Iron Mountain Inc.
) reported third quarter 2012 adjusted earnings per share of 34
cents, a penny shy of the Zacks Consensus Estimate of 35 cents.
Earnings decreased 15% from the year-ago quarter, primarily due
to lower-than-expected recycled paper prices and currency
Revenues were down 2.6% from the year-ago quarter to $748.1
million, and fell short of the Zacks Consensus Estimate of $764
million. Increase in the Storage revenue was fully offset by
lower Service revenue.
On a segment basis, Storage revenue (58% of revenues)
increased 1.7% year over year to $434.7 million, driven by strong
organic growth. Service revenue (42% of revenues) dropped 8% year
over year to $313.5 million. Service revenue was negatively
impacted by lower-than-expected organic growth in the core
services coupled with decline in activity-based service revenue
and decline in recycled paper prices.
Gross profit (excluding depreciation and amortization) was
down 5.2% year over year to $437.8 million in the reported
quarter. Gross margin for the quarter decreased to 58.5% from
60.1% in the year-ago quarter, due to lower revenue base.
Adjusted OIBDA was down 3.9% year over year to $244 million
due to the negative impact of lower recycled paper revenues.
Adjusted OIBDA margin for the quarter decreased 40 basis points
on a year-over-year basis to 32.6%.
Selling, general and administrative (SG&A) expenses were
down nearly 2.2% from the prior-year period to $204.5 million.
Operating income in the quarter increased 13.9% year over year to
$154 million. Operating margin was 20.5% compared with 17.5% in
the previous-year quarter due to lower operating expenses.
Net income from continuing operations was $54 million, which
increased from $50 million reported in the previous-year
Iron Mountain exited the quarter with cash and cash
equivalents of $334.6 million compared with $170.2 million at the
end of the previous quarter. Long-term debt (including the
current portion) was $3.74 billion compared with $3.49 billion in
the previous quarter.
For fiscal 2012, Iron Mountain expects revenues in the range
of $2.99 billion to $3.02 billion. The company forecasts adjusted
OIBDA between $900.0 million and $920.0 million. Iron Mountain
expects earnings per share in the range of $1.20 to $1.28. The
Zacks Consensus Estimate projects earnings of $1.30 per share for
The company expects to spend approximately $245 million on
capital assets. Free cash flow is expected in the range of
$320 million to $360 million for fiscal 2012. Moreover,
management expects a decline in paper prices to negatively impact
the top line throughout the year.
Iron Mountain recorded strong performance in the International
business segment and persistent growth in the North America
business, which positively impacted Storage revenue.
Strong product portfolio, increasing market share and
promising international business are the key positives for the
company. However, headwinds including tepid internal growth
coupled with volatile foreign exchange rates and a decline in
paper prices may negate the positives.
Iron Mountain faces stiff competition from Anacomp Inc. and
We maintain our Neutral recommendation on a long-term basis
(6-12 months). Iron Mountain carries a Zacks #3 Rank, which
implies a short-term 'Hold' rating (for the next 1-3 months).
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