filings.toolsItem 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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Item 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 1 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (UNAUDITED)
| MARCH 31, 2023 | DECEMBER 31, 2022 | ||||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | 146,442 | $ | 141,797 | |||||||
| Accounts receivable (less allowances of $61,039 and $54,143 as of March 31, 2023 and December 31, 2022, respectively) | 1,174,326 | 1,174,915 | |||||||||
| Prepaid expenses and other | 280,169 | 230,433 | |||||||||
| Total Current Assets | 1,600,937 | 1,547,145 | |||||||||
| Property, Plant and Equipment: | |||||||||||
| Property, plant and equipment | 9,286,873 | 9,025,765 | |||||||||
| Less—Accumulated depreciation | (3,944,300) | (3,910,321) | |||||||||
| Property, Plant and Equipment, Net | 5,342,573 | 5,115,444 | |||||||||
| Other Assets, Net: | |||||||||||
| Goodwill | 4,896,761 | 4,882,734 | |||||||||
| Customer and supplier relationships and other intangible assets | 1,380,316 | 1,423,145 | |||||||||
| Operating lease right-of-use assets | 2,666,951 | 2,583,704 | |||||||||
| Other | 578,171 | 588,342 | |||||||||
| Total Other Assets, Net | 9,522,199 | 9,477,925 | |||||||||
| Total Assets | $ | 16,465,709 | $ | 16,140,514 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current Liabilities: | |||||||||||
| Current portion of long-term debt | $ | 101,608 | $ | 87,546 | |||||||
| Accounts payable | 512,269 | 469,198 | |||||||||
| Accrued expenses and other current liabilities (includes current portion of operating lease liabilities) | 1,057,320 | 1,031,910 | |||||||||
| Deferred revenue | 335,393 | 328,910 | |||||||||
| Total Current Liabilities | 2,006,590 | 1,917,564 | |||||||||
| Long-term Debt, net of current portion | 10,862,188 | 10,481,449 | |||||||||
| Long-term Operating Lease Liabilities, net of current portion | 2,513,817 | 2,429,167 | |||||||||
| Other Long-term Liabilities | 170,391 | 317,376 | |||||||||
| Deferred Income Taxes | 271,504 | 263,005 | |||||||||
| Commitments and Contingencies | |||||||||||
| Redeemable Noncontrolling Interests | 95,630 | 95,160 | |||||||||
| Equity: | |||||||||||
| Preferred stock (par value $0.01; authorized 10,000,000 shares; none issued and outstanding) | — | — | |||||||||
| Common stock (par value $0.01; authorized 400,000,000 shares; issued and outstanding 291,584,999 and 290,830,296 shares as of March 31, 2023 and December 31, 2022, respectively) | 2,916 | 2,908 | |||||||||
| Additional paid-in capital | 4,459,265 | 4,468,035 | |||||||||
| (Distributions in excess of earnings) Earnings in excess of distributions | (3,510,949) | (3,392,272) | |||||||||
| Accumulated other comprehensive items, net | (405,768) | (442,003) | |||||||||
| Total Iron Mountain Incorporated Stockholders' Equity | 545,464 | 636,668 | |||||||||
| Noncontrolling Interests | 125 | 125 | |||||||||
| Total Equity | 545,589 | 636,793 | |||||||||
| Total Liabilities and Equity | $ | 16,465,709 | $ | 16,140,514 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 2 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
| THREE MONTHS ENDED MARCH 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Revenues: | |||||||||||
| Storage rental | $ | 810,089 | $ | 751,070 | |||||||
| Service | 504,260 | 496,976 | |||||||||
| Total Revenues | 1,314,349 | 1,248,046 | |||||||||
| Operating Expenses: | |||||||||||
| Cost of sales (excluding depreciation and amortization) | 571,626 | 546,622 | |||||||||
| Selling, general and administrative | 294,520 | 280,723 | |||||||||
| Depreciation and amortization | 182,094 | 183,615 | |||||||||
| Acquisition and Integration Costs | 1,595 | 15,661 | |||||||||
| Restructuring and other transformation | 36,913 | — | |||||||||
| (Gain) Loss on disposal/write-down of property, plant and equipment, net | (13,061) | (705) | |||||||||
| Total Operating Expenses | 1,073,687 | 1,025,916 | |||||||||
| Operating Income (Loss) | 240,662 | 222,130 | |||||||||
| Interest Expense, Net (includes Interest Income of $2,907 and $1,648 for the three months ended March 31, 2023 and 2022, respectively) | 137,169 | 114,442 | |||||||||
| Other Expense (Income), Net | 21,200 | 55,901 | |||||||||
| Net Income (Loss) Before Provision (Benefit) for Income Taxes | 82,293 | 51,787 | |||||||||
| Provision (Benefit) for Income Taxes | 16,758 | 10,080 | |||||||||
| Net Income (Loss) | 65,535 | 41,707 | |||||||||
| Less: Net Income (Loss) Attributable to Noncontrolling Interests | 940 | (592) | |||||||||
| Net Income (Loss) Attributable to Iron Mountain Incorporated | $ | 64,595 | $ | 42,299 | |||||||
| Net Income (Loss) Per Share Attributable to Iron Mountain Incorporated: | |||||||||||
| Basic | $ | 0.22 | $ | 0.15 | |||||||
| Diluted | $ | 0.22 | $ | 0.14 | |||||||
| Weighted Average Common Shares Outstanding—Basic | 291,442 | 290,328 | |||||||||
| Weighted Average Common Shares Outstanding—Diluted | 293,049 | 291,846 | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 3 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS) (UNAUDITED)
| THREE MONTHS ENDED MARCH 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Net Income (Loss) | $ | 65,535 | $ | 41,707 | |||||||
| Other Comprehensive Income (Loss): | |||||||||||
| Foreign Currency Translation Adjustment | 40,226 | 27,453 | |||||||||
| Change in Fair Value of Derivative Instruments | (3,442) | 16,766 | |||||||||
| Total Other Comprehensive Income (Loss): | 36,784 | 44,219 | |||||||||
| Comprehensive Income (Loss) | 102,319 | 85,926 | |||||||||
| Comprehensive Income (Loss) Attributable to Noncontrolling Interests | 1,489 | (362) | |||||||||
| Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated | $ | 100,830 | $ | 86,288 |
The accompanying notes are an integral part of these condensed consolidated financial statements
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 4 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
| THREE MONTHS ENDED MARCH 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| IRON MOUNTAIN INCORPORATED STOCKHOLDERS' EQUITY | ||||||||||||||||||||||||||||||||||||||||||||||||||
| COMMON STOCK | ADDITIONAL PAID-IN CAPITAL | (DISTRIBUTIONS IN EXCESS OF EARNINGS) EARNINGS IN EXCESS OF DISTRIBUTIONS | ACCUMULATED OTHER COMPREHENSIVE ITEMS, NET | NONCONTROLLING INTERESTS | REDEEMABLE NONCONTROLLING INTERESTS | |||||||||||||||||||||||||||||||||||||||||||||
| TOTAL | SHARES | AMOUNTS | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | 636,793 | 290,830,296 | $ | 2,908 | $ | 4,468,035 | $ | (3,392,272) | $ | (442,003) | $ | 125 | $ | 95,160 | |||||||||||||||||||||||||||||||||||
| Issuance and net settlement of shares under employee stock purchase plan and option plans and stock-based compensation | (8,762) | 754,703 | 8 | (8,770) | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Parent cash dividends declared | (183,272) | — | — | — | (183,272) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | 36,235 | — | — | — | — | 36,235 | — | 549 | ||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | 64,595 | — | — | — | 64,595 | — | — | 940 | ||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interests dividends | — | — | — | — | — | — | — | (1,019) | ||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | 545,589 | 291,584,999 | $ | 2,916 | $ | 4,459,265 | $ | (3,510,949) | $ | (405,768) | $ | 125 | $ | 95,630 | |||||||||||||||||||||||||||||||||||
| THREE MONTHS ENDED MARCH 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| IRON MOUNTAIN INCORPORATED STOCKHOLDERS' EQUITY | ||||||||||||||||||||||||||||||||||||||||||||||||||
| COMMON STOCK | ADDITIONAL PAID-IN CAPITAL | (DISTRIBUTIONS IN EXCESS OF EARNINGS) EARNINGS IN EXCESS OF DISTRIBUTIONS | ACCUMULATED OTHER COMPREHENSIVE ITEMS, NET | NONCONTROLLING INTERESTS | REDEEMABLE NONCONTROLLING INTERESTS | |||||||||||||||||||||||||||||||||||||||||||||
| TOTAL | SHARES | AMOUNTS | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | 857,068 | 289,757,061 | $ | 2,898 | $ | 4,412,553 | $ | (3,221,152) | $ | (338,347) | $ | 1,116 | $ | 72,411 | |||||||||||||||||||||||||||||||||||
| Issuance and net settlement of shares under employee stock purchase plan and option plans and stock-based compensation | (1,502) | 793,379 | 8 | (1,510) | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Changes in equity related to noncontrolling interests | (1,992) | — | — | (1,992) | — | — | — | 1,992 | ||||||||||||||||||||||||||||||||||||||||||
| Parent cash dividends declared | (181,023) | — | — | — | (181,023) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | 43,921 | — | — | — | — | 43,989 | (68) | 298 | ||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | 42,299 | — | — | — | 42,299 | — | — | (592) | ||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interests dividends | — | — | — | — | — | — | — | (681) | ||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | 758,771 | 290,550,440 | $ | 2,906 | $ | 4,409,051 | $ | (3,359,876) | $ | (294,358) | $ | 1,048 | $ | 73,428 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 5 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) (UNAUDITED)
| THREE MONTHS ENDED MARCH 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash Flows from Operating Activities: | |||||||||||
| Net income (loss) | $ | 65,535 | $ | 41,707 | |||||||
| Adjustments to reconcile net income (loss) to cash flows from operating activities: | |||||||||||
| Depreciation | 120,066 | 120,393 | |||||||||
| Amortization (includes amortization of deferred financing costs and discounts of $4,332 and $4,389 for the three months ended March 31, 2023 and 2022, respectively) | 66,360 | 67,611 | |||||||||
| Revenue reduction associated with amortization of customer inducements and above- and below-market leases | 1,760 | 1,860 | |||||||||
| Stock-based compensation expense | 12,509 | 11,341 | |||||||||
| Provision (benefit) for deferred income taxes | 4,183 | (10,142) | |||||||||
| Loss on early extinguishment of debt | — | 671 | |||||||||
| (Gain) loss on disposal/write-down of property, plant and equipment, net | (13,061) | (705) | |||||||||
| Loss (gain) on divestments and deconsolidations | — | 105,825 | |||||||||
| Gain associated with Clutter Transaction | — | (35,821) | |||||||||
| Foreign currency transactions and other, net | 34,435 | (7,219) | |||||||||
| (Increase) decrease in assets | (33,530) | (105,321) | |||||||||
| (Decrease) increase in liabilities | (129,449) | (135,694) | |||||||||
| Cash Flows from Operating Activities | 128,808 | 54,506 | |||||||||
| Cash Flows from Investing Activities: | |||||||||||
| Capital expenditures | (265,906) | (161,050) | |||||||||
| Cash paid for acquisitions, net of cash acquired | (1,094) | (717,907) | |||||||||
| Customer inducements | (1,357) | (1,913) | |||||||||
| Contract fulfillment costs | (24,014) | (14,237) | |||||||||
| Investments in joint ventures and other investments | (15,830) | — | |||||||||
| Proceeds from sales of property and equipment and other, net | 35,658 | 5,353 | |||||||||
| Cash Flows from Investing Activities | (272,543) | (889,754) | |||||||||
| Cash Flows from Financing Activities: | |||||||||||
| Repayment of revolving credit facility, term loan facilities and other debt | (4,649,926) | (2,278,884) | |||||||||
| Proceeds from revolving credit facility, term loan facilities and other debt | 5,008,631 | 3,254,197 | |||||||||
| Debt repayment and equity distribution to noncontrolling interests | (1,019) | (681) | |||||||||
| Parent cash dividends | (186,514) | (184,361) | |||||||||
| Net (payments) proceeds associated with employee stock-based awards | (21,271) | (12,843) | |||||||||
| Other, net | — | (5,875) | |||||||||
| Cash Flows from Financing Activities | 149,901 | 771,553 | |||||||||
| Effect of Exchange Rates on Cash and Cash Equivalents | (1,521) | 3,527 | |||||||||
| Increase (decrease) in Cash and Cash Equivalents | 4,645 | (60,168) | |||||||||
| Cash and Cash Equivalents, Beginning of Period | 141,797 | 255,828 | |||||||||
| Cash and Cash Equivalents, End of Period | $ | 146,442 | $ | 195,660 | |||||||
| Supplemental Information: | |||||||||||
| Cash Paid for Interest | $ | 204,902 | $ | 179,079 | |||||||
| Cash Paid for Income Taxes, Net | $ | 18,629 | $ | 19,277 | |||||||
| Non-Cash Investing and Financing Activities: | |||||||||||
| Financing Leases | $ | 20,194 | $ | 5,190 | |||||||
| Accrued Capital Expenditures | $ | 207,425 | $ | 78,466 | |||||||
| Deferred Purchase Obligations | $ | 197,222 | $ | 276,300 | |||||||
| Dividends Payable | $ | 191,030 | $ | 187,220 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 6 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data) (Unaudited)
1. GENERAL
The unaudited condensed consolidated financial statements of Iron Mountain Incorporated, a Delaware corporation, and its subsidiaries ("we" or "us"), have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to those rules and regulations, but we believe that the disclosures included herein are adequate to make the information presented not misleading. Certain prior year financial statement amounts have been reclassified to conform to the current year presentation. The interim condensed consolidated financial statements are presented herein and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair presentation. Interim results are not necessarily indicative of results for a full year.
The Condensed Consolidated Financial Statements and Notes thereto, which are included herein, should be read in conjunction with the Consolidated Financial Statements and Notes thereto for the year ended December 31, 2022 included in our Annual Report on Form 10-K filed with the SEC on February 23, 2023 (our "Annual Report").
In September 2022, we announced a global program designed to accelerate the growth of our business ("Project Matterhorn"). See Note 11.
We have been organized and have operated as a real estate investment trust for United States federal income tax purposes ("REIT") beginning with our taxable year ended December 31, 2014.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and cash invested in highly liquid short-term securities, which have remaining maturities at the date of purchase of less than 90 days. Cash and cash equivalents are carried at cost, which approximates fair value.
B. ACCOUNTS RECEIVABLE
We maintain an allowance for doubtful accounts and a credit memo reserve for estimated losses resulting from the potential inability of our customers to make required payments and potential disputes regarding billing and service issues. The rollforward of the allowance for doubtful accounts and credit memo reserves for the three months ended March 31, 2023 is as follows:
| Balance as of December 31, 2022 | $ | 54,143 | ||||||||||||
| Credit memos charged to revenue | 23,392 | |||||||||||||
| Allowance for bad debts charged to expense | 10,242 | |||||||||||||
| Deductions and other(1) | (26,738) | |||||||||||||
| Balance as of March 31, 2023 | $ | 61,039 |
(1)Primarily consists of the issuance of credit memos, the write-off of accounts receivable and the impact associated with currency translation adjustments.
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 7 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data) (Unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. LEASES
We lease facilities for certain warehouses, data centers and office space. We also have land leases, including those on which certain facilities are located.
Operating and financing lease right-of-use assets and lease liabilities as of March 31, 2023 and December 31, 2022 are as follows:
| DESCRIPTION | MARCH 31, 2023 | DECEMBER 31, 2022 | ||||||||||||
| Assets: | ||||||||||||||
| Operating lease right-of-use assets | $ | 2,666,951 | $ | 2,583,704 | ||||||||||
| Financing lease right-of-use assets, net of accumulated depreciation(1) | 250,216 | 251,690 | ||||||||||||
| Liabilities: | ||||||||||||||
| Current | ||||||||||||||
| Operating lease liabilities | $ | 293,795 | $ | 288,738 | ||||||||||
| Financing lease liabilities(1) | 47,516 | 43,857 | ||||||||||||
| Long-term | ||||||||||||||
| Operating lease liabilities | $ | 2,513,817 | $ | 2,429,167 | ||||||||||
| Financing lease liabilities(1) | 294,517 | 289,048 |
(1)Financing lease right-of-use assets, current financing lease liabilities and long-term financing lease liabilities are included within Property, Plant and Equipment, Net, Current portion of long-term debt and Long-term Debt, net of current portion, respectively, within our Condensed Consolidated Balance Sheets.
The components of the lease expense for the three months ended March 31, 2023 and 2022 are as follows:
| THREE MONTHS ENDED MARCH 31, | ||||||||||||||
| DESCRIPTION | 2023 | 2022 | ||||||||||||
| Operating lease cost(1) | $ | 155,873 | $ | 143,530 | ||||||||||
| Financing lease cost: | ||||||||||||||
| Depreciation of financing lease right-of-use assets | $ | 10,008 | $ | 11,454 | ||||||||||
| Interest expense for financing lease liabilities | 4,341 | 4,678 |
(1)Operating lease cost, the majority of which is included in Cost of sales, includes variable lease costs of $31,580 and $30,508 for the three months ended March 31, 2023 and 2022, respectively.
Other information: Supplemental cash flow information relating to our leases for the three months ended March 31, 2023 and 2022 is as follows:
| THREE MONTHS ENDED MARCH 31, | ||||||||||||||
| CASH PAID FOR AMOUNTS INCLUDED IN MEASUREMENT OF LEASE LIABILITIES: | 2023 | 2022 | ||||||||||||
| Operating cash flows used in operating leases | $ | 108,723 | $ | 101,605 | ||||||||||
| Operating cash flows used in financing leases (interest) | 4,341 | 4,678 | ||||||||||||
| Financing cash flows used in financing leases | 11,714 | 10,362 | ||||||||||||
| NON-CASH ITEMS: | ||||||||||||||
| Operating lease modifications and reassessments | $ | 18,163 | $ | 23,767 | ||||||||||
| New operating leases (including acquisitions and sale-leaseback transactions) | 113,853 | 125,902 |
In addition to the leases signed but not yet commenced that were disclosed in Note 2.j. to Notes to Consolidated Financial Statements included in our Annual Report, we entered into an operating lease in March 2023 that is expected to commence in July 2024, with an initial lease term of 25 years. The total undiscounted minimum lease payments for this lease are approximately $170,100.
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 8 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data) (Unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. GOODWILL
Our reporting units as of December 31, 2022 are described in detail in Note 2.l. to Notes to Consolidated Financial Statements included in our Annual Report.
The changes in the carrying value of goodwill attributable to each reportable segment for the three months ended March 31, 2023 are as follows:
| GLOBAL RIM BUSINESS | GLOBAL DATA CENTER BUSINESS | CORPORATE AND OTHER | TOTAL CONSOLIDATED | ||||||||||||||||||||||||||
| Goodwill balance, net of accumulated amortization as of December 31, 2022 | $ | 3,852,946 | $ | 418,502 | $ | 611,286 | $ | 4,882,734 | |||||||||||||||||||||
| Fair value and other adjustments | 71 | — | 2,333 | 2,404 | |||||||||||||||||||||||||
| Currency effects | 9,239 | 2,064 | 320 | 11,623 | |||||||||||||||||||||||||
| Goodwill balance, net of accumulated amortization as of March 31, 2023 | $ | 3,862,256 | $ | 420,566 | $ | 613,939 | $ | 4,896,761 | |||||||||||||||||||||
| Accumulated goodwill impairment balance as of March 31, 2023 | $ | 132,409 | $ | — | $ | 26,011 | $ | 158,420 |
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 9 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data) (Unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. FAIR VALUE MEASUREMENTS
The assets and liabilities carried at fair value measured on a recurring basis as of March 31, 2023 and December 31, 2022 are as follows:
| FAIR VALUE MEASUREMENTS AT MARCH 31, 2023 USING | ||||||||||||||||||||||||||
| DESCRIPTION | TOTAL CARRYING VALUE AT MARCH 31, 2023 | QUOTED PRICES IN ACTIVE MARKETS (LEVEL 1) | SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2) | SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) | ||||||||||||||||||||||
| Money Market Funds | $ | 9,786 | $ | — | $ | 9,786 | $ | — | ||||||||||||||||||
| Time Deposits | 1,721 | — | 1,721 | — | ||||||||||||||||||||||
| Trading Securities | 9,380 | 9,347 | 33 | — | ||||||||||||||||||||||
| Derivative Assets | 42,105 | — | 42,105 | — | ||||||||||||||||||||||
| Derivative Liabilities | 3,443 | — | 3,443 | — | ||||||||||||||||||||||
| Deferred Purchase Obligations(1) | 197,222 | — | — | 197,222 | ||||||||||||||||||||||
| FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2022 USING | ||||||||||||||||||||||||||
| DESCRIPTION | TOTAL CARRYING VALUE AT DECEMBER 31, 2022 | QUOTED PRICES IN ACTIVE MARKETS (LEVEL 1) | SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2) | SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) | ||||||||||||||||||||||
| Money Market Funds | $ | 11,311 | $ | — | $ | 11,311 | $ | — | ||||||||||||||||||
| Time Deposits | 1,102 | — | 1,102 | — | ||||||||||||||||||||||
| Trading Securities | 9,462 | 9,426 | 36 | — | ||||||||||||||||||||||
| Derivative Assets | 51,396 | — | 51,396 | — | ||||||||||||||||||||||
| Derivative Liabilities | 489 | — | 489 | — | ||||||||||||||||||||||
| Deferred Purchase Obligations(1) | 193,033 | — | — | 193,033 |
(1)Primarily relates to the fair value of the Deferred Purchase Obligation (as defined in Note 3 to Notes to Consolidated Financial Statements included in our Annual Report) associated with the ITRenew Transaction (as defined below in Note 3), which was determined utilizing a Monte-Carlo model and takes into account our forecasted projections as it relates to the underlying performance of the business. The Monte-Carlo simulation model incorporates assumptions as to expected gross profits over the applicable achievement period, including adjustments for the volatility of timing and amount of the associated revenue and costs, as well as discount rates that account for the risk of the underlying arrangement and overall market risks. Any material change to these assumptions may result in a significantly higher or lower fair value of the Deferred Purchase Obligation. The change in value of the Deferred Purchase Obligation during the three months ended March 31, 2023 was driven by the accretion of the obligation to present value.
There were no material items that were measured at fair value on a non-recurring basis at March 31, 2023 and December 31, 2022 other than those disclosed in Note 2.p. to Notes to Consolidated Financial Statements included in our Annual Report.
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 10 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data) (Unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
F. ACCUMULATED OTHER COMPREHENSIVE ITEMS, NET
The changes in Accumulated other comprehensive items, net for the three months ended March 31, 2023 and 2022 are as follows:
| THREE MONTHS ENDED MARCH 31, 2023 | THREE MONTHS ENDED MARCH 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||
| FOREIGN CURRENCY TRANSLATION AND OTHER ADJUSTMENTS | CHANGE IN FAIR VALUE OF DERIVATIVE INSTRUMENTS | TOTAL | FOREIGN CURRENCY TRANSLATION AND OTHER ADJUSTMENTS | CHANGE IN FAIR VALUE OF DERIVATIVE INSTRUMENTS | TOTAL | |||||||||||||||||||||||||||||||||||||||||||||
| Beginning of Period | $ | (454,509) | $ | 12,506 | $ | (442,003) | $ | (341,024) | $ | 2,677 | $ | (338,347) | ||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation and other adjustments | 39,677 | — | 39,677 | 27,223 | — | 27,223 | ||||||||||||||||||||||||||||||||||||||||||||
| Change in fair value of derivative instruments | — | (3,442) | (3,442) | — | 16,766 | 16,766 | ||||||||||||||||||||||||||||||||||||||||||||
| Total other comprehensive income (loss) | 39,677 | (3,442) | 36,235 | 27,223 | 16,766 | 43,989 | ||||||||||||||||||||||||||||||||||||||||||||
| End of Period | $ | (414,832) | $ | 9,064 | $ | (405,768) | $ | (313,801) | $ | 19,443 | $ | (294,358) |
G. REVENUES
The costs associated with the initial movement of customer records into physical storage and certain commissions are considered costs to obtain or fulfill customer contracts (collectively, "Contract Fulfillment Costs"). Contract Fulfillment Costs as of March 31, 2023 and December 31, 2022 are as follows:
| MARCH 31, 2023 | DECEMBER 31, 2022 | |||||||||||||||||||||||||||||||||||||
| GROSS CARRYING AMOUNT | ACCUMULATED AMORTIZATION | NET CARRYING AMOUNT | GROSS CARRYING AMOUNT | ACCUMULATED AMORTIZATION | NET CARRYING AMOUNT | |||||||||||||||||||||||||||||||||
| Intake Costs asset | $ | 71,426 | $ | (45,700) | $ | 25,726 | $ | 68,345 | $ | (42,132) | $ | 26,213 | ||||||||||||||||||||||||||
| Commissions asset | 142,763 | (63,244) | 79,519 | 133,145 | (58,949) | 74,196 | ||||||||||||||||||||||||||||||||
Deferred revenue liabilities are reflected in our Condensed Consolidated Balance Sheets as follows:
| DESCRIPTION | LOCATION IN BALANCE SHEET | MARCH 31, 2023 | DECEMBER 31, 2022 | |||||||||||||||||
| Deferred revenue - Current | Deferred revenue | $ | 335,393 | $ | 328,910 | |||||||||||||||
| Deferred revenue - Long-term | Other Long-term Liabilities | 29,482 | 32,960 |
DATA CENTER LESSOR CONSIDERATIONS
Our Global Data Center Business features storage rental provided to customers at contractually specified rates over a fixed contractual period, which are accounted for in accordance with Accounting Standards Codification ("ASC") No. 842 ("ASC 842"), Leases, as amended. Storage rental revenue, including revenue associated with power and connectivity, associated with our Global Data Center Business for the three months ended March 31, 2023 and 2022 is as follows:
| THREE MONTHS ENDED MARCH 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Storage rental revenue(1) | $ | 107,435 | $ | 87,451 |
(1)Revenue associated with power and connectivity included within storage rental revenue was $40,672 and $28,318 for the three months ended March 31, 2023 and 2022, respectively.
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 11 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data) (Unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
H. STOCK-BASED COMPENSATION
Our stock-based compensation expense includes the cost of stock options, restricted stock units ("RSUs") and performance units ("PUs") (together, the "Employee Stock-Based Awards").
STOCK-BASED COMPENSATION EXPENSE
Stock-based compensation expense for the Employee Stock-Based Awards for the three months ended March 31, 2023 and 2022 is as follows:
| THREE MONTHS ENDED MARCH 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Stock-based compensation expense | $ | 12,509 | $ | 11,341 | |||||||||||||||||||
As of March 31, 2023, unrecognized compensation cost related to the unvested portion of our Employee Stock-Based Awards is $115,329.
I. ACQUISITION AND INTEGRATION COSTS
Acquisition and integration costs represent operating expenditures directly associated with the closing and integration activities of our business acquisitions that have closed, or are highly probable of closing, and include (i) advisory, legal and professional fees to complete business acquisitions and (ii) costs to integrate acquired businesses into our existing operations, including move, severance and system integration costs (collectively, "Acquisition and Integration Costs"). Total Acquisition and Integration Costs were $1,595 and $15,661 for the three months ended March 31, 2023 and 2022, respectively.
J. (GAIN) LOSS ON DISPOSAL/WRITE-DOWN OF PROPERTY, PLANT AND EQUIPMENT, NET
(Gain) loss on disposal/write-down of property, plant and equipment, net for the three months ended March 31, 2023 and 2022 is as follows:
| THREE MONTHS ENDED MARCH 31, | |||||||||||
| 2023**(1)** | 2022 | ||||||||||
| (Gain) Loss on disposal/write-down of property, plant and equipment, net | $ | (13,061) | $ | (705) |
(1) The gains for the three months ended March 31, 2023 primarily consist of a gain of approximately $18,500 associated with a sale-leaseback transaction of a facility in Singapore, as part of our program to monetize a small portion of our industrial assets through sale and sale-leaseback transactions. The terms for this lease are consistent with the terms of our lease portfolio, which are disclosed in detail in Note 2.j. to Notes to Consolidated Financial Statements included in our Annual Report.
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 12 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data) (Unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
K. OTHER EXPENSE (INCOME), NET
Other expense (income), net for the three months ended March 31, 2023 and 2022 consists of the following:
| THREE MONTHS ENDED MARCH 31, | ||||||||||||||
| DESCRIPTION | 2023 | 2022 | ||||||||||||
| Foreign currency transaction losses (gains), net | $ | 14,424 | $ | (13,201) | ||||||||||
| Debt extinguishment expense | — | 671 | ||||||||||||
| Other, net(1) | 6,776 | 68,431 | ||||||||||||
| Other Expense (Income), Net | $ | 21,200 | $ | 55,901 |
(1)Other, net for the three months ended March 31, 2022 consists primarily of (i) a loss of approximately $105,800 associated with the OSG Deconsolidation (as defined in Note 4 to Notes to Consolidated Financial Statements included in our Annual Report), partially offset by (ii) a gain of approximately $35,800 associated with the Clutter Transaction (as defined in Note 5 to Notes to Consolidated Financial Statements included in our Annual Report).
L. INCOME TAXES
We provide for income taxes during interim periods based on our estimate of the effective tax rate for the year. Our effective tax rates for the three months ended March 31, 2023 and 2022 are as follows:
| THREE MONTHS ENDED MARCH 31, | |||||||||||
| 2023**(1)** | 2022**(2)** | ||||||||||
| Effective Tax Rate | 20.4 | % | 19.5 | % |
(1)The primary reconciling items between the federal statutory tax rate of 21.0% and our overall effective tax rate for the three months ended March 31, 2023 were the benefits derived from the dividends paid deduction and the differences in the tax rates to which our foreign earnings are subject.
(2)The primary reconciling items between the federal statutory tax rate of 21.0% and our overall effective tax rate for the three months ended March 31, 2022 were the benefits derived from the dividends paid deduction, the differences in the tax rates to which our foreign earnings are subject, and a release of valuation allowances on deferred tax assets of our U.S. taxable REIT subsidiaries of approximately $9,900 as a result of our acquisition of Intercept Parent, Inc. ("ITRenew").
M. INCOME (LOSS) PER SHARE—BASIC AND DILUTED
The calculation of basic and diluted income (loss) per share for the three months ended March 31, 2023 and 2022 are as follows:
| THREE MONTHS ENDED MARCH 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Net Income (Loss) | $ | 65,535 | $ | 41,707 | |||||||
| Less: Net Income (Loss) Attributable to Noncontrolling Interests | 940 | (592) | |||||||||
| Net Income (Loss) Attributable to Iron Mountain Incorporated (utilized in numerator of Earnings Per Share calculation) | $ | 64,595 | $ | 42,299 | |||||||
| Weighted-average shares—basic | 291,442,000 | 290,328,000 | |||||||||
| Effect of dilutive potential stock options | 1,216,000 | 995,625 | |||||||||
| Effect of dilutive potential RSUs and PUs | 391,000 | 521,977 | |||||||||
| Weighted-average shares—diluted | 293,049,000 | 291,845,602 | |||||||||
| Net Income (Loss) Per Share Attributable to Iron Mountain Incorporated: | |||||||||||
| Basic | $ | 0.22 | $ | 0.15 | |||||||
| Diluted | $ | 0.22 | $ | 0.14 | |||||||
| Antidilutive stock options, RSUs and PUs, excluded from the calculation | 145,730 | 755,580 |
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 13 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data) (Unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
N. RECENT ACCOUNTING PRONOUNCEMENTS
In December 2021, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08"). ASU 2021-08 requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers, and for the related revenue contracts in accordance with ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), as if it had originated the contracts. We adopted ASU 2021-08 on January 1, 2023 on a prospective basis, and there was no material impact on our condensed consolidated financial statements.
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 14 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data) (Unaudited)
3. ACQUISITIONS
ITRENEW PRO FORMA FINANCIAL INFORMATION
On January 25, 2022, in order to expand our asset lifecycle management operations, we acquired an approximately 80% interest in ITRenew at an agreed upon purchase price of $725,000, subject to certain working capital adjustments at, and subsequent to, the closing (the "ITRenew Transaction"). The unaudited consolidated pro forma financial information (the "Pro Forma Financial Information") below summarizes the combined results of Iron Mountain and ITRenew on a pro forma basis as if the ITRenew Transaction had occurred on January 1, 2021. The Pro Forma Financial Information is presented for informational purposes and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2021. The Pro Forma Financial Information, for the periods presented, includes purchase accounting adjustments (including amortization of acquired customer and supplier intangible assets and depreciation of acquired property, plant and equipment) and related tax effects. We and ITRenew collectively incurred $59,370 of operating expenditures to complete the ITRenew Transaction (including advisory and professional fees). These operating expenditures have been reflected within the results of operations in the Pro Forma Financial Information as if they were incurred on January 1, 2021.
| THREE MONTHS ENDED MARCH 31, 2022 | |||||||||||||||||||||||
| Total Revenues | $ | 1,266,020 | |||||||||||||||||||||
| Income from Continuing Operations | $ | 41,838 |
In addition to our acquisition of ITRenew, we completed certain other acquisitions in 2022. The Pro Forma Financial Information does not reflect these acquisitions due to the insignificant impact of these acquisitions on our consolidated results of operations.
4. INVESTMENTS
In April 2021, we closed on an agreement to form a joint venture (the "Web Werks JV") with the shareholders of Web Werks India Private Limited ("Web Werks"), a colocation data center provider in India. Through December 31, 2022, we made two investments totaling approximately 7,500,000 Indian rupees (or approximately $96,200, based upon the exchange rates between the United States dollar and Indian rupee on the closing date of each investment) in exchange for a noncontrolling interest in the form of convertible preference shares in the Web Werks JV. Under the terms of the original Web Werks JV shareholder agreement, we were required to make an additional investment of 3,750,000 Indian rupees by May 2023. In April 2023, the original Web Werks JV shareholder agreement was amended to extend the period by which the investment is required to be made to May 2024.
The following joint ventures are accounted for as equity method investments and are presented as a component of Other within Other assets, net in our Condensed Consolidated Balance Sheets. The carrying values and equity interests in our joint ventures at March 31, 2023 and December 31, 2022 are as follows:
| MARCH 31, 2023 | DECEMBER 31, 2022 | |||||||||||||||||||||||||
| CARRYING VALUE | EQUITY INTEREST | CARRYING VALUE | EQUITY INTEREST | |||||||||||||||||||||||
| Web Werks JV | $ | 98,637 | 53.58 | % | $ | 98,278 | 53.58 | % | ||||||||||||||||||
| Joint venture with AGC Equity Partners (the "Frankfurt JV") | 36,579 | 20.00 | % | 37,194 | 20.00 | % | ||||||||||||||||||||
| Joint venture with Clutter, Inc. (the "Clutter JV") | 50,712 | 26.73 | % | 54,172 | 26.73 | % |
Additionally, we have a loan receivable with the Frankfurt JV of approximately $22,800, which is included as a component of Other within Other assets, net within our Condensed Consolidated Balance Sheet at March 31, 2023.
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 15 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data) (Unaudited)
5. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Derivative instruments we are party to include: (i) interest rate swap agreements (which are designated as cash flow hedges) and (ii) cross-currency swap agreements (which are designated as net investment hedges).
INTEREST RATE SWAP AGREEMENTS DESIGNATED AS CASH FLOW HEDGES
In November 2022, we entered into a forward-starting interest rate swap agreement to limit our exposure to changes in interest rates on future borrowings under our Virginia Credit Agreement (as defined in Note 7 to Notes to Consolidated Financial Statements included in our Annual Report). The forward-starting interest rate swap agreement commences in July 2023 and expires in October 2025. As of both March 31, 2023 and December 31, 2022, we have $4,800 in notional value outstanding on this forward-starting interest rate swap agreement.
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. These forward-starting interest rate swap agreements commenced in March 2022. As of both March 31, 2023 and December 31, 2022, we have $350,000 in notional value outstanding on these interest rate swap agreements, which expire in March 2024.
We have designated each of the interest rate swap agreements described above as cash flow hedges. These interest rate swap agreements are marked to market at the end of each reporting period, representing the fair values of the interest rate swap agreements, and any changes in fair value are recognized as a component of Accumulated other comprehensive items, net. Unrealized gains are recognized as assets, while unrealized losses are recognized as liabilities.
CROSS-CURRENCY SWAP AGREEMENTS DESIGNATED AS A HEDGE OF NET INVESTMENT
We utilize cross-currency interest rate swaps to hedge the variability of exchange rate impacts between the United States dollar and the Euro. As of both March 31, 2023 and December 31, 2022, we have approximately $469,200 in notional value outstanding on cross-currency interest rate swaps with maturity dates ranging from August 2023 through February 2026.
We have designated these cross-currency swap agreements as hedges of net investments in certain of our Euro denominated subsidiaries and they require an exchange of the notional amounts at maturity. These cross-currency swap agreements are marked to market at the end of each reporting period, representing the fair values of the cross-currency swap agreements, and any changes in fair value are recognized as a component of Accumulated other comprehensive items, net. Unrealized gains are recognized as assets while unrealized losses are recognized as liabilities. The excluded component of our cross-currency swap agreements is recorded in Accumulated other comprehensive items, net and amortized to interest expense on a straight-line basis.
The fair value of derivative instruments recognized in our Condensed Consolidated Balance Sheets at March 31, 2023 and December 31, 2022, by derivative instrument, are as follows:
| MARCH 31, 2023 | DECEMBER 31, 2022 | |||||||||||||||||||||||||
| DERIVATIVE INSTRUMENTS**(1)** | Assets | Liabilities | Assets | Liabilities | ||||||||||||||||||||||
| Cash Flow Hedges*(2)* | ||||||||||||||||||||||||||
| Interest rate swap agreements | $ | 10,215 | $ | 1,151 | $ | 12,995 | $ | 489 | ||||||||||||||||||
| Net Investment Hedges*(3)* | ||||||||||||||||||||||||||
| Cross-currency swap agreements | 31,890 | 2,292 | 38,401 | — |
(1)Our derivative assets are included as a component of (i) Prepaid expenses and other or (ii) Other within Other assets, net and our derivative liabilities are included as a component of (i) Accrued expenses and other current liabilities or (ii) Other long-term liabilities in our Condensed Consolidated Balance Sheets. As of March 31, 2023, $11,538 is included within Prepaid expenses and other, $30,567 is included within Other assets, $2,292 is included within Accrued expense and other current liabilities and $1,151 is included within Other long-term liabilities. As of December 31, 2022, $2,606 is included within Prepaid expenses and other, $48,790 is included within Other assets, and $489 is included within Other long-term liabilities.
(2)As of March 31, 2023, cumulative net gains of $9,064 are recorded within Accumulated other comprehensive items, net associated with these interest rate swap agreements.
(3)As of March 31, 2023, cumulative net gains of $29,598 are recorded within Accumulated other comprehensive items, net associated with these cross-currency swap agreements. These cumulative net gains are offset by $14,934 related to the excluded component of our cross-currency swap agreements.
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 16 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data) (Unaudited)
5. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (CONTINUED)
Unrealized (losses) gains recognized in Accumulated other comprehensive income during the three months ended March 31, 2023 and 2022, by derivative instrument, are as follows:
| THREE MONTHS ENDED MARCH 31, | ||||||||||||||
| DERIVATIVE INSTRUMENTS | 2023 | 2022 | ||||||||||||
| Cash Flow Hedges | ||||||||||||||
| Interest rate swap agreements | $ | (3,442) | $ | 11,470 | ||||||||||
| Net Investment Hedges | ||||||||||||||
| Cross-currency swap agreements | (8,803) | 5,296 | ||||||||||||
| Cross-currency swap agreements (excluded component) | 5,834 | — |
(Losses) gains recognized in Net income during the three months ended March 31, 2023 and 2022, by derivative instrument, are as follows:
| THREE MONTHS ENDED MARCH 31, | |||||||||||||||||
| DERIVATIVE INSTRUMENTS | Location of (loss) gain | 2023 | 2022 | ||||||||||||||
| Net Investment Hedges | |||||||||||||||||
| Cross-currency swap agreements (excluded component) | Interest expense | $ | (5,834) | $ | — |
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 17 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data) (Unaudited)
6. DEBT
Long-term debt is as follows:
| MARCH 31, 2023 | DECEMBER 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| DEBT (INCLUSIVE OF DISCOUNT) | UNAMORTIZED DEFERRED FINANCING COSTS | CARRYING AMOUNT | FAIR VALUE | DEBT (INCLUSIVE OF DISCOUNT) | UNAMORTIZED DEFERRED FINANCING COSTS | CARRYING AMOUNT | FAIR VALUE | ||||||||||||||||||||||||||||||||||||||||||||||
| Revolving Credit Facility(1) | $ | 1,439,000 | $ | (5,687) | $ | 1,433,313 | $ | 1,439,000 | $ | 1,072,200 | $ | (6,790) | $ | 1,065,410 | $ | 1,072,200 | |||||||||||||||||||||||||||||||||||||
| Term Loan A(1) | 237,500 | — | 237,500 | 237,500 | 240,625 | — | 240,625 | 240,625 | |||||||||||||||||||||||||||||||||||||||||||||
| Term Loan B(1) | 664,379 | (3,434) | 660,945 | 665,000 | 666,073 | (3,747) | 662,326 | 666,750 | |||||||||||||||||||||||||||||||||||||||||||||
| Australian Dollar Term Loan | 197,929 | (585) | 197,344 | 199,746 | 202,641 | (633) | 202,008 | 204,623 | |||||||||||||||||||||||||||||||||||||||||||||
| UK Bilateral Revolving Credit Facility | 173,153 | — | 173,153 | 173,153 | 169,361 | — | 169,361 | 169,361 | |||||||||||||||||||||||||||||||||||||||||||||
| 37/8% GBP Senior Notes due 2025 (the "GBP Notes") | 494,722 | (2,413) | 492,309 | 467,572 | 483,888 | (2,589) | 481,299 | 445,206 | |||||||||||||||||||||||||||||||||||||||||||||
| 47/8% Senior Notes due 2027 (the "47/8% Notes due 2027")(2) | 1,000,000 | (6,399) | 993,601 | 942,500 | 1,000,000 | (6,754) | 993,246 | 917,500 | |||||||||||||||||||||||||||||||||||||||||||||
| 51/4% Senior Notes due 2028 (the "51/4% Notes due 2028")(2) | 825,000 | (5,904) | 819,096 | 781,688 | 825,000 | (6,200) | 818,800 | 754,875 | |||||||||||||||||||||||||||||||||||||||||||||
| 5% Senior Notes due 2028 (the "5% Notes due 2028")(2) | 500,000 | (3,859) | 496,141 | 461,250 | 500,000 | (4,039) | 495,961 | 450,000 | |||||||||||||||||||||||||||||||||||||||||||||
| 47/8% Senior Notes due 2029 (the "47/8% Notes due 2029")(2) | 1,000,000 | (9,403) | 990,597 | 897,500 | 1,000,000 | (9,764) | 990,236 | 865,000 | |||||||||||||||||||||||||||||||||||||||||||||
| 51/4% Senior Notes due 2030 (the "51/4% Notes due 2030")(2) | 1,300,000 | (11,031) | 1,288,969 | 1,170,000 | 1,300,000 | (11,407) | 1,288,593 | 1,111,500 | |||||||||||||||||||||||||||||||||||||||||||||
| 41/2% Senior Notes due 2031 (the "41/2% Notes")(2) | 1,100,000 | (9,850) | 1,090,150 | 937,750 | 1,100,000 | (10,161) | 1,089,839 | 891,000 | |||||||||||||||||||||||||||||||||||||||||||||
| 5% Senior Notes due 2032 (the "5% Notes due 2032") | 750,000 | (12,185) | 737,815 | 643,125 | 750,000 | (12,511) | 737,489 | 622,500 | |||||||||||||||||||||||||||||||||||||||||||||
| 55/8% Senior Notes due 2032 (the "55/8% Notes")(2) | 600,000 | (5,421) | 594,579 | 538,500 | 600,000 | (5,566) | 594,434 | 520,500 | |||||||||||||||||||||||||||||||||||||||||||||
| Real Estate Mortgages, Financing Lease Liabilities and Other | 434,283 | (522) | 433,761 | 434,283 | 425,777 | (578) | 425,199 | 425,777 | |||||||||||||||||||||||||||||||||||||||||||||
| Accounts Receivable Securitization Program | 325,000 | (477) | 324,523 | 325,000 | 314,700 | (531) | 314,169 | 314,700 | |||||||||||||||||||||||||||||||||||||||||||||
| Total Long-term Debt | 11,040,966 | (77,170) | 10,963,796 | 10,650,265 | (81,270) | 10,568,995 | |||||||||||||||||||||||||||||||||||||||||||||||
| Less Current Portion | (101,608) | — | (101,608) | (87,546) | — | (87,546) | |||||||||||||||||||||||||||||||||||||||||||||||
| Long-term Debt, Net of Current Portion | $ | 10,939,358 | $ | (77,170) | $ | 10,862,188 | $ | 10,562,719 | $ | (81,270) | $ | 10,481,449 |
(1)Collectively, the “Credit Agreement”. The Credit Agreement consists of a revolving credit facility (the “Revolving Credit Facility”), a term loan A (the “Term Loan A”) and a term loan B (the "Term Loan B"). The Revolving Credit Facility and the Term Loan A are scheduled to mature on March 18, 2027. The Term Loan B is scheduled to mature on January 2, 2026. The remaining amount available for borrowing under the Revolving Credit Facility as of March 31, 2023 was $807,146 (which amount represents the maximum availability as of such date). The weighted average interest rate in effect under the Revolving Credit Facility was 6.6% and 6.2% as of March 31, 2023 and December 31, 2022, respectively.
(2)Collectively, the "Parent Notes".
See Note 7 to Notes to Consolidated Financial Statements included in our Annual Report for additional information regarding our long-term debt, including the direct obligors of each of our debt instruments as well as information regarding the fair value of our debt instruments (including the levels of the fair value hierarchy used to determine the fair value of our debt instruments). The levels of the fair value hierarchy used to determine the fair value of our debt as of March 31, 2023 are consistent with the levels of the fair value hierarchy used to determine the fair value of our debt as of December 31, 2022 (which are disclosed in our Annual Report).
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 18 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data) (Unaudited)
6. DEBT (CONTINUED)
LETTERS OF CREDIT
As of March 31, 2023, we had outstanding letters of credit totaling $39,825, of which $3,854 reduce our borrowing capacity under the Revolving Credit Facility. The letters of credit expire at various dates between June 2023 and July 2025.
DEBT COVENANTS
The Credit Agreement, 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 other specified 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 net total lease adjusted leverage ratio and a fixed charge coverage 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 earnings before interest, taxes, depreciation and amortization and rent expense ("EBITDAR") based calculations and the bond indentures use earnings before interest, taxes, depreciation and amortization ("EBITDA") based calculations as the primary measures of financial performance for purposes of calculating leverage and fixed charge coverage ratios. The EBITDAR- and EBITDA-based leverage calculations include our consolidated subsidiaries, other than those we have designated as "Unrestricted Subsidiaries" as defined in the Credit Agreement and 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. We are in compliance with our leverage and fixed charge coverage ratios under the Credit Agreement, our bond indentures and other agreements governing our indebtedness as of March 31, 2023. Noncompliance with these leverage and fixed charge coverage ratios would have a material adverse effect on our financial condition and liquidity.
7. COMMITMENTS AND CONTINGENCIES
We are involved in litigation from time to time in the ordinary course of business, including litigation arising from damage to customer assets in our facilities caused by fires and other natural disasters. While the outcome of litigation is inherently uncertain, we do not believe any current litigation will have a material adverse effect on our consolidated financial condition, results of operations or cash flows.
We have estimated a reasonably possible range for all loss contingencies and believe it is reasonably possible that we could incur aggregate losses in addition to amounts currently accrued for all matters up to an additional $20,500 over the next several years, of which certain amounts would be covered by insurance or indemnity arrangement.
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 19 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data) (Unaudited)
8. STOCKHOLDERS' EQUITY MATTERS
In fiscal year 2022 and the three months ended March 31, 2023, our board of directors declared the following dividends:
| DECLARATION DATE | DIVIDEND PER SHARE | RECORD DATE | TOTAL AMOUNT | PAYMENT DATE | |||||||||||||||||||
| February 24, 2022 | $ | 0.6185 | March 15, 2022 | $ | 179,661 | April 6, 2022 | |||||||||||||||||
| April 28, 2022 | 0.6185 | June 15, 2022 | 179,781 | July 6, 2022 | |||||||||||||||||||
| August 4, 2022 | 0.6185 | September 15, 2022 | 179,790 | October 4, 2022 | |||||||||||||||||||
| November 3, 2022 | 0.6185 | December 15, 2022 | 179,866 | January 5, 2023 | |||||||||||||||||||
| February 23, 2023 | 0.6185 | March 15, 2023 | 180,339 | April 5, 2023 | |||||||||||||||||||
On May 4, 2023, we declared a dividend to our stockholders of record as of June 15, 2023 of $0.6185 per share, payable on July 6, 2023.
9. SEGMENT INFORMATION
Our reportable segments as of December 31, 2022 are described in Note 11 to Notes to Consolidated Financial Statements included in our Annual Report and are as follows:
-
Global RIM Business
-
Global Data Center Business
-
Corporate and Other
An analysis of our business segment information and reconciliation to the accompanying Condensed Consolidated Financial Statements for the three months ended March 31, 2023 and 2022 is as follows:
| THREE MONTHS ENDED MARCH 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Global RIM Business | |||||||||||||||||||||||
| Total Revenues | $ | 1,126,526 | $ | 1,048,891 | |||||||||||||||||||
| Adjusted EBITDA | 477,784 | 448,795 | |||||||||||||||||||||
| Global Data Center Business | |||||||||||||||||||||||
| Total Revenues | $ | 112,305 | $ | 96,987 | |||||||||||||||||||
| Adjusted EBITDA | 50,635 | 41,977 | |||||||||||||||||||||
| Corporate and Other | |||||||||||||||||||||||
| Total Revenues | $ | 75,518 | $ | 102,168 | |||||||||||||||||||
| Adjusted EBITDA | (67,611) | (59,778) | |||||||||||||||||||||
| Total Consolidated | |||||||||||||||||||||||
| Total Revenues | $ | 1,314,349 | $ | 1,248,046 | |||||||||||||||||||
| Adjusted EBITDA | 460,808 | 430,994 |
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 20 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data) (Unaudited)
9. SEGMENT INFORMATION (CONTINUED)
Adjusted EBITDA for each segment is defined as net income (loss) 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 | |||||
| •Acquisition and Integration Costs •Restructuring and other transformation •(Gain) loss on disposal/write-down of property, plant and equipment, net (including real estate) | •Other expense (income), net •Stock-based compensation expense | ||||
Internally, we use Adjusted EBITDA as the basis for evaluating the performance of, and allocating resources to, our operating segments.
A reconciliation of Net Income (Loss) to Adjusted EBITDA on a consolidated basis for the three months ended March 31, 2023 and 2022 is as follows:
| THREE MONTHS ENDED MARCH 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Net Income (Loss) | $ | 65,535 | $ | 41,707 | |||||||||||||||||||
| Add/(Deduct): | |||||||||||||||||||||||
| Interest expense, net | 137,169 | 114,442 | |||||||||||||||||||||
| Provision (benefit) for income taxes | 16,758 | 10,080 | |||||||||||||||||||||
| Depreciation and amortization | 182,094 | 183,615 | |||||||||||||||||||||
| Acquisition and Integration Costs | 1,595 | 15,661 | |||||||||||||||||||||
| Restructuring and other transformation | 36,913 | — | |||||||||||||||||||||
| (Gain) loss on disposal/write-down of property, plant and equipment, net (including real estate) | (13,061) | (705) | |||||||||||||||||||||
| Other expense (income), net, excluding our share of losses (gains) from our unconsolidated joint ventures | 17,491 | 53,515 | |||||||||||||||||||||
| Stock-based compensation expense | 12,509 | 11,341 | |||||||||||||||||||||
| Our share of Adjusted EBITDA reconciling items from our unconsolidated joint ventures | 3,805 | 1,338 | |||||||||||||||||||||
| Adjusted EBITDA | $ | 460,808 | $ | 430,994 |
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 21 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data) (Unaudited)
9. SEGMENT INFORMATION (CONTINUED)
Information as to our revenues by product and service lines by segment for the three months ended March 31, 2023 and 2022 is as follows:
| THREE MONTHS ENDED MARCH 31, | ||||||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||||||||
| Global RIM Business | ||||||||||||||||||||||||||
| Records Management(1) | $ | 867,988 | $ | 802,553 | ||||||||||||||||||||||
| Data Management(1) | 129,594 | 133,656 | ||||||||||||||||||||||||
| Information Destruction(1)(2) | 128,944 | 112,682 | ||||||||||||||||||||||||
| Data Center(1) | — | — | ||||||||||||||||||||||||
| Global Data Center Business | ||||||||||||||||||||||||||
| Records Management(1) | $ | — | $ | — | ||||||||||||||||||||||
| Data Management(1) | — | — | ||||||||||||||||||||||||
| Information Destruction(1) | — | — | ||||||||||||||||||||||||
| Data Center(1) | 112,305 | 96,987 | ||||||||||||||||||||||||
| Corporate and Other | ||||||||||||||||||||||||||
| Records Management(1) | $ | 34,348 | $ | 31,898 | ||||||||||||||||||||||
| Data Management(1) | — | — | ||||||||||||||||||||||||
| Information Destruction(1)(3) | 41,170 | 70,270 | ||||||||||||||||||||||||
| Data Center(1) | — | — | ||||||||||||||||||||||||
| Total Consolidated | ||||||||||||||||||||||||||
| Records Management(1) | $ | 902,336 | $ | 834,451 | ||||||||||||||||||||||
| Data Management(1) | 129,594 | 133,656 | ||||||||||||||||||||||||
| Information Destruction(1)(2)(3) | 170,114 | 182,952 | ||||||||||||||||||||||||
| Data Center(1) | 112,305 | 96,987 | ||||||||||||||||||||||||
(1)Each of these offerings has a component of revenue that is storage rental related and a component that is service revenue, except for information destruction, which does not have a storage rental component.
(2)Includes secure shredding services.
(3)Includes product revenue from ITRenew.
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 22 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data) (Unaudited)
10. RELATED PARTIES
In October 2020, in connection with the formation of the Frankfurt JV, we entered into agreements whereby we earn various fees, including (i) special project revenue and (ii) property management and construction and development fees for services we are providing to the Frankfurt JV (the "Frankfurt JV Agreements").
In March 2019, in connection with the formation of the MakeSpace JV (as defined in Note 5 to Notes to Consolidated Financial Statements included in our Annual Report), we 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"). In February 2022, in connection with the formation of the Clutter JV, we terminated the MakeSpace Agreement and entered into a storage and service agreement with the Clutter JV to provide certain storage and related services to the Clutter JV (the "Clutter Agreement").
Revenue recognized in the accompanying Condensed Consolidated Statements of Operations under these agreements for the three months ended March 31, 2023 and 2022 is as follows (approximately):
| THREE MONTHS ENDED MARCH 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Frankfurt JV Agreements(1) | $ | 900 | $ | 7,100 | |||||||
| MakeSpace Agreement and Clutter Agreement(2) | 6,000 | 7,000 |
(1)Revenue associated with the Frankfurt JV Agreements is presented as a component of our Global Data Center Business segment.
(2)Revenue associated with the MakeSpace Agreement and Clutter Agreement is presented as a component of our Global RIM Business segment.
11. RESTRUCTURING AND OTHER TRANSFORMATION
PROJECT MATTERHORN
In September 2022, we announced Project Matterhorn, a global program designed to accelerate the growth of our business. Project Matterhorn investments will focus on transforming our operating model to a global operating model. Project Matterhorn will focus on the formation of a solution-based sales approach that is designed to allow us to optimize our shared services and best practices to better serve our customers' needs. We will be investing to accelerate growth and to capture a greater share of the large, global addressable markets in which we operate. We expect to incur approximately $150,000 in costs annually related to Project Matterhorn from 2023 through 2025. Costs are comprised of (1) restructuring costs, which include (i) site consolidation and other related exit costs, (ii) employee severance costs and (iii) certain professional fees associated with these activities, and (2) other transformation costs, which include professional fees such as project management costs and costs for third party consultants who are assisting in the enablement of our growth initiatives. Total costs related to Project Matterhorn during the three months ended March 31, 2023 were approximately $36,913 and are included in Restructuring and other transformation in our Condensed Consolidated Statement of Operations. There were no Restructuring and other transformation costs related to Project Matterhorn for the three months ended March 31, 2022.
Restructuring and other transformation related to Project Matterhorn included in the accompanying Condensed Consolidated Statement of Operations for the three months ended March 31, 2023, and from the inception of Project Matterhorn through March 31, 2023, is as follows:
| THREE MONTHS ENDED MARCH 31, 2023 | FROM INCEPTION OF PROJECT MATTERHORN THROUGH MARCH 31, 2023 | ||||||||||
| Restructuring | $ | 11,957 | $ | 25,249 | |||||||
| Other transformation | 24,956 | 53,597 | |||||||||
| Restructuring and other transformation | $ | 36,913 | $ | 78,846 |
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 23 |
Part I. Financial Information
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share data) (Unaudited)
11. RESTRUCTURING AND OTHER TRANSFORMATION (CONTINUED)
Restructuring costs for Project Matterhorn, included as a component of Restructuring and other transformation in the accompanying Condensed Consolidated Statement of Operations, by segment for the three months ended March 31, 2023, and from the inception of Project Matterhorn through March 31, 2023, is as follows:
| THREE MONTHS ENDED MARCH 31, 2023 | FROM INCEPTION OF PROJECT MATTERHORN THROUGH MARCH 31, 2023 | ||||||||||
| Global RIM Business | $ | 9,525 | $ | 22,608 | |||||||
| Global Data Center Business | 78 | 78 | |||||||||
| Corporate and Other | 2,354 | 2,563 | |||||||||
| Total restructuring costs | $ | 11,957 | $ | 25,249 |
Other transformation costs for Project Matterhorn, included as a component of Restructuring and other transformation in the accompanying Condensed Consolidated Statement of Operations, by segment for the three months ended March 31, 2023, and from the inception of Project Matterhorn through March 31, 2023, is as follows:
| THREE MONTHS ENDED MARCH 31, 2023 | FROM INCEPTION OF PROJECT MATTERHORN THROUGH MARCH 31, 2023 | ||||||||||
| Global RIM Business | $ | 3,485 | $ | 7,386 | |||||||
| Global Data Center Business | 870 | 928 | |||||||||
| Corporate and Other | 20,601 | 45,283 | |||||||||
| Total other transformation costs | $ | 24,956 | $ | 53,597 |
Accrued restructuring costs and accrued other transformation costs included in the accompanying Condensed Consolidated Balance Sheet as of March 31, 2023 were approximately $4,600 and $12,000, respectively.
| IRON MOUNTAIN MARCH 31, 2023 FORM 10-Q | 24 |
Part I. Financial Information
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