Iron Mountain Inc.
) reported second quarter adjusted earnings per share (excluding
costs associated with the 2011 proxy contest, the Special Committee
and the proposed REIT conversion) of 36 cents, beating the Zacks
Consensus Estimate of 31 cents. Reported earnings increased 9.1%
from the year-ago quarter, primarily aided by lower share
Revenues slipped 0.8% from the year-ago quarter to $752.2
million, and fell short of the Zacks Consensus Estimate of $762.0
million. Quarterly revenues were primarily impacted by decline in
service revenue, which fully offset the increase in the storage
On a segment basis, Storage revenue (57.6% of revenues)
increased 3.4% year over year to $433.4 million, driven by strong
organic growth as well as from the recent acquisitions across North
Service revenue (42.4% of revenues) dropped 6.1% year over year
to $318.7 million. Service revenue was negatively impacted by
lower-than-expected organic growth in the core services coupled
with decline in complimentary service revenue and decline in
recycled paper revenue.
Gross profit (excluding depreciation and amortization) was down
2.7% year over year to $439.0 million in the reported quarter.
Gross margin for the quarter decreased to 58.4% versus 59.5% in the
year-ago quarter, due to lower revenue base.
Adjusted operating income (excluding costs associated with the
2011 proxy contest, the Special Committee and the proposed REIT
conversion and depreciation and amortization) increased 0.4% year
over year to $239.0 million. Adjusted OIBDA margin for the quarter
increased 40 basis points on a year-over-year basis to 31.8%,
reflecting benefits from international business and overhead cost
Selling, general and administrative (SG&A) expenses were
down nearly 8.9% from the prior-year period to $203.5 million,
attributable to stringent overhead cost controls.
Operating income in the quarter increased 2.0% year over year to
$162.0 million. Operating margin was 21.5% compared with 20.9% in
the previous-year quarter due to lower operating expenses.
Net income from continuing operations declined from $74 million
in the previous-year quarter to $42.0 million due to increased
Iron Mountain exited the quarter with cash and cash equivalents
of $170.2 million compared with $178.3 million at the end of the
previous quarter. Long-term debt (including the current portion)
was $3.49 billion compared with $3.35 billion in the previous
quarter. On June 13, 2012, the company paid a quarterly dividend of
27 cents per share.
For fiscal 2012, Iron Mountain expects revenues in the range of
$2.99 billion to $3.04 billion. The company forecasts adjusted
OIBDA between $890.0 million and $930.0 million. Iron Mountain
expects earnings per share in the range of $1.20 to $1.36. The
Zacks Consensus Estimate projects earnings of $1.30 per share for
The company expects to spend approximately $220.0 million on
capital assets. Free cash flow is expected in the range of
$320.0 million to $360.0 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. However, tepid
internal growth coupled with volatile foreign exchange rates and a
decline in paper prices are expected to partially negate the
company's strong product portfolio, increasing market share and
promising international business.
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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