolving Credit Facility (as defined below) and fees associated with the letters of credit, was 4.7% and 4.8% at December 31, 2020 and 2019, respectively. See Note 6 to Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding our indebtedness.


			IRON MOUNTAIN 2020 FORM 10-K			42

Part II

OTHER EXPENSE (INCOME), NET

Consolidated other expense (income), net consists of the following (in thousands):


	YEAR ENDED DECEMBER 31,				DOLLAR CHANGE
DESCRIPTION	2020		2019
Foreign currency transaction losses (gains), net	$	29,830	$	24,852	$	4,978
Debt extinguishment expense	68,300		—		68,300
Other, net	45,415		9,046		36,369
Other Expense (Income), Net	$	143,545	$	33,898	$	109,647

FOREIGN CURRENCY TRANSACTION LOSSES (GAINS), NET

We recorded net foreign currency transaction losses of $29.8 million in the year ended December 31, 2020, based on period-end exchange rates. These losses resulted primarily from the impact of changes in the exchange rate of the British pound sterling against the United States dollar compared to December 31, 2019 on our intercompany balances with and between certain of our subsidiaries.

DEBT EXTINGUISHMENT EXPENSE

Debt extinguishment expense represents the call premiums and write-off of unamortized deferred financing costs associated with the early redemption of the 6% Notes, the 43/8% Notes, the 53/4% Notes, the CAD Notes, the Euro Notes and the 53/8% Notes (as defined below).

OTHER, NET

Other, net for the year ended December 31, 2020 consists primarily of changes in the estimated value of our mandatorily redeemable noncontrolling interests as well as losses on our equity method investments.

PROVISION (BENEFIT) FOR INCOME TAXES

Our effective tax rates for the years ended December 31, 2020 and 2019 were 7.9% and 18.3%, respectively. Our effective tax rate is subject to variability in the future due to, among other items: (1) changes in the mix of income between our QRSs and our TRSs, as well as among the jurisdictions in which we operate; (2) tax law changes; (3) volatility in foreign exchange gains and losses; (4) the timing of the establishment and reversal of tax reserves; and (5) our ability to utilize net operating losses that we generate.

The primary reconciling items between the federal statutory tax rate of 21.0% and our overall effective tax rate were:


YEAR ENDED DECEMBER 31,
2020						2019
The benefit derived from the dividends paid deduction of $60.4 million and the impact of differences in the tax rates at which our foreign earnings are subject to, resulting in a tax provision of $9.5 million.						The benefit derived from the dividends paid deduction of $40.6 million and the impact of differences in the tax rates at which our foreign earnings are subject to, resulting in a tax provision of $8.6 million.

As a REIT, we are entitled to a deduction for dividends paid, resulting in a substantial reduction of federal income tax expense. As a REIT, substantially all of our income tax expense will be incurred based on the earnings generated by our foreign subsidiaries and our domestic TRSs.


43			IRON MOUNTAIN 2020 FORM 10-K

Part II

INCOME (LOSS) FROM CONTINUING OPERATIONS AND ADJUSTED EBITDA

The following table reflects the effect of the foregoing factors on our consolidated income (loss) from continuing operations and Adjusted EBITDA (in thousands):


	YEAR ENDED DECEMBER 31,						DOLLAR CHANGE		PERCENTAGE CHANGE
	2020			2019
Income (Loss) from Continuing Operations	$	343,096		$	268,211		$	74,885	27.9	%
Income (Loss) from Continuing Operations as a percentage of Consolidated Revenue	8.3		%	6.3		%
Adjusted EBITDA	$	1,475,721		$	1,469,009		$	6,712	0.5	%
Adjusted EBITDA Margin	35.6		%	34.5		%


	YEAR ENDED DECEMBER 31,						DOLLAR CHANGE		PERCENTAGE CHANGE
	2019			2018
Income (Loss) from Continuing Operations	$	268,211		$	367,558		$	(99,347)	(27.0)	%
Income (Loss) from Continuing Operations as a percentage of Consolidated Revenue	6.3		%	8.7		%
Adjusted EBITDA	$	1,469,009		$	1,458,924		$	10,085	0.7	%
Adjusted EBITDA Margin	34.5		%	34.5		%



Consolidated Adjusted EBITDA Margin for the year ended December 31, 2020 increased by 110 basis points compared to the prior year, reflecting benefits from Project Summit, revenue management, favorable revenue mix and ongoing cost containment measures, partially offset by fixed cost deleverage on lower service revenue and higher bonus compensation accruals.			↑ INCREASED BY $6.7 MILLION OR 0.5% Consolidated Adjusted EBITDA


			IRON MOUNTAIN 2020 FORM 10-K			44

Part II

SEGMENT ANALYSIS

See the discussion of Business Segments under Item I and Note 10 to Notes to Consolidated Financial Statements, both included in this Annual Report, for a description of our reportable operating segments.

GLOBAL RIM BUSINESS (IN THOUSANDS)


	YEAR ENDED DECEMBER 31,								PERCENTAGE CHANGE
	2020			2019			DOLLAR CHANGE		ACTUAL		CONSTANT CURRENCY		IMPACT OF ACQUISITIONS		ORGANIC GROWTH
Storage Rental	$	2,373,783		$	2,320,076		$	53,707	2.3	%	3.6	%	1.7	%	1.9	%
Service	1,325,497			1,492,357			(166,860)		(11.2)	%	(10.2)	%	1.9	%	(12.1)	%
Segment Revenue	$	3,699,280		$	3,812,433		$	(113,153)	(3.0)	%	(1.8)	%	1.8	%	(3.6)	%
Segment Adjusted EBITDA	$	1,574,069		$	1,566,065		$	8,004
Segment Adjusted EBITDA Margin	42.6		%	41.1		%


	YEAR ENDED DECEMBER 31,								PERCENTAGE CHANGE
	2019			2018			DOLLAR CHANGE		ACTUAL		CONSTANT CURRENCY		IMPACT OF ACQUISITIONS		ORGANIC GROWTH
Storage Rental	$	2,320,076		$	2,301,344		$	18,732	0.8	%	3.0	%	0.8	%	2.2	%
Service	1,492,357			1,541,256			(48,899)		(3.2)	%	(1.0)	%	0.3	%	(1.3)	%
Segment Revenue	$	3,812,433		$	3,842,600		$	(30,167)	(0.8)	%	1.4	%	0.6	%	0.8	%
Segment Adjusted EBITDA	$	1,566,065		$	1,572,438		$	(6,373)
Segment Adjusted EBITDA Margin	41.1		%	40.9		%

3-YEAR SEGMENT ANALYSIS: GLOBAL RIM BUSINESS (IN MILLIONS)

Primary factors influencing the change in revenue and Adjusted EBITDA Margin in our Global RIM Business segment for the year ended December 31, 2020 compared to the year ended December 31, 2019 include the following:

a decline in organic service revenue mainly driven by reduced service activity levels, primarily due to the COVID-19 pandemic;
organic storage rental revenue growth driven by revenue management;
a decrease in revenue of $45.7 million due to foreign currency exchange rate fluctuations;
a 2.1% increase in global records management volume due to acquisitions (excluding acquisitions, global records management volume decreased 1.1%); and
a 150 basis point increase in Adjusted EBITDA Margin primarily driven by benefits from Project Summit, revenue management, favorable revenue mix and ongoing cost containment measures, partially offset by fixed cost deleverage on lower service revenues and higher bonus compensation accruals.


45			IRON MOUNTAIN 2020 FORM 10-K

Part II

GLOBAL DATA CENTER BUSINESS (IN THOUSANDS)


	YEAR ENDED DECEMBER 31,								PERCENTAGE CHANGE				IMPACT OF ACQUISITIONS		ORGANIC GROWTH
	2020			2019			DOLLAR CHANGE		ACTUAL		CONSTANT CURRENCY
Storage Rental	$	263,695		$	246,925		$	16,770	6.8	%	6.5	%	—	%	6.5	%
Service	15,617			10,226			5,391		52.7	%	51.5	%	—	%	51.5	%
Segment Revenue	$	279,312		$	257,151		$	22,161	8.6	%	8.3	%	—	%	8.3	%
Segment Adjusted EBITDA	$	126,576		$	121,517		$	5,059
Segment Adjusted EBITDA Margin	45.3		%	47.3		%


	YEAR ENDED DECEMBER 31,								PERCENTAGE CHANGE				IMPACT OF ACQUISITIONS		ORGANIC GROWTH
	2019			2018			DOLLAR CHANGE		ACTUAL		CONSTANT CURRENCY
Storage Rental	$	246,925		$	218,675		$	28,250	12.9	%	13.4	%	8.1	%	5.3	%
Service	10,226			10,308			(82)		(0.8)	%	(0.7)	%	4.1	%	(4.8)	%
Segment Revenue	$	257,151		$	228,983		$	28,168	12.3	%	12.8	%	8.0	%	4.8	%
Segment Adjusted EBITDA	$	121,517		$	99,575		$	21,942
Segment Adjusted EBITDA Margin	47.3		%	43.5		%

3-YEAR SEGMENT ANALYSIS: GLOBAL DATA CENTER BUSINESS (IN MILLIONS)

Primary factors influencing the change in revenue and Adjusted EBITDA Margin in our Global Data Center Business segment for the year ended December 31, 2020 compared to the year ended December 31, 2019 include the following:

organic revenue growth from leases signed in prior periods and service revenue growth, partially offset by churn of 680 basis points;
non-recurring revenue benefits in the prior year include a previously disclosed lease modification fee of $5.4 million, while non-recurring revenue benefits in the current year were $1.8 million; and
a 200 basis point decrease in Adjusted EBITDA Margin reflecting headwinds from flow through of non-recurring revenue benefits described above and a $4.0 million prior year contractual settlement, partially offset by ongoing cost containment measures.


			IRON MOUNTAIN 2020 FORM 10-K			46

Part II

CORPORATE AND OTHER BUSINESS (IN THOUSANDS)


	YEAR ENDED DECEMBER 31,								PERCENTAGE CHANGE				IMPACT OF ACQUISITIONS		ORGANIC GROWTH
	2020			2019			DOLLAR CHANGE		ACTUAL		CONSTANT CURRENCY
Storage Rental	$	116,613		$	114,086		$	2,527	2.2	%	2.1	%	(1.1)	%	3.2	%
Service	52,065			78,914			(26,849)		(34.0)	%	(34.1)	%	0.3	%	(34.4)	%
Segment Revenue	$	168,678		$	193,000		$	(24,322)	(12.6)	%	(12.7)	%	(0.5)	%	(12.2)	%
Segment Adjusted EBITDA	$	(224,924)		$	(218,573)		$	(6,351)
Segment Adjusted EBITDA as a Percentage of Consolidated Revenue	(5.4)		%	(5.1)		%


	YEAR ENDED DECEMBER 31,								PERCENTAGE CHANGE				IMPACT OF ACQUISITIONS		ORGANIC GROWTH
	2019			2018			DOLLAR CHANGE		ACTUAL		CONSTANT CURRENCY
Storage Rental	$	114,086		$	102,436		$	11,650	11.4	%	11.9	%	8.7	%	3.2	%
Service	78,914			51,742			27,172		52.5	%	55.0	%	46.8	%	8.2	%
Segment Revenue	$	193,000		$	154,178		$	38,822	25.2	%	26.3	%	21.4	%	4.9	%
Segment Adjusted EBITDA	$	(218,573)		$	(213,089)		$	(5,484)
Segment Adjusted EBITDA as a Percentage of Consolidated Revenue	(5.1)		%	(5.0)		%

Primary factors influencing the change in revenue and Adjusted EBITDA in our Corporate and Other Business segment for the year ended December 31, 2020 compared to the year ended December 31, 2019 include the following:

a decline in organic service revenue due to lower service activity levels in our Fine Arts business, primarily related to the COVID-19 pandemic; and
a decrease in Adjusted EBITDA reflecting the impact of lower service activity in our Fine Arts business, increased information technology expenses and higher bonus compensation accruals, partially offset by benefits from Project Summit.


47			IRON MOUNTAIN 2020 FORM 10-K

Part II

LIQUIDITY AND CAPITAL RESOURCES

GENERAL

We expect to meet our short-term and long-term cash flow requirements through cash generated from operations, cash on hand, borrowings under our Credit Agreement (as defined below) and proceeds from monetizing a small portion of our total industrial real estate assets in the future, as well as other potential financings (such as the issuance of debt or equity). Our cash flow requirements, both in the near and long term, include, but are not limited to, capital expenditures, the repayment of outstanding debt, shareholder dividends, Project Summit initiatives, potential and pending business acquisitions and normal business operation needs.

PROJECT SUMMIT

As disclosed above, in October 2019, we announced Project Summit. We estimate that the implementation of Project Summit will result in total Restructuring Charges of approximately $450.0 million. From the inception of Project Summit through December 31, 2020, we have incurred approximately $243.0 million of Restructuring Charges related to Project Summit, primarily related to employee severance costs, internal costs associated with the development and implementation of Project Summit initiatives and professional fees. From the inception of Project Summit through December 31, 2020, we have also incurred approximately $10.1 million of capital expenditures.

CASH FLOWS

The following is a summary of our cash balances and cash flows (in thousands) as of and for the years ended December 31,


	2020		2019		2018
Cash Flows from Operating Activities - Continuing Operations	$	987,657	$	966,655	$	936,544
Cash Flows from Investing Activities - Continuing Operations	(85,440)		(735,946)		(2,230,128)
Cash Flows from Financing Activities - Continuing Operations	(886,699)		(198,973)		550,678
Cash and Cash Equivalents, including Restricted Cash, End of Year	205,063		193,555		165,485

A. CASH FLOWS FROM OPERATING ACTIVITIES

For the year ended December 31, 2020, net cash flows provided by operating activities increased by $21.0 million compared to the prior year period primarily due to an increase in cash provided by working capital of $125.6 million, primarily related to the timing of payments associated with certain accrued expenses offset by a decrease in net income (including non-cash charges and realized foreign exchange losses) of $104.6 million.

B. CASH FLOWS FROM INVESTING ACTIVITIES

Our significant investing activities during the year ended December 31, 2020 are highlighted below:

We paid cash for capital expenditures of $438.3 million. Additional details of our capital spending are included in the “Capital Expenditures” section below.
We paid cash for acquisitions (net of cash acquired) of $118.6 million, primarily funded by borrowings under our Revolving Credit Facility.
We received $564.7 million in proceeds from sales of property, plant and equipment, primarily related to proceeds from sale-leaseback transactions of facilities during the third quarter and fourth quarter of 2020 and proceeds received in connection with the Frankfurt JV Transaction during the fourth quarter of 2020.

C. CASH FLOWS FROM FINANCING ACTIVITIES

Our significant financing activities for the year ended December 31, 2020 included:

Net proceeds of $2,376.0 million associated with the June 2020 Offerings (as defined below).
Net proceeds of $1,089.0 million associated with the issuance of the 41/2% Notes (as defined below).
Payments, including call premiums, of $2,942.6 million associated with the early redemption of the 43/8% Notes, the 6% Notes, the 53/4% Notes, the CAD Notes, the Euro Notes and the 53/8% Notes (each as defined below).
Net payments of $664.9 million primarily associated with the repayments on our Revolving Credit Facility and Accounts Receivable Securitization Program (as defined below).
Payment of dividends in the amount of $716.3 million on our common stock.


			IRON MOUNTAIN 2020 FORM 10-K			48

Part II

CAPITAL EXPENDITURES

We present two categories of capital expenditures: (1) Growth Investment Capital Expenditures and (2) Recurring Capital Expenditures with the following sub-categories: (i) Data Center; (ii) Real Estate; (iii) Innovation and Other (for Growth Investment Capital Expenditures only); and (iv) Non-Real Estate (for Recurring Capital Expenditures only). During 2020, a portion of what was previously categorized as Non-Real Estate Growth Capital Expenditures was recategorized as Real Estate Growth Capital Expenditures and the remaining portion was recategorized as Recurring Capital Expenditures. In addition, capital expenditures associated with restructuring (including Project Summit) and integration of acquisitions, which was previously categorized as recurring capital expenditures, have been recategorized as Innovation and Other. We have reclassified the categorization of our prior year capital expenditures to conform with our current presentation.

GROWTH INVESTMENT CAPITAL EXPENDITURES:

Data Center:** Expenditures primarily related to investments in new construction of data center facilities (including the acquisition of land and development of facilities) or capacity expansion in existing buildings.
Real Estate:** Expenditures primarily related to investments in land, buildings, building improvements, leasehold improvements and racking structures to grow our revenues or achieve operational efficiencies.
Innovation and Other:** Discretionary capital expenditures for significant new products and services, restructuring (including Project Summit), and integration of acquisitions.

RECURRING CAPITAL EXPENDITURES:

Real Estate:** Expenditures primarily related to the replacement of components of real estate assets such as buildings, building improvements, leasehold improvements and racking structures.
Non-Real Estate:** Expenditures primarily related to the replacement of containers and shred bins, warehouse equipment, fixtures, computer hardware, or third-party or internally-developed software assets that support the maintenance of existing revenues or avoidance of an increase in costs.
Data Center:** Expenditures related to the upgrade or re-configuration of existing data center assets.

The following table presents our capital spend for 2020, 2019 and 2018 organized by the type of the spending as described above.


NATURE OF CAPITAL SPEND (IN THOUSANDS)	2020		2019		2018
Growth Investment Capital Expenditures:
Data Center	$	216,491	$	401,902	$	162,666
Real Estate	67,217		133,093		138,307
Innovation and Other	18,810		17,555		30,291
Total Growth Investment Capital Expenditures	302,518		552,550		331,264
Recurring Capital Expenditures:
Real Estate	51,009		55,444		73,146
Non-Real Estate	76,124		74,092		61,490
Data Center	15,959		8,589		9,051
Total Recurring Capital Expenditures	143,092		138,125		143,687
Total Capital Spend (on accrual basis)	445,610		690,675		474,951
Net increase (decrease) in prepaid capital expenditures	1,836		510		(1,844)
Net (increase) decrease in accrued capital expenditures	(9,183)		1,798		(13,045)
Total Capital Spend (on cash basis)	$	438,263	$	692,983	$	460,062

Excluding capital expenditures associated with potential future acquisitions, we expect total capital expenditures of approximately $550.0 million for the year ending December 31, 2021. Of this, we expect our capital expenditures for growth investment to be approximately $410.0 million, and our recurring capital expenditures to be approximately $140.0 million. Our capital expenditures for growth investment includes Global Data Center Business development spend of approximately $300.0 million.

DIVIDENDS

See Note 8 to Notes to Consolidated Financial Statements included in this Annual Report for information on dividends.


49			IRON MOUNTAIN 2020 FORM 10-K

Part II

FINANCIAL INSTRUMENTS AND DEBT

Financial instruments that potentially subject us to credit risk consist principally of cash and cash equivalents (including money market funds) and accounts receivable. The only significant concentration of liquid investments as of December 31, 2020 is related to cash and cash equivalents. See Note 2.f. to Notes to the Consolidated Financial Statements included in this Annual Report for information on our money market funds.

Long-term debt as of December 31, 2020 is as follows (in thousands):


	DECEMBER 31, 2020
	DEBT (INCLUSIVE OF DISCOUNT)		UNAMORTIZED DEFERRED FINANCING COSTS		CARRYING AMOUNT
Revolving Credit Facility	$	—	$	(8,620)	$	(8,620)
Term Loan A	215,625		—		215,625
Term Loan B	679,621		(6,244)		673,377
Australian Dollar Term Loan (the "AUD Term Loan")	243,152		(1,624)		241,528
UK Bilateral Revolving Credit Facility	191,101		(1,307)		189,794
37/8% GBP Senior Notes due 2025 (the "GBP Notes")	546,003		(4,983)		541,020
47/8% Senior Notes due 2027 (the "47/8% Notes due 2027")	1,000,000		(9,598)		990,402
51/4% Senior Notes due 2028 (the "51/4% Notes due 2028")	825,000		(8,561)		816,439
5% Senior Notes due 2028 (the "5% Notes")	500,000		(5,486)		494,514
47/8% Senior Notes due 2029 (the "47/8% Notes due 2029")	1,000,000		(12,658)		987,342
51/4% Senior Notes due 2030 (the "51/4% Notes due 2030")	1,300,000		(14,416)		1,285,584
41/2% Senior Notes due 2031 (the "41/2% Notes")	1,100,000		(12,648)		1,087,352
55/8% Senior Notes due 2032 (the "55/8% Notes")	600,000		(6,727)		593,273
Real Estate Mortgages, Financing Lease Liabilities and Other	511,922		(1,086)		510,836
Accounts Receivable Securitization Program	85,000		(152)		84,848

Total Long-term Debt	8,797,424		(94,110)		8,703,314
Less Current Portion	(193,759)		—		(193,759)
Long-term Debt, Net of Current Portion	$	8,603,665	$	(94,110)	$	8,509,555

See Note 6 to Notes to Consolidated Financial Statements included in this Annual Report for additional information regarding our long-term debt.

CREDIT AGREEMENT

Our credit agreement (the "Credit Agreement") consists of a revolving credit facility (the “Revolving Credit Facility”) and a term loan (the “Term Loan A”). The Revolving Credit Facility enables IMI and certain of its United States and foreign subsidiaries to borrow in United States dollars and (subject to sublimits) a variety of other currencies (including Canadian dollars, British pounds sterling and Euros, among other currencies) in an aggregate outstanding amount not to exceed $1,750.0 million. Under the Credit Agreement, we have the option to request additional commitments of up to $1,260.0 million, in the form of term loans or through increased commitments under the Revolving Credit Facility, subject to the conditions specified in the Credit Agreement. The Credit Agreement is scheduled to mature on June 4, 2023, at which point all obligations become due. The original principal amount of the Term Loan A was $250.0 million and is to be paid in quarterly installments in an amount equal to $3.1 million per quarter, with the remaining balance due on June 4, 2023.

IMI and the Guarantors guarantee all obligations under the Credit Agreement. The interest rate on borrowings under the Credit Agreement varies depending on our choice of interest rate and currency options, plus an applicable margin, which varies based on our consolidated leverage ratio. Additionally, the Credit Agreement requires the payment of a commitment fee on the unused portion of the Revolving Credit Facility, which fee ranges from between 0.25% to 0.4% based on our consolidated leverage ratio and fees associated with outstanding letters of credit. As of December 31, 2020, we had no outstanding borrowings under the Revolving Credit Facility and $215.6 million aggregate outstanding principal amount under the Term Loan A. At December 31, 2020, we had various outstanding letters of credit totaling $3.2 million under the Revolving Credit Facility. The amount available for borrowing under the Revolving Credit Facility as of December 31, 2020, which is based on IMI’s leverage ratio, the last 12 months' earnings before interest, taxes, depreciation and amortization and rent expense (“EBITDAR”), other adjustments as defined in the Credit Agreement and current external debt, was $1,746.8 million (which amount represents the maximum availability as of such date). Available borrowings under the Revolving Credit Facility are subject to compliance with our indenture covenants as discussed below. The average interest rate in effect for all outstanding borrowings under the Credit Agreement was 1.9% as of December 31, 2020.


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IMI’s wholly owned subsidiary, Iron Mountain Information Management, LLC (“IMIM”), has an incremental term loan B with a principal amount of $700.0 million (the “Term Loan B”). The Term Loan B, which matures on January 2, 2026, was issued at 99.75% of par. The Term Loan B holders benefit from the same security and guarantees as other borrowings under the Credit Agreement. The Term Loan B holders also benefit from the same affirmative and negative covenants as other borrowings under the Credit Agreement; however, the Term Loan B holders are not generally entitled to the benefits of the financial covenants under the Credit Agreement.

Principal payments on the Term Loan B are to be paid in quarterly installments of $1.8 million per quarter during the period June 30, 2018 through December 31, 2025, with the balance due on January 2, 2026. The Term Loan B may be prepaid without penalty at any time. The Term Loan B bears interest at a rate of LIBOR plus 1.75%. As of December 31, 2020, we had $679.6 million aggregate outstanding principal amount under the Term Loan B. The interest rate in effect under Term Loan B as of December 31, 2020 was 1.9%.

JUNE 2020 OFFERINGS

On June 22, 2020, IMI completed private offerings of (i) $500.0 million in aggregate principal amount of the 5% Notes, (ii) $1,300.0 million in aggregate principal amount of the 51/4% Notes due 2030 and (iii) $600.0 million in aggregate principal amount of the 55/8% Notes (collectively, the “June 2020 Offerings”). The 5% Notes, the 51/4% Notes due 2030 and the 55/8% Notes were issued at 100.000% of par. The total net proceeds of approximately $2,376.0 million from the June 2020 Offerings, after deducting the initial purchasers’ commissions, were used to redeem all of the 43/8% Senior Notes due 2021 (“the 43/8% Notes”), the 6% Senior Notes due 2023 (the “6% Notes”) and the 53/4% Senior Subordinated Notes due 2024 (the "53/4% Notes”) and to repay a portion of the outstanding borrowings under the Revolving Credit Facility.

On June 29, 2020, we redeemed all of the $500.0 million in aggregate principal outstanding of the 43/8% Notes at 100.000% of par and all of the $600.0 million in aggregate principal outstanding of the 6% Notes at 102.000% of par, plus, in each case, accrued and unpaid interest to, but excluding, the redemption date. We recorded a charge of approximately $17.0 million to Other expense (income), net during the second quarter of 2020 related to the early extinguishment of this debt, representing the call premium associated with the early redemption of the 6% Notes, as well as a write-off of unamortized deferred financing costs associated with the early redemption of the 43/8% Notes and the 6% Notes.

On July 2, 2020, we redeemed all of the $1,000.0 million in aggregate principal outstanding of the 53/4% Notes at 100.958% of par, plus accrued and unpaid interest to, but excluding, the redemption date. We recorded a charge of approximately $15.3 million to Other expense (income), net during the third quarter of 2020 related to the early extinguishment of this debt, representing the call premium and write-off of unamortized deferred financing fees.

AUGUST 2020 OFFERING

On August 18, 2020, IMI completed a private offering of $1,100.0 million in aggregate principal amount of the 41/2% Notes. The 41/2% Notes were issued at 100.000% of par. The total net proceeds of approximately $1,089.0 million from the issuance of the 41/2% Notes, after deducting the initial purchasers’ commissions, were used to redeem all of the 53/8% CAD Senior Notes due 2023 (the “CAD Notes”), the 3% Euro Senior Notes due 2025 (the “Euro Notes”) and the 53/8% Senior Notes due 2026 (the “53/8% Notes”) and to repay a portion of the outstanding borrowings under the Revolving Credit Facility.

On August 21, 2020, we redeemed all of the 250.0 million CAD in aggregate principal outstanding of the CAD Notes at 104.031% of par, 300.0 million Euro in aggregate principal outstanding of the Euro Notes at 101.500% of par and $250.0 million in aggregate principal outstanding of the 53/8% Notes at 106.628% of par, plus, in each case accrued and unpaid interest to, but excluding, the redemption date. We recorded a charge of approximately $36.0 million to Other expense (income), net during the third quarter of 2020 related to the early extinguishment of the CAD Notes, the Euro Notes and the 53/8% Notes, representing the call premiums and write off unamortized deferred financing costs associated with the early redemption of these debt instruments.

ACCOUNTS RECEIVABLE SECURITIZATION PROGRAM

We participate in an accounts receivable securitization program (the “Accounts Receivable Securitization Program”) involving several of our wholly owned subsidiaries and certain financial institutions. Under the Accounts Receivable Securitization Program, certain of our subsidiaries sell substantially all of their United States accounts receivable balances to our wholly owned special purpose entities, Iron Mountain Receivables QRS, LLC and Iron Mountain Receivables TRS, LLC (the “Accounts Receivable Securitization Special Purpose Subsidiaries”). The Accounts Receivable Securitization Special Purpose Subsidiaries use the accounts receivable balances to collateralize loans obtained from certain financial institutions. The Accounts Receivable Securitization Special Purpose Subsidiaries are consolidated subsidiaries of IMI. IMIM retains the responsibility of servicing the accounts receivable balances pledged as collateral for the Accounts Receivable Securitization Program and IMI provides a performance guaranty. The maximum availability allowed is limited by eligible accounts receivable, as defined under the terms of the Accounts Receivable Securitization Program.


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On March 31, 2020, we amended the Accounts Receivable Securitization Program to (i) increase the maximum amount available from $275.0 million to $300.0 million and (ii) extend the maturity date from July 30, 2020 to July 30, 2021, at which point all obligations become due. The full amount outstanding under the Accounts Receivable Securitization Program is classified within the current portion of long-term debt in our Consolidated Balance Sheet as of December 31, 2020. As of December 31, 2020, the maximum availability allowed and amount outstanding under the Accounts Receivable Securitization Program was $274.1 million and $85.0 million, respectively. The interest rate in effect under the Accounts Receivable Securitization Program was 1.1% as of December 31, 2020. Commitment fees at a rate of 40 basis points are charged on amounts made available but not borrowed under the Accounts Receivable Securitization Program.

LETTERS OF CREDIT

As of December 31, 2020, we had outstanding letters of credit totaling $36.2 million, of which $3.2 million reduce our borrowing capacity under the Revolving Credit Facility (as described above). The letters of credit expire at various dates between January 2021 and January 2033.

DEBT COVENANTS

The Credit Agreement (as defined in Note 6 to Notes of Consolidated Financial Statements included in this Annual Report), our bond indentures and other agreements governing our indebtedness contain certain restrictive financial and operating covenants, including covenants that restrict our ability to complete acquisitions, pay cash dividends, incur indebtedness, make investments, sell assets and take certain other corporate actions. The covenants do not contain a rating trigger. Therefore, a change in our debt rating would not trigger a default under the Credit Agreement, our bond indentures or other agreements governing our indebtedness. The Credit Agreement requires that we satisfy a fixed charge coverage ratio, a net total lease adjusted leverage ratio and a net secured debt lease adjusted leverage ratio on a quarterly basis and our bond indentures require that, among other things, we satisfy a leverage ratio (not lease adjusted) or a fixed charge coverage ratio (not lease adjusted), as a condition to taking actions such as paying dividends and incurring indebtedness.

The Credit Agreement uses EBITDAR-based calculations and the bond indentures use EBITDA-based calculations as the primary measures of financial performance for purposes of calculating leverage and fixed charge coverage ratios. The bond indenture EBITDA-based calculations include our consolidated subsidiaries, other than those we have designated as “Unrestricted Subsidiaries” as defined in the bond indentures. Generally, the Credit Agreement and the bond indentures use a trailing four fiscal quarter basis for purposes of the relevant calculations and require certain adjustments and exclusions for purposes of those calculations, which make the calculation of financial performance for purposes of those calculations under the Credit Agreement and bond indentures not directly comparable to Adjusted EBITDA as presented herein. These adjustments can be significant. For example, the calculation of financial performance under the Credit Agreement and certain of our bond indentures includes (subject to specified exceptions and caps) adjustments for non-cash charges and for expected benefits associated with (i) completed acquisitions, (ii) certain executed lease agreements associated with our data center business that have yet to commence, and (iii) restructuring and other strategic initiatives, such as Project Summit. The calculation of financial performance under our other bond indentures includes, for example, adjustments for non-cash charges and for expected benefits associated with (i) completed acquisitions, and (ii) events that are extraordinary, unusual or non-recurring, such as the COVID-19 pandemic.

Our leverage and fixed charge coverage ratios under the Credit Agreement and our indentures as of December 31, 2020 are as follows:


	DECEMBER 31, 2020	MAXIMUM/MINIMUM ALLOWABLE
Net total lease adjusted leverage ratio	5.3	Maximum allowable of 6.5
Net secured debt lease adjusted leverage ratio	1.9	Maximum allowable of 4.0
Fixed charge coverage ratio	2.3	Minimum allowable of 1.5
Bond leverage ratio (not lease adjusted)	5.9	Maximum allowable of 7.0(1)
Bond fixed charge coverage ratio (not lease adjusted)	3.2	Minimum allowable of 2.0(1)

(1)The maximum allowable leverage ratio under our indentures for the GBP Notes due 2025, the 47/8% Notes due 2027, the 51/4% Notes due 2028 and the 47/8% Notes due 2029 is 7.0. As of December 31, 2020, we no longer have any indentures subject to a maximum leverage ratio of 6.5. The indentures for the 5% Notes, the 51/4% Notes due 2030, the 41/2% Notes and the 55/8% Notes do not include a maximum leverage ratio covenant; the indentures for these notes instead require us to maintain a minimum fixed charge coverage ratio of 2.0. In certain instances as provided in our indentures, we have the ability to incur additional indebtedness that would result in our bond leverage ratio or bond fixed charge coverage ratio exceeding or falling below the maximum or minimum permitted ratio under our indentures and still remain in compliance with the applicable covenant.

Noncompliance with these leverage and fixed charge coverage ratios would have a material adverse effect on our financial condition and liquidity.

Our ability to pay interest on or to refinance our indebtedness depends on our future performance, working capital levels and capital structure, which are subject to general economic, financial, competitive, legislative, regulatory and other factors which may be beyond our control. There can be no assurance that we will generate sufficient cash flow from our operations or that future financings will be available on acceptable terms or in amounts sufficient to enable us to service or refinance our indebtedness or to make necessary capital expenditures.


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DERIVATIVE INSTRUMENTS

INTEREST RATE SWAP AGREEMENTS

In March 2018, we entered into interest rate swap agreements to limit our exposure to changes in interest rates on a portion of our floating rate indebtedness. As of December 31, 2020, we had $350.0 million in notional value of interest rate swap agreements outstanding, which expire in March 2022. Under the interest rate swap agreements, we receive variable rate interest payments associated with the notional amount of each interest rate swap, based upon one-month LIBOR, in exchange for the payment of fixed interest rates as specified in the interest rate swap agreements.

In July 2019, we entered into forward-starting interest rate swap agreements to limit our exposure to changes in interest rates on a portion of our floating rate indebtedness once our current interest rate swap agreements expire in March 2022. The forward-starting interest rate swap agreements have $350.0 million in notional value, commence in March 2022 and expire in March 2024. Under the swap agreements, we will receive variable rate interest payments based upon one-month LIBOR, in exchange for the payment of fixed interest rates as specified in the interest rate swap agreements.

We have designated these interest rate swap agreements, including the forward-starting interest rate swap agreements, as cash flow hedges.

CROSS-CURRENCY SWAP AGREEMENTS

We enter into cross-currency swap agreements to hedge the variability of exchange rate impacts between the United States dollar and the Euro. The cross-currency swap agreements are designated as a hedge of net investment against certain of our Euro denominated subsidiaries and require an exchange of the notional amounts at maturity.

In August 2019, we entered into cross-currency swap agreements whereby we notionally exchanged approximately $110.0 million at an interest rate of 6.0% for approximately 99.1 million Euros at a weighted average interest rate of approximately 3.65%. These cross-currency swap agreements expire in August 2023.

In September 2020, we entered into cross-currency swap agreements whereby we notionally exchanged approximately $359.2 million at an interest rate of 4.5% for approximately 300.0 million Euros at a weighted average interest rate of approximately 3.4%. These cross-currency swap agreements expire in February 2026.

See Note 5 to Notes to Consolidated Financial Statements included in this Annual Report for additional information on our derivative instruments.

EQUITY FINANCING

In 2017, we entered into a Distribution Agreement with the Agents pursuant to which we may sell, from time to time, up to an aggregate sales price of $500.0 million of our common stock through the At The Market (ATM) Equity Program. Sales of our common stock made pursuant to the Distribution Agreement may be made in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act, including sales made directly on the NYSE, or sales made to or through a market maker other than on an exchange, or as otherwise agreed between the applicable Agent and us. We intend to use the net proceeds from sales of our common stock pursuant to the At The Market (ATM) Equity Program for general corporate purposes, which may include acquisitions and investments, including acquisitions and investments in our Global Data Center Business, and repaying amounts outstanding from time to time under the Revolving Credit Facility.

During the quarter and year ended December 31, 2020, there were no shares of common stock sold under the At The Market (ATM) Equity Program. As of December 31, 2020, the remaining aggregate sale price of shares of our common stock available for distribution under the At The Market (ATM) Equity Program was approximately $431.2 million.


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ACQUISITIONS AND JOINT VENTURES

See Note 3 to Notes to Consolidated Financial Statements included in this Annual Report for information regarding our 2020 acquisitions and joint ventures.

OSG ACQUISITION

On January 9, 2020, we completed the acquisition of OSG Records Management (Europe) Limited ("OSG" and such acquisition, the "OSG Acquisition") for cash consideration of approximately $95.5 million. The OSG Acquisition enabled us to extend our Global RIM Business in Russia, Ukraine, Kazakhstan, Belarus, and Armenia. The results of OSG are fully consolidated within our consolidated financial statements from the closing date of the OSG Acquisition.

GLENBEIGH ACQUISITION

On February 17, 2020, in order to enhance our existing operations in the United Arab Emirates, we acquired Glenbeigh Records Management DWC-LLC, a storage and records management company, for total cash consideration of approximately $29.1 million.

MAKESPACE JV CAPITAL CONTRIBUTION

In March 2019, we formed the MakeSpace JV with MakeSpace Labs, Inc. In the second quarter of 2020, we committed to participate in a round of equity funding for the MakeSpace JV whereby we agreed to contribute $36.0 million of the $45.0 million being raised in installments beginning in May 2020 through October 2021. We account for our investment in the MakeSpace JV as an equity method investment, and the carrying value is presented as a component of Other within Other assets, net in our Consolidated Balance Sheet. At December 31, 2020, we owned approximately 39% of the outstanding equity in the MakeSpace JV and the carrying value of our investment in the MakeSpace JV at December 31, 2020 was approximately $16.9 million.

FORMATION OF FRANKFURT JOINT VENTURE

In October 2020, we formed a joint venture (the "Frankfurt JV") with AGC Equity Partners ("AGC") to design and develop a 280,000 square foot, 27 megawatt, hyperscale data center currently under development in Frankfurt, Germany (the “Frankfurt JV Transaction”). AGC acquired an 80% equity interest in the Frankfurt JV, while we retained a 20% equity interest (the "Frankfurt JV Investment"). The total cash consideration for the 80% equity interest sold to AGC was approximately $105.0 million. We received approximately $93.3 million (gross of certain transaction expenses) upon the closing of the Frankfurt JV, and we are entitled to receive an additional approximately $11.7 million upon the completion of development of the data center, which we expect to occur in the second quarter of 2021. As a result of the Frankfurt JV Transaction, we recognized a gain of approximately $24.1 million, representing the excess of the fair value of the consideration received over the carrying value of the assets, which consisted primarily of land and land development assets which were previously included within our Global Data Center Business segment.

We account for our Frankfurt JV Investment as an equity method investment. At the closing date of the Frankfurt JV Transaction, the fair value of the Frankfurt JV Investment was approximately $23.3 million. The carrying value of our Frankfurt JV Investment at December 31, 2020 was $26.5 million, which is presented as a component of Other within Other assets, net in our Consolidated Balance Sheet.

NET OPERATING LOSSES


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