<Page> - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-Q (MARK ONE) <Table> <C> <S> /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 </Table> FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001 OR <Table> <C> <S> / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 </Table> FOR THE TRANSITION PERIOD FROM ______________ TO ______________ COMMISSION FILE NUMBER 1-13045 ------------------------ IRON MOUNTAIN INCORPORATED (Exact Name of Registrant as Specified in its Charter) <Table> <S> <C> PENNSYLVANIA 23-2588479 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 745 ATLANTIC AVENUE, BOSTON, MA 02111 (Address of Principal Executive Offices, Including Zip Code) </Table> (617) 535-4766 (Registrant's Telephone Number, Including Area Code) ------------------------ Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Number of shares of the registrant's Common Stock outstanding as of November 2, 2001: 56,026,635 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- <Page> IRON MOUNTAIN INCORPORATED INDEX <Table> <Caption> PAGE -------- <S> <C> <C> <C> PART I--FINANCIAL INFORMATION Item 1 -- Unaudited Consolidated Financial Statements Consolidated Balance Sheets at September 30, 2001 and December 31, 2000 (Unaudited)............................. 3 Consolidated Statements of Operations for the Three Months Ended September 30, 2001 and 2000 (Unaudited)............. 4 Consolidated Statements of Operations for the Nine Months Ended September 30, 2001 and 2000 (Unaudited)................... 5 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2001 and 2000 (Unaudited)............. 6 Notes to Consolidated Financial Statements (Unaudited)...... 7-21 Item 2 -- Management's Discussion and Analysis of Financial Condition and Results of Operations................................. 22-29 Item 3 -- Quantitative and Qualitative Disclosures About Market Risk...................................................... 29 PART II -- OTHER INFORMATION Item 6 -- Exhibits and Reports on Form 8-K............................ 30 Signature................................................... 31 </Table> 2 <Page> PART I. FINANCIAL INFORMATION ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS IRON MOUNTAIN INCORPORATED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED) <Table> <Caption> SEPTEMBER 30, DECEMBER 31, 2001 2000 ------------- ------------ <S> <C> <C> ASSETS Current Assets: Cash and cash equivalents................................. $ 60,138 $ 6,200 Accounts receivable (less allowances of $17,894 and $15,989 respectively)................................... 223,760 176,442 Deferred income taxes..................................... 30,667 30,990 Prepaid expenses and other................................ 40,564 23,036 ---------- ---------- Total Current Assets.................................... 355,129 236,668 Property, Plant and Equipment: Property, plant and equipment............................. 1,122,637 984,939 Less: Accumulated depreciation............................ (214,009) (152,545) ---------- ---------- Property, Plant and Equipment, net...................... 908,628 832,394 Other Assets, net: Goodwill.................................................. 1,525,670 1,525,630 Customer acquisition costs................................ 31,881 27,692 Deferred financing costs.................................. 19,933 14,534 Other..................................................... 12,646 22,178 ---------- ---------- Total Other Assets, net................................. 1,590,130 1,590,034 ---------- ---------- Total Assets............................................ $2,853,887 $2,659,096 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt......................... $ 30,237 $ 40,789 Accounts payable.......................................... 50,998 42,531 Accrued expenses.......................................... 166,455 153,291 Deferred income........................................... 82,367 53,884 Other current liabilities................................. 19,650 23,558 ---------- ---------- Total Current Liabilities............................... 349,707 314,053 Long-term Debt, net of current portion...................... 1,469,866 1,314,342 Other Long-term Liabilities................................. 21,131 7,920 Deferred Rent............................................... 17,484 16,346 Deferred Income Taxes....................................... 39,699 38,948 Minority Interest........................................... 66,470 43,029 Shareholders' Equity: Common stock.............................................. 560 553 Additional paid-in capital................................ 1,002,396 990,854 Accumulated deficit....................................... (88,994) (59,383) Accumulated other comprehensive items..................... (24,432) (7,566) ---------- ---------- Total Shareholders' Equity.............................. 889,530 924,458 ---------- ---------- Total Liabilities and Shareholders' Equity.............. $2,853,887 $2,659,096 ========== ========== </Table> THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 3 <Page> IRON MOUNTAIN INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) <Table> <Caption> THREE MONTHS ENDED SEPTEMBER 30, ------------------- 2001 2000 -------- -------- <S> <C> <C> Revenues: Storage................................................... $175,012 $152,959 Service and storage material sales........................ 116,661 103,174 -------- -------- Total Revenues.......................................... 291,673 256,133 Operating Expenses: Cost of sales (excluding depreciation).................... 139,918 125,079 Selling, general and administrative....................... 76,822 63,783 Depreciation and amortization............................. 38,921 34,829 Stock option compensation expense......................... -- 171 Merger-related expenses................................... 1,049 1,262 -------- -------- Total Operating Expenses................................ 256,710 225,124 -------- -------- Operating Income............................................ 34,963 31,009 Interest Expense............................................ 33,421 31,038 Other Expense............................................... (13,845) (3,025) -------- -------- Loss Before Provision (Benefit) for Income Taxes and Minority Interest..................................... (12,303) (3,054) Provision (Benefit) for Income Taxes........................ 3,440 (7,023) Minority Interest in Earnings (Losses) of Subsidiaries...... 27 (630) -------- -------- Income (Loss) before Extraordinary Item................. (15,770) 4,599 Extraordinary Charge from Early Extinguishment of Debt (net of tax benefit of $4,861 and $1,928 respectively)......... (7,039) (2,892) -------- -------- Net Income (Loss)....................................... $(22,809) $ 1,707 ======== ======== Net Income (Loss) per Common Share--Basic and Diluted: Income (Loss) before Extraordinary Item................... $ (0.28) $ 0.08 Extraordinary Charge from Early Extinguishment of Debt.... (0.13) (0.05) -------- -------- Net Income (Loss) per Share--Basic and Diluted.......... $ (0.41) $ 0.03 ======== ======== Weighted Average Common Shares Outstanding--Basic........... 55,925 54,827 ======== ======== Weighted Average Common Shares Outstanding--Diluted......... 55,925 56,130 ======== ======== </Table> THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 4 <Page> IRON MOUNTAIN INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) <Table> <Caption> NINE MONTHS ENDED SEPTEMBER 30, ------------------- 2001 2000 -------- -------- <S> <C> <C> Revenues: Storage................................................... $514,768 $426,343 Service and storage material sales........................ 354,161 294,492 -------- -------- Total Revenues.......................................... 868,929 720,835 Operating Expenses: Cost of sales (excluding depreciation).................... 418,768 351,510 Selling, general and administrative....................... 225,825 181,964 Depreciation and amortization............................. 112,427 92,776 Stock option compensation expense......................... -- 15,110 Merger-related expenses................................... 2,227 5,653 -------- -------- Total Operating Expenses................................ 759,247 647,013 -------- -------- Operating Income............................................ 109,682 73,822 Interest Expense............................................ 101,451 85,066 Other Expense............................................... (16,017) (7,505) -------- -------- Loss Before Provision for Income Taxes and Minority Interest.............................................. (7,786) (18,749) Provision for Income Taxes.................................. 10,694 11,353 Minority Interest in Losses of Subsidiaries................. (943) (1,073) -------- -------- Loss before Extraordinary Item.......................... (17,537) (29,029) Extraordinary Charge from Early Extinguishment of Debt (net of tax benefit of $8,161 and $1,928 respectively)......... (11,819) (2,892) -------- -------- Net Loss................................................ $(29,356) $(31,921) ======== ======== Net Loss per Common Share -- Basic and Diluted: Loss before Extraordinary Item............................ $ (0.32) $ (0.55) Extraordinary Charge from Early Extinguishment of Debt.... (0.21) (0.06) -------- -------- Net Loss per Share--Basic and Diluted................... $ (0.53) $ (0.61) ======== ======== Weighted Average Common Shares Outstanding--Basic and Diluted................................................... 55,670 52,480 ======== ======== Weighted Average Common Shares Outstanding--Basic and Diluted................................................... 55,670 52,480 ======== ======== </Table> THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 5 <Page> IRON MOUNTAIN INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) <Table> <Caption> NINE MONTHS ENDED SEPTEMBER 30, ------------------- 2001 2000 -------- -------- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss.................................................. $(29,356) $(31,921) Adjustments to Reconcile Net Loss before Extraordinary Item: Extraordinary Charge from Early Extinguishment of Debt................................................... 11,819 2,892 -------- -------- Loss before Extraordinary Item............................ (17,537) (29,029) Adjustments to Reconcile Net Loss before Extraordinary Item to Cash Provided by Operating Activities: Minority Interests in Losses of Subsidiaries............ (943) (1,073) Depreciation and Amortization........................... 112,427 92,776 Impairment of Long-term Assets.......................... 6,925 -- Amortization of Deferred Financing Costs and Bond Discount............................................... 3,588 2,082 Provision for Doubtful Accounts......................... 8,491 4,101 Stock Option Compensation Expense....................... -- 15,110 Foreign Currency Loss................................... 8,661 7,723 Other, Net.............................................. (32) (50) Changes in Assets and Liabilities (Exclusive of Acquisitions): Accounts Receivable..................................... (30,423) (16,209) Prepaid Expenses and Other Current Assets............... (7,723) 11,614 Deferred Income Taxes................................... 8,325 9,697 Other Assets............................................ (466) 55 Accounts Payable........................................ 8,447 (3,618) Accrued Expenses........................................ 5,182 16,080 Deferred Income......................................... 2,363 (680) Other Current Liabilities............................... (156) -- Deferred Rent........................................... 1,164 1,490 Other Long-term Liabilities............................. (115) (387) -------- -------- Cash Flows Provided by Operating Activities........... 108,178 109,682 CASH FLOWS FROM INVESTING ACTIVITIES: Capital Expenditures...................................... (136,771) (116,158) Cash Paid for Acquisitions, net of cash acquired.......... (54,647) (76,119) Investment in Convertible Preferred Stock................. -- (6,524) Additions to Customer Acquisition Costs................... (6,602) (10,147) Other, Net................................................ 970 1,113 -------- -------- Cash Flows Used in Investing Activities............... (197,050) (207,835) CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of Debt......................................... (116,695) (579,277) Early Retirement of Senior Subordinated Notes............. (304,352) -- Proceeds from Borrowings.................................. 104,820 388,230 Proceeds from Term Loans.................................. -- 350,000 Net Proceeds from Sale of Senior Subordinated Notes....... 427,924 -- Equity Contributions from Minority Shareholders........... 24,744 -- Debt Financing from (Repayment to) Minority Shareholders............................................ (3,908) 9,457 Proceeds from Exercise of Stock Options................... 8,453 5,460 Financing and Stock Issuance Costs........................ (166) (5,419) -------- -------- Cash Flows Provided by Financing Activities........... 140,820 168,451 Effect of Exchange Rates on Cash and Cash Equivalents....... 1,990 459 -------- -------- Increase in Cash and Cash Equivalents....................... 53,938 70,757 Cash and Cash Equivalents, Beginning of Period.............. 6,200 3,830 -------- -------- Cash and Cash Equivalents, End of Period.................... $ 60,138 $ 74,587 ======== ======== </Table> THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 6 <Page> IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) (UNAUDITED) (1) GENERAL The interim consolidated financial statements presented herein have been prepared by Iron Mountain Incorporated (the "Company") without audit and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair presentation. Interim results are not necessarily indicative of results for a full year. The consolidated balance sheet presented as of December 31, 2000 has been derived from the consolidated financial statements that have been audited by the Company's independent public accountants. The unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to those rules and regulations, but the Company believes that the disclosures are adequate to make the information presented not misleading. The consolidated financial statements and notes included herein should be read in conjunction with the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2000. Certain reclassifications have been made to the 2000 financial statements to conform to the 2001 presentation. (2) COMPREHENSIVE INCOME (LOSS) Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," requires presentation of the components of comprehensive income (loss), including the changes in equity from non-owner sources such as unrealized gains (losses) on hedging transactions, securities and foreign currency translation adjustments. The Company's total comprehensive income (loss) is as follows: <Table> <Caption> THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ------------------- 2001 2000 2001 2000 -------- -------- -------- -------- <S> <C> <C> <C> <C> Comprehensive Income (Loss): Net Income (Loss)................................... $(22,809) $ 1,707 $(29,356) $(31,921) Other Comprehensive Loss: Foreign Currency Translation Adjustment........... (2,215) (1,144) (3,265) (3,621) Transition Adjustment Charge...................... -- -- (214) -- Unrealized Loss on Hedging Contracts.............. (11,693) -- (13,387) -- -------- ------- -------- -------- Comprehensive Income (Loss)......................... $(36,717) $ 563 $(46,222) $(35,542) ======== ======= ======== ======== </Table> (3) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES The Company adopted the provisions of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," on January 1, 2001. The adoption of SFAS No. 133 resulted in the recognition of a derivative liability and a corresponding transition adjustment charge to accumulated other comprehensive items of approximately $214. 7 <Page> IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) (UNAUDITED) (3) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (CONTINUED) The Company has entered into three interest rate swap agreements, which are derivatives as defined by SFAS No. 133 and designated as cash flow hedges. These swap agreements hedge interest rate risk on certain amounts of its Tranche B debt as well as certain variable operating lease commitments. For all qualifying and highly effective cash flow hedges, the changes in the fair value of the derivatives are recorded in other comprehensive income. As a result of these interest rate swap agreements, the Company has recorded a derivative liability of and a corresponding cumulative charge to accumulated other comprehensive items of $13,601 at September 30, 2001. For the three and nine months ended September 30, 2001, the Company recorded net losses of $919 and $1,375 resulting from interest rate swap settlements in interest, and $219 and $352 in rent expense, respectively. All interest rate swap agreements were determined to be highly effective whereby no ineffectiveness was recorded in earnings. (4) ACQUISITIONS In July 2001, the Financial Accounting Standards Board issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. Under SFAS No. 142, goodwill and intangible assets with indefinite lives are no longer amortized but are reviewed annually for impairment or more frequently if impairment indicators arise. Separable intangible assets that are not deemed to have indefinite lives will continue to be amortized over their useful lives. The amortization provisions of SFAS No. 142 apply to goodwill and intangible assets acquired after June 30, 2001. With respect to goodwill and intangible assets acquired prior to July 1, 2001, the Company is required to adopt SFAS No. 142 effective January 1, 2002. We expect the adoption of SFAS No. 142 will have the impact of reducing our amortization of goodwill and intangibles commencing January 1, 2002; however, impairment reviews may result in future periodic write-downs. The Company is currently evaluating the effect that the adoption of the provisions of SFAS No. 142 will have on its intangible assets. During the nine months ended September 30, 2001, the Company purchased substantially all of the assets, and assumed certain liabilities, of 13 businesses. Each of the 2001 acquisitions and all 12 of the records and information management services businesses acquired during 2000 were accounted for using the purchase method of accounting and, accordingly, the results of operations for each acquisition have been included in the consolidated results of the Company from their respective acquisition dates. In connection with certain 2001 and 2000 acquisitions, related real estate was also purchased. For the 2001 acquisitions closed prior to July 1, 2001, the aggregate purchase price exceeded the underlying fair value of the net assets acquired by $53,252 which has been assigned to goodwill and is being amortized over 20 to 30 years. For the 2001 acquisitions closed subsequent to June 30, 2001, the aggregate purchase price exceeded the underlying fair value of the net assets acquired by $3,975 which has been assigned to goodwill and has not been amortized. The Company recorded goodwill amortization expense of $14,735 and $44,217 for the three and nine months ended Septemer 30, 2001. 8 <Page> IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) (UNAUDITED) (4) ACQUISITIONS (CONTINUED) In connection with the 2001 and 2000 acquisitions, the Company has undertaken certain restructurings of the acquired businesses. The restructuring activities include certain reductions in staffing levels, elimination of duplicate facilities and other costs associated with exiting certain activities of the acquired businesses. These restructuring activities were recorded as costs of the acquisitions and were provided in accordance with Emerging Issues Task Force Issue No. 95-3, "Recognition of Liabilities in Connection with a Purchase Business Combination." The Company finalizes its restructuring plans for each business no later than one year from the date of acquisition. Unresolved matters primarily include completion of planned abandonments of facilities and employee severance costs for certain 2001 and 2000 acquisitions. The following is a summary of reserves related to such restructuring activities: <Table> <Caption> SEPTEMBER 30, DECEMBER 31, 2001 2000 ------------- ------------ <S> <C> <C> Reserves, Beginning Balance......................... $ 28,514 $ 9,340 Reserves Established................................ 2,729 31,409 Expenditures........................................ (6,251) (7,539) Adjustments to Goodwill............................. (2,828) (4,696) -------- -------- Reserves, Ending Balance............................ $ 22,164 $ 28,514 ======== ======== </Table> At September 30, 2001, the restructuring reserves related to acquisitions consisted of lease losses on abandoned facilities ($14,446), severance costs for approximately 14 people ($1,054) and other exit costs ($6,664). These accruals are expected to be used within one year of the finalization of the restructuring plans except for lease losses of $8,240 and severance contracts of approximately $586, all of which are based on contracts that extend beyond one year. 9 <Page> IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) (UNAUDITED) (5) LONG-TERM DEBT Long-term debt consists of the following: <Table> <Caption> SEPTEMBER 30, 2001 DECEMBER 31, 2000 ----------------------- ----------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> Revolving Credit Facility due 2005............ $ -- $ -- $ 4,000 $ 4,000 Tranche A Term Loan due 2005.................. 150,000 150,000 150,000 150,000 Tranche B Term Loan due 2006.................. 199,000 199,000 199,750 199,750 11 1/8% Senior Subordinated Notes due 2006 (the "11 1/8 notes")........................ -- -- 131,517 136,500 10 1/8% Senior Subordinated Notes due 2006 (the "10 1/8 notes")........................ 8,349 8,800 165,000 170,800 9 1/8% Senior Subordinated Notes due 2007 (the "9 1/8% notes")............................. 114,883 123,600 114,216 118,800 8 3/4% Senior Subordinated Notes due 2009 (the "8 3/4% notes")............................. 249,677 255,000 249,646 245,600 8 1/4% Senior Subordinated Notes due 2011 (the "8 1/4% notes")............................. 149,569 150,600 149,535 141,400 8 5/8% Senior Subordinated Notes due 2013 (the "8 5/8% notes")............................. 438,127 443,700 -- -- 8 1/8 Senior Subordinated Notes due 2008 (the "Subsidiary notes")......................... 122,281 133,700 120,850 128,600 Real Estate Mortgage.......................... 19,850 19,850 20,457 20,457 Seller Notes.................................. 12,608 12,608 13,971 13,971 Other......................................... 35,759 35,759 36,189 36,189 ---------- ---------- Long-term debt................................ 1,500,103 1,355,131 Less current portion.......................... (30,237) (40,789) ---------- ---------- Long-term debt, net of current portion........ $1,469,866 $1,314,342 ========== ========== </Table> The estimated fair values for the long-term debt are based on the borrowing rates available to the Company at September 30, 2001 and December 31, 2000 for loans with similar terms and average maturities. The fair values of the 11 1/8% notes, 10 1/8% notes, 9 1/8% notes, 8 3/4% notes, 8 1/4% notes, 8 5/8% notes (collectively, the "Parent Notes") and the Subsidiary notes are based on the quoted market prices for those notes on September 30, 2001 and December 31, 2000. In September 2001, the Company completed an underwritten public offering which resulted in the issuance of an additional $210,000 in aggregate principal amount of 8 5/8% Senior Subordinated Notes due 2013. The 8 5/8% notes were issued at a price to investors of 101.50% of par. The net proceeds to the Company, $209,334 after paying the underwriters' discounts and commissions and related expenses, were used to fund the Company's offer to purchase and consent solicitation relating to its outstanding 10 1/8% Senior Subordinated Notes due 2006 and to redeem the remaining 10 1/8% notes, as well as to 10 <Page> IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) (UNAUDITED) (5) LONG-TERM DEBT (CONTINUED) repay outstanding borrowings under the Company's revolving credit facility and for general corporate purposes, including future acquisitions. In September 2001, the Company received and accepted tenders for $156,651 of the $165,000 aggregate principal amount outstanding of its 10 1/8% notes. The Company recorded an extraordinary charge of $7,039 (net of tax benefit of $4,861) in the third quarter related to the early retirement of the 10 1/8% notes. In October 2001, the Company received and accepted tenders for an additional $250 in aggregate principal amount of its 10 1/8% notes and redeemed the remaining $8,099 of outstanding principal amount of its 10 1/8% notes, at a redemption price (expressed as a percentage of principal amount) of 105.06%, plus accrued and unpaid interest, totaling $8,960. 11 <Page> IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) (UNAUDITED) (6) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-GUARANTORS The following financial data summarizes the consolidating Company on the equity method of accounting as of September 30, 2001 and December 31, 2000 and for the three and nine month periods ended September 30, 2001 and 2000. The Guarantor column includes all subsidiaries that guarantee the Parent notes and the Subsidiary notes. The Canada Company column includes Iron Mountain Canada Corporation ("Canada Company") and the Company's other Canadian subsidiaries that guarantee the Subsidiary notes, but do not guarantee the Parent notes. The Parent and the Guarantors also guarantee the Subsidiary notes issued by Canada Company. The subsidiaries that do not guarantee either the Parent notes or the Subsidiary notes are referred to in the table as the "non-guarantors." <Table> <Caption> SEPTEMBER 30, 2001 ----------------------------------------------------------------------------- CANADA NON- PARENT GUARANTORS COMPANY GUARANTORS ELIMINATIONS CONSOLIDATED ---------- ---------- -------- ---------- ------------ ------------ <S> <C> <C> <C> <C> <C> <C> ASSETS Current Assets: Cash and Cash Equivalents............ $ -- $ 52,200 $ 1,216 $ 6,722 $ -- $ 60,138 Accounts Receivable.................. -- 187,726 14,379 21,655 -- 223,760 Intercompany Receivable (Payable).... 630,898 (514,174) (90,612) (26,112) -- -- Other Current Assets................. -- 64,109 2,943 4,202 (23) 71,231 ---------- ---------- -------- -------- ----------- ---------- Total Current Assets............... 630,898 (210,139) (72,074) 6,467 (23) 355,129 Property, Plant and Equipment, net..... -- 742,255 69,325 97,048 -- 908,628 Other Assets: Long-term Intercompany Receivable.... 547,939 -- -- -- (547,939) -- Long-term Notes Receivable from Affiliates......................... 654,278 -- -- -- (654,278) -- Investment in Subsidiaries........... 382,086 84,021 -- -- (466,107) -- Goodwill, net........................ -- 1,254,807 118,078 142,131 10,654 1,525,670 Other................................ 31,403 38,586 10,131 824 (16,484) 64,460 ---------- ---------- -------- -------- ----------- ---------- Total Other Assets................. 1,615,706 1,377,414 128,209 142,955 (1,674,154) 1,590,130 ---------- ---------- -------- -------- ----------- ---------- Total Assets....................... $2,246,604 $1,909,530 $125,460 $246,470 $(1,674,177) $2,853,887 ========== ========== ======== ======== =========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Total Current Liabilities............ $ 40,530 $ 218,230 $ 16,253 $ 74,717 $ (23) $ 349,707 Long-term Debt, Net of Current Portion............................ 1,316,544 1,722 124,562 27,038 -- 1,469,866 Long-term Intercompany Payable....... -- 547,939 -- -- (547,939) -- Long-term Notes Payable to Affiliates......................... -- 654,278 -- -- (654,278) -- Other Long-term Liabilities.......... -- 92,048 860 1,890 (16,484) 78,314 Minority Interest.................... -- -- -- (287) 66,757 66,470 Shareholders' Equity................. 889,530 395,313 (16,215) 143,112 (522,210) 889,530 ---------- ---------- -------- -------- ----------- ---------- Total Liabilities and Shareholders' Equity........................... $2,246,604 $1,909,530 $125,460 $246,470 $(1,674,177) $2,853,887 ========== ========== ======== ======== =========== ========== </Table> 12 <Page> IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) (UNAUDITED) (6) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-GUARANTORS (CONTINUED) <Table> <Caption> DECEMBER 31, 2000 ----------------------------------------------------------------------------- CANADA NON- PARENT GUARANTORS COMPANY GUARANTORS ELIMINATIONS CONSOLIDATED ---------- ---------- -------- ---------- ------------ ------------ <S> <C> <C> <C> <C> <C> <C> ASSETS Current Assets: Cash and Cash Equivalents..... $ 191 $ 3,336 $ 302 $ 2,371 $ -- $ 6,200 Accounts Receivable........... 7,060 140,095 12,370 16,917 -- 176,442 Intercompany Receivable (Payable)................... 795,522 (658,022) (98,386) (45,060) 5,946 -- Other Current Assets.......... 531 46,605 827 6,063 -- 54,026 ---------- ---------- -------- -------- ----------- ---------- Total Current Assets........ 803,304 (467,986) (84,887) (19,709) 5,946 236,668 Property, Plant and Equipment, net........................... 99,549 586,504 66,953 79,388 -- 832,394 Other Assets: Long-term Intercompany Receivable.................. 344,300 -- -- -- (344,300) -- Long-term Notes Receivable from Affiliates............. 607,600 124,100 -- -- (731,700) -- Investment in Subsidiaries.... 370,830 49,626 -- -- (420,456) -- Goodwill, net................. -- 1,255,302 138,663 121,096 10,569 1,525,630 Other......................... 20,986 42,956 11,036 1,834 (12,408) 64,404 ---------- ---------- -------- -------- ----------- ---------- Total Other Assets.......... 1,343,716 1,471,984 149,699 122,930 (1,498,295) 1,590,034 ---------- ---------- -------- -------- ----------- ---------- Total Assets................ $2,246,569 $1,590,502 $131,765 $182,609 $(1,492,349) $2,659,096 ========== ========== ======== ======== =========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Total Current Liabilities..... $ 26,921 $ 189,362 $ 12,429 $ 79,378 $ 5,963 $ 314,053 Long-term Debt, Net of Current Portion..................... 1,170,884 3,513 124,834 15,111 -- 1,314,342 Long-term Intercompany Payable..................... -- 344,300 -- -- (344,300) -- Long-term Notes Payable to Affiliates.................. 124,100 607,600 -- -- (731,700) -- Other Long-term Liabilities... 206 73,693 113 1,610 (12,408) 63,214 Minority Interest............. -- -- -- (1,636) 44,665 43,029 Shareholders' Equity.......... 924,458 372,034 (5,611) 88,146 (454,569) 924,458 ---------- ---------- -------- -------- ----------- ---------- Total Liabilities and Shareholders' Equity.... $2,246,569 $1,590,502 $131,765 $182,609 $(1,492,349) $2,659,096 ========== ========== ======== ======== =========== ========== </Table> 13 <Page> IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) (UNAUDITED) (6) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-GUARANTORS (CONTINUED) <Table> <Caption> THREE MONTHS ENDED SEPTEMBER 30, 2001 --------------------------------------------------------------------------- CANADA NON- PARENT GUARANTORS COMPANY GUARANTORS ELIMINATIONS CONSOLIDATED -------- ---------- -------- ---------- ------------ ------------ <S> <C> <C> <C> <C> <C> <C> Revenues: Storage............................ $ -- $152,553 $ 8,282 $14,177 $ -- $175,012 Service and Storage Material Sales............................ -- 100,341 8,060 8,260 -- 116,661 -------- -------- ------- ------- ------- -------- Total Revenues................... -- 252,894 16,342 22,437 -- 291,673 Operating Expenses: Cost of Sales (Excluding Depreciation).................... -- 119,513 8,940 11,465 -- 139,918 Selling, General and Administrative................... 3 67,967 2,890 5,962 -- 76,822 Depreciation and Amortization...... -- 33,452 2,531 2,938 -- 38,921 Merger-Related Expenses............ -- 1,049 -- -- -- 1,049 -------- -------- ------- ------- ------- -------- Total Operating Expenses......... 3 221,981 14,361 20,365 -- 256,710 -------- -------- ------- ------- ------- -------- Operating Income (Loss).............. (3) 30,913 1,981 2,072 -- 34,963 Interest Expense, net................ 12,371 15,099 3,968 1,983 -- 33,421 Equity in the (Earnings) Losses of Subsidiaries....................... (3,574) 148 -- -- 3,426 -- Other Income (Expense), net.......... (6,970) (1,244) (5,637) 6 -- (13,845) -------- -------- ------- ------- ------- -------- Income (Loss) Before Provision (Benefit) for Income Taxes and Minority Interest Expense........ (15,770) 14,422 (7,624) 95 (3,426) (12,303) Provision (Benefit) for Income Taxes.............................. -- 3,641 (367) 166 -- 3,440 Minority Interests in Earnings of Subsidiaries....................... -- -- -- 27 -- 27 -------- -------- ------- ------- ------- -------- Income (Loss) before Extraordinary Item............................. (15,770) 10,781 (7,257) (98) (3,426) (15,770) Extraordinary Charge from Early Extinguishment of Debt (Net of Tax Benefit of $4,861)................. (7,039) -- -- -- -- (7,039) -------- -------- ------- ------- ------- -------- Net Income (Loss).................. $(22,809) $ 10,781 $(7,257) $ (98) $(3,426) $(22,809) ======== ======== ======= ======= ======= ======== </Table> 14 <Page> IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) (UNAUDITED) (6) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-GUARANTORS (CONTINUED) <Table> <Caption> THREE MONTHS ENDED SEPTEMBER 30, 2000 --------------------------------------------------------------------------- CANADA NON- PARENT GUARANTORS COMPANY GUARANTORS ELIMINATIONS CONSOLIDATED -------- ---------- -------- ---------- ------------ ------------ <S> <C> <C> <C> <C> <C> <C> Revenues: Storage............................. $ 880 $135,498 $ 6,621 $ 9,960 $ -- $152,959 Service and Storage Material Sales............................. 4,750 85,750 6,612 7,356 (1,294) 103,174 ------- -------- ------- ------- -------- -------- Total Revenues.................... 5,630 221,248 13,233 17,316 (1,294) 256,133 Operating Expenses: Cost of Sales (Excluding Depreciation)..................... 3,725 100,105 6,203 10,092 4,954 125,079 Selling, General and Administrative.................... 790 61,244 3,447 4,550 (6,248) 63,783 Depreciation and Amortization....... 388 30,389 1,821 2,231 -- 34,829 Stock Option Compensation Expense... -- -- -- 171 -- 171 Merger-Related Expenses............. -- 931 70 261 -- 1,262 ------- -------- ------- ------- -------- -------- Total Operating Expenses.......... 4,903 192,669 11,541 17,305 (1,294) 225,124 ------- -------- ------- ------- -------- -------- Operating Income...................... 727 28,579 1,692 11 -- 31,009 Interest (Income) Expense............. 26,992 (1,016) 3,924 1,138 -- 31,038 Equity in the (Earnings) Losses of Subsidiaries........................ (28,773) 1,281 -- -- 27,492 -- Other Expense, net.................... -- (720) (1,808) (497) -- (3,025) ------- -------- ------- ------- -------- -------- Income (Loss) Before Provision (Benefit) for Income Taxes and Minority Interest Expense....... 2,508 27,594 (4,040) (1,624) (27,492) (3,054) Provision (Benefit) for Income Taxes............................... (2,178) (4,897) (560) 612 -- (7,023) Minority Interests in Earnings (Losses) of Subsidiaries............ 87 -- -- (717) -- (630) ------- -------- ------- ------- -------- -------- Income (Loss) before Extraordinary Item............................ 4,599 32,491 (3,480) (1,519) (27,492) 4,599 Extraordinary Charge from Early Extinguishment of Debt (Net of Tax Benefit of $1,928).................. (2,892) -- -- -- -- (2,892) ------- -------- ------- ------- -------- -------- Net Income (Loss)................. $ 1,707 $ 32,491 $(3,480) $(1,519) $(27,492) $ 1,707 ======= ======== ======= ======= ======== ======== </Table> 15 <Page> IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) (UNAUDITED) (6) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-GUARANTORS (CONTINUED) <Table> <Caption> NINE MONTHS ENDED SEPTEMBER 30, 2001 --------------------------------------------------------------------------- CANADA NON- PARENT GUARANTORS COMPANY GUARANTORS ELIMINATIONS CONSOLIDATED -------- ---------- -------- ---------- ------------ ------------ <S> <C> <C> <C> <C> <C> <C> Revenues: Storage........................... $ -- $448,794 $ 24,963 $41,011 $ -- $514,768 Service and Storage Material Sales........................... -- 303,856 25,268 25,037 -- 354,161 -------- -------- -------- ------- -------- -------- Total Revenues................ -- 752,650 50,231 66,048 -- 868,929 Operating Expenses: Cost of Sales (Excluding Depreciation)................... -- 356,986 26,044 35,738 -- 418,768 Selling, General and Administrative.................. 78 199,200 9,171 17,376 -- 225,825 Depreciation and Amortization..... -- 96,075 7,579 8,773 -- 112,427 Merger-Related Expenses........... -- 2,198 -- 29 -- 2,227 -------- -------- -------- ------- -------- -------- Total Operating Expenses...... 78 654,459 42,794 61,916 -- 759,247 -------- -------- -------- ------- -------- -------- Operating Income (Loss)............. (78) 98,191 7,437 4,132 -- 109,682 Interest Expense, net............... 38,731 44,821 12,081 5,818 -- 101,451 Equity in the (Earnings) Losses of Subsidiaries...................... (28,242) 1,346 -- -- 26,896 -- Other Expense, net.................. (6,970) (2,133) (6,907) (7) -- (16,017) -------- -------- -------- ------- -------- -------- Income (Loss) Before Provision (Benefit) for Income Taxes and Minority Interest Expense..................... (17,537) 49,891 (11,551) (1,693) (26,896) (7,786) Provision (Benefit) for Income Taxes............................. -- 10,387 (353) 660 -- 10,694 Minority Interests in Losses of Subsidiaries...................... -- -- -- (943) -- (943) -------- -------- -------- ------- -------- -------- Income (Loss) before Extraordinary Item.......... (17,537) 39,504 (11,198) (1,410) (26,896) (17,537) Extraordinary Charge from Early Extinguishment of Debt (Net of Tax Benefit of $8,161)................ (11,819) -- -- -- -- (11,819) -------- -------- -------- ------- -------- -------- Net Income (Loss)............. $(29,356) $ 39,504 $(11,198) $(1,410) $(26,896) $(29,356) ======== ======== ======== ======= ======== ======== </Table> 16 <Page> IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) (UNAUDITED) (6) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-GUARANTORS (CONTINUED) <Table> <Caption> NINE MONTHS ENDED SEPTEMBER 30, 2000 --------------------------------------------------------------------------- CANADA NON- PARENT GUARANTORS COMPANY GUARANTORS ELIMINATIONS CONSOLIDATED -------- ---------- -------- ---------- ------------ ------------ <S> <C> <C> <C> <C> <C> <C> Revenues: Storage........................... $ 2,323 $ 377,962 $ 17,624 $ 28,434 $ -- $ 426,343 Service and Storage Material Sales........................... 12,740 244,042 18,975 21,779 (3,044) 294,492 -------- --------- -------- -------- ------- --------- Total Revenues.................. 15,063 622,004 36,599 50,213 (3,044) 720,835 Operating Expenses: Cost of Sales (Excluding Depreciation)................... 9,090 295,035 17,343 30,042 -- 351,510 Selling, General and Administrative.................. 2,410 161,382 9,273 11,943 (3,044) 181,964 Depreciation and Amortization..... 2,118 79,860 4,458 6,340 -- 92,776 Stock Option Compensation Expense......................... -- 14,939 -- 171 -- 15,110 Merger-Related Expenses........... -- 5,200 192 261 -- 5,653 -------- --------- -------- -------- ------- --------- Total Operating Expenses........ 13,618 556,416 31,266 48,757 (3,044) 647,013 -------- --------- -------- -------- ------- --------- Operating Income.................... 1,445 65,588 5,333 1,456 -- 73,822 Interest Expense, net............... 45,326 26,080 10,656 3,004 -- 85,066 Equity in the (Earnings) Losses of Subsidiaries...................... (9,440) 1,365 -- -- 8,075 -- Other Expense, net.................. -- (1,367) (4,762) (1,376) -- (7,505) -------- --------- -------- -------- ------- --------- Income (Loss) Before Provision (Benefit) for Income Taxes and Minority Interest Expense..... (34,441) 36,776 (10,085) (2,924) (8,075) (18,749) Provision (Benefit) for Income Taxes............................. (5,499) 17,609 (1,130) 373 -- 11,353 Minority Interests in Earnings (Losses) of Subsidiaries.......... 87 -- -- (1,160) -- (1,073) -------- --------- -------- -------- ------- --------- Income (Loss) before Extraordinary Item............ (29,029) 19,167 (8,955) (2,137) (8,075) (29,029) Extraordinary Charge from Early Extinguishment of Debt (Net of Tax Benefit of $1,928)................ (2,892) -- -- -- -- (2,892) -------- --------- -------- -------- ------- --------- Net Income (Loss)............... $(31,921) $ 19,167 $ (8,955) $ (2,137) $(8,075) $ (31,921) ======== ========= ======== ======== ======= ========= </Table> 17 <Page> IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) (UNAUDITED) (6) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-GUARANTORS (CONTINUED) <Table> <Caption> NINE MONTHS ENDED SEPTEMBER 30, 2001 --------------------------------------------------------------------------- CANADA NON- PARENT GUARANTORS COMPANY GUARANTORS ELIMINATIONS CONSOLIDATED -------- ---------- -------- ---------- ------------ ------------ <S> <C> <C> <C> <C> <C> <C> Cash Flows from Operating Activities: Cash Flows Provided by (Used in) Operating Activities............... $(97,676) $ 196,711 $ 5,045 $ 4,098 $ -- $ 108,178 Cash Flows from Investing Activities: Cash Paid for Acquisitions, net of cash acquired............................. -- (33,903) (230) (20,514) -- (54,647) Capital Expenditures................... -- (114,177) (4,447) (18,147) -- (136,771) Intercompany Loans to Subsidiaries..... (20,204) (11,134) -- -- 31,338 -- Investment in Subsidiaries............. (6,739) (6,739) -- -- 13,478 -- Additions to Customer Acquisition Costs................................ -- (5,862) (292) (448) -- (6,602) Other, Net............................. -- 146 20 804 -- 970 -------- --------- ------- ------- ------- --------- Cash Flows Used in Investing Activities......................... (26,943) (171,669) (4,949) (38,305) 44,816 (197,050) Cash Flows from Financing Activities: Repayment of Debt...................... (110,431) (644) (2,465) (3,155) -- (116,695) Early Retirement of Senior Subordinated Notes................................ (304,352) -- -- -- -- (304,352) Proceeds from Borrowings............... 103,000 73 -- 1,747 -- 104,820 Net Proceeds from Sale of Senior Subordinated Notes................... 427,924 -- -- -- -- 427,924 Debt Repayment to Minority Shareholders......................... -- -- -- (3,908) -- (3,908) Equity Contributions from Minority Shareholders......................... -- -- -- 24,744 -- 24,744 Intercompany Loans from Parent......... -- 17,654 2,501 11,183 (31,338) -- Equity Contribution from Parent........ -- 6,739 -- 6,739 (13,478) -- Proceeds from Exercise of Stock Options.............................. 8,453 -- -- -- -- 8,453 Debt Financing and Stock Issuance Costs................................ (166) -- -- -- -- (166) -------- --------- ------- ------- ------- --------- Cash Flows Provided by Financing Activities......................... 124,428 23,822 36 37,350 (44,816) 140,820 Effect of Exchange Rates on Cash and Cash Equivalents............................ -- -- 782 1,208 -- 1,990 -------- --------- ------- ------- ------- --------- Increase (Decrease) in Cash and Cash Equivalents............................ (191) 48,864 914 4,351 -- 53,938 Cash and Cash Equivalents, Beginning of Period................................. 191 3,336 302 2,371 -- 6,200 -------- --------- ------- ------- ------- --------- Cash and Cash Equivalents, End of Period................................. $ -- $ 52,200 $ 1,216 $ 6,722 $ -- $ 60,138 ======== ========= ======= ======= ======= ========= </Table> 18 <Page> IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) (UNAUDITED) (6) SELECTED CONSOLIDATED FINANCIAL STATEMENTS OF PARENT, GUARANTORS AND NON-GUARANTORS (CONTINUED) <Table> <Caption> NINE MONTHS ENDED SEPTEMBER 30, 2000 ---------------------------------------------------------------------------- CANADA NON- PARENT GUARANTORS COMPANY GUARANTORS ELIMINATIONS CONSOLIDATED --------- ---------- -------- ---------- ------------ ------------ <S> <C> <C> <C> <C> <C> <C> Cash Flows from Operating Activities: Cash Flows Provided by (Used in) Operating Activities.......... $(100,603) $209,958 $(4,465) $ 4,792 $ -- $109,682 Cash Flows from Investing Activities: Cash Paid for Acquisitions, net of cash acquired................... (6,417) (61,926) 55 (7,831) -- (76,119) Capital Expenditures.............. (14,499) (87,254) (4,795) (9,610) -- (116,158) Investment in Convertible Preferred Stock................. -- (6,524) -- -- -- (6,524) Intercompany Loans to Subsidiaries.................... (252,074) (9,958) -- -- 262,032 -- Investment Subsidiaries........... (151) (151) -- -- 302 -- Additions to Customer Acquisition Costs........................... -- (8,897) (1.196) (54) -- (10,147) Other, Net........................ -- 1,113 -- -- -- 1,113 --------- -------- ------- ------- -------- -------- Cash Flows Used in Investing Activities.................... (273,141) (173,597) (5,936) (17,495) 262,334 (207,835) Cash Flows from Financing Activities: Repayment of Debt................. (390,999) (172,407) (6,951) (8,920) -- (579,277) Proceeds from Borrowings.......... 382,500 3,746 1,146 838 -- 388,230 Proceeds from Term Loans.......... 350,000 -- -- -- -- 350,000 Debt Financing and Equity Contribution from Minority Shareholders.................... -- -- -- 9,457 -- 9,457 Intercompany Loans from Parent.... 31,961 198,387 16,756 14,928 (262,032) -- Equity Contribution from Parent... -- 151 -- 151 (302) -- Proceeds from Exercise of Stock Options......................... 5,460 -- -- -- -- 5,460 Debt Financing and Stock Issuance Costs........................... (5,010) (409) -- -- -- (5,419) --------- -------- ------- ------- -------- -------- Cash Flows Provided by Financing Activities.................... 373,912 29,468 10,951 16,454 (262,334) 168,451 Effect of Exchange Rates on Cash and Cash Equivalents.................. -- -- (152) 611 -- 459 --------- -------- ------- ------- -------- -------- Increase in Cash and Cash Equivalents....................... 168 65,829 398 4,362 -- 70,757 Cash and Cash Equivalents, Beginning of Period......................... -- 2,260 -- 1,570 -- 3,830 --------- -------- ------- ------- -------- -------- Cash and Cash Equivalents, End of Period............................ $ 168 $ 68,089 $ 398 $ 5,932 $ -- $ 74,587 ========= ======== ======= ======= ======== ======== </Table> 19 <Page> IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) (UNAUDITED) (7) EARNINGS PER SHARE In accordance with SFAS No. 128, "Earnings per Share," basic net income (loss) per common share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding. The calculation of diluted net income (loss) per share is consistent with that of basic net income (loss) per share but gives effect to all potential common shares (that is, securities such as options, warrants or convertible securities) that were outstanding during the period, unless the effect is antidilutive. For the three and nine months ended September 30, 2001, 2,828 potential common shares have been excluded from the calculation of diluted net loss per share, as their effects are antidilutive. (8) SEGMENT INFORMATION An analysis of the Company's business segment information to the respective information in the consolidated financial statements is as follows: <Table> <Caption> BUSINESS OFF-SITE RECORDS DATA CORPORATE TOTAL MANAGEMENT PROTECTION INTERNATIONAL & OTHER CONSOLIDATED ---------- ---------- ------------- --------- ------------ <S> <C> <C> <C> <C> <C> THREE MONTHS ENDED SEPTEMBER 30, 2001 Revenue.............................. $ 193,064 $ 47,757 $ 38,266 $ 12,586 $ 291,673 Adjusted EBITDA...................... 53,424 11,906 8,950 653 74,933 THREE MONTHS ENDED SEPTEMBER 30, 2000 Revenue.............................. 176,019 43,635 30,136 6,343 256,133 Adjusted EBITDA...................... 46,138 11,709 6,215 3,209 67,271 NINE MONTHS ENDED SEPTEMBER 30, 2001 Revenue.............................. $ 576,204 $140,549 $114,808 $ 37,368 $ 868,929 Adjusted EBITDA...................... 156,629 35,386 26,504 5,817 224,336 Total Assets......................... 1,127,249 79,761 365,371 1,281,506 2,853,887 NINE MONTHS ENDED SEPTEMBER 30, 2000 Revenue.............................. 494,349 123,321 85,636 17,529 720,835 Adjusted EBITDA...................... 133,233 31,540 18,286 4,302 187,361 </Table> Beginning with this quarter, the Company will use the term Adjusted EBITDA, which the Company has consistently referred to in the past as EBITDA. Adjusted EBITDA has been regularly evaluated by the chief operating decision maker in deciding resource allocation and performance assessment. Adjusted EBITDA is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) adjusted for other income (expense), merger-related expenses, stock option compensation expense and minority interest. The Company's consulting business, previously analyzed as part of Business Records Management, is now analyzed within the Corporate & Other category. In addition, certain allocations from Corporate & Other to Business Records Management and Off-Site Data Protection have been changed. To the extent practicable, the prior period numbers shown above have been adjusted to reflect both such changes. 20 <Page> IRON MOUNTAIN INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (IN THOUSANDS) (UNAUDITED) (8) SEGMENT INFORMATION (CONTINUED) A reconciliation from EBITDA to Adjusted EBITDA and the consolidated balances for income (loss) before provision (benefit) for income taxes and minority interest is as follows: <Table> <Caption> THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------- --------------------- 2001 2000 2001 2000 ---------- ---------- --------- --------- <S> <C> <C> <C> <C> EBITDA...................................................... $ 60,012 $63,443 $207,035 $ 160,166 Other Expense............................................. 13,845 3,025 16,017 7,505 Merger-Related Expenses................................... 1,049 1,262 2,227 5,653 Stock Option Compensation Expense......................... -- 171 -- 15,110 Minority Interests in Earnings (Losses) of Subsidiaries... 27 (630) (943) (1,073) -------- ------- --------- --------- ADJUSTED EBITDA............................................. 74,933 67,271 224,336 187,361 Depreciation and Amortization............................. (38,921) (34,829) (112,427) (92,776) Stock Option Compensation Expense......................... -- (171) -- (15,110) Merger-Related Expenses................................... (1,049) (1,262) (2,227) (5,653) Interest Expense.......................................... (33,421) (31,038) (101,451) (85,066) Other Expense............................................. (13,845) (3,025) (16,017) (7,505) -------- ------- --------- --------- LOSS BEFORE PROVISION (BENEFIT) FOR INCOME TAXES AND MINORITY INTEREST......................................... $(12,303) $(3,054) $ (7,786) $ (18,749) ======== ======= ========= ========= </Table> Information as to the Company's operations in different geographical areas is as follows: <Table> <Caption> THREE MONTHS ENDED SEPTEMBER 30, --------------------------------- 2001 2000 --------------- --------------- <S> <C> <C> Revenues: United States............................................... $253,407 $225,997 International............................................... 38,266 30,136 -------- -------- Total Revenues.......................................... $291,673 $256,133 ======== ======== </Table> <Table> <Caption> NINE MONTHS ENDED SEPTEMBER 30, --------------------------------- 2001 2000 --------------- --------------- <S> <C> <C> Revenues: United States............................................... $754,121 $635,199 International............................................... 114,808 85,636 -------- -------- Total Revenues.......................................... $868,929 $720,835 ======== ======== </Table> <Table> <Caption> SEPTEMBER 30, DECEMBER 31, 2001 2000 --------------- --------------- <S> <C> <C> Long-lived Assets: United States............................................... $2,073,157 $2,050,257 International............................................... 425,601 372,171 ---------- ---------- Total Long-lived Assets................................. $2,498,758 $2,422,428 ========== ========== </Table> (9) SUBSEQUENT EVENTS In October 2001, the Company received and accepted tenders for an additional $250 in aggregate principal amount of its 10 1/8% notes and redeemed the remaining $8,099 of outstanding principal amount of its 10 1/8% notes, at a redemption price (expressed as a percentage of principal amount) of 105.06%, plus accrued and unpaid interest, totaling $8,960. 21 <Page> IRON MOUNTAIN INCORPORATED ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the Company's financial condition and results of operations for the three and nine months ended September 30, 2001 and 2000 should be read in conjunction with the consolidated financial statements and footnotes for the three and nine months ended September 30, 2001 included herein, and the year ended December 31, 2000, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 23, 2001. OVERVIEW The Company's consolidated revenues increased $35.5 million, or 13.9%, to $291.7 million for the third quarter of 2001 from $256.1 million for the third quarter of 2000. Internal revenue growth for the third quarter of 2001 was 9.0%, comprised of 10.9% for storage revenue and 6.2% for service revenue. For the nine months ended September 30, 2001, the Company's consolidated revenues were $868.9 million compared to $720.8 million for the same period last year, representing an increase of 20.5%. Internal revenue growth for the nine months ended September 30, 2001 was 10.4%, comprised of 11.7% for storage revenue and 8.4% for service revenue. The Company calculates internal revenue growth in local currency for our international operations and as if Pierce Leahy had merged with the Company on January 1, 2000. The events of September 11, 2001 negatively impacted the Company's service revenues by an estimated $3 million. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2000 Consolidated storage revenues increased $22.1 million, or 14.4%, to $175.0 million for the third quarter of 2001, from $153.0 million for the third quarter of 2000. The increase was attributable to: (i) internal revenue growth of 10.9% resulting primarily from net increases in records and other media stored by existing customers and sales to new customers; and (ii) acquisitions. The total increase in storage revenues was partially offset by the unfavorable effects of foreign currency translation of $0.9 million as a result of the strengthening of the U.S. dollar against certain currencies, primarily the Canadian dollar and the British pound sterling, in which the Company's international segment does business. Consolidated service and storage material sales revenues increased $13.5 million, or 13.1%, to $116.7 million for the third quarter of 2001, from $103.2 million for the third quarter of 2000. The increase was attributable to: (i) internal revenue growth of 6.2% resulting primarily from net increases in service and storage material sales to existing customers and sales to new customers; and (ii) acquisitions. The total increase in service and storage material sales revenues was partially offset by an estimated loss in service revenue of approximately $3 million due to the events of September 11, 2001, and by the unfavorable effects of foreign currency translation of $0.5 million as a result of the strengthening of the U.S. dollar against certain currencies, primarily the Canadian dollar and the British pound sterling, in which the Company's international segment does business. For the reasons discussed above, total consolidated revenues increased $35.5 million, or 13.9%, to $291.7 million for the third quarter of 2001 from $256.1 million for the third quarter of 2000. Consolidated cost of sales (excluding depreciation) increased $14.8 million, or 11.9%, to $139.9 million (48.0% of consolidated revenues) for the third quarter of 2001 from $125.1 million (48.8% of consolidated revenues) for the third quarter of 2000. The dollar increase was consistent with 22 <Page> IRON MOUNTAIN INCORPORATED the revenue growth of the Company and was partially offset by operating efficiencies at the Company's U.S. and Canadian operations, particularly related to real estate management and labor efficiencies obtained as a result of an increase in scale, and by an improvement in gross margin at the Company's expanding Latin American operations of 0.3% of consolidated revenues. In the Company's U.S. and Canadian operations, facility costs increased $4.0 million and labor costs increased $7.0 million, which represented a decrease of 0.2% of consolidated revenues for each category. The decrease as a percent of consolidated revenues was offset by a lower gross margin in the Company's expanding Confidential Destruction services business, negatively impacting the Company's gross margin by 0.3% of consolidated revenues. Consolidated selling, general and administrative expenses increased $13.0 million, or 20.4%, to $76.8 million (26.3% of consolidated revenues) for the third quarter of 2001 from $63.8 million (24.9% of consolidated revenues) for the third quarter of 2000. The dollar increase was consistent with the revenue growth of the Company, while the increase as a percent of revenues was primarily attributable to: (i) expenditures for the Company's marketing and information technology initiatives related to the development of complementary technology-based service offerings (0.6% of consolidated revenues); (ii) investment in management and administration compensation expenses in the Company's expanding Confidential Destruction business (0.4% of consolidated revenues); and (iii) an increase in compensation expense as a percent of revenue due to the loss of service revenue associated with the events of September 11, 2001 (0.1% of consolidated revenues). Consolidated depreciation and amortization expense increased $4.1 million, or 11.7%, to $38.9 million (13.3% of consolidated revenues) for the third quarter of 2001 from $34.8 million (13.6% of consolidated revenues) for the third quarter of 2000. Depreciation expense increased $3.7 million, primarily due to the additional depreciation expense related to the 2000 and 2001 acquisitions, and capital expenditures including racking systems, information systems and expansion of storage capacity in existing facilities. Amortization expense increased $0.4 million, primarily due to the additional amortization expense related to the goodwill generated by the Company's 2000 and 2001 acquisitions. Stock option compensation expense represents a non-cash charge resulting from the acceleration and extension of previously granted stock options as a part of separation agreements with certain executives. There were no such costs in the third quarter of 2001 compared to $0.2 million for the third quarter of 2000. Merger-related expenses are certain expenses directly related to the Company's merger with Pierce Leahy that cannot be capitalized and include system conversion costs, costs of exiting certain facilities, severance, relocation and pay-to-stay payments and other transaction-related costs. Merger-related expenses were $1.0 million (0.4% of consolidated revenues) for the third quarter of 2001 compared to $1.3 million (0.5% of consolidated revenues) for the third quarter of 2000. As a result of the foregoing factors, consolidated operating income increased $4.0 million, or 12.8%, to $35.0 million (12.0% of consolidated revenues) for the third quarter of 2001 from $31.0 million (12.1% of consolidated revenues) for the third quarter of 2000. Consolidated interest expense increased $2.4 million, or 7.7%, to $33.4 million for the third quarter of 2001 from $31.0 million for the third quarter of 2000. The increase was primarily attributable to increased indebtedness related to: (i) the inclusion of $5.5 million of interest expense on the 8 5/8% notes, which were issued in April and September 2001 and (ii) the financing of acquisitions and capital expenditures. These increases were partially offset by reduced interest expense of $4.1 million due to the early retirement of the 11 1/8% and 10 1/8% notes as well as a decline in the weighted average interest rate on the Company's variable rate debt. 23 <Page> IRON MOUNTAIN INCORPORATED Consolidated other expense was $13.8 million for the third quarter of 2001 compared to $3.0 million for the third quarter of 2000. The change was partially due to a $6.9 million impairment charge taken on the Company's investment in convertible preferred stock of a technology development company. Additionally, the Company recorded a non-cash foreign currency loss of $6.5 million, primarily due to the effect of further weakening of the Canadian dollar against the U.S. dollar in the third quarter of 2001, versus the third quarter of 2000, as it relates to Canada Company's 8 1/8% Senior Subordinated Notes and the intercompany balances with the Company's Canadian subsidiaries. As a result of the foregoing factors, consolidated loss before provision (benefit) for income taxes and minority interest increased $9.2 million to $12.3 million (4.2% of consolidated revenues) for the third quarter of 2001 from a loss of $3.1 million (1.2% of consolidated revenues) for the third quarter of 2000. The provision (benefit) for income taxes was a provision of $3.4 million for the third quarter of 2001 compared to a benefit of $7.0 million for the third quarter of 2000. Consolidated net income (loss) before extraordinary item decreased $20.4 million to a loss of $15.8 million (5.4% of consolidated revenues) for the third quarter of 2001 from income of $4.6 million (1.8% of consolidated revenues) for the third quarter of 2000. In addition, the Company recorded an extraordinary charge of $7.0 million (net of tax benefit of $4.9 million) related to the early retirement of the 10 1/8% notes in conjunction with the Company's additional underwritten public offering of the 8 5/8% notes in the third quarter of 2001. As noted in Note 8, Segment Information, of Notes to Consolidated Financial Statements, Adjusted EBITDA (EBITDA adjusted for other income (expense), merger-related expenses, stock option compensation expense and minority interest) is used for the Company's internal measurement of financial performance. In addition, substantially all of the Company's financing agreements contain covenants in which Adjusted EBITDA-based calculations are used as a measure of financial performance for financial ratio purposes. As a result of the foregoing factors, consolidated Adjusted EBITDA increased $7.7 million, or 11.4%, to $74.9 million (25.7% of consolidated revenues) for the third quarter of 2001 from $67.3 million (26.3% of consolidated revenues) for the third quarter of 2000. Excluding the $1.7 million of expenses related to the Company's technology-related service offerings, the Company's Adjusted EBITDA margin for the third quarter of 2001 was 26.3% of consolidated revenues. There were no such costs in the third quarter of 2000. Adjusted EBITDA as a percent of segment revenue for the Company's Business Records Management segment increased from 26.2% to 27.7%, primarily due to labor and transportation efficiencies obtained as a result of an increase in scale. Adjusted EBITDA as a percent of segment revenue for the Company's Off-Site Data Protection segment declined from 26.8% to 24.9%, despite an increase in gross margin, primarily due to decentralization of various overhead functions, an increase in spending for sales and marketing, and an increase in the provision for doubtful accounts. Adjusted EBITDA margins for the Company's International segment increased from 20.6% to 23.4% primarily due to a decrease in management and administrative expenses as a percent of revenue in the Company's Canadian subsidiary as a result of efficiencies gained through the increase in scale with the acquisition of FACS, a Canadian company, in December 2000 and improved margins at the Company's Latin American operations. These gains were partially offset by an increase in the provision for doubtful accounts at the Company's Canadian operations. NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2000 Consolidated storage revenues increased $88.4 million, or 20.7%, to $514.8 million for the first nine months of 2001, from $426.3 million for the first nine months of 2000. The increase was attributable to: (i) internal revenue growth of 11.7% resulting primarily from net increases in records 24 <Page> IRON MOUNTAIN INCORPORATED and other media stored by existing customers and sales to new customers; and (ii) acquisitions, particularly the inclusion of Pierce Leahy's revenue for nine months of 2001 versus eight months of 2000. The total increase in storage revenues was partially offset by the unfavorable effects of foreign currency translation of $3.2 million as a result of the strengthening of the U.S. dollar against certain currencies, primarily the Canadian dollar and the British pound sterling, in which the Company's international segment does business. Consolidated service and storage material sales revenues increased $59.7 million, or 20.3%, to $354.2 million for the first nine months of 2001, from $294.5 million for the first nine months of 2000. The increase was attributable to: (i) acquisitions, particularly the inclusion of Pierce Leahy's revenue for nine months of 2001 versus eight months of 2000; and (ii) internal revenue growth of 8.4% resulting primarily from net increases in service and storage material sales to existing customers and sales to new customers. The total increase in service and storage material sales revenues was partially offset by an estimated loss in service revenue of approximately $3 million due to the events of September 11, 2001, and by the unfavorable effects of foreign currency translation of $2.7 million as a result of the strengthening of the U.S. dollar against certain currencies, primarily the Canadian dollar and the British pound sterling, in which the Company's international segment does business. For the reasons discussed above, total consolidated revenues increased $148.1 million, or 20.5%, to $868.9 million for the first nine months of 2001 from $720.8 million for the first nine months of 2000. Consolidated cost of sales (excluding depreciation) increased $67.3 million, or 19.1%, to $418.8 million (48.2% of consolidated revenues) for the first nine months of 2001 from $351.5 million (48.8% of consolidated revenues) for the first nine months of 2000. The dollar increase was consistent with the revenue growth of the Company and was partially offset by operating efficiencies at the Company's U.S. and Canadian operations, particularly related to real estate management and labor efficiencies obtained as a result of an increase in scale, and by an improvement in gross margin at the Company's expanding Latin American operations of 0.3% of consolidated revenues. The decrease in cost of sales was offset by higher energy costs of 0.3% of consolidated revenues. In the Company's U.S. and Canadian operations, facility costs increased $18.7 million and labor costs increased $28.2 million, which represented a decrease of 0.4% and 0.5% of consolidated revenues, respectively. The decrease as a percent of consolidated revenues was offset by a lower gross margin in the Company's expanding Confidential Destruction services business, negatively impacting the Company's gross margin by 0.2% of consolidated revenues. Consolidated selling, general and administrative expenses increased $43.9 million, or 24.1%, to $225.8 million (26.0% of consolidated revenues) for the first nine months of 2001 from $182.0 million (25.2% of consolidated revenues) for the first nine months of 2000. The dollar increase was primarily attributable to revenue growth of the Company, while the increase as a percent of consolidated revenues was primarily attributable to expenditures for the Company's marketing and information technology initiatives related to the development of complementary technology-based service offerings (0.4% of consolidated revenues) as well as an increased provision for doubtful accounts, from 0.6% of consolidated revenues for the nine months ended September 30, 2000, to 1.0% of consolidated revenues in 2001. Consolidated depreciation and amortization expense increased $19.7 million, or 21.2%, to $112.4 million (12.9% of consolidated revenues) for the first nine months of 2001 from $92.8 million (12.9% of consolidated revenues) for the first nine months of 2000. Depreciation expense increased $14.3 million, primarily due to the additional depreciation expense related to the 2000 and 2001 acquisitions, particularly the inclusion of Pierce Leahy's depreciation expense for nine months of 2001 versus eight months of 2000, and capital expenditures including racking systems, information systems 25 <Page> IRON MOUNTAIN INCORPORATED and expansion of storage capacity in existing facilities. Amortization expense increased $5.4 million, primarily due to the additional amortization expense related to the goodwill generated by the Company's 2000 and 2001 acquisitions, particularly Pierce Leahy. Stock option compensation expense represents a non-cash charge resulting from the acceleration and extension of previously granted stock options as a part of separation agreements with certain executives. There were no such costs for the first nine months of 2001 compared to $15.1 million for the same period of 2000. Merger-related expenses are certain expenses directly related to the Company's merger with Pierce Leahy that cannot be capitalized and include system conversion costs, costs of exiting certain facilities, severance, relocation and pay-to-stay payments and other transaction-related costs. Merger-related expenses were $2.2 million (0.3% of consolidated revenues) for the first nine months of 2001 compared to $5.7 million (0.8% of consolidated revenues) for the same period of 2000. As a result of the foregoing factors, consolidated operating income increased $35.9 million, or 48.6%, to $109.7 million (12.6% of consolidated revenues) for the first nine months of 2001 from $73.8 million (10.2% of consolidated revenues) for the first nine months of 2000. Consolidated interest expense increased $16.4 million, or 19.3%, to $101.5 million for the first nine months of 2001 from $85.1 million for the first nine months of 2000. The increase was primarily attributable to increased indebtedness related to: (i) the inclusion of Pierce Leahy's debt for nine months of 2001 versus eight months of 2000 resulting in an increase of $4.7 million; (ii) the inclusion of $10.2 million of interest expense on the 8 5/8% notes, which were issued in April and September 2001; and (iii) the financing of acquisitions and capital expenditures. These increases were partially offset by reduced interest expense of $6.2 million due to the early retirement of the 11 1/8% and 10 1/8% notes as well as a decline in the weighted average interest rate on the Company's variable rate debt. Consolidated other expense was $16.0 million for the first nine months of 2001 compared to $7.5 million for the first nine months of 2000. The change was partially due to a $6.9 million impairment charge taken on the Company's investment in convertible preferred stock of a technology development company. Additionally, the Company recorded a non-cash foreign currency loss of $8.6 million, primarily due to the effect of further weakening of the Canadian dollar against the U.S. dollar in the first nine months of 2001, versus the first nine months of 2000, as it relates to Canada Company's 8 1/8% Senior Subordinated Notes and the intercompany balances with the Company's Canadian subsidiaries. As a result of the foregoing factors, consolidated loss before provision for income taxes and minority interest decreased $11.0 million to a loss of $7.8 million (0.9% of consolidated revenues) for the first nine months of 2001 from a loss of $18.7 million (2.6% of consolidated revenues) for the first nine months of 2000. The provision for income taxes was $10.7 million for the first nine months of 2001 compared to $11.4 million for the first nine months of 2000. For the nine months ended September 30, 2001, the Company recorded $29.5 million in nondeductible goodwill amortization expense. Consolidated net loss before extraordinary item decreased $11.5 million to $17.5 million (2.0% of consolidated revenues) for the first nine months of 2001 from $29.0 million (4.0% of consolidated revenues) for the first nine months of 2000. For the first nine months of 2001, the Company recorded an extraordinary charge of $11.8 million (net of tax benefit of $8.2 million) related to the early retirement of the 11 1/8% and 10 1/8% notes in conjunction with the Company's underwritten public offerings of the 8 5/8% notes. 26 <Page> IRON MOUNTAIN INCORPORATED As noted in Note 8, Segment Information, of Notes to Consolidated Financial Statements, Adjusted EBITDA is used for the Company's internal measurement of financial performance. In addition, substantially all of the Company's financing agreements contain covenants in which Adjusted EBITDA-based calculations are used as a measure of financial performance for financial ratio purposes. As a result of the foregoing factors, consolidated Adjusted EBITDA increased $37.0 million, or 19.7%, to $224.3 million (25.8% of consolidated revenues) for the first nine months of 2001 from $187.4 million (26.0% of consolidated revenues) for the first nine months of 2000. Excluding the $3.8 million of expenses related to the Company's technology-related service offerings, the Company's Adjusted EBITDA margin for the first nine months of 2001 was 26.3% of consolidated revenues. There were no such costs in the first nine months of 2000. Adjusted EBITDA as a percent of segment revenue for the Company's Business Records Management segment increased from 27.0% to 27.2%, partially due to an increase in gross margin driven by real estate management and labor efficiencies obtained as a result of an increase in scale. The increase in gross margin was offset by increased costs associated with the decentralization of the Company's administrative functions, which took place in the second half of 2000, as well as an increase in the provision for doubtful accounts. Adjusted EBITDA as a percent of segment revenue for the Company's Off-Site Data Protection segment declined from 25.6% to 25.2% primarily due to (i) decentralization of the Company's various overhead functions; (ii) an increase in spending for sales and marketing; and (iii) a decrease in contribution from the segments' higher margin complementary services due to the relatively slower growth in revenue for those services. This decrease was partially offset by an increase in gross margin as a result of improved labor management, as well as the contribution from the segment's two 2001 acquisitions of higher margin escrow businesses. Adjusted EBITDA margin for the Company's International segment increased from 21.4% to 23.1% due to: (i) the inclusion of an additional month in 2001 of the Company's more profitable Canadian business acquired as a part of the Pierce Leahy acquisition; (ii) efficiency gains from the December 2000 acquisition of FACS, a Canadian company; and (iii) improved margins from the Company's Latin American operations. These increases were partially offset by an increase of $0.9 million in the provision for doubtful accounts of bad debt expense at the Company's European operations. 27 <Page> IRON MOUNTAIN INCORPORATED LIQUIDITY AND CAPITAL RESOURCES The Company has made significant capital investments, consisting primarily of: (i) capital expenditures, primarily related to growth (including investments in real estate, racking systems, information systems and expansion of storage capacity in existing facilities); (ii) acquisitions; and (iii) customer acquisition costs. Cash paid for these investments during the first nine months of 2001 amounted to $136.8 million, $54.6 million and $6.6 million, respectively. These investments have been primarily funded through cash flows from operations, borrowings under the Company's credit agreements and a portion of the net proceeds from the 8 5/8% notes. Included in capital expenditures is $4.2 million related to the Company's technology-based service offerings. Net cash provided by operations was $108.2 million for the first nine months of 2001 compared to $109.7 million for the same period in 2000. The decrease primarily resulted from an increase in trade accounts receivable and prepaid expenses and a decrease in accrued expenses, which was partially offset by an increase in operating income and trade accounts payable. Net cash provided by financing activities was $140.8 million for the first nine months of 2001, consisting primarily of net proceeds of $427.9 million from the sale of the 8 5/8% notes and equity contributions from minority shareholders of $24.7 million, which were partially offset by the early retirement of the 11 1/8% notes and the 10 1/8% notes of $304.4 million. In April 2001, the Company completed an underwritten public offering of $225.0 million in aggregate principal amount of 8 5/8% Senior Subordinated Notes due 2013. The 8 5/8% notes were issued at a price to investors of 100% of par. The net proceeds to the Company, $218.6 million after paying the underwriters' discounts and commissions and related expenses, were used to fund the Company's offer to purchase and consent solicitation relating to its outstanding 11 1/8% Senior Subordinated Notes due 2006, to repay outstanding borrowings under the Company's revolving credit facility and for general corporate purposes, including acquisitions. In April 2001, the Company received and accepted tenders for $124.6 million of the outstanding principal amount of its 11 1/8% notes. The Company recorded an extraordinary charge of $4.8 million (net of tax benefit of $3.3 million) in the second quarter related to the early retirement of the 11 1/8% notes. The Company redeemed the remaining $5.4 million of principal amount of the 11 1/8% notes in July 2001, at a redemption price (expressed as a percentage of principal amount) of 105.563%, plus accrued and unpaid interest, totaling $6.0 million. In September 2001, the Company completed an underwritten public offering which resulted in the issuance of an additional $210.0 million in aggregate principal amount of 8 5/8% Senior Subordinated Notes due 2013. The 8 5/8% notes were issued at a price to investors of 101.50% of par. The net proceeds to the Company, $209.3 million after paying the underwriters' discounts and commissions and related expenses, were used to fund the Company's offer to purchase and consent solicitation relating to its outstanding 10 1/8% Senior Subordinated Notes due 2006 and to redeem the remaining 10 1/8% notes, as well as to repay outstanding borrowings under the Company's revolving credit facility and for general corporate purposes, including future acquisitions. In September 2001, the Company received and accepted tenders for $156.7 million of the $165.0 million aggregate principal amount outstanding of its 10 1/8% notes. The Company recorded an extraordinary charge of $7.0 million (net of tax benefit of $4.9 million) in the third quarter related to the early retirement of the 10 1/8% notes. In October 2001, the Company received and accepted tenders for an additional $0.3 million in aggregate principal amount of its 10 1/8% notes and redeemed the remaining $8.0 million of outstanding principal amount of its 10 1/8% notes, at a redemption price 28 <Page> IRON MOUNTAIN INCORPORATED (expressed as a percentage of principal amount) of 105.06%, plus accrued and unpaid interest, totaling $9.0 million. In July 2001, the Financial Accounting Standards Board issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. Under SFAS No. 142, goodwill and intangible assets with indefinite lives are no longer amortized but are reviewed annually for impairment or more frequently if impairment indicators arise. Separable intangible assets that are not deemed to have indefinite lives will continue to be amortized over their useful lives. The amortization provisions of SFAS No. 142 apply to goodwill and intangible assets acquired after June 30, 2001. With respect to goodwill and intangible assets acquired prior to July 1, 2001, the Company is required to adopt SFAS No. 142 effective January 1, 2002. We expect the adoption of SFAS No. 142 will have the impact of reducing our amortization of goodwill and intangibles commencing January 1, 2002; however, impairment reviews may result in future periodic write-downs. For the nine months ended September 30, 2001, the Company recorded goodwill amortization of $44.2 million. The Company is currently evaluating the effect that the adoption of the provisions of SFAS No. 142 will have on its intangible assets. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In December 2000 and January 2001, the Company entered into certain derivative financial contracts, which are variable-for-fixed swaps of interest payments payable on an aggregate principal amount of $195.5 million of the Company's Tranche B term loan and certain variable operating lease commitments. The Company's investments in Iron Mountain Europe Limited, Iron Mountain South America, Ltd. and other international investments may be subject to risks and uncertainties relating to fluctuations in currency valuation. One of the Company's Canadian subsidiaries, Canada Company, has U.S. dollar denominated debt. Gains and losses due to exchange rate fluctuations related to this debt are recognized in the Company's consolidated statements of operations. As of September 30, 2001, the Company had $177.0 million of variable rate debt outstanding with a weighted average interest rate of 6.17% and $1,323.1 million of fixed rate debt outstanding. If the weighted average variable interest rate had increased by 1%, such increase would have had a negative impact on the Company's net income for the three and nine month periods ended September 30, 2001 by approximately $0.3 and $0.9 million, respectively. See Note 5 of Notes to Consolidated Financial Statements for a discussion of the Company's long-term indebtedness, including the fair values of such indebtedness as of September 30, 2001. 29 <Page> IRON MOUNTAIN INCORPORATED PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS None. (b) REPORTS ON FORM 8-K On September 7, 2001, the Company filed a Current Report on Form 8-K under Items 5 and 7 to announce the Company's proposed underwritten public offering of Senior Subordinated Notes. The Current Report on Form 8-K also updated previously filed unaudited pro forma information for the year ended December 31, 2000 and provided unaudited pro forma information for the six months ended June 30, 2001, to include the impact of the March Debt Issuance and the September Debt Offering, as defined therein, and the related redemptions. On September 17, 2001, the Company filed a Current Report on Form 8-K under Item 5 to announce a change in the record date with respect to the October 1, 2001 interest payment on its Senior Subordinated Notes to September 24, 2001. 30 <Page> IRON MOUNTAIN INCORPORATED Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. <Table> <S> <C> <C> IRON MOUNTAIN INCORPORATED November 14, 2001 By: /s/ JEAN A. BUA - ------------------------------------------- ----------------------------------------- (date) Jean A. Bua VICE PRESIDENT AND CORPORATE CONTROLLER (PRINCIPAL ACCOUNTING OFFICER) </Table> 31