NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Share and Per Share Data)
(Unaudited)
(1) General
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. Iron Mountain Incorporated, a Delaware corporation ("IMI"), and its subsidiaries ("we" or "us") provide storage of physical records and data backup media, information management solutions and enterprise-class colocation and wholesale data center space that help organizations in various locations throughout North America, Europe, Latin America, Asia and Africa. We offer comprehensive records and information management services and data management services, along with the expertise and experience to address complex storage and information management challenges such as rising storage rental costs, legal and regulatory compliance and disaster recovery requirements. We provide secure and reliable data center facilities to protect digital information and ensure the continued operation of our customers’ information technology infrastructure, with flexible deployment options, including both colocation and wholesale space.
The unaudited condensed consolidated financial statements 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 ("GAAP") 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 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, 2018 included in our Annual Report on Form 10-K filed with the SEC on February 14, 2019 (our "Annual Report").
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.
On January 10, 2018, we completed the acquisition of IO Data Centers, LLC ("IODC") (the "IODC Transaction"). See Note 3.
On January 1, 2019, we adopted Accounting Standards Update ("ASU") No. 2016-02,
Leases (Topic 842),
as amended ("ASU 2016-02"). See Note 2.d.
(2) Summary of Significant Accounting Policies
This Note 2 to Notes to Condensed Consolidated Financial Statements provides information and disclosure regarding certain of our significant accounting policies and should be read in conjunction with Note 2 to Notes to Consolidated Financial Statements included in our Annual Report, which may provide additional information with regard to the accounting policies set forth herein and other of our significant accounting policies.
a. Cash, Cash Equivalents and Restricted Cash
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.
At March 31, 2019 and December 31, 2018, we had approximately
$15,250
and
$15,141
, respectively, of restricted cash held by certain financial institutions related to bank guarantees.
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)
b. Goodwill and Other Intangible Assets and Liabilities
Goodwill
Since December 31, 2018, there have been no changes to our accounting polices related to the accounting for goodwill. As of March 31, 2019 and
December 31, 2018
, no factors were identified that would alter our October 1, 2018 goodwill impairment analysis.
Our reporting units as of December 31, 2018 are described in detail in Note 2.h. to Notes to Consolidated Financial Statements included in our Annual Report. On March 19, 2019, we divested the business included in our former Consumer Storage reporting unit, which had no goodwill associated with it at December 31, 2018 or at the date of the divestment. See Note 9 for additional information.
The goodwill associated with acquisitions completed during the first three months of 2019 (which are described in Note 3) has been incorporated into our reporting units as they existed as of December 31, 2018.
The changes in the carrying value of goodwill attributable to each reportable operating segment for the
three
months ended
March 31, 2019
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American
Records and Information
Management
Business
|
|
North American
Data
Management
Business
|
|
Western
European Business
|
|
Other International Business
|
|
Global Data Center Business
|
|
Corporate and Other Business
|
|
Total
Consolidated
|
Goodwill balance, net of accumulated amortization as of December 31, 2018
|
$
|
2,251,795
|
|
|
$
|
493,491
|
|
|
$
|
381,806
|
|
|
$
|
818,223
|
|
|
$
|
425,956
|
|
|
$
|
69,759
|
|
|
$
|
4,441,030
|
|
Deductible goodwill acquired during the year
|
5,501
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,501
|
|
Non-deductible goodwill acquired during the year
|
—
|
|
|
—
|
|
|
4,991
|
|
|
3,767
|
|
|
—
|
|
|
1,874
|
|
|
10,632
|
|
Fair value and other adjustments(1)
|
31
|
|
|
—
|
|
|
92
|
|
|
3,350
|
|
|
(871
|
)
|
|
(468
|
)
|
|
2,134
|
|
Currency effects
|
3,921
|
|
|
1,067
|
|
|
1,393
|
|
|
1,126
|
|
|
(1,566
|
)
|
|
140
|
|
|
6,081
|
|
Goodwill balance, net accumulated amortization as of March 31, 2019
|
$
|
2,261,248
|
|
|
$
|
494,558
|
|
|
$
|
388,282
|
|
|
$
|
826,466
|
|
|
$
|
423,519
|
|
|
$
|
71,305
|
|
|
$
|
4,465,378
|
|
Accumulated Goodwill Impairment Balance as of December 31, 2018
|
$
|
85,909
|
|
|
$
|
—
|
|
|
$
|
46,500
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,011
|
|
|
$
|
135,420
|
|
Accumulated Goodwill Impairment Balance as of March 31, 2019
|
$
|
85,909
|
|
|
$
|
—
|
|
|
$
|
46,500
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,011
|
|
|
$
|
135,420
|
|
_______________________________________________________________________________
|
|
(1)
|
Total fair value and other adjustments primarily include
$2,565
in net adjustments related to property, plant and equipment, customer relationships and data center lease-based intangible assets and deferred income taxes and other liabilities offset by
$431
of cash received related to certain acquisitions completed in 2018.
|
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)
Finite-lived Intangible Assets and Liabilities
Finite-lived intangible assets and liabilities are primarily comprised of customer relationship intangible assets, customer inducements and data center intangible assets and liabilities (which include data center in-place lease intangible assets, data center tenant relationship intangible assets, data center above-market in-place lease intangible assets and data center below-market in-place lease intangible assets). Since December 31, 2018, there have been no changes to our accounting policies related to the accounting for any of our finite-lived intangible assets and liabilities as disclosed in Note 2.i. to Notes to Consolidated Financial Statements included in our Annual Report.
The gross carrying amount and accumulated amortization of our finite-lived intangible assets as of March 31, 2019 and December 31, 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationship intangible assets
|
$
|
1,754,794
|
|
|
$
|
(482,971
|
)
|
|
$
|
1,271,823
|
|
|
$
|
1,718,919
|
|
|
$
|
(455,705
|
)
|
|
$
|
1,263,214
|
|
Customer inducements
|
51,405
|
|
|
(28,711
|
)
|
|
22,694
|
|
|
56,478
|
|
|
(34,181
|
)
|
|
22,297
|
|
Data center lease-based intangible assets(1)
|
265,834
|
|
|
(65,013
|
)
|
|
200,821
|
|
|
271,818
|
|
|
(50,807
|
)
|
|
221,011
|
|
Third-party commissions asset(2)
|
30,861
|
|
|
(737
|
)
|
|
30,124
|
|
|
30,071
|
|
|
(1,089
|
)
|
|
28,982
|
|
|
$
|
2,102,894
|
|
|
$
|
(577,432
|
)
|
|
$
|
1,525,462
|
|
|
$
|
2,077,286
|
|
|
$
|
(541,782
|
)
|
|
$
|
1,535,504
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Data center below-market leases
|
$
|
12,715
|
|
|
$
|
(2,451
|
)
|
|
$
|
10,264
|
|
|
$
|
12,318
|
|
|
$
|
(1,642
|
)
|
|
$
|
10,676
|
|
_______________________________________________________________________________
|
|
(1)
|
Includes data center in-place lease intangible assets, data center tenant relationship intangible assets and data center above-market in-place lease intangible assets.
|
|
|
(2)
|
Third-party commissions asset is included in Other, a component of Other assets, net in the accompanying Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018. The third-party commissions asset is primarily comprised of additional payments associated with the execution of future customer contracts through the one-year anniversary of the acquisition of IODC, as described in Note 3.
|
Other finite-lived intangible assets, including trade names, noncompetition agreements and trademarks, are capitalized and amortized and are included in depreciation and amortization in the accompanying Condensed Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018. The other finite-lived intangible assets as of March 31, 2019 and December 31, 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
Other finite-lived intangible assets (included in Other, a component of other assets, net)
|
$
|
20,290
|
|
|
$
|
(15,794
|
)
|
|
$
|
4,496
|
|
|
$
|
20,310
|
|
|
$
|
(14,798
|
)
|
|
$
|
5,512
|
|
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)
Amortization expense associated with finite-lived intangible assets, revenue reduction associated with the amortization of customer inducements and net revenue reduction associated with the amortization of data center above-market leases and data center below-market leases for the three months ended March 31, 2019 and 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2019
|
|
2018
|
Amortization expense included in depreciation and amortization associated with:
|
|
|
|
|
Customer relationship and customer inducement intangible assets
|
|
$
|
27,881
|
|
|
$
|
28,806
|
|
Data center in-place leases and tenant relationships
|
|
12,609
|
|
|
10,838
|
|
Third-party commissions asset and other finite-lived intangible assets
|
|
757
|
|
|
1,185
|
|
Revenue reduction associated with amortization of:
|
|
|
|
|
Customer inducements
|
|
$
|
2,740
|
|
|
$
|
2,585
|
|
Data center above-market leases and data center below-market leases
|
|
905
|
|
|
1,079
|
|
c. Revenues
Since December 31, 2018, there have been no changes to our accounting policies related to the accounting for revenues as disclosed in Note 2.l. to Notes to Consolidated Financial Statements included in our Annual Report.
The costs of the initial intake of customer records into physical storage ("Intake Costs") and capitalized commissions asset (collectively, "Contract Fulfillment Costs") as of March 31, 2019 and December 31, 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
Description
|
|
Location in Balance Sheet
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
Intake Costs asset
|
|
Other (within Other Assets, Net)
|
|
$
|
36,155
|
|
|
$
|
(21,041
|
)
|
|
$
|
15,114
|
|
|
$
|
39,748
|
|
|
$
|
(24,504
|
)
|
|
$
|
15,244
|
|
Capitalized commissions asset
|
|
Other (within Other Assets, Net)
|
|
52,485
|
|
|
(24,923
|
)
|
|
27,562
|
|
|
58,424
|
|
|
(34,637
|
)
|
|
23,787
|
|
Amortization expense associated with the Intake Costs asset and capitalized commissions asset for the three months ended March 31, 2019 and 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2019
|
|
2018
|
Intake Costs asset
|
$
|
2,679
|
|
|
$
|
2,730
|
|
Capitalized commissions asset
|
3,946
|
|
|
3,587
|
|
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)
Deferred revenue liabilities are reflected as follows in our Condensed Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Location in Balance Sheet
|
|
March 31, 2019
|
|
December 31, 2018
|
Deferred revenue - Current
|
|
Deferred revenue
|
|
$
|
266,314
|
|
|
$
|
264,823
|
|
Deferred revenue - Long-term
|
|
Other Long-term Liabilities
|
|
25,625
|
|
|
26,401
|
|
Data Center Lessor Considerations
Our data center business features storage rental provided to customers at contractually specified rates over a fixed contractual period. Prior to January 1, 2019, our data center revenue contracts were accounted for in accordance with Accounting Standards Codification (“ASC”) No. 840,
Leases
("ASC 840"). On January 1, 2019, we adopted ASU 2016-02, as described in more detail in Note 2.d. Beginning on January 1, 2019, our data center revenue contracts will be accounted for in accordance with ASU 2016-02. ASU 2016-02 provides a practical expedient which allows lessors to account for nonlease components (such as power and connectivity, in the case of our data center business) with the related lease component if both the timing and pattern of transfer are the same for nonlease components and the lease component, and the lease component would be classified as an operating lease. The single combined component is accounted for under ASU 2016-02 if the lease component is the predominant component and is accounted for under ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
("ASU 2014-09"), if the nonlease components are the predominant components. We have elected to take this practical expedient. Storage rental revenue associated with our data center business was
$59,718
for the three months ended March 31, 2019, which includes approximately
$9,100
of revenue associated with power and connectivity. The revenue related to the service component of our data center business remains unchanged from the adoption of ASU 2016-02 and is recognized in the period the related services are provided. Our accounting treatment for data center revenue was not significantly impacted by the adoption of ASU 2016-02.
d. 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. The majority of our leased facilities are classified as operating leases that, on average, have initial lease terms of
five
to
10
years, with one or more lease renewal options to extend the lease term. Our lease renewal option terms generally range from
one
to
five
years. The exercise of the lease renewal option is at our sole discretion and may contain fixed rent, fair market value based rent or Consumer Price Index rent escalation clauses. We include option periods in the lease term when our failure to renew the lease would result in an economic disincentive, thereby making it reasonably certain that we will renew the lease. We recognize straight line rental expense over the life of the lease and any fair market value or Consumer Price Index rent escalations are recognized as variable lease expense in the period in which the obligation is incurred. In addition, we lease certain vehicles and equipment. Vehicle and equipment leases have lease terms ranging from
one
to
seven
years.
In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02,
Leases (Topic 842)
which requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases, both operating and financing (formerly referred to as capital leases under ASC 840). ASU 2016-02 requires certain qualitative and quantitative disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases.
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)
We adopted ASU 2016-02 on January 1, 2019 on a modified retrospective basis under which we recognized and measured leases existing at, or entered into after, the beginning of the period of adoption. Therefore, we applied ASC 840 to all earlier comparative periods (prior to the adoption of ASU 2016-02), including disclosures, and recognized the effects of applying ASU 2016-02 as a cumulative-effect adjustment to retained earnings as of January 1, 2019, the effective date of the standard. As such, the comparative Condensed Consolidated Balance Sheet as of December 31, 2018 has not been restated to reflect the adoption of ASU 2016-02. Accordingly, the majority of the amount presented as deferred rent liabilities on our Consolidated Balance Sheet as of December 31, 2018 is now included in the calculation of operating lease right-of-use assets and any remaining amounts are now classified within other liability line items on our Condensed Consolidated Balance Sheet as of March 31, 2019. The transition guidance associated with ASU 2016-02 also permitted certain practical expedients. We elected the "package of 3" practical expedients permitted under the transition guidance which, among other things, allowed us to carryforward our historical lease classifications. We also adopted an accounting policy which provides that leases with an initial term of 12 months or less will not be included within the lease right-of-use assets and lease liabilities recognized on our Condensed Consolidated Balance Sheets after the adoption of ASU 2016-02. We will continue to recognize the lease payments for those leases with an initial term of
12 months
or less in the Consolidated Statements of Operations on a straight-line basis over the lease term.
The lease right-of-use assets and related lease liabilities are classified as either operating or financing. Lease right-of-use assets are calculated as the net present value of future payments plus any capitalized initial direct costs less any tenant improvements or lease incentives. Lease liabilities are calculated as the net present value of future payments. In calculating the present value of the lease payments, we will utilize the rate stated within the lease (in the limited circumstances when such rate is available) or, if no rate is explicitly stated, we have elected to utilize a rate that reflects our securitized incremental borrowing rate by geography for the lease term. In July 2018, the FASB issued ASU 2018-11,
Leases - Targeted Improvements
("ASU 2018-11"). ASU 2018-11 provides a practical expedient which allows lessees to account for nonlease components (which include common area maintenance, taxes, and insurance) with the related lease component. Any variable nonlease components are not included within the lease right-of-use asset and lease liability on the Condensed Consolidated Balance Sheets, and instead, are reflected as an expense in the period incurred. We have elected to take this practical expedient upon adoption of ASU 2016-02.
At January 1, 2019, we recognized the cumulative effect of initially applying ASU 2016-02 as an adjustment to the opening balance of (distributions in excess of earnings) earnings in excess of distributions, resulting in an increase of approximately
$5,800
to stockholders' equity due to certain build to suit leases that were accounted for as financing leases under ASC 840,
Leases
,
but are accounted for as operating leases under ASU 2016-02 at January 1, 2019.
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)
Operating and financing lease right-of-use assets and lease liabilities as of March 31, 2019 and January 1, 2019 (date of adoption of ASU 2016-02) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Location in Balance Sheet
|
|
March 31, 2019
|
|
January 1, 2019
(Date of Adoption of ASU 2016-02)
|
Assets:
|
|
|
|
|
|
|
Operating lease right-of-use assets(1)
|
|
Operating lease right-of-use assets
|
|
$
|
1,791,536
|
|
|
$
|
1,825,721
|
|
Financing lease right-of-use assets, net of accumulated depreciation(2)
|
|
Property, plant and equipment, net
|
|
351,750
|
|
|
361,078
|
|
Total
|
|
|
|
$
|
2,143,286
|
|
|
$
|
2,186,799
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Operating lease liabilities
|
|
Accrued expenses and other current liabilities
|
|
$
|
206,286
|
|
|
$
|
209,911
|
|
Financing lease liabilities
|
|
Current portion of long-term debt
|
|
51,222
|
|
|
50,437
|
|
Total current lease liabilities
|
|
|
|
257,508
|
|
|
260,348
|
|
Long-term
|
|
|
|
|
|
|
Operating lease liabilities
|
|
Long-term operating lease liabilities, net of current portion
|
|
1,656,659
|
|
|
1,685,771
|
|
Financing lease liabilities
|
|
Long-term Debt, net of current portion
|
|
338,728
|
|
|
350,263
|
|
Total long-term lease liabilities
|
|
|
|
1,995,387
|
|
|
2,036,034
|
|
Total
|
|
|
|
$
|
2,252,895
|
|
|
$
|
2,296,382
|
|
______________________________________________________________
(1) At March 31, 2019, these assets are comprised of approximately
98%
real estate related assets (which include land, buildings and racking) and
2%
non-real estate related assets (which include warehouse equipment, vehicles, furniture and fixtures and computer hardware and software).
(2) At March 31, 2019, these assets are comprised of approximately
66%
real estate related assets and
34%
non-real estate related assets.
The components of the lease expense for the three months ended March 31, 2019 is as follows:
|
|
|
|
|
|
|
|
Description
|
|
Location in Statement of Operations
|
|
Amount
|
Operating lease cost(1)
|
|
Cost of sales and Selling, general and administrative
|
|
$
|
111,906
|
|
Financing lease cost:
|
|
|
|
|
Depreciation of financing lease right-of-use assets
|
|
Depreciation and amortization
|
|
$
|
16,329
|
|
Interest expense for financing lease liabilities
|
|
Interest expense, net
|
|
6,142
|
|
Total financing lease cost
|
|
|
|
$
|
22,471
|
|
______________________________________________________________
(1) Of the
$111,906
of operating lease cost incurred for the three months ended March 31, 2019,
$108,601
is included within Cost of sales and
$3,305
is included within Selling, general and administrative expenses. Operating lease cost includes variable lease costs of
$25,489
.
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)
We sublease certain real estate to third parties. The sublease income recognized for the three months ended March 31, 2019 is
$3,047
.
Weighted average remaining lease terms and discount rates as of March 31, 2019 are as follows:
|
|
|
|
Remaining Lease Term:
|
|
|
Operating leases
|
|
11.1 Years
|
Financing leases
|
|
11.0 Years
|
Discount Rate:
|
|
|
Operating leases
|
|
7.1%
|
Financing leases
|
|
5.7%
|
The estimated minimum future lease payments as of December 31, 2018, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
Operating Leases(1)
|
|
Sublease
Income
|
|
Capital Leases(1)(2)
|
2019
|
|
$
|
323,454
|
|
|
$
|
(7,525
|
)
|
|
$
|
80,513
|
|
2020
|
|
293,276
|
|
|
(7,200
|
)
|
|
71,335
|
|
2021
|
|
267,379
|
|
|
(7,063
|
)
|
|
61,269
|
|
2022
|
|
246,128
|
|
|
(6,694
|
)
|
|
52,832
|
|
2023
|
|
221,808
|
|
|
(6,409
|
)
|
|
44,722
|
|
Thereafter
|
|
1,287,807
|
|
|
(6,279
|
)
|
|
377,750
|
|
Total minimum lease payments
|
|
2,639,852
|
|
|
$
|
(41,170
|
)
|
|
688,421
|
|
Less amounts representing interest
|
|
|
|
|
|
|
(241,248
|
)
|
Present value of finance lease obligations
|
|
|
|
|
|
|
$
|
447,173
|
|
The estimated minimum future lease payments as of March 31, 2019, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
Operating Leases(1)
|
|
Sublease
Income
|
|
Financing Leases(1)
|
2019 (excluding the three months ended March 31, 2019)
|
|
$
|
251,699
|
|
|
$
|
(6,039
|
)
|
|
$
|
59,411
|
|
2020
|
|
308,267
|
|
|
(7,337
|
)
|
|
68,333
|
|
2021
|
|
280,931
|
|
|
(7,228
|
)
|
|
59,710
|
|
2022
|
|
257,598
|
|
|
(6,851
|
)
|
|
49,997
|
|
2023
|
|
234,035
|
|
|
(6,548
|
)
|
|
39,643
|
|
Thereafter
|
|
1,409,241
|
|
|
(6,922
|
)
|
|
287,609
|
|
Total minimum lease payments
|
|
2,741,771
|
|
|
$
|
(40,925
|
)
|
|
564,703
|
|
Less amounts representing interest or imputed interest
|
|
(878,826
|
)
|
|
|
|
|
(174,753
|
)
|
Present value of lease obligations
|
|
1,862,945
|
|
|
|
|
|
$
|
389,950
|
|
_______________________________________________________________________________
|
|
(1)
|
Estimated minimum future lease payments exclude variable common area maintenance charges, insurance and taxes. Differences in estimated lease payments between December 31, 2018 and March 31, 2019 are primarily related to adjustments to account for certain build to suit leases that were accounted for as financing obligations under ASC 840 but are accounted for as operating leases under ASU 2016-02 and foreign currency exchange rate impacts.
|
|
|
(2)
|
Includes capital lease and financing obligations associated with build to suit lease transactions at December 31, 2018.
|
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)
As of March 31, 2019, we do not have any material operating or financing leases that are signed but have not yet commenced and we have certain leases with related parties which are not material to our consolidated financial statements.
Other information:
Supplemental cash flow information relating to our leases for the three months ended March 31, 2019 is as follows:
|
|
|
|
|
|
Cash paid for amounts included in measurement of lease liabilities:
|
|
Three Months Ended
March 31, 2019
|
Operating cash flows used in operating leases
|
|
$
|
83,676
|
|
Financing cash flows used in financing leases
|
|
$
|
16,675
|
|
Non-cash items:
|
|
|
Operating lease modifications and reassessments
|
|
$
|
1,842
|
|
New operating leases (including acquisitions)
|
|
$
|
21,535
|
|
Financing lease modifications and reassessments
|
|
$
|
—
|
|
New financing leases
|
|
$
|
7,523
|
|
e. Stock-Based Compensation
We record stock-based compensation expense, utilizing the straight-line method, for the cost of stock options, restricted stock units ("RSUs"), performance units ("PUs") and shares of stock issued under our employee stock purchase plan (together, "Employee Stock-Based Awards"). There have been no significant changes to our accounting policies, assumptions and valuation methodologies related to the accounting for our Employee Stock-Based Awards as disclosed in Note 2.n. to Notes to Consolidated Financial Statements included in our Annual Report.
For our Employee Stock-Based Awards made on or after February 20, 2019, we have included the following retirement provision: Upon an employee’s retirement on or after attaining age 58, if the sum of (i) the award recipient’s age at retirement and (ii) the award recipient’s years of service with the company totals at least 70, the award recipient is entitled to continued vesting of any outstanding Employee Stock-Based Awards which include the 2019 Retirement Criteria subsequent to their retirement, provided that, for awards granted in the year of retirement, their retirement occurs on or after July 1st (the “2019 Retirement Criteria”). Accordingly, (i) grants of Employee Stock-Based Awards to an employee who has met the 2019 Retirement Criteria on or before the date of grant, or will meet the Retirement Criteria before July 1
st
of the year of the grant, will be expensed between the date of grant and July 1
st
of the grant year and (ii) grants of Employee Stock-Based Awards to employees who will meet the 2019 Retirement Criteria during the award’s normal vesting period will be expensed between the date of grant and the date upon which the award recipient meets the 2019 Retirement Criteria. Stock options and RSUs granted to recipients who meet the 2019 Retirement Criteria will continue vesting on the original vesting schedule, and the stock options will remain exercisable up to three years after retirement, or the original expiration date of the stock options, if earlier. PUs granted to recipients who meet the 2019 Retirement Criteria will continue to vest and be delivered in accordance with the original vesting schedule of the applicable PU award and remain subject to the same performance conditions.
Stock-based compensation expense for Employee Stock-Based Awards for the
three
months ended
March 31, 2019
and
2018
was
$8,519
(
$7,935
after tax or
$0.03
per basic and diluted share) and
$7,384
(
$6,833
after tax or
$0.02
per basic and diluted share), respectively, the substantial majority of which is included in Selling, general and administrative expenses in the accompanying Condensed Consolidated Statements of Operations. As of
March 31, 2019
, unrecognized compensation cost related to the unvested portion of our Employee Stock-Based Awards was
$72,353
and is expected to be recognized over a weighted-average period of
2.2
years.
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)
Stock Options
A summary of stock option activity for the
three
months ended
March 31, 2019
is as follows:
|
|
|
|
|
Stock Options
|
Outstanding at December 31, 2018
|
4,271,834
|
|
Granted
|
920,706
|
|
Exercised
|
(99,334
|
)
|
Forfeited
|
(6,007
|
)
|
Expired
|
(9,629
|
)
|
Outstanding at March 31, 2019
|
5,077,570
|
|
Options exercisable at March 31, 2019
|
3,258,982
|
|
Options expected to vest
|
1,691,146
|
|
Restricted Stock Units
The fair value of RSUs vested during the
three
months ended
March 31, 2019
and
2018
is as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2019
|
|
2018
|
Fair value of RSUs vested
|
$
|
15,333
|
|
|
$
|
15,330
|
|
A summary of RSU activity for the
three
months ended
March 31, 2019
is as follows:
|
|
|
|
|
RSUs
|
Non-vested at December 31, 2018
|
1,196,566
|
|
Granted
|
621,281
|
|
Vested
|
(453,167
|
)
|
Forfeited
|
(18,075
|
)
|
Non-vested at March 31, 2019
|
1,346,605
|
|
Performance Units
The fair value of earned PUs that vested during the
three
months ended
March 31, 2019
and
2018
is as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2019
|
|
2018
|
Fair value of earned PUs that vested
|
$
|
6,503
|
|
|
$
|
3,033
|
|
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)
A summary of PU activity for the
three
months ended
March 31, 2019
is as follows:
|
|
|
|
|
|
|
|
|
|
|
Original
PU Awards
|
|
PU Adjustment(1)
|
|
Total
PU Awards
|
Non-vested at December 31, 2018
|
967,049
|
|
|
(299,948
|
)
|
|
667,101
|
|
Granted
|
380,856
|
|
|
—
|
|
|
380,856
|
|
Vested
|
(169,523
|
)
|
|
—
|
|
|
(169,523
|
)
|
Forfeited/Performance or Market Conditions Not Achieved
|
(4,816
|
)
|
|
(14,850
|
)
|
|
(19,666
|
)
|
Non-vested at March 31, 2019
|
1,173,566
|
|
|
(314,798
|
)
|
|
858,768
|
|
_______________________________________________________________________________
|
|
(1)
|
Represents an increase or decrease in the number of original PUs awarded based on either the final performance criteria or market condition achievement at the end of the performance period of such PUs or a change in estimated awards based on the forecasted performance against the predefined targets.
|
As of
March 31, 2019
, we expected
100%
achievement of the predefined revenue, return on invested capital and Adjusted EBITDA (as defined in Note 6) targets associated with the awards of PUs made in
2019
,
2018
and
2017
.
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. Income (Loss) Per Share—Basic and Diluted
Basic income (loss) per common share is calculated by dividing income (loss) by the weighted average number of common shares outstanding. The calculation of diluted income (loss) per share is consistent with that of basic income (loss) per share, but gives effect to all potential common shares (that is, securities such as stock options, RSUs or PUs) that were outstanding during the period, unless the effect is antidilutive.
The calculation of basic and diluted income (loss) per share for the
three
months ended
March 31, 2019
and
2018
is as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2019
|
|
2018
|
Income (loss) from continuing operations
|
$
|
30,476
|
|
|
$
|
45,614
|
|
Less: Net income (loss) attributable to noncontrolling interests
|
891
|
|
|
468
|
|
Income (loss) from continuing operations (utilized in numerator of Earnings Per Share calculation)
|
$
|
29,585
|
|
|
$
|
45,146
|
|
(Loss) income from discontinued operations, net of tax
|
$
|
(24
|
)
|
|
$
|
(462
|
)
|
Net income (loss) attributable to Iron Mountain Incorporated
|
$
|
29,561
|
|
|
$
|
44,684
|
|
|
|
|
|
Weighted-average shares—basic
|
286,528,000
|
|
|
285,259,000
|
|
Effect of dilutive potential stock options
|
231,402
|
|
|
249,564
|
|
Effect of dilutive potential RSUs and PUs
|
732,421
|
|
|
484,314
|
|
Weighted-average shares—diluted
|
287,491,823
|
|
|
285,992,878
|
|
|
|
|
|
Earnings (losses) per share—basic:
|
|
|
|
|
|
Income (loss) from continuing operations
|
$
|
0.10
|
|
|
$
|
0.16
|
|
(Loss) income from discontinued operations, net of tax
|
—
|
|
|
—
|
|
Net income (loss) attributable to Iron Mountain Incorporated(1)
|
$
|
0.10
|
|
|
$
|
0.16
|
|
|
|
|
|
Earnings (losses) per share—diluted:
|
|
|
|
|
|
Income (loss) from continuing operations
|
$
|
0.10
|
|
|
$
|
0.16
|
|
(Loss) income from discontinued operations, net of tax
|
—
|
|
|
—
|
|
Net income (loss) attributable to Iron Mountain Incorporated(1)
|
$
|
0.10
|
|
|
$
|
0.16
|
|
|
|
|
|
|
Antidilutive stock options, RSUs and PUs, excluded from the calculation
|
3,985,161
|
|
|
3,242,141
|
|
_______________________________________________________________________________
(1) Columns may not foot due to rounding.
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)
g. Income Taxes
We provide for income taxes during interim periods based on our estimate of the effective tax rate for the year. Our estimate of the effective tax rates for the years ending December 31, 2019 and 2018 reflect the impact of the U.S. tax reform legislation, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Legislation”). See Note 7 to Notes to Consolidated Financial Statements included in our Annual Report for additional information regarding the impact the Tax Reform Legislation had on us. Discrete items and changes in our estimate of the annual effective tax rate are recorded in the period they occur. Our effective tax rate is subject to variability in the future due to, among other items: (1) changes in the mix of income between our qualified REIT subsidiaries ("QRSs") and our domestic taxable REIT subsidiaries ("TRSs"), as well as among the jurisdictions in which we operate; (2) tax law changes; (3) volatility in foreign exchange gains and losses; (4) the timing of the establishment and reversal of tax reserves; and (5) our ability to utilize net operating losses that we generate.
Our effective tax rates for the three months ended March 31, 2019 and 2018 is as follows:
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2019(1)
|
|
2018(2)
|
Effective Tax Rate
|
25.7
|
%
|
|
2.5
|
%
|
_______________________________________________________________________________
|
|
(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, 2019 were the benefit derived from the dividends paid deduction and the impact of differences in the tax rates at which our foreign earnings are subject, including foreign exchange gains and losses in different jurisdictions with different tax rates.
|
|
|
(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, 2018 were the benefit derived from the dividends paid deduction, a discrete tax benefit of approximately
$14,000
associated with the resolution of a tax matter and the impact of differences in the tax rates at which our foreign earnings are subject, including foreign exchange gains and losses in different jurisdictions with different tax rates.
|
h. Fair Value Measurements
Our financial assets or liabilities that are carried at fair value are required to be measured using inputs from the three levels of the fair value hierarchy. A financial asset or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
The three levels of the fair value hierarchy are as follows:
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.
Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3—Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.
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)
The assets and liabilities carried at fair value measured on a recurring basis as of
March 31, 2019
and
December 31, 2018
, respectively, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at
March 31, 2019 Using
|
Description
|
|
Total Carrying
Value at
March 31, 2019
|
|
Quoted prices
in active
markets
(Level 1)
|
|
|
|
Significant other
observable
inputs
(Level 2)
|
|
|
|
Significant
unobservable
inputs
(Level 3)
|
Money Market Funds(1)
|
|
$
|
1,739
|
|
|
$
|
—
|
|
|
|
|
$
|
1,739
|
|
|
|
|
$
|
—
|
|
Trading Securities
|
|
10,160
|
|
|
9,490
|
|
|
(2)
|
|
670
|
|
|
(3)
|
|
—
|
|
Derivative Assets (4)
|
|
23
|
|
|
—
|
|
|
|
|
23
|
|
|
|
|
—
|
|
Derivative Liabilities(4)
|
|
109
|
|
|
—
|
|
|
|
|
109
|
|
|
|
|
—
|
|
Interest Rate Swap Agreements Liabilities(5)
|
|
3,647
|
|
|
—
|
|
|
|
|
3,647
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at
December 31, 2018 Using
|
Description
|
|
Total Carrying
Value at
December 31, 2018
|
|
Quoted prices
in active
markets
(Level 1)
|
|
|
|
Significant other
observable
inputs
(Level 2)
|
|
|
|
Significant
unobservable
inputs
(Level 3)
|
Time Deposits(1)
|
|
$
|
956
|
|
|
$
|
—
|
|
|
|
|
$
|
956
|
|
|
|
|
$
|
—
|
|
Trading Securities
|
|
10,753
|
|
|
10,248
|
|
|
(2)
|
|
505
|
|
|
(3)
|
|
—
|
|
Derivative Assets(4)
|
|
93
|
|
|
—
|
|
|
|
|
93
|
|
|
|
|
—
|
|
Interest Rate Swap Agreements Liabilities(5)
|
|
973
|
|
|
—
|
|
|
|
|
973
|
|
|
|
|
—
|
|
_______________________________________________________________________________
|
|
(1)
|
Money market funds and time deposits are measured based on quoted prices for similar assets and/or subsequent transactions.
|
|
|
(2)
|
Certain trading securities are measured at fair value using quoted market prices.
|
|
|
(3)
|
Certain trading securities are measured based on inputs other than quoted market prices that are observable.
|
|
|
(4)
|
Derivative assets and liabilities relate to short-term (six months or less) foreign currency contracts that we have entered into to hedge certain of our foreign exchange intercompany exposures. We calculate the value of such forward contracts by adjusting the spot rate utilized at the balance sheet date for translation purposes by an estimate of the forward points observed in active markets. As of March 31, 2019, we had outstanding forward contracts to (i) purchase
4,000
Euros and sell
$4,610
United States dollars and (ii) purchase
$4,515
United States dollars and sell
4,000
Euros. As of December 31, 2018, we had outstanding forward contracts to purchase
29,000
Euros and sell
$33,374
United States dollars. We have not designated any of the forward contracts we have entered into as hedges.
|
|
|
(5)
|
We have entered into interest rate swap agreements to limit our exposure to changes in interest rates on a portion of our floating rate indebtedness. As of March 31, 2019 and
December 31, 2018
, we have
$350,000
in notional value of interest rate swap agreements outstanding, which expire in March 2022. Under the interest rate swap agreements, we receive variable rate interest payments associated with the notional amount of each interest rate swap, based upon one-month LIBOR, in exchange for the payment of fixed interest rate payments (at the fixed rate interest specified in the interest rate swap agreements). We have designated these interest rate swaps as cash flow hedges. Unrealized gains are recognized as assets while unrealized losses are recognized as liabilities. The fair value of the interest rate swaps are estimated using industry standard valuation models using market-based observable inputs, including interest rate curves.
|
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)
Disclosures are required in the financial statements for items measured at fair value on a non-recurring basis. There were no material items that are measured at fair value on a non-recurring basis at March 31, 2019 and December 31, 2018, other than those disclosed in Note 2.s. to Notes to Consolidated Financial Statements included in our Annual Report, those acquired in acquisitions that occurred during the three months ended March 31, 2019 and our investment in Makespace LLC (as disclosed in Note 9), all of which are based on Level 3 inputs.
The fair value of our long-term debt, which was determined based on either Level 1 inputs or Level 3 inputs, is disclosed in Note 4. Long-term debt is measured at cost in our Condensed Consolidated Balance Sheets as of March 31, 2019 and
December 31, 2018
.
i. Accumulated Other Comprehensive Items, Net
The changes in accumulated other comprehensive items, net for the
three
months ended March 31, 2019 and 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2019
|
|
2018
|
|
Foreign
Currency
Translation
Adjustments
|
|
Fair Value Adjustments for Interest Rate Swap Agreements
|
|
Total
|
|
Foreign
Currency
Translation
Adjustments
|
|
Fair Value Adjustments for Interest Rate Swap Agreements
|
|
Total
|
Beginning of Period
|
$
|
(264,691
|
)
|
|
$
|
(973
|
)
|
|
$
|
(265,664
|
)
|
|
$
|
(103,989
|
)
|
|
$
|
—
|
|
|
$
|
(103,989
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments(1)
|
17,378
|
|
|
—
|
|
|
17,378
|
|
|
30,092
|
|
|
—
|
|
|
30,092
|
|
Fair value adjustments for interest rate swap agreements
|
—
|
|
|
(2,674
|
)
|
|
(2,674
|
)
|
|
—
|
|
|
(185
|
)
|
|
(185
|
)
|
Total other comprehensive income (loss)
|
17,378
|
|
|
(2,674
|
)
|
|
14,704
|
|
|
30,092
|
|
|
(185
|
)
|
|
29,907
|
|
End of Period
|
$
|
(247,313
|
)
|
|
$
|
(3,647
|
)
|
|
$
|
(250,960
|
)
|
|
$
|
(73,897
|
)
|
|
$
|
(185
|
)
|
|
$
|
(74,082
|
)
|
______________________________________________________________
(1) This amount includes foreign exchange (gains) losses of
$(6,141)
and
$5,635
for the three months ended March 31, 2019 and 2018, respectively, related to the change in fair value of the portion of our Euro Notes (as defined and discussed more fully in Note 4) designated as a hedge of net investment of certain of our Euro denominated subsidiaries. For the three months ended March 31, 2019, we designated, on average,
271,146
Euros of our Euro Notes as a hedge of net investment of certain of our Euro denominated subsidiaries. For the three months ended March 31, 2018, we designated, on average,
164,244
Euros of our Euro Notes as a hedge of net investment of certain of our Euro denominated subsidiaries. As of March 31, 2019, cumulative net gains of
$20,399
net of tax, are recorded in accumulated other comprehensive items, net associated with this net investment hedge.
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)
j. Other Expense (Income), Net
Other expense (income), net for the
three
months ended March 31, 2019 and 2018 consists of the following:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2019
|
|
2018
|
Foreign currency transaction losses (gains), net
|
$
|
17,697
|
|
|
$
|
21,785
|
|
Other, net
|
(2,487
|
)
|
|
(1,634
|
)
|
|
$
|
15,210
|
|
|
$
|
20,151
|
|
The gain or loss on foreign currency transactions, calculated as the difference between the historical exchange rate and the exchange rate at the applicable measurement date, include gains or losses related to (i) borrowings in certain foreign currencies under our Revolving Credit Facility (as defined and discussed more fully in Note 4), (ii) our Euro Notes, (iii) certain foreign currency denominated intercompany obligations of our foreign subsidiaries to us and between our foreign subsidiaries, which are not considered permanently invested, and (iv) amounts that are paid or received on the net settlement amount from forward contracts (as more fully discussed in Note 2.h.).
Other, net for the three months ended March 31, 2019 is primarily comprised of a gain on sale resulting from the Consumer Storage Transaction (as defined and discussed more fully in Note 9) of approximately
$4,200
. Other, net for the three months ended March 31, 2019 also includes the change in estimated fair value of the noncontrolling interests associated with our business in India, which are accounted for as mandatorily redeemable noncontrolling interests.
k. New Accounting Pronouncements
In August 2018, the FASB issued ASU No. 2018-15,
Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force)
("ASU 2018-15"). ASU 2018-15 aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. We adopted ASU 2018-15 on January 1, 2019. ASU 2018-15 did not have a material impact on our consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02. We adopted ASU 2016-02 on January 1, 2019 on a modified retrospective basis. See Note 2.d. for information regarding the impact of the adoption of ASU 2016-02 on our consolidated financial statements.
l. Change in Presentation
Subsequent to our conversion to a REIT, we have historically classified gains on sale of real estate, net of tax, as a separate line on our consolidated statements of operations and excluded such amounts from our reported operating income. We presented such amounts net of tax as these gains were presented below the provision (benefit) for income taxes on our consolidated statements of operations. Commencing with the first quarter of 2019, we will present gains on sale of real estate as a component of operating income in the line item loss (gain) on disposal/write down of property, plant and equipment, net. Such amounts will be presented gross of tax with any tax impact presented within provision (benefit) for income taxes. All prior periods will be conformed to this presentation going forward. No gains on the sale of real estate were recognized during the three months ended March 31, 2019 or 2018.
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Data)
(Unaudited)
(3) Acquisitions
We account for acquisitions using the acquisition method of accounting, and, accordingly, the assets and liabilities acquired are recorded at their estimated fair values and the results of operations for each acquisition have been included in our consolidated results from their respective acquisition dates.
Acquisitions Completed During the Three Months Ended March 31, 201
9
In order to enhance our existing operations in the United States, the United Kingdom and Switzerland and to expand our operations into Bulgaria, we completed the acquisition of
four
storage and records management companies and
one
art storage company for total cash consideration of approximately
$31,900
.
Purchase Price Allocation
A summary of the cumulative consideration paid and the preliminary allocation of the purchase price paid for all of our 2019 acquisitions through March 31, 2019 is as follows:
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2019
|
Cash Paid (gross of cash acquired)(1)
|
|
$
|
34,198
|
|
Purchase Price Holdbacks and Other
|
|
1,042
|
|
Total Consideration
|
|
35,240
|
|
Fair Value of Identifiable Assets Acquired:
|
|
|
Cash
|
|
2,273
|
|
Accounts Receivable, Prepaid Expenses and Other Assets
|
|
2,845
|
|
Property, Plant and Equipment(2)
|
|
4,039
|
|
Customer Relationship Intangible Assets
|
|
13,589
|
|
Operating Lease Right-of-Use Assets
|
|
10,541
|
|
Accounts Payable, Accrued Expenses and Other
Liabilities
|
|
(2,065
|
)
|
Operating Lease Liabilities
|
|
(10,541
|
)
|
Deferred Income Taxes
|
|
(1,574
|
)
|
Total Fair Value of Identifiable Net Assets Acquired
|
|
19,107
|
|
Goodwill Initially Recorded(3)
|
|
$
|
16,133
|
|
_______________________________________________________________________________
|
|
(1)
|
Included in cash paid for acquisitions in the Condensed Consolidated Statement of Cash Flows for the
three
months ended
March 31, 2019
is net cash acquired of
$2,273
and contingent and other payments, net of
$7,498
related to acquisitions made in previous years.
|
|
|
(2)
|
Consists primarily of leasehold improvements, racking structures and warehouse equipment. These assets are depreciated using the straight-line method with the useful lives as noted in Note 2.f. to Notes to Consolidated Financial Statements included in our Annual Report.
|
(3) The goodwill associated with acquisitions 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.
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Data)
(Unaudited)
(3) Acquisitions (Continued)
See Note 6 to Notes to Consolidated Financial Statements included in our Annual Report for additional information regarding our allocations of the purchase price for acquisitions. The preliminary purchase price allocations that are not finalized as of March 31, 2019 primarily relate to the final assessment of the fair values of intangible assets and liabilities (primarily customer relationship intangible assets and data center lease-based intangible assets), property, plant and equipment (primarily building, building improvements, data center infrastructure and racking structures), right-of-use assets and liabilities associated with acquired operating leases, contingencies and income taxes (primarily deferred income taxes), primarily associated with the EvoSwitch Transaction (as defined in Note 6 to Notes to Consolidated Financial Statements included in our Annual Report), as well as other acquisitions we closed in 2019.
As the valuation of certain assets and liabilities for purposes of purchase price allocations are preliminary in nature, they are subject to adjustment as additional information is obtained about the facts and circumstances regarding these assets and liabilities that existed at the acquisition date. 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. Adjustments recorded during the three months ended March 31, 2019 were not material to our results from operations.
Acquisition of IO Data Centers in 2018
On January 10, 2018, we completed the IODC Transaction. At the closing of the IODC Transaction, we paid approximately
$1,347,000
. In February 2019, we paid approximately
$31,000
in additional purchase price associated with the execution of customer contracts from the closing through the one-year anniversary of the IODC Transaction, which was accrued at December 31, 2018. This amount, net of amortization, is reported as a third-party commissions asset as a component of Other within Other assets, net, in our Condensed Consolidated Balance Sheets at March 31, 2019 and December 31, 2018.
The unaudited consolidated pro forma financial information (the "Pro Forma Financial Information") below summarizes the combined results of us and IODC on a pro forma basis as if the IODC Transaction had occurred on January 1, 2017. 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, 2017. The Pro Forma Financial Information, for the period presented, includes purchase accounting adjustments (including amortization expenses from acquired intangible assets and depreciation of acquired property, plant and equipment). We and IODC collectively incurred
$28,064
of operating expenditures to complete the IODC 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, 2017.
|
|
|
|
|
|
Three Months Ended
March 31, 2018
|
Total Revenues
|
$
|
1,045,948
|
|
Income from Continuing Operations
|
$
|
55,566
|
|
Per Share Income from Continuing Operations - Basic
|
$
|
0.20
|
|
Per Share Income from Continuing Operations - Diluted
|
$
|
0.19
|
|
In addition to our acquisition of IODC, we completed certain other acquisitions during the first three months of 2019 and in fiscal year 2018. The Pro Forma Financial Information does not reflect these acquisitions due to the insignificant impact of these acquisitions on our consolidated results of operations.
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Data)
(Unaudited)
(4) Debt
Long-term debt is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
|
December 31, 2018
|
|
|
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)
|
|
$
|
1,139,566
|
|
|
$
|
(13,332
|
)
|
|
$
|
1,126,234
|
|
|
$
|
1,139,566
|
|
|
|
$
|
793,832
|
|
|
|
$
|
(14,117
|
)
|
|
$
|
779,715
|
|
|
$
|
793,832
|
|
Term Loan A(1)
|
|
237,500
|
|
|
—
|
|
|
237,500
|
|
|
237,500
|
|
|
|
240,625
|
|
|
|
—
|
|
|
240,625
|
|
|
240,625
|
|
Term Loan B(2)
|
|
691,476
|
|
|
(8,430
|
)
|
|
683,046
|
|
|
670,478
|
|
|
|
693,169
|
|
|
(8,742
|
)
|
|
684,427
|
|
|
660,013
|
|
Australian Dollar Term Loan (the "AUD Term Loan")(3)
|
|
234,000
|
|
|
(2,893
|
)
|
|
231,107
|
|
|
235,587
|
|
|
|
233,955
|
|
|
|
(3,084
|
)
|
|
230,871
|
|
|
235,645
|
|
UK Bilateral Revolving Credit Facility ("UK Bilateral Facility")(4)
|
|
182,450
|
|
|
(2,255
|
)
|
|
180,195
|
|
|
182,450
|
|
|
|
178,299
|
|
|
(2,357
|
)
|
|
175,942
|
|
|
178,299
|
|
4
3
/
8
% Senior Notes due 2021 (the "4
3
/
8
% Notes")(5)
|
|
500,000
|
|
|
(3,725
|
)
|
|
496,275
|
|
|
502,500
|
|
|
|
500,000
|
|
|
|
(4,155
|
)
|
|
495,845
|
|
|
488,750
|
|
6% Senior Notes due 2023 (the "6% Notes due 2023")(5)
|
|
600,000
|
|
|
(4,851
|
)
|
|
595,149
|
|
|
615,000
|
|
|
|
600,000
|
|
|
|
(5,126
|
)
|
|
594,874
|
|
|
606,000
|
|
5
3
/
8
% CAD Senior Notes due 2023 (the "CAD Notes")
|
|
187,262
|
|
|
(2,424
|
)
|
|
184,838
|
|
|
189,444
|
|
|
|
183,403
|
|
|
|
(2,506
|
)
|
|
180,897
|
|
|
186,154
|
|
5
3
/
4
% Senior Subordinated Notes due 2024 (the "5
3
/
4
% Notes")(5)
|
|
1,000,000
|
|
|
(7,439
|
)
|
|
992,561
|
|
|
1,010,000
|
|
|
|
1,000,000
|
|
|
|
(7,782
|
)
|
|
992,218
|
|
|
940,000
|
|
3% Euro Senior Notes due 2025 (the "Euro Notes")(5)
|
|
336,557
|
|
|
(3,941
|
)
|
|
332,616
|
|
|
337,684
|
|
|
|
343,347
|
|
|
|
(4,098
|
)
|
|
339,249
|
|
|
321,029
|
|
3
7
/
8
% GBP Senior Notes due 2025 (the "GBP Notes")
|
|
521,286
|
|
|
(6,480
|
)
|
|
514,806
|
|
|
495,852
|
|
|
|
509,425
|
|
|
|
(6,573
|
)
|
|
502,852
|
|
|
453,811
|
|
5
3
/
8
% Senior Notes due 2026 (the "5
3
/
8
% Notes")
|
|
250,000
|
|
|
(3,078
|
)
|
|
246,922
|
|
|
246,875
|
|
|
|
250,000
|
|
|
|
(3,185
|
)
|
|
246,815
|
|
|
224,375
|
|
4
7
/
8
% Senior Notes due 2027 (the "4
7
/
8
% Notes")(5)
|
|
1,000,000
|
|
|
(12,086
|
)
|
|
987,914
|
|
|
957,500
|
|
|
|
1,000,000
|
|
|
|
(12,442
|
)
|
|
987,558
|
|
|
855,000
|
|
5
1
/
4
% Senior Notes due 2028 (the "5
1
/
4
% Notes")(5)
|
|
825,000
|
|
|
(10,628
|
)
|
|
814,372
|
|
|
798,188
|
|
|
|
825,000
|
|
|
|
(10,923
|
)
|
|
814,077
|
|
|
713,625
|
|
Real Estate Mortgages, Financing Lease Liabilities and Other
|
|
566,677
|
|
|
(431
|
)
|
|
566,246
|
|
|
566,677
|
|
|
|
606,702
|
|
|
|
(171
|
)
|
|
606,531
|
|
|
606,702
|
|
Accounts Receivable Securitization Program(6)
|
|
252,373
|
|
|
(184
|
)
|
|
252,189
|
|
|
252,373
|
|
|
|
221,673
|
|
|
|
(218
|
)
|
|
221,455
|
|
|
221,673
|
|
Mortgage Securitization Program(7)
|
|
50,000
|
|
|
(1,091
|
)
|
|
48,909
|
|
|
50,000
|
|
|
|
50,000
|
|
|
(1,128
|
)
|
|
48,872
|
|
|
50,000
|
|
Total Long-term Debt
|
|
8,574,147
|
|
|
(83,268
|
)
|
|
8,490,879
|
|
|
|
|
|
|
8,229,430
|
|
—
|
|
(86,607
|
)
|
|
8,142,823
|
|
|
|
Less Current Portion
|
|
(125,142
|
)
|
|
—
|
|
|
(125,142
|
)
|
|
|
|
|
|
(126,406
|
)
|
|
—
|
|
|
(126,406
|
)
|
|
|
|
Long-term Debt, Net of Current Portion
|
|
$
|
8,449,005
|
|
|
$
|
(83,268
|
)
|
|
$
|
8,365,737
|
|
|
|
|
|
|
$
|
8,103,024
|
|
|
|
$
|
(86,607
|
)
|
|
$
|
8,016,417
|
|
|
|
|
______________________________________________________________
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Data)
(Unaudited)
(4) Debt (Continued)
|
|
(1)
|
Collectively, the credit agreement ("Credit Agreement"). The Credit Agreement consists of a revolving credit facility (the "Revolving Credit Facility") and a term loan (the "Term Loan A"). The Credit Agreement is scheduled to mature on June 3, 2023. Of the
$1,139,566
of outstanding borrowings under the Revolving Credit Facility as of March 31, 2019,
965,800
was denominated in United States dollars,
94,200
was denominated in Canadian dollars and
92,000
was denominated in Euros. In addition, we also had various outstanding letters of credit totaling
$37,271
. The remaining amount available for borrowing under the Revolving Credit Facility as of March 31, 2019 was
$573,163
(which amount represents the maximum availability as of such date). The average interest rate in effect under the Credit Agreement was
4.0%
as of
March 31, 2019
. The average interest rate in effect under the Revolving Credit Facility as of March 31, 2019 was
4.0%
and the interest rate in effect under Term Loan A as of
March 31, 2019
was
4.2%
.
|
|
|
(2)
|
In connection with the 2018 First Amendment (as defined in Note 5 to Notes to Consolidated Financial Statements included in our Annual Report), Iron Mountain Information Management, LLC ("IMIM") entered into an incremental term loan activation notice (the "Activation Notice") with certain lenders pursuant to which the lenders party to the Activation Notice agreed to provide commitments to fund an incremental term loan B in the amount of
$700,000
(the "Term Loan B"). On March 26, 2018, IMIM borrowed the full amount of the Term Loan B. The Term Loan B is scheduled to mature on January 2, 2026. The interest rate in effect as of March 31, 2019 was
4.3%
. The amount of debt for the Term Loan B reflects an unamortized original issue discount of
$1,524
and
$1,581
as of March 31, 2019 and December 31, 2018, respectively.
|
|
|
(3)
|
The interest rate in effect as of March 31, 2019 was
5.7%
. We had
331,875
Australian dollars outstanding on the AUD Term Loan as of March 31, 2019. The amount of debt for the AUD Term Loan reflects an unamortized original issue discount of
$1,587
and
$1,690
as of March 31, 2019 and December 31, 2018, respectively.
|
|
|
(4)
|
The interest rate in effect as of March 31, 2019 was
3.2%
.
|
|
|
(5)
|
Collectively, the "Parent Notes".
|
|
|
(6)
|
The interest rate in effect as of March 31, 2019 was
3.5%
.
|
|
|
(7)
|
The interest rate in effect as of March 31, 2019 was
3.5%
.
|
See Note 4 to Notes to Consolidated Financial Statements included in our Annual Report for additional information regarding our Credit Agreement and our other 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, 2019 are consistent with the levels of the fair value hierarchy used to determine the fair value of our debt as of December 31, 2018 (which are disclosed in our Annual Report). Additionally, see Note 5 to Notes to Consolidated Financial Statements included in our Annual Report for information regarding which of our consolidated subsidiaries guarantee certain of our debt instruments. There have been no material changes to our long-term debt since December 31, 2018.
Cash Pooling
As described in greater detail in Note 4 to Notes to Consolidated Financial Statements included in our Annual Report, certain of our subsidiaries participate in cash pooling arrangements (the “Cash Pools”) in order to help manage global liquidity requirements. We currently utilize two separate cash pools, one of which we utilize to manage global liquidity requirements for our QRSs (the "QRS Cash Pool") and the other for our TRSs (the "TRS Cash Pool").
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Data)
(Unaudited)
(4) Debt (Continued)
The approximate amount of the net cash position for our QRS Cash Pool and the TRS Cash Pool and the approximate amount of the gross position and outstanding debit balances for each of these pools as of March 31, 2019 and December 31, 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
Gross Cash Position
|
|
Outstanding Debit Balances
|
|
Net Cash Position
|
|
Gross Cash Position
|
|
Outstanding Debit Balances
|
|
Net Cash Position
|
QRS Cash Pool
|
$
|
271,400
|
|
|
$
|
(269,400
|
)
|
|
$
|
2,000
|
|
|
$
|
300,800
|
|
|
$
|
(298,800
|
)
|
|
$
|
2,000
|
|
TRS Cash Pool
|
281,100
|
|
|
(277,900
|
)
|
|
3,200
|
|
|
$
|
281,500
|
|
|
(279,300
|
)
|
|
2,200
|
|
The net cash position balances as of March 31, 2019 and December 31, 2018 are reflected as cash and cash equivalents in the Condensed Consolidated Balance Sheets.
Debt Covenants
The Credit Agreement, our indentures and other agreements governing our indebtedness contain certain restrictive financial and operating covenants, including covenants that restrict our ability to complete acquisitions, pay cash dividends, incur indebtedness, make investments, sell assets and take certain other corporate actions. The covenants do not contain a rating trigger. Therefore, a change in our debt rating would not trigger a default under the Credit Agreement, our indentures or other agreements governing our indebtedness. The Credit Agreement uses EBITDAR-based calculations as the primary measures of financial performance, including leverage and fixed charge coverage ratios.
Our leverage and fixed charge coverage ratios under the Credit Agreement as of March 31, 2019 and December 31, 2018, as well as our leverage ratio under our indentures as of March 31, 2019 and December 31, 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
Maximum/Minimum Allowable
|
Net total lease adjusted leverage ratio
|
5.8
|
|
|
5.6
|
|
|
Maximum allowable of 6.5
|
Net secured debt lease adjusted leverage ratio
|
2.8
|
|
|
2.6
|
|
|
Maximum allowable of 4.0
|
Bond leverage ratio (not lease adjusted)
|
6.1
|
|
|
5.8
|
|
|
Maximum allowable of 6.5-7.0(1)
|
Fixed charge coverage ratio
|
2.2
|
|
|
2.2
|
|
|
Minimum allowable of 1.5
|
______________________________________________________________
|
|
(1)
|
The maximum allowable leverage ratio under our indentures for the 4
7
/
8
% Notes, the GBP Notes and the 5
1
/
4
% Notes is
7.0
, while the maximum allowable leverage ratio under the indentures pertaining to our remaining senior and senior subordinated notes is
6.5
. In certain instances as provided in our indentures, we have the ability to incur additional indebtedness that would result in our bond leverage ratio exceeding the maximum allowable ratio under our indentures and still remain in compliance with the covenant.
|
Noncompliance with these leverage and fixed charge coverage ratios would have a material adverse effect on our financial condition and liquidity.
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Data)
(Unaudited)
(5) Selected Consolidated Financial Statements of Parent, Guarantors and Non-Guarantors
The following data summarizes the consolidating results of IMI on the equity method of accounting as of
March 31, 2019
and
December 31, 2018
and for the
three
months ended March 31, 2019 and 2018 and are prepared on the same basis as the consolidated financial statements.
The Parent Notes, the CAD Notes, the GBP Notes, and the 5
3
/
8
% Notes are guaranteed by the subsidiaries referred to below as the Guarantors. These subsidiaries are 100% owned by IMI. The guarantees are full and unconditional, as well as joint and several.
Additionally, IMI guarantees the CAD Notes, which were issued by Iron Mountain Canada Operations ULC ("Canada Company"), the GBP Notes, which were issued by Iron Mountain (UK) PLC ("IM UK"), and the 5
3
/
8
% Notes, which were issued by Iron Mountain US Holdings, Inc., which is one of the Guarantors. Canada Company and IM UK do not guarantee the Parent Notes. The subsidiaries that do not guarantee the Parent Notes, the CAD Notes, the GBP Notes, and the 5
3
/
8
% Notes are referred to below as the Non-Guarantors.
In the normal course of business, we periodically change the ownership structure of our subsidiaries to meet the requirements of our business. In the event of such changes, we recast the prior period financial information within this footnote to conform to the current period presentation in the period such changes occur. Generally, these changes do not alter the designation of the underlying subsidiaries as Guarantors or Non-Guarantors. However, they may change whether the underlying subsidiary is owned by the Parent, a Guarantor or a Non-Guarantor. If such a change occurs, the amount of investment in subsidiaries in the below Condensed Consolidated Balance Sheets and equity in the earnings (losses) of subsidiaries, net of tax in the below Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) with respect to the relevant Parent, Guarantors, Non-Guarantors and Eliminations columns also would change.
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Data)
(Unaudited)
(5) Selected Consolidated Financial Statements of Parent, Guarantors and Non-Guarantors (Continued)
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
Parent
|
|
Guarantors
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Consolidated
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents(1)
|
$
|
11
|
|
|
$
|
122,114
|
|
|
$
|
109,991
|
|
|
$
|
(70,641
|
)
|
|
$
|
161,475
|
|
Accounts receivable
|
—
|
|
|
37,598
|
|
|
799,923
|
|
|
—
|
|
|
837,521
|
|
Intercompany receivable
|
—
|
|
|
1,032,582
|
|
|
—
|
|
|
(1,032,582
|
)
|
|
—
|
|
Prepaid expenses and other
|
—
|
|
|
110,223
|
|
|
100,660
|
|
|
(29
|
)
|
|
210,854
|
|
Total Current Assets
|
11
|
|
|
1,302,517
|
|
|
1,010,574
|
|
|
(1,103,252
|
)
|
|
1,209,850
|
|
Property, Plant and Equipment, Net
|
168
|
|
|
2,999,744
|
|
|
1,525,671
|
|
|
—
|
|
|
4,525,583
|
|
Other Assets, Net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term notes receivable from affiliates and intercompany receivable
|
5,009,984
|
|
|
—
|
|
|
—
|
|
|
(5,009,984
|
)
|
|
—
|
|
Investment in subsidiaries
|
1,926,435
|
|
|
1,017,247
|
|
|
—
|
|
|
(2,943,682
|
)
|
|
—
|
|
Goodwill
|
—
|
|
|
2,857,855
|
|
|
1,607,523
|
|
|
—
|
|
|
4,465,378
|
|
Operating lease right-of-use assets
|
—
|
|
|
895,920
|
|
|
895,616
|
|
|
—
|
|
|
1,791,536
|
|
Other
|
5
|
|
|
976,403
|
|
|
720,608
|
|
|
—
|
|
|
1,697,016
|
|
Total Other Assets, Net
|
6,936,424
|
|
|
5,747,425
|
|
|
3,223,747
|
|
|
(7,953,666
|
)
|
|
7,953,930
|
|
Total Assets
|
$
|
6,936,603
|
|
|
$
|
10,049,686
|
|
|
$
|
5,759,992
|
|
|
$
|
(9,056,918
|
)
|
|
$
|
13,689,363
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany Payable
|
$
|
729,843
|
|
|
$
|
—
|
|
|
$
|
302,739
|
|
|
$
|
(1,032,582
|
)
|
|
$
|
—
|
|
Debit Balances Under Cash Pools
|
—
|
|
|
—
|
|
|
70,641
|
|
|
(70,641
|
)
|
|
—
|
|
Current Portion of Long-Term Debt
|
—
|
|
|
55,940
|
|
|
69,231
|
|
|
(29
|
)
|
|
125,142
|
|
Total Other Current Liabilities (includes current portion of operating lease liabilities)
|
224,825
|
|
|
632,699
|
|
|
532,467
|
|
|
—
|
|
|
1,389,991
|
|
Long-Term Debt, Net of Current Portion
|
4,218,887
|
|
|
2,212,686
|
|
|
1,934,164
|
|
|
—
|
|
|
8,365,737
|
|
Long-Term Operating Lease Liabilities, Net of Current Portion
|
—
|
|
|
832,007
|
|
|
824,652
|
|
|
—
|
|
|
1,656,659
|
|
Long-Term Notes Payable to Affiliates and Intercompany Payable
|
—
|
|
|
5,009,984
|
|
|
—
|
|
|
(5,009,984
|
)
|
|
—
|
|
Other Long-term Liabilities
|
3,647
|
|
|
51,575
|
|
|
262,776
|
|
|
—
|
|
|
317,998
|
|
Commitments and Contingencies (See Note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Noncontrolling Interests
|
—
|
|
|
—
|
|
|
73,102
|
|
|
—
|
|
|
73,102
|
|
Total Iron Mountain Incorporated Stockholders' Equity
|
1,759,401
|
|
|
1,254,795
|
|
|
1,688,887
|
|
|
(2,943,682
|
)
|
|
1,759,401
|
|
Noncontrolling Interests
|
—
|
|
|
—
|
|
|
1,333
|
|
|
—
|
|
|
1,333
|
|
Total Equity
|
1,759,401
|
|
|
1,254,795
|
|
|
1,690,220
|
|
|
(2,943,682
|
)
|
|
1,760,734
|
|
Total Liabilities and Equity
|
$
|
6,936,603
|
|
|
$
|
10,049,686
|
|
|
$
|
5,759,992
|
|
|
$
|
(9,056,918
|
)
|
|
$
|
13,689,363
|
|
______________________________________________________________
|
|
(1)
|
Included within Cash and Cash Equivalents at March 31, 2019 is approximately
$76,000
and
$0
of cash on deposit associated with our Cash Pools for the Guarantors and Non-Guarantors, respectively.
|
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Data)
(Unaudited)
(5) Selected Consolidated Financial Statements of Parent, Guarantors and Non-Guarantors (Continued)
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
Parent
|
|
Guarantors
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Consolidated
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents(1)
|
$
|
132
|
|
|
$
|
61,650
|
|
|
$
|
169,318
|
|
|
$
|
(65,615
|
)
|
|
$
|
165,485
|
|
Accounts receivable
|
—
|
|
|
47,900
|
|
|
798,989
|
|
|
—
|
|
|
846,889
|
|
Intercompany receivable
|
—
|
|
|
818,463
|
|
|
—
|
|
|
(818,463
|
)
|
|
—
|
|
Prepaid expenses and other
|
93
|
|
|
108,879
|
|
|
86,797
|
|
|
(29
|
)
|
|
195,740
|
|
Total Current Assets
|
225
|
|
|
1,036,892
|
|
|
1,055,104
|
|
|
(884,107
|
)
|
|
1,208,114
|
|
Property, Plant and Equipment, Net
|
190
|
|
|
3,002,104
|
|
|
1,487,263
|
|
|
—
|
|
|
4,489,557
|
|
Other Assets, Net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term notes receivable from affiliates and intercompany receivable
|
4,954,686
|
|
|
—
|
|
|
—
|
|
|
(4,954,686
|
)
|
|
—
|
|
Investment in subsidiaries
|
1,885,174
|
|
|
1,006,144
|
|
|
—
|
|
|
(2,891,318
|
)
|
|
—
|
|
Goodwill
|
—
|
|
|
2,858,539
|
|
|
1,582,491
|
|
|
—
|
|
|
4,441,030
|
|
Other
|
—
|
|
|
979,483
|
|
|
734,063
|
|
|
—
|
|
|
1,713,546
|
|
Total Other Assets, Net
|
6,839,860
|
|
|
4,844,166
|
|
|
2,316,554
|
|
|
(7,846,004
|
)
|
|
6,154,576
|
|
Total Assets
|
$
|
6,840,275
|
|
|
$
|
8,883,162
|
|
|
$
|
4,858,921
|
|
|
$
|
(8,730,111
|
)
|
|
$
|
11,852,247
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany Payable
|
$
|
462,927
|
|
|
$
|
—
|
|
|
$
|
355,536
|
|
|
$
|
(818,463
|
)
|
|
$
|
—
|
|
Debit Balances Under Cash Pools
|
—
|
|
|
10,612
|
|
|
55,003
|
|
|
(65,615
|
)
|
|
—
|
|
Current Portion of Long-Term Debt
|
—
|
|
|
63,703
|
|
|
62,732
|
|
|
(29
|
)
|
|
126,406
|
|
Total Other Current Liabilities
|
268,373
|
|
|
616,826
|
|
|
451,073
|
|
|
—
|
|
|
1,336,272
|
|
Long-Term Debt, Net of Current Portion
|
4,223,822
|
|
|
1,877,649
|
|
|
1,914,946
|
|
|
—
|
|
|
8,016,417
|
|
Long-Term Notes Payable to Affiliates and Intercompany Payable
|
—
|
|
|
4,954,686
|
|
|
—
|
|
|
(4,954,686
|
)
|
|
—
|
|
Other Long-term Liabilities
|
973
|
|
|
115,994
|
|
|
300,064
|
|
|
—
|
|
|
417,031
|
|
Commitments and Contingencies (See Note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Noncontrolling Interests
|
—
|
|
|
—
|
|
|
70,532
|
|
|
—
|
|
|
70,532
|
|
Total Iron Mountain Incorporated Stockholders' Equity
|
1,884,180
|
|
|
1,243,692
|
|
|
1,647,626
|
|
|
(2,891,318
|
)
|
|
1,884,180
|
|
Noncontrolling Interests
|
—
|
|
|
—
|
|
|
1,409
|
|
|
—
|
|
|
1,409
|
|
Total Equity
|
1,884,180
|
|
|
1,243,692
|
|
|
1,649,035
|
|
|
(2,891,318
|
)
|
|
1,885,589
|
|
Total Liabilities and Equity
|
$
|
6,840,275
|
|
|
$
|
8,883,162
|
|
|
$
|
4,858,921
|
|
|
$
|
(8,730,111
|
)
|
|
$
|
11,852,247
|
|
______________________________________________________________
|
|
(1)
|
Included within Cash and Cash Equivalents at December 31, 2018 is approximately
$57,200
and
$12,700
of cash on deposit associated with our Cash Pools for the Guarantors and Non-Guarantors, respectively.
|
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Data)
(Unaudited)
(5) Selected Consolidated Financial Statements of Parent, Guarantors and Non-Guarantors (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
Parent
|
|
Guarantors
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Consolidated
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Storage rental
|
$
|
—
|
|
|
$
|
403,741
|
|
|
$
|
259,233
|
|
|
$
|
—
|
|
|
$
|
662,974
|
|
Service
|
—
|
|
|
239,693
|
|
|
151,196
|
|
|
—
|
|
|
390,889
|
|
Intercompany revenues
|
—
|
|
|
1,154
|
|
|
4,923
|
|
|
(6,077
|
)
|
|
—
|
|
Total Revenues
|
—
|
|
|
644,588
|
|
|
415,352
|
|
|
(6,077
|
)
|
|
1,053,863
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (excluding depreciation and amortization)
|
—
|
|
|
263,137
|
|
|
198,407
|
|
|
—
|
|
|
461,544
|
|
Intercompany
|
—
|
|
|
4,923
|
|
|
1,154
|
|
|
(6,077
|
)
|
|
—
|
|
Selling, general and administrative
|
87
|
|
|
187,822
|
|
|
82,650
|
|
|
—
|
|
|
270,559
|
|
Depreciation and amortization
|
23
|
|
|
102,954
|
|
|
59,506
|
|
|
—
|
|
|
162,483
|
|
(Gain) Loss on disposal/write-down of property, plant and equipment, net
|
—
|
|
|
574
|
|
|
28
|
|
|
—
|
|
|
602
|
|
Total Operating Expenses
|
110
|
|
|
559,410
|
|
|
341,745
|
|
|
(6,077
|
)
|
|
895,188
|
|
Operating (Loss) Income
|
(110
|
)
|
|
85,178
|
|
|
73,607
|
|
|
—
|
|
|
158,675
|
|
Interest Expense (Income), Net(1)
|
49,625
|
|
|
4,057
|
|
|
48,754
|
|
|
—
|
|
|
102,436
|
|
Other Expense (Income), Net
|
182
|
|
|
527
|
|
|
14,501
|
|
|
—
|
|
|
15,210
|
|
(Loss) Income from Continuing Operations Before Provision (Benefit) for Income Taxes
|
(49,917
|
)
|
|
80,594
|
|
|
10,352
|
|
|
—
|
|
|
41,029
|
|
Provision (Benefit) for Income Taxes
|
—
|
|
|
1,301
|
|
|
9,252
|
|
|
—
|
|
|
10,553
|
|
Equity in the (Earnings) Losses of Subsidiaries, Net of Tax
|
(79,478
|
)
|
|
4,158
|
|
|
—
|
|
|
75,320
|
|
|
—
|
|
Income (Loss) from Continuing Operations
|
29,561
|
|
|
75,135
|
|
|
1,100
|
|
|
(75,320
|
)
|
|
30,476
|
|
(Loss) Income from Discontinued Operations, Net of Tax
|
—
|
|
|
(24
|
)
|
|
—
|
|
|
—
|
|
|
(24
|
)
|
Net Income (Loss)
|
29,561
|
|
|
75,111
|
|
|
1,100
|
|
|
(75,320
|
)
|
|
30,452
|
|
Less: Net Income (Loss) Attributable to Noncontrolling Interests
|
—
|
|
|
—
|
|
|
891
|
|
|
—
|
|
|
891
|
|
Net Income (Loss) Attributable to Iron Mountain Incorporated
|
$
|
29,561
|
|
|
$
|
75,111
|
|
|
$
|
209
|
|
|
$
|
(75,320
|
)
|
|
$
|
29,561
|
|
Net Income (Loss)
|
$
|
29,561
|
|
|
$
|
75,111
|
|
|
$
|
1,100
|
|
|
$
|
(75,320
|
)
|
|
$
|
30,452
|
|
Other Comprehensive Income (Loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Translation Adjustments
|
6,141
|
|
|
—
|
|
|
12,050
|
|
|
—
|
|
|
18,191
|
|
Change in fair value of interest rate swap agreements
|
(2,674
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,674
|
)
|
Equity in Other Comprehensive (Loss) Income of Subsidiaries
|
11,237
|
|
|
7,156
|
|
|
—
|
|
|
(18,393
|
)
|
|
—
|
|
Total Other Comprehensive Income (Loss)
|
14,704
|
|
|
7,156
|
|
|
12,050
|
|
|
(18,393
|
)
|
|
15,517
|
|
Comprehensive Income (Loss)
|
44,265
|
|
|
82,267
|
|
|
13,150
|
|
|
(93,713
|
)
|
|
45,969
|
|
Comprehensive (Loss) Income Attributable to Noncontrolling Interests
|
—
|
|
|
—
|
|
|
1,704
|
|
|
—
|
|
|
1,704
|
|
Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated
|
$
|
44,265
|
|
|
$
|
82,267
|
|
|
$
|
11,446
|
|
|
$
|
(93,713
|
)
|
|
$
|
44,265
|
|
_____________________________________________________________
|
|
(1)
|
Included within Interest Expense (Income), Net are intercompany management fees and royalty fees, which are eliminated in our consolidated financial statements.
|
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Data)
(Unaudited)
(5) Selected Consolidated Financial Statements of Parent, Guarantors and Non-Guarantors (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2018
|
|
Parent
|
|
Guarantors
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Consolidated
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Storage rental
|
$
|
—
|
|
|
$
|
396,476
|
|
|
$
|
254,673
|
|
|
$
|
—
|
|
|
$
|
651,149
|
|
Service
|
—
|
|
|
230,230
|
|
|
161,079
|
|
|
—
|
|
|
391,309
|
|
Intercompany revenues
|
—
|
|
|
1,205
|
|
|
4,491
|
|
|
(5,696
|
)
|
|
—
|
|
Total Revenues
|
—
|
|
|
627,911
|
|
|
420,243
|
|
|
(5,696
|
)
|
|
1,042,458
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (excluding depreciation and amortization)
|
—
|
|
|
246,163
|
|
|
202,558
|
|
|
—
|
|
|
448,721
|
|
Intercompany cost of sales
|
—
|
|
|
4,491
|
|
|
1,205
|
|
|
(5,696
|
)
|
|
—
|
|
Selling, general and administrative
|
43
|
|
|
185,348
|
|
|
84,339
|
|
|
—
|
|
|
269,730
|
|
Depreciation and amortization
|
33
|
|
|
102,446
|
|
|
58,099
|
|
|
—
|
|
|
160,578
|
|
(Gain) Loss on disposal/write-down of property, plant and equipment, net
|
—
|
|
|
(356
|
)
|
|
(774
|
)
|
|
—
|
|
|
(1,130
|
)
|
Total Operating Expenses
|
76
|
|
|
538,092
|
|
|
345,427
|
|
|
(5,696
|
)
|
|
877,899
|
|
Operating (Loss) Income
|
(76
|
)
|
|
89,819
|
|
|
74,816
|
|
|
—
|
|
|
164,559
|
|
Interest Expense (Income), Net(1)
|
49,941
|
|
|
(1,508
|
)
|
|
49,193
|
|
|
—
|
|
|
97,626
|
|
Other (Income) Expense, Net
|
(1,157
|
)
|
|
1,560
|
|
|
19,748
|
|
|
—
|
|
|
20,151
|
|
(Loss) Income from Continuing Operations Before Provision (Benefit) for Income Taxes
|
(48,860
|
)
|
|
89,767
|
|
|
5,875
|
|
|
—
|
|
|
46,782
|
|
(Benefit) Provision for Income Taxes
|
—
|
|
|
(6,712
|
)
|
|
7,880
|
|
|
—
|
|
|
1,168
|
|
Equity in the (Earnings) Losses of Subsidiaries, Net of Tax
|
(93,544
|
)
|
|
2,865
|
|
|
—
|
|
|
90,679
|
|
|
—
|
|
Income (Loss) from Continuing Operations
|
44,684
|
|
|
93,614
|
|
|
(2,005
|
)
|
|
(90,679
|
)
|
|
45,614
|
|
(Loss) Income from Discontinued Operations
|
—
|
|
|
(422
|
)
|
|
(40
|
)
|
|
—
|
|
|
(462
|
)
|
Net Income (Loss)
|
44,684
|
|
|
93,192
|
|
|
(2,045
|
)
|
|
(90,679
|
)
|
|
45,152
|
|
Less: Net Income (Loss) Attributable to Noncontrolling Interests
|
—
|
|
|
—
|
|
|
468
|
|
|
—
|
|
|
468
|
|
Net Income (Loss) Attributable to Iron Mountain Incorporated
|
$
|
44,684
|
|
|
$
|
93,192
|
|
|
$
|
(2,513
|
)
|
|
$
|
(90,679
|
)
|
|
$
|
44,684
|
|
Net Income (Loss)
|
$
|
44,684
|
|
|
$
|
93,192
|
|
|
$
|
(2,045
|
)
|
|
$
|
(90,679
|
)
|
|
$
|
45,152
|
|
Other Comprehensive Income (Loss):
|
|
|
|
|
|
|
|
|
|
Foreign Currency Translation Adjustments
|
(5,635
|
)
|
|
—
|
|
|
37,286
|
|
|
—
|
|
|
31,651
|
|
Change in fair value of interest rate swap agreements
|
(185
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(185
|
)
|
Equity in Other Comprehensive Income (Loss) of Subsidiaries
|
35,732
|
|
|
38,336
|
|
|
—
|
|
|
(74,068
|
)
|
|
—
|
|
Total Other Comprehensive Income (Loss)
|
29,912
|
|
|
38,336
|
|
|
37,286
|
|
|
(74,068
|
)
|
|
31,466
|
|
Comprehensive Income (Loss)
|
74,596
|
|
|
131,528
|
|
|
35,241
|
|
|
(164,747
|
)
|
|
76,618
|
|
Comprehensive Income (Loss) Attributable to Noncontrolling Interests
|
—
|
|
|
—
|
|
|
2,027
|
|
|
—
|
|
|
2,027
|
|
Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated
|
$
|
74,596
|
|
|
$
|
131,528
|
|
|
$
|
33,214
|
|
|
$
|
(164,747
|
)
|
|
$
|
74,591
|
|
_____________________________________________________________
|
|
(1)
|
Included within Interest Expense (Income), Net are intercompany management fees and royalty fees, which are eliminated in our consolidated financial statements.
|
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Data)
(Unaudited)
(5) Selected Consolidated Financial Statements of Parent, Guarantors and Non-Guarantors (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
Parent
|
|
Guarantors
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Consolidated
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities—Continuing Operations
|
$
|
(68,310
|
)
|
|
$
|
116,235
|
|
|
$
|
69,142
|
|
|
$
|
—
|
|
|
$
|
117,067
|
|
Cash Flows from Operating Activities—Discontinued Operations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Cash Flows from Operating Activities
|
(68,310
|
)
|
|
116,235
|
|
|
$
|
69,142
|
|
|
$
|
—
|
|
|
$
|
117,067
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
(84,766
|
)
|
|
(99,999
|
)
|
|
—
|
|
|
(184,765
|
)
|
Cash paid for acquisitions, net of cash acquired
|
—
|
|
|
(9,508
|
)
|
|
(29,915
|
)
|
|
—
|
|
|
(39,423
|
)
|
Intercompany loans to subsidiaries
|
252,175
|
|
|
22,859
|
|
|
—
|
|
|
(275,034
|
)
|
|
—
|
|
Acquisitions of customer relationships, customer inducements and data center lease-based intangibles
|
—
|
|
|
(49,301
|
)
|
|
(18,611
|
)
|
|
—
|
|
|
(67,912
|
)
|
Investments in joint ventures (see Note 9)
|
—
|
|
|
(19,222
|
)
|
|
—
|
|
|
—
|
|
|
(19,222
|
)
|
Proceeds from sales of property and equipment and other, net
|
—
|
|
|
36
|
|
|
69
|
|
|
—
|
|
|
105
|
|
Cash Flows from Investing Activities—Continuing Operations
|
252,175
|
|
|
(139,902
|
)
|
|
(148,456
|
)
|
|
(275,034
|
)
|
|
(311,217
|
)
|
Cash Flows from Investing Activities—Discontinued Operations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Cash Flows from Investing Activities
|
252,175
|
|
|
(139,902
|
)
|
|
(148,456
|
)
|
|
(275,034
|
)
|
|
(311,217
|
)
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of revolving credit facility, term loan facilities and other debt
|
—
|
|
|
(410,563
|
)
|
|
(940,679
|
)
|
|
—
|
|
|
(1,351,242
|
)
|
Proceeds from revolving credit facility, term loan facilities and other debt
|
—
|
|
|
734,243
|
|
|
989,219
|
|
|
—
|
|
|
1,723,462
|
|
Debit (payments) balances under cash pools
|
—
|
|
|
(10,612
|
)
|
|
15,638
|
|
|
(5,026
|
)
|
|
—
|
|
Debt (repayment to) financing from and equity (distribution to) contribution from noncontrolling interests, net
|
—
|
|
|
—
|
|
|
(498
|
)
|
|
—
|
|
|
(498
|
)
|
Intercompany loans from parent
|
—
|
|
|
(228,937
|
)
|
|
(46,097
|
)
|
|
275,034
|
|
|
—
|
|
Parent cash dividends
|
(178,023
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(178,023
|
)
|
Net (payments) proceeds associated with employee stock-based awards
|
(5,963
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,963
|
)
|
Cash Flows from Financing Activities—Continuing Operations
|
(183,986
|
)
|
|
84,131
|
|
|
17,583
|
|
|
270,008
|
|
|
187,736
|
|
Cash Flows from Financing Activities—Discontinued Operations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Cash Flows from Financing Activities
|
(183,986
|
)
|
|
84,131
|
|
|
17,583
|
|
|
270,008
|
|
|
187,736
|
|
Effect of exchange rates on cash and cash equivalents
|
—
|
|
|
—
|
|
|
2,404
|
|
|
—
|
|
|
2,404
|
|
(Decrease) Increase in cash and cash equivalents
|
(121
|
)
|
|
60,464
|
|
|
(59,327
|
)
|
|
(5,026
|
)
|
|
(4,010
|
)
|
Cash and cash equivalents, including Restricted Cash, beginning of period
|
132
|
|
|
61,650
|
|
|
169,318
|
|
|
(65,615
|
)
|
|
165,485
|
|
Cash and cash equivalents, including Restricted Cash,
end of period
|
$
|
11
|
|
|
$
|
122,114
|
|
|
$
|
109,991
|
|
|
$
|
(70,641
|
)
|
|
$
|
161,475
|
|
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Data)
(Unaudited)
(5) Selected Consolidated Financial Statements of Parent, Guarantors and Non-Guarantors (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2018
|
|
Parent
|
|
Guarantors
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Consolidated
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities—Continuing Operations
|
$
|
(66,516
|
)
|
|
$
|
96,674
|
|
|
$
|
61,410
|
|
|
$
|
—
|
|
|
$
|
91,568
|
|
Cash Flows from Operating Activities—Discontinued Operations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Cash Flows from Operating Activities
|
(66,516
|
)
|
|
96,674
|
|
|
61,410
|
|
|
—
|
|
|
91,568
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
(62,148
|
)
|
|
(33,457
|
)
|
|
—
|
|
|
(95,605
|
)
|
Cash paid for acquisitions, net of cash acquired
|
—
|
|
|
(1,315,549
|
)
|
|
(113,425
|
)
|
|
—
|
|
|
(1,428,974
|
)
|
Intercompany loans to subsidiaries
|
157,737
|
|
|
208,443
|
|
|
—
|
|
|
(366,180
|
)
|
|
—
|
|
Acquisitions of customer relationships, customer inducements and data center lease-based intangibles
|
—
|
|
|
(11,874
|
)
|
|
(6,172
|
)
|
|
—
|
|
|
(18,046
|
)
|
Proceeds from sales of property and equipment and other, net
|
—
|
|
|
(19,466
|
)
|
|
79
|
|
|
—
|
|
|
(19,387
|
)
|
Cash Flows from Investing Activities—Continuing Operations
|
157,737
|
|
|
(1,200,594
|
)
|
|
(152,975
|
)
|
|
(366,180
|
)
|
|
(1,562,012
|
)
|
Cash Flows from Investing Activities—Discontinued Operations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Cash Flows from Investing Activities
|
157,737
|
|
|
(1,200,594
|
)
|
|
(152,975
|
)
|
|
(366,180
|
)
|
|
(1,562,012
|
)
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of revolving credit facility, term loan facilities and other debt
|
—
|
|
|
(2,308,119
|
)
|
|
(2,102,537
|
)
|
|
—
|
|
|
(4,410,656
|
)
|
Proceeds from revolving credit facility, term loan facilities and other debt
|
—
|
|
|
3,067,988
|
|
|
2,428,503
|
|
|
—
|
|
|
5,496,491
|
|
Debit (payments) balances under cash pools
|
—
|
|
|
(51,946
|
)
|
|
(11,733
|
)
|
|
63,679
|
|
|
—
|
|
Debt (repayment to) financing from and equity (distribution to) contribution from noncontrolling interests, net
|
—
|
|
|
—
|
|
|
(561
|
)
|
|
—
|
|
|
(561
|
)
|
Intercompany loans from parent
|
—
|
|
|
(154,184
|
)
|
|
(211,996
|
)
|
|
366,180
|
|
|
—
|
|
Parent cash dividends
|
(169,006
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(169,006
|
)
|
Net (payments) proceeds associated with employee stock-based awards
|
(5,950
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,950
|
)
|
Net proceeds associated with the Over-Allotment Option exercise
|
76,192
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
76,192
|
|
Net proceeds associated with the At the Market (ATM) Program
|
8,716
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,716
|
|
Payment of debt financing and stock issuance costs
|
(412
|
)
|
|
(9,075
|
)
|
|
(487
|
)
|
|
—
|
|
|
(9,974
|
)
|
Cash Flows from Financing Activities—Continuing Operations
|
(90,460
|
)
|
|
544,664
|
|
|
101,189
|
|
|
429,859
|
|
|
985,252
|
|
Cash Flows from Financing Activities—Discontinued Operations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Cash Flows from Financing Activities
|
(90,460
|
)
|
|
544,664
|
|
|
101,189
|
|
|
429,859
|
|
|
985,252
|
|
Effect of exchange rates on cash and cash equivalents
|
—
|
|
|
—
|
|
|
1,984
|
|
|
—
|
|
|
1,984
|
|
Increase (Decrease) in cash and cash equivalents
|
761
|
|
|
(559,256
|
)
|
|
11,608
|
|
|
63,679
|
|
|
(483,208
|
)
|
Cash and cash equivalents, including Restricted Cash, beginning of period
|
2,433
|
|
|
634,317
|
|
|
383,675
|
|
|
(94,726
|
)
|
|
925,699
|
|
Cash and cash equivalents, including Restricted Cash,
end of period
|
$
|
3,194
|
|
|
$
|
75,061
|
|
|
$
|
395,283
|
|
|
$
|
(31,047
|
)
|
|
$
|
442,491
|
|
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Data)
(Unaudited)
(6) Segment Information
Our
six
reportable operating segments as of December 31, 2018 are described in Note 9 to Notes to Consolidated Financial Statements included in our Annual Report and are as follows:
|
|
•
|
North American Records and Information Management Business
|
|
|
•
|
North American Data Management Business
|
|
|
•
|
Western European Business
|
|
|
•
|
Other International Business
|
|
|
•
|
Global Data Center Business
|
|
|
•
|
Corporate and Other Business
|
There have been no changes made to our reportable operating segments since December 31, 2018, other than the impact of the Consumer Storage Transaction (as defined in Note 9). Prior to the Consumer Storage Transaction, our consumer storage business was a component of our Corporate and Other Business Segment. The previously reported segment information has been restated to conform to the current presentation and reflects the changes to our reportable operating segments that occurred in fourth quarter of 2018 as described in Note 9 to Notes to Consolidated Financial Statements included in our Annual Report. The operations associated with acquisitions completed during the first three months of 2019 have been incorporated into our existing reportable operating segments.
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Data)
(Unaudited)
(6) Segment Information (Continued)
An analysis of our business segment information and reconciliation to the accompanying Condensed Consolidated Financial Statements is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American
Records and
Information
Management
Business
|
|
North American
Data
Management
Business
|
|
Western European Business
|
|
Other International Business
|
|
Global Data Center Business
|
|
Corporate
and Other
Business
|
|
Total
Consolidated
|
As of and for the Three Months Ended March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
$
|
527,380
|
|
|
$
|
96,747
|
|
|
$
|
128,753
|
|
|
$
|
200,956
|
|
|
$
|
61,536
|
|
|
$
|
38,491
|
|
|
$
|
1,053,863
|
|
Storage Rental
|
|
306,986
|
|
|
66,572
|
|
|
80,695
|
|
|
129,473
|
|
|
59,718
|
|
|
19,530
|
|
|
662,974
|
|
Service
|
|
220,394
|
|
|
30,175
|
|
|
48,058
|
|
|
71,483
|
|
|
1,818
|
|
|
18,961
|
|
|
390,889
|
|
Depreciation and Amortization
|
|
60,002
|
|
|
10,202
|
|
|
15,257
|
|
|
30,599
|
|
|
31,632
|
|
|
14,791
|
|
|
162,483
|
|
Depreciation
|
|
45,752
|
|
|
8,013
|
|
|
10,947
|
|
|
18,218
|
|
|
19,013
|
|
|
12,668
|
|
|
114,611
|
|
Amortization
|
|
14,250
|
|
|
2,189
|
|
|
4,310
|
|
|
12,381
|
|
|
12,619
|
|
|
2,123
|
|
|
47,872
|
|
Adjusted EBITDA
|
|
223,683
|
|
|
50,552
|
|
|
39,209
|
|
|
58,124
|
|
|
26,011
|
|
|
(73,073
|
)
|
|
324,506
|
|
Total Assets(1)
|
|
5,823,817
|
|
|
902,514
|
|
|
1,414,878
|
|
|
2,686,938
|
|
|
2,310,001
|
|
|
551,215
|
|
|
13,689,363
|
|
Expenditures for Segment Assets
|
|
56,265
|
|
|
5,632
|
|
|
30,101
|
|
|
31,254
|
|
|
153,705
|
|
|
15,143
|
|
|
292,100
|
|
Capital Expenditures (see Liquidity and Capital Resources section of Management's Discussion & Analysis of Financial Condition and Results of Operations)
|
|
28,688
|
|
|
5,632
|
|
|
2,116
|
|
|
15,149
|
|
|
121,557
|
|
|
11,623
|
|
|
184,765
|
|
Cash Paid (Received) for Acquisitions, Net of Cash Acquired
|
|
9,876
|
|
|
—
|
|
|
11,484
|
|
|
14,543
|
|
|
—
|
|
|
3,520
|
|
|
39,423
|
|
Acquisitions of Customer Relationships, Customer Inducements and Contract Fulfillment Costs and third-party commissions.
|
|
17,701
|
|
|
—
|
|
|
16,501
|
|
|
1,562
|
|
|
32,148
|
|
|
—
|
|
|
67,912
|
|
As of and for the Three Months Ended March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
$
|
526,843
|
|
|
$
|
99,964
|
|
|
$
|
134,075
|
|
|
$
|
210,767
|
|
|
$
|
46,603
|
|
|
$
|
24,206
|
|
|
$
|
1,042,458
|
|
Storage Rental
|
|
304,819
|
|
|
69,246
|
|
|
83,952
|
|
|
131,747
|
|
|
45,495
|
|
|
15,890
|
|
|
651,149
|
|
Service
|
|
222,024
|
|
|
30,718
|
|
|
50,123
|
|
|
79,020
|
|
|
1,108
|
|
|
8,316
|
|
|
391,309
|
|
Depreciation and Amortization
|
|
62,752
|
|
|
10,104
|
|
|
17,556
|
|
|
31,873
|
|
|
22,268
|
|
|
16,025
|
|
|
160,578
|
|
Depreciation
|
|
49,138
|
|
|
8,023
|
|
|
12,758
|
|
|
19,064
|
|
|
11,380
|
|
|
13,069
|
|
|
113,432
|
|
Amortization
|
|
13,614
|
|
|
2,081
|
|
|
4,798
|
|
|
12,809
|
|
|
10,888
|
|
|
2,956
|
|
|
47,146
|
|
Adjusted EBITDA
|
|
225,738
|
|
|
53,852
|
|
|
43,966
|
|
|
60,747
|
|
|
20,790
|
|
|
(62,078
|
)
|
|
343,015
|
|
Total Assets(1)
|
|
5,030,238
|
|
|
833,690
|
|
|
917,155
|
|
|
2,441,685
|
|
|
1,875,766
|
|
|
899,615
|
|
|
11,998,149
|
|
Expenditures for Segment Assets
|
|
43,181
|
|
|
6,853
|
|
|
7,480
|
|
|
32,160
|
|
|
1,438,012
|
|
|
14,939
|
|
|
1,542,625
|
|
Capital Expenditures (see Liquidity and Capital Resources section of Management's Discussion & Analysis of Financial Condition and Results of Operations)
|
|
29,870
|
|
|
6,853
|
|
|
6,047
|
|
|
25,142
|
|
|
13,111
|
|
|
14,582
|
|
|
95,605
|
|
Cash Paid (Received) for Acquisitions, Net of Cash Acquired
|
|
1,551
|
|
|
—
|
|
|
—
|
|
|
3,208
|
|
|
1,424,215
|
|
|
—
|
|
|
1,428,974
|
|
Acquisitions of Customer Relationships, Customer Inducements and Contract Fulfillment Costs
|
|
11,760
|
|
|
—
|
|
|
1,433
|
|
|
3,810
|
|
|
686
|
|
|
357
|
|
|
18,046
|
|
______________________________________________________________
|
|
(1)
|
Excludes all intercompany receivables or payables and investment in subsidiary balances. Total assets as of March 31, 2019 reflects the adoption of ASU 2016-02.
|
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Data)
(Unaudited)
(6) Segment Information (Continued)
The accounting policies of the reportable operating segments are the same as those described in Note 2 and in Note 2 to Notes to Consolidated Financial Statements included in our Annual Report. Adjusted EBITDA for each segment is defined as income (loss) from continuing operations before interest expense, net, provision (benefit) for income taxes, depreciation and amortization, and also excludes certain items that we believe are not indicative of our core operating results, specifically: (i) (gain) loss on disposal/write-down of property, plant and equipment, net (including real estate); (ii) intangible impairments; (iii) other expense (income), net (which includes foreign currency transaction (gains) losses, net); and (iv) Significant Acquisition Costs (as defined below). Internally, we use Adjusted EBITDA as the basis for evaluating the performance of, and allocating resources to, our operating segments.
A reconciliation of Adjusted EBITDA to income (loss) from continuing operations on a consolidated basis is as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2019
|
|
2018
|
Adjusted EBITDA
|
$
|
324,506
|
|
|
$
|
343,015
|
|
(Add)/Deduct:
|
|
|
|
Provision (Benefit) for Income Taxes
|
10,553
|
|
|
1,168
|
|
Other Expense (Income), Net
|
15,210
|
|
|
20,151
|
|
Interest Expense, Net
|
102,436
|
|
|
97,626
|
|
Loss (gain) on disposal/write-down of property, plant and equipment, net
|
602
|
|
|
(1,130
|
)
|
Depreciation and Amortization
|
162,483
|
|
|
160,578
|
|
Significant Acquisition Costs(1)
|
2,746
|
|
|
19,008
|
|
Income (Loss) from Continuing Operations
|
$
|
30,476
|
|
|
$
|
45,614
|
|
_______________________________________________________________________________
|
|
(1)
|
As defined in Note 9 to Notes to Consolidated Financial Statements included in our Annual Report.
|
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Data)
(Unaudited)
(6) Segment Information (Continued)
Information as to our revenues by product and service lines by segment are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
American
Records and Information Management Business
|
|
North
American
Data
Management
Business
|
|
Western European Business
|
|
Other International Business
|
|
Global Data Center Business
|
|
Corporate and
Other Business
|
|
Total
Consolidated
|
For the Three Months Ended March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Records Management(1)
|
|
$
|
427,367
|
|
|
$
|
—
|
|
|
$
|
108,707
|
|
|
$
|
172,977
|
|
|
$
|
—
|
|
|
$
|
24,345
|
|
|
$
|
733,396
|
|
Data Management(1)
|
|
—
|
|
|
93,989
|
|
|
19,886
|
|
|
19,227
|
|
|
—
|
|
|
14,146
|
|
|
147,248
|
|
Information Destruction(1)(2)
|
|
100,013
|
|
|
2,758
|
|
|
160
|
|
|
8,752
|
|
|
—
|
|
|
—
|
|
|
111,683
|
|
Data Center
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
61,536
|
|
|
—
|
|
|
61,536
|
|
Total Revenues
|
|
$
|
527,380
|
|
|
$
|
96,747
|
|
|
$
|
128,753
|
|
|
$
|
200,956
|
|
|
$
|
61,536
|
|
|
$
|
38,491
|
|
|
$
|
1,053,863
|
|
For the Three Months Ended March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Records Management(1)
|
|
$
|
435,002
|
|
|
$
|
—
|
|
|
$
|
113,759
|
|
|
$
|
181,330
|
|
|
$
|
—
|
|
|
$
|
10,404
|
|
|
$
|
740,495
|
|
Data Management(1)
|
|
—
|
|
|
97,594
|
|
|
20,219
|
|
|
20,478
|
|
|
—
|
|
|
13,802
|
|
|
152,093
|
|
Information Destruction(1)(2)
|
|
91,841
|
|
|
2,370
|
|
|
97
|
|
|
8,959
|
|
|
—
|
|
|
—
|
|
|
103,267
|
|
Data Center
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
46,603
|
|
|
—
|
|
|
46,603
|
|
Total Revenues
|
|
$
|
526,843
|
|
|
$
|
99,964
|
|
|
$
|
134,075
|
|
|
$
|
210,767
|
|
|
$
|
46,603
|
|
|
$
|
24,206
|
|
|
$
|
1,042,458
|
|
_______________________________________________________________________________
|
|
(1)
|
Each of the offerings within our product and service lines has a component of revenue that is storage rental related and a component that is service revenues, except for information destruction, which does not have a storage rental component.
|
|
|
(2)
|
Includes secure shredding services.
|
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Data)
(Unaudited)
(7) Commitments and Contingencies
We are involved in litigation from time to time in the ordinary course of business. A portion of the defense and/or settlement costs associated with such litigation is covered by various commercial liability insurance policies purchased by us and, in limited cases, indemnification from third parties. Our policy is to establish reserves for loss contingencies when the losses are both probable and reasonably able to be estimated. We record legal costs associated with loss contingencies as expenses in the period in which they are incurred. There have been no material updates or changes to the matters disclosed in Note 10 to Notes to Consolidated Financial Statements included in our Annual Report, nor have there been any new material loss contingencies since December 31, 2018. We believe that the resolution of the matters disclosed in Note 10 to Notes to Consolidated Financial Statements included in our Annual Report will not have a material impact on our consolidated financial condition, results of operations or cash flows. We have estimated a reasonably possible range for all loss contingencies, including those disclosed in Note 10 to Notes to Consolidated Financial Statements included in our Annual Report, 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
$17,500
over the next several years, of which certain amounts would be covered by insurance or indemnity arrangements.
(8) Stockholders' Equity Matters
Our board of directors has adopted a dividend policy under which we have paid, and in the future intend to pay, quarterly cash dividends on our common stock. The amount and timing of future dividends will continue to be subject to the approval of our board of directors, in its sole discretion, and to applicable legal requirements.
In fiscal year 2018 and the first
three
months of 2019, our board of directors declared the following dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Declaration Date
|
|
Dividend
Per Share
|
|
Record Date
|
|
Total
Amount
|
|
Payment Date
|
February 14, 2018
|
|
$
|
0.5875
|
|
|
March 15, 2018
|
|
$
|
167,969
|
|
|
April 2, 2018
|
May 24, 2018
|
|
0.5875
|
|
|
June 15, 2018
|
|
168,078
|
|
|
July 2, 2018
|
July 24, 2018
|
|
0.5875
|
|
|
September 17, 2018
|
|
168,148
|
|
|
October 2, 2018
|
October 25, 2018
|
|
0.6110
|
|
|
December 17, 2018
|
|
174,935
|
|
|
January 3, 2019
|
February 7, 2019
|
|
0.6110
|
|
|
March 15, 2019
|
|
175,242
|
|
|
April 2, 2019
|
At The Market (ATM) Equity Program
As described in greater detail in Note 12 to Notes to Consolidated Financial Statements included in our Annual Report, we entered into a distribution agreement with a syndicate of
10
banks (the “Agents”) pursuant to which we may sell, from time to time, up to an aggregate sales price of
$500,000
of our common stock through the Agents (the “At The Market (ATM) Equity Program”). There were
no
shares of common stock sold under the At The Market (ATM) Equity Program during the three months ended March 31, 2019. As of March 31, 2019, the remaining aggregate sale price of shares of our common stock available for distribution under the At The Market (ATM) Equity Program was approximately
$431,200
.
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Data)
(Unaudited)
(9) Divestments
On March 19, 2019, we contributed our customer contracts and certain intellectual property and other assets used by us to operate our consumer storage business in the United States and Canada (the "IM Consumer Storage Assets") and approximately
$20,000
in cash (gross of certain transaction expenses) (the "Cash Contribution") to a joint venture entity, Makespace LLC (the "Makespace JV"), established by us and Makespace Labs, Inc. ("Makespace"), a consumer storage services provider (the "Consumer Storage Transaction"). At the closing date of the Consumer Storage Transaction, the Makespace JV owned (i) the IM Consumer Storage Assets, (ii) the Cash Contribution and (iii) the customer contracts, intellectual property and certain other assets used by Makespace to operate its consumer storage business in the United States. As part of the Consumer Storage Transaction, we received an equity interest of approximately
34%
in the Makespace JV (the "Makespace Investment"). In connection with the Consumer Storage Transaction and the Makespace Investment, we also entered into a storage and service agreement with the Makespace JV to provide certain storage and related services to the Makespace JV (see Note 11).
We have concluded that the divestment of the IM Consumer Storage Assets in the Consumer Storage Transaction does not meet the criteria to be reported as a discontinued operation in our consolidated financial statements, as our decision to divest this business does not represent a strategic shift that will have a major effect on our operations and financial results. Accordingly, the revenues and expenses associated with this business are presented as a component of income (loss) from continuing operations in our Condensed Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018, respectively, and the cash flows associated with this business are presented as a component of cash flows from continuing operations in our Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018, respectively, through the closing date of the Consumer Storage Transaction.
As a result of the Consumer Storage Transaction, we recorded a gain on sale of approximately
$4,200
to Other expense (income), net, in the first quarter of 2019, representing the excess of the fair value of the consideration received over the sum of (i) the carrying value of our consumer storage operations and (ii) the Cash Contribution. At the closing date of the Consumer Storage Transaction, the fair value of the Makespace Investment was approximately
$27,500
and is presented as a component of Other within Other assets, net in our Condensed Consolidated Balance Sheet as of March 31, 2019. We account for the Makespace Investment as an equity method investment.
IRON MOUNTAIN INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In Thousands, Except Share and Per Share Data)
(Unaudited)
(10) Significant Acquisition Costs
Significant Acquisition Costs included in the accompanying Condensed Consolidated Statements of Operations are as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2019
|
|
2018
|
Cost of sales (excluding depreciation and amortization)
|
$
|
898
|
|
|
$
|
296
|
|
Selling, general and administrative expenses
|
1,848
|
|
|
18,712
|
|
Total Significant Acquisition Costs
|
$
|
2,746
|
|
|
$
|
19,008
|
|
Significant Acquisition Costs included in the accompanying Condensed Consolidated Statements of Operations by segment are as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2019
|
|
2018
|
North American Records and Information Management Business
|
$
|
378
|
|
|
$
|
584
|
|
North American Data Management Business
|
—
|
|
|
—
|
|
Western European Business
|
—
|
|
|
2,152
|
|
Other International Business
|
502
|
|
|
537
|
|
Global Data Center Business
|
143
|
|
|
10,181
|
|
Corporate and Other Business
|
1,723
|
|
|
5,554
|
|
Total Significant Acquisition Costs
|
$
|
2,746
|
|
|
$
|
19,008
|
|
(11) Related Party Transactions
In connection with the Consumer Storage Transaction and the Makespace Investment (both as described more fully in Note 9), we also entered into a storage and service agreement with the Makespace JV to provide certain storage and related services to the Makespace JV (the "Makespace Agreement"). Revenues and expenses associated with the Makespace Agreement are presented as a component of our North American Records and Information Management Business segment. For the three months ended March 31, 2019, we recognized an immaterial amount of revenue associated with the Makespace Agreement.
IRON MOUNTAIN INCORPORATED