Edgar Filing: IRON MOUNTAIN INC

IRM 2015.3.31-10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q



(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2015

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission file number 1-13045

IRON MOUNTAIN INCORPORATED

(Exact Name of Registrant as Specified in Its Charter)



Delaware (State or other Jurisdiction of Incorporation or Organization)	23-2588479 (I.R.S. Employer Identification No.)

One Federal Street, Boston, Massachusetts 02110

(Address of Principal Executive Offices, Including Zip Code)

(617) 535-4766

(Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer ý	Accelerated filer o	Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

Number of shares of the registrant's Common Stock outstanding at April 24, 2015: 210,555,361

Table of Contents

IRON MOUNTAIN INCORPORATED

Index



	Page
PART I—FINANCIAL INFORMATION
Item 1—Unaudited Consolidated Financial Statements	3

Consolidated Balance Sheets at December 31, 2014 and March 31, 2015 (Unaudited)	3

Consolidated Statements of Operations for the Three Months Ended March 31, 2014 and 2015 (Unaudited)	4

Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2014 and 2015 (Unaudited)	5

Consolidated Statements of Equity for the Three Months Ended March 31, 2014 and 2015 (Unaudited)	6

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2015 (Unaudited)	7

Notes to Consolidated Financial Statements (Unaudited)	8

Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations	41

Item 4—Controls and Procedures	61

PART II—OTHER INFORMATION

Item 2—Unregistered Sales of Equity Securities and Use of Proceeds	62

Item 6—Exhibits	63

Signatures	64

Table of Contents

Part I. Financial Information

Item 1. Unaudited Consolidated Financial Statements

IRON MOUNTAIN INCORPORATED

CONSOLIDATED BALANCE SHEETS

(In Thousands, except Share and Per Share Data)

(Unaudited)



	December 31, 2014			March 31, 2015
ASSETS
Current Assets:
Cash and cash equivalents	$	125,933		$	119,605
Restricted cash	33,860			20,000
Accounts receivable (less allowances of $32,141 and $36,538 as of December 31, 2014 and March 31, 2015, respectively)	604,265			590,026
Deferred income taxes	14,192			21,052
Prepaid expenses and other	139,469			136,790
Total Current Assets	917,719			887,473
Property, Plant and Equipment:
Property, plant and equipment	4,668,705			4,597,207
Less—Accumulated depreciation	(2,117,978		)	(2,120,405		)
Property, Plant and Equipment, net	2,550,727			2,476,802
Other Assets, net:
Goodwill	2,423,783			2,358,561
Customer relationships and acquisition costs	607,837			580,441
Deferred financing costs	47,077			45,061
Other	23,199			23,116
Total Other Assets, net	3,101,896			3,007,179
Total Assets	$	6,570,342		$	6,371,454
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt	$	52,095		$	54,483
Accounts payable	203,014			184,406
Accrued expenses	404,485			296,247
Deferred revenue	197,142			185,195
Total Current Liabilities	856,736			720,331
Long-term Debt, net of current portion	4,611,436			4,667,359
Other Long-term Liabilities	73,506			72,363
Deferred Rent	104,051			99,021
Deferred Income Taxes	54,658			55,878
Commitments and Contingencies (see Note 7)
Equity:
Iron Mountain Incorporated Stockholders' Equity:
Preferred stock (par value $0.01; authorized 10,000,000 shares; none issued and outstanding)	—			—
Common stock (par value $0.01; authorized 400,000,000 shares; issued and outstanding 209,818,812 shares and 210,527,237 shares as of December 31, 2014 and March 31, 2015, respectively)	2,098			2,105
Additional paid-in capital	1,588,841			1,590,828
Earnings in excess of distributions (Distributions in excess of earnings)	(659,553		)	(718,996		)
Accumulated other comprehensive items, net	(75,031		)	(131,082		)
Total Iron Mountain Incorporated Stockholders' Equity	856,355			742,855
Noncontrolling Interests	13,600			13,647
Total Equity	869,955			756,502
Total Liabilities and Equity	$	6,570,342		$	6,371,454

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

IRON MOUNTAIN INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, except Per Share Data)

(Unaudited)



	Three Months Ended March 31,
	2014			2015
Revenues:
Storage rental	$	458,889		$	458,872
Service	311,237			290,414
Total Revenues	770,126			749,286
Operating Expenses:
Cost of sales (excluding depreciation and amortization)	335,145			321,654
Selling, general and administrative	214,780			196,414
Depreciation and amortization	86,433			85,951
Loss on disposal/write-down of property, plant and equipment (excluding real estate), net	1,152			333
Total Operating Expenses	637,510			604,352
Operating Income	132,616			144,934
Interest Expense, Net (includes Interest Income of $1,526 and $814 for the three months ended March 31, 2014 and 2015, respectively)	62,312			64,898
Other Expense, Net	5,317			22,349
Income from Continuing Operations Before Provision for Income Taxes and Gain on Sale of Real Estate	64,987			57,687
Provision for Income Taxes	29,734			15,948
Gain on Sale of Real Estate, Net of Tax	(7,468		)	—
Income from Continuing Operations	42,721			41,739
Loss from Discontinued Operations, Net of Tax	(612		)	—
Net Income	42,109			41,739
Less: Net Income Attributable to Noncontrolling Interests	442			643
Net Income Attributable to Iron Mountain Incorporated	$	41,667		$	41,096
Earnings (Losses) per Share—Basic:
Income from Continuing Operations	$	0.22		$	0.20
Total Loss from Discontinued Operations	$	—		$	—
Net Income Attributable to Iron Mountain Incorporated	$	0.22		$	0.20
Earnings (Losses) per Share—Diluted:
Income from Continuing Operations	$	0.22		$	0.20
Total Loss from Discontinued Operations	$	—		$	—
Net Income Attributable to Iron Mountain Incorporated	$	0.22		$	0.19
Weighted Average Common Shares Outstanding—Basic	191,879			210,237
Weighted Average Common Shares Outstanding—Diluted	193,069			212,249
Dividends Declared per Common Share	$	0.2700		$	0.4747

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

IRON MOUNTAIN INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In Thousands)

(Unaudited)



	Three Months Ended March 31,
	2014		2015
Net Income	$	42,109	$	41,739
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustments	1,788		(56,175		)
Market Value Adjustments for Securities	—		23
Total Other Comprehensive Income (Loss)	1,788		(56,152		)
Comprehensive Income (Loss)	43,897		(14,413		)
Comprehensive Income (Loss) Attributable to Noncontrolling Interests	553		542
Comprehensive Income (Loss) Attributable to Iron Mountain Incorporated	$	43,344	$	(14,955	)

The accompanying notes are an integral part of these consolidated financial statements.

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IRON MOUNTAIN INCORPORATED

CONSOLIDATED STATEMENTS OF EQUITY

(In Thousands, except Share Data)

(Unaudited)



				Iron Mountain Incorporated Stockholders' Equity
										Earnings in in Excess of Distributions (Distributions in Excess of Earnings)
													Accumulated Other Comprehensive Items, Net
				Common Stock			Additional Paid-in Capital									Noncontrolling Interests
	Total			Shares	Amounts		Additional Paid-in Capital									Noncontrolling Interests
Balance, December 31, 2013	$	1,051,734		191,426,920	$	1,914	$	980,164		$	67,820		$	(8,660	)	$	10,496
Issuance of shares under employee stock purchase plan and option plans and stock-based compensation, including tax charge of $185	4,821			494,009	5		4,816			—			—			—
Parent cash dividends declared	(52,290		)	—	—		—			(52,290		)	—			—
Currency translation adjustment	1,788			—	—		—			—			1,677			111
Net income (loss)	42,109			—	—		—			41,667			—			442
Noncontrolling interests dividends	(196		)	—	—		—			—			—			(196		)
Purchase of noncontrolling interests	(2,895		)	—	—		(395		)	—			—			(2,500		)
Balance, March 31, 2014	$	1,045,071		191,920,929	$	1,919	$	984,585		$	57,197		$	(6,983	)	$	8,353



				Iron Mountain Incorporated Stockholders' Equity
									Earnings in in Excess of Distributions (Distributions in Excess of Earnings)
												Accumulated Other Comprehensive Items, Net
				Common Stock			Additional Paid-in Capital								Noncontrolling Interests
	Total			Shares	Amounts		Additional Paid-in Capital								Noncontrolling Interests
Balance, December 31, 2014	$	869,955		209,818,812	$	2,098	$	1,588,841	$	(659,553	)	$	(75,031	)	$	13,600
Issuance of shares under employee stock purchase plan and option plans and stock-based compensation, including tax benefit of $231	1,994			708,425	7		1,987		—			—			—
Parent cash dividends declared	(100,539		)	—	—		—		(100,539		)	—			—
Currency translation adjustment	(56,175		)	—	—		—		—			(56,074		)	(101		)
Market value adjustments for securities	23			—	—		—		—			23			—
Net income (loss)	41,739			—	—		—		41,096			—			643
Noncontrolling interests dividends	(495		)	—	—		—		—			—			(495		)
Balance, March 31, 2015	$	756,502		210,527,237	$	2,105	$	1,590,828	$	(718,996	)	$	(131,082	)	$	13,647

The accompanying notes are an integral part of these consolidated financial statements.

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IRON MOUNTAIN INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)



	Three Months Ended March 31,
	2014			2015
Cash Flows from Operating Activities:
Net Income (loss)	$	42,109		$	41,739
Loss (income) from discontinued operations	612			—
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation	74,713			74,791
Amortization (includes deferred financing costs and bond discount of $1,906 and $2,092, for the three months ended March 31, 2014 and 2015, respectively)	13,626			13,252
Stock-based compensation expense	7,141			6,856
Benefit for deferred income taxes	(22,317		)	(3,273		)
(Gain) Loss on disposal/write-down of property, plant and equipment, net (including real estate)	(8,307		)	333
Foreign currency transactions and other, net	693			7,241
Changes in Assets and Liabilities (exclusive of acquisitions):
Accounts receivable	(9,209		)	3,437
Prepaid expenses and other	31,441			1,964
Accounts payable	(7,068		)	(17,995		)
Accrued expenses and deferred revenue	(77,216		)	(121,462		)
Other assets and long-term liabilities	9,423			(1,371		)
Cash Flows from Operating Activities	55,641			5,512
Cash Flows from Investing Activities:
Capital expenditures	(107,856		)	(74,776		)
Cash paid for acquisitions, net of cash acquired	(30,781		)	(6,431		)
Decrease (increase) in restricted cash	—			13,860
Additions to customer relationship and acquisition costs	(8,158		)	(9,243		)
Proceeds from sales of property and equipment and other, net (including real estate)	17,892			410
Cash Flows from Investing Activities	(128,903		)	(76,180		)
Cash Flows from Financing Activities:
Repayment of revolving credit and term loan facilities and other debt	(2,454,691		)	(2,282,261		)
Proceeds from revolving credit and term loan facilities and other debt	2,876,047			2,450,403
Early retirement of senior subordinated notes	(247,275		)	—
Debt (repayment to) financing and equity (distribution to) contribution from noncontrolling interests, net	(2,317		)	(388		)
Parent cash dividends	(52,735		)	(102,539		)
Proceeds from exercise of stock options and employee stock purchase plan	2,417			4,364
Excess tax (deficiency) benefit from stock-based compensation	(185		)	231
Payment of debt financing and stock issuance costs	(422		)	(947		)
Cash Flows from Financing Activities	120,839			68,863
Effect of Exchange Rates on Cash and Cash Equivalents	1,803			(4,523		)
Increase (Decrease) in Cash and Cash Equivalents	49,380			(6,328		)
Cash and Cash Equivalents, Beginning of Period	120,526			125,933
Cash and Cash Equivalents, End of Period	$	169,906		$	119,605
Supplemental Information:
Cash Paid for Interest	$	86,232		$	90,339
Cash Paid for Income Taxes	$	9,958		$	10,560
Non-Cash Investing and Financing Activities:
Capital Leases	$	(2,183	)	$	4,589
Accrued Capital Expenditures	$	36,110		$	44,335
Dividends Payable	$	54,698		$	4,183

The accompanying notes are an integral part of these consolidated financial statements.

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(1) General

The interim 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") store records, primarily paper documents and data backup media, and provide information management services in various locations throughout North America, Europe, Latin America and Asia Pacific. We have a diversified customer base consisting of commercial, legal, banking, healthcare, accounting, insurance, entertainment and government organizations.

The unaudited 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 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, 2014 included in our Annual Report on Form 10-K filed with the SEC on February 27, 2015.

We have been organized and operating as a real estate investment trust ("REIT") for federal income tax purposes effective for our taxable year beginning January 1, 2014.

(2) Summary of Significant Accounting Policies

a. Principles of Consolidation

The accompanying financial statements reflect our financial position, results of operations, comprehensive income (loss), equity and cash flows on a consolidated basis. All intercompany transactions and account balances have been eliminated.

b. 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.

We have restricted cash associated with a collateral trust agreement with our insurance carrier related to our workers' compensation self-insurance program. The restricted cash subject to this agreement was $33,860 and $20,000 as of December 31, 2014 and March 31, 2015, respectively, and is included in current assets on our Consolidated Balance Sheets. Restricted cash consists primarily of United States Treasuries.

c. Foreign Currency

Local currencies are the functional currencies for our operations outside the United States, with the exception of certain foreign holding companies and our financing centers in Switzerland, whose functional currency is the United States dollar. In those instances where the local currency is the functional currency, assets and liabilities are translated at period-end exchange rates, and revenues and expenses are translated at average exchange rates for the applicable period. Resulting translation adjustments are reflected in the accumulated other comprehensive items, net component of Iron Mountain Incorporated Stockholders' Equity and Noncontrolling Interests in the accompanying Consolidated Balance Sheets. 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, including those related to (1) our previously outstanding 7¹/₄% GBP Senior Subordinated Notes due 2014 (the "7¹/₄% Notes"), (2) our 6³/₄% Euro Senior Subordinated Notes due 2018 (the "6³/₄% Notes"), (3) borrowings in certain foreign currencies under our revolving credit facility and (4) certain foreign currency denominated intercompany obligations of our foreign subsidiaries to us and between our foreign subsidiaries, which are not considered permanently invested, are included in other expense (income), net, in the accompanying Consolidated Statements of Operations. The total gain or loss on foreign currency transactions amounted to a net loss of $6,438 and $22,266 for the three months ended March 31, 2014 and 2015, respectively.

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

d. Goodwill and Other Intangible Assets

Goodwill and intangible assets with indefinite lives are not amortized but are reviewed annually for impairment or more frequently if impairment indicators arise. Other than goodwill, we currently have no intangible assets that have indefinite lives and which are not amortized. Separable intangible assets that are not deemed to have indefinite lives are amortized over their useful lives. We annually, or more frequently if events or circumstances warrant, assess whether a change in the lives over which our intangible assets are amortized is necessary.

We have selected October 1 as our annual goodwill impairment review date. We performed our most recent annual goodwill impairment review as of October 1, 2014 and concluded there was no impairment of goodwill at such date. As of December 31, 2014 and March 31, 2015, no factors were identified that would alter our October 1, 2014 goodwill assessment. In making this assessment, we relied on a number of factors including operating results, business plans, anticipated future cash flows, transactions and marketplace data. There are inherent uncertainties related to these factors and our judgment in applying them to the analysis of goodwill impairment. When changes occur in the composition of one or more reporting units, the goodwill is reassigned to the reporting units affected based on their relative fair values.

Our reporting units at which level we performed our goodwill impairment analysis as of October 1, 2014 were as follows: (1) North American Records and Information Management; (2) technology escrow services that protect and manage source code (“Intellectual Property Management”); (3) the storage, assembly and detailed reporting of customer marketing literature and delivery to sales offices, trade shows and prospective customers’ sites based on current and prospective customer orders (“Fulfillment Services”); (4) North American Data Management; (5) Emerging Businesses (which primarily relates to our data center business in the United States and which is a component of our Corporate and Other Business segment); (6) the United Kingdom, Ireland, Norway, Austria, Belgium, France, Germany, Netherlands, Spain and Switzerland (“New Western Europe”); (7) the remaining countries in Europe in which we operate, excluding Russia, Ukraine and Denmark (“Emerging Markets - Eastern Europe” (formerly referred to as the "New Emerging Markets" reporting unit)); (8) Latin America; (9) Australia and Singapore; (10) China and Hong Kong (“Greater China”); (11) India; and (12) Russia, Ukraine and Denmark.

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

The carrying value of goodwill, net for each of our reporting units as of December 31, 2014 was as follows:



	Carrying Value as of December 31, 2014
North American Records and Information Management(1)	$	1,397,484
Intellectual Property Management(1)	38,491
Fulfillment Services(1)	3,247
North American Data Management(2)	375,957
Emerging Businesses(3)	—
New Western Europe(4)	354,049
Emerging Markets - Eastern Europe(5)	87,408
Latin America(5)	107,240
Australia and Singapore(5)	55,779
Greater China(5)	3,500
India(5)	—
Russia, Ukraine and Denmark(5)	628
Total	$	2,423,783

_______________________________________________________________________________


(1)	This reporting unit is included in the North American Records and Information Management Business segment.


(2)	This reporting unit is included in the North American Data Management Business segment.


(3)	This reporting unit is included in the Corporate and Other Business segment.


(4)	This reporting unit is included in the Western European Business segment.


(5)	This reporting unit is included in the Other International Business segment.

Beginning January 1, 2015, as a result of the changes in our reportable operating segments associated with our reorganization (see Note 6 for a description of our reportable operating segments), we reassessed the composition of our reporting units. Our North American Records and Information Management Business segment now consists of two reporting units: (1) North American Records and Information Management (which includes Intellectual Property Management and Fulfillment Services) and (2) North American Secure Shredding. Our Western European Business segment now consists of two reporting units: (1) the United Kingdom, Ireland and Norway (“UKI”) and (2) Austria, Belgium, France, Germany, Netherlands, Spain and Switzerland (“Continental Western Europe”). We have reassigned goodwill associated with the reporting units impacted by the reorganization among the new reporting units on a relative fair value basis. The fair value of each of our new reporting units was determined based on the application of a combined weighted average approach of preliminary fair value multiples of revenue and earnings and discounted cash flow techniques. These fair values represent our best estimate and preliminary assessment of goodwill allocations to each of the new reporting units on a relative fair value basis.

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

The carrying value of goodwill, net for each of our reporting units as of March 31, 2015 is as follows:



	Carrying Value as of March 31, 2015
North American Records and Information Management(1)(2)	$	1,384,736
North American Secure Shredding(1)(2)	40,788
North American Data Management(3)	372,482
Emerging Businesses(4)	—
UKI(1)(5)	258,695
Continental Western Europe(1)(5)	71,379
Emerging Markets - Eastern Europe(6)	81,458
Latin America(6)	92,993
Australia and Singapore(6)	51,957
Greater China(6)	3,518
India(6)	—
Russia, Ukraine and Denmark(6)	555
Total	$	2,358,561

_______________________________________________________________________________

(1)

We will finalize our preliminary estimates of fair value for these new reporting units once we finalize multi-year cash flow forecasts of such reporting units and conclude on the fair value of each new reporting unit based on the combined weighting of both fair value multiples and discounted cash flow techniques. To the extent final fair values of our new reporting units differ from our preliminary estimates, we will reassign goodwill amongst the new reporting units in a future period in which the final information is available to complete the fair values and the corresponding allocation of goodwill amongst the new reporting units.


(2)	This reporting unit is included in the North American Records and Information Management Business segment.


(3)	This reporting unit is included in the North American Data Management Business segment.


(4)	This reporting unit is included in the Corporate and Other Business segment.


(5)	This reporting unit is included in the Western European Business segment.


(6)	This reporting unit is included in the Other International Business segment.

As a result of the change in the composition of our reporting units noted above, we concluded that we had an interim triggering event, and, therefore, during the first quarter of 2015, we performed an interim goodwill impairment test, as of January 1, 2015, for the North American Records and Information Management, North American Secure Shredding, UKI and Continental Western Europe reporting units. We concluded that the goodwill for each of our new reporting units was not impaired as of such date. While we continue to refine our preliminary estimates of fair value of certain of our new reporting units for purposes of reallocating goodwill, we do not believe that any such changes to preliminary fair value estimates will result in a change in our conclusion that there is no goodwill impairment as of January 1, 2015.

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

The changes in the carrying value of goodwill attributable to each reportable operating segment for the three months ended March 31, 2015 are as follows:



	North American Records and Information Management Business			North American Data Management Business			Western European Business			Other International Business			Total Consolidated
Gross Balance as of December 31, 2014	$	1,645,209		$	429,982		$	412,322		$	254,706		$	2,742,219
Non-deductible goodwill acquired during the year	—			—			1,546			—			1,546
Fair value and other adjustments(1)	185			—			57			(395		)	(153		)
Currency effects	(14,575		)	(3,648		)	(26,385		)	(23,684		)	(68,292		)
Gross Balance as of March 31, 2015	$	1,630,819		$	426,334		$	387,540		$	230,627		$	2,675,320
Accumulated Amortization Balance as of December 31, 2014	$	205,987		$	54,025		$	58,273		$	151		$	318,436
Currency effects	(692		)	(173		)	(807		)	(5		)	(1,677		)
Accumulated Amortization Balance as of March 31, 2015	$	205,295		$	53,852		$	57,466		$	146		$	316,759
Net Balance as of December 31, 2014	$	1,439,222		$	375,957		$	354,049		$	254,555		$	2,423,783
Net Balance as of March 31, 2015	$	1,425,524		$	372,482		$	330,074		$	230,481		$	2,358,561
Accumulated Goodwill Impairment Balance as of December 31, 2014	$	85,909		$	—		$	46,500		$	—		$	132,409
Accumulated Goodwill Impairment Balance as of March 31, 2015	$	85,909		$	—		$	46,500		$	—		$	132,409

_______________________________________________________________________________


(1)	Total fair value and other adjustments primarily include $531 in net adjustments to deferred income taxes and $(4,619) related to customer relationships and acquisition costs and other assumed liabilities, as well as $3,935 of cash paid related to certain 2014 acquisitions.

The components of our amortizable intangible assets as of December 31, 2014 and March 31, 2015 are as follows:



	December 31, 2014							March 31, 2015
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer Relationships and Acquisition Costs	$	904,866	$	(297,029	)	$	607,837	$	880,221	$	(299,780	)	$	580,441
Core Technology(1)	3,568		(3,540		)	28		3,349		(3,315		)	34
Trademarks and Non-Compete Agreements(1)	7,062		(5,068		)	1,994		6,469		(4,874		)	1,595
Deferred Financing Costs	63,033		(15,956		)	47,077		62,892		(17,831		)	45,061
Total	$	978,529	$	(321,593	)	$	656,936	$	952,931	$	(325,800	)	$	627,131

_______________________________________________________________________________


(1)	Included in Other Assets, net in the accompanying Consolidated Balance Sheets.

Amortization expense associated with amortizable intangible assets (including deferred financing costs) was $13,626 and $13,252 for the three months ended March 31, 2014 and 2015, respectively.

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

e. Stock-Based Compensation

We record stock-based compensation expense, utilizing the straight-line method, for the cost of stock options, restricted stock, restricted stock units ("RSUs"), performance units ("PUs") and shares of stock issued under our employee stock purchase plan ("ESPP") (together, "Employee Stock-Based Awards").

Stock-based compensation expense for Employee Stock-Based Awards included in the accompanying Consolidated Statements of Operations for the three months ended March 31, 2014 and 2015 was $7,141 ($5,134 after tax or $0.03 per basic and diluted share) and $6,856 ($4,946 after tax or $0.02 per basic and diluted share), respectively.

Stock-based compensation expense for Employee Stock-Based Awards included in the accompanying Consolidated Statements of Operations related to continuing operations is as follows:



	Three Months Ended March 31,
	2014		2015
Cost of sales (excluding depreciation and amortization)	$	190	$	45
Selling, general and administrative expenses	6,951		6,811
Total stock-based compensation	$	7,141	$	6,856

The benefits associated with the tax deductions in excess of recognized compensation cost are required to be reported as financing activities in the accompanying Consolidated Statements of Cash Flows. This requirement reduces reported operating cash flows and increases reported financing cash flows. As a result, net financing cash flows from continuing operations included $(185) and $231 for the three months ended March 31, 2014 and 2015, respectively, from the (deficiency) benefit of tax deductions compared to recognized compensation cost. The tax benefit of any resulting excess tax deduction increases the Additional Paid-in Capital ("APIC") pool. Any resulting tax deficiency is deducted from the APIC pool.

Stock Options

Under our various stock option plans, options are generally granted with exercise prices equal to the market price of the stock on the date of grant; however, in certain limited instances, options are granted at prices greater than the market price of the stock on the date of grant. Certain of the options we issue become exercisable ratably over a period of ten years from the date of grant and have a contractual life of 12 years from the date of grant, unless the holder's employment is terminated sooner. As of March 31, 2015, ten-year vesting options represented 7.2% of total outstanding options. Certain of the options we issue become exercisable ratably over a period of three years from the date of grant and have a contractual life of ten years from the date of grant, unless the holder's employment is terminated sooner. As of March 31, 2015, three-year vesting options represented 45.7% of total outstanding options. Our non-employee directors are considered employees for purposes of our stock option plans and stock option reporting. Options granted to our non-employee directors generally become exercisable one year from the date of grant. The remainder of our options became exercisable ratably over a period of five years from date of grant and generally have a contractual life of ten years from the date of grant, unless the holder's employment is terminated sooner.

The weighted average fair value of options granted for the three months ended March 31, 2014 and 2015 was $5.60 and $4.99 per share, respectively. These values were estimated on the date of grant using the Black-Scholes option pricing model. The following table summarizes the weighted average assumptions used for grants in the respective period:



	Three Months Ended March 31,
Weighted Average Assumptions	2014		2015
Expected volatility	33.9	%	28.6	%
Risk-free interest rate	2.06	%	1.71	%
Expected dividend yield	4	%	5	%
Expected life	6.8 years		5.5 years

Table of Contents

IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

Expected volatility is calculated utilizing daily historical volatility over a period that equates to the expected life of the option. The risk-free interest rate was based on the United States Treasury interest rates whose term is consistent with the expected life of the stock options. Expected dividend yield is considered in the option pricing model and represents our current annualized expected per share dividends over the current trade price of our common stock. The expected life (estimated period of time outstanding) of the stock options granted is estimated using the historical exercise behavior of employees.

A summary of option activity for the three months ended March 31, 2015 is as follows:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Average Intrinsic Value
Outstanding at December 31, 2014	3,678,246		$	23.37
Granted	674,620		43.86
Exercised	(233,791	)	20.93
Forfeited	(19,119	)	23.97
Expired	(11,045	)	22.15
Outstanding at March 31, 2015	4,088,911		$	26.89	5.86	$	44,191
Options exercisable at March 31, 2015	2,725,000		$	22.74	4.42	$	37,445
Options expected to vest	1,265,183		$	34.97	8.71	$	6,435

The following table provides the aggregate intrinsic value of stock options exercised for the three months ended March 31, 2014 and 2015:



	Three Months Ended March 31,
	2014		2015
Aggregate intrinsic value of stock options exercised	$	977	$	4,167

Restricted Stock and Restricted Stock Units

Under our various equity compensation plans, we may also grant restricted stock or RSUs. Our restricted stock and RSUs generally have a vesting period of between three and five years from the date of grant. All RSUs accrue dividend equivalents associated with the underlying stock as we declare dividends. Dividends will generally be paid to holders of RSUs in cash upon the vesting date of the associated RSU and will be forfeited if the RSU does not vest. We accrued approximately $434 and $670 of cash dividends on RSUs for the three months ended March 31, 2014 and 2015, respectively. We paid approximately $831 and $1,729 of cash dividends on RSUs for the three months ended March 31, 2014 and 2015, respectively. The fair value of restricted stock and RSUs is the excess of the market price of our common stock at the date of grant over the purchase price (which is typically zero).

Table of Contents

IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

A summary of restricted stock and RSU activity for the three months ended March 31, 2015 is as follows:



	Restricted Stock and RSUs		Weighted- Average Grant-Date Fair Value
Non-vested at December 31, 2014	1,405,569		$	28.78
Granted	462,323		38.82
Vested	(426,901	)	30.49
Forfeited	(29,265	)	30.43
Non-vested at March 31, 2015	1,411,726		$	31.52

No restricted stock vested during each of the three months ended March 31, 2014 and 2015. The total fair value of RSUs vested during the three months ended March 31, 2014 and 2015 was $13,844 and $15,584, respectively.

Performance Units

Under our various equity compensation plans, we may also make awards of PUs. For the majority of PUs, the number of PUs earned is determined based on our performance against predefined targets of revenue or revenue growth and return on invested capital ("ROIC"). The number of PUs earned may range from 0% to 150% (for PUs granted prior to 2014) and 0% to 200% (for PUs granted in 2014 and 2015) of the initial award. The number of PUs earned is determined based on our actual performance as compared to the targets at the end of either the one-year performance period (for PUs granted prior to 2014) or the three-year performance period (for PUs granted in 2014 and 2015). Certain PUs granted in 2013, 2014 and 2015 will be earned based on a market condition associated with the total return on our common stock in relation to a subset of the S&P 500 rather than the revenue growth and ROIC targets noted above. The number of PUs earned based on this market condition may range from 0% to 200% of the initial award. All of our PUs will be settled in shares of our common stock and are subject to cliff vesting three years from the date of the original PU grant. For those PUs subject to a one-year performance period, employees who subsequently terminate their employment after the end of the one-year performance period and on or after attaining age 55 and completing 10 years of qualifying service (the "Retirement Criteria") shall immediately and completely vest in any PUs earned based on the actual achievement against the predefined targets as discussed above (but delivery of the shares remains deferred). As a result, PUs subject to a one-year performance period are generally expensed over the shorter of (1) the vesting period, (2) achievement of the Retirement Criteria, which may occur as early as January 1 of the year following the year of grant or (3) a maximum of three years. For those PUs subject to a three-year performance period, employees who terminate their employment during the performance period and on or after meeting the Retirement Criteria are eligible for pro rated vesting, subject to the actual achievement against the predefined targets as discussed above, based on the number of full years of service completed following the grant date (but delivery of the shares remains deferred). As a result, PUs subject to a three-year performance period are generally expensed over the three-year performance period. Outstanding PUs accrue dividend equivalents associated with the underlying stock as we declare dividends. Dividends will generally be paid to holders of PUs in cash upon the settlement date of the associated PU and will be forfeited if the PU does not vest. We accrued approximately $150 and $211 of cash dividends on PUs for the three months ended March 31, 2014 and 2015, respectively. We paid approximately $221 and $1,015 of cash dividends on PUs for the three months ended March 31, 2014 and 2015, respectively.

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

During the three months ended March 31, 2015, we issued 131,996 PUs. Our PUs are earned based on our performance against revenue or revenue growth and ROIC targets during their applicable performance period; therefore, we forecast the likelihood of achieving the predefined revenue, revenue growth and ROIC targets in order to calculate the expected PUs to be earned. We record a compensation charge based on either the forecasted PUs to be earned (during the applicable performance period) or the actual PUs earned (at the one-year anniversary date for PUs granted prior to 2014, and at the three-year anniversary date for PUs granted in 2014 and 2015) over the vesting period for each of the awards. For PUs earned based on a market condition, we utilized a Monte Carlo simulation to fair value these awards at the date of grant, and such fair value is expensed over the three-year performance period. The total fair value of earned PUs that vested during the three months ended March 31, 2014 and 2015 was $4,030 and $2,063, respectively. As of March 31, 2015, we expected 60% and 100% achievement of the predefined revenue, revenue growth and ROIC targets associated with the awards of PUs made in 2014 and 2015, respectively.

A summary of PU activity for the three months ended March 31, 2015 is as follows:



	Original PU Awards		PU Adjustment(1)		Total PU Awards		Weighted- Average Grant-Date Fair Value
Non-vested at December 31, 2014	461,666		(82,609	)	379,057		$	30.80
Granted	131,996		—		131,996		40.58
Vested	(78,311	)	(4,769	)	(83,080	)	29.47
Forfeited	(19,038	)	—		(19,038	)	30.96
Non-vested at March 31, 2015	496,313		(87,378	)	408,935		$	34.22

_______________________________________________________________________________


(1)	Represents an increase or decrease in the number of original PUs awarded based on either (a) the final performance criteria achievement at the end of the defined performance period of such PUs or (b) a change in estimated awards based on the forecasted performance against the predefined targets.

Employee Stock Purchase Plan

We offer an ESPP in which participation is available to substantially all United States and Canadian employees who meet certain service eligibility requirements. The ESPP provides a way for our eligible employees to become stockholders on favorable terms. The ESPP provides for the purchase of our common stock by eligible employees through successive offering periods. We have historically had two six-month offering periods per year, the first of which generally runs from June 1 through November 30 and the second of which generally runs from December 1 through May 31. During each offering period, participating employees accumulate after-tax payroll contributions, up to a maximum of 15% of their compensation, to pay the purchase price at the end of the offering. Participating employees may withdraw from an offering before the purchase date and obtain a refund of the amounts withheld as payroll deductions. At the end of the offering period, outstanding options under the ESPP are exercised, and each employee's accumulated contributions are used to purchase our common stock. The price for shares purchased under the ESPP is 95% of the fair market price at the end of the offering period, without a look-back feature. As a result, we do not recognize compensation expense for the ESPP shares purchased. In the three months ended March 31, 2014 and 2015, there were no offering periods which ended under the ESPP, and no shares were issued. As of March 31, 2015, we have 960,638 shares available under the ESPP.

_______________________________________________________________________________

As of March 31, 2015, unrecognized compensation cost related to the unvested portion of our Employee Stock-Based Awards was $53,880 and is expected to be recognized over a weighted-average period of 2.3 years.

We generally issue shares of our common stock for the exercises of stock options, restricted stock, RSUs, PUs and shares of our common stock under our ESPP from unissued reserved shares.

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IRON MOUNTAIN INCORPORATED

NOTES TO 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 options, warrants or convertible securities) that were outstanding during the period, unless the effect is antidilutive.

The following table presents the calculation of basic and diluted income (loss) per share:



	Three Months Ended March 31,
	2014			2015
Income (loss) from continuing operations	$	42,721		$	41,739
Total (loss) income from discontinued operations	$	(612	)	$	—
Net income (loss) attributable to Iron Mountain Incorporated	$	41,667		$	41,096

Weighted-average shares—basic	191,879,000			210,237,000
Effect of dilutive potential stock options	682,801			1,223,330
Effect of dilutive potential restricted stock, RSUs and PUs	507,219			788,758
Weighted-average shares—diluted	193,069,020			212,249,088

Earnings (losses) per share—basic:
Income (loss) from continuing operations	$	0.22		$	0.20
Total (loss) income from discontinued operations	$	—		$	—
Net income (loss) attributable to Iron Mountain Incorporated—basic	$	0.22		$	0.20

Earnings (losses) per share—diluted:
Income (loss) from continuing operations	$	0.22		$	0.20
Total (loss) income from discontinued operations	$	—		$	—
Net income (loss) attributable to Iron Mountain Incorporated—diluted	$	0.22		$	0.19

Antidilutive stock options, RSUs and PUs, excluded from the calculation	1,380,962			358,233

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

g. Revenues

Our revenues consist of storage rental revenues as well as service revenues and are reflected net of sales and value added taxes. Storage rental revenues, which are considered a key driver of financial performance for the storage and information management services industry, consist primarily of recurring periodic rental charges related to the storage of materials or data (generally on a per unit basis). Service revenues include charges for related service activities, which include: (1) the handling of records, including the addition of new records, temporary removal of records from storage, refiling of removed records and the destruction of records; (2) courier operations, consisting primarily of the pickup and delivery of records upon customer request; (3) secure shredding of sensitive documents and the related sale of recycled paper, the price of which can fluctuate from period to period; (4) other services, including the scanning, imaging and document conversion services of active and inactive records, or Document Management Solutions ("DMS"), which relate to physical and digital records, and project revenues; (5) customer termination and permanent withdrawal fees; (6) data restoration projects; (7) special project work; (8) Fulfillment Services; (9) consulting services; and (10) Intellectual Property Management and other technology services and product sales (including specially designed storage containers and related supplies).

We recognize revenue when the following criteria are met: persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable and collectability of the resulting receivable is reasonably assured. Storage rental and service revenues are recognized in the month the respective storage rental or service is provided, and customers are generally billed on a monthly basis on contractually agreed-upon terms. Amounts related to future storage rental or prepaid service contracts for customers where storage rental fees or services are billed in advance are accounted for as deferred revenue and recognized ratably over the period the applicable storage rental or service is provided or performed. Revenues from the sales of products, which are included as a component of service revenues, are recognized when products are shipped and title has passed to the customer. Revenues from the sales of products have historically not been significant.

h. Allowance for Doubtful Accounts and Credit Memo Reserves

We maintain an allowance for doubtful accounts and credit memos for estimated losses resulting from the potential inability of our customers to make required payments and potential disputes regarding billing and service issues. When calculating the allowance, we consider our past loss experience, current and prior trends in our aged receivables and credit memo activity, current economic conditions and specific circumstances of individual receivable balances. If the financial condition of our customers were to significantly change, resulting in a significant improvement or impairment of their ability to make payments, an adjustment of the allowance may be required. We charge-off uncollectible balances as circumstances warrant, generally, no later than one year past due.

Table of Contents

IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

i. Income Taxes

As noted previously, we have been organized and operating as a REIT for federal income tax purposes effective for our taxable year beginning January 1, 2014. As a REIT, we are generally permitted to deduct from our federal taxable income the dividends we pay to our stockholders. The income represented by such dividends is not subject to federal taxation at the entity level but is taxed, if at all, at the stockholder level. The income of our domestic taxable REIT subsidiaries (“TRSs”), which hold our domestic operations that may not be REIT‑compliant as currently operated and structured, is subject, as applicable, to federal and state corporate income tax. In addition, we and our subsidiaries continue to be subject to foreign income taxes in jurisdictions in which they hold assets or conduct operations, regardless of whether held or conducted through subsidiaries disregarded for federal tax purposes or TRSs. We will also be subject to a separate corporate income tax on any gains recognized during a specified period (generally ten years) following the REIT conversion that are attributable to “built‑in” gains with respect to the assets that we owned on January 1, 2014; this built‑in gains tax will also be imposed on our depreciation recapture recognized into income in 2014 and subsequent taxable years as a result of accounting method changes commenced in our pre‑REIT period. If we fail to remain qualified for taxation as a REIT, we will be subject to federal income tax at regular corporate tax rates. Even if we remain qualified for taxation as a REIT, we may be subject to some federal, state, local and foreign taxes on our income and property in addition to taxes owed with respect to our TRS operations. In particular, while state income tax regimes often parallel the federal income tax regime for REITs, many states do not completely follow federal rules and some do not follow them at all.

We provide for income taxes during interim periods based on our estimate of the effective tax rate for the year. 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 and our TRSs; (2) tax law changes; (3) volatility in foreign exchange gains (losses); (4) the timing of the establishment and reversal of tax reserves; and (5) our ability to utilize net operating losses that we generate. We are subject to income taxes in the United States and numerous foreign jurisdictions. We are subject to examination by various tax authorities in jurisdictions in which we have business operations or a taxable presence. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in changes in our estimates.

Accounting for income taxes requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the tax and financial reporting bases of assets and liabilities and for loss and credit carryforwards. Valuation allowances are provided when recovery of deferred tax assets does not meet the more likely than not standard as defined in GAAP.

We have elected to recognize interest and penalties associated with uncertain tax positions as a component of the provision (benefit) for income taxes in the accompanying Consolidated Statements of Operations. We recorded an increase of $966 and $942 for gross interest and penalties for the three months ended March 31, 2014 and 2015, respectively. We had $5,884 and $6,167 accrued for the payment of interest and penalties as of December 31, 2014 and March 31, 2015, respectively.

Our effective tax rate for the three months ended March 31, 2014 and 2015 was 45.8% and 27.6%, respectively. The primary reconciling items between the federal statutory rate of 35% and our overall effective tax rate in the three months ended March 31, 2014 were differences in the rates of tax at which our foreign earnings are subject, including foreign exchange gains and losses in different jurisdictions with different tax rates and state income taxes (net of federal tax benefit). During the three months ended March 31, 2014, there were foreign currency losses recorded in jurisdictions with tax rates lower than the federal statutory rate of 35% associated with our marking-to-market of intercompany loans, which increased our first quarter 2014 effective tax rate by 1.1%. In addition, the controlled foreign corporation look-through rule, which provided for the exception of certain foreign earnings from United States federal taxation as Subpart F income, expired on December 31, 2013 and as a result, our first quarter 2014 effective tax rate increased by 1.3%. The primary reconciling item between the federal statutory tax rate of 35% and our overall effective tax rate in the three months ended March 31, 2015 was due to differences in the rates of tax at which our foreign earnings are subject, including foreign exchange gains and losses in different jurisdictions with different tax rates.

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

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

j. Concentrations of Credit Risk

Financial instruments that potentially subject us to credit risk consist principally of cash and cash equivalents (including money market funds and time deposits), restricted cash (primarily United States Treasuries) and accounts receivable. The only significant concentrations of liquid investments as of both December 31, 2014 and March 31, 2015 relate to cash and cash equivalents and restricted cash held on deposit with three global banks and two "Triple A" rated money market funds, and three global banks and one "Triple A" rated money market fund, respectively, all of which we consider to be large, highly-rated investment-grade institutions. As per our risk management investment policy, we limit exposure to concentration of credit risk by limiting the amount invested in any one mutual fund to a maximum of $50,000 or in any one financial institution to a maximum of $75,000. As of December 31, 2014 and March 31, 2015, our cash and cash equivalents and restricted cash balance was $159,793 and $139,605, respectively, including money market funds and time deposits amounting to $53,032 and $33,909, respectively. The money market funds are invested substantially in United States Treasuries.

k. Fair Value Measurements

Entities are permitted under GAAP to elect to measure many financial instruments and certain other items at either fair value or cost. We did not elect the fair value measurement option.

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.

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

The following tables provide the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2014 and March 31, 2015, respectively:



			Fair Value Measurements at December 31, 2014 Using
Description	Total Carrying Value at December 31, 2014		Quoted prices in active markets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
Money Market Funds(1)	$	36,828	$	—		$	36,828		$	—
Time Deposits(1)	16,204		—			16,204			—
Trading Securities	13,172		12,428		(2)	744		(1)	—
Derivative Liabilities(3)	2,411		—			2,411			—



			Fair Value Measurements at March 31, 2015 Using
Description	Total Carrying Value at March 31, 2015		Quoted prices in active markets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
Money Market Funds(1)	$	20,000	$	—		$	20,000		$	—
Time Deposits(1)	13,909		—			13,909			—
Trading Securities	10,743		9,892		(2)	851		(1)	—
Derivative Liabilities(3)	7,756		—			7,756			—

_______________________________________________________________________________


(1)	Money market funds and time deposits (including certain trading securities) are measured based on quoted prices for similar assets and/or subsequent transactions.


(2)	Securities are measured at fair value using quoted market prices.

(3)

Derivative liabilities relate to short-term (six months or less) foreign currency contracts that we have entered into to hedge certain of our intercompany exposures, as more fully disclosed at Note 3. 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.

Disclosures are required in the financial statements for items measured at fair value on a non-recurring basis. We did not have any material items that are measured at fair value on a non-recurring basis for the three months ended March 31, 2014 and 2015.

l. Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements and for the period then ended. On an ongoing basis, we evaluate the estimates used. We base our estimates on historical experience, actuarial estimates, current conditions and various other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities and are not readily apparent from other sources. Actual results may differ from these estimates.

Table of Contents

IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

m. Accumulated Other Comprehensive Items, Net

The changes in accumulated other comprehensive items, net for the three months ended March 31, 2014 and 2015, respectively, are as follows:



	Foreign Currency Translation Adjustments			Market Value Adjustments for Securities		Total
Balance as of December 31, 2013	$	(9,586	)	$	926	$	(8,660	)
Other comprehensive income (loss):
Foreign currency translation adjustments	1,677			—		1,677
Total other comprehensive income (loss)	1,677			—		1,677
Balance as of March 31, 2014	$	(7,909	)	$	926	$	(6,983	)



	Foreign Currency Translation Adjustments			Market Value Adjustments for Securities		Total
Balance as of December 31, 2014	$	(76,010	)	$	979	$	(75,031	)
Other comprehensive income (loss):
Foreign currency translation adjustments	(56,074		)	—		(56,074		)
Market value adjustments for securities	—			23		23
Total other comprehensive income (loss)	(56,074		)	23		(56,051		)
Balance as of March 31, 2015	$	(132,084	)	$	1,002	$	(131,082	)

n. Other Expense, Net

Other expense, net consists of the following:



	Three Months Ended March 31,
	2014			2015
Foreign currency transaction losses, net	$	6,438		$	22,266
Other, net	(1,121		)	83
	$	5,317		$	22,349

o. Property, Plant and Equipment and Long-Lived Assets

We develop various software applications for internal use. Computer software costs associated with internal use software are expensed as incurred until certain capitalization criteria are met. Payroll and related costs for employees directly associated with, and devoting time to, the development of internal use computer software projects (to the extent time is spent directly on the project) are capitalized. During the three months ended March 31, 2014 and 2015, we capitalized $4,897 and $6,040 of costs, respectively, associated with the development of internal use computer software projects. Capitalization begins when the design stage of the application has been completed and it is probable that the project will be completed and used to perform the function intended. Capitalization ends when the asset is ready for its intended use. Depreciation begins when the software is placed in service. Computer software costs that are capitalized are periodically evaluated for impairment.

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

We review long-lived assets and all amortizable intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to their carrying amount. The operations are generally distinguished by the business segment and geographic region in which they operate. If the operation is determined to be unable to recover the carrying amount of its assets, the long-lived assets are written down, on a pro rata basis, to fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets.

As a result of our conversion to a REIT and in accordance with SEC rules applicable to REITs, we no longer report (gain) loss on the sale of real estate as a component of operating income, but we report it as a component of income (loss) from continuing operations. We report the (gain) loss on sale of property, plant and equipment (excluding real estate), along with any impairment, write-downs or involuntary conversions related to real estate, as a component of operating income. Previously reported amounts have been reclassified to conform to this presentation.

Consolidated loss on disposal/write-down of property, plant and equipment (excluding real estate), net was $333 for the three months ended March 31, 2015 and consisted primarily of the write-off of certain property associated with our North American Records and Information Management Business segment. Consolidated loss on disposal/write-down of property, plant and equipment (excluding real estate), net was $1,152 for the three months ended March 31, 2014 and consisted primarily of losses associated with the write-off of certain software associated with our North American Records and Information Management Business segment.

Consolidated gain on sale of real estate was $7,468, net of tax of $1,991, for the three months ended March 31, 2014 associated with the sale of two buildings in the United Kingdom.

p. New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). ASU 2014-09 provides additional guidance for management to reassess revenue recognition as it relates to: (1) transfer of control, (2) variable consideration, (3) allocation of transaction price based on relative standalone selling price, (3) licenses, (4) time value of money and (5) contract costs. Further disclosures will be required to provide a better understanding of revenue that has been recognized and revenue that is expected to be recognized in the future from existing contracts. ASU 2014-09 is effective for us on January 1, 2017, with no early adoption permitted. In April 2015, the FASB tentatively decided to defer the effective date of ASU 2014-09 for one year to January 1, 2018, with early adoption permitted as of January 1, 2017. We are currently evaluating the impact ASU 2014-09 will have on our consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements Going Concern (Subtopic 205-40) (“ASU 2014-15”). ASU 2014-15 requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles of current United States auditing standards. Specifically, the amendments (1) provide a definition of the term “substantial doubt”, (2) require an evaluation every reporting period, including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is still present, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). ASU 2014‑15 is effective for us on January 1, 2017, with early adoption permitted. We do not believe that this pronouncement will have an impact on our consolidated financial statements.

In February 2015, the FASB issued ASU No. 2015‑02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015‑02”). ASU 2015‑02 affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. ASU 2015‑02 is effective for us on January 1, 2016, with early adoption permitted. We do not believe that this pronouncement will have an impact on our consolidated financial statements.

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). The amendments in ASU 2015-03 require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in ASU 2015-03. ASU 2015‑03 is effective for us on January 1, 2016, with early adoption permitted. We do not believe that this pronouncement will have a material impact on our consolidated financial statements.

(3) Derivative Instruments and Hedging Activities

Every derivative instrument is required to be recorded in the balance sheet as either an asset or a liability measured at its fair value. Periodically, we acquire derivative instruments that are intended to hedge either cash flows or values that are subject to foreign exchange or other market price risk and not for trading purposes. We have formally documented our hedging relationships, including identification of the hedging instruments and the hedged items, as well as our risk management objectives and strategies for undertaking each hedge transaction. Given the recurring nature of our revenues and the long-term nature of our asset base, we have the ability and the preference to use long-term, fixed interest rate debt to finance our business, thereby preserving our long-term returns on invested capital. We target approximately 75% of our debt portfolio to be fixed with respect to interest rates. Occasionally, we may use interest rate swaps as a tool to maintain our targeted level of fixed rate debt. In addition, we may use borrowings in foreign currencies, either obtained in the United States or by our foreign subsidiaries, to hedge foreign currency risk associated with our international investments. Sometimes we enter into currency swaps to temporarily hedge an overseas investment, such as a major acquisition, while we arrange permanent financing or to hedge our exposure due to foreign currency exchange movements related to our intercompany accounts with and between our foreign subsidiaries. As of December 31, 2014 and March 31, 2015, none of our derivative instruments contained credit-risk related contingent features.

We have entered into a number of separate forward contracts to hedge our exposures in Euros, British pounds sterling and Australian dollars. As of March 31, 2015, we had outstanding forward contracts to purchase 206,000 Euros and sell $229,845 United States dollars to hedge our intercompany exposures with our European operations. At the maturity of the forward contracts, we may enter into new forward contracts to hedge movements in the underlying currencies. At the time of settlement, we either pay or receive the net settlement amount from the forward contract and recognize this amount in other expense (income), net in the Consolidated Statements of Operations as a realized foreign exchange gain or loss. At the end of each month, we mark the outstanding forward contracts to market and record an unrealized foreign exchange gain or loss for the mark-to-market valuation. We have not designated forward contracts as hedges. During the three months ended March 31, 2014 and 2015, there was $7,199 and $16,820 in net cash payments, respectively, included in cash from operating activities from continuing operations related to settlements associated with foreign currency forward contracts.

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(3) Derivative Instruments and Hedging Activities (Continued)

Our policy is to record the fair value of each derivative instrument on a gross basis. The following table provides the fair value of our derivative instruments as of December 31, 2014 and March 31, 2015 and their gains and losses for the three months ended March 31, 2014 and 2015:



	Liability Derivatives
	December 31, 2014			March 31, 2015
Derivatives Not Designated as Hedging Instruments	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Foreign exchange contracts	Accrued expenses	$	2,411	Accrued expenses	$	7,756
Total		$	2,411		$	7,756



		Amount of (Gain) Loss Recognized in Income on Derivatives
		Three Months Ended March 31,
Derivatives Not Designated as Hedging Instruments	Location of (Gain) Loss Recognized in Income on Derivative	2014		2015
Foreign exchange contracts	Other expense (income), net	$	2,922	$	28,533
Total		$	2,922	$	28,533

We have designated a portion of the 6³/₄% Notes as a hedge of net investment of certain of our Euro denominated subsidiaries. For the three months ended March 31, 2014 and 2015, we designated on average 64,208 and 36,000 Euros, respectively, of the 6³/₄% Notes as a hedge of net investment of certain of our Euro denominated subsidiaries. As a result, we recorded the following foreign exchange gains (losses), net of tax, related to the change in fair value of such debt due to the currency translation adjustments, which is a component of accumulated other comprehensive items, net:



	Three Months Ended March 31,
	2014		2015
Foreign exchange gains (losses)	$	145	$	4,930
Tax expense (benefit) on foreign exchange gains (losses)	57		—
Foreign exchange gains (losses), net of tax	$	88	$	4,930

As of March 31, 2015, cumulative net gains of $18,742, net of tax are recorded in accumulated other comprehensive items, net associated with this net investment hedge.

Table of Contents

IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(4) Debt

Long-term debt comprised the following:



	December 31, 2014					March 31, 2015
	Carrying Amount			Fair Value		Carrying Amount			Fair Value
Revolving Credit Facility(1)	$	883,428		$	883,428	$	823,881		$	823,881
Term Loan(1)	249,375			249,375		248,750			248,750
6³/₄% Euro Senior Subordinated Notes due 2018 (the "6³/₄% Notes")(2)(3)	308,616			309,634		273,760			274,369
7³/₄% Senior Subordinated Notes due 2019 (the "7³/₄% Notes")(2)(3)	400,000			429,000		400,000			425,750
8³/₈% Senior Subordinated Notes due 2021 (the "8³/₈% Notes")(2)(3)	106,030			110,500		106,038			109,836
6¹/₈% CAD Senior Notes due 2021 (the "CAD Notes")(2)(4)	172,420			175,437		157,470			162,194
6¹/₈% GBP Senior Notes due 2022 (the "GBP Notes")(2)(5)	622,960			639,282		592,160			620,998
6% Senior Notes due 2023 (the "6% Notes")(2)(3)	600,000			625,500		600,000			631,500
5³/₄% Senior Subordinated Notes due 2024 (the "5³/₄% Notes")(2)(3)	1,000,000			1,005,000		1,000,000			1,005,000
Accounts Receivable Securitization Program(6)(7)	—			—		220,800			220,800
Real Estate Mortgages, Capital Leases and Other(7)	320,702			320,702		298,983			298,983
Total Long-term Debt	4,663,531					4,721,842
Less Current Portion	(52,095		)			(54,483		)
Long-term Debt, Net of Current Portion	$	4,611,436				$	4,667,359

______________________________________________________________________________

(1)

The capital stock or other equity interests of most of our United States subsidiaries, and up to 66% of the capital stock or other equity interests of our first-tier foreign subsidiaries, are pledged to secure these debt instruments, together with all intercompany obligations (including promissory notes) of subsidiaries owed to us or to one of our United States subsidiary guarantors. In addition, Iron Mountain Canada Operations ULC ("Canada Company") has pledged 66% of the capital stock of its subsidiaries, and all intercompany obligations (including promissory notes) owed to or held by it, to secure the Canadian dollar subfacility under the Revolving Credit Facility (defined below). The fair value (Level 3 of fair value hierarchy described at Note 2.k.) of these debt instruments approximates the carrying value (as borrowings under these debt instruments are based on current variable market interest rates (plus a margin that is subject to change based on our consolidated leverage ratio)), as of both December 31, 2014 and March 31, 2015.


(2)	The fair values (Level 1 of fair value hierarchy described at Note 2.k.) of these debt instruments are based on quoted market prices for these notes on December 31, 2014 and March 31, 2015, respectively.

(3)

Collectively, the "Parent Notes." IMI is the direct obligor on the Parent Notes, which are fully and unconditionally guaranteed, on a senior or senior subordinated basis, as the case may be, by most of its direct and indirect 100% owned United States subsidiaries (the "Guarantors"). These guarantees are joint and several obligations of the Guarantors. Canada Company, Iron Mountain Europe PLC ("IME"), the Special Purpose Subsidiaries (as defined below) and the remainder of our subsidiaries do not guarantee the Parent Notes.


(4)	Canada Company is the direct obligor on the CAD Notes, which are fully and unconditionally guaranteed, on a senior basis, by IMI and the Guarantors. These guarantees are joint and several obligations of IMI and the Guarantors. See Note 5 to Notes to Consolidated Financial Statements.

Table of Contents

IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(4) Debt (Continued)


(5)	IME is the direct obligor on the GBP Notes, which are fully and unconditionally guaranteed, on a senior basis, by IMI and the Guarantors. These guarantees are joint and several obligations of IMI and the Guarantors. See Note 5 to Notes to Consolidated Financial Statements.


(6)	The Special Purpose Subsidiaries are the obligors under this program.


(7)	We believe the fair value (Level 3 of fair value hierarchy described at Note 2.k.) of this debt approximates its carrying

value.

On August 7, 2013, we amended our existing credit agreement. The revolving credit facilities (the "Revolving Credit Facility") under our credit agreement, as amended (the "Credit Agreement"), allow IMI and certain of its United States and foreign subsidiaries to borrow in United States dollars and (subject to sublimits) a variety of other currencies (including Canadian dollars, British pounds sterling, Euros, Brazilian reais and Australian dollars, among other currencies) in an aggregate outstanding amount not to exceed $1,500,000. Additionally, the Credit Agreement included an option to allow us to request additional commitments of up to $500,000, in the form of term loans or through increased commitments under the Revolving Credit Facility. On September 24, 2014, we exercised the option and borrowed an additional $250,000 in the form of a term loan under the Credit Agreement (the "Term Loan"). Commencing on December 31, 2014, the Term Loan began to amortize in quarterly installments in an amount equal to $625 per quarter, with the remaining balance due on June 27, 2016. The Term Loan may be prepaid without penalty or premium, in whole or in part, at any time. The Credit Agreement continues to include an option to allow us to request additional commitments of up to $250,000, in the form of term loans or through increased commitments under the Revolving Credit Facility.

The Credit Agreement terminates on June 27, 2016, at which point all obligations become due. IMI and the Guarantors guarantee all obligations under the Credit Agreement, and have pledged the capital stock or other equity interests of most of their United States subsidiaries, up to 66% of the capital stock or other equity interests of their first-tier foreign subsidiaries, and all intercompany obligations (including promissory notes) owed to or held by them to secure the Credit Agreement. In addition, Canada Company has pledged 66% of the capital stock of its subsidiaries, and all intercompany obligations (including promissory notes) owed to or held by it to secure the Canadian dollar subfacility under the Revolving Credit Facility. The interest rate on borrowings under the Credit Agreement varies depending on our choice of interest rate and currency options, plus an applicable margin, which varies based on our consolidated leverage ratio. Additionally, the Credit Agreement requires the payment of a commitment fee on the unused portion of the Revolving Credit Facility, which fee ranges from between 0.3% to 0.5% based on certain financial ratios and fees associated with outstanding letters of credit. As of March 31, 2015, we had $823,881 and $248,750 of outstanding borrowings under the Revolving Credit Facility and the Term Loan, respectively. Of the $823,881 of outstanding borrowings under the Revolving Credit Facility, $632,250 was denominated in United States dollars, 81,200 was denominated in Canadian dollars, 67,750 was denominated in Euros and 71,600 was denominated in Australian dollars. In addition, we also had various outstanding letters of credit totaling $12,219. The remaining amount available for borrowing under the Revolving Credit Facility as of March 31, 2015, based on IMI's leverage ratio, the last 12 months' earnings before interest, taxes, depreciation and amortization and rent expense ("EBITDAR"), other adjustments as defined in the Credit Agreement and current external debt, was $663,900 (which amount represents the maximum availability as of such date). The average interest rate in effect under the Credit Agreement was 2.8% as of March 31, 2015. The average interest rate in effect under the Revolving Credit Facility was 2.9% and ranged from 2.3% to 5.1% as of March 31, 2015 and the interest rate in effect under the Term Loan as of March 31, 2015 was 2.4%.

Table of Contents

IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(4) Debt (Continued)

In March 2015, we entered into a $250,000 accounts receivable securitization program (the "Accounts Receivable Securitization Program") involving several of our wholly owned subsidiaries and certain financial institutions. Under the Accounts Receivable Securitization Program, certain of our subsidiaries sell substantially all of their United States accounts receivable balances to our wholly owned special purpose entities, Iron Mountain Receivables QRS, LLC and Iron Mountain Receivables TRS, LLC (the "Special Purpose Subsidiaries"). The Special Purpose Subsidiaries use the accounts receivable balances to collateralize loans obtained from certain financial institutions. Iron Mountain Information Management, LLC retains the responsibility of servicing the accounts receivable balances pledged as collateral in this transaction and IMI provides a performance guaranty. The Accounts Receivable Securitization Program terminates on March 6, 2018, at which point all obligations become due. The maximum availability allowed is limited by eligible accounts receivable, as defined under the terms of the Accounts Receivable Securitization Program. As of March 31, 2015, the maximum availability allowed and amount outstanding under the Accounts Receivable Securitization Program was $220,800. The interest rate in effect under the Accounts Receivable Securitization Program was 1.1% as of March 31, 2015. Commitment fees at a rate of 40 basis points are charged on amounts made available but not borrowed under the Accounts Receivable Securitization Program.

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. IMI's Credit Agreement net total lease adjusted leverage ratio was 5.4 and 5.5 as of December 31, 2014 and March 31, 2015, respectively, compared to a maximum allowable ratio of 6.5, and its net secured debt lease adjusted leverage ratio was 2.6 and 2.7 as of December 31, 2014 and March 31, 2015, respectively, compared to a maximum allowable ratio of 4.0. IMI's bond leverage ratio (which is not lease adjusted), per the indentures, was 5.7 and 5.6 as of December 31, 2014 and March 31, 2015, respectively, compared to a maximum allowable ratio of 6.5. IMI's Credit Agreement fixed charge coverage ratio was 2.5 and 2.4 as of December 31, 2014 and March 31, 2015, respectively, compared to a minimum allowable ratio of 1.5 under the Credit Agreement. Noncompliance with these leverage and fixed charge coverage ratios would have a material adverse effect on our financial condition and liquidity.

For the three months ended March 31, 2014 and 2015, we recorded commitment fees and letters of credit fees of $658 and $867, respectively, based on the unused balances under the Revolving Credit Facility and the Accounts Receivable Securitization Program.

(5) Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors

The following data summarizes the consolidating results of IMI on the equity method of accounting as of December 31, 2014 and March 31, 2015 and for the three months ended March 31, 2014 and 2015 and are prepared on the same basis as the consolidated financial statements.

The Parent Notes, CAD Notes and GBP 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 and the Guarantors guarantee the CAD Notes, which were issued by Canada Company, and the GBP Notes, which were issued by IME. Canada Company and IME do not guarantee the Parent Notes. The subsidiaries that do not guarantee the Parent Notes, the CAD Notes and the GBP Notes, including IME and the Special Purpose Subsidiaries but excluding Canada Company, are referred to below as the Non-Guarantors.

Table of Contents

IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(5) Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)

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, Canada Company or a Non-Guarantor. If such a change occurs, the amount of investment in subsidiaries in the below consolidated balance sheets and equity in the earnings (losses) of subsidiaries, net of tax in the below consolidated statements of operations with respect to the relevant Parent, Guarantors, Canada Company, Non-Guarantors and Eliminations columns also would change.

In March 2015, we entered into the Accounts Receivable Securitization Program, which is described more fully in Note 4. The Special Purpose Subsidiaries, which were established in conjunction with the Accounts Receivable Securitization Program, are included in the Non-Guarantors column in the below consolidated balance sheet, consolidated statement of operations and consolidated statement of cash flows from that date forward. As a result of the Accounts Receivable Securitization Program, certain of our Guarantors sold substantially all of their United States accounts receivable balances to the Special Purpose Subsidiaries. As of March 31, 2015, this resulted in a decrease in accounts receivable, an increase in intercompany receivable and a decrease in long-term debt related to our Guarantors and a corresponding increase in accounts receivable, an increase in intercompany payable and an increase in long-term debt related to our Non-Guarantors. There was no material impact to the Guarantors and Non-Guarantors columns of the below consolidated statement of operations for the three months ended March 31, 2015. Additionally, the Accounts Receivable Securitization Program resulted in increased financing cash flow activity for our Non-Guarantor subsidiaries for the three months ended March 31, 2015, as the proceeds from borrowings under the Accounts Receivable Securitization Program were used to repay intercompany loans with certain of our Guarantor subsidiaries, which resulted in increased cash flows from investing activities for our Guarantor subsidiaries for the three months ended March 31, 2015.

Table of Contents

IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(5) Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)

CONSOLIDATED BALANCE SHEETS



	December 31, 2014
	Parent		Guarantors		Canada Company		Non- Guarantors		Eliminations			Consolidated
Assets
Current Assets:
Cash and Cash Equivalents	$	2,399	$	4,713	$	4,979	$	113,842	$	—		$	125,933
Restricted Cash	33,860		—		—		—		—			33,860
Accounts Receivable	—		361,330		37,137		205,798		—			604,265
Intercompany Receivable	—		586,725		—		—		(586,725		)	—
Other Current Assets	153		88,709		2,925		61,908		(34		)	153,661
Total Current Assets	36,412		1,041,477		45,041		381,548		(586,759		)	917,719
Property, Plant and Equipment, Net	840		1,580,337		160,977		808,573		—			2,550,727
Other Assets, Net:
Long-term Notes Receivable from Affiliates and Intercompany Receivable	2,851,651		245		2,448		—		(2,854,344		)	—
Investment in Subsidiaries	917,170		656,877		30,751		93,355		(1,698,153		)	—
Goodwill	—		1,611,957		180,342		631,484		—			2,423,783
Other	31,108		375,082		26,672		245,251		—			678,113
Total Other Assets, Net	3,799,929		2,644,161		240,213		970,090		(4,552,497		)	3,101,896
Total Assets	$	3,837,181	$	5,265,975	$	446,231	$	2,160,211	$	(5,139,256	)	$	6,570,342
Liabilities and Equity
Intercompany Payable	$	505,083	$	—	$	3,564	$	78,078	$	(586,725	)	$	—
Current Portion of Long-term Debt	—		24,955		—		27,174		(34		)	52,095
Total Other Current Liabilities	60,097		470,122		35,142		239,280		—			804,641
Long-term Debt, Net of Current Portion	2,414,646		908,431		245,861		1,042,498		—			4,611,436
Long-term Notes Payable to Affiliates and Intercompany Payable	1,000		2,851,384		—		1,960		(2,854,344		)	—
Other Long-term Liabilities	—		115,789		37,558		78,868		—			232,215
Commitments and Contingencies (See Note 7)
Total Iron Mountain Incorporated Stockholders' Equity	856,355		895,294		124,106		678,753		(1,698,153		)	856,355
Noncontrolling Interests	—		—		—		13,600		—			13,600
Total Equity	856,355		895,294		124,106		692,353		(1,698,153		)	869,955
Total Liabilities and Equity	$	3,837,181	$	5,265,975	$	446,231	$	2,160,211	$	(5,139,256	)	$	6,570,342

Table of Contents

IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(5) Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)

CONSOLIDATED BALANCE SHEETS (Continued)



	March 31, 2015
	Parent		Guarantors		Canada Company		Non- Guarantors		Eliminations			Consolidated
Assets
Current Assets:
Cash and Cash Equivalents	$	—	$	7,395	$	7,120	$	105,090	$	—		$	119,605
Restricted Cash	20,000		—		—		—		—			20,000
Accounts Receivable	—		14,842		33,975		541,209		—			590,026
Intercompany Receivable	—		857,050		—		—		(857,050		)	—
Other Current Assets	573		93,214		3,043		61,041		(29		)	157,842
Total Current Assets	20,573		972,501		44,138		707,340		(857,079		)	887,473
Property, Plant and Equipment, Net	795		1,580,203		147,886		747,918		—			2,476,802
Other Assets, Net: