filings.toolsItem 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
102K characters. Original on sec.gov · Markdown
Item 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| IRON MOUNTAIN MARCH 31, 2024 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, 2024 | DECEMBER 31, 2023 | ||||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | 191,655 | $ | 222,789 | |||||||
| Accounts receivable (less allowances of $77,413 and $74,762 as of March 31, 2024 and December 31, 2023, respectively) | 1,268,061 | 1,259,826 | |||||||||
| Prepaid expenses and other | 275,358 | 252,930 | |||||||||
| Total Current Assets | 1,735,074 | 1,735,545 | |||||||||
| Property, Plant and Equipment: | |||||||||||
| Property, plant and equipment | 10,647,036 | 10,373,989 | |||||||||
| Less—Accumulated depreciation | (4,108,897) | (4,059,120) | |||||||||
| Property, Plant and Equipment, Net | 6,538,139 | 6,314,869 | |||||||||
| Other Assets, Net: | |||||||||||
| Goodwill | 5,107,473 | 5,017,912 | |||||||||
| Customer and supplier relationships and other intangible assets | 1,330,638 | 1,279,800 | |||||||||
| Operating lease right-of-use assets | 2,677,803 | 2,696,024 | |||||||||
| Other | 440,429 | 429,652 | |||||||||
| Total Other Assets, Net | 9,556,343 | 9,423,388 | |||||||||
| Total Assets | $ | 17,829,556 | $ | 17,473,802 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current Liabilities: | |||||||||||
| Current portion of long-term debt | $ | 118,771 | $ | 120,670 | |||||||
| Accounts payable | 524,901 | 539,594 | |||||||||
| Accrued expenses and other current liabilities (includes current portion of operating lease liabilities) | 1,052,454 | 1,250,259 | |||||||||
| Deferred revenue | 332,801 | 325,665 | |||||||||
| Total Current Liabilities | 2,028,927 | 2,236,188 | |||||||||
| Long-term Debt, net of current portion | 12,588,569 | 11,812,500 | |||||||||
| Long-term Operating Lease Liabilities, net of current portion | 2,525,552 | 2,562,394 | |||||||||
| Other Long-term Liabilities | 255,491 | 237,590 | |||||||||
| Deferred Income Taxes | 233,135 | 235,410 | |||||||||
| Commitments and Contingencies | |||||||||||
| Redeemable Noncontrolling Interests | 179,222 | 177,947 | |||||||||
| Equity: | |||||||||||
| Iron Mountain Incorporated Stockholders' 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 293,085,683 and 292,142,739 shares as of March 31, 2024 and December 31, 2023, respectively) | 2,931 | 2,921 | |||||||||
| Additional paid-in capital | 4,518,644 | 4,533,691 | |||||||||
| (Distributions in excess of earnings) Earnings in excess of distributions | (4,074,243) | (3,953,808) | |||||||||
| Accumulated other comprehensive items, net | (428,797) | (371,156) | |||||||||
| Total Iron Mountain Incorporated Stockholders' Equity | 18,535 | 211,648 | |||||||||
| Noncontrolling Interests | 125 | 125 | |||||||||
| Total Equity | 18,660 | 211,773 | |||||||||
| Total Liabilities and Equity | $ | 17,829,556 | $ | 17,473,802 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| IRON MOUNTAIN MARCH 31, 2024 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, | |||||||||||
| 2024 | 2023 | ||||||||||
| Revenues: | |||||||||||
| Storage rental | $ | 884,842 | $ | 810,089 | |||||||
| Service | 592,021 | 504,260 | |||||||||
| Total Revenues | 1,476,863 | 1,314,349 | |||||||||
| Operating Expenses: | |||||||||||
| Cost of sales (excluding depreciation and amortization) | 653,255 | 571,626 | |||||||||
| Selling, general and administrative | 319,465 | 294,520 | |||||||||
| Depreciation and amortization | 209,555 | 182,094 | |||||||||
| Acquisition and Integration Costs | 7,809 | 1,595 | |||||||||
| Restructuring and other transformation | 40,767 | 36,913 | |||||||||
| Loss (gain) on disposal/write-down of property, plant and equipment, net | 389 | (13,061) | |||||||||
| Total Operating Expenses | 1,231,240 | 1,073,687 | |||||||||
| Operating Income (Loss) | 245,623 | 240,662 | |||||||||
| Interest Expense, Net (includes Interest Income of $3,660 and $2,907 for the three months ended March 31, 2024 and 2023, respectively) | 164,519 | 137,169 | |||||||||
| Other (Income) Expense, Net | (12,530) | 21,200 | |||||||||
| Net Income (Loss) Before Provision (Benefit) for Income Taxes | 93,634 | 82,293 | |||||||||
| Provision (Benefit) for Income Taxes | 16,609 | 16,758 | |||||||||
| Net Income (Loss) | 77,025 | 65,535 | |||||||||
| Less: Net Income (Loss) Attributable to Noncontrolling Interests | 2,964 | 940 | |||||||||
| Net Income (Loss) Attributable to Iron Mountain Incorporated | $ | 74,061 | $ | 64,595 | |||||||
| Net Income (Loss) Per Share Attributable to Iron Mountain Incorporated: | |||||||||||
| Basic | $ | 0.25 | $ | 0.22 | |||||||
| Diluted | $ | 0.25 | $ | 0.22 | |||||||
| Weighted Average Common Shares Outstanding—Basic | 292,746 | 291,442 | |||||||||
| Weighted Average Common Shares Outstanding—Diluted | 295,221 | 293,049 | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| IRON MOUNTAIN MARCH 31, 2024 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, | |||||||||||
| 2024 | 2023 | ||||||||||
| Net Income (Loss) | $ | 77,025 | $ | 65,535 | |||||||
| Other Comprehensive (Loss) Income: | |||||||||||
| Foreign Currency Translation Adjustment | (67,269) | 40,226 | |||||||||
| Change in Fair Value of Derivative Instruments | 11,388 | (3,442) | |||||||||
| Reclassifications from Accumulated Other Comprehensive Items, net | (2,528) | — | |||||||||
| Total Other Comprehensive (Loss) Income: | (58,409) | 36,784 | |||||||||
| Comprehensive Income (Loss) | 18,616 | 102,319 | |||||||||
| Comprehensive Income (Loss) Attributable to Noncontrolling Interests | 2,196 | 1,489 | |||||||||
| Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated | $ | 16,420 | $ | 100,830 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| IRON MOUNTAIN MARCH 31, 2024 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, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 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, 2023 | $ | 211,773 | 292,142,739 | $ | 2,921 | $ | 4,533,691 | $ | (3,953,808) | $ | (371,156) | $ | 125 | $ | 177,947 | |||||||||||||||||||||||||||||||||||
| Issuance and net settlement of shares under employee stock purchase plan and option plans and stock-based compensation | (15,459) | 942,944 | 10 | (15,469) | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Changes in equity related to redeemable noncontrolling interests | 422 | — | — | 422 | — | — | — | (422) | ||||||||||||||||||||||||||||||||||||||||||
| Parent cash dividends declared | (194,496) | — | — | — | (194,496) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive (loss) income | (57,641) | — | — | — | — | (57,641) | — | (768) | ||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | 74,061 | — | — | — | 74,061 | — | — | 2,964 | ||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interests dividends | — | — | — | — | — | — | — | (499) | ||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | 18,660 | 293,085,683 | $ | 2,931 | $ | 4,518,644 | $ | (4,074,243) | $ | (428,797) | $ | 125 | $ | 179,222 | |||||||||||||||||||||||||||||||||||
| 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 dividend | — | — | — | — | — | — | — | (1,019) | ||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | 545,589 | 291,584,999 | $ | 2,916 | $ | 4,459,265 | $ | (3,510,949) | $ | (405,768) | $ | 125 | $ | 95,630 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| IRON MOUNTAIN MARCH 31, 2024 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, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash Flows from Operating Activities: | |||||||||||
| Net income (loss) | $ | 77,025 | $ | 65,535 | |||||||
| Adjustments to reconcile net income (loss) to cash flows from operating activities: | |||||||||||
| Depreciation | 143,633 | 120,066 | |||||||||
| Amortization (includes amortization of deferred financing costs and discounts of $6,100 and $4,332 for the three months ended March 31, 2024 and 2023, respectively) | 72,022 | 66,360 | |||||||||
| Revenue reduction associated with amortization of customer inducements and above- and below-market leases | 1,321 | 1,760 | |||||||||
| Stock-based compensation expense | 14,039 | 12,509 | |||||||||
| Provision (benefit) for deferred income taxes | 1,125 | 4,183 | |||||||||
| Loss (gain) on disposal/write-down of property, plant and equipment, net | 389 | (13,061) | |||||||||
| Foreign currency transactions and other, net | (5,091) | 34,435 | |||||||||
| (Increase) decrease in assets | (29,738) | (33,530) | |||||||||
| (Decrease) increase in liabilities | (144,687) | (129,449) | |||||||||
| Cash Flows from Operating Activities | 130,038 | 128,808 | |||||||||
| Cash Flows from Investing Activities: | |||||||||||
| Capital expenditures | (381,145) | (265,906) | |||||||||
| Cash paid for acquisitions, net of cash acquired | (122,479) | (1,094) | |||||||||
| Customer inducements | (2,286) | (1,357) | |||||||||
| Contract costs | (25,304) | (24,014) | |||||||||
| Investments in joint ventures and other investments | — | (15,830) | |||||||||
| Proceeds from sales of property and equipment and other, net | 5,605 | 35,658 | |||||||||
| Cash Flows from Investing Activities | (525,609) | (272,543) | |||||||||
| Cash Flows from Financing Activities: | |||||||||||
| Repayment of revolving credit facility, term loan facilities and other debt | (1,730,252) | (4,649,926) | |||||||||
| Proceeds from revolving credit facility, term loan facilities and other debt | 2,479,378 | 5,008,631 | |||||||||
| Equity distribution to noncontrolling interests | (499) | (1,019) | |||||||||
| Parent cash dividends | (198,013) | (186,514) | |||||||||
| Payment of deferred purchase obligation | (158,677) | — | |||||||||
| Net (payments) proceeds associated with employee stock-based awards | (29,498) | (21,271) | |||||||||
| Other, net | (340) | — | |||||||||
| Cash Flows from Financing Activities | 362,099 | 149,901 | |||||||||
| Effect of Exchange Rates on Cash and Cash Equivalents | 2,338 | (1,521) | |||||||||
| (Decrease) increase in Cash and Cash Equivalents | (31,134) | 4,645 | |||||||||
| Cash and Cash Equivalents, Beginning of Period | 222,789 | 141,797 | |||||||||
| Cash and Cash Equivalents, End of Period | $ | 191,655 | $ | 146,442 | |||||||
| Supplemental Information: | |||||||||||
| Cash Paid for Interest | $ | 274,796 | $ | 204,902 | |||||||
| Cash Paid for Income Taxes, Net | $ | 18,613 | $ | 18,629 | |||||||
| Non-Cash Investing and Financing Activities: | |||||||||||
| Financing Leases and Other | $ | 38,082 | $ | 20,194 | |||||||
| Accrued Capital Expenditures | $ | 210,255 | $ | 207,425 | |||||||
| Deferred Purchase Obligations and Other Deferred Payments | $ | 133,713 | $ | 197,222 | |||||||
| Dividends Payable | $ | 198,875 | $ | 191,030 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| IRON MOUNTAIN MARCH 31, 2024 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. 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, 2023 included in our Annual Report on Form 10-K filed with the SEC on February 22, 2024 (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 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, 2024 is as follows:
| Balance as of December 31, 2023 | $ | 74,762 | ||||||||||||
| Credit memos charged to revenue | 24,035 | |||||||||||||
| Allowance for bad debts charged to expense | 14,338 | |||||||||||||
| Deductions and other(1) | (35,722) | |||||||||||||
| Balance as of March 31, 2024 | $ | 77,413 |
(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, 2024 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, 2024 and December 31, 2023 are as follows:
| DESCRIPTION | MARCH 31, 2024 | DECEMBER 31, 2023 | ||||||||||||
| Assets: | ||||||||||||||
| Operating lease right-of-use assets | $ | 2,677,803 | $ | 2,696,024 | ||||||||||
| Financing lease right-of-use assets, net of accumulated depreciation(1) | 318,753 | 304,600 | ||||||||||||
| Liabilities: | ||||||||||||||
| Current | ||||||||||||||
| Operating lease liabilities | $ | 301,344 | $ | 291,795 | ||||||||||
| Financing lease liabilities(1) | 39,973 | 39,089 | ||||||||||||
| Long-term | ||||||||||||||
| Operating lease liabilities | $ | 2,525,552 | $ | 2,562,394 | ||||||||||
| Financing lease liabilities(1) | 323,653 | 310,776 |
(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, 2024 and 2023 are as follows:
| THREE MONTHS ENDED MARCH 31, | ||||||||||||||||||||||||||
| DESCRIPTION | 2024 | 2023 | ||||||||||||||||||||||||
| Operating lease cost(1) | $ | 171,746 | $ | 155,873 | ||||||||||||||||||||||
| Financing lease cost: | ||||||||||||||||||||||||||
| Depreciation of financing lease right-of-use assets | $ | 10,944 | $ | 10,008 | ||||||||||||||||||||||
| Interest expense for financing lease liabilities | 5,221 | 4,341 |
(1)Operating lease cost, the majority of which is included in Cost of sales, includes variable lease costs of $38,094 and $31,580 for the three months ended March 31, 2024 and 2023, respectively.
Other information: Supplemental cash flow information relating to our leases for the three months ended March 31, 2024 and 2023 is as follows:
| THREE MONTHS ENDED MARCH 31, | ||||||||||||||
| CASH PAID FOR AMOUNTS INCLUDED IN MEASUREMENT OF LEASE LIABILITIES: | 2024 | 2023 | ||||||||||||
| Operating cash flows used in operating leases | $ | 117,336 | $ | 108,723 | ||||||||||
| Operating cash flows used in financing leases (interest) | 5,221 | 4,341 | ||||||||||||
| Financing cash flows used in financing leases | 10,679 | 11,714 | ||||||||||||
| NON-CASH ITEMS: | ||||||||||||||
| Operating lease modifications and reassessments | $ | (262) | $ | 18,163 | ||||||||||
| New operating leases (including acquisitions and sale-leaseback transactions) | 64,556 | 113,853 |
| IRON MOUNTAIN MARCH 31, 2024 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, 2023 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 and Corporate and Other (as defined in Note 9) for the three months ended March 31, 2024 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, 2023 | $ | 3,911,945 | $ | 478,930 | $ | 627,037 | $ | 5,017,912 | |||||||||||||||||||||
| Tax deductible goodwill acquired during the period | — | — | 131,695 | 131,695 | |||||||||||||||||||||||||
| Fair value and other adjustments | 143 | (186) | — | (43) | |||||||||||||||||||||||||
| Currency effects | (38,502) | (2,995) | (594) | (42,091) | |||||||||||||||||||||||||
| Goodwill balance, net of accumulated amortization, as of March 31, 2024 | $ | 3,873,586 | $ | 475,749 | $ | 758,138 | $ | 5,107,473 | |||||||||||||||||||||
| Accumulated goodwill impairment balance as of March 31, 2024 | $ | 132,409 | $ | — | $ | 26,011 | $ | 158,420 |
| IRON MOUNTAIN MARCH 31, 2024 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, 2024 and December 31, 2023 are as follows:
| FAIR VALUE MEASUREMENTS AT MARCH 31, 2024 USING | ||||||||||||||||||||||||||
| DESCRIPTION | TOTAL CARRYING VALUE AT MARCH 31, 2024 | QUOTED PRICES IN ACTIVE MARKETS (LEVEL 1) | SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2) | SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)****(2) | ||||||||||||||||||||||
| Money Market Funds | $ | 6,027 | $ | — | $ | 6,027 | $ | — | ||||||||||||||||||
| Time Deposits | 32,014 | — | 32,014 | — | ||||||||||||||||||||||
| Trading Securities | 10,662 | 6,783 | 3,879 | — | ||||||||||||||||||||||
| Derivative Assets | 20,290 | — | 20,290 | — | ||||||||||||||||||||||
| Deferred Purchase Obligations(1) | 113,471 | — | — | 113,471 | ||||||||||||||||||||||
| FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2023 USING | ||||||||||||||||||||||||||
| DESCRIPTION | TOTAL CARRYING VALUE AT DECEMBER 31, 2023 | QUOTED PRICES IN ACTIVE MARKETS (LEVEL 1) | SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2) | SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)****(2) | ||||||||||||||||||||||
| Money Market Funds | $ | 68,008 | $ | — | $ | 68,008 | $ | — | ||||||||||||||||||
| Time Deposits | 15,913 | — | 15,913 | — | ||||||||||||||||||||||
| Trading Securities | 9,952 | 6,149 | 3,803 | — | ||||||||||||||||||||||
| Derivative Assets | 6,359 | — | 6,359 | — | ||||||||||||||||||||||
| Derivative Liabilities | 5,769 | — | 5,769 | — | ||||||||||||||||||||||
| Deferred Purchase Obligations(1) | 208,265 | — | — | 208,265 |
(1)Primarily relates to the fair values of the deferred purchase obligations associated with the ITRenew Transaction (as defined in Note 3 to Notes to Consolidated Financial Statements included in our Annual Report) and the Regency Transaction (as defined in Note 3).
(2)The following is a rollforward of the Level 3 liabilities presented above for December 31, 2023 through March 31, 2024:
| Balance as of December 31, 2023 | $ | 208,265 | |||||||||||||||
| Additions | 63,600 | ||||||||||||||||
| Payments | (158,677) | ||||||||||||||||
| Other changes, including accretion | 283 | ||||||||||||||||
| Balance as of March 31, 2024 | $ | 113,471 |
The level 3 valuations of the deferred purchase obligations were determined utilizing Monte-Carlo models and take into account our forecasted projections as they relate to the underlying performance of the respective businesses. The Monte-Carlo simulation model applied in assessing the fair value of the deferred purchase obligation associated with the ITRenew Transaction incorporates assumptions as to expected gross profits over the 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 arrangement and overall market risks. The Monte-Carlo simulation model applied in assessing the fair value of the deferred purchase obligation associated with the Regency Transaction incorporates assumptions as to expected revenue over the achievement period, including adjustments for volatility and timing, as well as discount rates that account for the risk of the arrangement and overall market risks. Any material change to these assumptions may result in a significantly higher or lower fair value of the related deferred purchase obligation.
There were no material items that were measured at fair value on a non-recurring basis at March 31, 2024 and December 31, 2023 other than (i) those disclosed in Note 2.p. to Notes to Consolidated Financial Statements included in our Annual Report and (ii) assets acquired and liabilities assumed through our acquisitions that occurred during the three months ended March 31, 2024 (see Note 3), both of which are based on Level 3 inputs.
| IRON MOUNTAIN MARCH 31, 2024 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, 2024 and 2023 are as follows:
| THREE MONTHS ENDED MARCH 31, 2024 | THREE MONTHS ENDED MARCH 31, 2023 | ||||||||||||||||||||||||||||||||||
| FOREIGN CURRENCY TRANSLATION AND OTHER ADJUSTMENTS | DERIVATIVE FINANCIAL INSTRUMENTS | TOTAL | FOREIGN CURRENCY TRANSLATION AND OTHER ADJUSTMENTS | DERIVATIVE FINANCIAL INSTRUMENTS | TOTAL | ||||||||||||||||||||||||||||||
| Beginning of Period | $ | (373,628) | $ | 2,472 | $ | (371,156) | $ | (454,509) | $ | 12,506 | $ | (442,003) | |||||||||||||||||||||||
| Other comprehensive (loss) income: | |||||||||||||||||||||||||||||||||||
| Foreign currency translation and other adjustments | (66,501) | — | (66,501) | 39,677 | — | 39,677 | |||||||||||||||||||||||||||||
| Change in fair value of derivative instruments | — | 11,388 | 11,388 | — | (3,442) | (3,442) | |||||||||||||||||||||||||||||
| Reclassifications from accumulated other comprehensive items, net | — | (2,528) | (2,528) | — | — | — | |||||||||||||||||||||||||||||
| Total other comprehensive (loss) income | (66,501) | 8,860 | (57,641) | 39,677 | (3,442) | 36,235 | |||||||||||||||||||||||||||||
| End of Period | $ | (440,129) | $ | 11,332 | $ | (428,797) | $ | (414,832) | $ | 9,064 | $ | (405,768) |
G. REVENUES
The costs associated with the initial movement of customer records into physical storage and certain commissions are considered costs to fulfill or obtain customer contracts (collectively, "Contract Costs"). Contract Costs as of March 31, 2024 and December 31, 2023 are as follows:
| MARCH 31, 2024 | DECEMBER 31, 2023 | |||||||||||||||||||||||||||||||||||||
| GROSS CARRYING AMOUNT | ACCUMULATED AMORTIZATION | NET CARRYING AMOUNT | GROSS CARRYING AMOUNT | ACCUMULATED AMORTIZATION | NET CARRYING AMOUNT | |||||||||||||||||||||||||||||||||
| Intake Costs asset | $ | 76,233 | $ | (38,593) | $ | 37,640 | $ | 76,150 | $ | (39,617) | $ | 36,533 | ||||||||||||||||||||||||||
| Commissions asset | 171,254 | (66,803) | 104,451 | 156,639 | (64,279) | 92,360 |
Deferred revenue liabilities are reflected in our Condensed Consolidated Balance Sheets as follows:
| DESCRIPTION | LOCATION IN BALANCE SHEET | MARCH 31, 2024 | DECEMBER 31, 2023 | |||||||||||||||||
| Deferred revenue - Current | Deferred revenue | $ | 332,801 | $ | 325,665 | |||||||||||||||
| Deferred revenue - Long-term | Other Long-term Liabilities | 97,075 | 100,770 |
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 842. Storage rental revenue associated with our Global Data Center Business for the three months ended March 31, 2024 and 2023 is as follows:
| THREE MONTHS ENDED MARCH 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Storage rental revenue | $ | 140,028 | $ | 107,435 |
| IRON MOUNTAIN MARCH 31, 2024 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, 2024 and 2023 is as follows:
| THREE MONTHS ENDED MARCH 31, | |||||||||||||||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | $ | 14,039 | $ | 12,509 | |||||||||||||||||||||||||||||||
In March 2024, we granted approximately 83,100, 582,800 and 444,000 stock options, RSUs and PUs, respectively, under the 2014 Plan (as defined in Note 2.t to Notes to Consolidated Financial Statements included in our Annual Report).
As of March 31, 2024, unrecognized compensation cost related to the unvested portion of our Employee Stock-Based Awards, inclusive of our estimated achievement of the performance metrics, is $132,940.
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").
Acquisition and Integration Costs for the three months ended March 31, 2024 and 2023 are as follows:
| THREE MONTHS ENDED MARCH 31, | |||||||||||||||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||||||||||||||
| Acquisition and Integration Costs | $ | 7,809 | $ | 1,595 | |||||||||||||||||||||||||||||||
J. LOSS (GAIN) ON DISPOSAL/WRITE-DOWN OF PROPERTY, PLANT AND EQUIPMENT, NET
Loss (gain) on disposal/write-down of property, plant and equipment, net for the three months ended March 31, 2024 and 2023 is as follows:
| THREE MONTHS ENDED MARCH 31, | |||||||||||||||||||||||
| 2024 | 2023**(1)** | ||||||||||||||||||||||
| Loss (gain) on disposal/write-down of property, plant and equipment, net | $ | 389 | $ | (13,061) |
(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. The gains recognized during 2023 are the result of our program to monetize a small portion of our industrial assets through sale and sale-leaseback transactions. The terms for these leases 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, 2024 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 (INCOME) EXPENSE, NET
Other (income) expense, net for the three months ended March 31, 2024 and 2023 consists of the following:
| THREE MONTHS ENDED MARCH 31, | |||||||||||||||||||||||
| DESCRIPTION | 2024 | 2023 | |||||||||||||||||||||
| Foreign currency transaction (gains) losses, net | $ | (16,379) | $ | 14,424 | |||||||||||||||||||
| Other, net | 3,849 | 6,776 | |||||||||||||||||||||
| Other (Income) Expense, Net | $ | (12,530) | $ | 21,200 |
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, 2024 and 2023 are as follows:
| THREE MONTHS ENDED MARCH 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Effective Tax Rate(1) | 17.7 | % | 20.4 | % |
(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, 2024 and 2023 were the benefits derived from the dividends paid deduction and the differences in the tax rates to which our foreign earnings are subject.
M. INCOME (LOSS) PER SHARE—BASIC AND DILUTED
The calculations of basic and diluted income (loss) per share for the three months ended March 31, 2024 and 2023 are as follows:
| THREE MONTHS ENDED MARCH 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Net Income (Loss) | $ | 77,025 | $ | 65,535 | |||||||||||||||||||
| Less: Net Income (Loss) Attributable to Noncontrolling Interests | 2,964 | 940 | |||||||||||||||||||||
| Net Income (Loss) Attributable to Iron Mountain Incorporated (utilized in numerator of Earnings Per Share calculation) | $ | 74,061 | $ | 64,595 | |||||||||||||||||||
| Weighted-average shares—basic | 292,746,000 | 291,442,000 | |||||||||||||||||||||
| Effect of dilutive potential stock options | 1,886,000 | 1,216,000 | |||||||||||||||||||||
| Effect of dilutive potential RSUs and PUs | 589,000 | 391,000 | |||||||||||||||||||||
| Weighted-average shares—diluted | 295,221,000 | 293,049,000 | |||||||||||||||||||||
| Net Income (Loss) Per Share Attributable to Iron Mountain Incorporated: | |||||||||||||||||||||||
| Basic | $ | 0.25 | $ | 0.22 | |||||||||||||||||||
| Diluted | $ | 0.25 | $ | 0.22 | |||||||||||||||||||
| Antidilutive stock options, RSUs and PUs excluded from the calculation | 365,764 | 145,730 |
| IRON MOUNTAIN MARCH 31, 2024 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)
3. ACQUISITIONS
REGENCY TECHNOLOGIES
On January 3, 2024, in order to expand our asset lifecycle management ("ALM") business, we acquired 100% of RSR Partners, LLC (doing business as Regency Technologies), an information technology asset disposition services provider with operations throughout the United States, for an initial purchase price of approximately $200,000, with $125,000 paid at closing, funded by borrowings under the Revolving Credit Facility (as defined in Note 6), and the remaining $75,000 (the “January 2025 Payment”) to be paid in January 2025 (the "Regency Transaction"). The present value of the January 2025 Payment is included as a component of Accrued expenses and other current liabilities in our Condensed Consolidated Balance Sheet at March 31, 2024. The agreement for the Regency Transaction also includes a performance-based contingent consideration with a potential earnout range from zero to $200,000 based upon achievement of certain three-year cumulative revenue targets, which would be payable in 2027, if earned (the “Regency Deferred Purchase Obligation”). The preliminary fair value estimate of the Regency Deferred Purchase Obligation as of the date of the acquisition is approximately $78,400. The present value of the Regency Deferred Purchase Obligation is included as a component of Other Long-term Liabilities in our Condensed Consolidated Balance Sheet at March 31, 2024. Subsequent increases or decreases in the fair value estimate of the Regency Deferred Purchase Obligation, as well as the accretion of the discount to present value, will be included as a component of Other (income) expense, net in our Condensed Consolidated Statements of Operations until the deferred purchase obligation is settled or paid. Subsequent to the acquisition, the results of Regency Technologies are included as a component of Corporate and Other.
PRELIMINARY PURCHASE PRICE ALLOCATION
A summary of the cumulative consideration paid and the preliminary allocation of the purchase price paid for all of our acquisitions closed during the three months ended March 31, 2024 is as follows:
| THREE MONTHS ENDED MARCH 31, 2024 | |||||
| Cash Paid (gross of cash acquired) | $ | 125,000 | |||
| Deferred Purchase Obligations, Purchase Price Holdbacks and Other(1) | 133,713 | ||||
| Total Consideration | 258,713 | ||||
| Fair Value of Identifiable Assets Acquired(2) | 155,259 | ||||
| Fair Value of Identifiable Liabilities Acquired | (28,241) | ||||
| Goodwill Initially Recorded(3) | $ | 131,695 |
(1)Consists of the acquisition-date present values of the Regency Deferred Purchase Obligation and the January 2025 Payment.
(2)Assets acquired include a customer and supplier relationship intangible asset, which has a fair value of $108,000 and a weighted average life of approximately 20 years.
(3)Goodwill is primarily attributable to the assembled workforce, expanded market opportunities and costs and other operating synergies anticipated upon the integration of the operations of us and the acquired businesses.
The preliminary purchase price allocations that are not finalized as of March 31, 2024 relate to the final assessment of the fair values of property, plant and equipment and intangible assets associated with the acquisitions we closed during the three months ended March 31, 2024. Any adjustments to our estimates of purchase price allocation will be made in the periods in which the adjustments are determined, and the cumulative effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition dates. Purchase price allocation adjustments recorded during the three months ended March 31, 2024 were not material to our balance sheet or results from operations.
| IRON MOUNTAIN MARCH 31, 2024 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)
4. INVESTMENTS
JOINT VENTURE SUMMARY
Our joint venture with AGC Equity Partners (the "Frankfurt JV") is accounted for as an equity method investment and is presented as a component of Other within Other assets, net in our Condensed Consolidated Balance Sheets. The carrying value and equity interest in the Frankfurt JV at March 31, 2024 and December 31, 2023 is as follows:
| MARCH 31, 2024 | DECEMBER 31, 2023 | |||||||||||||||||||||||||
| CARRYING VALUE | EQUITY INTEREST | CARRYING VALUE | EQUITY INTEREST | |||||||||||||||||||||||
| Frankfurt JV | $ | 55,757 | 20 | % | $ | 57,874 | 20 | % |
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
We utilize interest rate swap agreements designated as cash flow hedges to limit our exposure to changes in interest rates on a portion of our floating rate indebtedness. Certain of our interest rate swap agreements have notional amounts that will increase with the underlying hedged transaction. Under our interest rate swap agreements, we receive variable rate interest payments associated with the notional amount of each interest rate swap, based upon the one-month Secured Overnight Financing Rate, in exchange for the payment of fixed interest rates as specified in the interest rate swap agreements. Our 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.
As of March 31, 2024 and December 31, 2023, we have approximately $1,104,000 and $520,000, respectively, in notional value outstanding on our interest rate swap agreements, with maturity dates ranging from October 2025 through February 2027.
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, 2024 and December 31, 2023, we have approximately $509,200 in notional value outstanding on cross-currency interest rate swaps, with maturity dates ranging from August 2024 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.
| IRON MOUNTAIN MARCH 31, 2024 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 (CONTINUED)
The fair values of derivative instruments recognized in our Condensed Consolidated Balance Sheets at March 31, 2024 and December 31, 2023, by derivative instrument, are as follows:
| MARCH 31, 2024 | DECEMBER 31, 2023 | |||||||||||||||||||||||||
| DERIVATIVE INSTRUMENTS**(1)** | Assets | Liabilities | Assets | Liabilities | ||||||||||||||||||||||
| Cash Flow Hedges*(2)* | ||||||||||||||||||||||||||
| Interest rate swap agreements | $ | 9,716 | $ | — | $ | 1,601 | $ | (3,273) | ||||||||||||||||||
| Net Investment Hedges*(3)* | ||||||||||||||||||||||||||
| Cross-currency swap agreements | 10,574 | — | 4,758 | (2,496) |
(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, 2024, $1,086 is included within Prepaid expenses and other and $19,204 is included within Other assets. As of December 31, 2023, $6,359 is included within Other assets, $2,496 is included within Accrued expenses and other liabilities and $3,273 is included within Other long-term liabilities.
(2)As of March 31, 2024, cumulative net gains recorded within Accumulated other comprehensive items, net associated with our interest rate swap agreements are $11,332.
(3)As of March 31, 2024, cumulative net gains recorded within Accumulated other comprehensive items, net associated with our cross-currency swap agreements are $44,947, which include $34,373 related to the excluded component of our cross-currency swap agreements.
Unrealized gains (losses) recognized in Accumulated other comprehensive items, net during the three months ended March 31, 2024 and 2023, by derivative instrument, are as follows:
| THREE MONTHS ENDED MARCH 31, | ||||||||||||||||||||||||||
| DERIVATIVE INSTRUMENTS | 2024 | 2023 | ||||||||||||||||||||||||
| Cash Flow Hedges | ||||||||||||||||||||||||||
| Interest rate swap agreements | $ | 11,388 | $ | (3,442) | ||||||||||||||||||||||
| Net Investment Hedges | ||||||||||||||||||||||||||
| Cross-currency swap agreements | 8,312 | (8,803) | ||||||||||||||||||||||||
| Cross-currency swap agreements (excluded component) | 4,176 | 5,834 |
Gains (losses) recognized in Net income (loss) during the three months ended March 31, 2024 and 2023, by derivative instrument, are as follows:
| THREE MONTHS ENDED MARCH 31, | |||||||||||||||||||||||||||||
| DERIVATIVE INSTRUMENTS | Location of gain (loss) | 2024 | 2023 | ||||||||||||||||||||||||||
| Cash Flow Hedges | |||||||||||||||||||||||||||||
| Interest rate swap agreements | Interest expense | $ | 2,528 | $ | — | ||||||||||||||||||||||||
| Net Investment Hedges | |||||||||||||||||||||||||||||
| Cross-currency swap agreements (excluded component) | Interest expense | (4,176) | (5,834) |
| IRON MOUNTAIN MARCH 31, 2024 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)
6. DEBT
Long-term debt is as follows:
| MARCH 31, 2024 | DECEMBER 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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) | $ | 660,000 | $ | (4,265) | $ | 655,735 | $ | 660,000 | $ | — | $ | (4,621) | $ | (4,621) | $ | — | |||||||||||||||||||||||||||||||||||||
| Term Loan A(1) | 225,000 | — | 225,000 | 225,000 | 228,125 | — | 228,125 | 228,125 | |||||||||||||||||||||||||||||||||||||||||||||
| Term Loan B due 2026(1) | 657,605 | (2,186) | 655,419 | 658,000 | 659,298 | (2,498) | 656,800 | 659,750 | |||||||||||||||||||||||||||||||||||||||||||||
| Term Loan B due 2031(1) | 1,188,318 | (12,610) | 1,175,708 | 1,197,000 | 1,191,000 | (13,026) | 1,177,974 | 1,200,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Virginia 3 Term Loans(2) | 165,555 | (4,206) | 161,349 | 165,555 | 101,218 | (4,641) | 96,577 | 101,218 | |||||||||||||||||||||||||||||||||||||||||||||
| Virginia 4/5 Term Loans(2) | 49,994 | (5,089) | 44,905 | 49,994 | 16,338 | (5,892) | 10,446 | 16,338 | |||||||||||||||||||||||||||||||||||||||||||||
| Australian Dollar Term Loan(2) | 188,064 | (426) | 187,638 | 189,327 | 197,743 | (482) | 197,261 | 199,195 | |||||||||||||||||||||||||||||||||||||||||||||
| UK Bilateral Revolving Credit Facility(2) | 176,737 | — | 176,737 | 176,737 | 178,239 | — | 178,239 | 178,239 | |||||||||||||||||||||||||||||||||||||||||||||
| GBP Notes(2) | 504,963 | (1,510) | 503,453 | 487,809 | 509,254 | (1,763) | 507,491 | 489,108 | |||||||||||||||||||||||||||||||||||||||||||||
| 47/8% Notes due 2027(2) | 1,000,000 | (4,976) | 995,024 | 960,000 | 1,000,000 | (5,332) | 994,668 | 967,500 | |||||||||||||||||||||||||||||||||||||||||||||
| 51/4% Notes due 2028(2) | 825,000 | (4,724) | 820,276 | 794,063 | 825,000 | (5,019) | 819,981 | 800,250 | |||||||||||||||||||||||||||||||||||||||||||||
| 5% Notes due 2028(2) | 500,000 | (3,135) | 496,865 | 476,250 | 500,000 | (3,316) | 496,684 | 478,750 | |||||||||||||||||||||||||||||||||||||||||||||
| 7% Notes due 2029(2) | 1,000,000 | (10,281) | 989,719 | 1,015,000 | 1,000,000 | (10,813) | 989,187 | 1,027,500 | |||||||||||||||||||||||||||||||||||||||||||||
| 47/8% Notes due 2029(2) | 1,000,000 | (7,956) | 992,044 | 932,500 | 1,000,000 | (8,318) | 991,682 | 945,000 | |||||||||||||||||||||||||||||||||||||||||||||
| 51/4% Notes due 2030(2) | 1,300,000 | (9,527) | 1,290,473 | 1,225,250 | 1,300,000 | (9,903) | 1,290,097 | 1,241,500 | |||||||||||||||||||||||||||||||||||||||||||||
| 41/2% Notes(2) | 1,100,000 | (8,607) | 1,091,393 | 987,250 | 1,100,000 | (8,917) | 1,091,083 | 995,500 | |||||||||||||||||||||||||||||||||||||||||||||
| 5% Notes due 2032(2) | 750,000 | (10,880) | 739,120 | 682,500 | 750,000 | (11,206) | 738,794 | 684,375 | |||||||||||||||||||||||||||||||||||||||||||||
| 55/8% Notes(2) | 600,000 | (4,840) | 595,160 | 567,000 | 600,000 | (4,985) | 595,015 | 567,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Real Estate Mortgages, Financing Lease Liabilities and Other | 552,265 | (678) | 551,587 | 552,265 | 519,907 | (403) | 519,504 | 519,907 | |||||||||||||||||||||||||||||||||||||||||||||
| Accounts Receivable Securitization Program | 360,000 | (265) | 359,735 | 360,000 | 358,500 | (317) | 358,183 | 358,183 | |||||||||||||||||||||||||||||||||||||||||||||
| Total Long-term Debt | 12,803,501 | (96,161) | 12,707,340 | 12,034,622 | (101,452) | 11,933,170 | |||||||||||||||||||||||||||||||||||||||||||||||
| Less Current Portion | (118,771) | — | (118,771) | (120,670) | — | (120,670) | |||||||||||||||||||||||||||||||||||||||||||||||
| Long-term Debt, Net of Current Portion | $ | 12,684,730 | $ | (96,161) | $ | 12,588,569 | $ | 11,913,952 | $ | (101,452) | $ | 11,812,500 |
(1)Collectively, the “Credit Agreement”. The Credit Agreement consists of a revolving credit facility (the “Revolving Credit Facility”), a term loan A facility (the “Term Loan A”) and two term loan B facilities (the "Term Loan B due 2026" and the "Term Loan B due 2031"). The Revolving Credit Facility and the Term Loan A are scheduled to mature on March 18, 2027. The Term Loan B due 2026 is scheduled to mature on January 2, 2026. The Term Loan B due 2031 is scheduled to mature on January 31, 2031. The remaining amount available for borrowing under the Revolving Credit Facility as of March 31, 2024 was $1,585,174 (which represents the maximum availability as of such date). The weighted average interest rate in effect under the Revolving Credit Facility was 7.3% as of March 31, 2024.
(2)Each as defined in Note 7 to Notes to Consolidated Financial Statements included in our Annual Report.
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, which are consistent with the levels of the fair value hierarchy used to determine the fair value of our debt as of March 31, 2024).
LETTERS OF CREDIT
As of March 31, 2024, we had outstanding letters of credit totaling $38,796, of which $4,826 reduce our borrowing capacity under the Revolving Credit Facility. The letters of credit expire at various dates between May 2024 and April 2025.
| IRON MOUNTAIN MARCH 31, 2024 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 (CONTINUED)
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, 2024. 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 $15,000 over the next several years, of which certain amounts would be covered by insurance or indemnity arrangement.
8. STOCKHOLDERS' EQUITY MATTERS
In fiscal year 2023 and the three months ended March 31, 2024, our board of directors declared the following dividends:
| DECLARATION DATE | DIVIDEND PER SHARE | RECORD DATE | TOTAL AMOUNT | PAYMENT DATE | |||||||||||||||||||
| February 23, 2023 | $ | 0.6185 | March 15, 2023 | $ | 180,339 | April 5, 2023 | |||||||||||||||||
| May 4, 2023 | 0.6185 | June 15, 2023 | 180,493 | July 6, 2023 | |||||||||||||||||||
| August 3, 2023 | 0.6500 | September 15, 2023 | 189,730 | October 5, 2023 | |||||||||||||||||||
| November 2, 2023 | 0.6500 | December 15, 2023 | 189,886 | January 4, 2024 | |||||||||||||||||||
| February 22, 2024 | 0.6500 | March 15, 2024 | 190,506 | April 4, 2024 | |||||||||||||||||||
On May 2, 2024, we declared a dividend to our stockholders of record as of June 17, 2024 of $0.65 per share, payable on July 5, 2024.
| IRON MOUNTAIN MARCH 31, 2024 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)
9. SEGMENT INFORMATION
Our reportable segments as of December 31, 2023 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
The remaining activities of our business consist primarily of our Fine Arts and ALM businesses and other corporate items ("Corporate and Other").
The operations associated with acquisitions completed during the first three months of 2024 have been incorporated into our existing reportable segments.
An analysis of our business segment information and reconciliation to the accompanying Condensed Consolidated Financial Statements for the three months ended March 31, 2024 and 2023 is as follows:
| THREE MONTHS ENDED MARCH 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Global RIM Business | |||||||||||||||||||||||
| Total Revenues | $ | 1,210,157 | $ | 1,126,526 | |||||||||||||||||||
| Adjusted EBITDA | 526,268 | 477,784 | |||||||||||||||||||||
| Global Data Center Business | |||||||||||||||||||||||
| Total Revenues | $ | 143,937 | $ | 112,305 | |||||||||||||||||||
| Adjusted EBITDA | 61,568 | 50,635 | |||||||||||||||||||||
| Corporate and Other | |||||||||||||||||||||||
| Total Revenues | $ | 122,769 | $ | 75,518 | |||||||||||||||||||
| Adjusted EBITDA | (68,981) | (67,611) | |||||||||||||||||||||
| Total Consolidated | |||||||||||||||||||||||
| Total Revenues | $ | 1,476,863 | $ | 1,314,349 | |||||||||||||||||||
| Adjusted EBITDA | 518,855 | 460,808 |
| IRON MOUNTAIN MARCH 31, 2024 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)
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 •Loss (gain) on disposal/write-down of property, plant and equipment, net (including real estate) | •Other (income) expense, 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, 2024 and 2023 is as follows:
| THREE MONTHS ENDED MARCH 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Net Income (Loss) | $ | 77,025 | $ | 65,535 | |||||||||||||||||||
| Add/(Deduct): | |||||||||||||||||||||||
| Interest expense, net | 164,519 | 137,169 | |||||||||||||||||||||
| Provision (benefit) for income taxes | 16,609 | 16,758 | |||||||||||||||||||||
| Depreciation and amortization | 209,555 | 182,094 | |||||||||||||||||||||
| Acquisition and Integration Costs | 7,809 | 1,595 | |||||||||||||||||||||
| Restructuring and other transformation | 40,767 | 36,913 | |||||||||||||||||||||
| Loss (gain) on disposal/write-down of property, plant and equipment, net (including real estate) | 389 | (13,061) | |||||||||||||||||||||
| Other (income) expense, net, excluding our share of losses (gains) from our unconsolidated joint ventures | (13,110) | 17,491 | |||||||||||||||||||||
| Stock-based compensation expense | 14,039 | 12,509 | |||||||||||||||||||||
| Our share of Adjusted EBITDA reconciling items from our unconsolidated joint ventures | 1,253 | 3,805 | |||||||||||||||||||||
| Adjusted EBITDA | $ | 518,855 | $ | 460,808 |
| IRON MOUNTAIN MARCH 31, 2024 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)
Information as to our revenues by product and service lines by segment for the three months ended March 31, 2024 and 2023 is as follows:
| THREE MONTHS ENDED MARCH 31, | ||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| Global RIM Business | ||||||||||||||||||||||||||
| Records Management(1) | $ | 936,652 | $ | 867,988 | ||||||||||||||||||||||
| Data Management(1) | 132,050 | 129,594 | ||||||||||||||||||||||||
| Information Destruction(1)(2) | 141,455 | 128,944 | ||||||||||||||||||||||||
| Data Center(1) | — | — | ||||||||||||||||||||||||
| Global Data Center Business | ||||||||||||||||||||||||||
| Records Management(1) | $ | — | $ | — | ||||||||||||||||||||||
| Data Management(1) | — | — | ||||||||||||||||||||||||
| Information Destruction(1) | — | — | ||||||||||||||||||||||||
| Data Center(1) | 143,937 | 112,305 | ||||||||||||||||||||||||
| Corporate and Other | ||||||||||||||||||||||||||
| Records Management(1) | $ | 39,072 | $ | 34,348 | ||||||||||||||||||||||
| Data Management(1) | — | — | ||||||||||||||||||||||||
| Information Destruction(1)(3) | 83,697 | 41,170 | ||||||||||||||||||||||||
| Data Center(1) | — | — | ||||||||||||||||||||||||
| Total Consolidated | ||||||||||||||||||||||||||
| Records Management(1) | $ | 975,724 | $ | 902,336 | ||||||||||||||||||||||
| Data Management(1) | 132,050 | 129,594 | ||||||||||||||||||||||||
| Information Destruction(1)(2)(3) | 225,152 | 170,114 | ||||||||||||||||||||||||
| Data Center(1) | 143,937 | 112,305 | ||||||||||||||||||||||||
(1)Each of these offerings has a component of revenue that is storage rental related and a component that is service related, except for information destruction, which does not have a storage rental component.
(2)Information destruction revenue for our Global RIM Business includes secure shredding services.
(3)Information destruction revenue for Corporate and Other includes product revenue from our ALM business.
| IRON MOUNTAIN MARCH 31, 2024 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)
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 February 2022, we entered into a storage and service agreement with the joint venture formed by Clutter, Inc. and us (the "Clutter JV") to provide certain storage and related services to the Clutter JV (the "Clutter Agreement"). On June 29, 2023, we completed the Clutter Acquisition (as defined in Note 3 to Notes to Consolidated Financial Statements included in our Annual Report) and terminated the Clutter Agreement.
Revenue recognized in the accompanying Condensed Consolidated Statements of Operations under these agreements for the three months ended March 31, 2024 and 2023 is as follows (approximately):
| THREE MONTHS ENDED MARCH 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Frankfurt JV Agreements(1) | $ | 400 | $ | 900 | |||||||||||||||||||
| Clutter Agreement(2) | — | 6,000 |
(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 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. Project Matterhorn investments focus on transforming our operating model to a global operating model. Project Matterhorn focuses 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 are 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.
Restructuring and other transformation related to Project Matterhorn included in the accompanying Condensed Consolidated Statement of Operations for the three months ended March 31, 2024 and 2023 and from the inception of Project Matterhorn through March 31, 2024 is as follows:
| THREE MONTHS ENDED MARCH 31, 2024 | THREE MONTHS ENDED MARCH 31, 2023 | FROM INCEPTION OF PROJECT MATTERHORN THROUGH MARCH 31, 2024 | |||||||||||||||
| Restructuring | $ | 10,726 | $ | 11,957 | $ | 81,337 | |||||||||||
| Other transformation | 30,041 | 24,956 | 176,578 | ||||||||||||||
| Restructuring and other transformation | $ | 40,767 | $ | 36,913 | $ | 257,915 |
| IRON MOUNTAIN MARCH 31, 2024 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)
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, 2024 and 2023 and from the inception of Project Matterhorn through March 31, 2024 is as follows:
| THREE MONTHS ENDED MARCH 31, 2024 | THREE MONTHS ENDED MARCH 31, 2023 | FROM INCEPTION OF PROJECT MATTERHORN THROUGH MARCH 31, 2024 | |||||||||||||||
| Global RIM Business | $ | 10,141 | $ | 9,525 | $ | 69,946 | |||||||||||
| Global Data Center Business | 4 | 78 | 524 | ||||||||||||||
| Corporate and Other | 581 | 2,354 | 10,867 | ||||||||||||||
| Total restructuring costs | $ | 10,726 | $ | 11,957 | $ | 81,337 |
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, 2024 and 2023 and from the inception of Project Matterhorn through March 31, 2024 is as follows:
| THREE MONTHS ENDED MARCH 31, 2024 | THREE MONTHS ENDED MARCH 31, 2023 | FROM INCEPTION OF PROJECT MATTERHORN THROUGH MARCH 31, 2024 | |||||||||||||||
| Global RIM Business | $ | 8,970 | $ | 3,485 | $ | 41,240 | |||||||||||
| Global Data Center Business | 1,391 | 870 | 6,413 | ||||||||||||||
| Corporate and Other | 19,680 | 20,601 | 128,925 | ||||||||||||||
| Total other transformation costs | $ | 30,041 | $ | 24,956 | $ | 176,578 |
The rollforward of the accrued restructuring costs and accrued other transformation costs, which are included as components of Accrued expenses and other current liabilities in our Condensed Consolidated Balance Sheets, for December 31, 2023 through March 31, 2024 is as follows:
| RESTRUCTURING | OTHER TRANSFORMATION | TOTAL RESTRUCTURING AND OTHER TRANSFORMATION | |||||||||||||||
| Balance as of December 31, 2023 | $ | 10,731 | $ | 24,854 | $ | 35,585 | |||||||||||
| Amount accrued | 10,726 | 30,041 | 40,767 | ||||||||||||||
| Payments | (13,321) | (38,241) | (51,562) | ||||||||||||||
| Balance as of March 31, 2024 | $ | 8,136 | $ | 16,654 | $ | 24,790 |
| IRON MOUNTAIN MARCH 31, 2024 FORM 10-Q | 23 |
Part I. Financial Information
Previous: Cover and table of contents · Next: Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS