Attached files
| file | filename |
|---|---|
| 8-K/A - 8-K/A - IRON MOUNTAIN INC | a2228581z8-ka.htm |
| EX-99.2 - EX-99.2 - IRON MOUNTAIN INC | a2228581zex-99_2.htm |
| EX-99.1 - EX-99.1 - IRON MOUNTAIN INC | a2228581zex-99_1.htm |
| EX-23.1 - EX-23.1 - IRON MOUNTAIN INC | a2228581zex-23_1.htm |
Exhibit 99.3
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial statements are derived from and should be read in conjunction with the historical consolidated financial statements and related notes of Iron Mountain Incorporated (“Iron Mountain”) referred to below and of Recall Holdings Limited (“Recall”), which are filed as Exhibits 99.1 and 99.2 to this Current Report on Form 8-K/A to which these unaudited pro forma consolidated financial statements are filed as Exhibit 99.3 (the “Current Report”).
The unaudited pro forma consolidated balance sheet as of March 31, 2016, and the unaudited pro forma consolidated statements of operations for the three months ended March 31, 2016 and the year ended December 31, 2015, are presented herein. The unaudited pro forma consolidated balance sheet combines the consolidated balance sheets of Iron Mountain and Recall as of March 31, 2016 and gives effect to (1) Iron Mountain’s acquisition of all of the outstanding shares of Recall in exchange for cash and newly issued shares of Iron Mountain common stock which occurred on May 2, 2016 (the “Recall Transaction”); (2) the initial financing of the Recall Transaction; (3) the divestments in Australia, Canada and the United States required by the regulators as described herein (the “Divestments”); and (4) the integration of a portion of Recall’s operations into Iron Mountain’s structure as a real estate investment trust for U.S. federal income tax purposes (“REIT”), as if these had been completed on March 31, 2016. The unaudited pro forma consolidated statements of operations combine the historical results of Iron Mountain and Recall for the three months ended March 31, 2016 and the year ended December 31, 2015 and give effect to (1) the Recall Transaction; (2) the initial financing of the Recall Transaction; (3) the Divestments; and (4) the integration of a portion of Recall’s operations into Iron Mountain’s structure as a REIT, as if these occurred on January 1, 2015. The historical financial information has been adjusted to give effect to pro forma adjustments that are (1) directly attributable to the Recall Transaction; (2) factually supportable; and (3) with respect to the unaudited consolidated statements of operations, expected to have a continuing impact on the consolidated results.
The unaudited pro forma consolidated financial statements presented are based on the assumptions and adjustments described in the accompanying notes. The unaudited pro forma consolidated financial statements are presented for illustrative purposes and do not purport to represent what the financial position or results of operations would actually have been if the Recall Transaction occurred as of the dates indicated or what financial position or results of operations would be for any future periods. The unaudited pro forma consolidated financial statements are based upon the respective historical consolidated financial statements of Iron Mountain and Recall, and should be read in conjunction with (1) the accompanying notes to the unaudited pro forma consolidated financial information; (2) the unaudited consolidated financial statements for the three months ended March 31, 2016 and notes thereto of Iron Mountain included in the Iron Mountain Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission (the “SEC”) on April 28, 2016; (3) the audited consolidated financial statements for the fiscal year ended December 31, 2015 and notes thereto of Iron Mountain included in the Iron Mountain Annual Report on Form 10-K, filed with the SEC on February 26, 2016; (4) the unaudited consolidated financial statements and notes thereto for the half year ended December 31, 2014 of Recall, which are not included within the Current Report; (5) the audited consolidated financial statements and notes thereto for fiscal year ended June 30, 2015 of Recall, which are filed as Exhibit 99.1 to the Current Report; (6) the unaudited consolidated financial statements and notes thereto for the half year ended December 31, 2015 of Recall, which are filed as Exhibit 99.2 to the Current Report; and (7) the unaudited consolidated balance sheet and unaudited consolidated statement of operations as of and for the three months ended March 31, 2016 of Recall, which are included as part of these unaudited pro forma consolidated financial statements, but not separately presented.
With regard to the Divestments, the unaudited pro forma consolidated financial statements give effect to the Divestments as described in Note 2 to the unaudited pro forma consolidated financial statements. In addition to the Divestments, the Recall Transaction’s impact on competition within the relevant United Kingdom (the “U.K.”) markets is still under investigation and review by the United Kingdom Competition and Markets Authority (the “CMA” and, with respect to the CMA’s investigation and review, the “CMA Review”). Iron Mountain agreed to place the entire Recall business located in the U.K. in a hold separate arrangement until the conclusion of the CMA Review and any subsequent period that might be required for the final implementation of any remedies that may be ordered by the CMA. Since any divestments that may be required based on the outcome of the CMA Review are
unknown at this time, the unaudited pro forma consolidated financial information does not give effect to any potential divestments which may be required in the U.K. See Note 2 to notes to unaudited pro forma consolidated financial information for information regarding provisional findings of the CMA Review. The unaudited pro forma consolidated financial statements does not include the impact of any proceeds from the Divestments or any divestment that may be required in the U.K. based on the outcome of the CMA Review, other than sales proceeds of approximately $80 million, subject to adjustment, associated with the Access Sale (as defined below), which closed on May 4, 2016.
The unaudited pro forma consolidated statements of operations also include certain purchase accounting adjustments, including items expected to have a continuing impact on the combined results, such as increased amortization expense on acquired intangible assets. The unaudited pro forma consolidated statements of operations do not include the impact of any revenue, cost or other operating synergies that may result from the Recall Transaction or any related restructuring costs.
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2016
(In thousands)
|
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Historical |
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Iron Mountain |
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Recall |
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U.S. GAAP |
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(Note) |
|
Recall |
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Adjustments to |
|
(Note) |
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Purchase Accounting |
|
(Note) |
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Financing |
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Divestment |
|
(Note) |
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Pro Forma |
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ASSETS |
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Current Assets: |
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|
|
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|
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Cash and cash equivalents |
|
$ |
117,945 |
|
$ |
155,400 |
|
$ |
— |
|
|
|
$ |
155,400 |
|
$ |
— |
|
|
|
$ |
(333,200 |
) |
7(b) |
|
$ |
359,559 |
|
7(m) |
|
$ |
80,000 |
|
7(n) |
|
$ |
379,704 |
|
|
Accounts receivable, net |
|
574,717 |
|
203,548 |
|
— |
|
|
|
203,548 |
|
(9,203 |
) |
7(a) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
769,062 |
| |||||||||
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Deferred income taxes |
|
22,261 |
|
— |
|
8,655 |
|
5(a)(b) |
|
8,655 |
|
— |
|
|
|
(3,096 |
) |
7(j) |
|
— |
|
|
|
(344 |
) |
7(p) |
|
27,476 |
| |||||||||
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Prepaid expenses and other |
|
116,973 |
|
30,300 |
|
— |
|
|
|
30,300 |
|
(633 |
) |
7(a) |
|
— |
|
|
|
— |
|
|
|
— |
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|
146,640 |
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Assets held for sale |
|
— |
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— |
|
— |
|
|
|
— |
|
120,244 |
|
7(a) |
|
79,283 |
|
7(d) |
|
— |
|
|
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(80,000 |
) |
7(o) |
|
119,527 |
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|
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Total Current Assets |
|
831,896 |
|
389,248 |
|
8,655 |
|
|
|
397,903 |
|
110,408 |
|
|
|
(257,013 |
) |
|
|
359,559 |
|
|
|
(344 |
) |
|
|
1,442,409 |
| |||||||||
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Property, Plant and Equipment: |
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Property, plant and equipment |
|
4,865,424 |
|
785,329 |
|
19,288 |
|
5(c) |
|
804,617 |
|
(111,661 |
) |
7(a) |
|
(92,854 |
) |
|
|
— |
|
|
|
— |
|
|
|
5,465,526 |
| |||||||||
|
Less Accumulated depreciation |
|
(2,326,120 |
) |
(373,777 |
) |
(3,922 |
) |
5(c) |
|
(377,699 |
) |
57,122 |
|
7(a) |
|
377,699 |
|
|
|
— |
|
|
|
— |
|
|
|
(2,268,998 |
) | |||||||||
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|
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Property, Plant and Equipment, net |
|
2,539,304 |
|
411,552 |
|
15,366 |
|
|
|
426,918 |
|
(54,539 |
) |
|
|
284,845 |
|
7(c) |
|
— |
|
|
|
— |
|
|
|
3,196,528 |
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Other Assets, net: |
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Goodwill |
|
2,400,719 |
|
703,400 |
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— |
|
|
|
703,400 |
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(39,438 |
) |
7(a) |
|
777,001 |
|
7(e) |
|
— |
|
|
|
— |
|
|
|
3,841,682 |
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Customer relationships and customer inducements |
|
618,339 |
|
117,126 |
|
— |
|
|
|
117,126 |
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(15,846 |
) |
7(a) |
|
598,844 |
|
7(f) |
|
— |
|
|
|
— |
|
|
|
1,318,463 |
| |||||||||
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Other |
|
32,051 |
|
16,874 |
|
(5,261 |
) |
5(a)(b)(c) |
|
11,613 |
|
(585 |
) |
7(a) |
|
47,386 |
|
7(f)(j) |
|
— |
|
|
|
— |
|
|
|
90,465 |
| |||||||||
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Total Other Assets, net |
|
3,051,109 |
|
837,400 |
|
(5,261 |
) |
|
|
832,139 |
|
(55,869 |
) |
|
|
1,423,231 |
|
|
|
— |
|
|
|
— |
|
|
|
5,250,610 |
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Total Assets |
|
$ |
6,422,309 |
|
$ |
1,638,200 |
|
$ |
18,760 |
|
|
|
$ |
1,656,960 |
|
$ |
— |
|
|
|
$ |
1,451,063 |
|
|
|
$ |
359,559 |
|
|
|
$ |
(344 |
) |
|
|
$ |
9,889,547 |
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LIABILITIES AND EQUITY |
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Current Liabilities: |
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|
|
|
|
|
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|
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|
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|
|
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| |||||||||
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Current portion of long-term debt |
|
$ |
89,974 |
|
$ |
89,400 |
|
$ |
— |
|
|
|
$ |
89,400 |
|
$ |
— |
|
|
|
$ |
— |
|
|
|
$ |
1,058,492 |
|
7(m) |
|
$ |
— |
|
|
|
$ |
1,237,866 |
|
|
Accounts payable |
|
180,259 |
|
133,720 |
|
— |
|
|
|
133,720 |
|
(1,634 |
) |
7(a) |
|
(1,721 |
) |
7(h) |
|
— |
|
|
|
— |
|
|
|
310,624 |
| |||||||||
|
Accrued expenses |
|
297,169 |
|
24,500 |
|
(11,395 |
) |
5(b) |
|
13,105 |
|
(4,216 |
) |
7(a) |
|
30,018 |
|
7(j) |
|
— |
|
|
|
2,658 |
|
7(p) |
|
338,734 |
| |||||||||
|
Deferred revenue |
|
181,091 |
|
36,680 |
|
— |
|
|
|
36,680 |
|
(1,777 |
) |
7(a) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
215,994 |
| |||||||||
|
Liabilities held for sale |
|
— |
|
— |
|
— |
|
|
|
— |
|
10,623 |
|
7(a) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,623 |
| |||||||||
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
Total Current Liabilities |
|
748,493 |
|
284,300 |
|
(11,395 |
) |
|
|
272,905 |
|
2,996 |
|
|
|
28,297 |
|
|
|
1,058,492 |
|
|
|
2,658 |
|
|
|
2,113,841 |
| |||||||||
|
Long-term Debt, net of current portion |
|
4,931,296 |
|
704,300 |
|
19,022 |
|
5(c) |
|
723,322 |
|
— |
|
|
|
13,641 |
|
7(g)(l) |
|
(698,933 |
) |
7(m) |
|
— |
|
|
|
4,969,326 |
| |||||||||
|
Other Long-Term Liabilities |
|
74,356 |
|
17,957 |
|
5,274 |
|
5(a) |
|
23,231 |
|
(2,996 |
) |
7(a) |
|
23,725 |
|
7(i) |
|
— |
|
|
|
— |
|
|
|
118,316 |
| |||||||||
|
Deferred Rent |
|
96,079 |
|
11,843 |
|
(3,036 |
) |
5(c) |
|
8,807 |
|
— |
|
|
|
(8,807 |
) |
7(h) |
|
— |
|
|
|
— |
|
|
|
96,079 |
| |||||||||
|
Deferred Income Taxes |
|
50,941 |
|
72,700 |
|
2,409 |
|
5(a)(b)(c) |
|
75,109 |
|
— |
|
|
|
96,093 |
|
7(j) |
|
— |
|
|
|
(3,002 |
) |
7(p) |
|
219,141 |
| |||||||||
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
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|
|
| |||||||||
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Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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| |||||||||
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Iron Mountain Incorporated Stockholders’ Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
| |||||||||
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Common stock |
|
2,119 |
|
— |
|
— |
|
|
|
— |
|
— |
|
|
|
507 |
|
7(k) |
|
— |
|
|
|
— |
|
|
|
2,626 |
| |||||||||
|
Additional paid-in capital |
|
1,628,971 |
|
388,800 |
|
— |
|
|
|
388,800 |
|
— |
|
|
|
1,462,393 |
|
7(k) |
|
— |
|
|
|
— |
|
|
|
3,480,164 |
| |||||||||
|
(Distributions in excess of earnings) Earnings in excess of distributions |
|
(982,532 |
) |
247,800 |
|
6,486 |
|
5(b)(c) |
|
254,286 |
|
— |
|
|
|
(254,286 |
) |
7(k) |
|
— |
|
|
|
— |
|
|
|
(982,532 |
) | |||||||||
|
Accumulated other comprehensive items, net |
|
(152,160 |
) |
(89,500 |
) |
— |
|
|
|
(89,500 |
) |
— |
|
|
|
89,500 |
|
7(k) |
|
— |
|
|
|
— |
|
|
|
(152,160 |
) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
Total Iron Mountain Incorporated Stockholders’ Equity |
|
496,398 |
|
547,100 |
|
6,486 |
|
|
|
553,586 |
|
— |
|
|
|
1,298,114 |
|
|
|
— |
|
|
|
— |
|
|
|
2,348,098 |
| |||||||||
|
Noncontrolling Interests |
|
24,746 |
|
— |
|
— |
|
|
|
— |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
24,746 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
Total Equity |
|
521,144 |
|
547,100 |
|
6,486 |
|
|
|
553,586 |
|
— |
|
|
|
1,298,114 |
|
|
|
— |
|
|
|
— |
|
|
|
2,372,844 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Equity |
|
$ |
6,422,309 |
|
$ |
1,638,200 |
|
$ |
18,760 |
|
|
|
$ |
1,656,960 |
|
$ |
— |
|
|
|
$ |
1,451,063 |
|
|
|
$ |
359,559 |
|
|
|
$ |
(344 |
) |
|
|
$ |
9,889,547 |
|
See accompanying notes to unaudited pro forma consolidated financial information.
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2015
(In thousands, except per share data)
|
|
|
Historical |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
Iron Mountain |
|
Recall |
|
U.S. GAAP |
|
(Note) |
|
Recall |
|
Purchase Accounting |
|
(Note) |
|
Financing |
|
(Note) |
|
Divestment |
|
(Note) |
|
Pro Forma |
| ||||||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Storage rental |
|
$ |
1,837,897 |
|
$ |
436,900 |
|
$ |
— |
|
|
|
$ |
436,900 |
|
$ |
— |
|
|
|
$ |
— |
|
|
|
$ |
(66,717 |
) |
8(h) |
|
$ |
2,208,080 |
|
|
Service |
|
1,170,079 |
|
361,500 |
|
— |
|
|
|
361,500 |
|
— |
|
|
|
— |
|
|
|
(46,438 |
) |
8(h) |
|
1,485,141 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Total Revenues |
|
3,007,976 |
|
798,400 |
|
— |
|
|
|
798,400 |
|
— |
|
|
|
— |
|
|
|
(113,155 |
) |
|
|
3,693,221 |
| ||||||||
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Cost of sales (excluding depreciation and amortization) |
|
1,290,025 |
|
408,300 |
|
(6,809 |
) |
5(b)(c) |
|
401,491 |
|
1,447 |
|
8(a) |
|
— |
|
|
|
(53,536 |
) |
8(h) |
|
1,639,427 |
| ||||||||
|
Selling, general and administrative |
|
844,960 |
|
239,700 |
|
— |
|
|
|
239,700 |
|
(77,189 |
) |
8(b) |
|
— |
|
|
|
(13,306 |
) |
8(h) |
|
994,165 |
| ||||||||
|
Depreciation and amortization |
|
345,464 |
|
69,300 |
|
386 |
|
5(c) |
|
69,686 |
|
48,559 |
|
8(c)(d) |
|
— |
|
|
|
(7,994 |
) |
8(h) |
|
455,715 |
| ||||||||
|
Loss (gain) on disposal/write-down of property, plant and equipment (excluding real estate), net |
|
3,000 |
|
(1,500 |
) |
— |
|
|
|
(1,500 |
) |
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,500 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Total Operating Expenses |
|
2,483,449 |
|
715,800 |
|
(6,423 |
) |
|
|
709,377 |
|
(27,183 |
) |
|
|
— |
|
|
|
(74,836 |
) |
|
|
3,090,807 |
| ||||||||
|
Operating Income (Loss) |
|
524,527 |
|
82,600 |
|
6,423 |
|
|
|
89,023 |
|
27,183 |
|
|
|
— |
|
|
|
(38,319 |
) |
8(h) |
|
602,414 |
| ||||||||
|
Interest Expense, Net |
|
263,871 |
|
22,700 |
|
2,063 |
|
5(c) |
|
24,763 |
|
(396 |
) |
8(f) |
|
42,268 |
|
8(g) |
|
— |
|
|
|
330,506 |
| ||||||||
|
Other Expense (Income), Net |
|
98,590 |
|
4,100 |
|
— |
|
|
|
4,100 |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
102,690 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Income (Loss) Before Provision (Benefit) for Income Taxes and (Gain) Loss on Sale of Real Estate |
|
162,066 |
|
55,800 |
|
4,360 |
|
|
|
60,160 |
|
27,579 |
|
|
|
(42,268 |
) |
|
|
(38,319 |
) |
|
|
169,218 |
| ||||||||
|
(Benefit) Provision for Income Taxes |
|
37,713 |
|
6,600 |
|
1,149 |
|
5(b)(c) |
|
7,749 |
|
(5,126 |
) |
8(e) |
|
5,753 |
|
8(g) |
|
(14,091 |
) |
8(h) |
|
31,998 |
| ||||||||
|
(Gain) Loss on Sale of Real Estate, Net of Tax |
|
(850 |
) |
— |
|
— |
|
|
|
— |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(850 |
) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) |
|
$ |
125,203 |
|
$ |
49,200 |
|
$ |
3,211 |
|
|
|
$ |
52,411 |
|
$ |
32,705 |
|
|
|
$ |
(48,021 |
) |
|
|
$ |
(24,228 |
) |
|
|
$ |
138,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Earnings per Share - Basic |
|
$ |
0.59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.53 |
| ||||||
|
Earnings per Share - Diluted |
|
$ |
0.59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.53 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Weighted Average Common Shares Outstanding — Basic |
|
210,764 |
|
|
|
|
|
|
|
|
|
50,691 |
|
8(i) |
|
|
|
|
|
|
|
|
|
261,455 |
| ||||||||
|
Weighted Average Common Shares Outstanding — Diluted |
|
212,118 |
|
|
|
|
|
|
|
|
|
50,691 |
|
8(i) |
|
|
|
|
|
|
|
|
|
262,809 |
| ||||||||
See accompanying notes to unaudited pro forma consolidated financial information.
IRON MOUNTAIN INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2016
(In thousands, except per share data)
|
|
|
Historical |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
Iron Mountain |
|
Recall |
|
U.S. GAAP |
|
(Note) |
|
Recall |
|
Purchase Accounting |
|
(Note) |
|
Financing |
|
(Note) |
|
Divestment |
|
(Note) |
|
Pro Forma |
| ||||||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Storage rental |
|
$ |
461,211 |
|
$ |
110,900 |
|
$ |
— |
|
|
|
$ |
110,900 |
|
$ |
— |
|
|
|
$ |
— |
|
|
|
$ |
(16,590 |
) |
8(h) |
|
$ |
555,521 |
|
|
Service |
|
289,479 |
|
90,400 |
|
— |
|
|
|
90,400 |
|
— |
|
|
|
— |
|
|
|
(11,707 |
) |
8(h) |
|
368,172 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Total Revenues |
|
750,690 |
|
201,300 |
|
— |
|
|
|
201,300 |
|
— |
|
|
|
— |
|
|
|
(28,297 |
) |
|
|
923,693 |
| ||||||||
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Cost of sales (excluding depreciation and amortization) |
|
326,105 |
|
98,063 |
|
1,659 |
|
5(b)(c) |
|
99,722 |
|
284 |
|
8(a) |
|
— |
|
|
|
(12,832 |
) |
8(h) |
|
413,279 |
| ||||||||
|
Selling, general and administrative |
|
207,766 |
|
65,417 |
|
— |
|
|
|
65,417 |
|
(28,732 |
) |
8(b) |
|
— |
|
|
|
(3,366 |
) |
8(h) |
|
241,085 |
| ||||||||
|
Depreciation and amortization |
|
87,204 |
|
18,829 |
|
96 |
|
5(c) |
|
18,925 |
|
10,622 |
|
8(c)(d) |
|
— |
|
|
|
(2,572 |
) |
8(h) |
|
114,179 |
| ||||||||
|
Loss (gain) on disposal/write-down of property, plant and equipment (excluding real estate), net |
|
(451 |
) |
— |
|
— |
|
|
|
— |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(451 |
) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Total Operating Expenses |
|
620,624 |
|
182,309 |
|
1,755 |
|
|
|
184,064 |
|
(17,826 |
) |
|
|
— |
|
|
|
(18,770 |
) |
|
|
768,092 |
| ||||||||
|
Operating Income (Loss) |
|
130,066 |
|
18,991 |
|
(1,755 |
) |
|
|
17,236 |
|
17,826 |
|
|
|
— |
|
|
|
(9,527 |
) |
8(h) |
|
155,601 |
| ||||||||
|
Interest Expense, Net |
|
67,062 |
|
6,600 |
|
477 |
|
5(c) |
|
7,077 |
|
(71 |
) |
8(f) |
|
19,655 |
|
8(g) |
|
— |
|
|
|
93,723 |
| ||||||||
|
Other Expense (Income), Net |
|
(11,937 |
) |
1,791 |
|
— |
|
|
|
1,791 |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10,146 |
) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Income (Loss) Before Provision (Benefit) for Income Taxes |
|
74,941 |
|
10,600 |
|
(2,232 |
) |
|
|
8,368 |
|
17,897 |
|
|
|
(19,655 |
) |
|
|
(9,527 |
) |
|
|
72,024 |
| ||||||||
|
(Benefit) Provision for Income Taxes |
|
11,900 |
|
3,400 |
|
(588 |
) |
5(b)(c) |
|
2,812 |
|
(199 |
) |
8(e) |
|
1,702 |
|
8(g) |
|
(3,539 |
) |
8(h) |
|
12,676 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) |
|
$ |
63,041 |
|
$ |
7,200 |
|
$ |
(1,644 |
) |
|
|
$ |
5,556 |
|
$ |
18,096 |
|
|
|
$ |
(21,357 |
) |
|
|
$ |
(5,988 |
) |
|
|
$ |
59,348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Earnings per Share - Basic |
|
$ |
0.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.23 |
| ||||||
|
Earnings per Share - Diluted |
|
$ |
0.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.23 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Weighted Average Common Shares Outstanding — Basic |
|
211,526 |
|
|
|
|
|
|
|
|
|
50,691 |
|
8(i) |
|
|
|
|
|
|
|
|
|
262,217 |
| ||||||||
|
Weighted Average Common Shares Outstanding — Diluted |
|
212,471 |
|
|
|
|
|
|
|
|
|
50,691 |
|
8(i) |
|
|
|
|
|
|
|
|
|
263,162 |
| ||||||||
See accompanying notes to unaudited pro forma consolidated financial information.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share amounts)
NOTE 1—DESCRIPTION OF THE RECALL TRANSACTION
On May 2, 2016 (Sydney, Australia time), Iron Mountain completed the Recall Transaction, pursuant to the Scheme Implementation Deed, as amended (the “Recall Agreement”), with Recall. As a result of the Recall Transaction, Recall became a wholly-owned subsidiary of Iron Mountain.
At the closing of the Recall Transaction, Iron Mountain paid approximately $333,200 and issued 50,691,329 shares of Iron Mountain common stock which, based on the closing price of Iron Mountain common stock as of April 29, 2016 of $36.53 per share, resulted in a total purchase price to Recall shareholders of approximately $2,184,900.
NOTE 2—BASIS OF PRESENTATION
The accompanying unaudited pro forma consolidated financial statements were prepared in accordance with Article 11 of SEC Regulation S-X. The unaudited pro forma consolidated balance sheet was prepared using the historical balance sheets of Iron Mountain and Recall as of March 31, 2016. Recall’s fiscal year ends on June 30 and Iron Mountain’s fiscal year ends on December 31. As the fiscal years differ by more than 93 days, financial information for Recall for the year ended December 31, 2015 and the three months ended March 31, 2016 has been derived for purposes of the preparation of the unaudited pro forma consolidated financial statements. The unaudited pro forma consolidated statements of operations were prepared using:
· the historical unaudited statement of operations of Iron Mountain for the three months ended March 31, 2016;
· the historical audited statement of operations of Iron Mountain for the year ended December 31, 2015;
· the historical unaudited consolidated income statement of Recall for the twelve months ended December 31, 2015, which has been derived by adding the financial data from the historical unaudited consolidated income statement for the six months ended December 31, 2015, to the financial data from the historical audited consolidated income statement for the fiscal year ended June 30, 2015, and subtracting the financial data from the historical unaudited consolidated income statement for the six months ended December 31, 2014; and
· the historical unaudited consolidated income statement of Recall for the three months ended March 31, 2016.
The unaudited pro forma consolidated financial information was prepared using the acquisition method of accounting with Iron Mountain treated as the acquiring entity. Accordingly, the historical consolidated financial information has been adjusted to give effect to the impact of the consideration issued in connection with the Recall Transaction. In the unaudited pro forma consolidated balance sheet, Iron Mountain’s purchase price has been allocated to the assets acquired and liabilities assumed based upon management’s preliminary estimate of their respective fair values as of the date of the Recall Transaction. Any differences between the fair value of the consideration issued and the fair value of the assets acquired and liabilities assumed will be recorded as goodwill. The amounts allocated to the assets acquired and liabilities assumed in the unaudited pro forma consolidated financial statements are based on management’s preliminary valuation estimates. Definitive allocations will be performed and finalized based on certain valuations and other studies that will be performed by Iron Mountain with the services of outside valuation specialists during the valuation period of the Recall Transaction. Accordingly, the purchase price allocation adjustments and related depreciation and amortization reflected in the unaudited pro forma consolidated financial statements are preliminary, have been made solely for the purpose of preparing these statements and are subject to revision based on a final determination of fair value upon the conclusion of the valuation period of the Recall Transaction.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share amounts)
The unaudited pro forma consolidated statements of operations also include certain purchase accounting adjustments, including items expected to have a continuing impact on the combined results, such as increased amortization expense on acquired intangible assets. The unaudited pro forma consolidated statements of operations do not include the impacts of any revenue, cost or other operating synergies that may result from the Recall Transaction or any related restructuring costs. The unaudited pro forma consolidated statements of operations also do not include the impact of any proceeds from the Divestments, with the exception of the Access Sale, which was completed on May 4, 2016.
Financing Arrangement
On April 29, 2016, Iron Mountain entered into a bridge credit agreement with JPMorgan Chase Bank N.A. (the “Bridge Financing”) and on that day borrowed the full amount of the $850,000 available to it under the Bridge Financing. Iron Mountain used the proceeds from the Bridge Financing, along with borrowings of $299,068 (the “Recall Closing Revolver Funds”) drawn under its existing revolving credit facility (the “Revolving Credit Facility”), to finance the closing of the Recall Transaction, including funding the cash consideration delivered to Recall shareholders in the Recall Transaction, refinancing Recall’s existing indebtedness and paying certain costs incurred by Iron Mountain in connection with the closing of the Recall Transaction. The cash proceeds from the issuance of the Bridge Financing and the Recall Closing Revolver Funds drawn to Iron Mountain were $1,141,843 (net of $7,225 of financing costs that have been deferred and will be amortized over the term of the Bridge Financing to interest expense). The Bridge Financing bears interest at LIBOR plus a margin of 325 basis points which increases by 50 basis points quarterly, and the Revolving Credit Facility bears interest at LIBOR plus a margin of 225 basis points, resulting in a weighted average interest rate of 4.30% and 7.84% per annum for the year ended December 31, 2015 and the three months ended March 31, 2016, respectively. Included in the weighted average interest rates above are certain duration fees applicable to the Bridge Financing (the “Duration Fees”). The Duration Fees are assessed based on the period of time the Bridge Financing is outstanding. The Duration Fees consist of (1) 25 basis points on the amount outstanding at 180 days from the date of first borrowing under the Bridge Financing; (2) 50 basis points on the amount outstanding at 270 days from the date of first borrowing under the Bridge Financing; and (3) 100 basis points on the amount outstanding at 365 days from the date of first borrowing under the Bridge Financing. Excluding the effect of the Duration Fees, the weighted average interest rate would have been 3.75% and 4.88% per annum for the year ended December 31, 2015 and the three months ended March 31, 2016, respectively. The borrowings under the Bridge Financing were subject to certain other fees including a structuring fee of $850, a commitment fee of 50 basis points on the amount borrowed and a funding fee of 25 basis points of the amount borrowed, which are included in the weighted average interest rate. In addition, the Bridge Financing includes certain fees to be paid upon extinguishment.
Divestments and Potential Divestitures in the U.K.
Divestments
In connection with the Recall Transaction, Iron Mountain sought regulatory approval from the Australian Competition and Consumer Commission (the “ACCC”), the United States Department of Justice (the “DOJ”), the Canada Competition Bureau (the “CCB”) and the CMA.
In March 2016, (1) the DOJ announced its approval of the Recall Transaction, on the basis that Iron Mountain make certain divestments following the closing of the Recall Transaction; (2) the ACCC announced that it will not oppose the Recall Transaction, after accepting an undertaking from Iron Mountain pursuant to section 87B of the Australian Competition and Consumer Act 2010 (Cth); and (3) the CCB announced that it has approved the Recall Transaction on the basis of the registration of a Consent Agreement with Iron Mountain pursuant to sections 92 and 105 of the Competition Act (R.S.C., 1985, c. C-34).
The Divestments agreed to with the ACCC, DOJ and CCB are as follows:
· Australia:
· The sale of Iron Mountain’s Australian business other than its data management business throughout Australia and its records and information management business in the Northern Territory of Australia, except in relation to customers who have holdings in other Australian states or territories.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share amounts)
· Canada:
· Recall’s records and information management facilities, including associated tangible and intangible assets and employees, in Edmonton, Alberta and Montreal (Laval), Quebec and certain of Recall’s records and information management facilities, including all associated tangible and intangible assets and employees, in Calgary, Alberta and Toronto, Ontario; and
· One of Iron Mountain’s records and information management facilities in Vancouver (Burnaby), British Columbia and two of Iron Mountain’s records and information management facilities in Ottawa, Ontario, including associated tangible and intangible assets and employees.
· United States (“U.S.”):
· Recall’s records and information management facilities, including all associated tangible and intangible assets, in the following 13 U.S. cities (the “Access Assets”): Buffalo, New York; Charlotte, North Carolina; Detroit, Michigan; Durham, North Carolina; Greenville/Spartanburg, South Carolina; Kansas City, Kansas/Missouri; Nashville, Tennessee; Pittsburgh, Pennsylvania; Raleigh, North Carolina; Richmond, Virginia; San Antonio, Texas; Tulsa, Oklahoma; and San Diego, California; and
· Recall’s records and information management facility in Seattle, Washington and certain of Recall’s records and information management facilities in Atlanta, Georgia, including in each case associated tangible and intangible assets (the “Seattle/Atlanta Divestments”).
Iron Mountain’s and Recall’s historical consolidated balance sheets as of March 31, 2016 and historical consolidated statements of operations for the year ended December 31, 2015 and for the three months ended March 31, 2016 have been adjusted to reflect the Divestments. The unaudited pro forma consolidated balance sheet as of March 31, 2016 gives effect to the reclassification of Iron Mountain’s and Recall’s historical assets and liabilities subject to the Divestments to the financial statement line items assets held for sale or liabilities held for sale. The unaudited pro forma consolidated statements of operations gives pro forma effect to the elimination of revenue, operating expenses and other income and expenses related to the Divestments.
The unaudited pro forma consolidated balance sheet also gives effect to the Access Sale, including the elimination of assets held for sale relating to the Access Sale and the proceeds and the taxes payable arising from the sale of the Access Assets to Access CIG, LLC as required by the DOJ in connection with its approval of the Recall Transaction, for total consideration of approximately $80,000, subject to adjustment (the “Access Sale”). With the exception of the Access Sale, as described above, the proceeds from the Divestments have not been given pro forma effect as they are not factually supportable.
Potential Divestitures in the United Kingdom
The CMA Review is ongoing. On May 4, 2016, the CMA issued its provisional findings regarding any potential required divestitures in the U.K. of Iron Mountain and/or Recall operations. Assuming the provisional findings were implemented, Iron Mountain would be required to divest assets accounting for approximately $5,000 in revenue, or approximately $300 of operating income. As the provisional findings are not final, any potential divestitures required in the U.K. are not known and the unaudited pro forma consolidated financial information does not give effect to any such divestitures.
REIT Conversion
Iron Mountain has integrated, or is in the process of integrating, a portion of Recall’s operations into Iron Mountain’s structure as a REIT. As a result, the unaudited pro forma consolidated balance sheet and unaudited pro forma statements of operations give pro forma effect to the portion of Recall’s operations, which Iron Mountain is integrating, as this assumption is determined to be factually supportable. In order to meet the requirements to qualify
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share amounts)
for taxation as a REIT, Iron Mountain will be required to distribute before the close of its current taxable year any earnings and profits (the “E&P Distribution”) that Recall has earned in the current year or accumulated in its subsidiaries holding the portion of its business that is integrated into Iron Mountain’s REIT structure. Iron Mountain believes that the potential range of this E&P Distribution is between $0 and $50,000. The final amount of the E&P Distribution, however, will be subject to a formal study which has not yet been performed. Accordingly, the unaudited pro forma consolidated financial information does not give effect to the E&P Distribution, as it is not factually supportable.
NOTE 3—RECLASSIFICATIONS
Certain balances presented in the historical Recall financial statements included within these unaudited pro forma consolidated financial statements were reclassified to conform their presentation to that of Iron Mountain as indicated in the tables below:
Unaudited Pro Forma Balance Sheet as of March 31, 2016
|
|
|
Amount |
|
Presentation in Recall’s IFRS |
|
Presentation in Unaudited | |
|
Inventories |
|
$ |
2,300 |
|
Inventories |
|
Prepaid expenses and other |
|
Other assets |
|
28,000 |
|
Other assets |
|
Prepaid expenses and other | |
|
Customer relationships |
|
88,545 |
|
Intangible assets |
|
Customer relationships and customer inducements | |
|
Customer acquisition costs |
|
28,581 |
|
Intangible assets |
|
Customer relationships and customer inducements | |
|
Computer software |
|
23,000 |
|
Intangible assets |
|
Property, Plant and Equipment, net | |
|
Deferred revenue |
|
36,680 |
|
Trade and other payables |
|
Deferred revenue | |
|
Deferred rent |
|
11,843 |
|
Other liabilities |
|
Deferred Rent | |
The following balances have been included in other assets, accrued expenses and other long-term liabilities as follows:
|
|
|
Amount |
|
Presentation in Unaudited | |
|
Other intangibles |
|
$ |
4,374 |
|
Other |
|
Other receivables |
|
5,300 |
|
Other | |
|
Deferred tax assets |
|
6,600 |
|
Other | |
|
Derivative financial instruments |
|
200 |
|
Other | |
|
Other assets |
|
400 |
|
Other | |
|
Taxes payable |
|
6,300 |
|
Accrued expenses | |
|
Provisions |
|
18,200 |
|
Accrued expenses | |
|
Derivative financial instruments |
|
400 |
|
Other Long-Term Liabilities | |
|
Provisions |
|
11,000 |
|
Other Long-Term Liabilities | |
|
Other liabilities |
|
6,557 |
|
Other Long-Term Liabilities | |
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share amounts)
Unaudited Pro Forma Consolidated Statements of Operations Adjustments
Certain line items in Recall’s consolidated income statements have been reclassified to conform to Iron Mountain’s presentation in the unaudited pro forma consolidated statements of operations as follows:
· Operating expenses have been reclassified to selling, general and administrative, cost of sales, depreciation and amortization;
· Gain on sale of business has been reclassified to loss (gain) on disposal/write-down of property, plant and equipment (excluding real estate), net;
· Finance revenue has been reclassified to interest expense, net; and
· Finance costs have been reclassified to interest expense, net and other expense (income), net.
NOTE 4—PURCHASE PRICE
At the closing of the Recall Transaction, Iron Mountain paid approximately $333,200 and issued 50,691,329 shares of Iron Mountain common stock which, based on the closing price of Iron Mountain common stock as of April 29, 2016 of $36.53 per share, resulted in a total purchase price to Recall shareholders of approximately $2,184,900.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share amounts)
The following is a summary of the preliminary allocation of the above purchase price as reflected in the unaudited pro forma consolidated balance sheet as of March 31, 2016:
|
Cash and cash equivalents |
|
$ |
155,400 |
|
|
Accounts receivable, net |
|
203,548 |
| |
|
Prepaid expenses and other |
|
30,300 |
| |
|
Assets held for sale |
|
105,800 |
| |
|
Property, plant and equipment |
|
685,246 |
| |
|
Customer relationship intangible asset |
|
715,970 |
| |
|
Other intangible assets |
|
52,698 |
| |
|
Deferred income tax assets, including current portion |
|
5,961 |
| |
|
Other assets—long term |
|
5,900 |
| |
|
Accounts payable |
|
(131,999 |
) | |
|
Accrued expenses |
|
(13,104 |
) | |
|
Deferred revenue |
|
(36,680 |
) | |
|
Long-term debt, including current portion |
|
(790,872 |
) | |
|
Unfavorable lease liabilities |
|
(23,725 |
) | |
|
Other Long-Term Liabilities |
|
(58,722 |
) | |
|
Deferred income tax liabilities, including current portion |
|
(201,222 |
) | |
|
Estimated fair value of net assets acquired |
|
704,499 |
| |
|
Preliminary allocation to goodwill |
|
1,480,401 |
| |
|
Estimated purchase price |
|
$ |
2,184,900 |
|
The goodwill balance is primarily attributed to the assembled workforce, expanded market opportunities and cost and other operating synergies anticipated upon the integration of the operations of Iron Mountain and Recall. See Note 7 for a discussion of the methods used to determine the fair value of Recall’s identifiable assets and liabilities.
NOTE 5—IFRS TO U.S. GAAP ADJUSTMENTS
(a) Reflects adjustments to the presentation of deferred income taxes as a result of the application of Accounting Principles Generally Accepted in the United States (“U.S. GAAP”). In accordance with International Financial Reporting Standards (“IFRS”), on a jurisdictional basis all deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) are netted together, and the net DTA or DTL is recorded on the balance sheet as a noncurrent DTA or DTL, respectively. Under U.S. GAAP, jurisdictional netting of DTAs and DTLs are performed on a current versus noncurrent basis. The following table reflects the adjustments to current and noncurrent DTAs and DTLs as a result of the application of U.S. GAAP as of March 31, 2016:
|
|
|
Amount |
|
Presentation in Unaudited |
| |
|
Current deferred tax assets |
|
$ |
10,518 |
|
Deferred income taxes |
|
|
Long-term deferred tax assets |
|
(7,550 |
) |
Other |
| |
|
Uncertain tax position liability |
|
5,274 |
|
Other Long-Term Liabilities |
| |
|
Long-term deferred tax liabilities |
|
(2,306 |
) |
Deferred income taxes |
| |
(b) Reflects adjustments to reverse accrued expenses and related tax effects for restructuring actions taken by Recall during the year ended December 31, 2015 and the three months ended March 31, 2016 due to differences in the timing of recognition of such liabilities permitted under IFRS and U.S. GAAP. Under IFRS, liabilities for plant closures, lease terminations and other exit costs may generally be recognized when an entity has formally committed to a plan. U.S. GAAP prohibits the recognition of a liability based solely on an entity’s commitment to a plan. Under U.S. GAAP, the recognition of a provision for a lease termination generally is upon the date the property is no longer in use and most categories of exit costs are recognized as incurred.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share amounts)
Unaudited Pro Forma Balance Sheet Adjustments
|
|
|
Adjustment |
|
Presentation in Unaudited |
| |
|
Current deferred tax assets |
|
$ |
(1,863 |
) |
Deferred income taxes |
|
|
Long-term deferred tax assets |
|
(2,507 |
) |
Other |
| |
|
Accrued expenses |
|
(11,395 |
) |
Accrued expenses |
| |
|
Long-term deferred tax liabilities |
|
105 |
|
Deferred income taxes |
| |
|
(Distributions in excess of earnings) Earnings in excess of distributions |
|
6,920 |
|
(Distribution in excess of earnings) Earnings in excess of distributions |
| |
Unaudited Pro Forma Statement of Operations Adjustments—Year Ended December 31, 2015
|
|
|
Adjustment |
|
|
| |
|
Cost of sales |
|
$ |
(4,977 |
) |
|
|
|
(Benefit) provision for income taxes |
|
1,312 |
|
|
| |
Unaudited Pro Forma Statement of Operations Adjustments—Three Months Ended March 31, 2016
|
|
|
Adjustment |
|
|
| |
|
Cost of sales |
|
$ |
2,086 |
|
|
|
|
(Benefit) provision for income taxes |
|
(550 |
) |
|
| |
(c) Reflects adjustments related to an existing Recall operating lease that is considered a financing obligation under U.S. GAAP. Under U.S. GAAP, Recall was deemed to be the accounting owner of the asset subject to this lease during the construction period. Upon completion of the construction period, Recall determined that the lease did not meet the criteria for “sale-leaseback” treatment. Under U.S. GAAP, Recall must continue to record an asset and corresponding financing obligation. As a result, contractual payments related to the leased property are reversed from rent expense and recorded as depreciation expense, ground rent expense and interest expense.
Unaudited Pro Forma Balance Sheet Adjustments
|
|
|
Adjustment |
|
|
| |
|
Property, plant and equipment |
|
$ |
19,288 |
|
|
|
|
Accumulated depreciation |
|
(3,922 |
) |
|
| |
|
Other |
|
4,796 |
|
|
| |
|
Long-term debt, net of current portion |
|
19,022 |
|
|
| |
|
Deferred rent |
|
(3,036 |
) |
|
| |
|
Deferred income taxes |
|
4,610 |
|
|
| |
|
(Distributions in excess of earnings) Earnings in excess of distributions |
|
(434 |
) |
|
| |
Unaudited Pro Forma Statement of Operations Adjustments—Year Ended December 31, 2015
|
|
|
Adjustment |
|
|
| |
|
Cost of sales |
|
$ |
(1,832 |
) |
|
|
|
Depreciation and amortization |
|
386 |
|
|
| |
|
Interest expense, net |
|
2,063 |
|
|
| |
|
(Benefit) provision for income taxes |
|
(163 |
) |
|
| |
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share amounts)
Unaudited Pro Forma Statement of Operations Adjustments—Three Months Ended March 31, 2016
|
|
|
Adjustment |
|
|
| |
|
Cost of sales |
|
$ |
(427 |
) |
|
|
|
Depreciation and amortization |
|
96 |
|
|
| |
|
Interest expense, net |
|
477 |
|
|
| |
|
(Benefit) provision for income taxes |
|
(38 |
) |
|
| |
NOTE 6—CONFORMING ACCOUNTING POLICIES
At this time, except for the adjustments noted in (1) Note 5 to restate the consolidated financial statements of Recall previously issued under IFRS to be consistent with U.S. GAAP and (2) Note 3 to reclassify certain balances presented in the historical financial statements of Recall to conform their presentation to that of Iron Mountain, Iron Mountain is not aware of any material differences between the accounting policies of the two companies that would continue to exist subsequent to the application of purchase accounting. Iron Mountain is currently in the process of conducting a more detailed review of Recall’s accounting policies in an effort to determine if differences in accounting policies require further reclassification of Recall’s results of operations or reclassification of assets or liabilities to conform to Iron Mountain’s accounting policies and classifications. As a result, Iron Mountain may identify additional differences between the accounting policies of the two companies that, when conformed, could have a material impact on these unaudited pro forma consolidated financial statements.
NOTE 7—UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET ADJUSTMENTS
Assets and liabilities held for sale adjustments
(a) As discussed under “Divestments” in Note 2, Iron Mountain was required to make divestments as part of the Recall Transaction in order to obtain certain regulatory approvals. Certain line items within Iron Mountain’s and Recall’s historical consolidated balance sheets as of March 31, 2016 have been adjusted to give effect to the reclassification of assets and liabilities included in the Divestments to held for sale prior to their divestment within the unaudited pro forma consolidated balance sheet as shown below:
|
|
|
Adjustments |
|
Total Adjustments |
| ||||||||||||||
|
|
|
Iron Mountain |
|
Iron Mountain |
|
Recall U.S. |
|
Recall U.S. (Seattle |
|
Recall Canada |
|
to Reflect Held for |
| ||||||
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Current Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Accounts receivable, net |
|
$ |
(9,203 |
) |
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
(9,203 |
) |
|
Prepaid expenses and other |
|
(633 |
) |
— |
|
— |
|
— |
|
— |
|
(633 |
) | ||||||
|
Assets held for sale |
|
90,868 |
|
2,859 |
|
20,688 |
|
3,458 |
|
2,371 |
|
120,244 |
| ||||||
|
Total Current Assets |
|
81,032 |
|
2,859 |
|
20,688 |
|
3,458 |
|
2,371 |
|
110,408 |
| ||||||
|
Property, Plant and Equipment: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Property, plant and equipment |
|
(57,337 |
) |
(8,493 |
) |
(28,232 |
) |
(9,700 |
) |
(7,899 |
) |
(111,661 |
) | ||||||
|
Less—Accumulated depreciation |
|
32,138 |
|
5,670 |
|
7,544 |
|
6,242 |
|
5,528 |
|
57,122 |
| ||||||
|
Property, Plant and Equipment, net |
|
(25,199 |
) |
(2,823 |
) |
(20,688 |
) |
(3,458 |
) |
(2,371 |
) |
(54,539 |
) | ||||||
|
Other Assets, net: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Goodwill |
|
(39,438 |
) |
— |
|
— |
|
— |
|
— |
|
(39,438 |
) | ||||||
|
Customer relationships and acquisition costs |
|
(15,846 |
) |
— |
|
— |
|
— |
|
— |
|
(15,846 |
) | ||||||
|
Other |
|
(549 |
) |
(36 |
) |
— |
|
— |
|
— |
|
(585 |
) | ||||||
|
Total Other Assets, net |
|
(55,833 |
) |
(36 |
) |
— |
|
— |
|
— |
|
(55,869 |
) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Accounts payable |
|
$ |
(1,634 |
) |
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
(1,634 |
) |
|
Accrued expenses |
|
(4,216 |
) |
— |
|
— |
|
— |
|
— |
|
(4,216 |
) | ||||||
|
Deferred revenue |
|
(1,777 |
) |
— |
|
— |
|
— |
|
— |
|
(1,777 |
) | ||||||
|
Liabilities held for sale |
|
10,623 |
|
— |
|
— |
|
— |
|
— |
|
10,623 |
| ||||||
|
Total Current Liabilities |
|
2,996 |
|
— |
|
— |
|
— |
|
— |
|
2,996 |
| ||||||
|
Other Long-Term Liabilities |
|
(2,996 |
) |
— |
|
— |
|
— |
|
— |
|
(2,996 |
) | ||||||
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share amounts)
Purchase Accounting Adjustments
(b) Reflects the cash portion of the purchase price paid to Recall shareholders of approximately $333,200.
(c) Reflects an increase in book value for Recall’s property, plant and equipment balance of $284,845 (consisting primarily of an increase in the value of racking structures of $166,310), resulting in a total fair value of acquired property, plant and equipment of $685,246, including the fair value of the property, which did not meet the criteria for “sale-leaseback” treatment for which Recall must continue to record as an asset. The fair value estimate for property, plant and equipment is preliminary and has been determined based on the assumptions that management believes market participants would use in pricing an asset, based on the most advantageous market for the asset (i.e., its highest and best use). This preliminary fair value estimate could include assets that are not intended to be used, may be sold or are intended to be used in a manner other than their highest and best use. For purposes of the accompanying unaudited pro forma consolidated financial statements, it is assumed that all assets will be used in a manner that represents their highest and best use. The final fair value determination for property, plant and equipment may differ materially from this preliminary determination.
(d) Reflects an increase in book value for Recall’s assets classified as held for sale of $79,283 (consisting primarily of an increase in the value in property, plant and equipment of $26,806), resulting in a total fair value less cost to sell of acquired assets held for sale of $105,800. The fair value of assets held for sale is preliminary and has been determined based on the assumptions that management believes market participants would use in pricing an asset, based on the most advantageous market for the asset (i.e., its highest and best use). The final fair value less cost to sell determination for assets held for sale may differ materially from this preliminary determination.
(e) Goodwill is calculated as the difference between the fair value of the purchase price and the values assigned to the identifiable tangible and intangible assets acquired and liabilities assumed. See Note 4 for the calculation of the amount of goodwill recognized in connection with the Recall Transaction.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share amounts)
(f) Reflects identifiable intangible assets expected to be recognized in connection with the Recall Transaction, consisting of the following:
|
Description |
|
Estimated Fair |
|
Presentation in Unaudited |
| |
|
Customer relationships |
|
$ |
715,970 |
|
Customer relationships and customer inducements |
|
|
Recall trade name |
|
17,140 |
|
Other |
| |
|
Favorable leases |
|
35,558 |
|
Other |
| |
|
Total identifiable intangible assets |
|
$ |
768,668 |
|
|
|
The fair value of the customer relationship intangible asset was valued using a multi-period excess earnings method, a form of the income approach, which incorporates the estimated future cash flows to be generated from Recall’s existing customer base. Excess earnings are the earnings remaining after deducting the market rates of return on the estimated values of contributory assets, including debt-free net working capital, tangible assets and other identifiable intangible assets. The excess earnings are thereby calculated for each year of a multi-year projection period and discounted to present value. Accordingly, the primary components of this method consist of the determination of excess earnings and an appropriate rate of return.
The Recall trade name was valued using the relief from royalty method under the income approach, which estimates the cost savings generated by a company related to the ownership of an asset for which it would otherwise have had to pay royalties or license fees on revenues earned through the use of the asset. The discount rate used is determined at the time of measurement based on an analysis of the implied internal rate of return of the Recall Transaction, weighted average cost of capital and weighted average return on assets.
The estimated value of favorable lease assets is $35,558, which reflects leases with contractual rents that are less than current market rents.
The fair value estimate for all identifiable intangible assets is preliminary and is based on assumptions that management believes market participants would use in pricing an asset, based on the most advantageous market for the asset (i.e., its highest and best use). This preliminary fair value estimate could include assets that are not intended to be used, may be sold or are intended to be used in a manner other than their highest and best use. For purposes of the accompanying unaudited pro forma consolidated financial statements, it is assumed that all assets will be used in a manner that represents their highest and best use. The final fair value determinations for identifiable intangible assets may differ from this preliminary determination and those differences may be material.
(g) Reflects the removal of capitalized borrowing costs of $5,053 associated with Recall’s outstanding indebtedness as a result of the application of purchase accounting.
(h) Reflects an adjustment to eliminate the previously existing current and long-term deferred rent liabilities of Recall of $1,721 and $8,807, respectively, as a result of the application of purchase accounting.
(i) Reflects an adjustment to record the fair value of unfavorable lease obligations of $23,725 for leases with contractual rents that are greater than current market rents. The final fair value determination for unfavorable lease obligations may differ from this preliminary determination and those differences may be material.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share amounts)
(j) Reflects the adjustments to record the step up of deferred income tax assets and liabilities resulting from pro forma fair value adjustments for the assets acquired and liabilities assumed, including the Divestments, and to give effect to the removal of deferred taxes as a result of the REIT conversion of a portion of Recall’s operations, as follows:
|
|
|
Purchase |
|
REIT |
|
Presentation in Unaudited |
| ||
|
|
|
Amount |
|
Financial Statements |
| ||||
|
Current deferred tax assets |
|
$ |
(516 |
) |
$ |
(2,580 |
) |
Deferred income taxes |
|
|
Long-term deferred tax assets |
|
(937 |
) |
— |
|
Other |
| ||
|
Current deferred tax liabilities |
|
1 |
|
30,017 |
|
Accrued expenses |
| ||
|
Long-term deferred tax liabilities |
|
300,485 |
|
(204,392 |
) |
Deferred income taxes |
| ||
This estimate of deferred taxes was determined based on the changes in the book basis of the net assets to be acquired compared to the historical basis reflected in Recall’s financial statements using an estimated statutory tax rate by jurisdiction, resulting in a weighted blended statutory rate of 31.08%. In addition, following the adjustments to the deferred taxes related to purchase accounting, Iron Mountain has integrated, or is in the process of integrating, a portion of Recall’s operations into Iron Mountain’s structure as a REIT. The REIT adjustments eliminate the deferred taxes related to the historical basis and the step up of certain of Recall’s assets and liabilities. Adjustments to established deferred tax assets and liabilities due to refined determination of statutory rates as well as the recognition of additional deferred tax assets and liabilities upon detailed analysis of the acquired assets and assumed liabilities may occur in conjunction with the finalization of the purchase accounting and these items could be material.
(k) Reflects an adjustment of $553,586 to eliminate Recall’s historical stockholders’ equity, which represents the historical book value of Recall’s net assets, as a result of the application of purchase accounting. Reflects adjustments of $507 and $1,851,193 to common stock and additional paid-in capital, respectively, to reflect the issuance of 50,691,329 shares of Iron Mountain common stock with a par value of $0.01 per share issued by Iron Mountain at the closing of the Recall Transaction, assuming a closing price of $36.53 per share of Iron Mountain common stock on April 29, 2016 (see Note 4).
(l) Reflects an adjustment of $8,588 to increase long-term debt, net of current portion for the step-up in fair value to the financing obligation related to Recall’s lease which did not meet the criteria for “sale-leaseback” for which Recall must continue to record the financing obligation related to the asset.
Financing Adjustments
(m) On April 29, 2016, Iron Mountain entered into the Bridge Financing and on that day borrowed the full amount of the $850,000 available to it under the Bridge Financing. Iron Mountain used the proceeds from the Bridge Financing, along with the Recall Closing Revolver Funds of $299,068, to finance the closing of the Recall Transaction, including funding the cash consideration delivered to Recall shareholders in the Recall Transaction, refinancing Recall’s existing indebtedness and paying certain costs incurred by Iron Mountain in connection with the closing of the Recall Transaction. The cash proceeds from the issuance of the Bridge Financing and the Recall Closing Revolver Funds drawn to Iron Mountain were $1,141,843 (net of $7,225 of financing costs that have been deferred and will be amortized over the term of the Bridge Financing to interest expense).The Bridge Financing bears interest at LIBOR plus a margin of 325 basis points which increases by 50 basis points quarterly, and the Revolving Credit Facility bears interest at LIBOR plus a margin of 225 basis points, resulting in a weighted average interest rate of 4.30% and 7.84% per annum for the year ended December 31, 2015 and the three months ended March 31, 2016, respectively. Included in the weighted average interest rates above are the Duration Fees. The Duration Fees are assessed based on the period of time the Bridge Financing is outstanding. The Duration Fees consist of (1) 25 basis points on the amount outstanding at 180 days from the date of first borrowing under the Bridge Financing; (2) 50 basis points on the amount outstanding at 270 days from the date of first borrowing under the Bridge Financing; and (3) 100 basis points on the amount outstanding at 365 days from the date of first borrowing under the Bridge Financing. Excluding the effect of the Duration Fees, the weighted average interest rate would have been 3.75% and 4.88% per annum for the year ended December 31, 2015 and the three months ended March 31, 2016, respectively. The borrowings were subject to fees including a structuring fee of $850, a commitment fee of 50 basis points on the amount borrowed and a funding fee of 25 basis points on the amount borrowed, which are included in the weighted average interest rate. In addition, the Bridge Financing includes certain fees to be paid upon extinguishment. The pro forma adjustment reflects the entry into the
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share amounts)
Bridge Financing, the borrowing of the Recall Closing Revolver Funds, as well as the repayment of $782,284 of Recall’s outstanding indebtedness as of March 31, 2016.
Divestment adjustments
(n) Reflects cash proceeds of $80,000 from the Access Sale.
(o) Reflects the removal of $80,000 of assets classified as held for sale related to the Access Sale.
(p) Reflects the removal of any deferred taxes and liabilities related to the Access Sale and the recognition of a tax payable resulting from the net removal of the deferred taxes and liabilities as a result the Access Sale, as follows:
|
|
|
|
Access Sale |
|
| |
|
|
Current deferred tax assets |
|
$ |
(344 |
) |
|
|
|
Current deferred tax liabilities |
|
— |
|
| |
|
|
Long-term deferred tax liabilities |
|
(3,002 |
) |
| |
|
|
Current income taxes payable |
|
2,658 |
|
| |
|
|
Tax provision/(benefit) on gain/(loss) |
|
$ |
— |
|
|
There is no tax gain or loss from the Access Sale as the assumed purchase price equals the fair value less cost to sell of the Access Assets.
NOTE 8—UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS ADJUSTMENTS
Purchase Accounting Adjustments
(a) Reflects adjustments to cost of sales of $1,466 and $19 for the year ended December 31, 2015 and $289 and $5 for the three months ended March 31, 2016, representing a net increase in rent expense related to the amortization of favorable and unfavorable lease assets and liabilities recognized as part of purchase accounting related to above- or below-market leases and an offsetting decrease to ground rent expense related to the Recall lease which did not meet the criteria for “sale-leaseback”, respectively.
(b) Reflects an adjustment to selling, general and administrative expense of $66,899 and $25,994 for the year ended December 31, 2015 and the three months ended March 31, 2016 representing the elimination of the advisory, legal and accounting expenses incurred by both Iron Mountain and Recall in connection with the Recall Transaction, which are not expected to have a continuing impact on results of operations.
Reflects adjustments to selling, general and administrative expense of $10,290 and $2,738 related to 8,651,888 and 8,417,401 performance and retention rights outstanding during the year ended December 31, 2015 and the three months ended March 31, 2016, respectively, representing the elimination of the Recall share-based compensation expense for each respective period as, in accordance with the Recall Agreement, prior to the completion of the Recall Transaction, all outstanding rights to acquire any ordinary shares of Recall under Recall’s equity incentive arrangements, including all unvested performance rights and retention rights (the “Recall Equity Awards”), vested and Recall issued the number of Recall shares required by the Recall Equity Awards such that the relevant former holders of the Recall Equity Awards were able to participate in the Recall Transaction. The unaudited pro forma consolidated statements of operations assume that the vesting and settlement of these awards occurred prior to January 1, 2015.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share amounts)
(c) Reflects adjustments to depreciation and amortization expense of $32,337 and $7,568 for the year ended December 31, 2015 and the three months ended March 31, 2016, respectively, representing an increase in amortization expense related to the fair value of identified intangible assets with finite lives, which were recorded within the unaudited pro forma consolidated balance sheet in Note 7(f). The following table shows the pre-tax impact on amortization expense:
|
|
|
|
|
|
|
Amortization Expense |
| |||||
|
Description |
|
Estimated |
|
Estimated |
|
Year Ended |
|
Three Months |
| |||
|
Customer relationships |
|
15 |
|
$ |
715,970 |
|
$ |
47,731 |
|
$ |
11,931 |
|
|
Recall trade name |
|
8 |
|
17,140 |
|
2,143 |
|
536 |
| |||
|
Amortization expense |
|
|
|
|
|
49,874 |
|
12,467 |
| |||
|
Less: Recall historical amortization |
|
|
|
|
|
(17,537 |
) |
(4,899 |
) | |||
|
Additional amortization expense |
|
|
|
|
|
$ |
32,337 |
|
$ |
7,568 |
| |
Preliminary estimated future amortization expense, based upon Iron Mountain’s newly acquired intangible assets at March 31, 2016, is as follows:
|
Year ending December 31, |
|
Amount |
| |
|
Remaining 2016 |
|
$ |
37,405 |
|
|
2017 |
|
49,874 |
| |
|
2018 |
|
49,874 |
| |
|
2019 |
|
49,874 |
| |
|
2020 |
|
49,874 |
| |
|
Thereafter |
|
496,209 |
| |
|
Total |
|
$ |
733,110 |
|
(d) Reflects adjustments to depreciation and amortization of $15,768 and $2,941 for the year ended December 31, 2015 and the three months ended March 31, 2016, respectively, representing increased depreciation expense related to the fair value step-up of property, plant and equipment, with estimated lives ranging from 3 to 35 years, which were recorded within the unaudited pro forma consolidated balance sheet in Note 7(c) as follows:
|
|
|
|
|
|
|
Depreciation Expense |
| |||||
|
Description |
|
Estimated |
|
Estimated |
|
Year Ended |
|
Three Months |
| |||
|
Racking |
|
12 |
|
$ |
369,310 |
|
$ |
30,777 |
|
$ |
7,694 |
|
|
Land |
|
N/A |
|
20,394 |
|
N/A |
|
N/A |
| |||
|
Warehouse equipment and vehicles |
|
4 |
|
48,593 |
|
12,148 |
|
3,037 |
| |||
|
Computer hardware and software |
|
3 |
|
40,674 |
|
13,558 |
|
3,390 |
| |||
|
Buildings |
|
35 |
|
89,754 |
|
2,564 |
|
641 |
| |||
|
Other property, plant and equipment |
|
11 |
|
92,734 |
|
8,430 |
|
2,108 |
| |||
|
Depreciation expense |
|
|
|
|
|
67,477 |
|
16,870 |
| |||
|
Less: Recall historical depreciation |
|
|
|
|
|
(51,709 |
) |
(13,929 |
) | |||
|
Additional depreciation expense |
|
|
|
|
|
$ |
15,768 |
|
$ |
2,941 |
| |
The adjustment to depreciation and amortization reflects an additional increase of $454 and $113 for the year ended December 31, 2015 and three months ended March 31, 2016, respectively, related to the fair value step-up of Recall’s property which did not meet criteria for “sale-leaseback” treatment, for which Recall must continue to record the asset, which were recorded within the unaudited pro forma consolidated balance sheet in Note 7(c).
(e) Reflects adjustments to (benefit) provision for income taxes of ($5,126) and ($199) for the year ended December 31, 2015 and three months ended March 31, 2016, respectively, to reflect the tax effect of the pro forma adjustments based on an estimated blended statutory tax rate of 26.36%. This statutory tax rate assumes that a portion of Recall’s operations will be integrated into Iron Mountain’s REIT structure. Because the tax rate used for these unaudited pro forma consolidated financial statements is an estimate, it will likely vary from the effective rate in periods subsequent to the completion of the Recall Transaction and those differences may be material.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share amounts)
(f) Reflects adjustments to interest expense of $396 and $71 for the year ended December 31, 2015 and three months ended March 31, 2016, respectively, related to an existing Recall operating lease that is considered a financing obligation under U.S. GAAP. Under U.S. GAAP, Recall was deemed to be the accounting owner during the construction period. Upon completion Recall determined that the lease did not meet the criteria for “sale-leaseback” treatment. Under U.S. GAAP, Iron Mountain must continue to record an asset and corresponding financing obligation. As a result, contractual payments related to the leased property are reversed from rent expense and recorded through the income statement as depreciation expense, ground rent expense and interest expense.
Financing Adjustments
(g) Reflects the following adjustments to interest expense resulting from the Bridge Financing and the Recall Closing Revolver Funds as well as the repayment in full of Recall’s outstanding indebtedness:
(i) increase to interest expense of $48,112 and $22,118 for the year ended December 31, 2015 and three months ended March 31, 2016, respectively, reflecting estimated interest expense associated with the Bridge Financing and the Recall Closing Revolver Funds using a weighted average interest rate of 4.30% and 7.84% for the year ended December 31, 2015 and the three months ended March 31, 2016, on an annualized basis, respectively;
(ii) increase to interest expense reflecting amortization of estimated deferred financing costs of $5,780 and $1,445 for the year ended December 31, 2015 and the three months ended March 31, 2016, respectively, associated with the establishment of the Bridge Financing;
(iii) increase to interest expense of $10,200 and $2,550 during the year ended December 31, 2015 and the three months ended March 31, 2016 for the accretion of fees that are required to be paid upon extinguishment of the Bridge Financing; and
(iv) the elimination of interest expense of $21,824 and $6,458 and a corresponding tax expense of $5,753 and $1,702 for the year ended December 31, 2015 and the three months ended March 31, 2016, respectively, related to Recall’s outstanding indebtedness that was repaid in full upon the closing of the Recall Transaction, which is assumed, for the purposes of the unaudited pro forma consolidated statements of operations, to have occurred on January 1, 2015.
The proceeds from the Bridge Financing were denominated in U.S. dollars and were borrowed by Iron Mountain. As Iron Mountain qualifies as a REIT, the unaudited pro forma consolidated statements of operations for the year ended December 31, 2015 and the three months ended March 31, 2016, respectively, do not reflect a tax benefit related to the pro forma interest expense and amortization of deferred financing costs associated with the Bridge Financing.
Divestments
(h) Reflects adjustments to eliminate the revenues, operating expenses and other income and expenses related to the Divestments. For the unaudited pro forma consolidated statements of operations for the year ended December 31, 2015 and for the three months ended March 31, 2016, respectively, a blended statutory tax rate of 36.7% and 37.0% was applied as the Divestments. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma consolidated financial information.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share amounts)
Adjustments for the year ended December 31, 2015
|
|
|
Adjustments |
|
|
| ||||||||||||||
|
|
|
Iron Mountain |
|
Iron Mountain |
|
Recall U.S. |
|
Recall U.S. (Seattle |
|
Recall Canada |
|
Divestment |
| ||||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Storage rental |
|
$ |
(26,767 |
) |
$ |
(2,003 |
) |
$ |
(21,654 |
) |
$ |
(9,863 |
) |
$ |
(6,430 |
) |
$ |
(66,717 |
) |
|
Service |
|
(25,450 |
) |
(729 |
) |
(12,470 |
) |
(3,985 |
) |
(3,804 |
) |
(46,438 |
) | ||||||
|
Total Revenues |
|
(52,217 |
) |
(2,732 |
) |
(34,124 |
) |
(13,848 |
) |
(10,234 |
) |
(113,155 |
) | ||||||
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Cost of sales (excluding depreciation and amortization) |
|
(28,388 |
) |
(1,240 |
) |
(14,225 |
) |
(4,942 |
) |
(4,741 |
) |
(53,536 |
) | ||||||
|
Selling, general and administrative |
|
(12,146 |
) |
(110 |
) |
(1,050 |
) |
— |
|
— |
|
(13,306 |
) | ||||||
|
Depreciation and amortization |
|
(7,121 |
) |
(873 |
) |
— |
|
— |
|
— |
|
(7,994 |
) | ||||||
|
Total Operating Expenses |
|
(47,655 |
) |
(2,223 |
) |
(15,275 |
) |
(4,942 |
) |
(4,741 |
) |
(74,836 |
) | ||||||
|
Operating Income (Loss) |
|
(4,562 |
) |
(509 |
) |
(18,849 |
) |
(8,906 |
) |
(5,493 |
) |
(38,319 |
) | ||||||
|
Interest Expense, Net |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
| ||||||
|
Other (Income) Expense, Net |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
| ||||||
|
Income (Loss) Before Provision (Benefit) for Income Taxes and (Gain) Loss on Sale of Real Estate |
|
(4,562 |
) |
(509 |
) |
(18,849 |
) |
(8,906 |
) |
(5,493 |
) |
(38,319 |
) | ||||||
|
(Benefit) Provision for Income Taxes |
|
(1,369 |
) |
(137 |
) |
(7,540 |
) |
(3,562 |
) |
(1,483 |
) |
(14,091 |
) | ||||||
|
Income (Loss) |
|
$ |
(3,193 |
) |
$ |
(372 |
) |
$ |
(11,309 |
) |
$ |
(5,344 |
) |
$ |
(4,010 |
) |
$ |
(24,228 |
) |
Adjustments for the three months ended March 31, 2016
|
|
|
Adjustments |
|
|
| ||||||||||||||
|
|
|
Iron Mountain |
|
Iron Mountain |
|
Recall U.S. |
|
Recall U.S. (Seattle |
|
Recall Canada |
|
Divestment |
| ||||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Storage rental |
|
$ |
(6,348 |
) |
$ |
(492 |
) |
$ |
(5,685 |
) |
$ |
(2,470 |
) |
$ |
(1,595 |
) |
$ |
(16,590 |
) |
|
Service |
|
(5,933 |
) |
(252 |
) |
(3,428 |
) |
(1,088 |
) |
(1,006 |
) |
(11,707 |
) | ||||||
|
Total Revenues |
|
(12,281 |
) |
(744 |
) |
(9,113 |
) |
(3,558 |
) |
(2,601 |
) |
(28,297 |
) | ||||||
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Cost of sales (excluding depreciation and amortization) |
|
(6,267 |
) |
(324 |
) |
(3,802 |
) |
(1,298 |
) |
(1,141 |
) |
(12,832 |
) | ||||||
|
Selling, general and administrative |
|
(3,077 |
) |
(26 |
) |
(263 |
) |
— |
|
— |
|
(3,366 |
) | ||||||
|
Depreciation and amortization |
|
(2,366 |
) |
(206 |
) |
— |
|
— |
|
— |
|
(2,572 |
) | ||||||
|
Total Operating Expenses |
|
(11,710 |
) |
(556 |
) |
(4,065 |
) |
(1,298 |
) |
(1,141 |
) |
(18,770 |
) | ||||||
|
Operating Income (Loss) |
|
(571 |
) |
(188 |
) |
(5,048 |
) |
(2,260 |
) |
(1,460 |
) |
(9,527 |
) | ||||||
|
Interest Expense, Net |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
| ||||||
|
Other (Income) Expense, Net |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
| ||||||
|
Income (Loss) Before Provision (Benefit) for Income Taxes and (Gain) Loss on Sale of Real Estate |
|
(571 |
) |
(188 |
) |
(5,048 |
) |
(2,260 |
) |
(1,460 |
) |
(9,527 |
) | ||||||
|
(Benefit) Provision for Income Taxes |
|
(171 |
) |
(51 |
) |
(2,019 |
) |
(904 |
) |
(394 |
) |
(3,539 |
) | ||||||
|
Income (Loss) |
|
$ |
(400 |
) |
$ |
(137 |
) |
$ |
(3,029 |
) |
$ |
(1,356 |
) |
$ |
(1,066 |
) |
$ |
(5,988 |
) |
(i) The weighted average shares outstanding used to compute basic and diluted net loss per share for the year ended December 31, 2015 and the three months ended March 31, 2016 have been adjusted to give effect to the issuance of 50,691,329 shares of Iron Mountain common stock issued upon closing of the Recall Transaction as if such issuances had occurred on January 1, 2015.
NOTE 9—UNADJUSTED PRO FORMA BALANCES
(a) In conjunction with the conversion of certain of Recall’s operations to a REIT, Iron Mountain believes that the potential range of the E&P Distribution is between $0 to $50,000. The final amount of the E&P Distribution will be determined based upon a formal study to determine the undistributed earnings and profits of the Recall subsidiaries that are integrated into Iron Mountain’s structure as a REIT. The unaudited pro forma consolidated financial information does not give effect to the E&P Distribution, as it is not factually supportable at this time. However, if the E&P Distribution was determined to be $50,000 and Iron Mountain elected to make the distribution 100% in cash, the impact to the unaudited pro forma consolidated balance sheet would reflect a reduction in cash of $50,000 and a reduction to (Distributions in excess of earnings) Earnings in excess of distributions of $50,000. If the E&P Distribution was determined to be $50,000 and Iron Mountain elected to pay 20% of the distribution with cash, the unaudited pro forma consolidated balance sheet would show a reduction of cash of $10,000. Furthermore, the new shares issued of approximately 1,110,000 to pay the remaining 80% of the E&P Distribution would be added to the weighted number of shares outstanding for the periods reported, such that unaudited pro forma consolidated EPS would decrease by $0.02 and $0.01 per share for the year ended December 31, 2015 and the three months ended March 31, 2016, respectively. For sensitivity analysis, Iron Mountain’s share price as of April 29, 2016 was used.