Iron Mountain (IRM) announced third-quarter earnings 24 cents per share, which was in line with the Zacks Consensus Estimate.
 
Revenues
 
Total revenues for the quarter were $764.9 million, a decrease of 2.6% from the $784.3 million reported in the year-ago quarter. This was in line with the company’s guidance range of $760 million to $780 million. Growth in internal revenue (excluding the effects of foreign currency fluctuations and acquisitions) was 2% year over year. The internal growth rate in storage was 7%, core service 1% and complementary service -15%. Currency had a -4% impact on revenue, while the impact of acquisitions was 0%. Internal growth rate of storage revenue in the North American Physical and International Physical business segments were offset to a certain extent by the negative economic impact on digital revenues and activity-based service revenues related to the handling and transportation of items in storage and secure shredding. Complementary service revenues decreased year-over-year, as a result of lower recycled paper prices and softness in the more discretionary revenues, such as project revenues and fulfillment services.
 
By segment, storage represented $433.1 million in sales, up 2.7% year over year. Service and storage material sales were $331.8 million, down 8.5% year over year. The overall growth rate was impacted by significant weakness in foreign currencies including the British pound, the Canadian dollar and the Euro, which reduced the revenue growth rate by 4% compared to the year-ago quarter.
 
Operating Results
 
The gross margin was 58% versus 55.1% in the year-ago quarter, driven primarily by improved storage gross margin and productivity gains in North America, as continued progress on transportation and record center optimization initiatives drove higher service gross margins. Gross margins also benefited from the improved performance in the International Physical business and from the reclassification of certain vehicle leases as capital leases.
 
Operating margin for the third quarter increased to 18.6% versus 17.4% in the year-ago quarter. Excluding the impact of gains and losses from sale of assets, operating income increased 4%, reflecting the flow-through of OIBDA gains. OIBDA for the quarter was $224.0 million.  OIBDA (operating income before depreciation and amortization) (excluding asset gains and losses) grew 6% compared to the year-ago quarter including a $5 million benefit from the restructuring of certain vehicle leases. Excluding the impact of exchange rate fluctuations and lease restructuring, OIBDA (excluding asset gains and losses) grew approximately 10%, compared to the year-ago quarter.
 
The company reported net income of $43.2 million or $0.21 per diluted share, up 144.4% compared to net income of $11.3 million or $0.06 per diluted share in the year-ago period. Excluding the impact from foreign currency rate changes and other discrete tax items, earnings per share came in at 24 cents.
 
Balance Sheet
 
The company exited the quarter with $449.3 million in cash and cash equivalents versus $316.0 million in the previous quarter. Long-term debt (including the current portion) was $3.3 million versus $3.2 million in the previous quarter. In the third quarter, the company maintained tight control over capital spending and continued to improve its capital efficiency. The company has lowered its 2009 capital spending outlook and now expects total capital expenditures to be approximately $360 million for the year.
 
Guidance
 
For the fourth quarter, Iron Mountain expects revenues in the range of $766 million to $786 million, operating income in the range of $128 million to $143 million, and depreciation and amortization of approximately $84 million. OIBDA is expected to be in the range of $212 million to $227 million.
 
For 2009, Iron Mountain expects revenues in the range of $3 billion to $3.2 billion, operating income in the range of $530 million to $545 million, and depreciation and amortization of approximately $320 million. OIBDA is expected to be in the range of $850 million to $865 million. The company expects to incur a capital expenditure of $360 million for the full year.
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