Iron Mountain Incorporated (IRM)

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Iron Mountain (IRM)

Q3 2012 Earnings Call

October 31, 2012 8:30 am ET


Stephen P. Golden - Vice President of Investor Relations

C. Richard Reese - Executive Chairman, Chief Executive Officer and Chairman of Strategic Review Special Committee

Brian P. McKeon - Chief Financial Officer, Principal Accounting Officer and Executive Vice President


James Samford - Citigroup Inc, Research Division

George K. Tong - Piper Jaffray Companies, Research Division

Nathan Brochmann - William Blair & Company L.L.C., Research Division

Andrew C. Steinerman - JP Morgan Chase & Co, Research Division

Gary E. Bisbee - Barclays Capital, Research Division

Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division

Shlomo H. Rosenbaum - Stifel, Nicolaus & Co., Inc., Research Division

Kevin D. McVeigh - Macquarie Research



Good morning. My name is Christy and I will be your conference operator today. At this time, I would like to welcome everyone to Iron Mountain's Third Quarter 2012 Earnings Conference Call. [Operator Instructions] I would like to turn the call over to Vice President of Investor Relations, Stephen Golden. Please go ahead, Sir.

Stephen P. Golden

Thank you, and welcome, everyone, to our 2012 third quarter earnings conference call. We're all hoping that those of you impacted by the recent impact of Sandy came through it safely, and we're glad you could join us today. Joining me this morning are Richard Reese, our Chairman and CEO, and Brian McKeon, our CFO, and after their prepared remarks, we'll open up the phones for Q&A. I'd like to take this opportunity to thank everybody for joining us in New York a few weeks back for our Annual Investor Day event. We had a great turnout, and I think the day was a great success. Again, we truly appreciate your interest and your support. Per our custom, we have a user-controlled slide presentation at the Investor Relations page of our website at

Referring now to Slide 2 of our presentation. Today's earnings call and slide presentation will contain a number of forward-looking statements, most notably our outlook for our 2012 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 most recently filed annual report on Form 10-K and quarterly report on Form 10-Q 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 and the reconciliations of these non-GAAP measures to the appropriate GAAP measures, as required by Reg G, at the Investor Relations page of our website, as well as in today's press release.

Please note that we have updated the definitions of adjusted OIBDA, adjusted EPS and free cash flow to exclude certain costs and expenditures related to our 2011 proxy contest, the work of the strategic review Special Committee of our board and our proposed conversion to a REIT.

With that, I'd like to introduce our Chairman and CEO, Richard Reese.

C. Richard Reese

Good morning, Stephen and thank you, everybody, and welcome to our call. I'd like to repeat Stephen's comments to those of you who may have suffered through Hurricane Sandy. It was a massive storm up on the East Coast. We have large operations, and quite a large facility footprint in that area. So we know what you all went through. I am happy to report that Iron Mountain did not suffer any significant facility damage and so forth from the hurricane, and we've weathered that storm quite well, given its impact around us and so forth. We are, however, having some operating challenges primarily related to local access. There are places where we still can't get into our facilities on a regular basis. We've been able to inspect and make sure things are fine, but it has mostly to do with control of local access, and I'm sure that will clear itself up in due course. We also, because of the impact on our customers, particularly in Manhattan, would expect to see some noise in our Q4 service revenues. There'll be some impact. It's a little early to quantify, but we don't expect it will impact storage or any of the real fundamentals of our business for the quarter.

So I hope you all are well. We are busy making sure our customers are taken care of and, quite frankly, through our foundation, making sure any of our employees that are impacted are taken care of, and that's a key part of our agenda at the moment.

Let's look back at the quarter. You'll see that we had good operating results, but we've had some noise or we call macro factors in our numbers. We are telling you and we do expect that for the full year, we'll be -- hit our full year targets. We think the business is running quite well, and we'll go through it. I would expect the call, frankly, to be relatively brief today, as we've just had our recent Investor Day. We appreciate the many of you that attended. We had a great turnout, and I think a good conversation, and we appreciate your feedback and your input and, hopefully, we did a good job of communicating to you where we are and where we're headed as a company.

As I said, operating results for the quarter were on target and in line with our expectation. Reported revenues at $748 million were down 2.6% on a reported basis compared to last year, primarily driven by the impacts of lower paper prices and unfavorable FX. Lower recycled paper prices in our shredding business, as well as destroying records from our storage business reduced our overall revenue growth by 1.5 percentage points versus the same quarter. And this is the same trend we saw last quarter. Last quarter and this quarter, we're in our toughest comps. As you remember, we started to see recycled paper prices really come off hard coming into this year, but last year, they were at all-time highs. So you have sort of the 2 worst comparisons. This trend will get better with time on a comparison basis and in fact, will be some -- we think somewhat better in Q4, as we lap it, but going into next year, these issues should go away.

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