Iron Mountain Incorporated (delaware) · NYSE:IRM
Iron Mountain Incorporated (delaware) — Iron Mountain — Investor Presentation (June 2012)
31 slides from Iron Mountain Incorporated (delaware)'s investor presentation, Jun 5, 2012
Slide 1: Iron Mountain Proposed Conversion to REIT
Iron Mountain Proposed Conversion to REIT June 5, 2012
Slide 2: Safe Harbor / Forward Looking Statements
Safe Harbor / Forward Looking Statements This presentation contains a number of forward looking statements. Please see Slides 29 to 31 for a description of these statements and the factors that may cause our actual results to differ materially from our current expectations.
Slide 3: Key Messages
Key Messages Conversion to REIT structure enhances strategy to extend and sustain long-term durability of the business No assurance conversion to REIT will ultimately be successful Must secure required approvals Long-term capital strategy as REIT will naturally shift toward lower leverage and use of
Slide 4: Agenda
REIT structure aligns with operating strategy Significant benefits from REIT structure REIT structure naturally leads to new capital allocation strategy Successful conversion requires approvals; significant hurdles remain Q & A Agenda
Slide 5: REIT Structure Aligns with Strategic Priorities
REIT Structure Aligns with Strategic Priorities Board completed comprehensive evaluation of long-term growth and capital allocation strategies Assessed a variety of potential structures to maximize value through alternative financing, capital and tax strategies REIT structure aligns with shift towar
Slide 6: Iron Mountain Fits as a REIT
Iron Mountain Fits as a REIT Owns, leases and operates income-producing real estate Holds at least 75% of total assets in real estate (Asset Test) Derives at least 75% of gross income from real property rents, including storage revenues, or other real property sources (75% Gross Income Test) Derives
Slide 7: Foundation of Our Business is Storage
Foundation of Our Business is Storage Iron Mountain rents space to its customers to store information assets Storage is the primary driver of profits and free cash flow Storage relationships support additional value-added services Drives attractive ROIC globally North America 16% International 8% IN
Slide 8: Storage Annuity is Durable and Expanding
Storage Annuity is Durable and Expanding Annual Storage Revenue ($MM) 19% CAGR 23 years of consecutive storage growth 2% to 4% constant dollar growth over the last 8 quarters Growth drivers Developed markets – new sales offsetting modest secular impacts Emerging markets – early-stage outsourcing tre
Slide 9: Plan to Extend and Sustain Durability of High-Return Business
North America: Sustain strong, growing, high-return business for the long-term Capture un-vended opportunity through a combination of Selling new accounts Further penetrating existing accounts Acquire businesses in a consolidating market, driving incremental returns Leverage storage efficiencies to
Slide 10: Agenda
REIT structure aligns with operating strategy Significant benefits from REIT structure REIT structure naturally leads to new capital allocation strategy Successful conversion requires approvals; significant hurdles remain Q & A Agenda
Slide 11: REIT Provides Significant Stockholder Benefits
REIT Provides Significant Stockholder Benefits Three Key Value Drivers Higher dividends over time supported by: U.S. federal & state income tax savings Higher distributable pre-tax income Both U.S. & international rental (QRS) income Potential to create value and reduce cost of financing through acq
Slide 12: Multiple Factors Drive High Dividend Payout
Multiple Factors Drive High Dividend Payout Significant tax savings Vast majority of U.S. income flows through an efficient tax structure best aligned with our business 2011PF tax savings of ~$120MM to ~$130MM Distributable income increases due to lower tax D&A versus book D&A Characterization of as
Slide 13: Potential to Create Value by Acquiring Select Leased Facilities
Potential to Create Value by Acquiring Select Leased Facilities Within Our Portfolio Higher return investment potential Increases storage income while maintaining or reducing total leverage (lease-adjusted leverage) Helps reduce borrowing costs over time due to higher-quality collateral Replaces hig
Slide 14: Attractive Business Characteristics May Expand Investor Base
Attractive Business Characteristics May Expand Investor Base REIT structure promotes further diversification of investor base, including both active and passive REIT investors and yield investors With 64MM square feet, IRM is a significant operator of storage space Iron Mountain has desirable real e
Slide 15: Agenda
REIT structure aligns with operating strategy Significant benefits from REIT structure REIT structure naturally leads to new capital allocation strategy Successful conversion requires approvals; significant hurdles remain Q & A Agenda
Slide 16: New Long-term Capital Allocation Strategy
New Long-term Capital Allocation Strategy Plan to reduce consolidated leverage and cost of financing over time No tax advantages related to deductibility of interest expense in U.S. QRS Naturally leads to shift in debt/equity mix toward more equity financing to support real estate investment and low
Slide 17: Significant Costs to Convert
Significant Costs to Convert Currently estimated to be $325MM to $425MM Potential tax payment related to D&A recapture ($225MM to $275MM, payable over up to 5 years) Significant portion may be payable in 2012 May be required to pay tax even if conversion is unsuccessful Other one-time conversion cos
Slide 18: Expect Large E&P Distribution in Connection with Conversion
Expect Large E&P Distribution in Connection with Conversion Current estimate is ~$1.0B to ~$1.5B Expect to pay E&P distributions in a combination of at least 20% in cash and up to 80% in stock Expect to distribute significant portion of E&P in 2012 Balance to be paid over several years beginning in
Slide 19: Resetting $1B Commitment to Support Conversion
Resetting $1B Commitment to Support Conversion Stockholders to receive $0.5B to $0.6B in cash; additional $0.8B to $1.2B to be paid in stock Regular dividend increased 8% to $0.27 per share(2) Additional $0.2B to $0.3B in cash for the E&P distribution Total expected cash and stock distributions to s
Slide 20: Agenda
REIT structure aligns with operating strategy Significant benefits from REIT structure REIT structure naturally leads to new capital allocation approach Successful conversion requires approvals; significant hurdles remain Q & A Agenda
Slide 21: Conversion Requires IRS Approval on Key Issues
Conversion Requires IRS Approval on Key Issues Necessary to seek IRS approval on numerous technical tax issues through a PLR request Anticipate filing PLR request in July 2012 Typical PLR process can take up to 12 months Favorable PLR necessary in order to complete REIT conversion May incur signific
Slide 22: Aggressive Plan to Convert by 2014
Aggressive Plan to Convert by 2014 Must be operating as a REIT by January 1st of conversion year Larger, much more complicated task than other REIT conversions Broader geographic footprint Separation of numerous operations into QRS/TRS structure Substantial realignment of tax and legal structures in
Slide 23: Risks to Conversion
Risks to Conversion Failure to receive favorable PLR from the IRS Changes to U.S. federal tax code Failure to complete necessary pre-conversion tasks by January 1, 2014 Failure to receive necessary stockholder approvals See forward looking statements beginning on Slide 29 for a description of risks
Slide 24: Summary
Summary REIT structure enhances operating strategy No unmanageable constraints on pursuing long-term strategic priorities identified Significant benefits from REIT structure Tax savings, high dividends, new opportunities for value creation, expanded investor base Disciplined capital allocation strat
Slide 25: Agenda
REIT structure aligns with operating strategy Significant benefits from REIT structure REIT structure naturally leads to new capital allocation approach Successful conversion requires approvals; significant hurdles remain Q & A Agenda
Slide 26: A tron Mountan:
A tron Mountan:
Slide 27: 2011 Pro Forma Information Assumptions
2011 Pro Forma Information Assumptions Method used for QRS/TRS split QRS TRS Revenues Storage associated with Records Management, Data Protection & Recovery, Film & Sound, Intellectual Property Management All other revenues Gross Profit Storage Gross Profit dollars linked to revenues above All other
Slide 28: Iron Mountain Real Estate Portfolio @ 12/31/2011
Iron Mountain Real Estate Portfolio @ 12/31/2011 All Facilities North America Europe Latin America Asia Pacific Total Total # Buildings 641 246 56 51 994 Total Sq Ft (MM’s) 50 9 3 2 64 Leased Facilities # Buildings 471 208 25 51 755 Sq Ft (MM’s) 31 7 1 2 41 Owned Facilities # Buildings 170 38 31 0 2
Slide 29: Cautionary Note Regarding Forward Looking Statements
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS This presentation states that the Company plans to pursue conversion to a REIT. In fact, there are significant implementation and operational complexities to address before the Company can convert to a REIT, including obtaining a favorable PLR fro
Slide 30: Cautionary Note Regarding Forward Looking Statements
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS This presentation states that the Company will experience large conversion-related outflows that will impact near-term capital deployment and provides an estimated range of the Company’s tax and other costs to convert to and remain a REIT, includi
Slide 31: Cautionary Note Regarding Forward Looking Statements
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS This presentation states that the Company expects to pay up to 80% of the E&P distribution and future dividends after converting to a REIT in the form of Company common stock. The Company may in fact decide, based on its cash flows, strategic plan