Iron Mountain Remains Solid

Guidance for 2009 Reaffirmed

At the Investor Day yesterday, Iron Mountain Incorporated (IRM - Analyst Report) reiterated its guidance for fiscal 2009. The company expects revenue in the range of $2.98 - $3.04 billion, representing growth of 3% to 5% from fiscal 2008, excluding the effects of foreign currency fluctuations and acquisitions.

Operating income is expected in the range of $510 - $540 million and depreciation and amortization of approximately $320 million. Thus operating income before depreciation and amortization (OIBDA), excluding asset gains and losses, is expected to be in the range of $830 - $860 million, a growth of 10% to 14% from fiscal 2008. The company expects to incur a capital expenditure of $380 million for the full year (approximately 10.8% of revenue).

Preliminary Guidance for 2010

Iron Mountain also provided a strong preliminary outlook for fiscal 2010 due to efficient capital spending and growth in earnings. The company expects revenue in the range of $3.15 - $3.21 billion, up 3% to 6% from fiscal 2009, excluding the effects of foreign currency fluctuations and acquisitions.

Operating income is expected in the range of $565 - $610 million and depreciation and amortization of approximately $330 million. OIBDA is expected to be in the range of $895 - $940 million, representing growth of 5% to 10% from fiscal 2008, ahead of the revenue growth. The company expects to incur a capital expenditure of $380 million.

Long-Term Goals

The company expects revenue to grow 7% to 12% for 2011 - 2014. OIBDA is expected to grow 10% to 15%. Capital expenditure as a percentage of revenue is expected to improve to 9.3% in 2014 from the previous expectation of 12%. Incremental ROIC is expected to be 15% to 20%.

Our Outlook

Boston, MA-based Iron Mountain is a leading provider of information protection and storage services in North America, Latin America, Europe and the Pacific Rim. We are encouraged by the company’s continuous momentum through 2007 and 2008, driven by strength in the storage segment, which has grown at a compound annual growth rate (CAGR) of 22%.

Through operational execution combined with record center optimization, the company expects to achieve over $20 million in cost savings. With an encouraging second half, steady recurring revenue, strong margins, strengthening capital structure and impressive cash flow, the company’s fundamentals remain strong.

Iron Mountain reported good second quarter results, with earnings exceeding the Zacks consensus estimates. We are encouraged by the continuing strength in the information protection and storage services business, which has driven steady profits for IRM. As a leader in record management and data protection services, it has further strengthened its position through acquisitions and international expansion.

While positive on the company’s prospects, we would like to caution investors about the high level of debt. Iron Mountain has a significant amount of debt (over 50% of its total asset balance) and low liquidity. At the end of the second quarter, the company reported $3.2 billion in total debt (including the current portion, yielding a debt-equity ratio of 1.65. Iron Mountain competes against Equifax (EFX - Analyst Report), R.R. Donnelley & Sons (RRD - Analyst Report), Dun & Bradstreet Corp. (DNB - Analyst Report) and Hewitt Associates, Inc. (HEW).

Iron Mountain rose 1.4% and closed at $26.51 yesterday. It is up another 7 cents in afternoon trading today.

Read the full analyst report on IRM

Read the full analyst report on EFX

Read the full analyst report on RRD

Read the full analyst report on DNB

Read the full analyst report on HEW