Iron Mountain Incorporated (IRM)

IRM 
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Iron Mountain Incorporated (IRM)

Q4 2009 Earnings Call Transcript

February 25, 2010 8:30 am ET

Executives

Stephen Golden – VP, IR

Brian McKeon – EVP and CFO

Bob Brennan – President and CEO

Analysts

David Gold – Sidoti

Andrew Steinerman – JPMorgan

Scott Schneeberger – Oppenheimer

Ashwin Shirvaikar – Citi

Justin Hawk [ph] – Robert W. Baird

Presentation

Operator

Good morning. My name is Taylor and I will be your conference operator today. At this time, I would like to welcome everyone to the Iron Mountain Q4 2009 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you. Mr. Golden, you may begin.

Stephen Golden

Thank you and welcome everyone to our 2009 fourth quarter earnings conference call. After my announcement this morning, Brian McKeon will review our financial results, followed by Bob Brennan's CEO remarks. When Bob is finished, we will open up the phones for our Q&A. Following today's earnings call, Brian and I will be presenting at the RW Baird Business Solutions Conference here in Boston.

As you may have seen in today's earnings release, we introduced two new metrics, adjusted OIBDA and adjusted EPS as part of our ongoing effort to enhance our investor communications. The year-over-year growth in these metrics is an important measure of our performance. As such, we believe that excluding certain components of these results will be helpful with respect to comparability.

Adjusted OIBDA is operating income before depreciation and amortization, excluding asset gains and losses. This metric more accurately reflects how we plan, forecast and evaluate the performance of our business. Adjusted EPS is reported EPS, excluding asset gains and losses, other income expense, the tax impact of these reconciling items and discrete tax items and net income loss attributable to non-controlling interest. This metric more accurately reflects how we forecast our earnings. Both metrics also facilitate the comparison of our results for the current periods and guidance for future guidance with results for past periods.

Per our custom, we have a user controlled slide presentation on the Investor Relations page of our website, at www.ironmountain.com. Referring now to slide two, today's earnings call and slide presentation will contain a number of forward-looking statements, most notably our outlook for our 2010 financial performance. All forward-looking statements are subject to risks and uncertainties. Please refer to today's press release, the Safe Harbor language on this slide and our current report on Form 8-K filed on March 8, 2009 for a discussion of the major risk factors that could cause our actual results to be materially different from those contemplated in our forward-looking statements.

As you know, we use several non-GAAP measures when presenting our financial results, adjusted OIBDA, adjusted EPS, and free cash flow before acquisitions and investments among others are metrics we speak to frequently and ones we believe to be important in evaluating our overall financial performance. We provide additional information in the reconciliations of these non-GAAP measures to their appropriate GAAP measures as required by Reg G at the Investor Relations page of our website, as well as in today's press release.

With that, I would like to introduce our CFO, Brian McKeon.

Brian McKeon

Thanks, Steve and good morning, everyone. We've got a lot to cover today, let's go right to it.

Slide three highlights the key messages from today's review. Q4 wrapped up a strong year of financial performance for Iron Mountain as we continued to deliver strong year-on-year profit and cash flow gains despite economic impacts that are constraining top line growth.

Revenue performance in the quarter was as expected. Storage internal growth was a solid 5% with gains moderated by the impact of constrained new sales and higher destruction we've experienced in recent quarters reflecting recessionary impacts. Service revenues were flat overall as continued pressure on activity levels offset solid gains in areas such as eDiscovery services.

Despite economic impacts, we continue to deliver strong profit and free cash flow performance. This is a result of our focus on operational excellence including productivity initiatives, pricing program improvements, and overhead and capital spending controls. This focus enabled us to drive almost 300 basis points of improvement in our adjusted OIBDA margin this year with solid gains across each of our major business segments.

For the quarter, we delivered adjusted OIBDA growth of 14% on a reported basis and 12% excluding the impacts of foreign currency rate changes. About 2% of this growth is due to the initial re-characterization of vehicle leases discussed in prior conference calls. We also continued to improve our cash flows and strengthen our balance sheet. Free cash flow for 2009 reached and all-time high of $336 million, driven by strong profit performance and controlled capital spending.

Looking ahead to 2010, we are targeting improved revenue growth and strong sustainable underlying operating performance. Today, we are raising our guidance to reflect recent performance, changes to macro factors, and the impact of the Mimosa acquisition.

Today, we also announced that our Board of Directors has approved a $150 million share repurchase authorization and a dividend with an annual rate of $0.25 per share. These actions are a direct result of our strong cash generation performance and reflect our confidence our long-term growth potential and our commitment to delivering long-term shareholder value. I'll talk more about this later in my remarks.

Let's turn now to slide four and begin with our review of fourth quarter results. Slide four compares our results for this quarter to the fourth quarter of 2008. Reported revenues for the quarter were up 4% to $779 million.

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