Sets Plan for Significant Improvement in ROIC
Exploring Strategic Alternatives for Digital Business
Commits to Total Stockholder Payouts of Approximately $2.2 Billion
Through 2013, With Approximately $1.2 Billion Returned to Stockholders
Within 12 Months
Reaches Agreement with Elliott Management Corporation to Support
Two New Board Members, Commits to Evaluating REIT Conversion
BOSTON, Apr 19, 2011 (BUSINESS WIRE) --
Iron Mountain Incorporated (NYSE: IRM), the information management
company, today announced a comprehensive strategic plan to enhance
stockholder value. In addition, the Company reached an agreement with
Elliott Management Corporation to support one of Elliott's nominees at
the 2011 Annual Meeting of Stockholders and to add another independent
director following the meeting.
Comprehensive Strategic Plan
By executing on its comprehensive strategic plan, Iron Mountain will be
able to drive higher returns on invested capital (ROIC) and increase the
return of capital to stockholders through:
-
Sustaining its leadership in the highly attractive North America
business
-
Significantly improving its International portfolio
-
Exploring strategic alternatives for its digital business
-
Committing to total stockholder payouts of approximately $2.2 billion
through 2013, including approximately $1.2 billion of capital returned
over the next 12 months through a combination of share repurchases and
dividends
-
Forming a Special Committee to evaluate financing, capital, and tax
strategies including conversion into a REIT
Sets Plan for Significant Improvement in ROIC
By executing on these initiatives, Iron Mountain expects to achieve
after-tax ROIC1 of 11% in 2013, up from 7.7% in 2010. These
gains will be driven by a combination of higher profitability levels and
lower capital intensity. Specifically, the Company seeks to achieve
Adjusted OIBDA1 margins of 32% while lowering its capital
spending (excluding real estate) to approximately 6% of revenue by 2013.
"Over the years we have built a great global business with strong
operating performance, record cash flows and a strong balance sheet,"
said Richard Reese, Iron Mountain's Chairman and Chief Executive
Officer. "Driven by our focus on operational excellence, since 2006 Iron
Mountain has increased Adjusted OIBDA and Free Cash Flow1 at
compounded annual growth rates of 12% and 68%, respectively, well ahead
of our solid 7% revenue growth. In addition, we initiated a stockholder
payout program in 2010, comprised of a $350 million share repurchase
program and a quarterly dividend which was increased by 200% in December
to an annual rate of $0.75 per share.
"Consistent with our focus on stockholder value creation, our Board and
management team regularly review our business portfolio and capital
allocation priorities. We are proud of what we have accomplished at Iron
Mountain, and we are always working to improve our returns. By
concentrating on our core strengths, optimizing our International
portfolio and increasing our commitment to stockholder payouts, we
believe we can further enhance stockholder value."
Sustaining Leadership in Highly Attractive North America Business
Iron Mountain's North American platform demonstrates the power of its
business model. By offering premium services and solutions, Iron
Mountain has attained an industry leadership position. Loyal customers
recognize Iron Mountain's superior value proposition, which drives
significant recurring revenues and substantial cash flows. In addition,
through effective productivity initiatives and pricing optimization,
Iron Mountain's North American business generates record margins. The
Company will continue to invest efficiently in North America, including
in its sales effort, to sustain cash flows and tap the large unvended
opportunity in this market.
"Since 2007, Iron Mountain has driven significant improvements in North
America's gross margin (+800 basis points) and Adjusted OIBDA margins
(+800 basis points)," said Mr. Reese. "In addition, the Company has
reduced the segment's capital expenditures2 as a percentage
of revenues from 10.7% in 2007 to an estimated 4.3% in 2011. We are
committed to making efficient and productive investments in the North
America business to sustain our leadership position and continue
generating the highly attractive cash flows that support our stockholder
payouts."
Optimizing the International Portfolio
Iron Mountain plans to further optimize its International portfolio
through targeted, market-specific initiatives that enhance the
portfolio's average ROIC. In mature markets where Iron Mountain already
has a leadership position, the Company is driving optimization by
continuing to apply its proven best practices from the North America
business. In mature markets where Iron Mountain does not have a
leadership position, the Company will implement aggressive improvement
plans and will evaluate exit alternatives if the Company is unable to
achieve its targeted returns. In emerging markets, Iron Mountain will
continue to invest to support profitable growth and market leadership.
Finally, in the BRIC countries, the Company is focusing on developing
Brazil and furthering its joint venture efforts in Russia, India and
China. Successful implementation of this strategy is expected to drive a
700 basis point improvement in Adjusted OIBDA margins and increase
after-tax ROIC by 500 basis points to 8% in the International business
by 2013.
Mr. Reese commented, "With our top North America enterprise customers
doing business with Iron Mountain around the world, our International
portfolio is key to our overall value proposition. Simply put, our top
customers demand global service. Given that the International portfolio
has the same attractive fundamentals as our North America business, we
see a great opportunity to drive significant revenue growth, margin
expansion and higher returns on invested capital. As market leadership
drives returns, our goal remains to achieve #1 or #2 positions in all of
our markets."
Exploring Strategic Alternatives for the Digital Business
Iron Mountain is exploring strategic alternatives for its digital
business, including a potential sale of the Company's digital archiving,
eDiscovery and online backup and recovery solutions.
Mr. Reese said, "We first entered the digital business 10 years ago as a
natural extension of our core services to address a clear customer need.
Recently however, our digital business has faced a number of challenges
resulting from a rapidly changing environment. In light of these
factors, our Board and management undertook a strategic review of the
digital business beginning last Fall and concluded that the Company
could not continue investing in technology development and meet its
return requirements and that exploring strategic alternatives for the
digital business was in the best interest of Iron Mountain's
stockholders. As we move forward, Iron Mountain will continue to deliver
technology services to solve our customers' digital information
management challenges through partnerships."
The Company noted that there can be no assurance that the exploration of
strategic alternatives for the digital business will result in any
transaction. Iron Mountain does not intend to further comment on the
strategic alternatives process unless and until a definitive agreement
is reached.
Increasing Return of Capital to Stockholders
Iron Mountain's Board of Directors has committed to stockholder payouts
of approximately $2.2 billion through 2013, with approximately $1.2
billion of capital returned to stockholders within the next 12 months
through a combination of share buybacks, ongoing quarterly dividends and
potential one-time dividends.
Iron Mountain announced its initial dividend in February 2010, which was
increased by 200% in December 2010. Iron Mountain currently pays an
annual dividend of $0.75 per share and intends to grow the dividend as
earnings and Free Cash Flow expand. In addition, the Company plans to
operate around the mid-point of its target leverage ratio range of 3x -
4x EBITDA (as defined in its senior credit agreement).
Mr. Reese said, "Our commitment to significant stockholder payouts
demonstrates the Board's confidence in our ability to grow our business
profitably as we execute on our comprehensive strategic plan to enhance
stockholder value."
Settlement Agreement
Iron Mountain has reached an agreement (the "Settlement Agreement") with
Elliott Associates, L.P. and Elliott International, L.P. (together,
"Elliott") in connection with the 2011 Annual Meeting of Stockholders,
which is scheduled to be held on June 10, 2011. Under the terms of the
Settlement Agreement, Iron Mountain has agreed to nominate Allan Z.
Loren, one of Elliott's nominees, to the Company's Board of Directors at
the 2011 Annual Meeting. The Company has also agreed to appoint an
additional, independent director to be mutually agreed upon by Iron
Mountain, Elliott, and Davis Selected Advisers L.P., Iron Mountain's
largest stockholder. To facilitate the Settlement Agreement, Constantin
R. Boden has decided to retire from Iron Mountain's Board after more
than 20 years of service, effective at the upcoming Annual Meeting. As
such, after the addition of Mr. Loren and the new independent director
candidate to be appointed after the completion of an independent search
process, the Iron Mountain Board will continue to be comprised of 12
directors.
Elliott has agreed to withdraw its slate of director nominees and vote
all of its shares in favor of the Company's slate at the 2011 Annual
Meeting. Additionally, Elliott has agreed to abide by certain standstill
provisions.
Iron Mountain's Board has also agreed to form a Special Committee,
chaired by Mr. Reese, to evaluate ways to maximize value through
alternative financing, capital, and tax strategies, including making its
first priority to evaluate a conversion to a REIT. The Special
Committee's members will include Mr. Loren upon his election to the
Board and the new independent director candidate to be appointed, as
well as other directors yet to be named. The conclusion of the
evaluation process to potentially convert to a REIT is expected to take
place within 12 months of the 2011 Annual Meeting.
Furthermore, Iron Mountain's Board has agreed to amend the charter of
the Finance Committee to increase its mandate to include the review of
material capital allocation decisions and strategic opportunities for
maximizing stockholder value. The Finance Committee will be renamed the
Strategic Planning and Capital Allocation Committee.
The full Settlement Agreement will be filed with the Securities and
Exchange Commission on a Form 8-K.
"On behalf of Iron Mountain's Board, I am pleased to nominate Allan
Loren for election to our Board. Allan is highly qualified and brings a
significant amount of information management experience to Iron
Mountain," said Kent Dauten,
Lead Independent Director of Iron Mountain's Board. "I would also like
to thank Constantin Boden for his more than 20 years of service on our
Board."
"We are confident that this agreement with Elliott is in the best
interest of the Company and our stockholders," said Mr. Reese. "I am
personally committed to the execution of our plan including a thorough
review of value creating opportunities, which includes an expedient
evaluation of a potential REIT conversion."
"Elliott is pleased to have helped contribute to this beneficial
outcome. After reviewing with the Board and management the actions
already taken and those underway, as well as their strategic plan for
the future, we support today's announcement. The strategic proposals
detailed today are aimed at increasing stockholder value and we look
forward to continuing our dialogue with the Company as the plan
progresses," said Scott Tagliarino, Director of Global Communications at
Elliott.
"We strongly support the Board of Directors' plan to increase
stockholder value with the actions announced today," said Ken Charles
Feinberg, portfolio manager at Davis Advisors. "We applaud the Board for
being responsive to shareholders and commend them for being exemplars of
excellent corporate governance."
Allan Z. Loren Bio
Mr. Loren is a Director at PHH Corporation. He serves as an Executive
Coach to Chief Executive Officers. Mr. Loren served as both Chairman and
Chief Executive Officer at D&B from 2000 through 2004 and as Chairman in
2005. Prior to joining D&B, he served as Executive Vice President and
Chief Information Officer at American Express from 1994 to 2000, as
President and Chief Executive Officer at Galileo International from 1991
to 1994, as President at Apple Computer US from 1988 to 1990, and as
Chief Information Officer at Apple Computer from 1987 to 1988. Mr. Loren
was also the Chief Administrative Officer and Chief Information Officer
at Cigna from 1979 to 1987 and 1971 to 1987, respectively. He currently
serves on the Board of Directors at Fair Isaac Corporation and on the
Board of Trustees of Queens College, City University of New York as a
Director. Mr. Loren previously served on the Board of Directors at
Hershey Foods, Reynolds & Reynolds, US Cellular, and Venator Group.
Advisors
J.P. Morgan Securities LLC and Morgan Stanley & Co. Incorporated are
serving as financial advisors and Weil, Gotshal & Manges LLP and
Sullivan & Worcester LLP are serving as legal advisors to Iron Mountain.
Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving as legal advisor
to Elliott.
Conference Call and Investor Presentation to Discuss Comprehensive
Strategic Plan
Iron Mountain will discuss the details of its comprehensive strategic
plan on a conference call for investors on Wednesday, April 20, 2011 at
9:30 AM ET. The public may access the conference call through a live
audio webcast available on the investor relations section of its
website, www.ironmountain.com.
The conference call can also be accessed in listen-only mode by dialing
(888) 263-0282, passcode 61501375. The Company suggests participants
dial in approximately 10 minutes before the call. In addition, a replay
of the call may be accessed online at the investor relations section of
its website, www.ironmountain.com,
or by phone in the U.S. at (800) 642-1687 for domestic callers, or (706)
645-9291 for international callers. No access code will be required.
Telephone replays will be available from 12:30 PM ET on April 20, 2011
until 11:59 PM ET on April 27, 2011.
Iron Mountain will also post an investor presentation on the investor
relations section of its website, www.ironmountain.com,
at 6:00 AM ET on Wednesday, April 20, 2011. The presentation will be
furnished to the Securities and Exchange Commission (SEC) and will be
available on the SEC's website www.sec.gov.
About Iron Mountain
Iron Mountain Incorporated (NYSE: IRM) provides information management
services that help organizations lower the costs, risks and
inefficiencies of managing their physical and digital data. The
company's solutions enable customers to protect and better use their
information--regardless of its format, location or lifecycle stage--so
they can optimize their business and ensure proper recovery, compliance
and discovery. Founded in 1951, Iron Mountain manages billions of
information assets, including business records, electronic files,
medical data, emails and more for organizations around the world. Visit www.ironmountain.com
for more information.
Forward Looking Statements
This press release contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 and
federal securities laws, and is subject to the safe-harbor created by
such Act. Forward-looking statements include our 2011 through 2013
financial performance outlook and statements regarding our operations,
economic performance, financial condition, goals, assumptions, beliefs,
future growth strategies, investment objectives and expected capital
spending, plans and current expectations, such as our three year
financial objectives, increased Adjusted OIBDA margins and cash
contributions, the exploration of strategic alternatives for our digital
business, commitment to stockholder payouts, expected dividend payout
and leverage ratios, expected continued productivity improvements and
plans to maximize value and international expansion. These statements
involve known and unknown risks, uncertainties and other factors that
may cause the actual results to be materially different from those
contemplated in the forward-looking statements. Such factors include,
but are not limited to: (i) the cost to comply with current and future
laws, regulations and customer demands relating to privacy issues; (ii)
the impact of litigation or disputes that may arise in connection with
incidents in which we fail to protect our customers' information; (iii)
changes in the price for our services relative to the cost of providing
such services; (iv) changes in customer preferences and demand for our
services; (v) the cost or potential liabilities associated with real
estate necessary for our business; (vi) the performance of business
partners upon whom we depend for technical assistance or management
expertise outside the United States; (vii) changes in the political and
economic environments in the countries in which our international
subsidiaries operate; (viii) in the various digital businesses in which
we are engaged, our ability to keep up with rapid technological changes,
evolving industry expectations and changing customer requirements or
competition for customers; (ix) the successful completion of our
strategic alternative review process for our digital business; (x)
claims that our technology violates the intellectual property rights of
a third party; (xi) the impact of legal restrictions or limitations
under stock repurchase plans on price, volume or timing of stock
repurchases; (xii) the impact of alternative, more attractive
investments on dividends or stock repurchases; (xiii) our ability or
inability to complete acquisitions on satisfactory terms and to
integrate acquired companies efficiently; (xiv) other trends in
competitive or economic conditions affecting our financial condition or
results of operations not presently contemplated; and (xv) other risks
described more fully in our most recently filed Annual Report on Form
10-K under "Item 1A. Risk Factors." and other documents that we file
with or furnish to the SEC from time to time. Except as required by law,
we undertake no obligation to release publicly the result of any
revision to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
Additional Information
This may be deemed to be solicitation material in respect of the
proposals described in Iron Mountain's preliminary proxy statement in
connection with its 2011 Annual Meeting of Stockholders, filed by Iron
Mountain with the Securities and Exchange Commission (the "SEC") on
April 1, 2011. In addition, Iron Mountain will file with, or furnish to,
the SEC all relevant materials, including a definitive proxy statement
(when available). BEFORE MAKING ANY VOTING DECISION, STOCKHOLDERS OF
IRON MOUNTAIN ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH OR
FURNISHED TO THE SEC, INCLUDING, THE PRELIMINARY PROXY STATEMENT FILED
BY IRON MOUNTAIN ON APRIL 1, 2011 AND, WHEN AVAILABLE, THE DEFINITIVE
PROXY STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
THE PROPOSALS. The definitive proxy statement (when available) will be
mailed to stockholders of Iron Mountain. Stockholders will be able to
obtain, without charge, a copy of the preliminary proxy statement, the
definitive proxy statement (when available) and other documents that
Iron Mountain files with the SEC from the SEC's website at www.sec.gov.
The preliminary proxy statement, definitive proxy statement (when
available) and other relevant documents will also be available, without
charge, by directing a request by mail or telephone to Iron Mountain
Incorporated, Attn: Investor Relations, 745 Atlantic Avenue, Boston,
Massachusetts 02111, or from Iron Mountain's website, www.ironmountain.com,
or by contacting Innisfree, toll free at (877) 717-3898.
Iron Mountain, its directors and executive officers and certain other
members of its management and employees may be deemed to be participants
in the solicitation of proxies in connection with the 2011 Annual
Meeting of Stockholders. Additional information regarding the interests
of such potential participants is included in the preliminary proxy
statement and will be included in the definitive proxy statement (when
available).
1 Adjusted OIBDA, ROIC and Free Cash Flow are non-GAAP
measures. Please refer to Investor Relations page of the Company's
website at www.ironmountain.com
for additional information and reconciliations to the nearest GAAP
measures.
2 Defined as capex incurred excluding real estate
SOURCE: Iron Mountain Incorporated
Iron Mountain
Stephen P. Golden, 617-535-4769
Vice President, Investor Relations
or
Joele Frank, Wilkinson Brimmer Katcher
Judith Wilkinson / Andrea Rose / Matthew Cuneo
212-355-4449
or
Innisfree M&A Incorporated
Alan Miller / Jennifer Shotwell / Scott Winter
212-750-5833