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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

For the Fiscal Year Ended December 31, 20032004

or

For the transition period from                             to                             

Commission File Number 1-13045

IRON MOUNTAIN INCORPORATED
(Exact name of registrant as specified in its charter)

617-535-4766
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:None

        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 ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes ý    No o

        As of June 30, 2003,2004, the aggregate market value of the Common Stock of the registrant held by non-affiliates of the registrant was $2,658,636,421$2,120,312,025 based on the closing price on the New York Stock Exchange on such date.

        Number of shares of the registrant's Common Stock at March 1, 2004:    85,775,5032, 2005: 129,889,755

IRON MOUNTAIN INCORPORATED
20032004 FORM 10-K ANNUAL REPORT

Table of Contents

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        References in this Annual Report on Form 10-K to "the Company", "we", "us" or "our" include Iron Mountain Incorporated and its consolidated subsidiaries, unless the context indicates otherwise.

DOCUMENTS INCORPORATED BY REFERENCE

        Certain information required in Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K is incorporated by reference from our definitive Proxy Statement for the Annual Meeting of Shareholders to be held on or about May 27, 2004.26, 2005.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

        We have made statements in this Annual Report on Form 10-K that constitute "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995 and in other federal securities laws. These forward-looking statements concern our operations, economic performance, financial condition, goals, beliefs, strategies, objectives, plans and current expectations. The forward-looking statements are subject to various known and unknown risks, uncertainties and other factors. When we use words such as "believes," "expects," "anticipates," "estimates" or similar expressions, we are making forward-looking statements.

        Although we believe that our forward-looking statements are based on reasonable assumptions, our expected results may not be achieved, and actual results may differ materially from our expectations. Important factors that could cause actual results to differ from expectations include, among others:

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changes in customer preferences and demand for our services;



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changes in the price for our services relative to the cost of providing such services;



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the cost and availability of financing for contemplated growth;



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our ability or inability to complete acquisitions on satisfactory terms and to integrate acquired companies efficiently;



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in the various digital businesses in which we are engaged, capital and technical requirements will be beyond our means, markets for our services will be less robust than anticipated, or competition will be more intense than anticipated;



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changes in the politicalour ability or inability to complete acquisitions on satisfactory terms and economic environments in the countries in which our international subsidiaries operate, including foreign currency fluctuations;to integrate acquired companies efficiently;



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the possibility that businesscost and availability of financing for contemplated growth;



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Business partners upon whom we depend for technical assistance or management and acquisition expertise outside the U.S. will not perform as anticipated;



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changes in the political and economic environments in the countries in which our international subsidiaries operate; and



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other trends in competitive or economic conditions affecting our financial condition or results of operations not presently contemplated.

        You should not rely upon forward-looking statements except as statements of our present intentions and of our present expectations, which may or may not occur. You should read these cautionary statements as being applicable to all forward-looking statements wherever they appear. We undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers are also urged to carefully review and consider the various disclosures we have made in this document, as well as our other periodic reports filed with the Securities and Exchange Commission (the "Commission" or "SEC").

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PART I

Item 1. Business.

A. Development of Business.

        We are the leader in recordsinformation storage and information managementprotection services. We are an international, full-service provider of recordsinformation storage and information managementprotection and related services, enabling customers to outsource these functions. We have a diversified customer base comprised of numerous commercial, legal, banking, healthcare, accounting, insurance, entertainment, and government organizations, including more than half95% of the Fortune 5001000 and more than two thirdstwo-thirds of the FTSE 100. Our comprehensive solutions help customers save money and manage risks associated with legal and regulatory compliance, protection of vital assets, and business continuity challenges.

        Our core business records management services include: records management program development and implementation based on best-practices to help customers comply with specific regulatory requirements; implementation of policy-based programs that feature secure, cost-effective storage for all major media, including paper, which is the dominant form of records storage, flexible retrieval access and retention management; digital archiving services for secure, legally compliant and cost-effective long-term archiving of electronic records; secure shredding services that ensure privacy and a secure chain of record custody; and specialized services for vital records, film and sound and regulated industries such as healthcare, energy and financial services.

        Our off-site data protection services include: disaster preparedness planning support; secure, off-site vaulting of data backup media for fast and efficient data recovery in the event of a disaster, human error or virus; electronic vaulting to provide managed, online data backup and recovery services for personal computers and server data; and intellectual property management services consisting of escrow services to protect and manage source code and other proprietary information with a trusted, neutral third party.party and domain name management services.

        In addition to our core records management and off-site data protection services, we sell storage materials, including cardboard boxes and magnetic media, and provide consulting, facilities management, fulfillment and other outsourcing services.

        Iron Mountain was founded in 1951 in an underground facility near Hudson, New York. Now in our 5354^rdth year, we have experienced tremendous growth and organizational change, particularly since successfully completing the initial public offering of our common stock in February 1996. Since then, we have built ourselves from a regional business with limited product offerings and annual revenues of $104 million in 1995 into the leader in recordsinformation storage and information managementprotection services, providing a full range of services to customers in markets around the world. For the year ended December 31, 2003,2004, we had total revenues of $1.5$1.8 billion.

        TheOur growth since 1995 has been accomplished primarily through the acquisition of U.S. and international records managementinformation storage and protection services companies. The goal of our current acquisition program is to supplement internal growth by continuing to establish a footprint in targeted international markets and adding fold-in acquisitions both in the U.S. and internationally. Having substantially completed our North American geographic expansion by the end of 2000, we shifted our focus from growth through acquisitions to internal revenue growth. In 2001, as a result of this shift, internal revenue growth exceeded growth through acquisitions for the first time since we began our acquisition program in 1996. This was also the case in 2002 and 2003, and2003. In 2004, revenue growth from acquisitions exceeded internal revenue growth due primarily to the acquisition of the records management operations of Hays plc ("Hays IMS") in July 2003. In the absence of unusual acquisition activity, we expect this trend to continue.achieve most of our revenue growth internally in 2005 and beyond. We expect to achieve our internal revenue growth through a sophisticated new sales and account management coverage model that is designed to drive incremental revenue by acquiring new customer relationships, increasing the revenue generated by existing customer relationships and by effectively selling a wide range of complementary

records management and ancillarydata protection services to expand our new and existing customer relationships.

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        In July 2003, we and Iron Mountain Europe ("IME"), our European joint venture, completed the acquisition of the records management operations of Hays plc ("Hays IMS") in two simultaneous transactions for aggregate cash consideration (including transactions costs) of approximately 205 million British pounds sterling ($333 million). IME acquired the European operations and we acquired the U.S. operations. IME's acquisition of Hays IMS has more than doubled our revenue base in Europe and has significantly strengthened our energy and U.K. public sector business lines. Since the acquisition, we have been integrating the cultures, operating systems and procedures, and information technology systems of IME and Hays IMS.

        In February 2004, we completed the acquisition of Mentmore plc'sthe 49.9% equity interest held by Mentmore plc ("Mentmore") in IMEIron Mountain Europe Limited ("IME"), our European joint venture, for total consideration of 82.5 million British pounds sterling ($154 million) in cash. Included in this amount is the repayment of all trade and working capital funding owed to Mentmore by IME. Completion of the transaction givesgave us 100% ownership of IME, affording us full access to all future cash flows and greater strategic and financial flexibility.

        In November 2004, we acquired Connected Corporation ("Connected") for total cash consideration of $109 million (net of cash acquired). Connected is the technology and market leader in the protection, archiving and recovery of distributed data. Our acquisition of Connected builds on our mission to protect our customers' information and protect our customers through compliant records management.

As of December 31, 2003,2004, we provided services to over 200,000235,000 customer accounts in 8285 markets in the U.S. and 5863 markets outside of the U.S., employed over 13,00014,500 people and operated approximately 800830 records management facilities in the U.S., Canada, Europe and Latin America.

B. Description of Business.

The RecordsInformation Storage and Information ManagementProtection Services Industry

Overview

        Companies in the recordsinformation storage and information managementprotection services industry store and manage information in a variety of media formats, which can broadly be divided into physical and electronic records, and provide a wide range of services related to the records stored. We refer to our general physical records storage and management services as business records management. We define physical records to include paper documents, as well as all other non-electronic media such as microfilm and microfiche, master audio and videotapes, film, X-rays and blueprints. Electronic records include various forms of magnetic media such as computer tapes and hard drives and optical disks. We include in our electronic records storage and management services (1) off-site data protection and (2) digital archiving services.

Physical Records

        Physical records may be broadly divided into two categories: active and inactive. Active records relate to ongoing and recently completed activities or contain information that is frequently referenced. Active records are usually stored and managed on-site by the organization that originated them to ensure ready availability. Inactive physical records are the principal focus of the recordsinformation storage and information managementprotection services industry. Inactive records consist of those records that are not needed for immediate access but which must be retained for legal, regulatory and compliance reasons or for occasional reference in support of ongoing business operations. A large and growing specialty subset of the physical records market is medical records. These are active and semi-active records that are often stored off-site with and serviced by a recordsinformation storage and information managementprotection services vendor. Special regulatory requirements often apply to medical records.

Electronic Records

        Electronic records management focuses on the storage of, and related services for, computer media that is either a backup copy of recently processed data or archival in nature. Customer needs for data backup and recovery and archiving are distinctively different. Backup data exists because of the need of many businesses to maintain backup copies of their data in order to be able to recover the data in the event of a system failure, casualty loss or other disaster. It is customary (and a best

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best-practice)practice) for data processing groups to rotate backup tapes to off-site locations on a regular basis and to require multiple copies of such information at multiple sites. We refer to these services as off-site data protection.

        In addition to the physical rotation and storage of backup data, we offer electronic vaulting services as an alternative way for businesses to transfer data to us, and to access the data they have stored with us. Electronic vaulting is a Web-based service that automatically backs up computer data over the Internet and stores it off site in one of our secure data centers. In early 2003, we announced an expansion of the electronic vaulting service to include backup and recovery for personal computer data, answering customers' needs to protect critical business data, which is often orphaned and unprotected on employee laptops and desktop personal computers. In November 2004, we acquired Connected, the market leader in the backup and recovery of this distributed data. We refer to the physical rotation and storage of backup data and electronic vaulting as data protection services.

        There is a growing need for better ways of archiving data for legal, regulatory and compliance reasons and for occasional reference in support of ongoing business operations. Historically, businesses have relied on backup tapes for storing archived data in electronic format, but this process can be costly and ineffective when attempting to search and retrieve the data for litigation or other needs. In addition, many industries, such as healthcare and financial services, are facing increased governmental regulation mandating the way in which electronic records are stored and managed. To help customers meet these growing storage challenges, we introduced digital archiving services. We have experienced early market adoption of these services, especially for e-mail archiving, which enables businesses to identify and retrieve electronic records quickly and cost-effectively, while maintaining regulatory compliance.

Growth of Market

        We believe that the volume of stored physical and electronic records will continue to increase for a number of reasons, including: (1) the rapid growth of inexpensive document producing technologies such as facsimile, desktop publishing software and desktop printing; (2) the continued proliferation of data processing technologies such as personal computers and networks; (3) regulatory requirements; (4) concerns over possible future litigation and the resulting increases in volume and holding periods of documentation; (5) the high cost of reviewing records and deciding whether to retain or destroy them; (6) the failure of many entities to adopt or follow policies on records destruction; and (7) audit requirements to keep backup copies of certain records in off-site locations.

        We believe that paper-based information will continue to grow, not in spite of, but because of, new "paperless" technologies such as e-mail and the Internet. These technologies have prompted the creation of hard copies of such electronic information and have also led to increased demand for electronic records services, such as the storage and off-site rotation of backup copies of magnetic media. In addition, we believe that the proliferation of digital information technologies and distributed data networks has created an emerging need for efficient, cost-effective, high quality solutions for digital archiving and the management of electronic documents.

Consolidation of a Highly Fragmented Industry

        There was significant consolidation within the highly fragmented recordsinformation storage and information managementprotection services industry in North America from 1995 to 2000.2000 and at a slower but continuing pace in recent years. Most recordsinformation storage and information managementprotection services companies serve a single local market, and are often either owner-operated or ancillary to another business, such as a moving and storage company. We believe that the consolidation trend, both in North America and other regions, will continue because of the industry's capital requirements for growth, opportunities for large recordsinformation storage and information managementprotection services providers to achieve economies of scale and customer demands for more sophisticated technology-based solutions.

        We believe that the consolidation trend in the industry is also due to, and will continue as a result of, the preference of certain large organizations to contract with one vendor in multiple cities and countries for multiple services. In particular, customers increasingly demand a single, large, sophisticated company to handle all of their important physical and electronic records needs. Large

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national and multinational companies are better able to satisfy these demands than smaller competitors. We have made, and intend to continue to make, acquisitions of our competitors, many of whom are small, single citysingle-city operators.

Description of Our Business

        We generate our revenues by providing storage for a variety of information media formats, core records management services and an expanding menu of complementary products and services to a large and diverse customer base. Providing outsourced storage for records and information is the mainstay of our customer relationships and provides the foundation for our revenue growth. The core services, which are a vital part of a comprehensive records management program, are highly recurring in nature and therefore very predictable. Core services consist primarily of the handling and transportation of stored records and information. In our secure shredding business, core services consist primarily of the scheduled collection and handling of sensitive records. In 2003,2004, our storage and core service revenues represented approximately 87%86% of our total revenues. In addition to our core services, we offer a wide array of complementary products and services such as performing special project work, selling records and information management services related products, providing fulfillment services and consulting on records management issues. These services address more specific needs and are designed to enhance our customers' overall records management programs. These services complement our core services; however, they are more episodic and discretionary in nature. Revenue generated by our business records and off-site data protection businesses includes both core and complementary components.

        Our various operating segments offer the products and services discussed below. In general, our business records management segment offers records management, secure shredding, healthcare information services, vital records services, and service and courier operations in the U.S. and Canada. Our off-site data protection segment offers data backup and disaster recovery services, vital records services, service and courier operations, and intellectual property protectionmanagement services in the U.S. Our international segment offers elements of all our product and services lines outside the U.S. and Canada. Our corporate and other segment includes our fulfillment, consulting and digital archiving services. Some of our complementary services and products are offered within all of our segments. The amount of revenues derived from our business records management, off-site data protection, international, and corporate and other operating segments and other relevant data, including financial information about geographic areas, for fiscal years 2001, 2002, 2003 and 20032004 are set forth in Note 12 to Notes to Consolidated Financial Statements.

Business Records Management

        The hard copy business records stored by our customers with us by their nature are not very active. These types of records are stored in cartons packed by the customer. We use a proprietary order processing and inventory management system known as theSafekeeperPLUS® system to efficiently store and later retrieve a customer's cartons. Storage charges are generally billed monthly on a per storage unit basis, usually either per carton or per cubic foot of records, and include the provision of space, racking, computerized inventory and activity tracking and physical security.

Off-Site Data Protection

        Off-site data        Data protection services consist of the storage and rotation of backup computer media as part of corporate disaster recovery and business continuity plans. Computer tapes, cartridges and disk packs are transported off-site by our courier operations on a scheduled basis to secure, climate-controlled facilities, where they are available to customers 24 hours a day, 365 days a year, to facilitate data

vaulting service automatically backs up personal computer and server data over the Internet and stores it off site in one of our secure data centers, always available in the event of a disaster.

Healthcare Information Services

        Healthcare information services principally include the handling, storage, filing, processing and retrieval of medical records used by hospitals, private practitioners and other medical institutions. Medical records tend to be more active in nature and are typically stored on specialized open shelving systems that provide easier access to individual files. Healthcare information services also include recurring project work and ancillary services. Recurring project work involves the on-site removal of aged patient files and related computerized file indexing. Ancillary healthcare information services include release of information (medical record copying), temporary staffing, contract coding, facilities management and imaging.

Vital Records Services

        Vital records contain critical or irreplaceable data such as master audio and video recordings, film software source code and other highly proprietary information. Vital records may require special facilities or services, either because of the data they contain or the media on which they are recorded. Our charges for providing enhanced security and special climate-controlled environments for vital records are higher than for typical storage functions. We provide the same ancillary services for vital records as we provide for our other storage operations.

Service and Courier Operations

        Service and courier operations are an integral part of a comprehensive records management program for all physical media including paper and electronic records. They include adding records to storage, temporary removal of records from storage, refiling of removed records, permanent withdrawals from storage, and destruction of records. Service charges are generally assessed for each procedure on a per unit basis. TheSafekeeperPLUS® system controls the service processes from order entry through transportation and invoicing for business records management while theMediaLink™ andSecureBase™ systems manage the process for the off-site data protection services business.

        Courier operations consist primarily of the pickup and delivery of records upon customer request. Charges for courier services are based on urgency of delivery, volume and location and are billed monthly. As of December 31, 2003,2004, we were utilizing a fleet of more than 2,000approximately 2,900 owned or leased vehicles.

Secure Shredding

        Secure shredding is a natural extension of our records management services, completing the lifecyclelife cycle of a record. The service involves the shredding of sensitive documents for corporate customers that, in many cases, also use our services for management of less sensitive archival records. We believe that customers are motivated by increased privacy regulation and the desire to protect their proprietary trade secrets. These services typically include the scheduled pick-up of loose office records which customers accumulate in specially designed secure containers we provide. Complementary to our shredding operations is the sale of the resultant waste paper to third-party recyclers. Through a combination of plant basedplant-based shredding operations and mobile shredding units comprised of custom built trucks, we are able to offer secure shredding services to our customers in all of our existing business records management markets throughout the U.S. and Canada. We seek to expand our presence in this

business through acquisitions and internal start-ups that leverage our existing records management infrastructure.

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Intellectual Property ProtectionManagement Services

        We provide intellectual property protectionmanagement services through our wholly-owned subsidiary, DSI Technology Escrow Services,Iron Mountain Intellectual Property Management, Inc. DSI("IPM"). IPM specializes in third party technology escrow services that protect intellectual property assets such as software source code. In addition, DSIIPM assists in securing intellectual property as collateral for lending, investments and other joint ventures, in managing domain name registrations and transfers, and providesin providing expertise and assistance to brokers and dealers in complying with electronic records regulations of the SEC.

Digital Archiving Services

        Our digital archiving services focus on archiving digital information with long-term preservation requirements. These services represent the digital analogy to our physical records management services. Because of increased litigation risks and regulatory mandates, companies are increasingly aware of the need to apply the same records management policies and retention schedules to electronic data as they do physical records. Typical digital records include e-mail, e-statements, images, electronic documents retained for legal or compliance purposes and other data documenting business transactions.

        The growth rate of mission-critical digital information is accelerating, driven in part by the use of the Internet as a distribution and transaction medium. The rising cost and increasing importance of digital information management, coupled with the increasing availability of telecommunications bandwidth at lower costs, may create meaningful opportunities for us. We continue to cultivate marketing and technology partnerships to support this anticipated growth.

        We believe the issues encountered by customers trying to manage their electronic records are similar to the ones they face in their business records management programs and consist primarily of: (1) storage capacity and the preservation of data; (2) access to and control over the data in a secure environment; and (3) the need to retain electronic records due to regulatory compliance or for litigation support. Our digital archiving service is representative of our commitment to address evolving records management needs and expand the array of services we offer.

Complementary Services and Products

        We offer a variety of additional services which customers may request or contract for on an individual basis. These services include conducting records inventories, packing records into cartons or other containers, and creating computerized indices of files and individual documents. We also provide services for the management of active records programs. We can provide these services, which generally include document and file processing and storage, both off-site at our own facilities and by supplying our own personnel to perform management functions on-site at the customer's premises.

        Other complementary lines of business that we operate include fulfillment services and professional consulting services. Fulfillment services are performed by our wholly-owned subsidiary, COMAC, Inc. ("COMAC"). COMAC stores customer marketing literature and delivers this material to sales offices, trade shows and prospective customers' sites based on current and prospective customer orders. In addition, COMAC assembles custom marketing packages and orders, and manages and provides detailed reporting on customer marketing literature inventories.

        We provide professional consulting services to customers, enabling them to develop and implement comprehensive records and information management programs. Our consulting business draws on our experience in recordsinformation storage and information managementprotection services to analyze the practices of companies and assist them in creating more effective programs of records and information management. Our

consultants work with these customers to develop policies for document review, analysis and evaluation and for scheduling of document retention and destruction.

        We also sell: (1) a full line of specially designed corrugated cardboard, metal and plastic storage containers; (2) magnetic media products including computer tapes, cartridges and drives, tape cleaners

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and supplies and CDs; and (3) computer room equipment and supplies such as racking systems, furniture, bar code scanners and printers.

Financial Characteristics of Our Business

        Our financial model is based on the recurring nature of our revenues. The historical predictability of this revenue stream and the resulting operating income before depreciation and amortization (OIBDA)("OIBDA")¹ allow us to operate with a high degree of financial leverage. Our primary financial goal has always been, and continues to be, to increase consolidated OIBDA in relation to capital invested, even as our focus has shifted from growth through acquisitions to internal revenue growth. Our business has the following financial characteristics:

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For a more detailed definition and reconciliation of OIBDA and a discussion of why we believe this measure provides relevant and useful information to our current and potential investors, see Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Measures."

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Recurring Revenues.  We derive a majority of our consolidated revenues from fixed periodic, usually monthly, fees charged to customers based on the volume of records stored. Our quarterly revenues from these fixed periodic storage fees have grown for 6064 consecutive quarters. Once a customer places physical records in storage with us and until those records are destroyed or permanently removed, for which we typically receive a service fee, we receive recurring payments for storage fees without incurring additional labor or marketing expenses or significant capital costs. Similarly, contracts for the storage of electronic backup media consist primarily of fixed monthly payments. In each of the last five years, storage revenues, which are stable and recurring, have accounted for approximately 58%over 57% of our total revenues. This stable and growing storage revenue base also provides the foundation for increases in service revenues and OIBDA.

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Historically Non-Cyclical Storage Business.  We have not experienced any significant reductions in our storage business as a result of past general economic downturns, although we can give no assurance that this would be the case in the future. We believe that companies that have outsourced records and information management services are less likely during economic downturns to incur the move-out costs and other expenses associated with switching vendors or moving their records and information management services programs in-house. However, during this most recent economic slowdown, the rate at which some customers added new cartons to their inventory was below historical levels. The net effect of these factors is the continued growth of our storage revenue base, albeit at a lower rate.

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We define "Carton" as a measurement of volume equal to a single standard storage carton, approximately 1.2 cubic feet.

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We define "Net Carton Growth From Existing Customers" as the net increase in Cartons attributable to existing customers. This calculation excludes our Latin American and European operations as well as a portion of our medical records operations.

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Inherent Growth from Existing Physical Records Customers.  Our physical records customers have on average generated additional Cartons²cartons at a faster rate than stored Cartonscartons have been destroyed or permanently removed. From January 1, 1998 through December 31, 2001, our annual Net Carton Growth From Existing Customers³ rangedWe estimate that inherent growth from existing customers represents approximately 4% to approximately 6%. For the years ended December 31, 2002 and 2003, Net Carton Growth from Existing Customers was between 3% to 4%.half of total net volume growth in North America. We believe the consistent growth of our physical records storage revenues is the result of a number of factors, including: (1) the trend toward increased records retention; (2) customer satisfaction with our services; and (3) the costs and

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inconvenience of moving storage operations in-house or to another provider of recordsinformation storage and information managementprotection services.





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Diversified and Stable Customer Base.  As of December 31, 2003,2004, we had over 200,000235,000 customer accounts in a variety of industries. We currently provide services to numerous commercial, legal,




banking, healthcare, accounting, insurance, entertainment and government organizations, including more than half95% of the Fortune 5001000 and more than two thirdstwo-thirds of the FTSE 100. No customer accounted for more than 2% of our consolidated revenues for the year ended December 31, 2003. From January 1, 19992004. For the years 2002 through December 31, 2003,2004, the average annual permanent removals of Cartons, not including destructions, represented approximately 3% of total Cartons stored.

volume reduction due to customers terminating their relationship with us was less than 2%.

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Capital Expenditures Related Primarily to Growth.  Our recordsinformation storage and information management servicesprotection business requires limited annual capital expenditures made in order to maintain our current revenue stream. From January 1, 1999For the years 2002 through December 31, 2003,2004, over 85% of our aggregate capital expenditures were growth-related investments, primarily in storage systems, which include racking, building and leasehold improvements, computer systems hardware and software, and buildings. These growth-related capital expenditures are primarily discretionary and create additional capacity for increases in revenues and OIBDA. In addition, since shifting our focus from growth through acquisitions to internal revenue growth, our capital expenditures, made primarily to support our internal revenue growth, have exceeded the aggregate acquisition consideration we conveyed in both 2001 and 2002. Although this was not the case in 2003 due to the acquisition of Hays IMS and in 2004 due to the acquisition of Connected and the 49.9% equity interest held by Mentmore in IME, we expect this to be the case in 20042005 and thereafter absent unusual acquisition activity.thereafter.

Growth Strategy

        Our objective is to maintain our position as the leader in recordsinformation storage and information managementprotection services. In the U.S. and Canada, we seek to be one of the largest recordsinformation storage and information managementprotection services providers in each of our geographic markets. Internationally, our objectives are to continue to capitalize on our expertise in the recordsinformation storage and information managementprotection services industry and to make additional acquisitions and investments in selected international markets. Our primary avenues of growth are: (1) increased business with existing customers; (2) the addition of new customers; (3) the introduction of new products and services such as secure shredding, electronic vaulting and digital archiving; and (4) selective acquisitions in new and existing markets.

Growth from Existing Customers

        Our existing customers storing physical records contribute to storage and storage-related service revenues growth because on average they generate additional Cartonscartons at a faster rate than old Cartonscartons are destroyed or permanently removed. In order to maximize growth opportunities from existing customers, we seek to maintain high levels of customer retention by providing premium customer service through our local account management staff.

        Our new sales coverage model is designed to identify and capitalize on incremental revenue opportunities by reallocating our sales resources based on a more sophisticated segmentation of our customer base and selling additional business records management and off-site data protection services within our existing customer relationships. We also seek to leverage existing business relationships with our customers by selling complementary services and products. Services include records tracking, indexing, customized reporting, vital records management and consulting services.

Addition of New Customers

        Our sales forces are dedicated to three primary objectives: (1) establishing new customer account relationships, (2) generating additional revenue from existing customers and (3) expanding new and

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existing customer relationships by effectively selling a wide array of complementary services and products. In order to accomplish these objectives, our sales forces draw on our U.S. and international marketing organizations and senior management. As a result of acquisitions and our decision to recruit additional qualified sales professionals, we have increased the size of our sales force to approximately 600700 such professionals as of December 31, 20032004 from approximately 450 as of December 31, 2002.






Introduction of New Products and Services

        We continue to expand our menu of products and services. We have established a national presence in the U.S. and Canadian secure shredding industry and offer new electronic vaulting and digital archiving services. These new products and services allow us to further penetrate our existing customer accounts and attract new customers in previously untapped markets.

Growth through Acquisitions

        Our acquisition strategy includes expanding geographically, as necessary, and increasing our presence and scale within existing markets through "fold-in" acquisitions. We have a successful record of acquiring and integrating recordsinformation storage and information managementprotection services companies. Between January 1, 1996 and December 31, 2000, the height of our acquisition activity, we completed 78 acquisitions in the U.S., Canada,North America, Europe and Latin America for total consideration of approximately $2 billion.billion, including approximately $1.0 billion associated with our merger with Pierce Leahy Corp. ("Pierce Leahy") in February 2000. During that period, we substantially completed our geographic expansion in the U.S. and CanadaNorth America and began to expand in Europe and Latin America. Between January 1, 2001 and December 31, 2003,2004, we completed an additional 3463 acquisitions for total consideration of approximately $500$890 million, (includingprimarily in the information storage and protection services industry in North America, Europe and Latin America and the secure shredding industry in North America. The major transactions during this period included the Hays IMS acquisition in July 2003 for approximately $333 million), primarilymillion, the acquisition of the 49.9% interest held by Mentmore in the secure shredding industryIME for approximately 82.5 million British pounds sterling ($154 million) in the U.S.cash in February 2004 and the records and information management industryConnected acquisition in the U.S., Canada, Europe and Latin America.November 2004 for approximately $109 million, net of cash acquired.

Acquisitions in the U.S. and Canada

        We intend to continue our acquisition program in the U.S. and Canada focusing on the secure shredding industry, expanding geographically, as necessary and building scale in some of our smaller markets through "fold-in" acquisitions. However, given the small number of large acquisition prospects and our increased revenue base, future acquisitions are expected to be less significant to overall U.S. and Canadian revenue growth than they were prior to 2001.

International Growth Strategy

        We also intend to continue to make acquisitions and investments in recordsinformation storage and information managementprotection services businesses outside the U.S. and Canada. We have acquired and invested in, and seek to acquire and invest in, recordsinformation storage and information managementprotection services companies in countries, and, more specifically, markets within such countries, where we believe there is sufficient demand from existing multinational customers or the potential for significant growth. Since beginning our international expansion program in January 1999, we have directly and through joint ventures, expanded our operations into 1920 countries in Europe and Latin America. These transactions have taken, and may continue to take, the form of acquisitions of the entire business or controlling or minority investments, with a long-term goal of full ownership. In addition to the criteria we use to evaluate U.S. and Canadian acquisition candidates, we also evaluate the presence in the potential market of our existing customers as well as the risks uniquely associated with an international investment, including those risks described below.

        The experience, depth and strength of local management are particularly important in our international acquisition strategy. As a result, we have formed joint ventures with, or acquired significant interests in, target businesses throughout Europe and Latin America. We began our international expansion by acquiring a 50.1% controlling interest in each of our Iron Mountain Europe

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Limited, Iron Mountain South America, Ltd. ("IMSA") and Sistemas de Archivo Corporativo (a Mexican limited liability company) subsidiaries. Iron Mountain South AmericaIMSA has in some cases bought controlling, yet not






full, ownership in local businesses in order to enhance our local market expertise. We believe this strategy, rather than an outright acquisition, may, in certain markets, better position us to expand the existing business. The local partner benefits from our expertise in the recordsinformation storage and information managementprotection services industry, our access to capital and our technology, and we benefit from our local partner's knowledge of the market, relationships with customers and their presence in the community.

        Our long-term goal is to acquire full ownership of each such business, as evidencedbusiness. To that end, in February 2004 we acquired the 49.9% equity interest held by our recent acquisition of Mentmore'sMentmore in IME and in January 2005 we acquired the 49.9% equity interest in IME discussed previously under "—A. DevelopmentIMSA held by Compass Capital Fund L.P. In addition, we have bought out partnership interests, in whole or in part, in Chile, Mexico, Eastern Europe and the Netherlands. As a result of Business."these transactions we have direct ownership of more than 98% of our international operations.

        Our international investments are subject to risks and uncertainties relating to the indigenous political, social, regulatory, tax and economic structures of other countries, as well as fluctuations in currency valuation, exchange controls, expropriation and governmental policies limiting returns to foreign investors.

        The amount of our revenues derived from international operations and other relevant financial data for fiscal years 2001, 2002, 2003 and 20032004 are set forth in Note 12 to Notes to Consolidated Financial Statements. For the yearyears ended December 31, 2002, 2003 and 2004, we derived approximately 14%, 19% and 27%, respectively, of our total revenues from outside of the U.S. We expect this percentage to increase inAs of December 31, 2002, 2003 and 2004, due to the acquisitionwe have long-lived assets of approximately 16%, 27% and 31%, respectively, from outside of the European operations of Hays IMS.U.S.

Customers

        Our customer base is diversified in terms of revenues and industry concentration. We track customer accounts based on invoices. Accordingly, depending upon how many invoices have been arranged at the request of a customer, one organization may represent multiple customer accounts. As of December 31, 2003,2004, we had over 200,000235,000 customer accounts in a variety of industries. We currently provide services to numerous commercial, legal, banking, healthcare, accounting, insurance, entertainment and government organizations, including more than half95% of the Fortune 5001000 and more than two thirdstwo-thirds of the FTSE 100. No customer accounted for more than 2% of our consolidated revenues for the year ended December 31, 2003.2004.

Competition

        We compete with our current and potential customers' internal recordsinformation storage and information managementprotection services capabilities. We can provide no assurance that these organizations will begin or continue to use an outside company such as Iron Mountain for their future recordsinformation storage and information managementprotection services.

        We compete with multiple recordsinformation storage and information managementprotection services providers in all geographic areas where we operate. We believe that competition for customers is based on price, reputation for reliability, quality of service and scope and scale of technology and that we generally compete effectively based on these factors.

        We also compete with other recordsinformation storage and information managementprotection services providers for companies to acquire. Some of our competitors may possess substantial financial and other resources. If any such competitor were to devote additional resources to the recordsinformation storage and information managementprotection services business and such acquisition candidates or focus their strategy on our markets, our results of operations could be adversely affected.






Alternative Technologies

        We derive most of our revenues from the storage of paper documents and storage-related services. This storage requires significant physical space. Alternative storage technologies exist, many of which

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require significantly less space than paper documents. These technologies include computer media, microform, CD-ROM and optical disk. To date, none of these technologies has replaced paper documents as the principal means for storing information. However, we can provide no assurance that our customers will continue to store most of their records in paper documents format. A significant shift by our customers to storage of data through non-paper documents based technologies, whether now existing or developed in the future, could adversely affect our business. We continue to invest in additional services such as electronic vaulting and digital archiving, designed to address our customers' need for efficient, cost-effective, high quality solutions for electronic records and information management.

Employees

        As of December 31, 2003,2004, we employed over 9,0009,500 employees in the U.S. Directly and through majority-owned joint ventures, as of December 31, 2003, we employed over 4,0005,000 employees outside of the U.S. A small percentageAt December 31, 2004, an aggregate of our460 employees arewere represented by unions. These unionized employees are locatedunions in California and two cities in Canada. As of December 31, 2003, the aggregate number of unionized employees was less than 450.

        All non-union employees are generally eligible to participate in our benefit programs, which include medical, dental, life, short and long-term disability, retirement/401(k) and accidental death and dismemberment plans. Unionized employees receive these types of benefits through their unions. In addition to base compensation and other usual benefits, all full-time employees participate in some form of incentive-based compensation program that provides payments based on revenues, profits, collections or attainment of specified objectives for the unit in which they work. Management believes that we have good relationships with our employees and unions.

Insurance

        For strategic risk transfer purposes, we maintain a comprehensive insurance program with insurers that we believe to be reputable and that have adequate market securitycapitalization in amounts that we believe to be appropriate. Property insurance is purchased on an all-risk basis, including flood and earthquake, subject to certain policy conditions, sublimits and deductibles, and inclusive of the replacement cost of real and personal property, including leasehold improvements, business income loss and extra expense. Separate excess policies for insurer defined Critical Earthquake Zone exposures are maintained at what we believe to be appropriate limits and deductibles for that exposure. Included among other types of insurance that we carry are: workers compensation, general liability, umbrella, automobile, professional and directors and officers liability policies, subject to certain policy conditions, sublimits and deductibles. In 2002, we established a wholly-owned Vermont domiciled captive insurance company as a subsidiary; through the subsidiary we retain and reinsure a portion of our property loss exposure.

        Our standard form of storage contract sets forth an agreed maximum valuation for each carton or other storage unit held by us, which serves as a limitation of liability for loss or damage, as permitted under the Uniform Commercial Code. In contracts containing such limits, such values are nominal, and we believe that in typical circumstances our liability would be so limited in the event of loss or damage to stored items for which we may be held liable. However, some of our agreements with large volume accounts and some of the contracts assumed in our acquisitions contain no such limits or contain higher limits or supplemental insurance arrangements. See "Item 3. Legal Proceedings" for a description of claims by particular customers seeking to rescind their contracts, including limitations on liability, as a result of the fires experienced at our South Brunswick Township, New Jersey facilities in 1997.

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Environmental Matters

        Some of our currently and formerly owned or operated properties were previously used by entities other than us for industrial or other purposes that involved the use or storage of hazardous substances or petroleum products or may have involved the generation of hazardous wastes. In some instances these properties included the operation of underground storage tanks or the presence of asbestos-containing materials. We have undertaken remediation activities at some of our properties. Although






we regularly conduct limited environmental reviews of real property that we intend to purchase, we have not undertaken an in-depth environmental review of all of our owned and operated properties. Under various federal, state and local environmental laws, we may be potentially liable for environmental compliance and remediation costs to address contamination, if any, located at owned and operated properties as well as damages arising from such contamination. Environmental conditions for which we might be liable may also exist at properties that we may acquire in the future. In addition, future regulatory action and environmental laws may impose costs for environmental compliance that do not exist today.

        We currently transfer a portion of our risk of financial loss due to currently undetected environmental matters by purchasing an environmental impairment liability insurance policy, which covers all owned and leased locations. Coverage is provided for both liability and remediation costs.

Internet Website

        Our Internet address iswww.ironmountain.com. Under the "Investor Relations" category on our Internet website, we make available through a hyperlink to a third party SEC website, free of charge, our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") as soon as reasonably practicable after such forms are electronically filed with or furnished to the SEC. We are not including the information contained on or available through our website as a part of, or incorporating such information by reference into, this Annual Report. Copies of our corporate governance guidelines, code of ethics and the charters of our audit, compensation, and nominating and governance committees may be obtained free of charge by writing to our Secretary, Iron Mountain Incorporated, 745 Atlantic Avenue, Boston, Massachusetts, 02111 and will beare available on our websitewww.ironmountain.com under the heading "Corporate Governance" prior to our Annual Meeting of Shareholders to be held on or about May 27, 2004..


Item 2. Properties.


        As of December 31, 2003,2004, we conducted operations through 582627 leased facilities and 207206 facilities that we own or are owned by variable interest entities that we consolidate.own. Our facilities are divided among our reportable segments as follows: Business Records Management (524)(563), Off-Site Data Protection (60)(63), International (187)(193) and Corporate and Other (18)(14). These facilities contain a total of 49.351.7 million square feet of space. RentFacility rent expense was $112.8 million and $134.4 million for the yearyears ended December 31, 2003.2003 and 2004, respectively. The leased facilities typically have initial lease terms of ten years with options to renew for an additional five to ten years. In addition, some of the leases contain either a purchase option or a right of first refusal upon the sale of the property. Our facilities are located throughout North America, Europe and Latin America, with the largest number of facilities in California, Florida, Illinois, New Jersey, Texas, Canada and the U.K. We believe that the space available in our facilities is adequate to meet our current needs, although future growth may require that we acquire additional real property either by leasing or purchasing. See Note 13 to Notes to Consolidated Financial Statements for information regarding our minimum annual rental commitments.

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Item 3. Legal Proceedings.


Sequedex,Pierce, H-W Associates, Pioneer and PierceSequedex Proceedings

        We are involved as a plaintiff or defendant in a series of actions in New Jersey and Pennsylvania generally involving or arising out of assertions by Iron Mountain Incorporated that J. Peter Pierce, Sr. and others engaged in conduct in respect of an entity, Sequedex, LLC ("Sequedex"), that constituted a breach of Mr. Pierce's contractual and fiduciary obligations to us. The following is a summary of each of those cases.






        On March 28, 2002, Iron Mountainwe and Iron Mountain Information Management, Inc. ("IMIM"), one of our wholly owned subsidiaries, commenced an action in the Middlesex County, New Jersey, Superior Court, Chancery Division, captioned Iron Mountain Incorporated and Iron Mountain Information Management, Inc. v. J. Peter Pierce, Sr., Douglas B. Huntley, J. Michael Gold, Fred A. Mathewson, Jr., Michael DiIanni, J. Anthony Hayden, Pioneer Capital, LLC, and Sequedex, LLC. In the complaint, we alleged that defendant J. Peter Pierce, Sr., a former member of our Board of Directors and the former President of IMIM until his termination without cause effective June 30, 2000, violated his fiduciary obligations, as well as various noncompetition and other provisions of an employment agreement with Iron Mountain,us, dated February 1, 2000, by providing direct and/or indirect financial, management and other support to defendant Sequedex. Sequedex was established in October 2000, and competed directly with us in the records and information management services industry. The complaint also alleged that Mr. Pierce and certain of the other defendants, who were employed by or affiliated with Pierce Leahy Corp. prior to the merger of Pierce Leahy with Iron Mountain in February 2000, misappropriated and used our trade secrets and other confidential information. Finally, the complaint asserted claims against Sequedex and others for tortious interference with contractual relations, against all of the defendants for civil conspiracy in respect of the matters described above, and against defendant Michael DiIanni for breach of his employment agreement with IMIM, dated September 6, 2000. The litigation seekssought injunctions in respect of certain matters and recovery of damages against the defendants.

        On April 12, 2002, Iron Mountainwe also initiated a related arbitration proceeding against Mr. Pierce before the Philadelphia, Pennsylvania, Officeoffice of the American Arbitration Association (the "AAA") pursuant to an arbitration clause in the employment agreement between Iron Mountainus and Mr. Pierce. In the arbitration, Mr. Pierce counterclaimed for indemnification of his expenses, including attorneys' fees. We disputed Mr. Pierce's claim. On July 19, 2002, the litigation was stayed pending the outcome of the arbitration proceeding. On February 25, 2003, in response to Iron Mountain'sour request, the AAA removed the arbitrator. The arbitration proceeding was transferred by agreement of the parties to ADR Options, Inc. On February 4, 2004, the arbitrator rendered a decision. The arbitrator did not find the evidence provided by us in our action against Mr. Pierce sufficient to rule in our favor on the particular claims at issue. In addition, the arbitrator ruled that, pursuant to an indemnification provision in Mr. Pierce's employment agreement, we must pay Mr. Pierce's attorneys fees and costs that are attributable to this single arbitration. The arbitrator has established a procedure to ascertain the amount of these fees and expenses, which, in any case are not expected to be material to our financial position or results of operations.expenses. We have recently filed a motion to vacate the arbitrator's decision and award in Middlesex County, New Jersey. On June 16, 2004, that court denied our motion to vacate and confirmed the arbitration decision. We appealed the court's decision to the Appellate Division of the New Jersey whereSuperior Court and voluntarily withdrew, without prejudice, the claims in that case other than those purportedly covered by the arbitration decision. Mr. Pierce filed a motion to dismiss the appeal, which was denied by the Appellate Division. Mr. Pierce subsequently filed an opposition to the appeal. The parties are awaiting notice of a hearing date for the appeal.

        On September 13, 2004, the arbitrator issued a final award, granting Mr. Pierce indemnification for legal expenses incurred in the arbitration in the amount of approximately $1.6 million. Mr. Pierce brought an action in the Superior Court for Middlesex County to confirm such award and such court issued an order to show cause. We opposed this action and filed a motion to dismiss Mr. Pierce's claims and vacate the arbitration award, or in the alternative, for a stay pending disposition of the pending action against Mr. Pierce and others is currently stayed.appeal regarding the motion to vacate.

        On December 16, 2002, Hartford Windsor Associates, L.P. ("H-W Associates"), Hartford General, LLC, J. Anthony Hayden, Mr. Pierce, Frank Seidman and John H. Greenwald, Jr. commenced an action in the Court of Common Pleas, Montgomery County, Pennsylvania, against Iron Mountain Incorporated.us. In the complaint, the plaintiffs allege that H-W Associates purchased a warehouse property in Connecticut to serve as a records storage facility, and entered into a lease for the facility with Sequedex, then a competitor of ours, and that the remaining plaintiffs were limited or general partners of H-W Associates. The plaintiffs also allege that we tortiously interfered with Sequedex's contractual relations with an actual or






prospective customer of Sequedex and, as a result, caused Sequedex to default on its lease to H-W Associates. The complaint seeks damages in excess of $100,000.$0.1 million. We have denied the material allegations in the complaint filed against us by H-W Associates and the other plaintiffs and have since filed counterclaims against the plaintiffs alleging tortious

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interference with our business relationship with one of our longstanding customers. Discovery is proceeding.Certain discovery has been undertaken.

        Also on December 16, 2002, Pioneer Capital L.P. ("Pioneer"), Pioneer Capital Genpar, Inc. ("PCG"), the general partner of Pioneer, and Mr. Pierce, the President of PCG, commenced an action in the Court of Common Pleas, Montgomery County, Pennsylvania, against Iron Mountain Incorporated, C. Richard Reese, John F. Kenny, Jr., Garry Watzke, Schooner Capital LLC ("Schooner") and Vincent J. Ryan. The named individuals are Directors and/or officers of Iron Mountain and Schooner is a shareholder of Iron Mountain. In the complaint, the plaintiffs allege that the defendants had numerous conversations and arrangements with Mr.Thomas Carr, one of Mr. Pierce's and Pioneer's business partners in a company named Logisteq LLC. The plaintiffs further allege that, as a result of such conversations and arrangements, defendants conspired to, and did intentionally, interfere with Pioneer's relationship with its partner and Logisteq. The plaintiffs also allege that defendants damaged Mr. Pierce's reputation in the community by telling Iron Mountainour employees and other third parties that Mr. Pierce breached his employment agreement with Iron Mountain,us, misappropriated and used Iron Mountain'sour confidential information, breached his fiduciary duties to Iron Mountain'sour shareholders and assisted Sequedex, then a competitor of Iron Mountain,ours, in unfairly competing with Iron Mountain.us. Finally, the complaint alleges that the business partner in Logisteq taped conversations with Mr. Pierce and others which allegedly violated privacy laws, that the defendants knew, or should have known, that the tapes were being made without the consent of the individuals and, as a result, Mr. Pierce was harmed. The complaint seeks damages in excess of $5,000,000. Iron Mountain$5.0 million. We and the other defendants have challenged the legal sufficiency of the plaintiffs' pleadings in each of these cases.cases and the court has issued a notice of its intention to dismiss the case for inactivity unless a party gives written notice of his or its intention to proceed by April 15, 2005.

        On September 10, 2003, IMIM filed a complaint in the Court of Common Pleas, Montgomery County, Pennsylvania in a matter related to the litigation between the CompanyIron Mountain Incorporated and Sequedex, Mr. Pierce and others disclosed above. The new matter namesnamed Sequedex, J. Michael Gold and Peter Hamilton as defendants, and alleges that in 2000 defendants Gold and Hamilton, both former IMIM employees, used confidential and proprietary business information that they had obtained while employed by IMIM to form their own records management company, Sequedex. The complaint also allegesalleged unlawful interference with IMIM's contractual relationship with a certain customer and other matters. The defendants filed preliminary objections to our complaint and Iron Mountain haswe answered those preliminary objections. This matter has been voluntarily dismissed without prejudice.

        Prior to the litigation directly pertaining to Mr. Pierce having been filed, inIn approximately October 2000, three former management employees of IMIM became employed by or otherwise associated with Sequedex. IMIM commenced actions against these three former employees to enforce its rights under their confidentiality and non-competition agreements. IMIM has also asserted claims against Sequedex for tortious interference with these agreements, and against both Sequedex and the former employees for misappropriation and use of IMIM's trade secrets and confidential information.

        The defendants in all three cases have denied the material allegations in IMIM's complaints and asserted various affirmative defenses. In addition, Sequedex and the individual defendants filed counterclaims against IMIM and third party complaints against Iron Mountain.Mountain Incorporated. The counterclaims and third party complaints assertasserted claims for tortious interference with certain contracts and prospective business relations between Sequedex and its current and potential customers as well as a claim for trade disparagement and defamation. The defendantdefamation, and sought approximately $58 million in one of these actions sought a declaratory judgment regarding the enforceability of the confidentiality and non-competition agreements at issue in that case and filed a motion for summary judgment seeking to have the non-competition agreement declared void, or to limit its scope. IMIM and Iron Mountain filed motions in all three cases to dismiss the various counterclaims and third-party complaints. All of these motions, i.e., the defendants' motion for summary judgment and IMIM's and Iron Mountain's motions to dismiss, were denied by the court following a hearing on May 7, 2002. As previously disclosed in our quarterly report on Form 10-Q for the quarter ended September 30, 2003, Sequedex furnished a preliminary statement of damages, with an

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estimate of compensatory damages of approximately $172 million and an indication that Sequedex intended to seekplus unspecified punitive damages of approximately $1.5 billion. Sequedex is no longer seeking damages in this amount and in connection with its proposed amended counterclaim, Sequedex has recently furnished a litigation expert's report of damages claiming approximately $59 million plus approximately $6.6 million of pre-judgment interest. Sequedex has indicated that it also intends to seek punitive damages in an undisclosed amount. Extensive discovery has been conducted in the three cases and is ongoing; on the basis of that discovery, it is our belief that Sequedex has not produced any material evidence that we or IMIM acted wrongfully in any respect. Further, limited discovery has been conducted in respect of Sequedex's damages claim; on the basis of that discovery, we do not believe that Sequedex has any foundation, and we believe that it cannot provide any foundation, for its damages calculations. We believe that the damages calculations submitted by Sequedex are not supported by credible evidence and are subject to serious legal, methodological and factual deficiencies.damages. A trial of the three actions in which the Sequedex counterclaims and third party complaints have beenwere asserted is scheduled to commenceoccurred in April and May of 2004. On June 18, 2004, the Court






held that the three individual defendants had not violated their covenants not to compete and had not misappropriated any of IMIM's trade secrets or confidential information, that Sequedex had not tortiously interfered with those agreements, and that IMIM and Iron Mountain Incorporated had not interfered with any of Sequedex's potential or actual business relationships and had not disparaged or defamed Sequedex. The Court thus entered a judgment dismissing all claims and counterclaims. Sequedex and oneappealed the Court's decision to the Appellate Division of the individual defendants recently filed dispositive motions, including motions for summary judgment as to certain of the claims. All of these motions were denied by the court following a hearing on February 24, 2004.

        Discovery is proceeding in each of these cases, other than the arbitration. We intend to prosecute these actions vigorously, as well as to defend ourselves vigorously against the counterclaims and the third party complaints.

South Brunswick Fires Litigation

        In March 1997, we experienced three fires, all of which authorities have determined were caused by arson. The fires resulted in damage to one and destruction of another records and information management services facility in South Brunswick Township, New Jersey.

        Certain of our customers or their insurance carriers have asserted claims as a consequence of the destruction of, or damage to, their records as a result of the fires, including claims with specific requests for compensation and allegations of negligence or other culpability on the part of Iron Mountain. We and our insurers have denied any liability on the part of Iron Mountain as to all of these claims.

        We are presently aware of five pending lawsuits that have been filed against Iron Mountain by certain of our customers and/or their insurers, and one pending lawsuit filed by the insurers of an abutter of one of the South Brunswick facilities. Five of these six lawsuits have been consolidated for pre-trial purposes in the Middlesex County, New Jersey Superior Court. The sixth lawsuit, brought by a single customer, is pendingIron Mountain Incorporated and IMIM filed an appellate brief in the Supreme Court for New York County, New York. A seventh lawsuit, also brought by a single customer, was tried before a federal judge in New Jersey in February 2000, with a defendant's verdict entered in favor of Iron Mountain. An eighth lawsuit filed by an injured firefighter is currently being settled by our insurer for a nominal amount. Several other claims that were originally filed in relationopposition to these lawsuits have been voluntarily dismissed without prejudice by the customers, abutting business owners, and/or their insurance carriers.

        We have denied liability and asserted affirmative defenses in all of the remaining cases arising out of the fires and, in certain of the cases, have asserted counterclaims for indemnification against the plaintiffs. Discovery is ongoing. We deny any liability as a result of the destruction of, or damage to, customer records or property of abutters as a result of the fires, which were beyond our control.Sequedex's appeal. We intend to vigorously defend ourselves against these and any other lawsuits that may arise.

        Our professional liability insurer, together with our general liability and property insurance carriers, have entered intooppose the appeal by Sequedex vigorously. The parties are awaiting notice of a binding agreement with us regarding reimbursement of defense costs and have agreed to ongoing discussions regarding any remaining coverage issues, further defense and/or settlement of these claims.hearing date for the appeal.

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General

        In addition to the matters discussed above, we are involved in litigation from time to time in the ordinary course of business with a portion of the defense and/or settlement costs being covered by various commercial liability insurance policies purchased by us. In the opinion of management, no other material legal proceedings are pending to which we, or any of our properties, are subject.

        The outcome of the South Brunswick fires, Sequedex,Pierce, H-W Associates, Pioneer and PierceSequedex proceedings cannot be predicted with certainty. Based on our present assessment of the situation, after consultation with legal counsel, management does not believe that the outcome of these proceedings will have a material adverse effect on our financial condition or results of operations, although there can be no assurance in this regard.


Item 4. Submission of Matters to a Vote of Security Holders.


        There were no matters submitted to a vote of security holders of Iron Mountain during the fourth quarter of the fiscal year ended December 31, 2003.2004.

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PART II



Item 5. Market for the Registrant's Common Stock, and Related Shareholder Matters.Matters and Issuer Purchases of Equity Securities.


        Our common stock is traded on the New York Stock Exchange ("NYSE") under the symbol "IRM." On May 27, 2004, our board authorized and approved a three-for-two stock split effected in the form of a dividend on our common stock. We issued the additional shares of common stock resulting from this stock dividend on June 30, 2004 to all shareholders of record as of the close of business on June 15, 2004.

The following table sets forth the high and low sale prices on the NYSE, for the years 20022003 and 2003:2004, giving effect to such stock split:

			Sale Prices
			High			Low
2002
	First Quarter		$	32.83		$	29.19
	Second Quarter			33.17			29.10
	Third Quarter			31.30			22.72			Sale Prices
	Fourth Quarter			34.20			20.14			High			Low
2003	2003							2003
	First Quarter		$	39.49		$	30.23	First Quarter		$	26.33		$	20.15
	Second Quarter			40.64			36.63	Second Quarter			27.09			24.42
	Third Quarter			39.94			33.56	Third Quarter			26.63			22.37
	Fourth Quarter			40.15			34.78	Fourth Quarter			26.77			23.19
2004								2004
								First Quarter		$	30.75		$	25.83
								Second Quarter			32.77			27.95
								Third Quarter			33.94			30.21
								Fourth Quarter			35.09			28.80

        The closing price of our common stock on the NYSE on March 1, 20042, 2005 was $45.23.$30.45. As of March 1, 2004,2, 2005, there were 576529 holders of record of our common stock. We believe that there are more than 15,00024,000 beneficial owners of our common stock.

        WeThe only dividends we have not paid dividends on our common stock during the last two years.years was the stock dividend paid in connection with the stock split referenced above. Our Board currently intends to retain future earnings, if any, for the development of our business and does not anticipate paying cash dividends on our common stock in the foreseeable future. Any determinations by our Board to pay cash dividends on our common stock in the future will be based primarily upon our financial condition, results of operations and business requirements. Our Fifth Amended and Restated Credit Agreement dated March 15, 2002 (the "Amended and Restated Credit Agreement")July 8, 2004 contains provisions that limitpermitting the amountpayment of cash dividends we may pay and stock repurchases that we may make.subject to certain limitations.






        The following table sets forth our common stock repurchased for the three months ended December 31, 2004:

Issuer Purchases of Equity Securities

Period		Total Number of Shares Purchased(1)		Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
December 1, 2004-December 31, 2004		10,379		$	30.45		—		—
Total		10,379		$	30.45		—		—

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(1)

Consists of shares tendered by current and former employees, as payment of the exercise price of stock options granted, in accordance with provisions of our equity compensation plans and individual stock option agreements. No shares have been purchased other than as payment of the exercise price of stock options.


Item 6. Selected Financial Data.


        The following selected consolidated statements of operations, balance sheet and other data have been derived from our audited consolidated financial statements. The selected consolidated financial and operating information set forth below should be read in conjunction with Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our Consolidated Financial Statements and the Notes thereto included elsewhere in this filing.

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				Year Ended December 31,																		Year Ended December 31,
				1999			2000(1)			2001(1)			2002(1)(2)			2003(2)						2000(1)			2001(1)			2002(1)(2)			2003(2)			2004(2)
				(In thousands, except per share data)																		(In thousands, except per share data)
Consolidated Statements of Operations Data:	Consolidated Statements of Operations Data:																		Consolidated Statements of Operations Data:
Revenues:	Revenues:																		Revenues:
	Storage			$	317,387		$	585,664		$	694,474		$	759,536		$	875,035		Storage			$	585,664		$	694,474		$	759,536		$	875,035		$	1,043,366
	Service and Storage Material Sales				214,002			418,501			491,244			558,961			626,294		Service and Storage Material Sales				418,501			491,244			558,961			626,294			774,223
		Total Revenues			531,389			1,004,165			1,185,718			1,318,497			1,501,329			Total Revenues			1,004,165			1,185,718			1,318,497			1,501,329			1,817,589
Operating Expenses:	Operating Expenses:																		Operating Expenses:
	Cost of Sales (excluding depreciation)				272,770			500,565			576,538			622,299			680,747		Cost of Sales (excluding depreciation)(3)				500,565			576,538			622,299			680,747			823,899
	Selling, General and Administrative				128,948			246,998			307,800			333,050			383,641		Selling, General and Administrative(3)				246,998			307,800			333,050			383,641			486,246
	Depreciation and Amortization				65,214			126,662			153,271			108,992			130,918		Depreciation and Amortization				126,662			153,271			108,992			130,918			163,629
	Stock Option Compensation Expense				—			15,110			—			—			—		Stock Option Compensation Expense				15,110			—			—			—			—
	Merger-related Expenses				—			9,133			3,673			796			—		Merger-related Expenses				9,133			3,673			796			—			—
	Loss on Disposal/Writedown of Property, Plant and Equipment, Net				208			148			320			774			1,130		Loss (Gain) on Disposal/Writedown of Property, Plant and Equipment, Net				148			320			774			1,130			(681	)
		Total Operating Expenses			467,140			898,616			1,041,602			1,065,911			1,196,436			Total Operating Expenses			898,616			1,041,602			1,065,911			1,196,436			1,473,093
Operating Income	Operating Income				64,249			105,549			144,116			252,586			304,893		Operating Income				105,549			144,116			252,586			304,893			344,496
Interest Expense, Net	Interest Expense, Net				54,425			117,975			134,742			136,632			150,468		Interest Expense, Net				117,975			134,742			136,632			150,468			185,749
Other (Income) Expense, Net					(17	)		10,865			37,485			1,435			(2,564	)
Other Expense (Income), Net																			Other Expense (Income), Net				10,865			37,485			1,435			(2,564	)		(7,988	)
Income (Loss) from Continuing Operations Before Provision for Income Taxes and Minority Interest					9,841			(23,291	)		(28,111	)		114,519			156,989
(Loss) Income from Continuing Operations Before Provision for Income Taxes and Minority Interest																			(Loss) Income from Continuing Operations Before Provision for Income Taxes and Minority Interest				(23,291	)		(28,111	)		114,519			156,989			166,735
Provision for Income Taxes	Provision for Income Taxes				10,579			6,758			17,875			47,318			66,730		Provision for Income Taxes				6,758			17,875			47,318			66,730			69,574
Minority Interests in Earnings (Losses) of Subsidiaries, Net					322			(2,224	)		(1,929	)		3,629			5,622
Minority Interests in (Losses) Earnings of Subsidiaries, Net																			Minority Interests in (Losses) Earnings of Subsidiaries, Net				(2,224	)		(1,929	)		3,629			5,622			2,970
(Loss) Income from Continuing Operations before Discontinued Operations and Cumulative Effect of Change in Accounting Principle	(Loss) Income from Continuing Operations before Discontinued Operations and Cumulative Effect of Change in Accounting Principle				(1,060	)		(27,825	)		(44,057	)		63,572			84,637		(Loss) Income from Continuing Operations before Discontinued Operations and Cumulative Effect of Change in Accounting Principle				(27,825	)		(44,057	)		63,572			84,637			94,191
Income from Discontinued Operations (net of tax)	Income from Discontinued Operations (net of tax)				241			—			—			1,116			—		Income from Discontinued Operations (net of tax)				—			—			1,116			—			—
Loss on Sale of Discontinued Operations (net of tax benefit)					(13,400	)		—			—			—			—
Cumulative Effect of Change in Accounting Principle (net of minority interest)	Cumulative Effect of Change in Accounting Principle (net of minority interest)				—			—			—			(6,396	)		—		Cumulative Effect of Change in Accounting Principle (net of minority interest)				—			—			(6,396	)		—			—
Net (Loss) Income	Net (Loss) Income			$	(14,219	)	$	(27,825	)	$	(44,057	)	$	58,292		$	84,637		Net (Loss) Income			$	(27,825	)	$	(44,057	)	$	58,292		$	84,637		$	94,191
Net (Loss) Income per Common Share—Basic:	Net (Loss) Income per Common Share—Basic:																		Net (Loss) Income per Common Share—Basic:
	(Loss) Income from Continuing Operations			$	(0.02	)	$	(0.35	)	$	(0.53	)	$	0.75		$	0.99
	Income from Discontinued Operations (net of tax)				0.01			—			—			0.01			—		(Loss) Income from Continuing Operations			$	(0.23	)	$	(0.35	)	$	0.50		$	0.66		$	0.73
	Loss on Sale of Discontinued Operations (net of tax benefit)				(0.27	)		—			—			—			—		Income from Discontinued Operations (net of tax)				—			—			0.01			—			—
	Cumulative Effect of Change in Accounting Principle (net of minority interest)				—			—			—			(0.08	)		—		Cumulative Effect of Change in Accounting Principle (net of minority interest)				—			—			(0.05	)		—			—
Net (Loss) Income—Basic	Net (Loss) Income—Basic			$	(0.28	)	$	(0.35	)	$	(0.53	)	$	0.69		$	0.99		Net (Loss) Income—Basic			$	(0.23	)	$	(0.35	)	$	0.46		$	0.66		$	0.73
Net (Loss) Income per Common Share—Diluted:	Net (Loss) Income per Common Share—Diluted:																		Net (Loss) Income per Common Share—Diluted:
	(Loss) Income from Continuing Operations			$	(0.02	)	$	(0.35	)	$	(0.53	)	$	0.74		$	0.98		(Loss) Income from Continuing Operations			$	(0.23	)	$	(0.35	)	$	0.49		$	0.65		$	0.72
	Income from Discontinued Operations (net of tax)				0.01			—			—			0.01			—		Income from Discontinued Operations (net of tax)				—			—			0.01			—			—
	Loss on Sale of Discontinued Operations (net of tax benefit)				(0.27	)		—			—			—			—		Cumulative Effect of Change in Accounting Principle (net of minority interest)				—			—			(0.05	)		—			—
	Cumulative Effect of Change in Accounting Principle (net of minority interest)				—			—			—			(0.07	)		—
Net (Loss) Income—Diluted	Net (Loss) Income—Diluted			$	(0.28	)	$	(0.35	)	$	(0.53	)	$	0.68		$	0.98		Net (Loss) Income—Diluted			$	(0.23	)	$	(0.35	)	$	0.45		$	0.65		$	0.72
Weighted Average Common Shares Outstanding—Basic	Weighted Average Common Shares Outstanding—Basic				50,018			79,688			83,666			84,651			85,267		Weighted Average Common Shares Outstanding—Basic				119,532			125,499			126,977			127,901			129,083
Weighted Average Common Shares Outstanding—Diluted	Weighted Average Common Shares Outstanding—Diluted				50,018			79,688			83,666			86,071			86,718		Weighted Average Common Shares Outstanding—Diluted				119,532			125,499			129,107			130,077			131,176

(footnotes follow)

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		Year Ended December 31,
		1999			2000(1)			2001(1)			2002(1)			2003
		(In thousands)
Other Data:
OIBDA (3)		$	129,463		$	232,211		$	297,387		$	361,578		$	435,811
OIBDA Margin (3)			24.4	%		23.1	%		25.1	%		27.4	%		29.0	%
Ratio of Earnings to Fixed Charges			1.1	x		0.8	x(4)		0.8	x(4)		1.6	x		1.8	x

		As of December 31,
		1999			2000(1)			2001			2002			2003
		(In thousands)
Consolidated Balance Sheet Data:
Cash and Cash Equivalents		$	3,830		$	6,200		$	21,359		$	56,292		$	74,683
Total Assets			1,317,212			2,659,096			2,859,906			3,230,655			3,892,099
Total Long-Term Debt (including Current Portion of Long-Term Debt)			612,947			1,355,131			1,496,099			1,732,097			2,089,928
Shareholders' Equity			488,754			924,458			885,959			944,861			1,066,114

		Year Ended December 31,
		2000(1)			2001(1)			2002(1)			2003			2004
		(In thousands)
Other Data:
OIBDA (4)		$	232,211		$	297,387		$	361,578		$	435,811		$	508,125
OIBDA Margin (4)			23.1	%		25.1	%		27.4	%		29.0	%		28.0	%
Ratio of Earnings to Fixed Charges			0.8	x(5)		0.8	x(5)		1.6	x		1.8	x		1.7	x

		As of December 31,
		2000(1)			2001			2002			2003			2004
		(In thousands)
Consolidated Balance Sheet Data:
Cash and Cash Equivalents		$	6,200		$	21,359		$	56,292		$	74,683		$	31,942
Total Assets			2,659,096			2,859,906			3,230,655			3,892,099			4,442,387
Total Long-Term Debt (including Current Portion of Long-Term Debt)			1,355,131			1,496,099			1,732,097			2,089,928			2,478,022
Shareholders' Equity			924,458			885,959			944,861			1,066,114			1,218,568

Reconciliation of OIBDA to Operating Income and Net (Loss) Income:

			Year Ended December 31,																	Year Ended December 31,
			1999			2000(1)			2001(1)			2002(1)(2)			2003(2)					2000(1)			2001(1)			2002(1)(2)			2003(2)			2004(2)
			(In thousands)																	(In thousands)
OIBDA	OIBDA		$	129,463		$	232,211		$	297,387		$	361,578		$	435,811		OIBDA		$	232,211		$	297,387		$	361,578		$	435,811		$	508,125
Less: Depreciation and Amortization	Less: Depreciation and Amortization			65,214			126,662			153,271			108,992			130,918		Less: Depreciation and Amortization			126,662			153,271			108,992			130,918			163,629
Operating Income	Operating Income			64,249			105,549			144,116			252,586			304,893		Operating Income			105,549			144,116			252,586			304,893			344,496
Less: Interest Expense, Net	Less: Interest Expense, Net			54,425			117,975			134,742			136,632			150,468		Less: Interest Expense, Net			117,975			134,742			136,632			150,468			185,749
	Other (Income) Expense, Net			(17	)		10,865			37,485			1,435			(2,564	)	Other Expense (Income), Net			10,865			37,485			1,435			(2,564	)		(7,988	)
	Provision for Income Taxes			10,579			6,758			17,875			47,318			66,730		Provision for Income Taxes			6,758			17,875			47,318			66,730			69,574
	Minority Interests in Earnings (Losses) of Subsidiaries			322			(2,224	)		(1,929	)		3,629			5,622		Minority Interests in (Losses) Earnings of Subsidiaries			(2,224	)		(1,929	)		3,629			5,622			2,970
	Income from Discontinued Operations (net of tax)			(241	)		—			—			(1,116	)		—		Income from Discontinued Operations (net of tax)			—			—			(1,116	)		—			—
	Loss on Sale of Discontinued Operations (net of tax benefit)			13,400			—			—			—			—		Cumulative Effect of Change in Accounting Principle (net of minority interest)			—			—			6,396			—			—
	Cumulative Effect of Change in Accounting Principle (net of minority interest)			—			—			—			6,396			—
Net (Loss) Income	Net (Loss) Income		$	(14,219	)	$	(27,825	)	$	(44,057	)	$	58,292		$	84,637		Net (Loss) Income		$	(27,825	)	$	(44,057	)	$	58,292		$	84,637		$	94,191

(footnotes follow)

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(1)

On February 1, 2000, we completed a merger with Pierce Leahy in a transaction valued at approximately $1,036,000. The results of the Pierce Leahy merger are reflected in the table above beginning with 11 months of activity in 2000. In addition, we recorded specific charges associated with the integration of the operations of Pierce Leahy in 2000, 2001 and 2002 within merger related expenses and recorded non-cash stock option compensation expense as a result of the Pierce Leahy acquisition in 2000. This merger impacts the comparability of results before and after the merger.



(2)

Effective January 1, 2002, we ceased amortizing our goodwill balance in accordance with Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." The accounting change impacts the comparability of results to previous years. See Note 2(g) to Notes to Consolidated Financial Statements.



(3)

Effective January 1, 2003, we began using the fair value method of accounting in our financial statements using the prospective method in accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure." As a result, we recorded $1,664 and $3,857 for the years ended December 31, 2003 and 2004, respectively, associated with such stock compensation expenses.



(4)

OIBDA is defined as operating income before depreciation and amortization expenses. OIBDA Margin is calculated by dividing OIBDA by total revenues. For a more detailed definition and reconciliation of OIBDA and a discussion of why we believe these measures provide relevant and useful information to our current and potential investors, see Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Measures."



(4)(5)

We reported a loss from continuing operations before provision for income taxes and minority interest for the years ended December 31, 2000 and 2001. We would have needed to generate for the years ended December 31, 2000 and 2001 additional income from operations before provision for income taxes and minority interest of $23,291 and $28,111, respectively, to cover our fixed charges of $154,975 and $177,032, respectively.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.


        The following discussion should be read in conjunction with "Item 6. Selected Financial Data" and the Consolidated Financial Statements and Notes thereto and the other financial and operating information included elsewhere in this filing.

        This discussion contains "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995 and in other federal securities laws. See "Cautionary Note Regarding Forward-Looking Statements" on page ii of this filing.

Overview

        Our revenues consist of storage revenues as well as service and storage material sales revenues. Storage revenues, which are considered a key performance indicator for the recordsinformation storage and information managementprotection services industry, consist of largely recurring periodic charges related to the storage of materials (either on a per unit or per cubic foot of records basis), which are typically retained by customers for many years, and have accounted for approximately 58%over 57% of total consolidated revenues in each of the last five years. Our quarterly revenues from these fixed periodic storage fees have grown for 6064 consecutive quarters. In certain circumstances, based upon customer requirements, storage revenues include periodic charges associated with normal, recurring service activities. Service and storage material sales revenues are comprised of charges for related service activities and courier operations and the sale of storage materials. Related core service revenues arise from additions of new records, temporary removal of records from storage, refiling of removed records, destructions of records, permanent withdrawals from storage and otherthe secure shredding of sensitive records. Our complementary and ancillaryservices revenues arise from special project work, providing fulfillment services, consulting services and sales of software licenses, specially designed storage containers, magnetic media including computer tapes and related supplies. Courier operations consist primarily of the pickup and delivery of records upon customer request. Customers are generally billed on a monthly basis on contractually agreed-upon terms. Our consolidated revenues are subject to variations caused by the net effect of foreign currency translation on revenue derived from outside the U.S. For the years ended December 31, 2003 and 2002,2004, we derived 19.0% and 14.0%26.8%, respectively, of our total revenues from outside the U.S. We expect the percentage ofThe increase in total revenues that we derivederived from outside the U.S. to increase in 2004 due tois primarily a result of our acquisition of the European operations of Hays IMS.

        Cost of sales (excluding depreciation) consists primarily of wages and benefits for field personnel, facility occupancy costs including rent and utilities, transportation expenses including vehicle leases and fuel, other product cost of sales and other equipment costs and supplies. Of these, wages and benefits and facility occupancy costs are the most significant. Trends in total wages and benefits dollars and as a percentage of total consolidated revenue are influenced by changes in headcount and compensation levels, achievement of incentive compensation targets, workforce productivity and variability in costs associated with medical insurance and workers compensation. Trends in facility occupancy costs are similarly impacted by the total number of facilities we occupy, the mix of properties we own versus properties we occupy under operating leases, fluctuations in per square foot occupancy costs, and the levels of utilization of these properties.

        The expansion of our European operations, including the acquisition of Hays IMS, and secure shredding operations havehas resulted in changes to the mix of certain cost of sales components. We expect that until we complete the integration of the European operations of Hays IMS, rationalize our European facilities and maximize their utilization, our facilities costs may increase as a percentage of consolidated revenue, as our European operations become a greater percentage of our consolidated results. Our European and secure shredding operations are more labor intensive; therefore, our labor expense will be higher as a percentage of revenue as compared to our matureNorth American information storage and protection operations. In addition, our secure shredding operations incur higher transportation costs and lower facility costs, as a percentage of consolidated revenue, as compared to our matureNorth American information storage and protection operations.

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        Selling, general and administrative expenses consist primarily of wages and benefits for management, administrative, information technology, sales, account management and marketing






personnel, as well as expenses related to communications and data processing, travel, professional fees, bad debts, training, office equipment and supplies. Trends in total wages and benefits dollars and as a percentage of total consolidated revenue are influenced by changes in headcount and compensation levels, achievement of incentive compensation targets, workforce productivity and variability in costs associated with medical insurance. We expect ourOur adoption of the measurement provisions of SFAS No. 123 "Accounting for Stock-Based Compensation," as amended by SFAS No. 148 "Accounting for Stock-Based Compensation—Transition and Disclosure," will resulthas resulted in increasing amounts of selling, general and administrative expenses in the future.expenses. We began using the fair value method of accounting in our financial statements beginning January 1, 2003 using the prospective method. The prospective method involves recognizing expense for the fair value for all awards granted or modified in the year of adoption and thereafter with no expense recognition for previous awards. As we continue to grant new options subject to these standards and amortize compensation expense associated with options granted after January 1, 2003, we expect our stock compensation expense will grow significantly over the $1.5 million we recorded for such expense in selling, general and administrative expenses for the year ended December 31, 2003. It is not possible to predict the increase in stock compensation expense for 2004 as it is dependent upon the number of options that will be granted throughout 2004 and the valuation assumptions in use at the time those options are granted. The overhead structure of our expanding European operations, as compared to our matureNorth American operations, is more labor intensive and has not achieved the same level of overhead leverage, which may result in an increase in selling, general and administrative expenses, as a percentage of consolidated revenue, as our European operations become a more meaningful percentage of our consolidated results.

        Our depreciation and amortization charges result primarily from the capital-intensive nature of our business. The principal components of depreciation relate to storage systems, which include racking, building and leasehold improvements, computer systems hardware and software, and buildings. Amortization relates primarily to customer relationships and acquisition costs.

        Effective July 1, 2001 and January 1, 2002, we adopted the provisions of SFAS No. 141, "Business Combinations" and SFAS No. 142. SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting. 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. Had SFAS No. 142 been effective January 1, 2001, goodwill amortization expense would have been reduced by $59.2 million ($50.9 million, net of tax) for the year ended December 31, 2001. See Note 2(g) to Notes to Consolidated Financial Statements.

In February 2004, we completed the acquisition of Mentmore plc'sthe 49.9% equity interest held by Mentmore in IME. This transaction should havehad no material impact on revenue or operating income since we already fully consolidate IME's financial results. Since we will be usinghave used the purchase method of accounting for this acquisition, 49.9% of the net assets of IME will behave been adjusted to reflect their fair market value if different from their current carrying value.value on the acquisition date. As a result, we expect this transaction will increaseincreased depreciation and amortization expenses going forward.expenses. Additionally, we will recordhave recorded an increase in interest expense, net associated with debt used to fund this acquisition and will no longer record the minority interest in earnings of subsidiaries, net related to Mentmore's ownership interest in IME.

        All of our costsOur consolidated expenses are subject to variations caused by the net effect of foreign currency translation on costsexpenses incurred by our entities outside the U.S. During 2003,2004, we have seen increases in costsboth revenues and expenses as a result of the strengthening of the British pound sterling, the Euro, and the Canadian dollar against the U.S. dollar, based on an analysis of weighted average rates for the comparable periods. It is impossibledifficult to predict how much foreign currency exchange rates will fluctuate in the future and how those

22

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fluctuations will impact individual balances reported in our consolidated statement of operations; however, givenoperations. Given the relative increase in our international operations, these fluctuations may become material.

Reclassificationsmaterial on individual balances. However, because both the revenues and Changesexpenses are denominated in Presentation

        Previously, consolidated losses (gains) on disposal/writedownthe local currency of property, plant and equipment, net were recorded within various captionsthe country in which they are derived or incurred, the impact of currency fluctuations of our consolidated statements of operations based on the nature of the underlying asset. During the first quarter of 2003, we determined that it was more appropriate to record these gainsoperating income, operating margin and losses separately within our results from operations. We have reflected this change in all applicable tables and discussions for all periods presented within the following discussion of results of operations.

        Previously, debt extinguishment expenses were recorded as an extraordinary charge within our consolidated statements of operations. Effective January 1, 2003, we have reflected these charges to other (income) expense, net in accordance with recent changes in accounting pronouncements. We have reflected this change in all applicable tables and discussions for all periods presented within the following discussion of results of operations.income is mitigated.

Non-GAAP Measures

Operating Income Before Depreciation and Amortization, or OIBDA

        OIBDA is defined as operating income before depreciation and amortization expenses. OIBDA Margin is calculated by dividing OIBDA by total revenues. Our management uses these measures to evaluate the operating performance of our consolidated business. As such, we believe these measures provide relevant and useful information to our current and potential investors. We use OIBDA for planning purposes and multiples of current or projected OIBDA-based calculations in conjunction with our discounted cash flow models to determine our overall enterprise valuation and to evaluate acquisition targets. We believe OIBDA and OIBDA Margin are useful measures to evaluate our ability to grow our revenues faster than our operating expenses and they are an integral part of our internal reporting system utilized by management to assess and evaluate the operating performance of our






business. OIBDA does not include certain items, specifically (1) minority interest in earnings (losses) of subsidiaries, net, (2) other (income) expense, net, (3) income from discontinued operations and loss on sale of discontinued operations and (4) cumulative effect of change in accounting principle that we believe are not indicative of our core operating results. OIBDA also does not include interest expense, net and the provision for income taxes. These expenses are associated with our capitalization and tax structures, which management does not consider when evaluating the profitability of our core operations. Finally, OIBDA does not include depreciation and amortization expenses, in order to eliminate the impact of capital investments, which management believes is better evaluated by comparing capital expenditures to incremental revenue generated and as a percentage of total revenues. OIBDA and OIBDA Margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with accounting principles generally accepted in the Unites States of America, or GAAP, such as operating or net income or cash flows from operating activities (as determined in accordance with GAAP).

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Reconciliation of OIBDA to Operating Income and Net (Loss) Income (In Thousands):

			Year Ended December 31,											Year Ended December 31,
			2001			2002			2003					2002			2003			2004
OIBDA	OIBDA		$	297,387		$	361,578		$	435,811		OIBDA		$	361,578		$	435,811		$	508,125
Less: Depreciation and Amortization	Less: Depreciation and Amortization			153,271			108,992			130,918		Less: Depreciation and Amortization			108,992			130,918			163,629
Operating Income	Operating Income			144,116			252,586			304,893		Operating Income			252,586			304,893			344,496
Less: Interest Expense, Net	Less: Interest Expense, Net			134,742			136,632			150,468		Less: Interest Expense, Net			136,632			150,468			185,749
	Other Expense (Income), Net			37,485			1,435			(2,564	)	Other Expense (Income), Net			1,435			(2,564	)		(7,988	)
	Provision for Income Taxes			17,875			47,318			66,730		Provision for Income Taxes			47,318			66,730			69,574
	Minority Interest			(1,929	)		3,629			5,622		Minority Interest			3,629			5,622			2,970
	Income from Discontinued Operations			—			(1,116	)		—		Income from Discontinued Operations			(1,116	)		—			—
	Cumulative Effect of Change in Accounting Principle			—			6,396			—		Cumulative Effect of Change in Accounting Principle			6,396			—			—
Net (Loss) Income			$	(44,057	)	$	58,292		$	84,637
Net Income												Net Income		$	58,292		$	84,637		$	94,191

Critical Accounting Policies

        Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements and for the period then ended. On an on-going basis, we evaluate the estimates used, including those related to the allowance for doubtful accounts and credit memos, impairments of tangible and intangible assets, income taxes, purchase accounting related reserves, self-insurance liabilities, incentive compensation liabilities, litigation liabilities and contingencies. We base our estimates on historical experience, actuarial estimates, current conditions and various other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities and are not readily apparent from other sources. We use these estimates to assist us in the identification and assessment of the accounting treatment necessary with respect to commitments and contingencies. Actual results may






differ from these estimates. Our critical accounting policies include the following, andwhich are listed in no particular order:

Accounting for Acquisitions

        Part of our growth strategy has included the acquisition of numerous businesses. The purchase price of these acquisitions has been determined after due diligence of the acquired business, market research, strategic planning, and the forecasting of expected future results and synergies. Estimated future results and expected synergies are subject to revisions as we integrate each acquisition and attempt to leverage resources.

        Each acquisition has been accounted for using the purchase method of accounting as defined under the applicable accounting standards at the date of each acquisition, including, Accounting Principles Board Opinion No. 16, "Accounting for Business Combinations," and more recently, SFAS No. 141.141, "Business Combinations." Accounting for these acquisitions has resulted in the capitalization of the cost in excess of fair value of the net assets acquired in each of these acquisitions as goodwill. We estimated the fair values of the assets acquired in each acquisition as of the date of acquisition and these estimates are subject to adjustment. These estimates are subject to final assessments of the fair value of property, plant and equipment, intangible assets, operating leases and deferred income taxes. We complete these assessments within one year of the date of acquisition. We are not aware of any information that would

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indicate that the final purchase price allocations for acquisitions completed in 20032004 would differ meaningfully from preliminary estimates. See Note 7 to Notes to Consolidated Financial Statements.

        In connection with each of our acquisitions, we have undertaken certain restructurings of the acquired businesses to realize efficiencies and potential cost savings. Our restructuring activities include the elimination of duplicate facilities, reductions in staffing levels, and other costs associated with exiting certain activities of the businesses we acquire. The estimated cost of these restructuring activities are included as costs of the acquisition and are recorded as goodwill consistent with the guidance of Emerging Issues Task Force ("EITF") Issue No. 95-3, "Recognition of Liabilities in Connection with a Purchase Business Combination." While we finalize our plans to restructure the businesses we acquire within one year of the date of acquisition, it may take more than one year to complete all activities related to the restructuring of an acquired business.

        Our acquisitions have resulted in a significant accumulation of goodwill. Beginning on January 1, 2002, we ceased to amortize goodwill in accordance with SFAS No. 142. We reviewed goodwill for impairment consistent with the guidelines of SFAS No. 142 using a discounted future cash flow approach to approximate fair value. The result of testing our goodwill for impairment in accordance with SFAS No. 142, as of January 1, 2002, was a non-cash charge of $6.4 million (net of minority interest of $8.5 million), which, consistent with SFAS No. 142, is reported in the caption "cumulative effect of change in accounting principle" in our consolidated statement of operations. Impairment adjustments recognized in the future, if any, are generally required to be recognized as operating expenses. The $6.4 million charge relatesrelated to our South American reporting unit within our international reporting segment. The South American reporting unit failed the impairment test primarily due to a reduction in the expected future performance of the unit resulting from a deterioration of the local economic environment and the devaluation of the currency in Argentina. As goodwill amortization expense in our South American reporting unit is not deductible for tax purposes, this impairment charge is not net of a tax benefit. We haveAt the time of the impairment, we had a controlling 50.1% interest in Iron Mountain South America, Ltd ("IMSA") and the remainder iswas owned by an unaffiliated entity.entity; in January 2005 we acquired the unaffiliated entity's interest in IMSA. IMSA has acquired a controlling interest in entities in which local partners have retained a minority interest in order to enhance our local market expertise. These local partners have no ownership interest in IMSA. This has caused the minority interest portion of the non-cash goodwill impairment charge ($8.5 million) to






exceed our portion of the non-cash goodwill impairment charge ($6.4 million). In accordance with SFAS No. 142, we selected October 1 as our annual goodwill impairment review date. We performed our most recent annual goodwill impairment review as of October 1, 20032004 and noted no impairment of goodwill at our reporting units as of that date. As of December 31, 2003,2004, no factors were identified that would alter this assessment.

Allowance for Doubtful Accounts and Credit Memos

        We maintain an allowance for doubtful accounts and credit memos for estimated losses resulting from the potential inability of our customers to make required payments.payments and disputes regarding billing and service issues. When calculating the allowance, we consider our past loss experience, current and prior trends in our aged receivables and credit memo activity, current economic conditions, and specific circumstances of individual receivable balances. If the financial condition of our customers were to significantly change, resulting in a significant improvement or impairment of their ability to make payments, an adjustment of the allowance may be required. As of December 31, 20022003 and 2003,2004, our allowance for doubtful accounts and credit memos balance totaled $20.3$20.9 million and $18.3$13.9 million, respectively. The decrease in the allowance for doubtful accounts and credit memos as of December 31, 20032004 compared to December 31, 20022003 is primarily attributable to the success of our centralized collection efforts within the U.S. and Canada, which resulted in improved cash collections and an improved accounts receivable aging that enabled us to significantly reduce our allowance for doubtful accounts in the year ended December 31, 2003. Theand credit memos. This decrease in the allowance for doubtful accounts was partially offset by an increase in the

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allowance for doubtful accounts and credit memos associated with businesses acquired during the year ended December 31, 2003, including Hays IMS.2004.

Accounting for Variable Interest Entities

        Three variable interest entities were established to acquire properties and lease those properties to us. These leases were designed to qualify as operating leases for accounting purposes, where the monthly lease expense was recorded as rent expense in our consolidated statements of operations and where the related underlying assets and liabilities were not consolidated in our consolidated balance sheets. We changed the characterization and the related accounting for properties in one variable interest entity ("VIE III") during the third quarter of 2002 and prospectively for new property acquisitions in the fourth quarter of 2002. In addition, anticipating the requirement to consolidate, and in line with our objective of transparent reporting, we voluntarily guaranteed all of the at-risk equity in VIE III and our two other variable interest entities (together, the "Other Variable Interest Entities" and, collectively with VIE III, our "Variable Interest Entities") as of December 31, 2002. These guarantees resulted in our consolidating all of our Variable Interest Entities' assets and liabilities.

        Our Variable Interest Entities were financed with real estate term loans. These real estate term loans have always been and continue to be treated as indebtedness for purposes of our financial covenants under our Amended and Restated Credit Agreement. As of the date they were consolidated into our financial statements, they were also considered indebtedness under our indentures for certain of our senior subordinated notes. As of December 31, 2003, these real estate term loans amounted to $202.6 million. No further financing is currently available to our Variable Interest Entities to fund further property acquisitions. See Note 5 to Notes to Consolidated Financial Statements.

        As of December 31, 2002, we voluntarily guaranteed all of the at-risk equity in VIE III. This resulted in our consolidating all of its remaining assets and liabilities. VIE III's remaining assets and liabilities relate to an interest rate swap agreement, which it entered into upon its inception. This swap agreement hedges the majority of interest rate risk associated with VIE III's real estate term loans. Specifically, VIE III has swapped $97.0 million of floating rate debt to fixed rate debt. Since the time it entered into the swap agreement, interest rates have fallen. As a result, the estimated fair value of the derivative liability held by VIE III, and now consolidated on our balance sheet, related to the swap agreement was $11.0 million at December 31, 2003. This swap has been since inception and continues to be, as of December 31, 2003, an effective hedge in accordance with SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." During the years ended December 31, 2002 and 2003, we recorded depreciation expense of $1.7 million and $1.8 million, respectively, associated with the properties and interest expense of $6.2 million and $8.2 million, respectively, associated with the real estate term loans. See Notes 3, 4 and 5 to Notes to Consolidated Financial Statements.

        In addition, as of December 31, 2002, we voluntarily guaranteed all of the at-risk equity in the Other Variable Interest Entities. This resulted in our consolidating all of their assets and liabilities. As of December 31, 2002, the total impact of consolidating the Other Variable Interest Entities was an increase of $103.9 million both in property, plant and equipment and long-term debt. The underlying leases associated with the Other Variable Interest Entities were treated as operating leases from inception (as early as 1998) through consolidation on December 31, 2002. As a result, during the years ended December 31, 2001 and 2002, we recorded $6.7 million and $5.9 million, respectively, in rent expense in our consolidated statements of operations related to these leases. In 2003, we began recording depreciation expense associated with the properties, interest expense associated with the real estate term loans and no longer have rent expense related to leases associated with the Other Variable Interest Entities in our consolidated financial results. During the year ended December 31, 2003, we recorded depreciation expense of $2.0 million associated with the properties and interest expense of $5.5 million associated with the real estate term loans. If the Other Variable Interest Entities had been consolidated in our historical financial statements as of January 1, 2002: (1) depreciation expense would

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have increased in an amount equal to $2.0 million for the twelve months ended December 31, 2002; and (2) rent expense for these properties would have been reclassified as interest expense in an amount equal to $5.9 million for the twelve months ended December 31, 2002. Consequently, our OIBDA, operating income and interest expense would have increased by $5.9 million, $3.9 million and $5.9 million, respectively, for the twelve months ended December 31, 2002. In addition, net income before provision for income taxes would have decreased by $2.0 million for the twelve months ended December 31, 2002.

        In January and December 2003, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 46 ("FIN 46") and No. 46, revised ("FIN 46R"), "Consolidation of Variable Interest Entities." These statements, which address perceived weaknesses in accounting for entities commonly known as special-purpose or off-balance-sheet, require consolidation of certain interests or arrangements by virtue of holding a controlling financial interest in such entities. Certain provisions of FIN 46R related to interests in special purpose entities were applicable for the period ended December 31, 2003. We must apply FIN 46R to our interests in all entities subject to the interpretation as of the first interim or annual period ending after March 15, 2004. Adoption of this new method of accounting for variable interest entities did not and is not expected to have a material impact on our consolidated results of operations and financial position. As a result of the actions described above, as of December 31, 2002 and December 31, 2003, we did not have any unconsolidated variable interest entities.

Accounting for Derivative Instruments and Hedging Activities

        SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives), and for hedging activities. SFAS No. 133 requires an entity to recognize all derivatives as either assets or liabilities on its balance sheet and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (1) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment; (2) a hedge of the exposure to variable cash flows of a forecasted transaction; or (3) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency-denominated forecasted transaction. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and resulting designation. Unrealized gains and losses are recognized each period as other comprehensive income which is a component of accumulated other comprehensive items included in shareholders' equity, assets and liabilities or earnings depending on the nature of such derivatives. See Note 4 to Notes to Consolidated Financial Statements for a detailed description of our derivative instruments.

        In order for a derivative contract to be designated as a hedge, the relationship between the hedging instrument and the hedged item or transaction must be highly effective. The effectiveness test is performed at the inception of the hedge and each reporting period thereafter, throughout the period that the hedge is designated. Any amounts determined to be ineffective are recorded currently in earnings.

        For fair value hedges, the gains and losses are recorded in earnings each period along with the change in the fair value of the hedged item. For cash flow hedges, the effective portions of the gains and losses are recorded to other comprehensive income and are recognized in earnings concurrent with the disposition of the hedged risks. For hedges of foreign currency the accounting treatment generally






follows the treatment for cash flow hedges or fair value hedges depending on the nature of the foreign currency hedge.

        Although we apply some judgment in the assessment of hedge effectiveness to designate certain derivatives as hedges, the nature of the contracts used to hedge the underlying risks is such that the

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correlation of the changes in fair values of the derivatives and underlying risks is generally high. We had $25.6 million ofnet interest rate risk management liabilities and had a corresponding amount for unrealized losses to other comprehensive income ($16.2of $11.3 million net of tax) related to cash flow hedges at December 31, 2003.2004. During the year ended December 31, 2004, we recorded charges totaling $9.5 million due to the recharacterization of interest rate swaps associated with our real estate term loans. As of December 31, 2004, we had $2.7 million, net of tax of unrealized losses included in other comprehensive income in shareholders' equity.

        We provided the initial financing totaling 190.5 million British pounds sterling to IME our European joint venture, for all of the consideration associated with the July 2003 acquisition of the European operations of Hays IMS using cash on hand and borrowings under our revolving credit facility. We recorded a foreign currency gain of $27.8 million in other (income) expense, net for this intercompany balance for the year ended December 31, 2003. In order to minimize the foreign currency risk associated with providing IME with the consideration necessary for the acquisition of HayHays IMS, we borrowed 80.0 million British pounds sterling under our revolving credit facility to create a natural hedge. We recorded a foreignhedge against our British pounds sterling denominated intercompany receivable from IME. The 80.0 million British pounds sterling outstanding under our revolving credit facility was repaid in March 2004 using proceeds received from IME in repayment of the initial financing, which reduced the intercompany balance. Foreign currency loss of $11.5 million onlosses and gains associated with the translation of this revolving credit balance were equivalent to U.S. dollars in other (income) expense, net forgains and losses recorded on the year ended December 31, 2003.associated portion of the intercompany balance with IME. In addition, we entered into two cross currency swaps with a combined notional value of 100.0 million British pounds sterling. These swaps each havehad a term of one year and at maturity we havehad a right to receive $162.8 million in exchange for 100.0 million British pounds sterling. We havedid not designateddesignate these swaps as hedges and, therefore, all mark to market fluctuations of the swaps arewere recorded in other (income) expense, net in our consolidated statements of operations.operations from inception to cash payment of the swaps. We have recorded foreign currency losses of $19.0 million and $8.7 million for the yearyears ended December 31, 2003 a foreign currency loss of $19.0 millionand 2004, respectively, in other (income) expense, net. Both cross currency swaps were terminated in March 2004 and were settled with proceeds received from IME in repayment of the initial financing.

        One of our interest rate swaps was used to hedge interest rate risk on certain variable operating lease commitments. As a result of the December 31, 2002 consolidation of one of the Other Variable Interest Entitiesour variable interest entities ("VIE I"), the operating lease commitments that were hedged by this swap are now considered to be inter-company transactions and we determined that this hedge was no longer effective on a prospective basis. We have consolidated the real estate term loans of VIE I, and beginning on January 1, 2003 we willbegan prospectively recordrecording interest expense instead of rent expense as we makemade cash interest payments on this debt. The unrealized mark to market losses previouslyIn March 2004, we repaid this real estate term loan. As a result, we recorded in other comprehensive income attributable to this swap ($1.9 million anda charge of $0.8 million netin interest expense due to recharacterization of tax, as of December 31, 2002 and 2003, respectively) will be amortized through other (income) expense, net in our consolidated statement of operations based on the changes ininterest rate swap associated with this real estate term loan. This charge represents the fair market value of the swap, each period thatwhich is a calculation of the net present value of the expected monthly cash payments over the remaining interest payments are madeterm of the swap based on VIE I's external debt.current market conditions, as of the date the real estate term loan was repaid. We are accounting fordid not terminate the swap and expect to enjoy the benefit of the fixed rate financing and will continue to mark to market changes inthe fair market value of the derivative liability to interest expense, net and make our monthly cash payments as required under the swap contract for the remaining term. This swap will terminate in March 2005.

        Another of thisour interest rate swaps was used to hedge interest rate risk on certain variable operating lease commitments. This swap agreement through other (income)was established to hedge the majority of interest rate risk associated with another of our variable interest entity's ("VIE III") real estate term loans. This swap had been since inception an effective hedge in accordance with SFAS No. 133. As a result of repaying VIE III's real estate term loan in August 2004, we recorded an additional $8.7 million in interest expense due to recharacterization of the interest rate swap associated with this real estate term






loan. This charge represents the fair market value of the swap, which is a calculation of the net in our consolidated statementpresent value of operations. This accounting has a net zero impact within our consolidated statementthe expected monthly cash payments over the remaining term of operationsthe swap based on current market conditions, as it relatesof the date the real estate term loan was repaid. We did not terminate the swap and expect to enjoy the amortizationbenefit of unrealizedthe fixed rate financing and will continue to mark to market losses and the fair valuingmarket value of the derivative liability.liability to interest expense, net and make our monthly cash payments as required under the swap contract for the remaining term of approximately three years. See Notes 3, 4 and 5 to Notes to Consolidated Financial Statements.

Accounting for Internal Use Software

        We develop various software applications for internal use. We account for those costs in accordance with the provisions of Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." SOP 98-1 requires computer software costs associated with internal use software to be expensed as incurred until certain capitalization criteria are met. SOP 98-1 also defines which types of costs should be capitalized and which should be expensed. Payroll and related costs for employees who are directly associated with, and who devote time to, the development of internal use computer software projects, to the extent time is spent directly on the project, are capitalized and depreciated over the estimated useful life of the software. Capitalization begins when the design stage of the application has been completed and it is probable that the project will be completed and used to perform the function intended. Depreciation begins when the software is placed in service. Computer software costs that are capitalized are evaluated for impairment in accordance with SFAS No.144, "Accounting for the Impairment or Disposal of Long-Lived Assets."

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        It may be necessary for us to write-off amounts associated with the development of internal use software if the project cannot be completed as intended. Our expansion into new technology-based service offerings requires the development of internal use software that will be susceptible to rapid and significant changes in technology. We may be required to write-off unamortized costs or shorten the estimated useful life if an internal use software program is replaced with an alternative tool prior to the end of the software's estimated useful life. General uncertainties related to expansion into digital businesses, including the timing of introduction and market acceptance of our services, may adversely impact the recoverability of these assets. See Note 2(f) to Notes to Consolidated Financial Statements.

        During the years ended December 31, 2002 and 2003, we replaced internal use software programs, which resulted in the write-off to loss on disposal/writedown of property, plant and equipment, net of the remaining net book value of $1.1 million and $0.7 million, respectively. We did not have any such write-offs during 2004.

Deferred Income Taxes

        We recordhave recorded a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We have considered estimated future taxable incomeIn the ordinary course of our business, there are many transactions and ongoingcalculations where the ultimate tax planning strategies in assessing the amount needed for the valuation allowance.outcome is uncertain. If actual results differ unfavorably from thosecertain of our estimates used, we may not be able to realize all or part of our net deferred tax assets and additional valuation allowances may be required. Although we believe our estimates are reasonable, no assurance can be given that our estimates reflected in the income tax provisions and accruals will equal our actual results. These differences could have a material impact on our income tax provision and operating results in the period in which such determination is made.

        We have not provided deferred taxes on book basis differences related to certain foreign subsidiaries because such basis differences are not expected to reverse in the foreseeable future and we intend to reinvest indefinitely outside the U.S. These basis differences arose primarily through the undistributed book earnings of our foreign subsidiaries. The basis differences could be reversed through a sale of the subsidiaries, the receipt of dividends from subsidiaries as well as certain other events or actions on our part, which would result in an increase in our provision for income taxes.






        In December 2004, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position No. 109-2, "Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004" ("FSP 109-2"). The American Jobs Creation Act of 2004 ("AJCA") introduces a special one-time dividends received deduction on the repatriation of certain foreign earnings to a U.S. taxpayer ("repatriation provision"), provided certain criteria are met. FSP 109-2 provides accounting and disclosure guidance for the repatriation provision. The Treasury Department or Congress will be providing additional clarifying language on key elements of the repatriation provision in the future. FSP 109-2 grants an enterprise additional time beyond the year ended December 31, 2004, in which the AJCA was enacted, to evaluate the effects of the AJCA on its plan for reinvestment or repatriation of unremitted earnings. FSP 109-2 calls for enhanced disclosures of, among other items, the status of our evaluations, the effects of completed evaluations, and the potential range of income tax effects of repatriations. Such disclosures are included in Note 10 to Notes to Consolidated Financial Statements.

Stock-based Compensation

        As of January 1, 2003, we adopted the measurement provisions of SFAS No. 123 and SFAS No. 148. As a result we began using the fair value method of accounting in our financial statements beginning January 1, 2003 using the prospective method. The prospective method involves recognizing expense for the fair value for all awards granted or modified in the year of adoption and thereafter with no expense recognition for previous awards. We will applyhave applied the fair value recognition provisions to all stock based awards granted, modified or settled on or after January 1, 2003 and will continue to provide the required pro forma information for all awards previously granted, modified or settled before January 1, 2003 in our consolidated financial statements. During the year ended December 31, 2003,2004, we recorded $1.7$3.9 million of stock compensation expense in our consolidated statement of operations. Had we elected to recognize compensation cost based on the fair value of all options as of their grant dates as prescribed by SFAS No. 123 and No. 148, we would have recorded stock compensation expense of $4.9 million, $4.5 million, $5.6 million and $5.6$7.0 million in our consolidated statements of operations for the years ended December 31, 2001, 2002, 2003 and 2003,2004, respectively.

29        In December 2004, the Financial Accounting Standards Board issued SFAS No. 123R, "Share-Based Payment." SFAS No. 123R is a revision of SFAS No. 123 and supersedes Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"). Among other items, SFAS No. 123R eliminates the use of APB No. 25 and the intrinsic value method of accounting, and requires companies to recognize the cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value of those awards, in the financial statements. The effective date of SFAS No. 123R is the first reporting period beginning after June 15, 2005, which would be our third quarter of 2005, although early adoption is allowed. SFAS No. 123R permits companies to adopt its requirements using either a "modified prospective" method, or a "modified retrospective" method. Under the "modified prospective" method, compensation cost is recognized in the financial statements beginning with the effective date, based on the requirements of SFAS No. 123R for all share-based payments granted after that date, and based on the requirements of SFAS No. 123 for all unvested awards granted prior to the effective date of SFAS No. 123R. Under the "modified retrospective" method, the requirements are the same as under the "modified prospective" method, but this method also permits entities to restate financial statements of previous periods based on pro forma disclosures made in accordance with SFAS No. 123.

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        SFAS No. 123R also requires that the benefits associated with the tax deductions in excess of recognized compensation cost be reported as a financing cash flow, rather than as an operating cash flow as required under current rules. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after the effective date. Since we do not pay significant cash taxes currently, we do not expect this provision to materially impact our statement of cash flows within the next few years.






        We expect to adopt SFAS No. 123R effective July 1, 2005 using the modified prospective method of implementation. Based on outstanding stock options granted to employees prior to our prospective implementation of the measurement provisions of SFAS No. 123 and SFAS No. 148 on January 1, 2003, we expect to record approximately $0.9 million of stock compensation expense in the second half of 2005 associated with unvested stock option grants issued prior to January 1, 2003.

Self-Insured Liabilities

        We are self-insured up to certain limits for costs associated with workers' compensation claims, vehicle accidents, property and general business liabilities, and benefits paid under employee healthcare and long-term disability programs. At December 31, 2003 and 2004 there were approximately $23.2 million and $25.7 million, respectively, of self-insurance accruals reflected in our consolidated balance sheets. The measurement of these costs requires the consideration of historical cost experience and judgments about the present and expected levels of cost per claim. We account for these costs primarily through actuarial methods, which develop estimates of the undiscounted liability for claims incurred, including those claims incurred but not reported. These methods provide estimates of future ultimate claim costs based on claims incurred as of the balance sheet date.

        We believe the use of actuarial methods to account for these liabilities provides a consistent and effective way to measure these highly judgmental accruals. However, the use of estimate techniques in this area is inherently sensitive given the magnitude of claims involved and the length of time until the ultimate cost is known. We believe our recorded obligations for these expenses are consistently measured on a conservative basis. Nevertheless, changes in healthcare costs, accident frequency and severity, and other factors can materially affect the estimates for these liabilities.

Results of Operations

        The following table sets forth, for the periods indicated, information derived from our consolidated statementsComparison of operations, expressed as a percentage of total consolidated revenues.

				Year Ended December 31,
				2001		2002		2003
Revenues:
	Storage			58.6	%	57.6	%	58.3	%
	Service and Storage Material Sales			41.4		42.4		41.7
		Total Revenues		100.0		100.0		100.0
Operating Expenses:
	Cost of Sales (excluding depreciation)			(48.6	)	(47.2	)	(45.3	)
	Selling, General and Administrative			(26.0	)	(25.3	)	(25.6	)
	Depreciation and Amortization			(12.9	)	(8.3	)	(8.7	)
	Merger-related Expenses			(0.3	)	(0.1	)	—
	Loss on Disposal/Writedown of Property, Plant and Equipment, Net			—		(0.1	)	(0.1	)
		Total Operating Expenses		(87.8	)	(80.8	)	(79.7	)
Operating Income				12.2		19.2		20.3
Interest Expense, Net				(11.4	)	(10.4	)	(10.0	)
Other (Expense) Income, Net				(3.2	)	(0.1	)	0.2
(Loss) Income from Continuing Operations Before Provision for Income Taxes and Minority Interest				(2.4	)	8.7		10.5
Provision for Income Taxes				(1.5	)	(3.6	)	(4.4	)
Minority Interest in Losses (Earnings) of Subsidiaries				0.2		(0.3	)	(0.4	)
(Loss) Income from Continuing Operations before Discontinued Operations and Cumulative Effect of Change in Accounting Principle				(3.7	)	4.8		5.6
Income from Discontinued Operations (net of tax)				—		0.1		—
Cumulative Effect of Change in Accounting Principle (net of minority interest)				—		(0.5	)	—
Net (Loss) Income				(3.7	)%	4.4	%	5.6	%
Other Data:
OIBDA Margin (1)				25.1	%	27.4	%	29.0	%

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(1)

See "Non-GAAP Measures—Operating Income Before Depreciation and Amortization, or OIBDA" for definition, reconciliation and a discussion of why we believe this measure provides relevant and useful informationYear Ended December 31, 2004 to our current and potential investors.

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Year Ended December 31, 2003 Comparedand Comparison of Year Ended December 31, 2003 to Year Ended December 31, 2002 Consolidated Results (in thousands):

				Year Ended December 31,
										Dollar Change			Percent Change
				2002			2003
Revenues:
	Storage			$	759,536		$	875,035		$	115,499		15.2	%
	Service and Storage Material Sales				558,961			626,294			67,333		12.0	%
		Total Revenues			1,318,497			1,501,329			182,832		13.9	%
Operating Expenses:
	Cost of Sales (excluding depreciation)				622,299			680,747			58,448		9.4	%
	Selling, General and Administrative				333,050			383,641			50,591		15.2	%
	Depreciation and Amortization				108,992			130,918			21,926		20.1	%
	Merger-related Expenses				796			—			(796	)	—
	Loss on Disposal/Writedown of Property, Plant and Equipment, Net				774			1,130			356		46.0	%
		Total Operating Expenses			1,065,911			1,196,436			130,525		12.2	%
		Operating Income			252,586			304,893			52,307		20.7	%
Interest Expense, Net					136,632			150,468			13,836		10.1	%
Other Expense (Income), Net					1,435			(2,564	)		(3,999	)	(278.7	%)
Income from Continuing Operations Before Provision for Income Taxes and Minority Interest					114,519			156,989			42,470		37.1	%
Provision for Income Taxes					47,318			66,730			19,412		41.0	%
Minority Interest in Earnings of Subsidiaries					3,629			5,622			1,993		54.9	%
Income from Continuing Operations before Discontinued Operations and Cumulative Effect of Change in Accounting Principle					63,572			84,637			21,065		33.1	%
Income from Discontinued Operations (net of tax)					1,116			—			(1,116	)	—
Cumulative Effect of Change in Accounting Principle (net of minority interest)					(6,396	)		—			6,396		—
Net Income				$	58,292		$	84,637		$	26,345		45.2	%
Other Data:
OIBDA (1)				$	361,578		$	435,811		$	74,233		20.5	%
OIBDA Margin (1)					27.4	%		29.0	%

		Year Ended December 31,
								Dollar Change			Percent Change
		2003			2004
Revenues		$	1,501,329		$	1,817,589		$	316,260		21.1	%
Operating Expenses			1,196,436			1,473,093			276,657		23.1	%
Operating Income			304,893			344,496			39,603		13.0	%
Other Expenses, Net			220,256			250,305			30,049		13.6	%
Net Income		$	84,637		$	94,191		$	9,554		11.3	%
OIBDA(1)		$	435,811		$	508,125		$	72,314		16.6	%
OIBDA Margin(1)			29.0	%		28.0	%

		Year Ended December 31,
								Dollar Change			Percent Change
		2002			2003
Revenues		$	1,318,497		$	1,501,329		$	182,832		13.9	%
Operating Expenses			1,065,911			1,196,436			130,525		12.2	%
Operating Income			252,586			304,893			52,307		20.7	%
Other Expenses, Net			194,294			220,256			25,962		13.4	%
Net Income		$	58,292		$	84,637		$	26,345		45.2	%
OIBDA(1)		$	361,578		$	435,811		$	74,233		20.5	%
OIBDA Margin(1)			27.4	%		29.0	%

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(1)

See "Non-GAAP Measures—Operating Income Before Depreciation and Amortization, or OIBDA" for definition, reconciliation and a discussion of why we believe these measures provide relevant and useful information to our current and potential investors.

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Comparison of Year Ended December 31, 2003 to Year Ended December 31, 2002

Revenue

        Our consolidated storage revenues increased $168.3 million, or 19.2%, to $1,043.4 million for the year ended December 31, 2004 and $115.5 million, or 15.2%, to $875.0 million for the year ended December 31, 2003.2003, in comparison to the years ended December 31, 2003 and 2002, respectively. The increase is attributable to internal revenue growth (8%)(9% during 2004 and 8% during 2003) resulting from net increases in records and other media stored by existing customers and sales to new customers, acquisitions (5%)(8% during 2004 and 5% during 2003), primarily consisting of $91.2 million and $30.0 million from the operations of Hays IMS in 2004 and 2003, respectively, and foreign currency exchange rate fluctuations (2%). Foreign currency exchange rate fluctuations were primarily due to the strengthening of the British pound sterling, Canadian dollar,(3% during 2004 and Euro against the U.S. dollar, offset by a weakening of the Mexican peso and Brazilian real against the U.S. dollar, based on an analysis of weighted average rates for the comparable periods.2% during 2003).

        Consolidated service and storage material sales revenues increased $147.9 million, or 23.6%, to $774.2 million for the year ended December 31, 2004 and $67.3 million, or 12.0%, to $626.3 million for the year ended December 31, 2003.2003, in comparison to the years ended December 31, 2003 and 2002, respectively. The increase is attributable to acquisitions (7%)(14% during 2004 and 7% during 2003), including revenue from the Hays IMS operations of $86.3 million and $24.6 million in 2004 and 2003, respectively, internal revenue growth (3%)(6% during 2004 and 3% during 2003) resulting from net increases in service and storage material sales to existing customers and sales to new customers, and foreign currency exchange rate fluctuations (2%)(3% during 2004 and 2% during 2003).

        For the reasons stated above, our consolidated revenues increased $316.3 million, or 21.1%, to $1,817.6 million for the year ended December 31, 2004 and $182.8 million, or 13.9%, to $1,501.3 million for the year ended December 31, 2003, in comparison to the years ended December 31, 2003 and 2002, respectively. Foreign currency exchange rate fluctuations that impacted our revenues were primarily due to the strengthening of the British pound sterling, Canadian dollar, and Euro against the U.S. dollar, offset by a weakening of the Mexican peso and Brazilian real against the U.S. dollar, based on an analysis of weighted average rates for the comparable periods.

        For the reasons stated above, our consolidated revenues increased $182.8 million, or 13.9%, to $1,501.3 million. Internal revenue growth was 10%, 6%, and 8% for the yearyears ended December 31, 2002, 2003, was 6%.and 2004, respectively. We calculate internal revenue growth in local currency for our international operations.

Internal Growth—Eight-Quarter Trend

		2002										2003											2003										2004
		First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Full Year		First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Full Year			First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Full Year		First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Full Year
Storage Revenue		8	%	9	%	9	%	8	%	8	%	8	%	8	%	9	%	8	%	8	%		8	%	8	%	9	%	8	%	8	%	8	%	9	%	8	%	9	%	9	%
Service and Storage Material Sales Revenue		9	%	10	%	15	%	10	%	11	%	8	%	3	%	2	%	1	%	3	%		8	%	3	%	2	%	1	%	3	%	6	%	4	%	5	%	9	%	6	%
Total Revenue		9	%	9	%	11	%	9	%	10	%	8	%	6	%	6	%	5	%	6	%		8	%	6	%	6	%	5	%	6	%	8	%	7	%	7	%	9	%	8	%

        Our internal revenue growth rate represents the weighted average year over year growth rate of our revenues after removing the effects of acquisitions and foreign currency exchange rate fluctuations. Over the past eight quarters, the internal growth rate of our storage revenues has consistently ranged between 8% toand 9%. Our storage revenue internal growth rate trend for the yearyears ended December 31, 2004 and 2003 reflects higher growth rates in our international businesses, primarily Europe, stabilizedstable net carton volume growth in our North American records management business and higherstrong growth rates in our digital businesses. We experienced higher volumes of carton destructions and permanent removals in the fourth quarter of 2003 as compared to the first three quarters of 2003, which contributed to the decline in our internal growth rate for storage revenue from the third quarter to the fourth quarter of 2003. We experienced similar volumes of destructions and permanent removals in the fourth quarter of 2002.international businesses. Net carton volume growth is a function of the rate new cartons are added by existing and new customers offset by the rate of carton destructions and other permanent removals.

        The internal growth rate for service and storage material sales revenue is inherently more volatile than the storage revenue internal growth rate due to more discretionary services we offer such as large special projects, data products and carton sales, and the cost of recycled paper. These revenues are impacted to a greater extent by economic downturns as customers defer or cancel the purchase of these






services as a way to reduce their short-term costs. As a commodity, recycled paper prices are subject to the volatility

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of that market.

        The quarterlyinternal growth ratesrate for service and storage material sales revenues increased during 2004 compared to 2003 due primarily to high growth in 2003 were negatively impacted byour Secure Shredding product line and several factors: (1) large special projectof our complementary service revenue did not achieve the same high levels experienced in the corresponding periods of 2002, (2) product sales, primarilylines including data product sales, decreasedspecial projects and (3) carton destructions and other permanent removals have decreased relativefulfillment services. The growth rate of our secure shredding product line increased for 2004 primarily due to prior periods.increased sales production as our entire records management sales force began selling the shredding product for the first time. In addition, our off-site data protection business continued to operateproduct sales were particularly strong in a market experiencing downward pressure on information technology spending as companies look to reduce their costs.the second half of 2004 and we completed several large special projects in our film and sound and fulfillment product lines.

Cost of Sales

        Consolidated cost of sales (excluding depreciation) is comprised of the following expenses (in thousands):

													% of Consolidated Revenues
		2002			2003			Dollar Change			Percent Change		2002		2003		Percent Change (Favorable)/ Unfavorable
Labor		$	318,707		$	344,761		$	26,054		8.2	%	24.2	%	23.0	%	(1.2	)%
Facilities			184,988			211,597			26,609		14.4	%	14.0	%	14.1	%	0.1	%
Transportation			56,972			65,142			8,170		14.3	%	4.3	%	4.3	%	—
Product Cost of Sales			34,552			30,987			(3,565	)	(10.3	)%	2.6	%	2.1	%	(0.5	)%
Other			27,080			28,260			1,180		4.4	%	2.1	%	1.9	%	(0.2	)%
		$	622,299		$	680,747		$	58,448		9.4	%	47.2	%	45.3	%	(1.9	)%

													% of Consolidated Revenues
																	Percent Change (Favorable)/ Unfavorable
								Dollar Change			Percent Change
		2003			2004								2003		2004
Labor		$	344,761		$	419,345		$	74,584		21.6	%	23.0	%	23.1	%	0.1	%
Facilities			211,597			246,325			34,728		16.4	%	14.1	%	13.6	%	(0.5	)%
Transportation			65,142			81,976			16,834		25.8	%	4.3	%	4.5	%	0.2	%
Product Cost of Sales			30,987			35,908			4,921		15.9	%	2.1	%	2.0	%	(0.1	)%
Other			28,260			40,345			12,085		42.8	%	1.9	%	2.2	%	0.3	%
		$	680,747		$	823,899		$	143,152		21.0	%	45.3	%	45.3	%	—	%

													% of Consolidated Revenues
																	Percent Change (Favorable)/ Unfavorable
								Dollar Change			Percent Change
		2002			2003								2002		2003
Labor		$	318,707		$	344,761		$	26,054		8.2	%	24.2	%	23.0	%	(1.2	)%
Facilities			184,988			211,597			26,609		14.4	%	14.0	%	14.1	%	0.1	%
Transportation			56,972			65,142			8,170		14.3	%	4.3	%	4.3	%	—
Product Cost of Sales			34,552			30,987			(3,565	)	(10.3	)%	2.6	%	2.1	%	(0.5	)%
Other			27,080			28,260			1,180		4.4	%	2.1	%	1.9	%	(0.2	)%
		$	622,299		$	680,747		$	58,448		9.4	%	47.2	%	45.3	%	(1.9	)%

Labor

        LaborFor the year ended December 31, 2004 as compared to the year ended December 31, 2003, labor expense decreasedincreased slightly as a percentage of revenue due primarily to our mix of services. Specifically, increases in labor expense were caused by (1) more labor intensive operations, primarily in Europe and in our secure shredding operations, (2) higher incentive compensation expense in 2004 compared to 2003, and (3) higher allocations of labor costs associated with internal information technology personnel and consultants to revenue producing projects in our digital business. These increases were partially offset by improved labor management in our data protection operations.

        For the year ended December 31, 2003 as compared to the year ended December 31, 2002, labor expense as a percentage of revenue decreased as a result of improved labor management in our North American operations and lower incentive compensation expense for the year ended December 31, 2003 as compared to the year ended December 31, 2002.expense. This improvement was partially offset by increases in wages, medical expenses, and headcount due to growth, acquisitions, including Hays






IMS, and acquisitionschanges in our labor mix resulting from the expansion of our secure shredding operations. Our secure shredding operations and the acquisitionare more labor intensive, therefore, labor expense will be higher as a percentage of Hays IMS. We expect labor expensesrevenue in these operations as compared to our storage operations.

Facilities

        Facilities costs as a percentage of consolidated revenues decreased to 13.6% as of December 31, 2004 from 14.1% as of December 31, 2003. The decrease in facilities costs as a percentage of consolidated revenues was primarily a result of maintaining approximately the same overall base rent per square foot in our North American operations during 2003 and 2004 may increase aswhile we report a full year of integrated Hays IMS operations.

Facilities

increased our square footage under lease over that period. The largest component of our facilities cost is rent expense, which increased $21.0 million for the year ended December 31, 2004 compared to the year ended December 31, 2003 primarily as a result of increased rent in our European operations of $15.4 million attributable to new facilities and properties acquired through acquisitions, including our acquisition of Hays IMS. Other facilities expenses in our European operations for year ended December 31, 2004 increased $14.4 million compared to the year ended December 31, 2003 primarily due to the growth of operations and acquisitions. Aside from our European operations, the remaining facilities expenses for the year ended December 31, 2004 were consistent with the year ended December 31, 2003.

        Rent expense increased $6.9 million for the year ended December 31, 2003 primarily as a result of increased rent in our European operations of $9.0 million attributable to new facilities and properties acquired through acquisitions, including our acquisition of Hays IMS. In addition, after adjusting for the consolidation of properties owned by our Variable Interest Entities,variable interest entities, we have increased the number of leased facilities we occupy in the U.S. and Canada as of December 31, 2003 compared to December 31, 2002 primarily due to acquisitions. The increase in rent iswas offset by the consolidation of 38 properties owned by our Variable Interest Entitiesvariable interest entities during the third and fourth quarter of 2002. The leases associated with these properties were accounted for as operating leases prior to December 31, 2002. We recorded $5.9 million of rent expense for these 38 properties during the year ended December 31, 2002 and no rent expense in the year ended December 31, 2003. Rather than rent expense, we recorded interest expense and depreciation expense associated with these properties for the year ended December 31, 2003. ExcludingAside from our European operations, the dollar increase in facilities expenses is attributable to property taxes, utilities, and property insurance, which increased $5.5 million, $4.0 million, and $1.9 million, respectively, for the year ended December 31, 2003 compared to the year ended December 31, 2002. Facilities expenses in our European operations increased $6.4 million primarily due to the growth of operations and acquisitions for the year ended December 31, 2003 compared to the year ended December 31, 2002.

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We anticipate that reporting a full year of integrated Hays IMS operations and no longer having the offsetting impact caused by our Variable Interest Entities could cause an increase in rent expense and possibly in total facility costs as a percentage of consolidated revenues in 2004.

Transportation

        Our transportation expenses, which were flatincreased 0.2% as a percentage of consolidated revenues for the year ended December 31, 2004 compared to the year ended December 31, 2003, are influenced by several variables including total number of vehicles, owned versus leased vehicles, use of subcontracted couriers, fuel expenses, and maintenance. In the year ended December 31, 2003,2004, we experienced a $3.4$7.0 million increase in transportation expenses in our European operations as compared to the year ended December 31, 2003, which is primarily attributable to an increase in fleet size and vehicles under operating lease resulting from the acquisition of Hays IMS and growth of operations. An increased percentage of vehicles under operating lease, higher fuel expenses, and increased subcontracted courier expenses during the year ended December 31, 2004 compared to the year ended December 31, 2003 also contributed to higher expenses.

        In the year ended December 31, 2003, our transportation expenses were flat as a percentage of consolidated revenues. Transportation expenses increased $3.4 million in our European operations as compared to the year ended December 31, 2002, which is primarily attributable to an increase in fleet






size and vehicles under operating lease resulting from the acquisition of Hays IMS and growth of operations. Transportation efficiencies achieved in our North American operations, partially offset by higher fuel costs and an increased percentage of vehicles under operating lease, mitigated the impact of our European operations on transportation expenses as a percentage of consolidated revenues.

Product Cost of Sales and Other Cost of Sales

        Product and other cost of sales are highly correlated to complementary revenue streams. Product and other cost of sales for the year ended December 31, 2003 was lower2004 were higher than the year ended December 31, 20022003 as a percentage of productconsolidated revenues due to more focused selling efforts on higherincreased royalty payments associated with our electronic vaulting revenues and increased sales of lower margin data products and improved product sourcing.in the second half of 2004.

Selling, General and Administrative Expenses

        Selling, general and administrative expenses are comprised of the following expenses (in thousands):

													% of Consolidated Revenues
		2002			2003			Dollar Change			Percent Change		2002		2003		Percent Change (Favorable)/ Unfavorable
General and Administrative		$	179,550		$	206,575		$	27,025		15.1	%	13.6	%	13.8	%	0.2	%
Sales, Marketing & Account Management			85,932			111,408			25,476		29.6	%	6.5	%	7.4	%	0.9	%
Information Technology			55,971			67,950			11,979		21.4	%	4.2	%	4.5	%	0.3	%
Bad Debt Expense			11,597			(2,292	)		(13,889	)	(119.8	)%	0.9	%	(0.2	)%	(1.1	)%
		$	333,050		$	383,641		$	50,591		15.2	%	25.3	%	25.6	%	0.3	%

													% of Consolidated Revenues
																	Percent Change (Favorable)/ Unfavorable
								Dollar Change			Percent Change
		2003			2004								2003		2004
General and Administrative		$	206,293		$	259,209		$	52,916		25.7	%	13.7	%	14.3	%	0.6	%
Sales, Marketing & Account Management			111,432			150,419			38,987		35.0	%	7.4	%	8.3	%	0.9	%
Information Technology			68,208			81,187			12,979		19.0	%	4.5	%	4.5	%	—	%
Bad Debt Expense			(2,292	)		(4,569	)		(2,277	)	(99.3	)%	(0.2	)%	(0.3	)%	(0.1	)%
		$	383,641		$	486,246		$	102,605		26.7	%	25.6	%	26.8	%	1.2	%

													% of Consolidated Revenues
																	Percent Change (Favorable)/ Unfavorable
								Dollar Change			Percent Change
		2002			2003								2002		2003
General and Administrative		$	179,550		$	206,293		$	26,743		14.9	%	13.6	%	13.7	%	0.1	%
Sales, Marketing & Account Management			85,932			111,432			25,500		29.7	%	6.5	%	7.4	%	0.9	%
Information Technology			55,971			68,208			12,237		21.9	%	4.2	%	4.5	%	0.3	%
Bad Debt Expense			11,597			(2,292	)		(13,889	)	(119.8	)%	0.9	%	(0.2	)%	(1.1	)%
		$	333,050		$	383,641		$	50,591		15.2	%	25.3	%	25.6	%	0.3	%

General and Administrative

        The increase in general and administrative expenses as a percentage of consolidated revenues for the year ended December 31, 2004 compared to the year ended December 31, 2003 is primarily attributable to a $31.0 million increase in general and administrative expenses in our European operations due to the growth of operations and acquisitions, including Hays IMS. In our North American operations, general and administrative expenses increased as a result of increased headcount and higher wages due to normal inflation and merit increases, increased stock compensation expense, increased travel, recruiting, and professional fees, including costs associated with compliance with the Sarbanes-Oxley Act of 2002. These increases were partially offset by lower incentive compensation expenses.






        The increase in general and administrative expenses as a percentage of consolidated revenues for the year ended December 31, 2003 is primarily attributable to a $16.4 million increase in general and administrative expenses in our European operations due to the growth of operations and acquisitions. In our North American operations, general and administrative expenses increased as a result of higher wages due to normal inflation and merit increases, and increases in worker's compensation and medical expenses. The increase in labor expenses and was partially offset by decreases in general insurance expenses and lower incentive compensation expenses. We anticipate increased pressure on our general and administrative expenses as a percentage of consolidated revenues as we integrate the operations of Hays IMS.

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Sales, Marketing & Account Management

        The majority of our sales, marketing and account management costs are labor related and are primarily driven by the headcount in each of these departments. Increased headcount and commissions are the most significant contributors to the increase in sales and marketing expenses as a percentage of revenues for the years ended December 31, 2003 and 2004. Throughout the year ended December 31, 2003. Throughout the years ended December 31, 20022003 and 2003,during 2004, we continued to invest in the expansion and improvement of our sales force and account management personnel. Excluding our European operations, since December 31, 2002, weWe added 66 sales and marketing employees, a 16% increase in headcount, increasedenlarged our account management force, and initiatedcontinued several new marketing and promotional efforts to develop awareness in the marketplace of our entire service offerings. The costs associated with these efforts have contributed to the increase in our sales, marketing and account management expenses. Our larger North American sales force generated a $10.3 million increase in sales commissions for the year ended December 31, 2004 compared to the year ended December 31, 2003. During the year ended December 31, 2003 our North American sales force generated a comparable increase of $10.3 million over the year ended December 31, 2002. In addition, costs associated with our European sales and account management teams increased by $7.7 million and $4.1 million for the yearyears ended December 31, 2004 and 2003, respectively, compared to the years ended December 31, 2003 as comparedand 2002, respectively, due to the year ended December 31, 2002, due todoubling of our sales force through the hiring of new personnel and the expansion of our European sales force.acquisitions. We expect that sales, marketing and account management expenses will continue to increase as a percentage of consolidated revenues as our sales force gains traction and we continue to expand and train our sales force and develop new product development and marketing initiatives.

Information Technology

        Information technology expenses remained flat as a percentage of consolidated revenues for the year ended December 31, 2004 compared to the year ended December 31, 2003. Higher utilization of existing information technology resources and increased $12.0 millionallocations of information technology resources to revenue producing projects were offset by increases in internal software development projects within our digital business, the acquisition of Connected, associated research and development activities and increased information technology spending in our European operations of $8.5 million.

        Information technology expenses increased as a percentage of consolidated revenues for the year ended December 31, 2003 principally due to higher compensation costs resulting from increased headcount, normal inflation and merit increases, as well as an increase in external resources, which was partially offset by lower incentive compensation expenses. As our technology initiatives mature, less of our efforts are development related, thus decreasing capitalizable expenditures, which results in increased information technology expenses. In addition, we incurred additional costs to expand bandwidth and international connectivity in the year ended December 31, 2003 as compared to the year ended December 31, 2002 to satisfy growth of our business and to integrate acquisitions.

Bad Debt Expense

        The decrease in consolidated bad debt expense for the yearyears ended December 31, 2003 and 2004 compared to the year ended December 31, 2002prior years is primarily attributable to the success of our centralized collection efforts within the U.S. and Canada, during 2002 and 2003, which resulted in improved cash collections and an improved accounts






receivable aging that enabledallowed us to significantly reduce our allowance for doubtful accounts induring the yearyears ended December 31, 2003. We do not expect to experience a similar decrease during 20042003 and expect bad debt expense to be approximately 0.5% of consolidated revenues in 2004.

Depreciation, Amortization Merger-Related Expenses and (Gain) Loss on Disposal/Writedown of Property, Plant and Equipment, Net

        Consolidated depreciation and amortization expense increased $32.7 million to $163.6 million (9.0% of consolidated revenues) for the year ended December 31, 2004 from $130.9 million (8.7% of consolidated revenues) for the year ended December 31, 2003. Depreciation expense increased $28.0 million for the year ended December 31, 2004 compared to the year ended December 31, 2003 primarily due to the additional depreciation expense related to recent capital expenditures, including storage systems, which include racking, building and leasehold improvements, computer systems hardware and software, and buildings. Amortization expense increased $4.7 million for the year ended December 31, 2004 compared to the year ended December 31, 2003 due to amortization of intangible assets, primarily customer relationship intangible assets acquired through business combinations. We expect that amortization expense will continue to increase as we acquire new businesses and buy out our minority interest partners.

        Consolidated depreciation and amortization expense increased $21.9 million to $130.9 million (8.7% of consolidated revenues) for the year ended December 31, 2003 from $109.0 million (8.3% of consolidated revenues) for the year ended December 31, 2002. Depreciation expense increased $19.8 million, primarily due to the additional depreciation expense related to recent capital expenditures, including storage systems, which include racking, building and leasehold improvements, computer systems hardware and software, and buildings, and depreciation associated with facilities accounted for as capital leases. Depreciation associated with our digital initiatives increased $5.4 million during the year ended December 31, 2003 as a result of software and hardware assets placed in service throughout the years ended December 31, 2002 and 2003. The consolidation of the properties owned by our Variable Interest Entitiesvariable interest entities during the year ended December 31, 2002 resulted in $2.2 million of additional depreciation in the year ended December 31, 2003. Amortization expense increased as a

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result of the amortization of intangible assets associated with acquisitions we completed in the fourth quarter of 2002 and during the year ended December 31, 2003.

        Merger-related expenses are certain expenses directly related to our merger with Pierce Leahy that cannot be capitalized and included system conversion costs, costs of exiting certain facilities, severance, relocation and pay-to-stay payments and other transaction-related costs. Merger-related expenses were $0.8 million for the year ended December 31, 2002. All merger related activities associated with the Pierce Leahy merger were completed in 2002.

Consolidated lossgains on disposal/writedown of property, plant and equipment, net of $0.7 million for the year ended December 31, 2004, consisted primarily of a $1.2 million gain on the sale of a property in Florida during the second quarter of 2004 offset by disposals and asset writedowns. We recorded consolidated losses on disposal/writedown of property, plant and equipment, net of $1.1 million in the year ended December 31, 2003 consisting of disposals and asset writedowns partially offset by $4.2 million of gains on the sale of properties in Texas, Florida and the U.K. We recorded consolidated losses on disposal/writedown of property, plant and equipment, net of $0.8 million in the year ended December 31, 20032002 consisting of disposals and asset writedowns partially offset by a gain of $2.1 million gain on the sale of a property in the U.K. in the year ended December 31, 2002.

Operating Income

        As a result of the foregoing factors, consolidated operating income increased $39.6 million, or 13.0%, to $344.5 million (19.0% of consolidated revenues) for the year ended December 31, 2004 from $304.9 million (20.3% of consolidated revenues) for the year ended December 31, 2003.

        Consolidated operating income increased $52.3 million, or 20.7%, to $304.9 million (20.3% of consolidated revenues) for the year ended December 31, 2003 from $252.6 million (19.2% of consolidated revenues) for the year ended December 31, 2002.






OIBDA

        As a result of the foregoing factors, consolidated OIBDA increased $72.3 million, or 16.6%, to $508.1 million (28.0% of consolidated revenues) for the year ended December 31, 2004 from $435.8 million (29.0% of consolidated revenues) for the year ended December 31, 2003.

        Consolidated OIBDA increased $74.2 million, or 20.5%, to $435.8 million (29.0% of consolidated revenues) for the year ended December 31, 2003 from $361.6 million (27.4% of consolidated revenues) for the year ended December 31, 2002.

Interest Expense, Net

        Consolidated interest expense, net increased $35.3 million to $185.7 million (10.2% of consolidated revenues) for year ended December 31, 2004 from $150.5 million (10.0% of consolidated revenues) for the year ended December 31, 2003. Increased borrowings, primarily from the issuance of our 7¹/4% GBP Senior Subordinated Notes due 2014, contributed to the dollar increase in interest expense. The increase of interest expense, net as a percentage of consolidated revenues was partially due to charges totaling $9.5 million (0.5% of consolidated revenues) related to recharacterization of interest rate swaps associated with real estate term loans we repaid in March and August 2004. These charges represent the fair market value of the swaps, which is a calculation of the net present value of the expected monthly cash payments over the remaining term of the swap based on current market conditions, as of the date the real estate term loan was repaid. We did not terminate the swaps and will continue to mark to market the fair market value of the derivative liability to interest expense, net and make our monthly cash payments as required under the swap contract for the remaining term of approximately three years.

        Consolidated interest expense, net increased $13.8 million to $150.5 million (10.0% of consolidated revenues) for the year ended December 31, 2003 from $136.6 million (10.4% of consolidated revenues) for the year ended December 31, 2002. This increase was primarily attributable to (1) $7.4 million of interest expense associated with real estate term loans held by our Variable Interest Entitiesvariable interest entities that were consolidated in the second half of 2002, (2) borrowings under our revolving credit facility and the issuance of our 6⁵/8% Senior Subordinated Notes due 2016 (the "6⁵/8% notes") which were used to finance the Hays IMS acquisition, and (3) an increase in our overall weighted average outstanding borrowings. The increasedecrease as a percentage of revenues was offset by aattributable to the decline in our overall weighted average interest rate from 8.3% as of December 31, 2002 to 7.7% as of December 31, 2003 resulting from our refinancing efforts and a decline in variable interest rates.






Other Expense (Income), Net (in thousands)

		2003			2004			Change
Foreign currency transaction gains		$	(30,220	)	$	(8,915	)	$	21,305
Debt extinguishment expense			28,174			2,454			(25,720	)
Loss on investments			(462	)		0			462
Other, net			(56	)		(1,527	)		(1,471	)
		$	(2,564	)	$	(7,988	)	$	(5,424	)

		2002			2003			Change
Foreign currency transaction gains		$	(5,045	)	$	(30,220	)	$	(25,175	)
Debt extinguishment expense			5,431			28,174			22,743
Loss on investments			901			(462	)		(1,363	)
Other, net			148			(56	)		(204	)
		$	1,435		$	(2,564	)	$	(3,999	)

        Foreign currency gains of $30.2$8.9 million based on period-end exchange rates were recorded in the year ended December 31, 2004 primarily due to the strengthening of the British pound sterling, Euro, and the Canadian dollar against the U.S. dollar as these currencies relate to our intercompany balances with our Canadian, U.K. and European subsidiaries, U.S. dollar denominated debt held by our Canadian subsidiary, borrowings denominated in foreign currencies under our revolving credit facility, British pounds sterling denominated debt held by our U.S. parent company, British pounds sterling currency held in the U.S. and our British pound sterling denominated cross currency swap, which was terminated in March 2004.

        We recorded foreign currency gains of $30.2 million and $5.0 million during the years ended December 31, 2003 and 2002, respectively, based on period-end exchange rates, primarily due to the strengthening of the Canadian dollar and British pound sterling against the U.S. dollar as these currencies relate to our intercompany balances with our Canadian and U.K. subsidiaries, U.S. dollar denominated debt held by our Canadian subsidiary,

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borrowings denominated in foreign currencies under our revolving credit facility, and our British pound sterling denominated cross currency swap.

        During the three months ended March 31, 2004, we redeemed the remaining outstanding principal amount of the 8¹/8% Senior Notes due 2008 of our Canadian subsidiary (the "Subsidiary notes"), resulting in a charge of $2.0 million, and we repaid a portion of our real estate term loans, which resulted in a charge of $0.4 million. During the year ended December 31, 2003, we redeemed the remaining outstanding principal amount of our 9¹/8% Senior Subordinated Notes due 2007 (the "9¹/8% notes"), resulting in a charge of $1.8 million, the remaining outstanding principal amount of our 8³/4% Senior Subordinated Notes due 2009 (the "8³/4% notes"), resulting in a charge of $13.8 million, and $115.0 million of the outstanding principal of the 8¹/8% Senior Notes due 2008 of our Canadian subsidiary (the "Subsidiary notes"),Subsidiary notes, resulting in a charge of $12.6 million. During the year ended December 31, 2002, we recorded a charge of $1.2 million related to the early retirement of debt in conjunction with the refinancing of our revolving credit facility and a charge of $4.2 million related to the early retirement of a portion of our 9¹/8% notes. The charges consisted primarily of the call and tender premiums associated with the extinguished debt and the write-off of unamortized deferred financing cost and discounts.

Provision for Income Taxes

        Our effective tax raterates for the yearyears ended December 31, 2002, 2003, wasand 2004 were 41.3%, 42.5%., and 41.7%, respectively. The primary reconciling item between the statutory rate of 35% and our effective tax rate is state income taxes (net of federal benefit). The disallowance of certain intercompany






interest charges by states, including a change in Massachusetts tax laws, retroactive to January 1, 2002, increased our provision for income taxes by 1.1% and 1.0% for the yearyears ended December 31, 2003 by 1.1%. Our effectiveand 2004, respectively. We are subject to income taxes in both the U.S. and numerous foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax rate was 41.3% fordetermination is uncertain. Although we believe our tax estimates are reasonable, the year ended December 31, 2002. There mayfinal determination of tax audits and any related litigation could be future volatility with respect tomaterially different than that which is reflected in historical income tax provisions and accruals. Additional taxes assessed as a result of an audit or litigation could have a material effect on our effectiveincome tax rate related to items including unusual unforecasted permanent items, significant changesprovision and net income in tax ratesthe period or periods in foreign jurisdictions and the need for additional valuation allowances. Also, aswhich that determination is made. As a result of our net operating loss carryforwards, we do not expect to pay any significant international, U.S. federal and state income taxes during 2004.2005.

Minority Interest, Discontinued Operations, and Cumulative Effect of Change in Accounting Principle

        Minority interest in earnings of subsidiaries, net resulted in a charge to income of $3.6 million (0.3% of consolidated revenues), $5.6 million (0.4% of consolidated revenues) for the year ended December 31, 2003 compared to $3.6and $3.0 million (0.3%(0.2% of consolidated revenues) for the yearyears ended December 31, 2002.2002, 2003, and 2004, respectively. This represents our minority partners' share of earnings in our majority-owned international subsidiaries that are consolidated in our operating results. The increasedecrease during 2004 is a result of our acquisition of the improvedremaining 49.9% equity interest in IME which was reflected for the first time during the second quarter of 2004. Increased profitability of our European and South American businesses.businesses in 2003 and 2004 contributed to the increase in minority interest in 2003 and offset the impact of acquiring the remaining 49.9% equity interest in IME in 2004.

        In the fourth quarter of 2002, we recorded income from discontinued operations of $1.1 million (net of tax of $0.8 million) as a result of resolving several outstanding contingencies remaining from the sale of the Arcus Staffing Resources, Inc. business unit in 1999. There was no such income recorded in 2003.2003 and 2004.

        In the first quarter of 2002, we recorded a non-cash charge for the cumulative effect of change in accounting principle of $6.4 million (net of minority interest of $8.5 million) as a result of our implementation of SFAS No. 142. There was no such charge in 2003.2003 and 2004.

Net Income

        As a result of the foregoing factors, for the year ended December 31, 2004 consolidated net income increased $9.6 million, or 11.3%, to $94.2 million (5.2% of consolidated revenues) from net income of $84.6 million (5.6% of consolidated revenues) for the year ended December 31, 2003.

        Consolidated net income for the year ended December 31, 2003 increased $26.3 million, or 45.2%, to $84.6 million (5.6% of consolidated revenues) for the year ended December 31, 2003 from net income of $58.3 million (4.4% of consolidated revenues) for the year ended December 31, 2002.

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Segment Analysis (in thousands)

        The results of our various operating segments are discussed below. In general, our business records management segment offers records management, secure shredding, healthcare information services, vital records services, and service and courier operations in the U.S. and Canada. Our off-site data protection segment offers data backup and disaster recovery services, vital records services, service and courier operations, and intellectual property protectionmanagement services in the U.S. Our international segment offers elements of all our product and services lines outside the U.S. and Canada. Our corporate and other segment includes our corporate overhead functions and our fulfillment, consulting, and digital archiving and PC/desktop computing electronic vaulting services.

		Business Records Management			Off-Site Data Protection			International			Corporate & Other
Segment Revenue
Year Ended
December 31, 2003		$	1,022,335		$	251,141		$	198,068		$	29,785
December 31, 2002			944,845			239,081			109,381			25,190
Increase in Revenues		$	77,490		$	12,060		$	88,687		$	4,595
Percentage Increase in Revenues			8.2	%		5.0	%		81.1	%		18.2	%
Segment Contribution (1)
Year Ended
December 31, 2003		$	286,208		$	71,240		$	46,825		$	32,668
December 31, 2002			262,541			61,729			21,988			16,890
Segment Contribution (1) as a Percentage of Segment Revenue
Year Ended
December 31, 2003			28.0	%		28.4	%		23.6	%		109.7	%
December 31, 2002			27.8	%		25.8	%		20.1	%		67.1	%






Business Records Management

Segment Revenue									Increase in Revenues						Percentage Increase in Revenues
For Years Ended
December 31, 2002			December 31, 2003			December 31, 2004			December 31, 2003			December 31, 2004			December 31, 2003		December 31, 2004
$	944,845		$	1,022,335		$	1,107,587		$	77,490		$	85,252		8.2	%	8.3	%

Segment Contribution(1)									Segment Contribution(1) as a Percentage of Segment Revenue
For Years Ended
December 31, 2002			December 31, 2003			December 31, 2004			December 31, 2002		December 31, 2003		December 31, 2004
$	262,541		$	286,208		$	308,630		27.8	%	28.0	%	27.9	%

Items Excluded from the Calculation of Segment Contribution(1)

Depreciation and Amortization									Foreign Currency (Gains) Losses, Net									Loss (Gain) on Disposal/Writedown of Property, Plant and Equipment, Net									Loss on Debt Extinguishment
For Years Ended
Dec. 31, 2002			Dec. 31, 2003			Dec. 31, 2004			Dec. 31, 2002			Dec. 31, 2003			Dec. 31, 2004			Dec. 31, 2002			Dec. 31, 2003			Dec. 31, 2004			Dec. 31, 2002		Dec. 31, 2003			Dec. 31, 2004
$	67,702		$	71,709		$	82,955		$	(1,864	)	$	(29,459	)	$	(2,127	)	$	1,686		$	(631	)	$	(846	)	—		$	12,530		$	2,028

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(1)

See Note 12 toof Notes to Consolidated Financial Statements for definition of Contribution and for the basis on which allocations are made and a reconciliation of Contribution to net income (loss) on a consolidated basis.




Business Records Management        During the year ended December 31, 2004, revenue in our business records management segment increased 8.3% primarily due to increased storage revenues, growth of our secure shredding operations and acquisitions (including a full year of revenue from the U.S. operations of Hays IMS in 2004 which represents an increase of $8.6 million over the partial year of revenue recorded in 2003), and was impacted by slower growth in service and special project revenue. In addition, favorable currency fluctuations during the year ended December 31, 2004 in Canada increased revenue $7.8 million when compared to the year ended December 31, 2003. Contribution as a percent of segment revenue decreased in the year ended December 31, 2004 due to higher transportation expenses and our increased investment in our sales and account management force, which were partially offset by reduced facility expenses.

        During the year ended December 31, 2003, revenue in our business records management segment increased 8.2% primarily due to increased storage revenues, growth of our secure shredding operations and acquisitions (including a partial year of revenue from the U.S. operations of Hays IMS of $8.2 million), and was offset by lower special project service revenue and lower permanent removal and destruction fees. In addition, favorable currency fluctuations during the year ended December 31, 2003 in Canada increased revenue $9.6 million when compared to the year ended December 31, 2002. Contribution as a percent of segment revenue increased primarily due to lower bad debt expense and lower incentive compensation expense which were partially offset by higher property taxes, utilities and our increased investment in our sales and account management force.






Data Protection

Segment Revenue									Increase in Revenues						Percentage Increase in Revenues
For Years Ended
December 31, 2002			December 31, 2003			December 31, 2004			December 31, 2003			December 31, 2004			December 31, 2003		December 31, 2004
$	239,081		$	251,141		$	278,984		$	12,060		$	27,843		5.0	%	11.1	%

Segment Contribution(1)									Segment Contribution(1) as a Percentage of Segment Revenue
For Years Ended
December 31, 2002			December 31, 2003			December 31, 2004			December 31, 2002		December 31, 2003		December 31, 2004
$	61,729		$	71,240		$	78,597		25.8	%	28.4	%	28.2	%

Items excludedExcluded from the calculationCalculation of Segment Contribution(1)

Depreciation and Amortization									Loss (Gain) on Disposal/Writedown of Property, Plant and Equipment, Net
For Years Ended
December 31, 2002			December 31, 2003			December 31, 2004			December 31, 2002			December 31, 2003			December 31, 2004
$	12,835		$	13,792		$	14,808		$	237		$	1,944		$	18

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(1)

See Note 12 of Notes to Consolidated Financial Statements for definition of Contribution includeand for the following: (1) depreciationbasis on which allocations are made and amortization expense fora reconciliation of Contribution to net income on a consolidated basis.

        During the year ended December 31, 2004, revenue in our data protection segment increased 11.1% primarily due to internal revenue growth from both existing and new customers. Higher revenue growth rates from our product sales, electronic vaulting, and intellectual property management services augmented the segment's overall revenue growth rate. Contribution as a percent of segment revenue decreased primarily due to decreased product sales margins, increased royalty payments, and the growth of our sales and account management force including higher sales commissions. This decrease was partially offset by improved labor management and stable overhead costs.

        During the year ended December 31, 2003, of $71.7 million compared to $67.7 million for the year ended December 31, 2002, (2) foreign currency gains of $29.5 million and $1.6 million for the years ended December 31, 2003 and 2002, respectively, and (3) gain on disposal/writedown of property plant and equipment, net of

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$0.6 million for the year ended December 31, 2003 and a loss on disposal/writedown of property plant and equipment, net of $1.5 million for the year ended December 31, 2002.

Off-Site Data Protection

        Revenuerevenue in our off-site data protection segment increased 5.0% primarily due to internal revenue growth from both existing and new customers in the face of increasing pressure in the marketplace to reduce information technology related spending. Contribution as a percent of segment revenue increased primarily due to reduced bad debt expense increased product sales margins and improved labor management. This increase was partially offset by the growth of our sales and account management force.




International

Segment Revenue									Increase in Revenues						Percentage Increase in Revenues
For Years Ended
December 31, 2002			December 31, 2003			December 31, 2004			December 31, 2003			December 31, 2004			December 31, 2003		December 31, 2004
$	109,381		$	198,068		$	380,033		$	88,687		$	181,965		81.1	%	91.9	%

Segment Contribution(1)									Segment Contribution(1) as a Percentage of Segment Revenue
For Years Ended
December 31, 2002			December 31, 2003			December 31, 2004			December 31, 2002		December 31, 2003		December 31, 2004
$	21,988		$	46,825		$	89,751		20.1	%	23.6	%	23.6	%

Items excludedExcluded from the calculationCalculation of Segment Contribution(1)

Depreciation and Amortization									Foreign Currency (Gains) Losses, Net									Loss (Gain) on Disposal/Writedown of Property, Plant and Equipment, Net
For Years Ended
December 31, 2002			December 31, 2003			December 31, 2004			December 31, 2002			December 31, 2003			December 31, 2004			December 31, 2002			December 31, 2003			December 31, 2004
$	7,074		$	16,048		$	33,234		$	250		$	507		$	1,562		$	(1,927	)	$	(879	)	$	176

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(1)

See Note 12 of Notes to Consolidated Financial Statements for definition of Contribution includeand for the following: (1) depreciationbasis on which allocations are made and amortization expense fora reconciliation of Contribution to net income on a consolidated basis.

        Revenue in our international segment increased 91.9% during the year ended December 31, 2004 primarily due to acquisitions completed in Europe, including a full year of revenue from the acquisition of Hays IMS in 2004 which represents an increase of $114.2 million over the partial year of revenue recorded in 2003, of $13.8 million compared to $12.8 million forand in South America and strong internal growth in both Europe and Latin America. Favorable currency fluctuations during the year ended December 31, 20022004 in Europe, Mexico and (2) a loss on disposal/writedown of property plant and equipment, net of $1.9South America increased revenue, as measured in U.S. dollars, by $35.7 million and $0.2 million forcompared to the year ended December 31, 20032003. Contribution as a percent of segment revenue remained flat primarily due to lower gross margins and 2002, respectively.

Internationalincreased overhead in our European operations attributable to our acquisition integration efforts and the establishment of a new shared service center offset by improved gross margins from our South American and Mexican operations.

        Revenue in our international segment increased 81.1% primarily due to acquisitions completed in Europe, including $46.4 million from the acquisition of Hays IMS, and in South America, as well as increased sales effortsstrong internal growth and a large service project in the U.K. Favorable currency fluctuations during the year ended December 31, 2003 in Europe increased revenue, as measured in U.S. dollars, by $17.5 million compared to the year ended December 31, 2002. This increase was offset by $1.2 million of unfavorable currency fluctuations in Mexico and South America during the year ended December 31, 2003 compared to the year ended December 31, 2002. Contribution as a percent of segment revenue increased primarily due to improved gross margins from our European, South American, and Mexican operations and overall increased direct labor utilization and lower bad debt expenses. This increase was partially offset by increased overhead expenses associated with the growth of these emerging businesses.

Corporate and Other

        The Corporate and Other segment is comprised of results from operations not discussed above, including our digital archiving services, PC/Desktop computing electronic vaulting services, consulting






and fulfillment operations and costs associated with our corporate headquarters' operations. Certain costs incurred by our Corporate division were allocated to the other segments in 2002, 2003, and 2004, primarily to our Business Records Management and Data Protection segments. These allocations, which include rent, worker's compensation, property, general liability, auto and other insurance, pension/medical costs, incentive compensation, real estate property taxes and provision for bad debts, are based on rates set at the beginning of each year.

        Revenue in our Corporate and Other segment increased $21.2 million to $51.0 million for the year ended December 31, 2004 and $4.6 million to $29.8 million for the year ended December 31, 2003 from $25.2 million for the year ended December 31, 2002. Contribution decreased $2.2 million to $30.5 million for the year ended December 31, 2004 and increased $15.8 million to $32.7 million for the year ended December 31, 2003 from $16.9 million for the year ended December 31, 2002. Items excluded from the calculation of Contribution include the following: (1) depreciation and amortization expense for the year ended December 31, 2003 of $16.0 million compared to $7.1 million for the yearyears ended December 31, 2002, including $3.62003, and 2004 of $21.4 million, associated with the acquisition of Hays IMS in the year ended December 31, 2003, (2) gains on disposal/writedown of property plant and equipment, net of $0.8$29.4 million, and $2.1$32.6 million, respectively, (2) foreign currency gains of $3.4 million, $1.3 million, and $8.4 million for the years ended December 31, 2002, 2003, and 2002,2004, respectively, and (3) a foreign currency gaindebt extinguishment expense of $1.2$5.4 million, in the year ended December 31, 2003 compared to a loss of $0.3 million in the year ended December 31, 2002.

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Year Ended December 31, 2002 Compared to Year Ended December 31, 2001 Consolidated Results (in thousands)

				Year Ended December 31,
										Dollar Change			Percent Change
				2001			2002
Revenues:
	Storage			$	694,474		$	759,536		$	65,062		9.4	%
	Service and Storage Material Sales				491,244			558,961			67,717		13.8	%
		Total Revenues			1,185,718			1,318,497			132,779		11.2	%
Operating Expenses:
	Cost of Sales (excluding depreciation)				576,538			622,299			45,761		7.9	%
	Selling, General and Administrative				307,800			333,050			25,250		8.2	%
	Depreciation and Amortization				153,271			108,992			(44,279	)	(28.9	)%
	Merger-related Expenses				3,673			796			(2,877	)	(78.3	)%
	Loss on Disposal/Writedown of Property, Plant and Equipment, Net				320			774			454		141.9	%
		Total Operating Expenses			1,041,602			1,065,911			24,309		2.3	%
Operating Income					144,116			252,586			108,470		75.3	%
Interest Expense, Net					134,742			136,632			1,890		1.4	%
Other Expense, Net					37,485			1,435			(36,050	)	(96.2	)%
(Loss) Income from Continuing Operations Before Provision for Income Taxes and Minority Interest					(28,111	)		114,519			142,630		507.4	%
Provision for Income Taxes					17,875			47,318			29,443		164.7	%
Minority Interest in (Losses) Earnings of Subsidiaries					(1,929	)		3,629			5,558		288.1	%
(Loss) Income from Continuing Operations before Discontinued Operations and Cumulative Effect of Change in Accounting Principle					(44,057	)		63,572			107,629		244.3	%
Income from Discontinued Operations (net of tax)					—			1,116			1,116		—
Cumulative Effect of Change in Accounting Principle (net of minority interest)					—			(6,396	)		(6,396	)	—
Net (Loss) Income				$	(44,057	)	$	58,292		$	102,349		232.3	%
Other Data:
OIBDA (1)				$	297,387		$	361,578		$	64,191		21.6	%
OIBDA Margin (1)					25.1	%		27.4	%

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(1)

See "Non-GAAP Measures—Operating Income Before Depreciation and Amortization, or OIBDA" for definition, reconciliation and a discussion of why we believe these measures provide relevant and useful information to our current and potential investors.

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Comparison of Year Ended December 31, 2002 to Year Ended December 31, 2001

Revenue

        For the year ended December 31, 2002, our consolidated revenues increased $132.8 million, or 11.2%, compared to the same period of 2001. This increase was principally a result of internal revenue growth, which for the year ended December 31, 2002 was 10%, comprised of 8% for storage revenue and 11% for service and storage material sales revenue. We calculate internal revenue growth in local currency for our international operations.

        Consolidated storage revenues increased $65.1 million, or 9.4%, to $759.5 million for the year ended December 31, 2002. The increase was primarily attributable to internal revenue growth of 8% resulting from net increases in records and other media stored by existing customers and sales to new customers. The net effect of foreign currency translation on storage revenues was a decrease in revenue of $2.4 million. This was a result of a weakening of the Argentine peso, the Canadian dollar, and the Brazilian real against the U.S. dollar, offset by a strengthening of the British pound sterling and the Euro against the U.S. dollar, based on an analysis of weighted average rates for the comparable periods.

        Consolidated service and storage material sales revenues increased $67.7 million, or 13.8%, to $559.0 million for the year ended December 31, 2002. The increase was primarily attributable to internal revenue growth of 11% resulting from net increases in service and storage material sales to existing customers and sales to new customers. The net effect of foreign currency translation on service and storage material sales revenues was a decrease in revenue of $0.7 million. This was a result of a weakening of the Argentine peso, the Canadian dollar, and the Brazilian real against the U.S. dollar, offset by a strengthening of the British pound sterling and the Euro against the U.S. dollar, based on an analysis of weighted average rates for the comparable periods.

Internal Growth—Eight-Quarter Trend

		2001										2002
		First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Full Year		First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Full Year
Storage Revenue		13	%	12	%	11	%	10	%	11	%	8	%	9	%	9	%	8	%	8	%
Service and Storage Material Sales Revenue		9	%	9	%	5	%	11	%	8	%	9	%	10	%	15	%	10	%	11	%
Total Revenue		11	%	10	%	9	%	10	%	10	%	9	%	9	%	11	%	9	%	10	%

        The consecutive quarter storage revenue internal growth trend over the last eight quarters, as calculated quarterly comparing the current quarter to the applicable quarter in the prior year, is primarily attributable to a decline in the rate at which customers have added new cartons to their inventory, which may be a result of current economic conditions. However, we have not seen a decline in the duration that our customers maintain their cartons in inventory nor an increase in the rate of cartons destroyed or permanently removed from inventory as a percentage of the total population. In addition, growth from new sales was adversely affected in 2001 and 2002 as a result of the disruption caused by the merging of our sales force with that of Pierce Leahy in 2000. The sales force reorganization has been completed and growth from new sales has begun to increase.

        Service and storage material sales revenue internal growth is subject to fluctuations in the timing of non-recurring service projects ordered by customers and in some cases can be affected by delays or cancellations as some customers seek to reduce short-term costs. During the year ended December 31, 2002, we benefited from a number of large non-recurring service projects in North America and Europe. The volatility in the service revenue growth for the third and fourth quarters of 2001 and 2002 is primarily due to a disruption in the normal pattern of services we provide to our customers following

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the events of September 11, 2001 and the resulting shift of some services and related revenue, to the fourth quarter of 2001. This caused a favorable comparison for the service revenue growth rate in the third quarter of 2002 and a difficult comparison in the fourth quarter of 2002.

Cost of Sales

        Consolidated cost of sales (excluding depreciation) is comprised of the following expenses (in thousands):

													% of Consolidated Revenues
		2001			2002			Dollar Change			Percent Change		2001		2002		Percent Change (Favorable)/Unfavorable
Labor		$	286,951		$	318,707		$	31,756		11.1	%	24.2	%	24.2	%	—
Facilities			173,610			184,988			11,378		6.6	%	14.6	%	14.0	%	(0.6	)%
Transportation			55,167			56,972			1,805		3.3	%	4.7	%	4.3	%	(0.4	)%
Product Cost of Sales			31,363			34,552			3,189		10.2	%	2.6	%	2.6	%	—
Other			29,447			27,080			(2,367	)	(8.0	%)	2.5	%	2.1	%	(0.4	)%
		$	576,538		$	622,299		$	45,761		7.9	%	48.6	%	47.2	%	(1.4	)%

Labor

        The dollar increase in labor expense is primarily attributable to increases in headcount and changes in our labor mix resulting from the expansion of our secure shredding operations. Our secure shredding operations are more labor intensive, therefore, labor expense will be higher as a percentage of revenue as compared to our mature operations. In the year ended December 31, 2002, this impact was mitigated by improved labor management in our off-site data protection segment. In addition, our operations in the U.S. and Canada, which comprise approximately 75% of our workforce, experienced an overall increase in wages due to normal inflation, merit increases and significant increases in medical insurance and worker's compensation expenses of approximately $12.0 million. The majority of these increases are attributable to higher premiums and self-insurance requirements.

Facilities

        Our property management activities combined with a higher utilization of our space has driven the decrease of our facilities expenses as a percentage of consolidated revenues from 14.6% in the year ended December 31, 2001 to 14.0% in the year ended December 31, 2002. The largest component of our facilities cost is rent expense, which decreased $0.3 million for the year ended December 31, 2002. We reduced the number of leased facilities we occupy by 23 in the year ended December 31, 2002 primarily through the consolidation of our property portfolio as we exited less desirable facilities and consolidated our remaining properties subsequent to the Pierce Leahy merger.

        The decrease in leased properties is also a result of the recharacterization of eight properties held by our Variable Interest Entities at the end of 2001, which are now consolidated on our balance sheet at the end of 2002. During the years ended December 31, 2001 and 2002, we recorded $1.8$15.6 million, and $0.0$0.4 million of rent expense for these eight properties, respectively. An additional 23 properties held by our Variable Interest Entities were consolidated as of December 31, 2002; however, they were accounted for as operating leases during the year ended December 31, 2002 and their costs were included in rent expense. For the years ended December 31, 2001 and 2002, we recorded rent expense of $6.7 million and $5.9 million, respectively, on these 23 properties and we recorded rent expense as interest expense beginning in 2003.

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        The dollar increase in facilities expenses is attributable to property insurance, which increased $4.7 million for the year ended December 31, 2002 compared to the year ended December 31, 2001. The market-wide increase in property insurance premiums in the wake of the events of September 11, 2001, in addition to experience based annual premium adjustments, resulted in this dramatic increase. Increased rent and facilities expenses in our European operations of $4.6 million and higher property taxes in the U.S. and Canada of $1.8 million have also contributed to the dollar increase in facilities expenses.

Transportation

        Our transportation expenses are influenced by several variables including total number of vehicles, owned versus leased vehicles, use of subcontracted couriers, fuel expenses, and maintenance. For the years ended December 31, 2002, 2003, and 2001 our fleet of vehicles used in operations totaled 2,1402004, respectively, and 2,032, respectively, of which 1,429(4) a $0.8 million and 1,269, respectively, were under operating leases. The net increase in vehicles is primarily attributable to an increase of 40 vehicles in our secure shredding division that were either acquired through acquisitions or added to support growth in the business. We reduced our operating lease expense by $0.6 million during the year ended December 31, 2002 as a result of our fleet leasing program, which has benefited from an overall reduction in interest rates and our improving credit rating.

        The results of our ongoing transportation efficiency projects and the completion of our conversions to theSafeKeeper Plus® system have been significant in reducing transportation expenses, including fuel and outside courier fees, as a percentage of consolidated revenues. In the year ended December 31, 2002 we had an overall reduction in fuel consumption and a decrease in fuel expense of $0.4 million in spite of an average increase in the price per gallon of fuel during the year ended December 31, 2002. We also benefited from a $0.9 million decline in subcontracted courier expenses, which we believe is the result of better management of internal transportation resources. Our improvements in transportation have been partially offset by increased vehicle insurance and repair costs of $0.7 million and $0.9 million, respectively, for the year ended December 31, 2002 over the year ended December 31, 2001, as a result of the increased size of our fleet. We experienced a $2.0 million increase in transportation expenses in our European operations, which is primarily attributable to the growth of operations and is also impacted by the weakening of the U.S. dollar in comparison to the British pound sterling in the year ended December 31, 2002 versus the year ended December 31, 2001.

Product Cost of Sales and Other Cost of Sales

        Product and other cost of sales are highly correlated to complementary revenue streams. Product cost of sales for the year ended December 31, 2002 was consistent with the year ended December 31, 2001 as a percentage of product revenues. The decrease in other cost of sales of $2.4 million is directly attributable to decreases in variable expenses from our changing mix of complementary services and will vary as our mix of special projects changes from period to period.

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Selling, General and Administrative Expenses

        Selling, general and administrative expenses are comprised of the following expenses (in thousands):

													% of Consolidated Revenues
		2001			2002			Dollar Change			Percent Change		2001		2002		Percent Change (Favorable)/Unfavorable
General and Administrative		$	175,639		$	179,550		$	3,911		2.2	%	14.8	%	13.6	%	(1.2	)%
Sales, Marketing & Account Management			70,956			85,932			14,976		21.1	%	6.0	%	6.5	%	0.5	%
Information Technology			50,866			55,971			5,105		10.0	%	4.3	%	4.2	%	(0.1	%)
Bad Debt Expense			10,339			11,597			1,258		12.2	%	0.9	%	0.9	%	—
		$	307,800		$	333,050		$	25,250		8.2	%	26.0	%	25.3	%	(0.7	)%

General and Administrative

        The dollar increase in general and administrative expenses is primarily attributable to an increase in professional fees, office facilities, telephone, and supplies expenses. However, these costs were consistent with the increasing scale of our business, as indicated by the decrease of 1.2% as a percentage of consolidated revenues. Increased overhead leverage offset an increase in wages due to normal inflation and merit increases.

Sales, Marketing & Account Management

        The majority of our sales, marketing and account management expenses are labor related and are primarily driven by the headcount in each of these departments. Throughout the year ended December 31, 2002, we continued to expand our sales force and account management teams. We added approximately 60 new sales and marketing employees since December 31, 2001, a 15% increase in headcount.

Information Technology

        Information technology expenses increased $5.1 million, or 10.0%, to $56.0 million (4.2% of consolidated revenues) for the year ended December 31, 2002 principally due to increased compensation costs as a result of increased headcount and normal inflation and merit increases, as well as, a decrease in capitalizable projects. Additionally, these costs were offset by savings of $1.7 million realized through improved management of information technology telecommunication expenses and a reduction of $1.1 million of information technology equipment lease expenses.

Bad Debt Expense

        Consolidated bad debt expense increased $1.3 million, or 12.2%, to $11.6 million (0.9% of consolidated revenues) for the year ended December 31, 2002. Our projects to centralize collection efforts within our divisions have contributed significantly to holding bad debt expense flat as a percentage of consolidated revenues.

Depreciation, Amortization, Merger-Related Expenses and Loss on Disposal/Writedown of Property, Plant and Equipment, Net

        Consolidated depreciation and amortization expense decreased $44.3 million, or 28.9%, to $109.0 million (8.3% of consolidated revenues) for the year ended December 31, 2002 from $153.3 million (12.9% of consolidated revenues) for the year ended December 31, 2001. Depreciation

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expense increased $16.7 million, primarily due to the additional depreciation expense related to capital expenditures, including storage systems, which include racking, building and leasehold improvements, computer systems hardware and software, and buildings, and depreciation associated with facilities accounted for as capital leases. Depreciation associated with our digital initiatives increased $3.7 million during the year ended December 31, 2002 as a result of software and hardware assets placed in service during late 2001 and throughout the years ended December 31, 2002. In the year ended December 31, 2002, the recharacterization of eight properties added in the year ended December 31, 2001 under one of our synthetic lease programs, as well as nine properties added to such program in the year ended December 31, 2002, resulted in $1.7 million of additional depreciation. Amortization expense decreased $61.3 million, primarily due to eliminating amortization expense related to goodwill in accordance with SFAS No. 142. See Note 2(g) to Notes to Consolidated Financial Statements and "—Critical Accounting Policies—Accounting for Acquisitions."

        Merger-related expenses are certain expenses directly related to our 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 $0.8 million (0.1% of consolidated revenues) for the year ended December 31, 2002 compared to $3.7 million (0.3% of consolidated revenues) for the same period of 2001. All merger related activities associated with the Pierce Leahy merger were completed in the year ended December 31, 2002.

        Consolidated loss on disposal/writedown of property, plant and equipment, net for the year ended December 31, 2002 consisted of disposals and asset write-downs partially offset by a gain of $2.1 million recorded on the sale of a property in the U.K. during the second quarter of 2002.

Operating Income

        As a result of the foregoing factors, consolidated operating income increased $108.5 million, or 75.3%, to $252.6 million (19.2% of consolidated revenues) for the year ended December 31, 2002 from $144.1 million (12.2% of consolidated revenues) for the year ended December 31, 2001.

OIBDA

        As a result of the foregoing factors, consolidated OIBDA increased $64.2 million, or 21.6%, to $361.6 million (27.4% of consolidated revenues) for the year ended December 31, 2002 from $297.4 million (25.1% of consolidated revenues) for the year ended December 31, 2001.

Interest Expense, Net

        Consolidated interest expense, net increased $1.9 million, or 1.4%, to $136.6 million for the year ended December 31, 2002 from $134.7 million for the year ended December 31, 2001. This increase was primarily attributable to $6.2 million of interest expense associated with 17 properties within one of our Variable Interest Entities and increased long-term borrowings through our 2001 bond offerings. These increases were offset by a decline in our overall weighted average interest rate resulting from a general decline in interest rates coupled with our refinancing efforts.

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Other (Income) Expense, Net

        Significant items included in other (income) expense, net include the following (in thousands):

		2001			2002			Change
Foreign currency transaction (gains) and losses		$	10,437		$	(5,045	)	$	(15,482	)
Debt extinguishment expense			19,978			5,431			(14,547	)
Loss on investments			6,900			901			(5,999	)
Other, net			170			148			(22	)
		$	37,485		$	1,435		$	(36,050	)

        Foreign currency gains of $5.0 million based on period-end exchange rates were recorded in the year ended December 31, 2002 primarily due to the strengthening of the Canadian dollar and British pound sterling against the U.S. dollar as these currencies relate to our intercompany balances with our Canadian and European subsidiaries. During the year ended December 31, 2001, the Canadian dollar had weakened compared to the U.S. dollar and was the primary reason for the foreign currency loss of $10.4 million, based on period-end exchange rates.

        The loss on investments is the result of a $6.9 million impairment charge taken on our investment in convertible preferred stock of a technology development company in the third quarter of 2001. In the year ended December 31, 2002, we recorded $0.9 million of similar write-downs.

        During the year ended December 31, 2002, we recorded a debt extinguishment charge of $1.2 million related to the early retirement of debt in conjunction with the refinancing of our revolving credit facility and in the fourth quarter of 2002 we recorded a debt extinguishment charge of $4.2 related to the early retirement of a portion of our 9¹/8% notes in conjunction with our underwritten public offering of the 7³/4% Senior Subordinated Notes due 2015 (the "7³/4% notes"). For the year ended December 31, 2001, we recorded a debt extinguishment charge of $20.0 million related to the early retirement of the 11¹/8% senior subordinated notes and 10¹/8% senior subordinated notes in conjunction with our underwritten public offerings of the 8⁵/8% Senior Subordinated Notes due 2013 (the "8⁵/8% notes"). The charges consisted primarily of the write-off of unamortized deferred financing costs and call and tender premiums associated with the extinguished debt.

Provision for Income Taxes

       ��The provision for income taxes was $47.3 million for the year ended December 31, 2002 compared to $17.9 million for the year ended December 31, 2001. The effective rate was 41.3% for the yearyears ended December 31, 2002 and the primary reconciling item between the statutory rate of 35% and the effective rate is state income taxes (net of federal benefit). The effective rate was (63.6%) for the year ended December 31, 2001. During the year ended December 31, 2001, we amortized non-deductible goodwill for book purposes, however, as result of the adoption of SFAS No. 142 in 2002, goodwill amortization ceased, thereby reducing the effective rate and some of the volatility with respect to our effective rate in the future. Additionally, the 2001 effective rate was impacted by state income taxes (net of federal benefit).2003, respectively.

Minority Interest, Discontinued Operations, and Cumulative Effect of Change in Accounting Principle

        Minority interest in earnings (losses) of subsidiaries, net resulted in a charge to income of $3.6 million (0.3% of consolidated revenues) for the year ended December 31, 2002. This represents our minority partners' share of earnings (losses) in our majority-owned international subsidiaries that are consolidated in our operating results. In the year ended December 31, 2001, our subsidiaries incurred losses and the minority interest resulted in a credit to income of $1.9 million. The improved results are primarily a result of (1) the elimination of goodwill amortization expense in accordance with

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SFAS No. 142, (2) increased profitability in our European business and (3) our European minority partners' share ($0.7 million, net of tax) of the $2.1 million gain recorded on the sale of a property held by one of our European subsidiaries during the second quarter of 2002.

        In the fourth quarter of 2002, we recorded income from discontinued operations of $1.1 million (net of tax of $0.8 million) as a result of resolving several outstanding contingencies remaining from the sale of the Arcus Staffing Resources, Inc. business unit in 1999.

        In the first quarter of 2002, we recorded a non-cash charge for the cumulative effect of change in accounting principle of $6.4 million (net of minority interest of $8.5 million) as a result of our implementation of SFAS No. 142. There was no such charge in 2001.

Net Income (Loss)

        As a result of the foregoing factors, consolidated net income increased $102.3 million, or 232.3%, to $58.3 (4.4% of consolidated revenues) for the year ended December 31, 2002 from a net loss of $44.1 (3.7% of consolidated revenues) for the year ended December 31, 2001.

Segment Analysis (in thousands)

        The results of our various operating segments are discussed below. In general, our business records management segment offers records management, secure shredding, healthcare information services, vital records services, and service and courier operations in the U.S. and Canada. Our off-site data protection segment offers data backup and disaster recovery services, vital records services, service and courier operations, and intellectual property protection services in the U.S. Our international segment offers elements of all our product and services lines outside the U.S. and Canada. Our corporate and other segment includes our corporate overhead functions and our fulfillment, consulting and digital archiving services.

		Business Records Management			Off-Site Data Protection			International			Corporate & Other
Segment Revenue
Year Ended
December 31, 2002		$	944,845		$	239,081		$	109,381		$	25,190
December 31, 2001			861,302			209,429			89,475			25,512
Increase (Decrease) in Revenues		$	83,543		$	29,652		$	19,906		$	(322	)
Percentage Increase in Revenues			9.7	%		14.2	%		22.2	%		(1.3	%)
Segment Contribution (1)
Year Ended
December 31, 2002		$	262,541		$	61,729		$	21,988		$	16,890
December 31, 2001			227,164			50,254			16,250			7,712
Segment Contribution (1) as a Percentage of Segment Revenue
Year Ended
December 31, 2002			27.8	%		25.8	%		20.1	%		67.1	%
December 31, 2001			26.4	%		24.0	%		18.2	%		30.2	%

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(1)

See Note 12 to Notes to Consolidated Financial Statements for definition of Contribution and for the basis on which allocations are made and a reconciliation of Contribution to net income (loss) on a consolidated basis.

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Business Records Management

        Revenue in our business records management segment increased 9.7% primarily due to increased storage revenues, strong special projects revenues and acquisitions. The increase in Contribution, which we use as our internal measurement of financial performance and as the basis for allocating resources to our segments, as a percent of segment revenue for our business records management segment is primarily due to labor and transportation efficiencies gained by the increasing scale of our business and the completion of our integration of Pierce Leahy. Lower facilities expenditures, including rent expense and utilities, and lower bad debt expense resulting from our improved collection efforts also contributed to the improvement of Contribution, as a percentage of segment revenue. This increase was partially offset by higher insurance premiums for property and casualty insurance and an increased investment in our sales force. Reductions in spending related to telecommunication expenditures, as a percentage of segment revenue, also contributed to increasing Contribution.

Off-Site Data Protection

        Revenue in our off-site data protection segment increased 14.2% primarily due to internal revenue growth from both existing and new customers. Contribution as a percent of segment revenue for our off-site data protection segment increased primarily due to improved labor and transportation management. This increase was partially offset by higher insurance premiums for property and casualty insurance and an increase in bad debt expense.

International

        Revenue in our international segment increased primarily due to increased sales efforts and a large service project in the U.K., as well as, acquisitions completed in Europe and South America in the fourth quarter of 2002. Contribution as a percent of segment revenue for our international segment increased primarily due to improved gross margins from our European operations and reduced bad debt expense. This increase was partially offset by higher insurance premiums for property and casualty insurance and reduced margins in our South American operations due to the deteriorating local economic conditions and devaluation of the currency in Argentina. Unfavorable currency fluctuations in South America and Mexico during the year ended December 31, 2002 reduced revenues, as measured in U.S. dollars, by $5.0 million. This reduction was offset by the impact of favorable currency fluctuations during the year ended December 31, 2002 in Europe that increased revenue $2.9 million when compared to the prior year rates.

Liquidity and Capital Resources

        The following is a summary of our cash balances and cash flows for the years ended 2001, 2002, 2003 and 20032004 (in thousands).

		2001			2002			2003				2002			2003			2004
Cash flows provided by operating activities		$	160,909		$	254,948		$	288,693			$	254,948		$	288,693		$	305,364
Cash flows used in investing activities			(278,136	)		(247,757	)		(586,634	)			(247,757	)		(586,634	)		(626,523	)
Cash flows provided by financing activities			134,901			27,098			315,054				27,098			315,054			276,569
Cash and cash equivalents at the end of year		$	21,359		$	56,292		$	74,683			$	56,292		$	74,683		$	31,942

        Net cash provided by operating activities was $305.4 million for the year ended December 31, 2004 compared to $288.7 million for the year ended December 31, 2003 compared to $254.9 million for the year ended December 31, 2002.2003. The increase resulted primarily from an increase in operating income and non-cash items, such as depreciation amortization, debt extinguishment expensesoffset by the net change in assets and deferred income taxes.liabilities. The net change in assets and liabilities is primarily associated with growth in revenues and the resulting increase in receivables, growth in deferred revenue from selling efforts in our digital businesses, an increase in days sales outstanding in our European operations and disbursements to

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vendors contributed $2.0 million to cash flows from operating activities in theincreased purchase reserve payments year ended December 31, 2003 as compared to $27.6 million in the year ended December 31, 2002.over year.

        We have made significant capital expenditures, additions to customer relationship and acquisition costs and other investments, primarily acquisitions. Our capital expenditures are primarily related to growth and include investments in storage systems, information systems and discretionary investments in real estate. Cash paid for our capital expenditures and additions to customer relationship and acquisition costs during the year ended December 31, 20032004 amounted to $204.5$232.0 million and $12.6$12.5 million, respectively. These investments have been funded entirely through cash flows from operations, as wasFor the case in the yearyears ended December 31, 2002, 2003 and we expect this2004, capital expenditures, net and additions to be the case again in the year ended December 31, 2004. In addition, we received proceeds from sales of propertycustomer relationship and equipment of $11.7 million in the year ended December 31, 2003.acquisition costs were funded entirely with cash flows provided by operating activities. Excluding any potential acquisitions, we expect our capital expenditures to be between approximately $210$220 million and approximately $240$250 million in the year ending December 31, 2004.2005.

        In the year ended December 31, 2003,2004, we paid net cash consideration of $381.2$384.3 million for acquisitions, which included $111.7 million associated with the purchase of Mentmore's 49.9% equity interest in IME and other investments including $333.0approximately $109 million for the acquisition(net of Hays IMS.cash acquired) to acquire Connected. Cash






flows from operations, funded all but the Hays IMS acquisition, which was funded through borrowings under our revolving credit facilities and the net proceeds from other financing transactions. In the year ended December 31, 2002, cash flows from operationstransactions funded all of ourthese acquisitions.

        Net cash provided by financing activities was $315.1 million for the year ended December 31, 2003. During the year we had gross borrowings under our revolving credit facilities of $744.0 million and we received net proceeds of $617.2 million from the issuance of our 7³/4% notes and our 6⁵/8% notes. We used the proceeds from these financing transactions to repay debt and term loans ($698.8 million), retire senior subordinated notes ($374.3 million) and to partially fund the acquisition of Hays IMS.

Since December 31, 2003,2004, we have completed three6 acquisitions for total consideration of approximately $26$15 million. In addition, we acquired the remaining 49.9% equityWe also closed on two transactions to buy out minority interest partners in IMEour Latin American subsidiaries for approximately $154total consideration of $19 million. These transactions will be reflected in our consolidated statement of cash flows in the first quarter of 2005.

        Net cash provided by financing activities was $276.6 million for the year ended December 31, 2004. During the year ended December 31, 2004 we had gross borrowings under our revolving credit facilities and term loan facilities of $1,148.3 million and we received net proceeds of $269.4 million from the issuance of our 7¹/4% GBP Senior Subordinated Notes due 2014 ("7¹/4% notes"). We used the proceeds from these financing transactions to repay debt and term loans ($1,085.0 million), retire notes of our principal Canadian subsidiary, that we guaranteed, (the "Subsidiary notes"), ($20.8 million), repay debt financing from minority shareholders, net ($42.0 million) and to fund acquisitions.

        We are highly leveraged and expect to continue to be highly leveraged for the foreseeable future. Our consolidated debt as of December 31, 20032004 was comprised of the following (in thousands):

Revolving Credit Facility due 2005		$	142,280
Term Loan due 2008			248,750
81/8% Senior Notes due 2008			18,768
IMI Revolving Credit Facility						$	122,563
IMI Term Loan Facility							349,000
IME Revolving Credit Facility							101,478
IME Term Loan Facility							184,330
81/4% Senior Subordinated Notes due 2011(1)			149,670				149,715
85/8% Senior Subordinated Notes due 2013(1)			481,075				481,054
71/4% GBP Senior Subordinated Notes due 2014(1)							288,990
73/4% Senior Subordinated Notes due 2015(1)			441,331				440,418
65/8% Senior Subordinated Notes due 2016(1)			314,071				314,565
Real Estate Term Loans			202,647
Real Estate Mortgages			17,584				5,908
Seller Notes			12,607				11,307
Other			61,145				28,694
Long-term Debt			2,089,928				2,478,022
Less Current Portion			(115,781	)			(39,435	)
Long-term Debt, Net of Current Portion		$	1,974,147			$	2,438,587

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(1)

These debt instruments are collectively referred to as the "Parent Notes." The Parent notes along with our revolving credit facility and term loan, are fully and unconditionally guaranteed, on a

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senior subordinated basis, by substantially all of our direct and indirect wholly owned U.S. subsidiaries (the "Guarantors"). These guarantees are joint and several obligations of the Guarantors. The remainder of our subsidiaries do not guarantee the Parent notes or the IMI revolving credit facility and IMI term loan.

loan facility.

        Our indentures use OIBDA-based calculations as primary measures of financial performance, including leverage ratios. Our key bond leverage ratio, as calculated per our bond indentures, increased towas 5.0 as of December 31, 2003 from 4.8 as of December 31, 2002. The increase was primarily attributable to indebtedness incurred by us and lent to IME to fund IME's acquisition of the European operations of Hays IMS.2004. Noncompliance with this leverage ratio would have a material adverse effect on our financial condition and liquidity. Subsequent to December 31, 2003, our key bond leverage ratio decreased to 4.9. The decrease was the result of the partial repayment by IME of the financing we provided to acquire Hays IMS offset by our January 2004 offering of 150 million British pounds sterling in aggregate principal amount of our 7¹/4% Senior Subordinated Notes due 2014 (the "7¹/4% notes") and the related use of the proceeds to acquire Mentmore's 49.9% equity interest in IME and to repay existing debts. Our target for this ratio is generally in the range of 4.5 to 5.5 while the maximum ratio allowable under the bond indentures is 6.5.

        Our ability to pay interest on or to refinance our indebtedness depends on our future performance, working capital levels and capital structure, which are subject to general economic, financial, competitive, legislative, regulatory and other factors which may be beyond our control. There can be no assurance that we will generate sufficient cash flow from our operations or that future financings will be available on acceptable terms or in amounts sufficient to enable us to service or refinance our indebtedness, or to make necessary capital expenditures.






        Our indentures and other agreements governing our indebtedness contain certain restrictive financial and operating covenants including covenants that restrict our ability to complete acquisitions, pay cash dividends, incur indebtedness, make investments, sell assets and take certain other corporate actions. The covenants do not contain a rating trigger. Therefore, a change in our debt rating would not trigger a default under our indentures and other agreements governing our indebtedness. As of December 31, 2003,2004, we were in compliance with all material debt covenants and agreements.

        As of December 31, 2003, we had $142.3 million of borrowings outstanding under our revolving credit facility, all of which was denominated in British pounds sterling in the amount of GBP 80.0 million. We also had various outstanding letters of credit totaling $34.4 million. The remaining availability under the revolving credit facility on December 31, 2003 was $223.3 million based on our current level of external debt and the leverage ratio under the Amended and Restated Credit Agreement. The interest rate in effect was 5.6% as of December 31, 2003.

        In January 2003, we redeemed the remaining $23.2 million of outstanding principal amount of our 9¹/8% notes, at a redemption price (expressed as a percentage of principal amount) of 104.563%, plus accrued and unpaid interest, with proceeds from our underwritten public offering of $100.0 million in aggregate principal of our 7³/4% notes. We recorded a charge to other (income) expense, net in the accompanying consolidated statement of operations of $1.8 million in the first quarter of 2003 related to the early retirement of the remaining 9¹/8% notes.

        In March 2003, we completed two debt exchanges, which resulted in the issuance of $31.3 million in face value of our 7³/4% notes and the retirement of $30.0 million of our 8³/4% notes. These non-cash debt exchanges resulted in carryover basis and, therefore, no gain (loss) on extinguishment of debt in accordance with EITF No. 96-19, "Debtor's Accounting for Modification or Exchange of Debt Instruments." These exchanges result in a lower interest rate and, therefore, lower interest expense in future periods, as well as extend the maturity of our debt obligations. From time to time, we may enter into similar exchange transactions that we deem appropriate.

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        In April 2003, we completed an underwritten public offering of an additional $300 million in aggregate principal amount of our 7³/4% notes, which were issued at a price to investors of 104% of par, implying an effective yield to worst of 7.066%. Our net proceeds of $307.3 million, after paying the underwriters' discounts, commissions and transaction fees, were used to fund our offer to purchase and consent solicitation relating to our outstanding 8³/4% notes, redeem the 8³/4% notes not purchased in the offer, repay borrowings under our revolving credit facility, repay other indebtedness and pay for acquisitions.

        In April 2003, we received and accepted tenders for $143.3 million of the $220 million aggregate principal amount outstanding of our 8³/4% notes. In May 2003, we redeemed the remaining $76.7 million of outstanding principal amount of our 8³/4% notes, at a redemption price (expressed as a percentage of principal amount) of 104.375%, plus accrued and unpaid interest. We recorded a charge to other (income) expense, net of $13.8 million in the second quarter of 2003 related to the early retirement of the 8³/4% notes, which consists of redemption premiums and transaction costs, as well as original issue discount and unamortized deferred financing costs related to the 8³/4% notes.

        In June 2003, we completed an underwritten public offering of $150 million in aggregate principal amount of our 6⁵/8% notes. The 6⁵/8% notes were issued at a price to investors of 100% of par. Our net proceeds of $147.5 million, after paying the underwriters' discounts, commissions and transaction fees, were used to redeem $50 million in aggregate principal amount of the outstanding Subsidiary notes in the third quarter of 2003 and pay for acquisitions.

        In July 2003, using proceeds from our June 2003 offering of 6⁵/8% notes, we redeemed $50 million of outstanding principal amount of the Subsidiary notes, at a redemption price (expressed as a percentage of principal amount) of 104.063%, plus accrued and unpaid interest. We recorded a charge to other (income) expense, net of $5.5 million in the third quarter of 2003 related to the early retirement of these Subsidiary notes, which consists of redemption premiums and transaction costs, as well as original issue discount related to these Subsidiary notes.

        In July 2003, we and IME completed the acquisition of Hays IMS in two simultaneous transactions. IME acquired the European operations of Hays IMS for aggregate cash consideration (including transaction costs) of approximately 190.0 million British pounds sterling ($309.0 million), while we acquired the U.S. operations of Hays IMS for aggregate cash consideration (including transaction costs) of 14.5 million British pounds sterling ($24.0 million). Both transactions were on a cash and debt free basis.

        We provided the initial financing totaling 190.5 million British pounds sterling to IME for all of the consideration associated with the acquisition of the European operations of Hays IMS using cash on hand and borrowings under our revolving credit facility. We recorded a foreign currency gain of $27.8 million in other (income) expense, net for this intercompany balance for the year ended December 31, 2003. In order to minimize the foreign currency risk associated with providing IME with the consideration necessary for the acquisition of the European operations of Hay IMS, we borrowed 80.0 million British pounds sterling under our revolving credit facility to create a natural hedge. We recorded a foreign currency loss of $11.5 million on the translation of this revolving credit balance to U.S. dollars in other (income) expense, net for the year ended December 31, 2003. Additionally, on July 16, 2003 we entered into two cross currency swaps with a combined notional value of 100.0 million British pounds sterling. These swaps each have a term of one year and at maturity we have a right to receive $162.8 million in exchange for 100.0 million British pounds sterling. We have not designated these swaps as hedges and, therefore, all mark to market fluctuations of the swaps are recorded in other (income) expense, net in our consolidated statements of operations. We have recorded, as of December 31, 2003, a foreign currency loss of $19.0 million in other (income) expense, net.

        In December 2003, we completed an underwritten public offering of an additional $170 million in aggregate principal amount of our 6⁵/8% notes, which were issued at a price to investors of 96.5% of

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par, implying an effective yield to worst of 7.06%. Our net proceeds of $161.3 million, after paying the underwriters' discounts, commissions and transaction fees, were used to redeem $65.0 million in aggregate principal amount of the outstanding Subsidiary notes in the fourth quarter of 2003, repay borrowings under our revolving credit facility, repay other indebtedness and pay for acquisitions.

        In December 2003, using proceeds from our December 2003 offering of 6⁵/8% notes, we redeemed $65.0 million of outstanding principal amount of the Subsidiary notes, at a redemption price (expressed as a percentage of principal amount) of 104.313%, plus accrued and unpaid interest. We recorded a charge to other (income) expense, net of $7.0 million in the fourth quarter of 2003 related to the early retirement of these Subsidiary notes, which consists of redemption premiums and transaction costs, as well as original issue discount related to these Subsidiary notes.

        In January 2004, we completed an offering of 150 million British pounds sterling in aggregate principal amount of our 7¹/4% notes, which were issued at a price of 100.0% of par. Our net proceeds of 146.9 million British pounds sterling (approximately $270 million), after paying the initial purchasers' discounts, commissions and transaction fees, were used to fund our acquisition of Mentmore plc'sMentmore's 49.9% equity interest in IME for total consideration of 82.5 million British pounds sterling (approximately $154 million), to redeem $20.0 million in aggregate principal amount of theour outstanding Subsidiary notes in the first quarter ofFebruary 2004, to repay borrowings under our revolving credit facility, to repay $48.8 million of our term loans, to repay other indebtedness and to pay for other acquisitions.

        In February 2004, using proceeds from our January 2004 offering of 7¹/4% notes, we redeemed the remaining $20 million of outstanding principal amount of the Subsidiary notes, at a redemption price (expressed as a percentage of principal amount) of 104.063%, plus accrued and unpaid interest. We will recordrecorded a charge of approximately $2 million to other (income) expense, net in the first quarter of 2004 related to the early retirement of these remaining Subsidiary notes, which consists of redemption premiums and transaction costs as well as original issue discount related to these Subsidiary notes.

        In February 2004, we completed the acquisition of Mentmore plc'sthe 49.9% equity interest held by Mentmore in IME for total consideration of 82.5 million British pounds sterling ($154(approximately $154 million) in cash from proceeds of our 7¹/4% notes issued in January 2004. Included in this amount is the repayment of all trade and working capital funding owed to Mentmore by IME. Completion of the transaction givesgave us 100% ownership of IME, affording us full access to all future cash flows and greater strategic and financial flexibility. This transaction should have no impact on revenue or operating income since we already fully consolidate IME's financial results. Since we will be using the purchase method of accounting for this acquisition, 49.9% of the net assets of IME will be adjusted to reflect their fair market value if different from their current carrying value. As a result, we expect this transaction will increase depreciation and amortization expenses going forward. Additionally, we will record an increase in interest expense, net associated with the 7¹/4% notes used to fund this acquisition and will no longer record the minority interest in earnings of subsidiaries, net related to Mentmore's ownership interest in IME.

        In March 2004, IME and certain of its subsidiaries entered into a credit agreement (the "IME Credit Agreement") with a syndicate of European lenders. The IME Credit Agreement provides for maximum borrowing availability in the principal amount of 210 million British pounds sterling, including a 100 million British pounds sterling revolving credit facility( (the "IME revolving credit facility"), which includes the ability to borrow in certain other foreign currencies,), a 100 million British pounds sterling term loan (the "IME term loan facility"), and a 10 million British pounds sterling overdraft protection line. The IME revolving credit facility matures on March 2,5, 2009. The IME term loan facility is payable in three installments; two installments of 20 million British pounds sterling on March 2,5, 2007 and 2008, respectively, and the final payment of the remaining balance on March 2,5, 2009. The interest rate on borrowings under the IME Credit Agreement is based on LIBOR and varies depending on IME's choice of currency options and interest rate period, plus an applicable margin. The IME Credit Agreement includes various financial covenants applicable to the results of IME, which may restrict IME's ability to incur indebtedness under the IME Credit

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Agreement and withfrom third parties. Eachparties, as well as limit IME's ability to pay dividends to us. Most of IME's non-dormant subsidiaries willhave either guaranteeguaranteed the obligations or pledgehave their shares pledged to secure IME's obligations under the IME Credit Agreement. We have not guaranteed or otherwise provided security for the IME Credit Agreement nor have any of our U.S., Canadian, Mexican andor South American subsidiaries.

        In March 2004, IME borrowed approximately 147 million British pounds sterling under the IME Credit Agreement, including the full amount of the term loan. IME used those proceeds to repay us 135 million British pounds sterling related to our initial financing of the acquisition of the European operations of Hays IMS.IMS, to repay amounts outstanding under its prior term loan and revolving credit facility and to pay transaction costs associated with the IME Credit Agreement. We expect to use those proceedsused the






135 million British pounds sterling received from IME to: (1) pay down approximately $104 million of real estate term loans, (2) settle all obligations totaling $27.7 million associated with terminating our two cross currency swaps used to hedge the foreign currency impact of our intercompany financing with IME related to the Hays IMS acquisition and (3) to pay down amounts outstanding under our Amendedprior credit agreement. The IME Credit Agreement in conjunction with our 7¹/4% notes provided permanent financing for the Hays IMS acquisition and Restated Credit Agreement. Afterallowed us to maintain the initialeconomics of the transaction with respect to exchange rates as originally contemplated at the time of the acquisition. Our consolidated balance IME's availabilitysheet as of December 31, 2004 included 155.1 million British pounds sterling (approximately $285.8 million) of borrowings under the IME Credit Agreement,Agreement. The remaining availability, based on its current level of external debt and the leverage ratio under the IME Credit Agreement,revolving credit facility on October 31, 2004, was approximately 949.0 million British pounds sterling.sterling (approximately $90.2 million).

        On April 2, 2004 and subsequently on July 8, 2004, we entered into a new amended and restated credit facility and term loan facility (the "IMI Credit Agreement") to replace our prior credit agreement and to reflect more favorable pricing of our term loans. The IMI Credit Agreement has an aggregate principal amount of $550.0 million and is comprised of a $350.0 million revolving credit facility (the "IMI revolving credit facility"), which includes the ability to borrow in certain foreign currencies, and a $200.0 million term loan facility (the "IMI term loan facility"). The IMI revolving credit facility matures on April 2, 2009. With respect to the IMI term loan facility, quarterly loan payments of $0.5 million began in the third quarter of 2004 and will continue through maturity on April 2, 2011, at which time the remaining outstanding principal balance of the IMI term loan facility is due. The interest rate on borrowings under the IMI Credit Agreement varies depending on our choice of interest rate and currency options, plus an applicable margin. All intercompany notes and the capital stock of most of our U.S. subsidiaries are pledged to secure the IMI Credit Agreement. As of December 31, 2004, we had $122.6 million of borrowings under the IMI revolving credit facility, of which $3 million was denominated in U.S. dollars and the remaining balance was denominated in Canadian dollars (CAD 144.0 million); we also had various outstanding letters of credit totaling $22.1 million. The remaining availability, based on IMI's current level of external debt and the leverage ratio under the IMI revolving credit facility, on December 31, 2004 was $205.3 million. In November 2004, we entered into an additional $150.0 million of term loans as permitted under our IMI Credit Agreement. The new term loans will mature at the same time as our current IMI term loan facility with quarterly loan payments of $0.4 million beginning in the first quarter of 2005 and are priced at LIBOR plus a margin of 1.75%. As a result, the IMI Credit Agreement has an aggregate maximum principal amount of $700 million as of December 31, 2004. The interest rate in effect under the IMI revolving credit facility was 4.6% as of December 31, 2004.

        In April 2004, IME entered into two floating for fixed interest rate swap contracts, each with a notional value of 50.0 million British pounds sterling and a duration of two years, which were designated as cash flow hedges. These swap agreements hedge interest rate risk on IME's term loan facility.

        Our variable interest entities were financed with real estate term loans. In March 2004, approximately $104 million of these real estate term loans was repaid. In August 2004, we repaid the remaining $98.7 million of real estate term loans held by our Variable Interest Entities have always been and continue to be treated as indebtedness for purposesone of our financial covenantsvariable interest entities using available borrowing capacity under our Amended and Restated Credit Agreement.the IMI revolving credit facility. As a result, we recorded a charge of $9.5 million due to recharacterization of the date they were consolidated into our financial statements, they were also considered indebtedness under our Indentures for our Senior Subordinated Notes and our Subsidiary notes. As of December 31, 2002 and 2003,interest rate swaps associated with these real estate term loans amountedduring 2004. This charge represents the fair market value of the swap, which is a calculation of the net present value of the expected monthly cash payments over the remaining term of the swap based on current market conditions, as of the date the real estate term loan was repaid. We did not terminate the swap and expect to $202.6 million. No furtherenjoy the benefit of the fixed rate financing is currently availableand will continue to our Variable Interest Entitiesmark to fund further property acquisitions.market the fair market value of the derivative liability to interest expense, net and make our






monthly cash payments as required under the swap contract for the remaining term of approximately three years. See Notes 3, 4 and 5 to Notes to Consolidated Financial StatementsStatements.

        The IME Credit Agreement, IMI Credit Agreement and "—Critical Accounting Policies."our indentures and other agreements governing our indebtedness contain certain restrictive financial and operating covenants, including covenants that restrict our ability to complete acquisitions, pay cash dividends, incur indebtedness, make investments, sell assets and take certain other corporate actions. The detailscovenants do not contain a rating trigger. Therefore, a change in our debt rating would not trigger a default under the IME Credit Agreement and IMI Credit Agreement. We were in compliance with all material debt covenants as of each real estate term loan is a follows:

•

A $47.5 million real estate term loan made in October 1998 bearing interest at various variable interest rates based on LIBOR (London Inter-Bank Offered Rate) plus an applicable margin. This real estate term note has a principal payment due on March 31, 2004 of $28.8 million with the remaining $18.7 million maturing on March 31, 2005. This real estate term loan is expected to be repaid in March 2004.



•

A $56.4 million real estate term loan made in July 1999 bearing interest at various variable interest rates based on LIBOR plus an applicable margin. This real estate term note matures on December 31, 2005. This real estate term loan is expected to be repaid in March 2004.



•

A $98.7 million real estate term loan made in May 2001 bearing interest at various variable interest rates based on LIBOR plus an applicable margin. This real estate term note matures on November 22, 2007.

Contractual Obligations

        The following table summarizes our contractual obligations as of December 31, 20032004 and the anticipated effect of these obligations on our liquidity in future years (in thousands):

		Payments Due by Period															Payments Due by Period
		Total			Less than 1 Year			1-3 Years			3-5 Years			More than 5 Years			Total			Less than 1 Year			1-3 Years			3-5 Years			More than 5 Years
Long-term Debt (including Capital Lease Obligations)		$	2,087,127		$	116,998		$	228,472		$	347,209		$	1,394,448		$	2,474,399		$	39,435		$	52,508		$	370,238		$	2,012,218
Interest Payments(1)																		1,257,981			163,244			281,821			262,627			550,289
Operating Lease Obligations			902,884			135,512			222,238			158,722			386,412			1,077,681			151,166			253,298			182,915			490,302
Purchase Obligations			42,528			16,011			23,888			2,629			—
Purchase Obligations(2)																		70,362			21,428			31,784			17,150			—
Total		$	3,032,539		$	268,521		$	474,598		$	508,560		$	1,780,860		$	4,880,423		$	375,273		$	619,411		$	832,930		$	3,052,809

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(1)

Amounts do not include variable rate interest payments; see Note 5 to Notes to Consolidated Financial Statements for the applicable interest rates.



(2)

In addition, in connection with some of our acquisitions, we have potential earn-out obligations that would be payable in the event businesses we acquired meet certain operational objectives. These payments are

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based on the future results of these operations and our estimate of the maximum contingent earn-out payments we would be required to make under all such agreements as of December 31, 20032004 is approximately $5$16.8 million.

        We expect to meet our cash flow requirements for the next twelve months from cash generated from operations, existing cash, cash equivalents and marketable securities, borrowings under ourthe IMI revolving credit facility and other financings, which may include secured credit facilities, securitizations and mortgage or capital lease financings. See Notes 5, 10 and 13 to Notes to Consolidated Financial Statements.

Off-Balance Sheet Arrangements

        We have no off-balance sheet arrangements as defined in Regulation S-K, Item 303(a)(4)(ii).

Net Operating Loss Carryforwards

        At December 31, 2003,2004, we had estimated net operating loss carryforwards of approximately $123$170 million for federal income tax purposes. As a result of such loss carryforwards, cash paid for income taxes has historically been substantially lower than the provision for income taxes. These net operating loss carryforwards do not include approximately $103 million of potential preacquisition net operatingoperation loss carryforwards of Arcus Group, Inc. and certain foreign acquisitions.("Arcus Group"). Any tax benefit realized related to preacquisition net operating loss carryforwards will be recorded as a reduction of goodwill when, and if,






realized. The Arcus Group carryforwards begin to expire in two years.next year. As a result of these loss carryforwards, we do not expect to pay any significant international, U.S. federal and state income taxes in 2004.2005.

Seasonality

        Historically, our businesses have not been subject to seasonality in any material respect.

Inflation

        Certain of our expenses, such as wages and benefits, insurance, occupancy costs and equipment repair and replacement, are subject to normal inflationary pressures. Although to date we have been able to offset inflationary cost increases through increased operating efficiencies and the negotiation of favorable long-term real estate leases, we can give no assurance that we will be able to offset any future inflationary cost increases through similar efficiencies, leases or increased storage or service charges.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk.


Interest Rate Risk

        InGiven the recurring nature of our revenues and the long term nature of our asset base, we have the ability and the preference to use long term, fixed interest rate debt to finance our business, thereby helping to preserve our long term returns on invested capital. We target a range 80% to 85% of our debt portfolio to be fixed with respect to interest rates. Occasionally, we will use floating to fixed interest rate swaps as a tool to maintain our targeted level of fixed rate debt. As part of this strategy, in December 2000, January 2001, and May 2001, and April 2004 we, IME, and our Variable Interest Entities, whichvariable interest entities we now consolidate, entered into a total of foursix derivative financial contracts, which are variable-for-fixed interest rate swaps consisting of (a) two contracts for interest payments payable on ourthe IMI term loan facility of an aggregate principal amount of $195.5 million, (b) one contract forbased on interest payments previously payable (previously certain variable operating lease commitments payable) on our real estate term loans of an aggregate principal amount of $47.5 million andthat have been subsequently repaid, (c) one contract forbased on interest payments previously payable on our real estate term loans of an aggregate principal amount of $97.0 million.million that have been subsequently repaid, and (d) two contracts for interest payments payable on IME's term loan facility of an aggregate principal amount of 100.0 million British pounds sterling. See Note 4 to Notes to Consolidated Financial Statements and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies" in this Form 10-K.

        After consideration of the swap contracts mentioned above, as of December 31, 2003,2004, we had $308.1$275.3 million of variable rate debt outstanding with a weighted average variable interest rate of 4.72%5.1%, and $1,781.8$2,202.8 million of fixed rate debt outstanding. As of December 31, 2003, 85%2004, 89% of our total debt outstanding was fixed. If the weighted average variable interest rate on our variable rate debt had increased by 1%, our net income for the year ended December 31, 20032004 would have been reduced by $1.7$1.5 million. See Note 5 to Notes to Consolidated Financial Statements included in this Form 10-K for a discussion of our

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long-term indebtedness, including the fair values of such indebtedness as of December 31, 2003 included in this Form 10-K.2004.

Currency Risk

        Our investments in IME, Iron Mountain Canada Corporation ("IM Canada"), Iron Mountain South America, Ltd.Mexico, SA de RL de CV, IMSA and other international investments may be subject to risks and uncertainties related to fluctuations in currency valuation. Our reporting currency is the U.S.U..S. dollar. However, our international revenues and expenses are generated in the currencies of the countries in which we operate, primarily the Canadian dollar and British pound sterling. The currencies of many Latin American countries, particularly the Argentine peso, have experienced substantial volatility and depreciation in the past, including the Argentine peso. In addition, one of our Canadian subsidiaries, Iron Mountain Canada Corporation, has U.S. dollar denominated debt.






depreciation. Declines in the value of the local currencies in which we are paid relative to the U.S. dollar will cause revenues in U.S. dollar terms to decrease and dollar-denominated liabilities to increase in local currency. The impact on our earnings is mitigated somewhat by the fact that most operating and other expenses are also incurred and paid in the local currency. We also have several intercompany obligations between our foreign subsidiaries and Iron Mountain and our U.S.-based subsidiaries. These intercompany obligations are primarily denominated in the local currency of the foreign subsidiary. Our

        We have adopted and implemented a number of strategies to mitigate the risks associated with fluctuations in currency valuations. One strategy is to finance our largest international subsidiaries with local debt that is denominated in local currencies, thereby providing a natural hedge. In determining the amount of any such financing, we take into account local tax strategies among other factors. Another strategy we utilize is to borrow in foreign currencies at the U.S. parent level to hedge our intercompany financing activities. Finally, on occasion, we enter into currency swaps to temporarily hedge an overseas investment, such as a major acquisition to lock in certain transaction economics, while we arrange permanent financing. We have implemented these strategies for our two major foreign investments in the U.K. and Canada. Specifically, through IME borrowing under the IME Credit Agreement and our 150 million British pounds sterling denominated 7¹/4% senior subordinated notes, which effectively hedges most of our outstanding intercompany loan with IME. With respect to Canada, in August 2004, we repaid the remaining $98.7 million of real estate term loans by having IM Canada draw on its portion of the IMI revolving credit facility in local currency and repaying a portion of its intercompany loan back to the U.S. parent. This has created a natural hedge on a portion of the intercompany balance and will reduce our currency fluctuations with regard to our investment in IM Canada while providing IM Canada with additional borrowings and interest expenses to reduce its income tax burden. As of December 31, 2004, except as noted above, our currency exposures to intercompany borrowingsbalances are generally unhedged, except as discussed below.

        We provided the initial financing to IME for all of the consideration associated with the acquisition of the European operations of Hays IMS using cash on hand and borrowings under our revolving credit facility. In order to minimize the foreign currency risk associated with providing IME with the consideration necessary for the acquisition of Hay IMS, we borrowed 80.0 million British pounds sterling under our revolving credit facility to create a natural hedge. Additionally, on July 16, 2003 we entered into two cross currency swaps with a combined notional value of 100.0 million British pounds sterling. These swaps each have a term of one year and at maturity we have a right to receive $162.8 million in exchange for 100.0 million British pounds sterling. We have not designated these swaps as hedges and, therefore, all mark to market fluctuations of the swaps are recorded in other (income) expense, net in our consolidated statements of operations.unhedged.

        The impact of devaluation or depreciating currency on an entity depends on the residual effect on the local economy and the ability of an entity to raise prices and/or reduce expenses. Due to our constantly changing currency exposure and the potential substantial volatility of currency exchange rates, we cannot predict the effect of exchange fluctuations on our business. The effect of a change in foreign exchange rates on our net investment in foreign subsidiaries is reflected in the "Accumulated Other Comprehensive Items" component of shareholders' equity. A 10% depreciation in year-end 20032004 functional currencies, relative to the U.S. dollar, would result in a $14.5 million reduction in our shareholders' equity.equity of approximately $20 million.


Item 8. Financial Statements and Supplementary Data.


        The information required by this item is included in Item 15 (a) of this Annual Report on Form 10-K.


Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.


        On June 19, 2002, our Board of Directors, upon recommendation of the Audit Committee and approval of the Executive Committee, dismissed Arthur Andersen LLP as our independent public accountants and engaged Deloitte & Touche LLP as our independent public accountants for the fiscal year ending December 31, 2002.

        The audit reports of Arthur Andersen on our consolidated financial statements for the fiscal year ended December 31, 2001 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.

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        During the fiscal year ended December 31, 2001 and the subsequent interim period through June 19, 2002, there were no disagreements with Arthur Andersen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Arthur Andersen's satisfaction, would have caused Arthur Andersen to make reference to the subject matter of the disagreement in connection with its reports. None of the reportable events described under Item 304(a)(1)(v) of Regulation S-K occurred within the fiscal year ended December 31, 2001 or within the interim period through June 19, 2002.

        We provided Arthur Andersen with a copy of the above disclosures. A letter dated June 19, 2002 from Arthur Andersen stating its agreement with our statements was listed under Item 7 and filed as Exhibit 16.1 and incorporated by reference into our report on Form 8-K filed June 19, 2002.

        During the fiscal year ended December 31, 2001 and the subsequent interim period through June 19, 2002, we did not consult with Deloitte & Touche with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements or regarding any other matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.None.


Item 9A. Controls and ProceduresProcedures.


Evaluation of Disclosure Controls and Procedures

        The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act").Act. These rules refer to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods. As of December 31, 20032004 (the "Evaluation Date"), we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures.






Based upon that evaluation, the chief executive officer and chief financial officer have concluded that, as of the Evaluation Date, such disclosure controls and procedures were effective in ensuring that required information will be disclosed on a timely basis in our reports filed under the Exchange Act.

Changes        We continue to strive to give our shareholders as much information as possible to allow them to make their own judgments regarding our performance. In that spirit, we are providing an update to our disclosure in Internal Controls

our Quarterly Report on Form 10-Q for the period ended September 30, 2004 filed with the SEC on November 9, 2004. In that report, we disclosed a material change to our European internal controls over financial reporting related to the Hays integration which had resulted in the relocation of our United Kingdom accounting operations center. We maintain a systemhave since completed our internal testing of internal accounting controls and concluded that, are designed to provide reasonable assurance that our transactions are properly recorded and reported and that our assets are safeguarded against unauthorized or improper use. As partas of the evaluation of our disclosureDecember 31, 2004, controls and procedures, we evaluated our internal controls.over financial reporting were effective.

        There werehave been no changes toin our internal control over financial reporting during the quarter ended December 31, 20032004 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, including any corrective actions taken with regard to any significant deficiencies or material weaknesses.reporting.

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Item 9B. Other Information.


        None.


PART III


Item 10. Directors and Executive Officers of the Registrant.


        The information required by Item 10 is incorporated by reference to our definitive Proxy Statement for the Annual Meeting of Shareholders to be held on or about May 27, 2004.26, 2005.


Item 11. Executive Compensation.


        The information required by Item 11 is incorporated by reference to our definitive Proxy Statement for the Annual Meeting of Shareholders to be held on or about May 27, 2004.26, 2005.


Item 12. Security Ownership of Certain Beneficial Owners and Management.


        The information required by Item 12 is incorporated by reference to our definitive Proxy Statement for the Annual Meeting of Shareholders to be held on or about May 27, 2004.26, 2005.


Item 13. Certain Relationships and Related Transactions.


        The information required by Item 13 is incorporated by reference to our definitive Proxy Statement for the Annual Meeting of Shareholders to be held on or about May 27, 2004.26, 2005.


Item 14. Principal AccountingAccountant Fees and Services.


        The information required by Item 14 is incorporated by reference to our definitive Proxy Statement for the Annual Meeting of Shareholders to be held on or about May 27, 2004.26, 2005.

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Item 15. Exhibits and Financial Statement Schedules, and Reports on Form 8-K.Schedules.


(a)(1) and (2) Financial Statements and Financial Statement Schedules filed as part of this report:

		Page
A. Iron Mountain Incorporated
Report of Independent Auditors' ReportRegistered Public Accounting Firm		5951
Management's Report on Internal Control Over Financial Reporting		52
Report of Independent Registered Public AccountantsAccounting Firm		6153
Consolidated Balance Sheets, December 31, 20022003 and 20032004		6255
Consolidated Statements of Operations, Years Ended December 31, 2001, 2002, 2003 and 20032004		6356
Consolidated Statements of Shareholders' Equity and Comprehensive Income, (Loss), Years Ended December 31, 2001, 2002, 2003 and 20032004		6457
Consolidated Statements of Cash Flows, Years Ended December 31, 2001, 2002, 2003 and 20032004		6558
Notes to Consolidated Financial Statements		6659
B. Iron Mountain Europe Limited
Report of the Independent Auditors		111
C. Financial Statement Schedule:
Report of Independent Public Accountants		112
Schedule II—Valuation and Qualifying Accounts		113103

(a)(3) (b) Exhibits filed as part of this report:

        As listed in the Exhibit Index following the signature page hereof.

(b)   Reports on Form 8-K:

        On December 5, 2003, the Company filed a Current Report on Form 8-K under Item 7 to file certain exhibits related to the (1) Underwriting Agreement dated December 4, 2003 between the Company, certain of the Company's subsidiaries and certain underwriters as an exhibit, (2) announcement of a proposed public offering of an additional $160 million of the Company's 6⁵/8% Senior Subordinated Notes due 2016, (3) commencement of a tender offer and consent solicitation for any and all of the $85 million aggregate principal amount of 8¹/8% Senior Notes due 2008 of Iron Mountain Canada Corporation and (4) announcement that the Company priced an underwritten public offering of an additional $170 million in aggregate principal amount of its 6⁵/8% Senior Subordinated Notes due 2016.

        On December 10, 2003, the Company filed a Current Report on Form 8-K under Items 5 and 7 to announce that the Company signed an agreement with Mentmore plc to acquire Mentmore's 49.9% equity interest in Iron Mountain Europe Limited for total consideration of 82.5 million British pounds sterling in cash.

58

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REPORT OF INDEPENDENT AUDITORS' REPORTREGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Shareholders of
Iron Mountain Incorporated:

        We have audited the accompanying consolidated balance sheets of Iron Mountain Incorporated (a Pennsylvania corporation) and its subsidiaries (the "Company") as of December 31, 20032004 and 2002,2003, and the related consolidated statements of operations, shareholders'stockholders' equity and comprehensive income, (loss), and cash flows for each of the three years then ended.in the period ended December 31, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Iron Mountain Europe Limited (a consolidated subsidiary) as of or for the two years ended October 31, 2003, and 2002, which statements reflect total assets constituting 18% and 8%, respectively, of consolidated total assets as of December 31, 2003, and 2002, and total revenues constituting 12% and 7%, respectively, of the total consolidated total revenuesrevenue for the years then ended. Thoseended December 31, 2003 and 2002, respectively. Such financial statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Iron Mountain Europe Limited for 2003 and 2002, is based solely on the report of such other auditors. The financial statements of Iron Mountain Incorporated and its subsidiaries for the year ended December 31, 2001 were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those financial statements and referred to the report of other auditors in their report dated February 22, 2002 (except with respect to Note 17, as to which the date is March 15, 2002).

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion.

        In our opinion, based on our audits and the report of the other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of Iron Mountain Incorporated and its subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

59

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        As discussed above, the consolidated financial statements of Iron Mountain Incorporated and its subsidiaries for the year ended December 31, 2001 were audited by other auditors who have ceased operations. As described in Note 2g, these consolidated financial statements have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards (Statement) No. 142, Goodwill and Other Intangible Assets, which was adopted by the Company as of January 1, 2002. Our audit procedures with respect to the disclosures in Note 2g for 2001 amounts included (a) agreeing the previously reported net income to the previously issued consolidated financial statements and the adjustments to reported net income representing amortization expense (including any related tax effects) recognized in those periods related to goodwill, intangible assets that are no longer being amortized and changes in amortization periods for intangible assets that will continue to be amortized as a result of initially applying Statement No. 142 (including any related tax effects) to the Company's underlying records obtained from management, and (b) testing the mathematical accuracy of the reconciliation of adjusted net income to reported net income, and the related earnings-per-share amounts. In our opinion, the disclosures for 2001 in Note 2g are appropriate. However, we were not engaged to audit, review, or apply any procedures to the 2001 consolidated financial statements of the Company other than with respect to such disclosures and, accordingly, we do not express an opinion or any other form of assurance on the 2001 consolidated financial statements taken as a whole.

/s/ DELOITTE & TOUCHE LLP

Boston, Massachusetts
March 8, 2004

60

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        This is a copy of the audit report previously issued by Arthur Andersen LLP in connection with Iron Mountain Incorporated's filing of an Annual Report on Form 10-K for the year ended December 31, 2001. This audit report has not been reissued by Arthur Andersen LLP in connection with this Annual Report on Form 10-K for the year ended December 31, 2003. See Exhibit 23.3 to the December 31, 2002 Annual Report on Form 10-K filed with the SEC for further discussion. The consolidated balance sheets as of December 31, 2000 and 2001 and the consolidated statements of operations, shareholders' equity and comprehensive loss and cash flows for the years ended December 31, 1999 and 2000 referred to in this report have not been included in the accompanying consolidated financial statements.


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors of
Iron Mountain Incorporated:

        We have audited the accompanying consolidated balance sheets of Iron Mountain Incorporated (a Pennsylvania corporation) and its subsidiaries as of December 31, 2000 and 2001, and the related consolidated statements of operations, shareholders' equity and comprehensive loss and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of Iron Mountain Incorporated's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the consolidated financial statements of Iron Mountain Europe Limited as of October 31, 2000 and 2001, which statements reflect total assets and total revenues of 6 percent and 5 percent in 2000, and 8 percent and 6 percent in 2001, respectively, of the related consolidated totals. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for this entity, is based solely on the report of the other auditors.

        We conducted our audits in accordance with auditingthe standards generally accepted inof the United States.Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion.

        In our opinion, based on our audits and the report of other auditors, thesuch consolidated financial statements referred to above present fairly, in all material respects, the financial position of Iron Mountain Incorporated and its subsidiaries as of December 31, 20002004 and 20012003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001,2004, in conformity with accounting principles generally accepted in the United States.States of America.

		/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts February 22, 2002 (Except with respect to Note 17, as to which the date is March 15, 2002)

61        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company's internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 11, 2005 expressed an unqualified opinion on management's assessment of the effectiveness of the Company's internal control over financial reporting and an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

---

/s/ DELOITTE & TOUCHE LLP

Boston, Massachusetts
March 11, 2005





Management's Report on Internal Control Over Financial Reporting


        Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13a-15(f). Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework inInternal Control—Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2004. Our management's assessment of the effectiveness of our internal control over financial reporting as of December 31, 2004 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which is included herein.





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Shareholders of
Iron Mountain Incorporated:

        We have audited management's assessment, included in the accompanying Management's Report on Internal Control Over Financial Reporting, that Iron Mountain Incorporated and subsidiaries (the "Company") maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the Company's internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

        A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.




        In our opinion, management's assessment that the Company maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2004 of the Company and our report dated March 11, 2005 expressed an unqualified opinion on those financial statements.

/s/ DELOITTE & TOUCHE LLP

Boston, Massachusetts
March 11, 2005





IRON MOUNTAIN INCORPORATED

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)


				December 31,									December 31,
				2002			2003						2003			2004
ASSETS	ASSETS									ASSETS
Current Assets:	Current Assets:									Current Assets:
	Cash and cash equivalents			$	56,292		$	74,683		Cash and cash equivalents			$	74,683		$	31,942
	Accounts receivable (less allowances of $20,274 and $18,310, respectively)				225,416			279,800		Accounts receivable (less allowances of $20,922 and $13,886, respectively)				279,800			354,434
	Deferred income taxes				34,192			33,043		Deferred income taxes				33,043			36,033
	Prepaid expenses and other				51,140			84,057		Prepaid expenses and other				84,057			78,745
		Total Current Assets			367,040			471,583			Total Current Assets			471,583			501,154
Property, Plant and Equipment:	Property, Plant and Equipment:									Property, Plant and Equipment:
	Property, plant and equipment				1,577,588			1,950,893		Property, plant and equipment				1,950,893			2,266,839
	Less—Accumulated depreciation				(338,400	)		(458,626	)	Less—Accumulated depreciation				(458,626	)		(617,043	)
		Net Property, Plant and Equipment			1,239,188			1,492,267			Net Property, Plant and Equipment			1,492,267			1,649,796
Other Assets, net:	Other Assets, net:									Other Assets, net:
	Goodwill				1,544,974			1,776,279		Goodwill				1,776,279			2,040,217
	Customer relationships and acquisition costs				48,213			116,466		Customer relationships and acquisition costs				116,466			189,780
	Deferred financing costs				19,358			23,934		Deferred financing costs				23,934			36,590
	Other				11,882			11,570		Other				11,570			24,850
		Total Other Assets, net			1,624,427			1,928,249			Total Other Assets, net			1,928,249			2,291,437
		Total Assets		$	3,230,655		$	3,892,099			Total Assets		$	3,892,099		$	4,442,387
LIABILITIES AND SHAREHOLDERS' EQUITY	LIABILITIES AND SHAREHOLDERS' EQUITY									LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:	Current Liabilities:									Current Liabilities:
	Current portion of long-term debt			$	69,732		$	115,781		Current portion of long-term debt			$	115,781		$	39,435
	Accounts payable				76,115			87,006		Accounts payable				87,006			103,415
	Accrued expenses				168,025			234,426		Accrued expenses				234,426			234,697
	Deferred revenue				95,188			107,857		Deferred revenue				107,857			136,470
	Other current liabilities				18,902			39,675		Other current liabilities				39,675			1,446
		Total Current Liabilities			427,962			584,745			Total Current Liabilities			584,745			515,463
Long-term Debt, net of current portion	Long-term Debt, net of current portion				1,662,365			1,974,147		Long-term Debt, net of current portion				1,974,147			2,438,587
Other Long-term Liabilities	Other Long-term Liabilities				35,433			24,499		Other Long-term Liabilities				24,499			23,932
Deferred Rent	Deferred Rent				19,438			20,578		Deferred Rent				20,578			26,253
Deferred Income Taxes	Deferred Income Taxes				78,464			146,231		Deferred Income Taxes				146,231			206,539
Commitments and Contingencies (see Note 13)	Commitments and Contingencies (see Note 13)									Commitments and Contingencies (see Note 13)
Minority Interests	Minority Interests				62,132			75,785		Minority Interests				75,785			13,045
Shareholders' Equity:	Shareholders' Equity:									Shareholders' Equity:
	Preferred stock (par value $0.01; authorized 10,000,000 shares; none issued and outstanding)				—			—		Preferred stock (par value $0.01; authorized 10,000,000 shares; none issued and outstanding)				—			—
	Common stock (par value $0.01; authorized 150,000,000 shares; issued and outstanding 85,049,624 shares and 85,575,254 shares, respectively)				850			856		Common stock (par value $0.01; authorized 200,000,000 shares; issued and outstanding 128,362,881 shares and 129,817,914 shares, respectively)				1,283			1,298
	Additional paid-in capital				1,020,452			1,034,070		Additional paid-in capital				1,033,643			1,063,560
	(Accumulated deficit) Retained earnings				(45,403	)		39,234		Retained earnings				39,234			133,425
	Accumulated other comprehensive items, net				(31,038	)		(8,046	)	Accumulated other comprehensive items, net				(8,046	)		20,285
		Total Shareholders' Equity			944,861			1,066,114			Total Shareholders' Equity			1,066,114			1,218,568
		Total Liabilities and Shareholders' Equity		$	3,230,655		$	3,892,099			Total Liabilities and Shareholders' Equity		$	3,892,099		$	4,442,387

The accompanying notes are an integral part of these consolidated financial statements.

62

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IRON MOUNTAIN INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)


				Year Ended December 31,												Year Ended December 31,
				2001			2002			2003						2002			2003			2004
Revenues:	Revenues:												Revenues:
	Storage			$	694,474		$	759,536		$	875,035		Storage			$	759,536		$	875,035		$	1,043,366
	Service and storage material sales				491,244			558,961			626,294		Service and storage material sales				558,961			626,294			774,223
		Total Revenues			1,185,718			1,318,497			1,501,329			Total Revenues			1,318,497			1,501,329			1,817,589
Operating Expenses:	Operating Expenses:												Operating Expenses:
	Cost of sales (excluding depreciation)				576,538			622,299			680,747		Cost of sales (excluding depreciation)				622,299			680,747			823,899
	Selling, general and administrative				307,800			333,050			383,641		Selling, general and administrative				333,050			383,641			486,246
	Depreciation and amortization				153,271			108,992			130,918		Depreciation and amortization				108,992			130,918			163,629
	Merger-related expenses				3,673			796			—		Merger-related expenses				796			—			—
	Loss on disposal/writedown of property, plant and equipment, net				320			774			1,130		Loss (Gain) on disposal/writedown of property, plant and equipment, net				774			1,130			(681	)
		Total Operating Expenses			1,041,602			1,065,911			1,196,436			Total Operating Expenses			1,065,911			1,196,436			1,473,093
Operating Income	Operating Income				144,116			252,586			304,893		Operating Income				252,586			304,893			344,496
Interest Expense, Net	Interest Expense, Net				134,742			136,632			150,468		Interest Expense, Net				136,632			150,468			185,749
Other Expense (Income), Net	Other Expense (Income), Net				37,485			1,435			(2,564	)	Other Expense (Income), Net				1,435			(2,564	)		(7,988	)
	(Loss) Income from Continuing Operations Before Provision for Income Taxes and Minority Interest				(28,111	)		114,519			156,989		Income from Continuing Operations Before Provision for Income Taxes and Minority Interest				114,519			156,989			166,735
Provision for Income Taxes	Provision for Income Taxes				17,875			47,318			66,730		Provision for Income Taxes				47,318			66,730			69,574
Minority Interest in (Losses) Earnings of Subsidiaries					(1,929	)		3,629			5,622
Minority Interest in Earnings of Subsidiaries													Minority Interest in Earnings of Subsidiaries				3,629			5,622			2,970
	(Loss) Income from Continuing Operations before Discontinued Operations and Cumulative Effect of Change in Accounting Principle				(44,057	)		63,572			84,637		Income from Continuing Operations before Discontinued Operations and Cumulative Effect of Change in Accounting Principle				63,572			84,637			94,191
Income from Discontinued Operations (net of tax of $768)	Income from Discontinued Operations (net of tax of $768)				—			1,116			—		Income from Discontinued Operations (net of tax of $768)				1,116			—			—
Cumulative Effect of Change in Accounting Principle (net of minority interest)	Cumulative Effect of Change in Accounting Principle (net of minority interest)				—			(6,396	)		—		Cumulative Effect of Change in Accounting Principle (net of minority interest)				(6,396	)		—			—
		Net (Loss) Income		$	(44,057	)	$	58,292		$	84,637			Net Income		$	58,292		$	84,637		$	94,191
Net (Loss) Income per Share—Basic:
Net Income per Share—Basic:													Net Income per Share—Basic:
	(Loss) Income from Continuing Operations before Discontinued Operations and Cumulative Effect of Change in Accounting Principle			$	(0.53	)	$	0.75		$	0.99		Income from Continuing Operations before Discontinued Operations and Cumulative Effect of Change in Accounting Principle			$	0.50		$	0.66		$	0.73
	Income from Discontinued Operations (net of tax)				—			0.01			—		Income from Discontinued Operations (net of tax)				0.01			—			—
	Cumulative Effect of Change in Accounting Principle (net of minority interest)				—			(0.08	)		—		Cumulative Effect of Change in Accounting Principle (net of minority interest)				(0.05	)		—			—
		Net (Loss) Income per Share—Basic		$	(0.53	)	$	0.69		$	0.99			Net Income per Share—Basic		$	0.46		$	0.66		$	0.73
Net (Loss) Income per Share—Diluted:
Net Income per Share—Diluted:													Net Income per Share—Diluted:
	(Loss) Income from Continuing Operations before Discontinued Operations and Cumulative Effect of Change in Accounting Principle			$	(0.53	)	$	0.74		$	0.98		Income from Continuing Operations before Discontinued Operations and Cumulative Effect of Change in Accounting Principle			$	0.49		$	0.65		$	0.72
	Income from Discontinued Operations (net of tax)				—			0.01			—		Income from Discontinued Operations (net of tax)				0.01			—			—
	Cumulative Effect of Change in Accounting Principle (net of minority interest)				—			(0.07	)		—		Cumulative Effect of Change in Accounting Principle (net of minority interest)				(0.05	)		—			—
		Net (Loss) Income per Share—Diluted		$	(0.53	)	$	0.68		$	0.98			Net Income per Share—Diluted		$	0.45		$	0.65		$	0.72
Weighted Average Common Shares Outstanding—Basic	Weighted Average Common Shares Outstanding—Basic				83,666			84,651			85,267		Weighted Average Common Shares Outstanding—Basic				126,977			127,901			129,083
Weighted Average Common Shares Outstanding—Diluted	Weighted Average Common Shares Outstanding—Diluted				83,666			86,071			86,718		Weighted Average Common Shares Outstanding—Diluted				129,107			130,077			131,176

The accompanying notes are an integral part of these consolidated financial statements.

63

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IRON MOUNTAIN INCORPORATED

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except share data)


		Common Stock Voting
							Additional Paid-in Capital			(Accumulated Deficit) Retained Earnings			Accumulated Other Comprehensive Items			Total Shareholders' Equity
		Shares		Amount
Balance, December 31, 2000		82,919,847		$	829		$	990,578		$	(59,383	)	$	(7,566	)	$	924,458
Issuance of shares under employee stock purchase plan and option plans, including tax benefit		1,374,468			14			16,258			—			—			16,272
Currency translation adjustment		—			—			—			—			(4,388	)		(4,388	)
Transition adjustment charge		—			—			—			—			(214	)		(214	)
Unrealized loss on hedging contracts		—			—			—			—			(5,857	)		(5,857	)
Adjustment due to differences in consolidation year end		—			—			—			(255	)		—			(255	)
Net loss		—			—			—			(44,057	)		—			(44,057	)
Balance, December 31, 2001		84,294,315			843			1,006,836			(103,695	)		(18,025	)		885,959
Issuance of shares under employee stock purchase plan and option plans, including tax benefit		755,309			7			13,373			—			—			13,380
Deferred compensation		—			—			243			—			—			243
Currency translation adjustment		—			—			—			—			3,378			3,378
Unrealized loss on hedging contracts		—			—			—			—			(16,391	)		(16,391	)
Net income		—			—			—			58,292			—			58,292
Balance, December 31, 2002		85,049,624			850			1,020,452			(45,403	)		(31,038	)		944,861
Issuance of shares under employee stock purchase plan and option plans, including tax benefit		525,630			6			18,242			—			—			18,248
Deferred compensation		—			—			(4,624	)		—			—			(4,624	)
Currency translation adjustment		—			—			—			—			16,466			16,466
Unrealized loss on hedging contracts		—			—			—			—			6,215			6,215
Unrealized gain on securities, net of tax		—			—			—			—			311			311
Net income		—			—			—			84,637			—			84,637
Balance, December 31, 2003		85,575,254		$	856		$	1,034,070		$	39,234		$	(8,046	)	$	1,066,114

			2001			2002			2003
COMPREHENSIVE (LOSS) INCOME:
Net (loss) income			$	(44,057	)	$	58,292		$	84,637
Other Comprehensive (Loss) Income, Net of Tax:
	Foreign Currency Translation Adjustments			(4,388	)		3,378			16,466
	Transition Adjustment Charge			(214	)		—			—
	Unrealized (Loss) Gain on Hedging Contracts			(5,857	)		(16,391	)		6,215
	Unrealized Gain on Securities			—			—			311
Comprehensive (Loss) Income			$	(54,516	)	$	45,279		$	107,629

		Common Stock Voting
							Additional Paid-in Capital			(Accumulated Deficit) Retained Earnings			Accumulated Other Comprehensive Items			Total Shareholders' Equity
		Shares		Amounts
Balance, December 31, 2001		126,441,473		$	1,264		$	1,006,415		$	(103,695	)	$	(18,025	)	$	885,959
Issuance of shares under employee stock purchase plan and option plans, including tax benefit		1,132,963			11			13,369			—			—			13,380
Deferred compensation		—			—			243			—			—			243
Currency translation adjustment		—			—			—			—			3,378			3,378
Market value adjustments for hedging contracts		—			—			—			—			(16,391	)		(16,391	)
Net income		—			—			—			58,292			—			58,292
Balance, December 31, 2002		127,574,436			1,275			1,020,027			(45,403	)		(31,038	)		944,861
Issuance of shares under employee stock purchase plan and option plans, including tax benefit		788,445			8			18,240			—			—			18,248
Deferred compensation		—			—			(4,624	)		—			—			(4,624	)
Currency translation adjustment		—			—			—			—			16,466			16,466
Market value adjustments for hedging contracts		—			—			—			—			6,215			6,215
Market value adjustments for securities		—			—			—			—			311			311
Net income		—			—			—			84,637			—			84,637
Balance, December 31, 2003		128,362,881			1,283			1,033,643			39,234			(8,046	)		1,066,114
Issuance of shares under employee stock purchase plan and option plans, including tax benefit		1,455,033			15			33,450			—			—			33,465
Deferred compensation		—			—			(3,533	)		—			—			(3,533	)
Currency translation adjustment		—			—			—			—			14,669			14,669
Market value adjustments for hedging contracts		—			—			—			—			13,576			13,576
Market value adjustments for securities		—			—			—			—			86			86
Net income		—			—			—			94,191			—			94,191
Balance, December 31, 2004		129,817,914		$	1,298		$	1,063,560		$	133,425		$	20,285		$	1,218,568

			2002			2003			2004
COMPREHENSIVE INCOME:
Net Income			$	58,292		$	84,637		$	94,191
Other Comprehensive (Loss) Income:
	Foreign Currency Translation Adjustments			3,378			16,466			14,669
	Market Value Adjustments for Hedging Contracts, Net of (Tax Benefit) Tax Provision of $(5,983), $2,268 and $4,955			(16,391	)		6,215			13,576
	Market Value Adjustments for Securities			—			311			86
Comprehensive Income			$	45,279		$	107,629		$	122,522

The accompanying notes are an integral part of these consolidated financial statements.

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IRON MOUNTAIN INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


			Year Ended December 31,											Year Ended December 31,
			2001			2002			2003					2002			2003			2004
Cash Flows from Operating Activities:	Cash Flows from Operating Activities:											Cash Flows from Operating Activities:
	Net (loss) income		$	(44,057	)	$	58,292		$	84,637		Net income		$	58,292		$	84,637		$	94,191
Adjustments to reconcile net (loss) income to (loss) income from continuing operations before discontinued operations and cumulative effect of change in accounting principle:
Adjustments to reconcile net income to income from continuing operations before discontinued operations and cumulative effect of change in accounting principle:												Adjustments to reconcile net income to income from continuing operations before discontinued operations and cumulative effect of change in accounting principle:
	Income from discontinued operations (net of tax of $768)			—			(1,116	)		—		Income from discontinued operations (net of tax of $768)			(1,116	)		—			—
	Cumulative effect of change in accounting principle (net of minority interest)			—			6,396			—		Cumulative effect of change in accounting principle (net of minority interest)			6,396			—			—
(Loss) Income from continuing operations				(44,057	)		63,572			84,637
Adjustments to reconcile (loss) income from continuing operations to cash flows provided by operating activities:
Income from continuing operations												Income from continuing operations			63,572			84,637			94,191
Adjustments to reconcile income from continuing operations to cash flows provided by operating activities:												Adjustments to reconcile income from continuing operations to cash flows provided by operating activities:
	Minority interests, net			(1,929	)		3,629			5,622		Minority interests in earnings of subsidiaries, net			3,629			5,622			2,970
	Depreciation			87,130			104,176			123,974		Depreciation			104,176			123,974			151,947
	Amortization (includes deferred financing costs and bond discount of $4,930, $4,921 and $3,654, respectively)			71,071			9,737			10,598		Amortization (includes deferred financing costs and bond discount of $4,921, $3,654 and $3,646, respectively)			9,737			10,598			15,328
	Provision for deferred income taxes			15,688			44,112			61,485		Provision for deferred income taxes			44,112			61,485			62,165
	Loss on early extinguishment of debt			19,980			5,430			28,175		Loss on early extinguishment of debt			5,430			28,175			2,454
	Loss on impairment of long-term assets			6,925			1,717			—		Loss on impairment of long-term assets			1,717			—			—
	Loss on disposal/writedown of property, plant and equipment, net			320			774			1,130		Loss (Gain) on disposal/writedown of property, plant and equipment, net			774			1,130			(681	)
	Loss (Gain) on foreign currency and other, net			10,399			(5,773	)		(28,961	)	(Gain) Loss on foreign currency and other, net			(5,773	)		(28,961	)		9,084
Changes in Assets and Liabilities (exclusive of acquisitions):	Changes in Assets and Liabilities (exclusive of acquisitions):											Changes in Assets and Liabilities (exclusive of acquisitions):
	Accounts receivable			(15,677	)		(2,547	)		(16,004	)	Accounts receivable			(2,547	)		(16,004	)		(48,020	)
	Prepaid expenses and other current assets			(17,158	)		(3,792	)		6		Prepaid expenses and other current assets			(3,792	)		6			(7,462	)
	Accounts payable			12,554			11,802			979		Accounts payable			11,802			979			12,366
	Accrued expenses, deferred revenue and other current liabilities			10,448			20,575			18,134		Accrued expenses, deferred revenue and other current liabilities			20,575			18,134			9,852
	Other assets and long-term liabilities			5,215			1,536			(1,082	)	Other assets and long-term liabilities			1,536			(1,082	)		1,170
	Cash Flows Provided by Operating Activities			160,909			254,948			288,693		Cash Flows Provided by Operating Activities			254,948			288,693			305,364
Cash Flows from Investing Activities:	Cash Flows from Investing Activities:											Cash Flows from Investing Activities:
	Capital expenditures			(197,039	)		(196,997	)		(204,477	)	Capital expenditures			(196,997	)		(204,477	)		(231,966	)
	Cash paid for acquisitions, net of cash acquired			(71,397	)		(49,361	)		(379,890	)	Cash paid for acquisitions, net of cash acquired			(49,361	)		(379,890	)		(384,338	)
	Additions to customer relationship and acquisition costs			(8,420	)		(8,419	)		(12,577	)	Additions to customer relationship and acquisition costs			(8,419	)		(12,577	)		(12,472	)
	Investment in convertible preferred stock			(2,000	)		—			(1,357	)	Investment in convertible preferred stock			—			(1,357	)		(858	)
	Proceeds from sales of property and equipment			720			7,020			11,667		Proceeds from sales of property and equipment			7,020			11,667			3,111
	Cash Flows Used in Investing Activities			(278,136	)		(247,757	)		(586,634	)	Cash Flows Used in Investing Activities			(247,757	)		(586,634	)		(626,523	)
Cash Flows from Financing Activities:	Cash Flows from Financing Activities:											Cash Flows from Financing Activities:
	Repayment of debt and tern loans			(118,278	)		(462,243	)		(698,817	)	Repayment of debt and term loans			(462,243	)		(698,817	)		(1,085,013	)
	Proceeds from borrowings and term loans			105,595			438,842			744,016		Proceeds from borrowings and term loans			438,842			744,016			1,148,275
	Early retirement of senior subordinated notes			(312,701	)		(54,380	)		(374,258	)	Early retirement of notes			(54,380	)		(374,258	)		(20,797	)
	Net proceeds from sales of senior subordinated notes			427,924			99,000			617,179		Net proceeds from sales of senior subordinated notes			99,000			617,179			269,427
	Debt financing (repayment to) and equity contribution from (distribution to) minority shareholders, net			21,216			(1,241	)		20,225		Debt (repayment to) financing and equity (distribution to) contribution from minority shareholders, net			(1,241	)		20,225			(41,978	)
	Other, net			11,145			7,120			6,709		Other, net			7,120			6,709			6,655
	Cash Flows Provided by Financing Activities			134,901			27,098			315,054		Cash Flows Provided by Financing Activities			27,098			315,054			276,569
Effect of Exchange Rates on Cash and Cash Equivalents	Effect of Exchange Rates on Cash and Cash Equivalents			(2,515	)		644			1,278		Effect of Exchange Rates on Cash and Cash Equivalents			644			1,278			1,849
Increase in Cash and Cash Equivalents				15,159			34,933			18,391
Increase (Decrease) in Cash and Cash Equivalents												Increase (Decrease) in Cash and Cash Equivalents			34,933			18,391			(42,741	)
Cash and Cash Equivalents, Beginning of Year	Cash and Cash Equivalents, Beginning of Year			6,200			21,359			56,292		Cash and Cash Equivalents, Beginning of Year			21,359			56,292			74,683
Cash and Cash Equivalents, End of Year	Cash and Cash Equivalents, End of Year		$	21,359		$	56,292		$	74,683		Cash and Cash Equivalents, End of Year		$	56,292		$	74,683		$	31,942
Supplemental Information:	Supplemental Information:											Supplemental Information:
Cash Paid for Interest	Cash Paid for Interest		$	133,373		$	133,873		$	126,952		Cash Paid for Interest		$	133,873		$	126,952		$	177,005
Cash Paid for Income Taxes	Cash Paid for Income Taxes		$	4,925		$	3,147		$	8,316		Cash Paid for Income Taxes		$	3,147		$	8,316		$	6,888

The accompanying notes are an integral part of these consolidated financial statements.

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 20032004

(In thousands, except share and per share data)


1. Nature of Business

        The accompanying financial statements represent the consolidated accounts of Iron Mountain Incorporated, a Pennsylvania corporation, and its subsidiaries. We are an international full-service provider of recordsinformation storage and information managementprotection and related services for all media in various locations throughout the United States, Canada, Europe, Mexico and South America to Fortune 500 and FTSE 100 companies, and numerous legal, banking, health care, accounting, insurance, entertainment and government organizations.organizations, including more than 95% of the Fortune 1000 and more than two-thirds of the FTSE 100.

2. Summary of Significant Accounting Policies

        a.     Principles of Consolidation

        The accompanying financial statements reflect our financial position and results of operations on a consolidated basis. Financial position and results of operations of Iron Mountain Europe Limited ("IME"), our European subsidiary, are consolidated for the appropriate periods based on its fiscal year ended October 31. All significant intercompany account balances have been eliminated.eliminated or presented to reflect the underlying economics of the transactions.

        b.     Use of Estimates

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements and for the period then ended. On an on-going basis, we evaluate the estimates used, including those related to the allowance for doubtful accounts and credit memos, impairments of tangible and intangible assets, income taxes, purchase accounting related reserves, self-insurance liabilities, incentive compensation liabilities, litigation liabilities and contingencies. We base our estimates on historical experience, actuarial estimates, current conditions and various other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities and are not readily apparent from other sources. We use these estimates to assist us in the identification and assessment of the accounting treatment necessary with respect to commitments and contingencies. Actual results may differ from these estimates.

        c.     Cash and Cash Equivalents

        Cash and cash equivalents include cash on hand and cash invested in short-term securities which have remaining maturities at the date of purchase of less than 90 days. Cash and cash equivalents are carried at cost, which approximates fair value. Our balance of cash and cash equivalents as of December 31, 2003 includes $1,959 of restricted cash due to contractual and other arrangements.

        d.     Foreign Currency Translation

        Local currencies are considered the functional currencies for most of our operations outside the United States. All assets and liabilities are translated at year-endperiod-end exchange rates, and revenues and expenses are translated at average exchange rates for the year,applicable period, in accordance with Statement of Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation." Resulting translation adjustments are reflected in the accumulated other comprehensive items






component of shareholders' equity. The gain or loss on foreign currency transactions, including those related to (a) U.S. dollar denominated 8¹/8% senior notes of our Canadian subsidiary (the "Subsidiary notes"), (b) our 7¹/4% GBP Senior Subordinated Notes due 2014 (the "7¹/4% notes"), (c) the borrowings in certain foreign currencies under our revolving credit agreements, and those related to(d) the foreign currency

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denominated intercompany obligations of our foreign subsidiaries to us, are included in Other (Income) Expense,other (income) expense, net, on our Consolidated Statementsconsolidated statements of Operations.operations. The total of such net (gains) lossesgains amounted to $10,437, $(5,043)$5,043, $30,223 and $(30,223)$8,915 for the years ended December 31, 2001, 2002, 2003 and 2003,2004, respectively.

        e.     Derivative Instruments and Hedging Activities

        SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"Activities," requires that every derivative instrument be recorded in the balance sheet as either an asset or a liability measured at its fair value. 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 as of January 1, 2001.

Periodically, we acquire derivative instruments that are intended to hedge either cash flows or fair values which are subject to foreign exchange or other market price risk, and not for trading purposes. We have formally documented our hedging relationships, including identification of the hedging instruments and the hedged items, as well as theour risk management objectives and strategies for undertaking each hedge transaction. Given the recurring nature of our revenues and the long term nature of our asset base, we have the ability and the preference to use long term, fixed interest rate debt to finance our business, thereby preserving our long term returns on invested capital. We target a range 80% to 85% of our debt portfolio to be long term and fixed with respect to interest rates. Occasionally, we will use floating to fixed interest rate swaps as a tool to maintain our targeted level of fixed rate debt. In addition, we will use borrowings in foreign currencies, either obtained in the U.S. or by our foreign subsidiaries, to naturally hedge foreign currency risk associated with our international investments. Sometimes we enter into currency swaps to temporarily hedge an overseas investment, such as a major acquisition, while we arrange permanent financing.

        f.      Property, Plant and Equipment

        Property, plant and equipment are stated at cost and depreciated using the straight-line method with the following useful lives:

Buildings		40 to 50 years
Leasehold improvements		8 to 10 years or the life of the lease, whichever is shorter
Racking		5 to 20 years
Warehouse equipment/vehiclesequipment		3 to 209 years
Vehicles		5 to 10 years
Furniture and fixtures		32 to 105 years
Computer hardware and software		3 to 5 years




        Property, plant and equipment, at cost, consist of the following:

		December 31,						December 31,
		2002			2003			2003			2004
Land and buildings		$	623,717		$	745,838		$	745,838		$	819,221
Leasehold improvements			96,509			144,244			144,244			181,452
Racking			496,919			598,101			598,101			699,104
Warehouse equipment/vehicles			66,718			88,127			88,127			117,740
Furniture and fixtures			34,005			41,996			41,996			51,075
Computer hardware and software			204,444			260,190			260,190			326,613
Construction in progress			55,276			72,397			72,397			71,634
		$	1,577,588		$	1,950,893		$	1,950,893		$	2,266,839

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        Minor maintenance costs are expensed as incurred. Major improvements which extend the life, increase the capacity or improve the safety or the efficiency of property owned are capitalized. Major improvements to leased buildings are capitalized as leasehold improvements and depreciated.

        We develop various software applications for internal use. Payroll and related costs for employees who are directly associated with, and who devote time to, the development of internal use computer software projects (to the extent of the time spent directly on the project) are capitalized and depreciated over the estimated useful life of the software. Capitalization begins when the design stage of the application has been completed and it is probable that the project will be completed and used to perform the function intended. Depreciation begins when the software is placed in service.

        We apply the provisions of Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" ("SOP 98-1") which requires computer software costs associated with internal use software to be expensed as incurred until certain capitalization criteria are met.met.. SOP 98-1 also defines which types of costs should be capitalized and which should be expensed. The computer software costs incurred and capitalized are being depreciated over their useful lives or the useful lives of the related assets, and are evaluated for impairment in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."

        During the year ended December 31, 2002 and 2003, we replaced certain of our internal use software programs, which resulted in the write-off to loss on disposal/writedown of property, plant and equipment, net of the remaining net book value of $1,077 and $710, respectively.assets.

        g.     Goodwill and Other Intangible Assets

        Effective July 1, 2001 and January 1, 2002, we adopted the provisions of SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets," respectively. 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. Had SFAS No. 142 been effective January 1, 2001, goodwill amortization expense would have been reduced by $59,217 ($50,903, net of tax) for the year ended December 31, 2001.

        Through December 31, 2001, we reviewed our existing goodwill for impairment, consistent with the guidelines of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" and determined that no amounts of goodwill were impaired using the undiscounted future cash flow methodology of SFAS No. 121.        Effective January 1, 2002, we reviewed goodwill for impairment consistent with the guidelines of SFAS No. 142 using a discounted future cash flow approach to approximate fair value. The result of testing our goodwill for impairment in accordance with SFAS No. 142, as of January 1, 2002, was a non-cash charge of $6,396 (net of minority interest of $8,487), which, consistent with SFAS No. 142, is reported in the caption "cumulative effect of change in accounting principle" in the accompanying consolidated statement of operations. Impairment adjustments recognized in the future, if any, are






generally required to be recognized as

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operating expenses. The $6,396 charge relates to our South American reporting unit within our international reporting segment. The South American reporting unit failed the impairment test primarily due to a reduction in the expected future performance of the unit resulting from a deterioration of the local economic environment and the devaluation of the currency in Argentina. As goodwill amortization expense in our South American reporting unit is not deductible for tax purposes, this impairment charge is not net of a tax benefit. We have a controlling 50.1% interest in Iron Mountain South America, LtdLtd. ("IMSA") and the remainder is owned by an unaffiliated entity. IMSA has acquired a controlling interest in entities in which local partners have retained a minority interest in order to enhance our local market expertise. These local partners have no ownership interest in IMSA. This has caused the minority interest portion of the non-cash goodwill impairment charge ($8,487) to exceed our portion of the non-cash goodwill impairment charge ($6,396). In accordance with SFAS No. 142, we selected October 1 as our annual goodwill impairment review date. We performed our annual goodwill impairment review as of October 1, 2003 and 2004 and noted no impairment of goodwill at our reporting units as of that date.such dates. As of December 31, 2003,2004, no factors were identified that would alter this assessment.

        The changes in the carrying value of goodwill attributable to each reportable operating segment for the years ended December 31, 20022003 and 20032004 is as follows:

		Business Records Management			Off-Site Data Protection			International			Corporate & Other			Total Consolidated
Balance as of December 31, 2001		$	1,139,212		$	236,850		$	149,928		$	3,557		$	1,529,547
Goodwill acquired during the year			19,726			895			15,163			—			35,784
Adjustments to purchase reserves			(5,134	)		(85	)		561			—			(4,658	)
Fair value adjustments			(4,355	)		35			—			(26	)		(4,346	)
Other adjustments and currency effects			2,311			(517	)		3,896			(2,160	)		3,530
Impairment losses			—			—			(14,883	)		—			(14,883	)
Balance as of December 31, 2002			1,151,760			237,178			154,665			1,371			1,544,974
Goodwill acquired during the year			39,330			7,675			142,065			—			189,070
Adjustments to purchase reserves			(613	)		(52	)		(285	)		—			(950	)
Fair value adjustments			3,097			(150	)		(4,385	)		—			(1,438	)
Other adjustments and currency effects			24,898			(30	)		19,755			—			44,623
Balance as of December 31, 2003		$	1,218,472		$	244,621		$	311,815		$	1,371		$	1,776,279

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        Actual results of operations for the years ended December 31, 2002 and 2003 and pro forma results of operations for the year ended December 31, 2001 had we applied the non-amortization provisions of SFAS No. 142 as of January 1, 2001 are as follows:

		Year Ended December 31,
		2001			2002			2003
		(Proforma)			(Actual)
(Loss) Income from Continuing Operations before Provision for Income Taxes and Minority Interest		$	(28,111	)	$	114,519		$	156,989
Add: Goodwill Amortization			59,217			—			—
Provision for Income Taxes			26,154			47,318			66,730
Minority Interest in Earnings of Subsidiaries, Net			1,197			3,629			5,622
Adjusted Income from Continuing Operations before Discontinued Operations, Extraordinary Charges and Cumulative Effect of Change in Accounting Principle			3,755			63,572			84,637
Income from Discontinued Operations			—			1,116			—
Cumulative Effect of Change in Accounting Principle			—			(6,396	)		—
Net Income		$	3,755		$	58,292		$	84,637
Net (Loss) Income per Share—Basic:
(Loss) Income from Continuing Operations before Discontinued Operations and Cumulative Effect of Change in Accounting Principle, as Reported		$	(0.53	)	$	0.75		$	0.99
Add: Goodwill Amortization, Net of Change in Provision for Income Taxes and Minority Interest			0.57			—			—
Adjusted Income from Continuing Operations before Discontinued Operations and Cumulative Effect of Change in Accounting Principle			0.04			0.75			0.99
Income from Discontinued Operations			—			0.01			—
Cumulative Effect of Change in Accounting Principle			—			(0.08	)		—
Net Income per Share—Basic		$	0.04		$	0.69		$	0.99
Net (Loss) Income per Share—Diluted:
(Loss) Income from Continuing Operations before Discontinued Operations and Cumulative Effect of Change in Accounting Principle, as Reported		$	(0.53	)	$	0.74		$	0.98
Add: Goodwill Amortization, Net of Change in Provision for Income Taxes and Minority Interest			0.56			—			—
Adjusted Income from Continuing Operations before Discontinued Operations and Cumulative Effect of Change in Accounting Principle			0.04			0.74			0.98
Income from Discontinued Operations			—			0.01			—
Cumulative Effect of Change in Accounting Principle			—			(0.07	)		—
Net Income per Share—Diluted		$	0.04		$	0.68		$	0.98

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		Business Records Management			Data Protection			International			Corporate & Other			Total Consolidated
Balance as of December 31, 2002		$	1,151,760		$	237,178		$	154,665		$	1,371		$	1,544,974
Deductible Goodwill acquired during the year			18,998			7,675			136,178			—			162,851
Non-Deductible Goodwill acquired during the year			20,332			—			5,887			—			26,219
Adjustments to purchase reserves			(613	)		(52	)		(285	)		—			(950	)
Fair value adjustments			3,097			(150	)		(4,385	)		—			(1,438	)
Currency effects and other adjustments			24,898			(30	)		19,755			—			44,623
Balance as of December 31, 2003			1,218,472			244,621			311,815			1,371			1,776,279
Deductible Goodwill acquired during the year			50,408			881			55,297			3,238			109,824
Non-Deductible Goodwill acquired during the year			11,106			1,599			11,141			73,667			97,513
Adjustments to purchase reserves			(414	)		(104	)		11,966			—			11,448
Fair value adjustments			(1,701	)		(31	)		940			—			(792	)
Currency effects and other adjustments			12,780			—			33,214			(49	)		45,945
Balance as of December 31, 2004		$	1,290,651		$	246,966		$	424,373		$	78,227		$	2,040,217




        Estimated amortization expense for existing intangible assets (excluding deferred financing costs which are amortized through interest expense) for the next five succeeding fiscal years is as follows:

		Estimated Amortization Expense			Estimated Amortization Expense
2004		$	6,935
2005			6,314		$	14,672
2006			5,970			14,391
2007			5,891			14,193
2008			5,755			13,957
2009						13,920

        h.     Long-Lived Assets

        In accordance with SFAS No. 144, we review long-lived assets and all amortizable intangible assets (excluding goodwill) for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to their carrying amount. The operations are generally distinguished by the business segment and geographic region in which they operate. If the operation is determined to be unable to recover the carrying amount of its assets, then intangible assets are written down first, followed by the other long-lived assets of the operation, to fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets.

        Consolidated losses on disposal/writedown of property, plant and equipment, net of $774 in the year ended December 31, 2002 consisted of disposals and asset writedowns partially offset by a $2,091 gain on the sale of a property in the U.K. Consolidated losses on disposal/writedown of property, plant and equipment, net of $1,130 in the year ended December 31, 2003 consisted of disposals and asset writedowns partially offset by approximately $4,200 of gains on the sale of properties in Texas, Florida and the U.K. Consolidated gains on disposal/writedown of property, plant and equipment, net of $681 for the year ended December 31, 2004, consisted primarily of a gain on the sale of a property in Florida during the second quarter of 2004 of approximately $1,200 offset by disposals and asset writedowns.

i.      Customer Relationships and Acquisition Costs and Other

        In connection with adopting SFAS No. 142, we reassessed the useful lives and classification of our intangible assets. Costs related to the acquisition of large volume accounts, net of revenues received for the initial transfer of the records, are capitalized and amortized for periods ranging from five to 30 years (weighted average of 2928 years at December 31, 2003)2004). These costs had previously been amortized over periods not to exceed 12 years. If the customer terminates its relationship with us, the unamortized cost is charged to expense. However, in the event of such termination, we collect, and record as income, permanent removal fees that generally equal or exceed the amount of the unamortized costs. Customer relationship intangible assets acquired through business combinations are amortized over periods ranging from five to 30 years (weighted average of 2118 years at December 31, 2003)2004). As of December 31, 20022003 and 2003,2004, the gross carrying amount of customer relationships and acquisition costs was $58,781$131,294 and $131,294,$213,378, respectively, and accumulated amortization of those costs






was $10,568$14,828 and $14,828,$23,598, respectively. For the years ended December 31, 2001, 2002, 2003 and 2003,2004, amortization expense was $3,053, $1,770, $4,395 and $4,395,$10,044, respectively.

        Other intangible assets, including noncompetition agreements, acquired core technology and trademarks, are capitalized and amortized over a weighted average period of fivesix years. As of December 31, 20022003 and 2003,2004, the gross carrying amount of other intangible assets was $21,088$22,212 and $22,212,$26,410, respectively, and accumulated amortization of those costs was $16,857$20,280 and $20,280,$9,447, respectively. For the years ended December 31, 2001, 2002, 2003 and 2003,2004, amortization expense was $3,872, $3,046, $2,559 and $2,559,$1,638, respectively.

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        j.      Deferred Financing Costs

        Deferred financing costs are amortized over the life of the related debt using the effective interest rate method. If debt is retired early, the related unamortized deferred financing costs are written off in the period the debt is retired to other (income) expense, net. As of December 31, 20022003 and 2003,2004, gross carrying amount of deferred financing costs was $25,883$29,620 and $29,620,$46,231, respectively, and accumulated amortization of those costs was $6,525$5,686 and $5,686,$9,641, respectively, and was recorded in interest expense, net.

        k.     Investment in Preferred Stock

        In May 2000, we made a $6,500 investment in the convertible preferred stock of LiveVault Corporation, a technology development company. This investment is accounted for at the lower of cost or market. In September 2001, we recorded an impairment charge in other (income) expense, net of $6,900, including the original investment and certain loans related to such investment. In December 2001, in connection with a recapitalization of LiveVault, we made an additional $2,000 investment in LiveVault's convertible preferred stock. In December 2002, we recorded an impairment charge related to this investment in other (income) expense, net of $600. In March 2003 and October 2004, we made an additional investments of $1,357 investmentand $858, respectively, in LiveVault's convertible preferred stock. As of December 31, 20022003 and 2003, $1,4002004, $2,757 and $2,757,$3,615, respectively, of carrying value related to this investment is included in other assets in the accompanying consolidated balance sheets.

        l.      Accrued Expenses

        Accrued expenses consist of the following:

		December 31						December 31
		2002			2003			2003			2004
Interest		$	26,647		$	48,960		$	48,960		$	50,669
Payroll and vacation			36,634			47,874			45,652			43,637
Derivative Liability			13,778			30,633
Derivative liability									30,633			7,150
Restructuring costs (see Note 7)			9,906			16,322			16,322			21,414
Incentive compensation			23,752			15,306			17,528			21,789
Other			57,308			75,331			75,331			90,038
		$	168,025		$	234,426		$	234,426		$	234,697




        m.    Revenues

        Our revenues consist of storage revenues as well as service and storage material sales revenues. Storage revenues consist of periodic charges related to the storage of materials (either on a per unit or per cubic foot of records basis). In certain circumstances, based upon customer requirements, storage revenues include periodic charges associated with normal, recurring service activities. Service and storage material sales revenues are comprised of charges for related service activities and courier

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operations and the sale of storage materials. Customers are generally billed on a monthly basis on contractually agreed-upon terms.

        Storage and service revenues are recognized in the month the respective service is provided. Storage material sales are recognized when shipped to the customer. Amounts related to future storage for customers where storage fees are billed in advance are accounted for as deferred revenue and amortized over the applicable period.

        n.     Deferred Rent Normalization

        We have entered into various leases for buildings used in the storage of records. Certain leases have fixed escalation clauses or other features which require normalization of the rental expense over the life of the lease resulting in deferred rent being reflected in the accompanying consolidated balance sheets. In addition, we have assumed various above and below market leases in connection with certain of our acquisitions. The difference between the present value of these lease obligations and the market rate at the date of the acquisition was recorded as a netprepaid rent or deferred rent liability and is being amortized over the remaining lives of the respective leases.

        o.     Stock-based Compensation

        As of January 1, 2003, we adopted the measurement provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure." As a result we began using the fair value method of accounting in our financial statements beginning January 1, 2003 using the prospective method. The prospective method involves recognizing expense for the fair value for all awards granted or modified in the year of adoption and thereafter with no expense recognition for previous awards. Additionally, we recognize expense related to the discount embedded in our employee stock purchase plan. We will apply the fair value recognition provisions to all stock based awards granted, modified or settled on or after January 1, 2003 and will continue to provide the required pro forma information for all awards previously granted, modified or settled before January 1, 2003.






        Had we elected to recognize compensation cost based on the fair value of the options granted at grant date as prescribed by SFAS No. 123 and No. 148, net (loss) income and net (loss) income per share would have been changed to the pro forma amounts indicated in the table below:

			Year Ended December 31,
			2001			2002			2003
Net (loss) income, as reported			$	(44,057	)	$	58,292		$	84,637
Add: Stock-based employee compensation expense included in reported net income, net of tax benefit				—			—			984
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of tax benefit				2,912			2,687			3,304
Net (loss) income, pro forma			$	(46,969	)	$	55,605		$	82,317
(Losses) Earnings per share:
	Basic—as reported			(0.53	)		0.69			0.99
	Basic—pro forma			(0.56	)		0.66			0.97
	Diluted—as reported			(0.53	)		0.68			0.98
	Diluted—pro forma			(0.56	)		0.65			0.95

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			Year Ended December 31,
			2002			2003			2004
Net income, as reported			$	58,292		$	84,637		$	94,191
Add: Stock-based employee compensation expense included in reported net income, net of tax benefit				—			984			3,567
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of tax benefit				(2,687	)		(3,304	)		(5,432	)
Net income, pro forma			$	55,605		$	82,317		$	92,326
Earnings per share:
	Basic—as reported			0.46			0.66			0.73
	Basic—pro forma			0.44			0.65			0.72
	Diluted—as reported			0.45			0.65			0.72
	Diluted—pro forma			0.43			0.63			0.70

        The weighted average fair value of options granted in 2001, 2002, 2003 and 20032004 was $8.74, $9.70, $10.97 and $10.97$8.58 per share, respectively. The values were estimated on the date of grant using the Black-Scholes option pricing model. The following table summarizes the weighted average assumptions used for grants in the year ended December 31:

Assumption		2001		2002		2003			2002		2003		2004
Expected volatility		27.0	%	27.5	%	27.0	%		27.5	%	27.0	%	24.8	%
Risk-free interest rate		4.65		4.08		2.91			4.08		2.91		3.41
Expected dividend yield		None		None		None			None		None		None
Expected life of the option		5.0 years		5.0 years		5.0 years			5.0 years		5.0 years		5.0 years

        p.     Merger-related Expenses

        Merger-related expenses as presented in the accompanying consolidated financial statements relate primarily to non-capitalizable expenses directly related to our merger with Pierce Leahy Corp. and consist primarily of severance, relocation and pay-to-stay payments, costs of exiting certain facilities, system conversion costs and other transaction-related costs.

        q.     Income Taxes

        We account for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the tax and financial reporting basis of assets and liabilities and for loss and credit carryforwards. Valuation allowances are provided when recovery of deferred tax assets is not considered likely.






        r.     Income (Loss) Per Share—Basic and Diluted

        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. Potential common shares, substantially attributable to stock options, included in the calculation of diluted net income per share totaled 1,420,6552,130,983, 2,177,201 and 1,451,4672,092,831 shares for the years ended December 31, 2002, 2003 and 2003,2004, respectively. Potential common shares of 1,912,069, 316,864475,296, 570,456 and 380,30491,045 for the years ended December 31, 2001, 2002, 2003 and 2003,2004, respectively, have been excluded from the calculation of diluted net income per share, as their effects are antidilutive.

        s.     Reclassifications

        Certain reclassifications have been made to the 2001 and 2002 consolidated financial statements to conform to the 2003 presentation.

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        t.      New Accounting Pronouncements

        In April 2002,December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 145, "Rescission123R, "Share-Based Payment." SFAS No. 123R is a revision of FASB StatementsSFAS No. 4, 44123 and 64, amendment of FASB Statement No. 13, and Technical Corrections," which, among other things, limits the classification of gains and losses from extinguishment of debt as extraordinary to only those transactions that are unusual and infrequent in nature as defined by APBsupersedes Accounting Principles Board Opinion No. 30 "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions."25, "Accounting for Stock Issued to Employees" ("APB No. 25"). We adopted the measurement provisions of SFAS No. 145123 and SFAS No. 148 in our financial statements beginning January 1, 2003 using the prospective method. The prospective method involves recognizing expense for the fair value for all awards granted or modified in the year of adoption and thereafter with no expense recognition for previous awards. We have applied the fair value recognition provisions to all stock based awards granted, modified or settled on or after January 1, 2003.

        Among other items, SFAS No. 123R eliminates the use of APB No. 25 and the intrinsic value method of accounting, and requires companies to recognize the cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value of those awards, in the financial statements. The effective date of SFAS No. 123R is the first reporting period beginning after June 15, 2005, which would be our third quarter of 2005, although early adoption is allowed. SFAS No. 123R permits companies to adopt its requirements using either a "modified prospective" method, or a "modified retrospective" method. Under the "modified prospective" method, compensation cost is recognized in the financial statements beginning with the effective date, based on the requirements of SFAS No. 123R for all share-based payments granted after that date, and based on the requirements of SFAS No. 123 for all unvested awards granted prior to the effective date of SFAS No. 123R. Under the "modified retrospective" method, the requirements are the same as under the "modified prospective" method, but this method also permits entities to restate financial statements of previous periods based on proforma disclosures made in accordance with SFAS No. 123.

        SFAS No. 123R also requires that the benefits associated with the tax deductions in excess of recognized compensation cost be reported as a financing cash flow, rather than as an operating cash flow as required under current rules. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after the effective date. Since we do not pay significant cash taxes currently, we do not expect this provision to materially impact our statement of cash flows within the next few years.






        We expect to adopt SFAS No. 123R effective July 1, 2005 using the modified prospective method of implementation. Subject to a complete review of the requirements of SFAS No. 123R, based on outstanding stock options granted to employees prior to our prospective implementation of the measurement provisions of SFAS No. 123 and SFAS No. 148 on January 1, 2003. Gains and losses on certain future debt extinguishments, if any, will be recorded2003, we expect to record approximately $900 of stock compensation expense in pre-tax income. Losses on early extinguishmentthe second half of debt of $19,980, $5,430 and $28,175 for the years ended December 31, 2001, 2002 and 2003, respectively, are included in other (income) expense, net in our accompanying consolidated statements of operations2005 associated with unvested stock option grants issued prior to conform to the requirements under SFAS No. 145.January 1, 2003.

        In January and December 2003,2004, the FASB issued FASB InterpretationStaff Position No. 46109-2, "Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004" ("FIN 46"FSP 109-2"). The American Jobs Creation Act of 2004 ("AJCA") and No. 46, revised ("FIN 46R"), "Consolidation of Variable Interest Entities." These statements, which address perceived weaknesses in accounting for entities commonly known as special-purpose or off-balance-sheet, require consolidationintroduces a special one-time dividends received deduction on the repatriation of certain interests or arrangements by virtue of holdingforeign earnings to a controlling financial interest in such entities. Certain provisions of FIN 46R related to interests in special purpose entities were applicableU.S. taxpayer ("repatriation provision"), provided certain criteria are met. FSP 109-2 provides accounting and disclosure guidance for the periodrepatriation provision. The Treasury Department or Congress will be providing additional clarifying language on key elements of the repatriation provision in the future. FSP 109-2 grants an enterprise additional time beyond the year ended December 31, 2003. We must apply FIN 46R2004, in which the AJCA was enacted, to our interests in all entities subject toevaluate the interpretation aseffects of the first interimAJCA on its plan for reinvestment or annual period ending after March 15, 2004. Adoptionrepatriation of this new methodunremitted earnings. FSP 109-2 calls for enhanced disclosures of, accounting for variable interest entities did notamong other items, the status of our evaluations, the effects of completed evaluations, and is not expected to have a material impact on our consolidated resultsthe potential range of operations and financial position.income tax effects of repatriations. Such disclosures are included in Note 10.

        u.t.      Rollforward of Allowance for Doubtful Accounts and Credit Memo Reserves

Year Ended December 31,		Balance at Beginning of the Year			Charged to Expense			Other Additions(1)			Deductions			Balance at End of the Year			Balance at Beginning of the Year			Charged to Revenue			Charged to Expense			Other Additions(1)			Deductions(2)			Balance at End of the Year
2002		$	17,086		$	11,597		$	783		$	(9,192	)	$	20,274		$	17,086		$	12,133		$	11,597		$	3,365		$	(22,772	)	$	21,409
2003		$	20,274		$	(2,292	)	$	4,873		$	(4,545	)	$	18,310			21,409			14,657			(2,292	)		9,133			(21,985	)		20,922
2004																		20,922			17,858			(4,569	)		4,397			(24,722	)		13,886

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(1)

Includes allowancePrimarily consists of recoveries of previously written-off accounts receivable, allowances of businesses acquired during the year as described in Note 7,and the impact associated with currency translation adjustments.



(2)

Primarily consists of the write-off of accounts receivable and adjustments and the reclassificationto allowances of certain allowances and credit memo reserves that were historically presented in other balance sheet accounts.businesses acquired.

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        v.u.     Accumulated Other Comprehensive Items, Net

        Accumulated other comprehensive items, net consists of the following:

		December 31,							December 31,
		2002			2003				2003			2004
Foreign currency translation adjustments		$	(8,576	)	$	7,890			$	7,890		$	22,559
Transition adjustment charge			(214	)		(214	)
Unrealized loss on hedging contracts			(22,248	)		(16,033	)			(16,247	)		(2,671	)
Unrealized gain on securities			—			311				311			397
		$	(31,038	)	$	(8,046	)		$	(8,046	)	$	20,285

3. Variable Interest Entities

        Three variable interest entities were established to acquire properties and lease those properties to us. These leases were designed to qualify as operating leases for accounting purposes, where the monthly lease expense was recorded as rent expense in our consolidated statements of operations and where the related underlying assets and liabilities were not consolidated in our consolidated balance sheets. We changed the characterization and the related accounting for properties in one variable interest entity ("VIE III") during the third quarter of 2002 and prospectively for new property acquisitions in the fourth quarter of 2002. In addition, anticipating the requirement to consolidate, and in line with our objective of transparent reporting, we voluntarily guaranteed all of the at-risk equity in VIE III and our two other variable interest entities (together, the "Other Variable Interest Entities" and, collectively with VIE III, our "Variable Interest Entities") as of December 31, 2002. These guarantees resulted in our consolidating all of our Variable Interest Entities' assets and liabilities.

        Our Variable Interest Entities were financed with real estate term loans. These real estate term loans have always been and continue to be treated as indebtedness for purposes of our financial covenants under our Fifth Amended and Restated Credit Agreement dated March 15, 2002 (the "Amended and Restated Credit Agreement"). As of the date they were consolidated into our financial statements, they were also considered indebtedness under our indentures for certain of our senior subordinated notes. As of December 31, 2003, these real estate term loans amounted to $202,647. No further financing is currently available to our Variable Interest Entities to fund further property acquisitions. See Note 5.

        As of December 31, 2002, we voluntarily guaranteed all of the at-risk equity in VIE III. This resulted in our consolidating all of its remaining assets and liabilities. VIE III's remaining assets and liabilities relate to an interest rate swap agreement, which it entered into upon its inception. This swap agreement hedges the majority of interest rate risk associated with VIE III's real estate term loans. Specifically, VIE III has swapped $97,000 of floating rate debt to fixed rate debt. Since the time it entered into the swap agreement, interest rates have fallen. As a result, the estimated fair value of the derivative liability held by VIE III, and now consolidated on our balance sheet, related to the swap agreement was $13,658 and $10,960 at December 31, 2002 and 2003, respectively. This swap has been

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since inception and continues to be, as of December 31, 2003, an effective hedge in accordance with SFAS No. 133. During the years ended December 31, 2002 and 2003, we recorded depreciation expense of $1,675 and $1,779 associated with the properties, respectively, and interest expense of $6,193 and $8,169, respectively, associated with the real estate term loans. See Notes 4 and 5.

        In addition, as of December 31, 2002, we voluntarily guaranteed all of the at-risk equity in the Other Variable Interest Entities. This resulted in our consolidating all of their assets and liabilities. As of December 31, 2002, the total impact of consolidating the Other Variable Interest Entities was an increase of $103,932 both in property, plant and equipment and long-term debt. The underlying leases associated with the Other Variable Interest Entities were treated as operating leases from inception (as early as 1998) through consolidation on December 31, 2002. As a result, we recorded $6,733 and $5,915 in rent expense in our consolidated statementsstatement of operations related to these leases for the year ended December 31, 2002. For the years ended December 31, 20012003 and 2002, respectively. For the year ended December 31, 2003,2004, we recorded depreciation expense of $2,001 for each year associated with the properties, and interest expense of $5,464 and $2,014, respectively, associated with the real estate term loans andwhich were repaid in March 2004. We no longer have rent expense related to leases associated with the Other Variable Interest Entities in our consolidated financial results.

4. Derivative Instruments and Hedging Activities

        We have entered into two 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 our term loan. For all qualifying and highly effective cash flow hedges, the changes in the fair value of the derivatives are recorded in other comprehensive income (loss) which is a component of accumulated other comprehensive items included in shareholders' equity in the accompanying consolidated balance sheets.. Specifically, we chose to swap the interest rates on $195,500 of floating rate debt to fixed rate. Since entering into these two swap agreements, interest rates have fallen. As a result, the estimated cost to terminate these swaps (fair value of derivative liability) would be $18,713$13,370 and $13,370$4,333 at December 31, 20022003 and 2003,2004, respectively. We have recorded, in the accompanying consolidated balance sheets, the fair value of the






derivative liability, a deferred tax asset and a corresponding charge to accumulated other comprehensive items of $13,370 ($8,709 recorded in accrued expenses and $4,661 recorded in other long-term liabilities), $4,878 and $8,492, respectively, as of December 31, 2003. We have recorded, in the accompanying consolidated balance sheets, the fair value of the derivative liability, a deferred tax asset and a corresponding charge to accumulated other comprehensive items of $4,333 ($2,910 recorded in accrued expenses and $1,423 recorded in other long-term liabilities), $1,585 and $2,748, respectively, as of December 31, 2004. Additionally, as a result of the foregoing, for the years ended December 31, 2001, 2002, 2003 and 2003,2004, we recorded additional interest expense of $2,677, $7,534, $8,709 and $8,709$8,460 resulting from interest rate swap settlements.payments. These interest rate swap agreements were determined to be highly effective, and therefore no ineffectiveness was recorded in earnings.

        WeIn addition, we have entered into a third interest rate swap agreement, which was designated as a cash flow hedge through December 31, 2002. This swap agreement hedged interest rate risk on certain amounts of our variable operating lease commitments. Specifically, we chose to swap the variable component of $47,500 of certain operating lease commitments to fixed operating lease commitments. Since entering into the swap agreement, interest rates have fallen. As a result, the estimated cost to terminate these swaps (fair value of derivative liability) would be $2,949$1,250 and $1,250$140 at December 31, 20022003 and 2003,2004, respectively. We have recorded, in the accompanying consolidated balance sheets,sheet, the estimated cost to terminate this swap a deferred tax asset and a corresponding charge to accumulated other

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comprehensive items(fair value of $1,250 ($1,135the derivative liability) of $140 (which was all recorded in accrued expenses and $115 recorded in other long-term liabilities), $456 and $794, respectively,expenses) as of December 31, 2003.2004. From inception through December 31, 2002, this interest rate swap agreement was determined to be highly effective, and therefore no ineffectiveness was recorded in earnings. As a result of the consolidation of one of the Other Variable Interest Entities ("VIE I") on December 31, 2002, we consolidated the real estate term loans of VIE I and the operating lease commitments that were hedged by this swap are now considered to be inter-company transactions. As a result, this interest rate swap agreement was deemed to be no longer effective on a prospective basis. The unrealized mark to market losses previously recorded in other comprehensive income attributable to this swap ($1,875, net of tax, as of December 31, 2002) will be amortized through other (income) expense, net in the accompanying consolidated statement of operations based on the changes in the fair value of the swap each period that the remaining interest payments are made on VIE I's real estate term loans. We will prospectively account for mark to market changes in the derivative liability of this swap through other (income) expense, net in the accompanying consolidated statement of operations. This accounting will have a net zero impact within our consolidated statement of operations as it relates to the amortization of unrealized mark to market losses and the fair valuing of the derivative liability. Additionally, as a result of the foregoing, for the yearsyear ended December 31, 2001 and 2002, we recorded additional rent expense of $743 and $1,807, respectively, resulting from the settlementspayments associated with this interest rate swap agreement and for the year ended December 31, 2003 we recorded additional interest expense of $2,083 resulting from settlementspayments associated with this interest rate swap agreement. As a result of the repayment of the real estate term loans discussed in Note 5, we recorded an additional $795 of interest in the first quarter of 2004, representing the fair value of the derivative liability. The total impact of marking to market the fair market value of the derivative liability and cash payments associated with the interest rate swaps agreement resulted in our recording additional interest expense of $1,246 for the year ended December 31, 2004.






        Also, as of December 31, 2002, we consolidated VIE III which had entered into an interest rate swap agreement upon its inception which was designated as a cash flow hedge. This swap agreement hedges the majority of interest rate risk associated with VIE III's real estate term loans. Specifically, VIE III has swapped $97,000 of floating rate debt to fixed rate debt. Since the time it entered into the swap agreement, interest rates have fallen. As a result, the estimated cost to terminate these swaps (fair value of derivative liability) would be $13,658$10,960 and $10,960$6,934 at December 31, 20022003 and 2003,2004, respectively. We have recorded, in the accompanying consolidated balance sheets,sheet, the fairestimated cost to terminate this swap (fair value of the derivative liability, a deferred tax asset and a corresponding charge to accumulated other comprehensive itemsliability) of $10,960$6,934 ($4,8064,100 recorded in accrued expenses and $6,154$2,834 recorded in other long-term liabilities), $3,998 and $6,962, respectively, as of December 31, 2003.2004. Additionally, as a result of the foregoing, for the year ended December 31, 2002 and 2003, we recorded additional interest expense of $3,423 and $4,806, respectively, resulting from interest rate swap settlements. Thispayments. As a result of the repayment of the real estate term loans discussed in Note 5, we recorded an additional $8,656 of interest in the third quarter of 2004, representing the fair value of the derivative liability. The total impact of marking to market the fair market value of the derivative liability and cash payments associated with the interest rate swap agreement has been since inception and continues to be a highly effective hedge, and therefore no ineffectiveness was recordedresulted in earnings.our recording additional interest expense of $11,565 for the year ended December 31, 2004.

        In July 2003, we provided the initial financing totaling 190,459 British pounds sterling to Iron Mountain Europe Limited ("IME"), our European joint venture,IME for all of the consideration associated with the acquisition of the European information management services business of Hays plc ("Hays IMS") using cash on hand and borrowings under our revolving credit facility. We recorded a foreign currency gain of $27,777 in other (income) expense, net for this intercompany balance for the year ended December 31, 2003. In March 2004, IME repaid 135,000 British pounds sterling with proceeds from their new credit agreement (see Note 5). We recorded a foreign currency gain of $11,866 in other (income) expense, net for this intercompany balance in the first quarter of 2004. In order to minimize the foreign currency risk associated with providing IME with the consideration necessary for the acquisition of the European operations of HayHays IMS, we borrowed

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80,000 British pounds sterling under our revolving credit facility to create a natural hedge. We recorded a foreign currency loss of $11,496 on the translation of this revolving credit balance to U.S. dollars in other (income) expense, net for the year ended December 31, 2003. In the first quarter of 2004, these borrowings were repaid and we recorded a foreign currency loss of $2,995 on the translation of this revolving credit balance to U.S. dollars in other (income) expense, net.

        In addition, on July 16, 2003, we entered into two cross currency swaps with a combined notional value of 100,000 British pounds sterling. TheseWe settled these swaps each havein March 2004 by paying our counter parties a termtotal of one year$27,714 representing the fair market value of the derivative and at maturitythe associated swap costs, of which $18,978 was accrued for as of December 31, 2003. In the first quarter of 2004, we haverecorded a right to receiveforeign currency loss for this swap of $8,736 in other (income) expense, net in the accompanying consolidated statement of operations. Upon cash payment, we received $162,800 in exchange for 100,000 British pounds sterling. We havedid not designateddesignate these swaps as hedges and, therefore, all mark to market fluctuations of the swaps arewere recorded in other (income) expense, net in our consolidated statements of operations.operations from inception to cash payment of the swaps.

        In April 2004, IME entered into two floating for fixed interest rate swap contracts, each with a notional value of 50,000 British pounds sterling and a duration of two years, which were designated as






cash flow hedges. These swap agreements hedge interest rate risk on IME's 100,000 British pounds sterling term loan facility (see Note 5). We have recorded, in the accompanying consolidated balance sheet, the fair value of the derivative asset, a deferred tax liability and the associated swap costa corresponding increase to accumulated other comprehensive items of $18,978$115 (which was all recorded in accrued expensesother current assets), $39 and $76, respectively, as of December 31, 2003 and for2004. For the year ended December 31, 2003,2004, we recorded $18,978 in other (income)additional interest expense net in the accompanying consolidated statement of operations.$202 resulting from interest rate swap cash payments.

5. Debt

        Long-term debt consists of the following:

		December 31,							December 31,
		2002			2003				2003			2004
Revolving Credit Facility due 2005		$	75,360		$	142,280
Term Loan due 2008			249,750			248,750
91/8% Senior Subordinated Notes due 2007 (the "91/8% notes")			22,409			—
IMI Revolving Credit Facility									$	142,280		$	122,563
IMI Term Loan Facility										248,750			349,000
IME Revolving Credit Facility										—			101,478
IME Term Loan Facility										—			184,330
81/8% Senior Notes due 2008 (the "Subsidiary notes")			124,666			18,768				18,768			—
83/4% Senior Subordinated Notes due 2009 (the "83/4% notes")			249,727			—
81/4% Senior Subordinated Notes due 2011 (the "81/4% notes")			149,625			149,670				149,670			149,715
85/8% Senior Subordinated Notes due 2013 (the "85/8% notes")			481,097			481,075				481,075			481,054
71/4% GBP Senior Subordinated Notes due 2014 (the "71/4% notes")										—			288,990
73/4% Senior Subordinated Notes due 2015 (the "73/4% notes")			100,000			441,331				441,331			440,418
65/8% Senior Subordinated Notes due 2016 (the "65/8% notes")			—			314,071				314,071			314,565
Real Estate Term Loans			202,647			202,647				202,647			—
Real Estate Mortgages			16,262			17,584				17,584			5,908
Seller Notes			12,864			12,607				12,607			11,307
Other			47,690			61,145
Other(1)										61,145			28,694
Long-term Debt			1,732,097			2,089,928
Total Long-term Debt										2,089,928			2,478,022
Less Current Portion			(69,732	)		(115,781	)			(115,781	)		(39,435	)
Long-term Debt, Net of Current Portion		$	1,662,365		$	1,974,147			$	1,974,147		$	2,438,587

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(1)

Includes $51,990 of outstanding amounts under IME's previous term loan and revolving credit facilities as of December 31, 2003.

        a.     Revolving Credit Facility and Term Loans

        In March 2004, IME and certain of its subsidiaries entered into a credit agreement (the "IME Credit Agreement") with a syndicate of European lenders. The Amended and RestatedIME Credit Agreement replacedprovides for maximum borrowing availability in the principal amount of 210,000 British pounds sterling, including a 100,000 British pounds sterling revolving credit facility (the "IME revolving credit facility"), which includes the ability to borrow in certain other foreign currencies, a 100,000 British pounds sterling term loan (the "IME term loan facility"), and a 10,000 British pounds sterling overdraft protection line. The






IME revolving credit facility matures on March 5, 2009. The IME term loan facility is payable in three installments; two installments of 20,000 British pounds sterling on March 5, 2007 and 2008, respectively, and the final payment of the remaining balance on March 5, 2009. The interest rate on borrowings under the IME Credit Agreement varies depending on IME's choice of currency options and interest rate period, plus an applicable margin. The IME Credit Agreement includes various financial covenants applicable to the results of IME, which may restrict IME's ability to incur indebtedness under the IME Credit Agreement and from third parties, as well as limit IME's ability to pay dividends to us. Most of IME's non-dormant subsidiaries have either guaranteed the obligations or have their shares pledged to secure IME's obligations under the IME Credit Agreement. We have not guaranteed or otherwise provided security for the IME Credit Agreement nor have any of our U.S., Canadian, Mexican or South American subsidiaries.

        In March 2004, IME borrowed approximately 147,000 British pounds sterling under the IME Credit Agreement, including the full amount of the term loan. IME used those proceeds to repay us 135,000 British pounds sterling related to our initial financing of the acquisition of Hays IMS, to repay amounts outstanding under its prior term loan and revolving credit facility and to pay transaction costs associated with the IME Credit Agreement. We used the 135,000 British pounds sterling received from IME to: (1) pay down $103,932 of real estate term loans, (2) settle all obligations totaling $27,714 associated with terminating our two cross currency swaps used to hedge the foreign currency impact of our intercompany financing with IME related to the Hays IMS acquisition, and (3) to pay down amounts outstanding under our prior credit agreement. As a result, we recorded a charge to other (income) expense, net inOur consolidated balance sheet as of December 31, 2004 included 155,052 British pounds sterling ($285,808) of borrowings under the accompanying consolidated statementIME Credit Agreement. The remaining availability, based on its current level of operations of $1,222 related toexternal debt and the early retirement of debt in conjunction withleverage ratio under the refinancing of ourIME revolving credit facility on October 31, 2004, was approximately 48,951 British pounds sterling ($90,231). The interest rate in effect under the IME revolving credit facility ranged from 3.4% to 6.6% as of October 31, 2004. For the year ended December 31, 2002.2004, we recorded commitment fees of $396 based on 0.9% of unused balances under the IME revolving credit facility.

        On April 2, 2004 and subsequently on July 8, 2004, we entered into a new amended and restated revolving credit facility and term loan facility (the "IMI Credit Agreement") to replace our prior credit agreement and to reflect more favorable pricing of our term loans. The Amended and RestatedIMI Credit Agreement has an aggregate principal amount of $650,000$550,000 and includesis comprised of a $400,000$350,000 revolving credit

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facility (the "IMI revolving credit facility"), which includes the ability to borrow in certain foreign currencies, and a $250,000$200,000 term loan facility.facility (the "IMI term loan facility"). The IMI revolving credit facility matures on January 31, 2005. QuarterlyApril 2, 2009. With respect to the IMI term loan facility, quarterly loan payments of $250$500 began in the fourththird quarter of 20022004 and will continue through maturity on February 15, 2008,April 2, 2011, at which time the remaining outstanding principal balance of the IMI term loan facility is due. In November 2004, we entered into an additional $150,000 of term loans as permitted under our IMI Credit Agreement. The new term loans will mature at the same time as our current IMI term loan facility with quarterly loan payments of $375 beginning in the first quarter of 2005 and will be priced at LIBOR plus a margin of 1.75%. As a result, the IMI Credit Agreement has an aggregate maximum principal amount of $700,000 as of December 31, 2004. The interest rate on borrowings under the Amended and RestatedIMI Credit Agreement varies depending






on our choice of interest rate and currency options, plus an applicable margin. All intercompany notes and the capital stock of allmost of our U.S. subsidiaries are pledged to secure the Amended and RestatedIMI Credit Agreement. As of December 31, 2003,2004, we had $142,280$122,563 of borrowings outstanding under our IMI revolving credit facility, all of which $3,000 was denominated in British pound sterlingU.S. dollars and the remaining balance was denominated in the amount of GBP 80,000. WeCanadian dollars (CAD 144,000); we also had various outstanding letters of credit totaling $34,447.$22,099. The remaining availability, under the revolving credit facility on December 31, 2003 was $223,273 based on ourIMI's current level of external debt and the leverage ratio under the Amended and Restated Credit Agreement.IMI revolving credit facility, on December 31, 2004 was $205,338. The interest rate in effect under the IMI revolving credit facility was 5.6%4.6% as of December 31, 2003.2004. For the year ended December 31, 2004, we recorded commitment fees of $1,112 based on 0.5% of unused balances under the IMI revolving credit facility.

        In December 2000, we entered into an interest rate swap contract to hedge the risk of changes in market interest rates on our Tranche B term loan. The instrument is a variable-for-fixed swap of quarterly interest payments payable on certain amounts of the Tranche Bour term loan through 2006. The notional value of the swap equals $99,500 and has a fixed rate of 5.9% and a variable rate based on periodic three-month London Inter-Bank Offered Rate (LIBOR). In January 2001, we entered into a second interest rate swap contract on the Tranche Bour term loan. The notional value of the second swap equals $96,000 and has a fixed rate of 5.5% and a variable rate based on periodic three-month LIBOR.LIBOR.. In conjunction with the Amended and RestatedIMI Credit Agreement, on March 15, 2002, these interest rate swap contracts hedge the risk of changes in market interest rates on our new term loan due 20082011 rather than the previous Tranche B term loan due 2006.

        The Amended and RestatedIME Credit Agreement containsand IMI Credit Agreement contain certain restrictive financial and operating covenants, including covenants that restrict our ability to complete acquisitions, pay cash dividends, incur indebtedness, make investments, sell assets and take certain other corporate actions. The covenants do not contain a rating trigger. Therefore, a change in our debt rating would not trigger a default under the AmendedIME Credit Agreement and RestatedIMI Credit Agreement. We were in compliance with all material debt covenants as of December 31, 2003.2004.

        b.     PubliclyNotes Issued Notesunder Indentures

        As of December 31, 2003,2004, we have fourfive series of senior subordinated notes issued to the public,under various indentures, that are obligations of the parent company, Iron Mountain Incorporated (the "Parent notes"):

•

$150,000 principal amount of notes maturing on July 1, 2011 and bearing interest at a rate of 8¹/4% per annum, payable semi-annually in arrears on January 1 and July 1;



•

$480,874 principal amount of notes maturing on April 1, 2013 and bearing interest at a rate of 8⁵/8% per annum, payable semi-annually in arrears on April 1 and October 1;



•

150,000 British pounds sterling principal amount of notes maturing on April 15, 2014 and bearing interest at a rate of 7¹/4% per annum, payable semi-annually in arrears on April 15 and October 15, these notes are listed on the Luxembourg Stock Exchange;



•

$431,255 principal amount of notes maturing on January 15, 2015 and bearing interest at a rate of 7³/4% per annum, payable semi-annually in arrears on January 15 and July 15; and

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•

$320,000 principal amount of notes maturing on January 1, 2016 and bearing interest at a rate of 6⁵/8% per annum, payable semi-annually in arrears on January 1 and July 1.

        The Parent notes along with our revolving credit facility and term loan, are fully and unconditionally guaranteed, on a senior subordinated basis, by substantially all of our direct and indirect wholly owned U.S. subsidiaries (the "Guarantors"). These guarantees are joint and several obligations of the Guarantors. The remainder of our subsidiaries do not guarantee the Parent notes or the IMI Credit Agreement.

        In January 2004, we completed an offering of 150,000 British pounds sterling in aggregate principal amount of our 7¹/4% notes, which were issued at a price of 100% of par. Our net proceeds of 146,900 British pounds sterling ($269,427), after paying the initial purchasers' discounts, commissions and transaction fees, were used to fund our acquisition of the 49.9% equity interest held by Mentmore in IME for total consideration of 82,500 British pounds sterling ($154,000), to redeem $19,985 in aggregate principal amount of our outstanding Subsidiary notes in February 2004, to repay borrowings under our revolving credit facility, to repay $48,750 of our term loans, to repay other indebtedness and the term loan.to pay for other acquisitions.

        In addition, Iron Mountain Canada Company,Corporation ("IM Canada"), our principal Canadian subsidiary, hashad publicly issued $135,000 principal amount of senior notes that maturematured on May 15, 2008 and bearbore interest at a rate of 8¹/8% per annum, payable semi-annually in arrears on May 15 and November 15. The Subsidiary notes arewere general unsecured obligations of IM Canada, Company, rankingpari passu in right of payment to all of Canada Company'sIM Canada's existing and future senior indebtedness. The Subsidiary notes arewere fully and unconditionally guaranteed, on a senior subordinated basis, by Iron Mountain Incorporated and the Guarantors. In addition, several of the non-guarantors that are organized under the laws of Canadian provinces fully and unconditionally guaranteeguaranteed the Subsidiary notes on a senior basis. As with the Parent notes, these guarantees arewere joint and several. In July 2003, we redeemed $50,000 of outstanding principal amount of the Subsidiary notes, at a redemption price (expressed as a percentage of principal amount) of 104.063%, plus accrued and unpaid interest. In December 2003, we redeemed $65,015 of outstanding principal amount of the Subsidiary notes, at a redemption price (expressed as a percentage of principal amount) of 104.313%, plus accrued and unpaid interest. We recorded a charge to other (income) expense, net of $12,530 in 2003 related to the early retirement of these Subsidiary notes, which consists of redemption premiums and transaction costs, as well as original issue discount related to these Subsidiary notes. In February 2004, we redeemed the remaining $19,985 of outstanding principal amount of the Subsidiary notes, at a redemption price (expressed as a percentage of principal amount) of 104.063%, plus accrued and unpaid interest. We will recordrecorded a charge to other (income) expense, net of approximately $2,000$2,028 in the first quarter of 2004 related to the early retirement of these remaining Subsidiary notes, which consists of redemption premiums and transaction costs as well as original issue discount related to these Subsidiary notes.

        In January 2003,For the year ended December 31, 2002, we redeemed the remaining $23,183 of outstanding principal amount of our 9¹/8% notes, at a redemption price (expressed as a percentage of principal amount) of 104.563%, plus accrued and unpaid interest, with proceeds from our underwritten public offering of $100,000 in aggregate principal of our 7³/4% notes. We recorded a charge to other (income) expense, net in the accompanying consolidated statement of operations of $1,804 in the first quarter of 2003 related to the early retirement of the remaining 9¹/8% notes.

        In March 2003, we completed two debt exchanges which resulted in the issuance of $31,255 in face value of our 7³/4% notes and the retirement of $30,000 of our 8³/4% notes. These non-cash debt exchanges resulted in carryover basis and, therefore, no gain (loss) on extinguishment of debt in accordance with EITF No. 96-19, "Debtor's Accounting for Modification or Exchange of Debt Instruments." These exchanges result in a lower interest rate and, therefore, lower interest expense in

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future periods as well as extend the maturity of our debt obligations. From time to time, we may enter into similar exchange transactions that we deem appropriate.

        In April 2003, we completed an underwritten public offering of an additional $300,000 in aggregate principal amount of our 7³/4% notes, which were issued at a price to investors of 104% of par, implying an effective yield to worst of 7.066%. Our net proceeds of $307,340, after paying the underwriters' discounts, commissions and transaction fees, were used to fund our offer to purchase and consent solicitation relating to our outstanding 8³/4% notes, redeem the 8³/4% notes not purchased in the offer, repay borrowings under our revolving credit facility, repay other indebtedness and pay for acquisitions.

        In April 2003, we received and accepted tenders for $143,317 of the $220,000 aggregate principal amount outstanding of our 8³/4% notes. In May 2003, we redeemed the remaining $76,683 of outstanding principal amount of our 8³/4% notes, at a redemption price (expressed as a percentage of principal amount) of 104.375%, plus accrued and unpaid interest. We recorded a charge to other (income) expense, net of $13,841 in the second quarter of 2003$5,431 related to the early retirement of debt in conjunction with the 8refinancing of the IMI credit facility and 9³¹/48% notes, which consistsSenior Subordinated Notes (the "9¹/8% notes"). For the year ended December 31, 2003, we recorded a charge to other (income) expense, net of redemption premiums and transaction costs, as well as original issue discount and unamortized deferred financing costs$28,174 related to the 8³/4% notes.

        In June 2003, we completed an underwritten public offeringearly retirement of $150,000 in aggregate principal amount of our 69⁵/8% notes. The 6⁵¹/8% notes, were issued at a price to investors of 100% of par. Our net proceeds of $147,500, after paying the underwriters' discounts, commissions and transaction fees, were used to redeem $50,000 in aggregate principal amount of the outstanding Subsidiary notes in the third quarter of 2003 and pay for acquisitions.

        In December 2003, we completed an underwritten public offering of an additional $170,000 in aggregate principal amount of our 68⁵/8% notes, which were issued at a price to investors of 96.5% of par, implying an effective yield to the worst of 7.06%. Our net proceeds of $161,339, after paying the underwriters' discounts, commissions and transaction fees, were used to redeem $65,015 in aggregate principal amount of our outstanding Subsidiary notes in the fourth quarter of 2003, repay borrowings under our revolving credit facility, repay other indebtedness and pay for acquisitions.

        In January 2004, we completed an offering of 150,000 British pounds sterling in aggregate principal amount of our 7¹³/4% Senior Subordinated Notes due 2014 (the "7¹/4% notes"), which were issued at a price of 100% of par. Our net proceeds of 146,900 British pounds sterling, after payingand the initial purchasers' discounts, commissions and transaction fees, were used to fund our acquisition of Mentmore plc's 49.9% equity interest in IME for total consideration of 82,500 British pounds sterling, to redeem $19,985 in aggregate principal amount of our outstanding Subsidiary notes in the first quarter of 2004, repay borrowings under our revolving credit facility, repay other indebtedness and pay for other acquisitions.notes.






        Each of the indentures for the notes provides that we may redeem the outstanding notes, in whole or in part, upon satisfaction of certain terms and conditions. In any redemption, we are also required to pay all accrued but unpaid interest on the outstanding notes.

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        The following table presents the various redemption dates and prices of the public notes. The redemption dates reflect the date at or after which the notes may be redeemed at our option at a premium redemption price. After these dates, the notes may be redeemed at 100% of face value:

Redemption Date		81/4% notes July 15,		85/8% notes April 1,		71/4% notes April 15,		73/4% notes January 15,		65/8% notes July 1,			81/4% notes July 15,		85/8% notes April 1,		71/4% notes April 15,		73/4% notes January 15,		65/8% notes July 1,
2003		—		—		—		—		—
2004		104.125	%	—		—		—		—			104.125	%	—		—		—		—
2005		102.750	%	—		—		—		—			102.750	%	—		—		—		—
2006		101.375	%	104.313	%	—		—		—			101.375	%	104.313	%	—		—		—
2007		—		102.875	%	—		—		—			—		102.875	%	—		—		—
2008		—		101.438	%	—		103.875	%	103.313	%		—		101.438	%	—		103.875	%	103.313	%
2009		—		—		103.625	%	102.583	%	102.208	%		—		—		103.625	%	102.583	%	102.208	%
2010		—		—		102.417	%	101.292	%	101.104	%		—		—		102.417	%	101.292	%	101.104	%
2011		—		—		101.208	%	—		—			—		—		101.208	%	—		—

        Prior to July 1, 2004, the 8¹/4% notes are redeemable at our option, in whole or in part, at a specified make-whole price.

        In addition, until April 1, 2004, we may under certain conditions redeem up to 35% of the 8⁵/8% notes with the net proceeds of one or more public equity offerings, at a redemption price of 108.625% of the principal amount.

        Prior to January 15, 2008, the 7³/4% notes are redeemable at our option, in whole or in part, at a specified make-whole price. Prior to January 15, 2006, we may under certain conditions redeem up to 35% of the 7³/4% notes with the net proceeds of one or more public equity offerings, at a redemption price of 107.750% of the principal amount.

        Prior to July 1, 2008, the 6⁵/8% notes are redeemable at our option, in whole or in part, at a specified make-whole price. Prior to July 1, 2006, we may under certain conditions redeem 6⁵/8% notes with the net proceeds of one or more public equity offerings, at a redemption price of 106.625% of the principal amount.

        Prior to April 15, 2009, the 7¹/4% notes are redeemable at our option, in whole or in part, at a specified make-whole price. Prior to April 15, 2007, we may under certain conditions redeem 7¹/4% notes with the net proceeds of one or more public equity offerings, at a redemption price of 107.25% of the principal amount.

        Each of the indentures for the notes provides that we or, in the case of the Subsidiary notes, Canada Company must repurchase, at the option of the holders, the notes at 101% of their principal amount, plus accrued and unpaid interest, upon the occurrence of a "Change of Control," which is defined in each respective indenture. Except for required repurchases upon the occurrence of a Change of Control or in the event of certain asset sales, each as described in the respective indenture, we are not required to make sinking fund or redemption payments with respect to any of the notes.

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        Our indentures and other agreements governing our indebtedness contain certain restrictive financial and operating covenants including covenants that restrict our ability to complete acquisitions, pay cash dividends, incur indebtedness, make investments, sell assets and take certain other corporate






actions. The covenants do not contain a rating trigger. Therefore, a change in our debt rating would not trigger a default under our indentures and other agreements governing our indebtedness. As of December 31, 2003,2004, we were in compliance with all material debt covenants and agreements.

        c.     Real Estate Term Loans

        Our Variable Interest Entities were financed with real estate term loans. See Note 3. As of December 31, 2003, these real estate term loans amounted to $202,647. No further financing is currently available to our Variable Interest Entities to fund further property acquisitions. The details of each real estate term loan is a follows:

•

A $47,500 real estate term loan made in October, 1998$202,647 bearing interest at various variable interest rates based on LIBOR plus an applicable margin. This real estate term note has a principal payment due onIn March 31, 2004, $103,932 of $28,800 with the remaining $18,700 maturing on March 31, 2005. Effective February 1, 2001, we entered into an interest rate swap to fix this floating rate debt for its full term at a fixed interest of 7.42%. This real estate term loan is expected to be repaid in March 2004.



•

A $56,432 real estate term loan made in July, 1999 bearing interest at various variable interest rates based on LIBOR plus an applicable margin. As of December 31, 2003, the weighted average interest rate on this note was 3.33%. This real estate term note matures on December 31, 2005. This real estate term loan is expected to be repaid in March 2004.



•

A $98,715 real estate term loan made in May, 2001 bearing interest at various variable interest rates based on LIBOR plus an applicable margin. This real estate term note matures on November 22, 2007. Effective May 21, 2001, we entered into an interest rate swap to fix $97,000 of this floating rate debt for its full term at a fixed interest of 8.41%.

        The real estate term loans held by our Variable Interest Entities have always been and continue to be treated as indebtedness for purposes of our financial covenants under our Amended and Restated Credit Agreement. As of the date they were consolidated into our financial statements, they were also considered indebtedness under our Indentures for our Senior Subordinated Notes and our Subsidiary notes. We were in compliance with all material debt covenants under these real estate term loans aswas repaid; the remaining $98,715 of December 31, 2003.real estate term loans was repaid in August 2004. We recorded a charge to other (income) expense, net of $426 in 2004 related to the early retirement of these real estate term loans.

        d.     Real Estate Mortgages

        In connection with the purchase of real estate and acquisitions, we assumed several mortgages on real property. The mortgages bear interest at rates ranging from 5%5.5% to 8.5%7.6% and are payable in various installments through 2025.2023.

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        e.     Seller Notes

        In connection with the merger with Pierce Leahy in 2000, we assumed debt related to certain existing notes as a result of acquisitions which Pierce Leahy completed in 1999. The notes bear interest at a rate of 4.75% per year. The outstanding balance of $12,6075,869 British pounds sterling ($11,307) on these notes at December 31, 20032004 is due on demand through 2009 and is classified as a current portion of long-term debt. The notes are supported by a letter of credit under our revolving credit facility.

        f.      Other

        Other long-term debt includes various notes and obligations assumed by us as a result of certain acquisitions. Additionally, IME has term loans and revolving credit facilities with its local banks that provide for approximately $87,791The outstanding balance of credit, of which $35,801 was available as of$28,694 on these notes at December 31, 2003. As of December 31, 2002, the amounts outstanding under IME's bank overdraft (due on demand), term loan and working capital/revolving credit facilities amounted to $11,175, $11,050 and $12,811, respectively. As of December 31, 2003, the amounts outstanding under IME's term loan and revolving credit facilities amounted to $32,503 and $19,487, respectively. Principal on the term loan and revolving credit facility are due on April 30, 2004 and interest is charged on borrowings at 1.25% over LIBOR. Thewith a weighted average effective interest rate of IME's debt was 6.05%, 5.80% and 4.22% for the years ending 2001, 2002 and 2003, respectively. IME's various debt and credit facilities are secured by the assets of IME and each of its subsidiaries and includes various financial and non-financial covenants and restrictions based on net worth, net indebtedness and net finance charges. During 2003, IME breached its interest covenant following the acquisition of the European operations of Hays IMS. However, IME obtained from the bank a waiver of the breach.7.9%.

        Maturities of long-term debt, excluding (premiums) discounts, net, are as follows:

Year		Amount			Amount
2004		$	116,998
2005			224,504		$	39,435
2006			3,968			8,464
2007			101,120			44,044
2008			246,089			43,885
2009						326,353
Thereafter			1,394,448			2,012,218
		$	2,087,127		$	2,474,399

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        We have estimated the following fair values for our long-term debt as of December 31:

		2002						2003
		Carrying Amount			Fair Value			Carrying Amount			Fair Value
Revolving Credit Facility (1)		$	75,360		$	75,360		$	142,280		$	142,280
Term Loan (1)			249,750			249,750			248,750			248,750
91/8% notes (2)(3)			22,409			24,241			—			—
83/4% notes (2)(3)			249,727			257,825			—			—
81/4% notes (2)(3)			149,625			154,500			149,670			156,375
85/8% notes (2)(3)			481,097			502,513			481,075			521,748
73/4% notes (2)(3)			100,000			100,000			441,331			456,052
65/8% notes (2)(3)			—			—			314,071			311,200
Subsidiary notes (3)			124,666			138,038			18,768			20,684
Real Estate Term Loans (1)			202,647			202,647			202,647			202,647
Real Estate Mortgages (1)			16,262			16,262			17,584			17,584
Seller Notes (1)			12,864			12,864			12,607			12,607
Other (1)			47,690			47,690			61,145			61,145

		2003						2004
		Carrying Amount			Fair Value			Carrying Amount			Fair Value
IMI Revolving Credit Facility(1)		$	142,280		$	142,280		$	122,563		$	122,563
IMI Term Loan Facility(1)			248,750			248,750			349,000			349,000
IME Revolving Credit Facility(1)			—			—			101,478			101,478
IME Term Loan Facility(1)			—			—			184,330			184,330
81/4% notes(2)(3)			149,670			156,375			149,715			154,500
85/8% notes(2)(3)			481,075			521,748			481,054			509,726
71/4% notes(2)(3)			—			—			288,990			275,263
73/4% notes(2)(3)			441,331			456,052			440,418			435,568
65/8% notes(2)(3)			314,071			311,200			314,565			299,200
Subsidiary notes(3)			18,768			20,684			—			—
Real Estate Term Loans(1)			202,647			202,647			—			—
Real Estate Mortgages(1)			17,584			17,584			5,908			5,908
Seller Notes(1)			12,607			12,607			11,307			11,307
Other(1)			61,145			61,145			28,694			28,694

---

(1)

The fair value of this long-term debt either approximates the carrying value (as borrowings under these debt instruments are based on current variable market interest rates as of December 31, 20022003 and 2003)2004) or it is impracticable to estimate the fair value due to the nature of such long-term debt.



(2)

These debt instruments are collectively referred to as the "Parent notes."



(3)

The fair values of the Parent notes and the Subsidiary notes are based on quoted market prices for these notes on December 31, 20022003 and 2003.2004.

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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 December 31, 2003 and 20022004 and for the years ended December 31, 2002, 2003 2002 and 2001.2004. The GuarantorGuarantors column includes all subsidiaries that guarantee the Parent notes and the Subsidiary notes. The Canada Company column includes Canada Company and our 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. The subsidiaries that do not guarantee either the Parent notes or the Subsidiary notes are referred to in the table as the "non-guarantors."Non-Guarantors."

				December 31, 2003
				Parent			Guarantors			Canada Company			Non-Guarantors			Eliminations			Consolidated
Assets
Current Assets:
	Cash and Cash Equivalents			$	—		$	54,793		$	2,659		$	17,231		$	—		$	74,683
	Accounts Receivable				—			202,271			16,593			60,936			—			279,800
	Intercompany Receivable				870,924			—			—			13,935			(884,859	)		—
	Other Current Assets				3,591			84,733			1,398			27,788			(410	)		117,100
		Total Current Assets			874,515			341,797			20,650			119,890			(885,269	)		471,583
Property, Plant and Equipment, Net					—			973,619			108,259			410,389			—			1,492,267
Other Assets, Net:
	Long-term Notes Receivable from Affiliates and Intercompany Receivable				1,625,796			1,000			—			98,715			(1,725,511	)		—
	Investment in Subsidiaries				402,045			91,336			—			—			(493,381	)		—
	Goodwill, Net				—			1,323,340			138,720			304,478			9,741			1,776,279
	Other, Net				23,661			69,221			6,895			54,888			(2,695	)		151,970
		Total Other Assets, Net			2,051,502			1,484,897			145,615			458,081			(2,211,846	)		1,928,249
		Total Assets		$	2,926,017		$	2,800,313		$	274,524		$	988,360		$	(3,097,115	)	$	3,892,099
Liabilities and Shareholders' Equity
	Intercompany Payable			$	—		$	237,392		$	233,597		$	413,870		$	(884,859	)	$	—
	Total Current Liabilities				74,650			257,663			41,075			211,767			(410	)		584,745
	Long-term Debt, Net of Current Portion				1,777,480			2,924			3,594			190,149			—			1,974,147
	Long-term Notes Payable to Affiliates and Intercompany Payable				1,000			1,724,511			—			—			(1,725,511	)		—
	Other Long-term Liabilities				6,773			169,695			5,152			12,383			(2,695	)		191,308
	Commitments and Contingencies
	Minority Interests				—			—			—			6,105			69,680			75,785
	Shareholders' Equity (Deficit)				1,066,114			408,128			(8,894	)		154,086			(553,320	)		1,066,114
		Total Liabilities and Shareholders' Equity		$	2,926,017		$	2,800,313		$	274,524		$	988,360		$	(3,097,115	)	$	3,892,099

87

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				December 31, 2003
				Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated
Assets
Current Assets:
	Cash and Cash Equivalents			$	—		$	54,793		$	19,890		$	—		$	74,683
	Accounts Receivable				—			202,271			77,529			—			279,800
	Intercompany Receivable				870,924			—			13,935			(884,859	)		—
	Other Current Assets				3,591			84,733			29,186			(410	)		117,100
		Total Current Assets			874,515			341,797			140,540			(885,269	)		471,583
Property, Plant and Equipment, Net					—			973,619			518,648			—			1,492,267
Other Assets, Net:
	Long-term Notes Receivable from Affiliates and Intercompany Receivable				1,625,796			1,000			98,715			(1,725,511	)		—
	Investment in Subsidiaries				402,045			91,336			—			(493,381	)		—
	Goodwill				—			1,323,340			443,198			9,741			1,776,279
	Other				23,661			69,221			61,783			(2,695	)		151,970
		Total Other Assets, Net			2,051,502			1,484,897			603,696			(2,211,846	)		1,928,249
		Total Assets		$	2,926,017		$	2,800,313		$	1,262,884		$	(3,097,115	)	$	3,892,099
Liabilities and Shareholders' Equity
	Intercompany Payable			$	—		$	237,392		$	647,467		$	(884,859	)	$	—
	Current Portion of Long-term Debt				1,265			1,645			112,871			—			115,781
	Total Other Current Liabilities				73,385			256,018			139,971			(410	)		468,964
	Long-term Debt, Net of Current Portion				1,777,480			2,924			193,743			—			1,974,147
	Long-term Notes Payable to Affiliates and Intercompany Payable				1,000			1,724,511			—			(1,725,511	)		—
	Other Long-term Liabilities				6,773			169,695			17,535			(2,695	)		191,308
	Commitments and Contingencies
	Minority Interests				—			—			6,105			69,680			75,785
	Shareholders' Equity				1,066,114			408,128			145,192			(553,320	)		1,066,114
		Total Liabilities and Shareholders' Equity		$	2,926,017		$	2,800,313		$	1,262,884		$	(3,097,115	)	$	3,892,099




				December 31, 2002
				Parent			Guarantors			Canada Company			Non-Guarantors			Eliminations			Consolidated
Assets
Current Assets:
	Cash and Cash Equivalents			$	—		$	52,025		$	1,759		$	2,508		$	—		$	56,292
	Accounts Receivable				—			183,610			13,898			27,908			—			225,416
	Intercompany Receivable				782,547			—			—			13,785			(796,332	)		—
	Other Current Assets				3,400			72,140			2,299			7,665			(172	)		85,332
		Total Current Assets			785,947			307,775			17,956			51,866			(796,504	)		367,040
Property, Plant and Equipment, Net					—			926,147			77,003			236,038			—			1,239,188
Other Assets, Net:
	Long-term Notes Receivable from Affiliates and Intercompany Receivable				1,150,627			—			—			98,715			(1,249,342	)		—
	Investment in Subsidiaries				367,355			76,011			—			—			(443,366	)		—
	Goodwill, Net				—			1,273,774			114,131			147,328			9,741			1,544,974
	Other, Net				21,191			52,292			9,327			4,785			(8,142	)		79,453
		Total Other Assets, Net			1,539,173			1,402,077			123,458			250,828			(1,691,109	)		1,624,427
		Total Assets		$	2,325,120		$	2,635,999		$	218,417		$	538,732		$	(2,487,613	)	$	3,230,655
Liabilities and Shareholders' Equity
	Intercompany Payable			$	—		$	637,941		$	92,259		$	66,132		$	(796,332	)	$	—
	Total Current Liabilities				62,025			255,016			15,249			95,844			(172	)		427,962
	Long-term Debt, Net of Current Portion				1,306,027			1,232			126,408			228,698			—			1,662,365
	Long-term Notes Payable to Affiliates and Intercompany Payable				—			1,249,342			—			—			(1,249,342	)		—
	Other Long-term Liabilities				12,207			111,415			997			16,858			(8,142	)		133,335
	Commitments and Contingencies
	Minority Interests				—			—			—			4,182			57,950			62,132
	Shareholders' Equity (Deficit)				944,861			381,053			(16,496	)		127,018			(491,575	)		944,861
		Total Liabilities and Shareholders' Equity		$	2,325,120		$	2,635,999		$	218,417		$	538,732		$	(2,487,613	)	$	3,230,655

88

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				December 31, 2004
				Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated
Assets
Current Assets:
	Cash and Cash Equivalents			$	—		$	11,021		$	20,921		$	—		$	31,942
	Accounts Receivable				—			239,015			115,419			—			354,434
	Intercompany Receivable				869,370			—			—			(869,370	)		—
	Other Current Assets				1,064			83,977			30,146			(409	)		114,778
		Total Current Assets			870,434			334,013			166,486			(869,779	)		501,154
Property, Plant and Equipment, Net					—			1,131,277			518,519			—			1,649,796
Other Assets, Net:
	Long-term Notes Receivable from Affiliates and Intercompany Receivable				1,923,614			11,420			—			(1,935,034	)		—
	Investment in Subsidiaries				479,270			182,866			1,061			(663,197	)		—
	Goodwill				—			1,435,151			594,264			10,802			2,040,217
	Other				30,128			116,438			105,196			(542	)		251,220
		Total Other Assets, Net			2,433,012			1,745,875			700,521			(2,587,971	)		2,291,437
		Total Assets		$	3,303,446		$	3,211,165		$	1,385,526		$	(3,457,750	)	$	4,442,387
Liabilities and Shareholders' Equity
	Intercompany Payable			$	—		$	313,259		$	556,111		$	(869,370	)	$	—
	Current Portion of Long-term Debt				3,823			2,355			33,257			—			39,435
	Total Other Current Liabilities				51,190			298,755			126,492			(409	)		476,028
	Long-term Debt, Net of Current Portion				2,024,224			112			414,251			—			2,438,587
	Long-term Notes Payable to Affiliates and Intercompany Payable				1,000			1,923,614			10,420			(1,935,034	)		—
	Other Long-term Liabilities				4,641			212,083			40,542			(542	)		256,724
	Commitments and Contingencies
	Minority Interests				—			—			4,177			8,868			13,045
	Shareholders' Equity				1,218,568			460,987			200,276			(661,263	)		1,218,568
		Total Liabilities and Shareholders' Equity		$	3,303,446		$	3,211,165		$	1,385,526		$	(3,457,750	)	$	4,442,387




				Year Ended December 31, 2003
				Parent			Guarantors			Canada Company			Non-Guarantors			Eliminations			Consolidated
Revenues:
	Storage			$	—		$	712,862		$	45,841		$	116,332		$	—		$	875,035
	Service and Storage Material Sales				—			499,992			41,751			84,551			—			626,294
		Total Revenues			—			1,212,854			87,592			200,883			—			1,501,329
Operating Expenses:
	Cost of Sales (Excluding Depreciation)				—			545,202			43,580			91,965			—			680,747
	Selling, General and Administrative				427			314,424			15,028			53,762			—			383,641
	Depreciation and Amortization				20			106,024			6,209			18,665			—			130,918
	Loss (Gain) on disposal/writedown of property, plant and equipment, net				—			1,771			238			(879	)		—			1,130
		Total Operating Expenses			447			967,421			65,055			163,513			—			1,196,436
	Operating (Loss) Income				(447	)		245,433			22,537			37,370			—			304,893
	Interest Expense, Net				23,809			91,881			13,481			21,297			—			150,468
	Equity in the Earnings of Subsidiaries				(159,933	)		(4,334	)		—			—			164,267			—
	Other Expense (Income), Net				51,040			(45,492	)		(8,612	)		500			—			(2,564	)
		Income from Continuing Operations Before Provision for Income Taxes and Minority Interest			84,637			203,378			17,668			15,573			(164,267	)		156,989
	Provision for Income Taxes				—			53,449			7,734			5,547			—			66,730
	Minority Interest in Earnings of Subsidiaries				—			—			—			5,622			—			5,622
		Net Income		$	84,637		$	149,929		$	9,934		$	4,404		$	(164,267	)	$	84,637

89

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				December 31, 2002
				Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated
Revenues:
	Storage			$	—		$	658,613		$	100,923		$	—		$	759,536
	Service and Storage Material Sales				—			473,077			85,884			—			558,961
		Total Revenues			—			1,131,690			186,807			—			1,318,497
Operating Expenses:
	Cost of Sales (Excluding Depreciation)				—			527,215			95,084			—			622,299
	Selling, General and Administrative				57			295,435			37,558			—			333,050
	Depreciation and Amortization				—			95,622			13,370			—			108,992
	Merger-related Expenses				—			796			—			—			796
	Loss (Gain) on Disposal/Writedown of Property, Plant and Equipment, Net				—			2,706			(1,932	)		—			774
		Total Operating Expenses			57			921,774			144,080			—			1,065,911
	Operating (Loss) Income				(57	)		209,916			42,727			—			252,586
	Interest Expense, Net				7,077			101,660			27,895			—			136,632
	Equity in the (Earnings) Losses of Subsidiaries				(72,104	)		3,320			—			68,784			—
	Other Expense (Income), Net				6,678			(4,189	)		(1,054	)		—			1,435
		Income from Continuing Operations Before Provision for Income Taxes and Minority Interest			58,292			109,125			15,886			(68,784	)		114,519
	Provision for Income Taxes				—			41,132			6,186			—			47,318
	Minority Interest in Earnings of Subsidiaries				—			—			3,629			—			3,629
		Income from Continuing Operations before Discontinued Operations and Cumulative Effect of Change in Accounting Principle			58,292			67,993			6,071			(68,784	)		63,572
	Income from Discontinued Operations (Net of Tax of $768)				—			1,116			—			—			1,116
	Cumulative Effect of Change in Accounting Principle (net of Minority Interest)				—			—			(6,396	)		—			(6,396	)
	Net Income (Loss)			$	58,292		$	69,109		$	(325	)	$	(68,784	)	$	58,292




				Year Ended December 31, 2002
				Parent			Guarantors			Canada Company			Non-Guarantors			Eliminations			Consolidated
Revenues:
	Storage			$	—		$	658,613		$	36,169		$	64,754		$	—		$	759,536
	Service and Storage Material Sales				—			473,077			38,947			46,937			—			558,961
		Total Revenues			—			1,131,690			75,116			111,691			—			1,318,497
Operating Expenses:
	Cost of Sales (Excluding Depreciation)				—			527,215			37,464			57,620			—			622,299
	Selling, General and Administrative				57			295,435			13,756			23,802			—			333,050
	Depreciation and Amortization				—			95,622			5,714			7,656			—			108,992
	Merger-related Expenses				—			796			—			—			—			796
	Loss (Gain) on disposal/writedown of property, plant and equipment, net				—			2,706			(8	)		(1,924	)		—			774
		Total Operating Expenses			57			921,774			56,926			87,154			—			1,065,911
	Operating (Loss) Income				(57	)		209,916			18,190			24,537			—			252,586
	Interest Expense, Net				7,077			101,660			14,708			13,187			—			136,632
	Equity in the (Earnings) Losses of Subsidiaries				(72,104	)		3,320			—			—			68,784			—
	Other Expense (Income), Net				6,678			(4,189	)		(1,490	)		436			—			1,435
		Income from Continuing Operations Before Provision for Income Taxes and Minority Interest			58,292			109,125			4,972			10,914			(68,784	)		114,519
	Provision for Income Taxes				—			41,132			2,064			4,122			—			47,318
	Minority Interest in Earnings of Subsidiaries				—			—			—			3,629			—			3,629
		Income from Continuing Operations before Discontinued Operations and Cumulative Effect of Change in Accounting Principle			58,292			67,993			2,908			3,163			(68,784	)		63,572
	Income from Discontinued Operations (Net of Tax of $768)				—			1,116			—			—			—			1,116
	Cumulative Effect of Change in Accounting Principle (net of Minority Interest)				—			—			—			(6,396	)		—			(6,396	)
		Net Income (Loss)		$	58,292		$	69,109		$	2,908		$	(3,233	)	$	(68,784	)	$	58,292

90

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				Year Ended December 31, 2003
				Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated
Revenues:
	Storage			$	—		$	712,862		$	162,173		$	—		$	875,035
	Service and Storage Material Sales				—			499,992			126,302			—			626,294
		Total Revenues			—			1,212,854			288,475			—			1,501,329
Operating Expenses:
	Cost of Sales (Excluding Depreciation)				—			545,202			135,545			—			680,747
	Selling, General and Administrative				427			314,424			68,790			—			383,641
	Depreciation and Amortization				20			106,024			24,874			—			130,918
	Loss (Gain) on Disposal/Writedown of Property, Plant and Equipment, Net				—			1,771			(641	)		—			1,130
		Total Operating Expenses			447			967,421			228,568			—			1,196,436
Operating (Loss) Income					(447	)		245,433			59,907			—			304,893
Interest Expense, Net					23,809			91,881			34,778			—			150,468
Equity in the Earnings of Subsidiaries					(159,933	)		(4,334	)		—			164,267			—
Other Expense (Income), Net					51,040			(45,492	)		(8,112	)		—			(2,564	)
	Income Before Provision for Income Taxes and Minority Interest				84,637			203,378			33,241			(164,267	)		156,989
Provision for Income Taxes					—			53,449			13,281			—			66,730
Minority Interest in Earnings of Subsidiaries					—			—			5,622			—			5,622
Net Income				$	84,637		$	149,929		$	14,338		$	(164,267	)	$	84,637




				Year Ended December 31, 2001
				Parent			Guarantors			Canada Company			Non-Guarantors			Eliminations			Consolidated
Revenues:
	Storage			$	—		$	604,546		$	33,475		$	56,453		$	—		$	694,474
	Service and Storage Material Sales				—			421,735			34,549			34,960			—			491,244
		Total Revenues			—			1,026,281			68,024			91,413			—			1,185,718
Operating Expenses:
	Cost of Sales (Excluding Depreciation)				—			493,048			35,093			48,397			—			576,538
	Selling, General and Administrative				83			270,201			12,733			24,783			—			307,800
	Depreciation and Amortization				—			131,003			10,144			12,124			—			153,271
	Merger-Related Expenses				—			3,644			—			29			—			3,673
	Loss (Gain) on disposal/writedown of property, plant and equipment, net				—			339			(8	)		(11	)		—			320
		Total Operating Expenses			83			898,235			57,962			85,322			—			1,041,602
Operating (Loss) Income					(83	)		128,046			10,062			6,091			—			144,116
Interest Expense, Net					17,755			92,823			16,244			7,920			—			134,742
Equity in the Losses of Subsidiaries					(672	)		2,117			—			—			(1,445	)		—
Other Expense, Net					26,891			2,887			7,338			369			—			37,485
	(Loss) Income from Continuing Operations Before Provision for Income Taxes and Minority Interest				(44,057	)		30,219			(13,520	)		(2,198	)		1,445			(28,111	)
Provision (Benefit) for Income Taxes					—			16,077			(111	)		1,909			—			17,875
Minority Interest in Losses of Subsidiaries					—			—			—			(1,929	)		—			(1,929	)
		Net Loss		$	(44,057	)	$	14,142		$	(13,409	)	$	(2,178	)	$	1,445		$	(44,057	)

91

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				Year Ended December 31, 2004
				Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated
Revenues:
	Storage			$	—		$	774,945		$	268,421		$	—		$	1,043,366
	Service and Storage Material Sales				—			552,405			221,818			—			774,223
		Total Revenues			—			1,327,350			490,239			—			1,817,589
Operating Expenses:
	Cost of Sales (Excluding Depreciation)				—			586,437			237,462			—			823,899
	Selling, General and Administrative				460			362,635			123,151			—			486,246
	Depreciation and Amortization				36			123,098			40,495			—			163,629
	(Gain) Loss on Disposal/Writedown of Property, Plant and Equipment, Net				—			(861	)		180			—			(681	)
		Total Operating Expenses			496			1,071,309			401,288			—			1,473,093
Operating (Loss) Income					(496	)		256,041			88,951			—			344,496
Interest Expense (Income), Net					150,476			(29,598	)		64,871			—			185,749
Equity in the Earnings of Subsidiaries					(267,560	)		(6,812	)		—			274,372			—
Other Expense (Income), Net					22,397			(34,934	)		4,549			—			(7,988	)
	Income Before Provision for Income Taxes and Minority Interest				94,191			327,385			19,531			(274,372	)		166,735
Provision for Income Taxes					—			60,376			9,198			—			69,574
Minority Interest in Earnings of Subsidiaries					—			—			2,970			—			2,970
		Net Income		$	94,191		$	267,009		$	7,363		$	(274,372	)	$	94,191




				Year Ended December 31, 2003
				Parent			Guarantors			Canada Company			Non-Guarantors			Eliminations			Consolidated
Cash Flows from Operating Activities:
	Cash Flows (Used in) Provided by Operating Activities			$	(3,823	)	$	252,175		$	23,486		$	16,855		$	—		$	288,693
Cash Flows from Investing Activities:
	Capital expenditures				—			(142,744	)		(17,829	)		(43,904	)		—			(204,477	)
	Cash paid for acquisitions, net of cash acquired				—			(66,707	)		—			(313,183	)		—			(379,890	)
	Intercompany loans to subsidiaries				(407,292	)		(324,980	)		—			—			732,272			—
	Investment in subsidiaries				(1,705	)		(1,705	)		—			—			3,410			—
	Additions to customer relationship and acquisition costs				—			(9,549	)		(797	)		(2,231	)		—			(12,577	)
	Investment in convertible preferred stock				—			(1,357	)		—			—			—			(1,357	)
	Proceeds from sales of property and equipment				—			9,423			47			2,197			—			11,667
		Cash Flows Used in Investing Activities			(408,997	)		(537,619	)		(18,579	)		(357,121	)		735,682			(586,634	)
Cash Flows from Financing Activities:
	Repayment of debt and term loans				(600,445	)		(683	)		(53,955	)		(43,734	)		—			(698,817	)
	Proceeds from borrowings and term loans				643,784			—			49,569			50,663			—			744,016
	Early retirement of senior subordinated notes				(254,407	)		—			(119,851	)		—			—			(374,258	)
	Net proceeds from sales of senior subordinated notes				617,179			—			—			—			—			617,179
	Debt financing and equity contribution from minority shareholders, net				—			—			—			20,225			—			20,225
	Intercompany loans from parent				—			287,190			119,829			325,253			(732,272	)		—
	Equity contribution from parent				—			1,705			—			1,705			(3,410	)		—
	Other, net				6,709			—			—			—			—			6,709
		Cash Flows Provided by (Used in) Financing Activities			412,820			288,212			(4,408	)		354,112			(735,682	)		315,054
Effect of exchange rates on cash and cash equivalents					—			—			401			877			—			1,278
Increase in cash and cash equivalents					—			2,768			900			14,723			—			18,391
Cash and cash equivalents, beginning of year					—			52,025			1,759			2,508			—			56,292
Cash and cash equivalents, end of year				$	—		$	54,793		$	2,659		$	17,231		$	—		$	74,683

92

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				Year Ended December 31, 2002
				Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated
Cash Flows from Operating Activities				$	2,259		$	223,446		$	29,243		$	—		$	254,948
Cash Flows from Investing Activities:
	Capital expenditures				—			(152,501	)		(44,496	)		—			(196,997	)
	Cash paid for acquisitions, net of cash acquired				—			(28,041	)		(21,320	)		—			(49,361	)
	Intercompany loans to subsidiaries				(19,365	)		(17,928	)		—			37,293			—
	Investment in subsidiaries				(1,940	)		(1,940	)		—			3,880			—
	Additions to customer relationship and acquisition costs				—			(7,137	)		(1,282	)		—			(8,419	)
	Proceeds from sales of property and equipment				—			1,460			5,560			—			7,020
		Cash Flows from Investing Activities			(21,305	)		(206,087	)		(61,538	)		41,173			(247,757	)
Cash Flows from Financing Activities:
	Repayment of debt and term loans				(458,929	)		(606	)		(2,708	)		—			(462,243	)
	Proceeds from borrowings and term loans				426,235			—			12,607			—			438,842
	Early retirement of notes				(54,380	)		—			—			—			(54,380	)
	Net proceeds from sales of senior subordinated notes				99,000			—			—			—			99,000
	Debt financing (repayment to) and equity contribution from (distribution to) minority shareholders, net				—			—			(1,241	)		—			(1,241	)
	Intercompany loans from parent				—			21,937			15,356			(37,293	)		—
	Equity contribution from parent				—			1,940			1,940			(3,880	)		—
	Other, net				7,120			—			—			—			7,120
		Cash Flows from Financing Activities			19,046			23,271			25,954			(41,173	)		27,098
Effect of exchange rates on cash and cash equivalents					—			—			644			—			644
Increase (Decrease) in cash and cash equivalents					—			40,630			(5,697	)		—			34,933
Cash and cash equivalents, beginning of year					—			11,395			9,964			—			21,359
Cash and cash equivalents, end of year				$	—		$	52,025		$	4,267		$	—		$	56,292




				Year Ended December 31, 2002
				Parent			Guarantors			Canada Company			Non-Guarantors			Eliminations			Consolidated
Cash Flows from Operating Activities:
	Cash Flows Provided by Operating Activities			$	2,259		$	223,446		$	11,174		$	18,069		$	—		$	254,948
Cash Flows from Investing Activities:
	Capital expenditures				—			(152,501	)		(8,125	)		(36,371	)		—			(196,997	)
	Cash paid for acquisitions, net of cash acquired				—			(28,041	)		(21	)		(21,299	)		—			(49,361	)
	Intercompany loans to subsidiaries				(19,365	)		(17,928	)		—			—			37,293			—
	Investment in subsidiaries				(1,940	)		(1,940	)		—			—			3,880			—
	Additions to customer relationship and acquisition costs				—			(7,137	)		(613	)		(669	)		—			(8,419	)
	Proceeds from sales of property and equipment				—			1,460			8			5,552			—			7,020
		Cash Flows Used in Investing Activities			(21,305	)		(206,087	)		(8,751	)		(52,787	)		41,173			(247,757	)
Cash Flows from Financing Activities:
	Repayment of debt and term loans				(458,929	)		(606	)		(535	)		(2,173	)		—			(462,243	)
	Proceeds from borrowings and term loans				426,235			—			—			12,607			—			438,842
	Early retirement of senior subordinated notes				(54,380	)		—			—			—			—			(54,380	)
	Net proceeds from sales of senior subordinated notes				99,000			—			—			—			—			99,000
	Debt repayment and equity distribution to minority shareholders, net				—			—			—			(1,241	)		—			(1,241	)
	Intercompany loans from parent				—			21,937			(2,469	)		17,825			(37,293	)		—
	Equity contribution from parent				—			1,940			—			1,940			(3,880	)		—
	Other, net				7,120			—			—			—			—			7,120
		Cash Flows Provided by (Used in) Financing Activities			19,046			23,271			(3,004	)		28,958			(41,173	)		27,098
Effect of exchange rates on cash and cash equivalents					—			—			644			—			—			644
Increase (Decrease) in cash and cash equivalents					—			40,630			63			(5,760	)		—			34,933
Cash and cash equivalents, beginning of year					—			11,395			1,696			8,268			—			21,359
Cash and cash equivalents, end of year				$	—		$	52,025		$	1,759		$	2,508		$	—		$	56,292

93

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				Year Ended December 31, 2003
				Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated
Cash Flows from Operating Activities				$	(3,823	)	$	252,175		$	40,341		$	—		$	288,693
Cash Flows from Investing Activities:
	Capital expenditures				—			(142,744	)		(61,733	)		—			(204,477	)
	Cash paid for acquisitions, net of cash acquired				—			(66,707	)		(313,183	)		—			(379,890	)
	Intercompany loans to subsidiaries				(407,292	)		(324,980	)		—			732,272			—
	Investment in subsidiaries				(1,705	)		(1,705	)		—			3,410			—
	Investment in convertible preferred stock				—			(1,357	)		—			—			(1,357	)
	Additions to customer relationship and acquisition costs				—			(9,549	)		(3,028	)		—			(12,577	)
	Proceeds from sales of property and equipment				—			9,423			2,244			—			11,667
		Cash Flows from Investing Activities			(408,997	)		(537,619	)		(375,700	)		735,682			(586,634	)
Cash Flows from Financing Activities:
	Repayment of debt and term loans				(600,445	)		(683	)		(97,689	)		—			(698,817	)
	Proceeds from borrowings and term loans				643,784			—			100,232			—			744,016
	Early retirement of notes				(254,407	)		—			(119,851	)		—			(374,258	)
	Net proceeds from sales of senior subordinated notes				617,179			—			—			—			617,179
	Debt financing (repayment to) and equity contribution from (distribution to) minority shareholders, net				—			—			20,225			—			20,225
	Intercompany loans from parent				—			287,190			445,082			(732,272	)		—
	Equity contribution from parent				—			1,705			1,705			(3,410	)		—
	Other, net				6,709			—			—			—			6,709
		Cash Flows from Financing Activities			412,820			288,212			349,704			(735,682	)		315,054
Effect of exchange rates on cash and cash equivalents					—			—			1,278			—			1,278
Increase in cash and cash equivalents					—			2,768			15,623			—			18,391
Cash and cash equivalents, beginning of year					—			52,025			4,267			—			56,292
Cash and cash equivalents, end of year				$	—		$	54,793		$	19,890		$	—		$	74,683




				Year Ended December 31, 2001
				Parent			Guarantors			Canada Company			Non-Guarantors			Eliminations			Consolidated
Cash Flows from Operating Activities:
	Cash Flows Provided by Operating Activities			$	2,557		$	141,177		$	8,867		$	8,308		$	—		$	160,909
Cash Flows from Investing Activities:
	Capital expenditures				—			(164,335	)		(10,330	)		(22,374	)		—			(197,039	)
	Cash paid for acquisitions, net of cash acquired				—			(50,467	)		(177	)		(20,753	)		—			(71,397	)
	Intercompany loans to subsidiaries				(114,792	)		(15,836	)		—			—			130,628			—
	Investment in subsidiaries				(6,866	)		(6,866	)		—			—			13,732			—
	Additions to customer relationship and acquisition costs				—			(7,292	)		(319	)		(809	)		—			(8,420	)
	Investment in convertible preferred stock				—			(2,000	)		—			—			—			(2,000	)
	Proceeds from sales of property and equipment				—			87			21			612			—			720
		Cash Flows Used in Investing Activities			(121,658	)		(246,709	)		(10,805	)		(43,324	)		144,360			(278,136	)
Cash Flows from Financing Activities:
	Repayment of debt and term loans				(110,869	)		(1,066	)		(2,590	)		(3,753	)		—			(118,278	)
	Proceeds from borrowings				103,411			73			—			2,111			—			105,595
	Early retirement of senior subordinated notes				(312,701	)		—			—			—			—			(312,701	)
	Net Proceeds from sales of senior subordinated notes				427,924			—			—			—			—			427,924
	Debt financing and equity contribution from minority shareholders, net				—			—			—			21,216			—			21,216
	Intercompany loans from parent				—			107,718			7,016			15,894			(130,628	)		—
	Equity contribution from parent				—			6,866			—			6,866			(13,732	)		—
	Other, net				11,145			—			—			—			—			11,145
	Cash Flows Provided by Financing Activities				118,910			113,591			4,426			42,334			(144,360	)		134,901
Effect of exchange rates on cash and cash equivalents					—			—			(1,094	)		(1,421	)		—			(2,515	)
(Decrease) Increase in cash and cash equivalents					(191	)		8,059			1,394			5,897			—			15,159
Cash and cash equivalents, beginning of year					191			3,336			302			2,371			—			6,200
Cash and cash equivalents, end of year				$	—		$	11,395		$	1,696		$	8,268		$	—		$	21,359

94

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				Year Ended December 31, 2004
				Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated
Cash Flows from Operating Activities				$	(176,437	)	$	426,230		$	55,571		$	—		$	305,364
Cash Flows from Investing Activities:
	Capital expenditures				—			(162,032	)		(69,934	)		—			(231,966	)
	Cash paid for acquisitions, net of cash acquired				—			(163,828	)		(220,510	)		—			(384,338	)
	Intercompany loans to subsidiaries				44,240			28,501			—			(72,741	)		—
	Investment in subsidiaries				(111,988	)		(111,988	)		—			223,976			—
	Investment in convertible preferred stock				—			(858	)		—			—			(858	)
	Additions to customer relationship and acquisition costs				—			(10,050	)		(2,422	)		—			(12,472	)
	Proceeds from sales of property and equipment				—			3,053			58			—			3,111
		Cash Flows from Investing Activities			(67,748	)		(417,202	)		(292,808	)		151,235			(626,523	)
Cash Flows from Financing Activities:
	Repayment of debt and term loans				(706,149	)		(117,246	)		(261,618	)		—			(1,085,013	)
	Proceeds from borrowings and term loans				668,882			—			479,393			—			1,148,275
	Early retirement of notes				—			—			(20,797	)		—			(20,797	)
	Net proceeds from sales of senior subordinated notes				269,427			—			—			—			269,427
	Debt financing (repayment to) and equity contribution from (distribution to) minority shareholders, net				—			—			(41,978	)		—			(41,978	)
	Intercompany loans from parent				—			(47,542	)		(25,199	)		72,741			—
	Equity contribution from parent				—			111,988			111,988			(223,976	)		—
	Other, net				12,025			—			(5,370	)		—			6,655
		Cash Flows from Financing Activities			244,185			(52,800	)		236,419			(151,235	)		276,569
Effect of exchange rates on cash and cash equivalents					—			—			1,849			—			1,849
(Decrease) Increase in cash and cash equivalents					—			(43,772	)		1,031			—			(42,741	)
Cash and cash equivalents, beginning of year					—			54,793			19,890			—			74,683
Cash and cash equivalents, end of year				$	—		$	11,021		$	20,921		$	—		$	31,942




7. Acquisitions

        In July 2003, we and IME completed the acquisition of Hays IMS in two simultaneous transactions. IME acquired the European operations of Hays IMS for aggregate cash consideration (including transaction costs) of approximately 190,000 British pounds sterling ($309,000), while we acquired the U.S. operations of Hays IMS for aggregate cash consideration (including transaction costs) of approximately 14,500 British pounds sterling ($24,000). Both transactions were on a cash and debt free basis.

        We purchased substantially allIn February 2004, we completed the acquisition of the 49.9% equity interest held by Mentmore in IME for total consideration of 82,500 British pounds sterling ($154,000) in cash. Included in this amount is the repayment of all trade and working capital funding owed to Mentmore by IME. Completion of the transaction gives us 100% ownership of IME. This transaction did not have material impact on revenue or operating income since we already fully consolidate IME's financial results. Using the purchase method of accounting for this acquisition, the net assets of IME were adjusted to reflect 49.9% of the difference between the fair market value and assumed certain liabilitiestheir carrying value on the date of 16, 10 and 8 records management businesses during 2001, 2002 and 2003, respectively.acquisition.

        In November 2004, we acquired Connected Corporation ("Connected") for total cash consideration of $109,326 (net of cash acquired).

        Each of thesethe 2002, 2003 and 2004 acquisitions waswere accounted for using the purchase method of accounting, and accordingly, the results of operations for each acquisition have been included in our consolidated results from their respective acquisition dates. ConsiderationCash consideration for the various acquisitions included: (1) cash, which was provided through our credit facilities and (2) the issuance of certain of our senior subordinated notes.

        A summary of the consideration paid and the allocation of the purchase price of the acquisitions is as follows:

			2001			2002			2003					2002			2003			2004
Cash Paid (gross of cash acquired)	Cash Paid (gross of cash acquired)		$	72,222	(1)	$	41,356	(2)	$	387,803	(3)	Cash Paid (gross of cash acquired)		$	41,356	(1)	$	387,803	(1)	$	388,243	(1)
Fair Value of Debt Assumed/Issued				10,352			—			—
Fair Value of Options Issued												Fair Value of Options Issued			—			—			1,245
	Total Consideration			82,574			41,356			387,803		Total Consideration			41,356			387,803			389,488
Fair Value of Identifiable Assets Acquired(2)	Fair Value of Identifiable Assets Acquired(2)			19,504			10,440			244,950		Fair Value of Identifiable Assets Acquired(2)			10,440			244,950			160,622
Liabilities Assumed(3)	Liabilities Assumed(3)			(10,019	)		(4,868	)		(46,217	)	Liabilities Assumed(3)			(4,868	)		(46,217	)		(50,006	)
Minority Interest(4)												Minority Interest(4)			—			—			71,535
	Fair Value of Identifiable Net Assets Acquired			9,485			5,572			198,733		Total Fair Value of Identifiable Net Assets Acquired			5,572			198,733			182,151
Recorded Goodwill	Recorded Goodwill		$	73,089		$	35,784		$	189,070		Recorded Goodwill		$	35,784		$	189,070		$	207,337

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(1)

Included in cash paid for acquisitions in the consolidated statementstatements of cash flows for the yearyears ended December 31, 20012002, 2003 and 2004 is a $5,524 contingent payment that was paid during 2001of $7,165, $1,077 and $5,513, respectively, related to acquisitions made before 2001.in the previous years.



(2)

Included in cash paid for acquisitions in the consolidated statementConsisted primarily of cash flows for the year ended December 31, 2002 is a $7,165 contingent payment that was paid during 2002 related to an acquisition made in 2000.accounts receivable, prepaid expenses and other, land, buildings, racking, leasehold improvements, and customer relationship assets.




(3)

Consisted primarily of accounts payable, accrued expenses and notes payable.



(3)(4)

IncludedConsisted primarily of the carrying value of Mentmore's 49.9% minority interest in cash paid for acquisitions inIME at the consolidated statementdate of cash flows for the year ended December 31, 2003 is a $1,077 contingent payment that was paid in 2003 related to an acquisition made in 2001.acquisition.

        Allocation of the purchase price for the 20032004 acquisitions was based on estimates of the fair value of net assets acquired, and is subject to adjustment. The purchase price allocations of certain 20032004 transactions are subject to finalization of the assessment of the fair value of property, plant and equipment, intangible assets (primarily customer relationship assets), operating leases, restructuring purchase reserves, deferred revenue and deferred income taxes. We are not aware of any information that would indicate that the final purchase price allocations will differ meaningfully from preliminary estimates.

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        In connection with each of our acquisitions, we have 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. The estimated cost of these restructuring activities were recorded as costs of the acquisitions and were provided in accordance with EITF No. 95-3, "Recognition of Liabilities in Connection with a Purchase Business Combination." We finalize restructuring plans for each business no later than one year from the date of acquisition. Unresolved matters at December 31, 20032004 primarily include completion of planned abandonments of facilities and severances forseverance contracts in connection with certain acquisitions.

        The following is a summary of reserves related to such restructuring activities:

		2002			2003				2003			2004
Reserves, beginning of the year		$	16,225		$	9,906			$	9,906		$	16,322
Reserves established			4,963			12,526				12,526			15,282
Expenditures			(6,745	)		(5,436	)			(5,436	)		(10,200	)
Adjustments to goodwill, including currency effect(1)			(4,537	)		(674	)			(674	)		10
Reserves, end of the year		$	9,906		$	16,322			$	16,322		$	21,414

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(1)

Includes adjustments to goodwill as a result of management finalizing its restructuring plans.

        At December 31, 2002, the restructuring reserves related to acquisitions consisted of lease losses on abandoned facilities ($5,146), severance costs for approximately two people ($578) and move and other exit costs ($4,182).

        At December 31, 2003, the restructuring reserves related to acquisitions consisted of lease losses on abandoned facilities ($6,849), severance costs for approximately 158 people ($3,593) and move and other exit costs ($5,880). These accruals are expected to be used prior to December 31, 2004 except for lease losses of $4,927 and severance contracts of $314, both of which are based on contracts that extend beyond one year.

        At December 31, 2004, the restructuring reserves related to acquisitions consisted of lease losses on abandoned facilities ($12,348), severance costs for approximately 56 people ($2,463) and move and other exit costs ($6,603). These accruals are expected to be used prior to December 31, 2005 except for lease losses of $10,560 and severance contracts of $193, both of which are based on contracts that extend beyond one year.






In connection with some of our acquisitions, we have potential earn-out obligations that would be payable in the event businesses we acquired meet certain operational objectives. These payments are based on the future results of these operations and our estimate of the maximum contingent earn-out payments we would be required to make under all such agreements as of December 31, 20032004 is approximately $4,800.$16,798.

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8. Capital Stock and Stock Options

        a.     Capital Stock

        On May 27, 2004, our board authorized and approved a three-for-two stock split effected in the form of a dividend on our common stock. We issued the additional shares of common stock resulting from this stock dividend on June 30, 2004 to all shareholders of record as of the close of business on June 15, 2004. All share data has been reflected for such stock split.

        The following table summarizes the number of shares authorized, issued and outstanding for each issue of our capital stock as of December 31:

					Number of Shares											Number of Shares
					Authorized				Issued and Outstanding							Authorized				Issued and Outstanding
Equity Type
		Par Value			2002		2003		2002		2003		Par Value			2003		2004		2003		2004
Preferred stock		$	.01		10,000,000		10,000,000		—		—		$	.01		10,000,000		10,000,000		—		—
Common stock			.01		150,000,000		150,000,000		85,049,624		85,575,254			.01		150,000,000		200,000,000		128,362,881		129,817,914

        b.     Stock Options

        A total of 8,703,77116,055,657 shares of common stock have been reserved for grants of options and other rights under our various stock incentive plans.






        The following is a summary of stock option transactions, including those issued to employees of acquired companies, during the applicable periods, excluding transactions under the employee stock purchase plan:

		Options		Weighted Average Exercise Price
Options outstanding, December 31, 2000		5,048,543		$	12.55
Granted		497,757			26.38
Exercised		(1,188,316	)		6.94
Canceled		(73,592	)		19.28
							Options		Weighted Average Exercise Price
Options outstanding, December 31, 2001		4,284,392			15.63		6,426,588		$	10.42
Granted		432,560			29.96		648,840			19.97
Exercised		(594,049	)		9.26		(891,074	)		6.17
Canceled		(226,087	)		17.01		(339,130	)		11.34
Options outstanding, December 31, 2002		3,896,816			18.08		5,845,224			12.05
Granted		458,567			37.20		687,851			24.80
Exercised		(440,868	)		13.27		(661,302	)		8.85
Canceled		(52,346	)		26.40		(78,519	)		17.60
Options outstanding, December 31, 2003		3,862,169			20.59		5,793,254			13.73
Granted							811,722			28.55
Exercised							(1,118,332	)		9.38
Canceled							(214,598	)		23.58
Options outstanding, December 31, 2004							5,272,046			16.55

        Except for the optionsOptions granted in connection with acquisitions, these options2002, 2003 and 2004 were granted with exercise prices equal to the market price of the stock at the date of grant. The majority of these options become exercisable ratably over a period of five years unless the holder terminates employment and generally have a contractual life of 10 years. The number of shares available for grant at December 31, 20032004 was 969,331.3,855,031.

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        The following table summarizes additional information regarding options outstanding and exercisable at December 31, 2003:2004:

				Outstanding
				Weighted Average Remaining Contractual Life (in Years)					Exercisable
Range of Exercise Prices		Number				Weighted Average Exercise Price			Number		Weighted Average Exercise Price
$0.50 to $0.58		5,239		3.2		$	0.57		5,239		$	0.57
$2.88 to $3.84		245,968		2.2			3.04		245,968			3.04
$4.42 to $6.07		84,312		4.6			5.53		84,312			5.53
$6.83 to $7.29		456,098		2.5			6.93		456,098			6.93
$11.44 to $16.22		554,808		3.9			14.40		535,998			14.36
$18.11 to $26.30		1,541,204		6.4			22.51		929,659			22.17
$27.41 to $38.40		974,540		8.6			33.31		159,793			29.21
		3,862,169		5.8			20.59		2,417,067			15.45

				Outstanding
				Weighted Average Remaining Contractual Life (in Years)					Exercisable
Range of Exercise Prices		Number				Weighted Average Exercise Price			Number		Weighted Average Exercise Price
$0.33 to $0.39		1,944		2.1		$	0.37		1,944		$	0.37
$1.92 to $2.57		258,773		3.0			2.01		258,773			2.01
$2.95 to $4.05		94,406		3.6			3.68		94,406			3.68
$4.56 to $4.87		343,570		1.6			4.62		343,570			4.62
$7.63 to $10.78		619,840		2.8			9.54		619,840			9.54
$12.07 to $17.54		1,950,570		5.5			15.05		1,533,081			14.88
$18.28 to $25.60		1,328,899		7.6			22.18		468,662			20.90
$27.77 to $32.86		674,044		9.4			29.76		8,278			29.88
		5,272,046		5.8			16.55		3,328,554			12.39




9. Discontinued Operations

        In June 1999, in order to focus on our recordsinformation storage and information managementprotection services business, we decided to sell our information technology staffing business, Arcus Staffing Resources, Inc. ("Arcus Staffing"), which was acquired in January 1998 as part of the acquisition of Arcus Group, Inc. Effective November 1, 1999, we completed the sale of substantially all of the assets of Arcus Staffing. The terms of the sale included contingent payments for a period of 18 months. In accordance with the provisions of APB No. 30, the sale of Arcus Staffing was accounted for as a discontinued operation. Accordingly, the Arcus Staffing operations were segregated from our continuing operations and reported as a separate line item on our consolidated statement of operations.

        In 1999, we recorded an estimated loss on the sale of Arcus Staffing of $13,400, comprised of a write-off of goodwill, a deferred tax benefit and estimated expenses directly related to the transaction partially offset by the estimated income from operations of Arcus Staffing through the date of disposition. In 2002, we recorded income from discontinued operations of $1,116 (net of tax of $768) related to the reversal of remaining liabilities associated with certain contingencies which have been resolved.

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10. Income Taxes

        The components of income (loss) from continuing operations before provision for income taxes and minority interest are:

		2001			2002			2003			2002			2003			2004
U.S. and Canada		$	(25,156	)	$	103,561		$	140,638		$	103,561		$	140,638		$	157,929
Foreign			(2,955	)		10,958			16,351			10,958			16,351			8,806
		$	(28,111	)	$	114,519		$	156,989		$	114,519		$	156,989		$	166,735

        We have estimated federal net operating loss carryforwards which begin to expire in 2018 through 2021 of $123,200$169,900 at December 31, 20032004 to reduce future federal taxable income, if any. TheseThe preceding net operating loss carryforwards do not include approximately $103,000 of potential preacquisitionpre-acquisition net operating loss carryforwards of Arcus Group, Inc. and certain foreign acquisitions.in the amount of approximately $103,000. Any tax benefit realized related to preacquisitionpre-acquisition net operating loss carryforwards will be recorded as a reduction of goodwill when, and if, realized. The Arcus Group carryforwards begin to expire in two years.next year. We also have estimated state net operating loss carryforwards of $73,776.$92,568. The state net operating loss carryforwards are subject to a valuation allowance of approximately 54%55%. Additionally, we have alternative minimum tax credit carryforwards of $1,187,$1,364, which have no expiration date and are available to reduce future income taxes, if any.

        We are subject to income taxes in many jurisdictions around the world. Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our tax estimates for certain tax loss contingencies are reasonable, the final determination of tax audits and any related litigation could be materially different than that which is reflected in historical income tax provisions and accruals. Additional taxes assessed as a result of an audit or litigation could have a material effect on our income tax provision and net income in the




period or periods in which the determination is made. We revise our estimates of such tax loss contingencies, if and when appropriate.

        The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:

			December 31,								December 31,
			2002			2003					2003			2004
Deferred Tax Assets:	Deferred Tax Assets:								Deferred Tax Assets:
	Accrued liabilities		$	11,809		$	12,854		Accrued liabilities		$	12,854		$	26,181
	Deferred rent			7,941			8,399		Deferred rent			8,399			8,654
	Net operating loss carryforwards			63,445			46,611		Net operating loss carryforwards			46,611			63,579
	AMT credit			587			1,187		AMT credit			1,187			1,364
	Valuation Allowance			(5,804	)		(4,829	)	Valuation Allowance			(4,829	)		(5,691	)
	Unrealized loss on hedging contracts			12,858			9,332		Unrealized loss on hedging contracts			9,332			1,585
	Other			31,567			16,589		Other			16,589			9,278
				122,403			90,143					90,143			104,950
Deferred Tax Liabilities:	Deferred Tax Liabilities:								Deferred Tax Liabilities:
	Other assets, principally due to differences in amortization			(47,274	)		(68,956	)	Other assets, principally due to differences in amortization			(68,956	)		(98,348	)
	Plant and equipment, principally due to differences in depreciation			(103,606	)		(115,061	)	Plant and equipment, principally due to differences in depreciation			(115,061	)		(154,642	)
	Customer acquisition costs			(15,795	)		(19,314	)	Customer acquisition costs			(19,314	)		(22,466	)
				(166,675	)		(203,331	)				(203,331	)		(275,456	)
	Net deferred tax liability		$	(44,272	)	$	(113,188	)	Net deferred tax liability		$	(113,188	)	$	(170,506	)

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        We receive a tax deduction upon the exercise of non-qualified stock options or upon the disqualifying disposition by employees of incentive stock options and shares acquired under our employee stock purchase plan for the difference between the exercise price and the market price of the underlying common stock on the date of exercise which isor disqualifying disposition. The tax benefit for non-qualified stock options and the 15% discount associated with our employee stock purchase plan are included in the net operating loss carryforwards above. During 2002 and 2003, we recognized $4,476 and $3,950 ofconsolidated financial statements in the period in which compensation expense is recorded. The tax benefit associated with compensation expense recorded in the consolidated financial statements related to the exercise of non-qualifiedincentive stock options and incremental amounts recorded above the 15% discount associated with the employee stock purchase plan are recorded in the period the disqualifying disposition occurs. All tax benefits for awards issued prior to January 1, 2003 and incremental tax benefits in excess of compensation expense recorded in the consolidated financial statements are credited directly to equity and amounted to $4,476, $3,950 and $6,904 for the years ended December 31, 2002, 2003 and 2004, respectively.

        We have not provided deferred taxes on book basis differences related to certain foreign subsidiaries because such basis differences are not expected to reverse in the foreseeable future and we intend to reinvest indefinitely outside the U.S. These basis differences arose primarily through the






undistributed book earnings of our foreign subsidiaries. The basis differences could be reversed through a sale of the subsidiaries, the receipt of dividends from subsidiaries as well as certain other events or actions on our part, which was credited to equity.would result in an increase in our provision for income taxes. We currently do not anticipate utilizing the repatriation provision outlined in the American Jobs Creation Act of 2004.

        We file a consolidated federal income tax return with our U.S. subsidiaries. The provision for income taxes consists of the following components:

		Year Ended December 31,									Year Ended December 31,
		2001			2002			2003			2002			2003			2004
Federal—deferred		$	8,332		$	33,629		$	43,856		$	33,629		$	43,856		$	54,237
State—current			(726	)		1,447			2,758			1,447			2,758			4,094
State—deferred			8,359			8,121			14,871			8,121			14,871			9,339
Foreign—current and deferred			1,910			4,121			5,245			4,121			5,245			1,904
		$	17,875		$	47,318		$	66,730		$	47,318		$	66,730		$	69,574

        A reconciliation of total income tax expense and the amount computed by applying the federal income tax rate of 35% to income (loss) from continuing operations before provision for income taxes and minority interests for the years ended December 31, 2001, 2002, 2003 and 2003,2004, respectively, is as follows:

			Year Ended December 31,											Year Ended December 31,
			2001			2002			2003					2002			2003			2004
Computed "expected" tax (benefit) provision			$	(9,838	)	$	40,082		$	54,946
Computed "expected" tax provision												Computed "expected" tax provision		$	40,082		$	54,946		$	58,357
Changes in income taxes resulting from:	Changes in income taxes resulting from:											Changes in income taxes resulting from:
	State taxes (net of federal tax benefit)			2,432			6,220			10,650		State taxes (net of federal tax benefit)			6,220			10,650			7,107
	Impact of retroactive state law change (net of federal tax benefit)			—			—			809		Impact of retroactive state law change (net of federal tax benefit)			—			809			1,625
	Nondeductible expenses			18,066			—			—		Increase in valuation allowance			210			—			—
	Increase in valuation allowance			4,832			210			—		Foreign tax rate and tax law differential			(209	)		(540	)		(1,584	)
	Foreign tax rate and tax law differential			598			(209	)		(540	)	Other, net			1,015			865			4,069
	Other, net			1,785			1,015			865
														$	47,318		$	66,730		$	69,574
			$	17,875		$	47,318		$	66,730




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11. Quarterly Results of Operations (Unaudited)

Quarter Ended		March 31			June 30			Sept. 30			Dec. 31			March 31			June 30			Sept. 30			Dec. 31
2002
Total revenues		$	317,198		$	327,720		$	333,113		$	340,466
Gross profit			164,752			172,313			179,255			179,878
Income from continuing operations before discontinued operations and cumulative effect of change in accounting principle			12,518			19,989			15,697			15,368
Net income			6,122			19,989			15,697			16,484
Income from continuing operations per share before discontinued operations and cumulative effect of change in accounting principle—basic			0.15			0.24			0.19			0.18
Income from continuing operations per share before discontinued operations and cumulative effect of change in accounting principle—diluted			0.15			0.23			0.18			0.18
Net income per share—basic			0.07			0.24			0.19			0.19
Net income per share—diluted			0.07			0.23			0.18			0.19
2003
Total revenues		$	351,811		$	359,270		$	381,758		$	408,490		$	351,811		$	359,270		$	381,758		$	408,490
Gross profit			191,660			197,238			210,403			221,281			191,660			197,238			210,403			221,281
Net income			21,284			20,133			14,794			28,426			21,284			20,133			14,794			28,426
Net income per share—basic			0.25			0.24			0.17			0.33			0.17			0.16			0.12			0.22
Net income per share—diluted			0.25			0.23			0.17			0.33			0.16			0.15			0.11			0.22
2004
Total revenues														$	433,922		$	445,410		$	459,330		$	478,927
Gross profit															235,612			244,583			249,533			263,962
Net income															22,997			22,857			18,450			29,887
Net income per share—basic															0.18			0.18			0.14			0.23
Net income per share—diluted															0.18			0.17			0.14			0.23

12. Segment Information

        We operate in seven operating segments, based on their economic environment, geographic area, the nature of their services and the nature of their processes:

•

Business Records Management—throughout the United States and Canada, the storage of paper documents, as well as all other non-electronic media such as microfilm and microfiche, master audio and videotapes, film, X-rays and blueprints, including healthcare information services, vital records services and service, courier operations, and the collection, handling and disposal of sensitive documents for corporate customers



•

Off-Site Data Protection—the storage and rotation of backup computer media as part of corporate disaster and business recovery plans, including service and courier operations and electronic vaulting services for the server market



•

Fulfillment—the storage of customer marketing literature and delivery to sales offices, trade shows and prospective customers' sites based on current and prospective customer orders; the assembly of custom marketing packages and orders; the management and detailed reporting on customer marketing literature inventories



•

Digital Archiving Services—storage and related services for electronic records conveyed via telecommunication lines and the Internet



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•

Europe—recordsinformation storage and information management services and off-site data protection services throughout Europe



•

South America—recordsinformation storage and information managementprotection services throughout South America



•

Mexico—recordsinformation storage and information managementprotection services throughout Mexico




        The South America and Mexico operating segments do not individually meet the quantitative thresholds for a reporting segment, but have been aggregated and reported with Europe as one




reporting segment, "International," given their similar economic characteristics, products, customers and processes. The Fulfillment and Digital Archiving Services operating segments do not meet the quantitative thresholds for a reportable segment and thus are included in the "Corporate and Other" category. Corporate items include non-operating overhead, corporate general and administrative expenses, non-allocated operating expenses and inter-segment eliminations. Corporate assets are principally cash and cash equivalents, prepaid items, certain non-operating fixed assets, deferred income taxes, certain non-trade receivables, certain inter-segment receivables, and deferred financing costs.

        An analysis of our business segment information to the respective information inand reconciliation to the consolidated financial statements is as follows:

		Business Records Management			Off-Site Data Protection			International			Corporate & Other(1)			Total Consolidated			Business Records Management			Data Protection			International			Corporate & Other(1)			Total Consolidated
2001
Total Revenues		$	861,302		$	209,429		$	89,475		$	25,512		$	1,185,718
Contribution			227,164			50,254			16,250			7,712			301,380
Total Assets			2,277,836			348,181			265,968			(32,079	)		2,859,906
2002
Total Revenues			944,845			239,081			109,381			25,190			1,318,497		$	944,845		$	239,081		$	109,381		$	25,190		$	1,318,497
Contribution			262,541			61,729			21,988			16,890			363,148			262,541			61,729			21,988			16,890			363,148
Total Assets			2,358,459			359,339			317,073			195,784			3,230,655			2,358,459			359,339			317,073			195,784			3,230,655
Expenditures for Segment Assets(2)																		141,663			24,642			58,107			30,365			254,777
2003
Total Revenues			1,022,335			251,141			198,068			29,785			1,501,329			1,022,335			251,141			198,068			29,785			1,501,329
Contribution			286,208			71,240			46,825			32,668			436,941			286,208			71,240			46,825			32,668			436,941
Total Assets			2,536,415			375,845			765,814			214,025			3,892,099			2,536,415			375,845			765,814			214,025			3,892,099
Expenditures for Segment Assets(2)																		179,450			28,667			358,515			30,312			596,944
2004
Total Revenues																		1,107,587			278,984			380,033			50,985			1,817,589
Contribution																		308,630			78,597			89,751			30,466			507,444
Total Assets																		2,708,068			391,184			1,024,135			319,000			4,442,387
Expenditures for Segment Assets(2)																		217,868			19,528			243,030			148,350			628,776

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(1)

Total assets include the inter-segment elimination amounts of $1,564,730, $1,277,393, $1,813,276 and $1,813,276$1,884,185 as of December 31, 2001, 2002, 2003 and 2003,2004, respectively.



(2)

Includes capital expenditures, cash paid for acquisitions, net of cash acquired and additions to customer relationship and acquisition costs in the accompanying consolidated statements of cash flows.




        The accounting policies of the reportable segments are the same as those described in Note 2 except that certain costs arecontinue to be allocated from Corporate & Other to the other segments in 2001, 2002, 2003 and 2003,2004, primarily to our Business Records Management and Off-Site Data Protection segments. These allocations, which include rent, worker's compensation, property, general liability, auto and other insurance, pension/medical costs, sick and vacation costs, incentive compensation, real estate property taxes and provision for






bad debts, are based on rates set at the beginning of each year. Contribution for each segment is defined as total revenues less cost of sales (excluding depreciation) and selling,

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general and administrative expenses including(including the costs allocated to each segment as described above.above). Internally, we use Contribution as the basis for evaluating the performance of and allocating resources to our operating segments.

        A reconciliation of Contribution to net (loss) income on a consolidated basis is as follows:

				Years Ended December 31,
				2001			2002			2003
Contribution				$	301,380		$	363,148		$	436,941
	Less: Depreciation and Amortization				153,271			108,992			130,918
		Merger-related Expenses			3,673			796			—
		Loss on Disposal/Writedown of Property, Plant and Equipment, Net			320			774			1,130
		Interest Expense, Net			134,742			136,632			150,468
		Other Expense (Income), Net			37,485			1,435			(2,564	)
		Provision for Income Taxes			17,875			47,318			66,730
		Minority Interest in (Losses) Earnings of Subsidiaries			(1,929	)		3,629			5,622
		Income from Discontinued Operations, Net of Tax			—			(1,116	)		—
		Cumulative Effect of Change in Accounting Principle, Net of Minority Interest			—			6,396			—
Net (Loss) Income				$	(44,057	)	$	58,292		$	84,637

        Our consulting business, previously analyzed as part of Business Records Management, is now analyzed within the Corporate & Other category. Our secure shredding business, previously analyzed as part of Corporate & Other, is now analyzed within the Business Records Management segment. Our film and sound business, previously analyzed as part of Business Records Management, is now analyzed within the Off-Site Data Protection segment. Our electronic vaulting business, previously analyzed as part of Corporate & Other, is now analyzed within the Off-Site Data Protection segment. Our Canadian business, previously analyzed as part of our International segment, is now analyzed within the Business Records Management segment. 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 all of these changes.

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				Years Ended December 31,
				2002			2003			2004
Contribution				$	363,148		$	436,941		$	507,444
	Less: Depreciation and Amortization				108,992			130,918			163,629
		Merger-related Expenses			796			—			—
		Loss (Gain) on Disposal/Writedown of Property, Plant and Equipment, Net			774			1,130			(681	)
		Interest Expense, Net			136,632			150,468			185,749
		Other Expense (Income), Net			1,435			(2,564	)		(7,988	)
		Provision for Income Taxes			47,318			66,730			69,574
		Minority Interest in Earnings of Subsidiaries			3,629			5,622			2,970
		Income from Discontinued Operations, Net of Tax			(1,116	)		—			—
		Cumulative Effect of Change in Accounting Principle, Net of Minority Interest			6,396			—			—
Net Income				$	58,292		$	84,637		$	94,191

        Information as to our operations in different geographical areas is as follows:

			2001			2002			2003				2002			2003			2004
Revenues:	Revenues:										Revenues:
United States	United States		$	1,028,219		$	1,134,000		$	1,215,669	United States		$	1,134,000		$	1,215,669		$	1,330,979
United Kingdom	United Kingdom			59,226			79,228			145,735	United Kingdom			79,228			145,735			270,665
Canada	Canada			68,024			75,116			87,592	Canada			75,116			87,592			106,577
Other International	Other International			30,249			30,153			52,333	Other International			30,153			52,333			109,368
	Total Revenues		$	1,185,718		$	1,318,497		$	1,501,329	Total Revenues		$	1,318,497		$	1,501,329		$	1,817,589
Long-lived Assets:	Long-lived Assets:										Long-lived Assets:
United States	United States		$	2,118,828		$	2,395,018		$	2,514,031	United States		$	2,395,018		$	2,514,031		$	2,735,545
United Kingdom	United Kingdom			165,443			216,040			551,924	United Kingdom			216,040			551,924			618,712
Canada	Canada			200,425			200,461			253,874	Canada			200,461			253,874			315,872
Other International	Other International			65,893			52,096			100,687	Other International			52,096			100,687			271,104
	Total Long-lived Assets		$	2,550,589		$	2,863,615		$	3,420,516	Total Long-lived Assets		$	2,863,615		$	3,420,516		$	3,941,233




13. Commitments and Contingencies

        a.     Leases

        We lease most of our facilities under various operating leases. A majority of these leases have renewal options of five to ten years and have either fixed or Consumer Price Index escalation clauses. We also lease equipment under operating leases, primarily computers which have an average lease life of three years. Trucks and office equipment are also leased and have remaining lease lives ranging from one to seven years. RentTotal rent expense under all of our operating leases was $126,871, $125,866, $134,371 and $134,371$163,564 for the years ended December 31, 2001, 2002, 2003 and 2003,2004, respectively. There was $6,733, $5,915 and $0 related to synthetic lease facilities included in rent expense for the yearsyear ended December 31, 2001, 20022002. There was no such expense in 2003 and 2003, respectively.2004. See Note 3.

        Minimum future lease payments, net of sublease income of $2,238, $1,650, $767, $414, $267$2,715, $1,933, $1,375, $1,127, $912 and $560$1,546 for 2004, 2005, 2006, 2007, 2008, 2009 and thereafter, respectively, are as follows:

Year		Operating			Operating
2004		$	135,512
2005			119,441		$	151,166
2006			102,797			134,694
2007			88,365			118,604
2008			70,357			99,714
2009						83,201
Thereafter			386,412			490,302
Total minimum lease payments		$	902,884		$	1,077,681

        We have guaranteed the residual value of certain vehicle operating leases to which we are a party. The maximum net residual value guarantee obligation for these vehicles as of December 31, 20032004 was

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$679. $34,316. Such amount does not take into consideration the recovery or resale value associated with these vehicles. We believe that it is not reasonably likely that we will be required to perform under these guarantee agreements or that any performance requirement would have a material impact on our consolidated financial statements.

        b.     South Brunswick Fires Litigation

        In March 1997, we experienced three fires, all of which authorities have determined were caused by arson. The fires resulted in damage to one and destruction of another records and information services facility in South Brunswick Township, New Jersey.

Certain of our customers or their insurance carriers have asserted claims as a consequence of the destruction of, or damage to, their records as a result of the fires, including claims with specific requests for compensation and allegations of negligence or other culpability on the part of Iron Mountain. We and our insurers have denied any liability on the part of Iron Mountain as to all of these claims.

        We are presently aware of five pendingFive lawsuits that have beenwere filed against Iron Mountain by certain of our customers and/or their insurers, and one pendinga sixth lawsuit was filed by the insurersissuers of an abutter of one of the South Brunswick facilities. FiveAs a result of a mediation in August 2004, the parties to these six lawsuits have been consolidatedentered into a written settlement of these matters. Pursuant to the settlement agreement, Iron Mountain contributed $500 to a settlement fund in exchange for pre-trial purposes in thecomplete release. The Superior Court for Middlesex County, New Jersey Superior Court. The sixth lawsuit, brought by a single customer, is pending inhas, therefore, dismissed all of these cases. In addition, our






insurers reimbursed us for the Supreme Court for New York County, New York.costs of the defense. A seventh lawsuit, also brought by a single customer, was tried before a federal judge in New Jersey in February 2000, with a defendant's verdict entered in favor of Iron Mountain. An eighth lawsuit filed by an injured firefighter is currently beingwas settled by our insurer for a nominal amount. Several other claims that were originally filed in relation to these lawsuits have been voluntarily dismissed without prejudice by the customers, abutting business owners, and/or their insurance carriers.

        We have denied liability and asserted affirmative defenses in all of the remaining cases arising out of the fires and, in certain of the cases, have asserted counterclaims for indemnification against the plaintiffs. Discovery is ongoing. We deny any liability as a result of the destruction of, or damage to, customer records or property of abutters as a result of the fires, which were beyond our control. We intend to vigorously defend ourselves against these and any other lawsuits that may arise.

        Our professional liability insurer, together with our general liability and property insurance carriers, have entered into a binding agreement with us regarding reimbursement of defense costs and have agreed to ongoing discussions regarding any remaining coverage issues, further defense and/or settlement of these claims.

c.     Sequedex,Pierce, H-W Associates, Pioneer and Sequedex Proceedings

        We are involved as a plaintiff or defendant in a series of actions in New Jersey and Pennsylvania generally involving or arising out of assertions by Iron Mountain Incorporated that J. Peter Pierce, ProceedingsSr. and others engaged in conduct in respect of an entity, Sequedex, LLC ("Sequedex"), that constituted a breach of Mr. Pierce's contractual and fiduciary obligations to us. The following is a summary of each of those cases.

        On March 28, 2002, Iron Mountain Incorporated and Iron Mountain Information Management, Inc. ("IMIM"), one of our wholly owned subsidiaries, commenced an action in the Middlesex County, New Jersey, Superior Court, Chancery Division, captioned Iron Mountain Incorporated and Iron Mountain Information Management, Inc. v. J. Peter Pierce, Sr., Douglas B. Huntley, J. Michael Gold, Fred A. Mathewson, Jr., Michael DiIanni, J. Anthony Hayden, Pioneer Capital, LLC, and Sequedex, LLC. In the complaint, we alleged that defendant J. Peter Pierce, Sr., a former member of our Board of

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Directors and the former President of IMIM until his termination without cause effective June 30, 2000, violated his fiduciary obligations, as well as various noncompetition and other provisions of an employment agreement with Iron Mountain,us, dated February 1, 2000, by providing direct and/or indirect financial, management and other support to defendant Sequedex. Sequedex was established in October 2000, and competed directly with us in the records and information management information services industry. The complaint also alleged that Mr. Pierce and certain of the other defendants, who were employed by or affiliated with Pierce Leahy Corp. prior to the merger of Pierce Leahy with Iron Mountain in February 2000, misappropriated and used our trade secrets and other confidential information. Finally, the complaint asserted claims against Sequedex and others for tortious interference with contractual relations, against all of the defendants for civil conspiracy in respect of the matters described above, and against defendant Michael DiIanni for breach of his employment agreement with IMIM, dated September 6, 2000. The litigation seekssought injunctions in respect of certain matters and recovery of damages against the defendants.

        On April 12, 2002, Iron Mountainwe also initiated a related arbitration proceeding against Mr. Pierce before the Philadelphia, Pennsylvania, Officeoffice of the American Arbitration Association (the "AAA") pursuant to an arbitration clause in the employment agreement between Iron Mountainus and Mr. Pierce. In the arbitration, Mr. Pierce counterclaimed for indemnification of his expenses, including attorneys' fees. We disputed Mr. Pierce's claim. On July 19, 2002, the litigation was stayed pending the outcome of the arbitration proceeding. On February 25, 2003, in response to Iron Mountain'sour request, the AAA removed the arbitrator. The arbitration proceeding was transferred by agreement of the parties to ADR Options, Inc. On February 4, 2004, the arbitrator rendered a decision. The arbitrator did not find the evidence provided by us in our action against Mr. Pierce sufficient to rule in our favor on the particular claims at issue. In






addition, the arbitrator ruled that, pursuant to an indemnification provision in Mr. Pierce's employment agreement, we must pay Mr. Pierce's attorneys fees and costs that are attributable to this single arbitration. The arbitrator has established a procedure to ascertain the amount of these fees and expenses, which, in any case are not expected to be material to our financial position or results of operations.expenses. We have recently filed a motion to vacate the arbitrator's decision and award in Middlesex County, New Jersey. On June 16, 2004, that court denied our motion to vacate and confirmed the arbitration decision. We appealed the court's decision to the Appellate Division of the New Jersey whereSuperior Court and voluntarily withdrew, without prejudice, the claims in that case other than those purportedly covered by the arbitration decision. Mr. Pierce filed a motion to dismiss the appeal, which was denied by the Appellate Division. Mr. Pierce subsequently filed an opposition to the appeal. The parties are awaiting notice of a hearing date for the appeal.

        On September 13, 2004, the arbitrator issued a final award, granting Mr. Pierce indemnification for legal expenses incurred in the arbitration in the amount of approximately $1,600. Mr. Pierce brought an action in the Superior Court for Middlesex County to confirm such award and such court issued an order to show cause. We opposed this action and filed a motion to dismiss Mr. Pierce's claims and vacate the arbitration award, or in the alternative, for a stay pending disposition of the pending action against Mr. Pierce and others is currently stayed.appeal regarding the motion to vacate.

        On December 16, 2002, Hartford Windsor Associates, L.P. ("H-W Associates"), Hartford General, LLC, J. Anthony Hayden, Mr. Pierce, Frank Seidman and John H. Greenwald, Jr. commenced an action in the Court of Common Pleas, Montgomery County, Pennsylvania, against Iron Mountain Incorporated. In the complaint, the plaintiffs allege that H-W Associates purchased a warehouse property in Connecticut to serve as a records storage facility, and entered into a lease for the facility with Sequedex, then a competitor of ours, and that the remaining plaintiffs were limited or general partners of H-W Associates. The plaintiffs also allege that we tortiously interfered with Sequedex's contractual relations with an actual or prospective customer of Sequedex and, as a result, caused Sequedex to default on its lease to H-W Associates. The complaint seeks damages in excess of $100,000.$100,000.. We have denied the material allegations in the complaint filed against us by H-W Associates and the other plaintiffs and have since filed counterclaims against the plaintiffs alleging tortious interference with our business relationship with one of our longstanding customers. Discovery is proceeding.Certain discovery has been undertaken.

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        Also on December 16, 2002, Pioneer Capital L.P. ("Pioneer"), Pioneer Capital Genpar, Inc. ("PCG"), the general partner of Pioneer, and Mr. Pierce, the President of PCG, commenced an action in the Court of Common Pleas, Montgomery County, Pennsylvania, against Iron Mountain Incorporated, C. Richard Reese, John F. Kenny, Jr., Garry Watzke, Schooner Capital LLC ("Schooner") and Vincent J. Ryan. The named individuals are Directors and/or officers of Iron Mountain Incorporated and Schooner is a shareholder of Iron Mountain.Mountain Incorporated. In the complaint, the plaintiffs allege that the defendants had numerous conversations and arrangements with Mr.Thomas Carr, one of Mr. Pierce's and Pioneer's business partners in a company named Logisteq LLC. The plaintiffs further allege that, as a result of such conversations and arrangements, defendants conspired to, and did intentionally, interfere with Pioneer's relationship with its partner and Logisteq. The plaintiffs also allege that defendants damaged Mr. Pierce's reputation in the community by telling Iron Mountainour employees and other third parties that Mr. Pierce breached his employment agreement with Iron Mountain, us,






misappropriated and used Iron Mountain'sour confidential information, breached his fiduciary duties to Iron Mountain'sour shareholders and assisted Sequedex, then a competitor of Iron Mountain,ours, in unfairly competing with Iron Mountain.us. Finally, the complaint alleges that the business partner in Logisteq taped conversations with Mr. Pierce and others which allegedly violated privacy laws, that the defendants knew, or should have known, that the tapes were being made without the consent of the individuals and, as a result, Mr. Pierce was harmed. The complaint seeks damages in excess of $5,000,000. Iron MountainWe and the other defendants have challenged the legal sufficiency of the plaintiffs' pleadings in each of these cases.cases and the court has issued a notice of its intention to dismiss the case for inactivity unless a party gives written notice of his or its intention to proceed by April 15, 2005.

        On September 10, 2003, IMIM filed a complaint in the Court of Common Pleas, Montgomery County, Pennsylvania in a matter related to the litigation between the CompanyIron Mountain Incorporated and Sequedex, Mr. Pierce and others disclosed above. The new matter namesnamed Sequedex, J. Michael Gold and Peter Hamilton as defendants, and alleges that in 2000 defendants Gold and Hamilton, both former IMIM employees, used confidential and proprietary business information that they had obtained while employed by IMIM to form their own records management company, Sequedex. The complaint also allegesalleged unlawful interference with IMIM's contractual relationship with a certain customer and other matters. The defendants filed preliminary objections to our complaint and Iron Mountain haswe answered those preliminary objections. This matter has been voluntarily dismissed without prejudice.

        Prior to the litigation directly pertaining to Mr. Pierce having been filed, inIn approximately October 2000, three former management employees of IMIM became employed by or otherwise associated with Sequedex. IMIM commenced actions against these three former employees to enforce its rights under their confidentiality and non-competition agreements. IMIM has also asserted claims against Sequedex for tortious interference with these agreements, and against both Sequedex and the former employees for misappropriation and use of IMIM's trade secrets and confidential information.

        The defendants in all three cases have denied the material allegations in IMIM's complaints and asserted various affirmative defenses. In addition, Sequedex and the individual defendants filed counterclaims against IMIM and third party complaints against Iron Mountain.Mountain Incorporated. The counterclaims and third party complaints assertasserted claims for tortious interference with certain contracts and prospective business relations between Sequedex and its current and potential customers as well as a claim for trade disparagement and defamation. The defendantdefamation, and sought approximately $58,000 in one of these actions sought a declaratory judgment regarding the enforceability of the confidentiality and non-competition agreements at issue in

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that case and filed a motion for summary judgment seeking to have the non-competition agreement declared void, or to limit its scope. IMIM and Iron Mountain filed motions in all three cases to dismiss the various counterclaims and third-party complaints. All of these motions, i.e., the defendants' motion for summary judgment and IMIM's and Iron Mountain's motions to dismiss, were denied by the court following a hearing on May 7, 2002. As previously disclosed in our quarterly report on Form 10-Q for the quarter ended September 30, 2003, Sequedex furnished a preliminary statement of damages, with an estimate of compensatory damages of approximately $172 million and an indication that Sequedex intended to seekplus unspecified punitive damages of approximately $1.5 billion. Sequedex is no longer seeking damages in this amount and in connection with its proposed amended counterclaim, Sequedex has recently furnished a litigation expert's report of damages claiming approximately $59 million plus approximately $6.6 million of pre-judgment interest. Sequedex has indicated that it also intends to seek punitive damages in an undisclosed amount. Extensive discovery has been conducted in the three cases and is ongoing; on the basis of that discovery, it is our belief that Sequedex has not produced any material evidence that we or IMIM acted wrongfully in any respect. Further, limited discovery has been conducted in respect of Sequedex's damages claim; on the basis of that discovery, we do not believe that Sequedex has any foundation, and we believe that it cannot provide any foundation, for its damages calculations. We believe that the damages calculations submitted by Sequedex are not supported by credible evidence and are subject to serious legal, methodological and factual deficiencies.damages. A trial of the three actions in which the Sequedex counterclaims and third party complaints have beenwere asserted is scheduled to commenceoccurred in April and May of 2004. On June 18, 2004, the Court held that the three individual defendants had not violated their covenants not to compete and had not misappropriated any of IMIM's trade secrets or confidential information, that Sequedex had not tortiously interfered with those agreements, and that IMIM and Iron Mountain Incorporated had not interfered with any of Sequedex's potential or actual business relationships and had not disparaged or defamed Sequedex. The Court thus entered a judgment dismissing all claims and counterclaims. Sequedex and oneappealed the Court's decision to the Appellate Division of the individual defendants recentlyNew Jersey Superior Court. Iron Mountain Incorporated and IMIM filed dispositive motions, including motions for summary judgment asan appellate brief in opposition to certain of the claims. All of these motions were denied by the court following a hearing on February 24, 2004.

        Discovery is proceeding in each of these cases, other than the arbitration.Sequedex's appeal. We intend to prosecute these actions vigorously, as well as to defend ourselves vigorously againstoppose the counterclaims andappeal by Sequedex vigorously. The parties are awaiting notice of a hearing date for the third party complaints.appeal.




        d.     Other Litigation

        In addition to the matters discussed above, we are involved in litigation from time to time in the ordinary course of business with a portion of the defense and/or settlement costs being covered by various commercial liability insurance policies purchased by us. In the opinion of management, no other material legal proceedings are pending to which we, or any of our properties, are subject.

        The outcome of the South Brunswick fires, Sequedex,Pierce, H-W Associates, Pioneer and PierceSequedex proceedings cannot be predicted with certainty. Based on our present assessment of the situation, after consultation with legal counsel, management does not believe that the outcome of these proceedings will have a material adverse effect on our financial condition or results of operations, although there can be no assurance in this regard. In addition, we record legal costs associated with loss contingencies as expenses in the period in which they are incurred.

14. Related Party Transactions

        We lease space to an affiliated company, Schooner, for its corporate headquarters located in Boston, Massachusetts. For the years ended December 31, 2001, 2002, 2003 and 2003,2004, Schooner paid rent to us totaling $101, $128, $144 and $144,$153, respectively. We lease facilities from an officer and three separate

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limited partnerships, whose general partner was a related party. Our aggregate rental payment for such facilities during 2001, 2002, 2003 and 20032004 was $1,381, $1,372, $1,309 and $1,309,$1,345, respectively. In the opinion of management, all of these leases were entered into at market prices and terms.

        We have an agreement with Leo W. Pierce, Sr., our former Chairman Emeritus and the father of J. Peter Pierce, our former director, that requires pension payments of $8 per month until his death. The total benefit is recorded in accrued expenses in the accompanying consolidated balance sheets in the amount of $922$826 as of December 31, 2003.2004.

        At December 31, 2003,2004, we have outstanding loans to an officer with an aggregate principal amount of $331.$87. These notes bear interest at a variable rate. This liability was assumed in connection with our merger with Pierce Leahy.

15. Employee Benefit Plans

        a.     Iron Mountain Companies 401(k) Plan

        We have a defined contribution plan, which generally covers all non-union U.S. employees meeting certain service requirements. Eligible employees may elect to defer from 1% to 25% of compensation per pay period up to the amount allowed by the Internal Revenue Code. In addition, IME operates a defined contribution plan, which is similar to the U.S.'s 401(k) Plan. We make matching contributions based on the amount of an employee's contribution in accordance with the plan document. We have expensed $2,466, $3,043, $4,164 and $4,164$4,320 for the years ended December 31, 2001, 2002, 2003 and 2003,2004, respectively.






        b.     Employee Stock Purchase Plan

        On March 23, 1998, we introduced an employee stock purchase plan (the "Plan"), participation in which is available to substantially all employees who meet certain service eligibility requirements. The Plan was approved by our shareholders on May 28, 1998 and commenced operations on October 1, 1998. The Plan provided a way for our eligible employees to become shareholders on favorable terms. The Plan provided for the purchase of up to 562,500843,750 shares of our common stock by eligible employees through successive offering periods. At the start of each offering period, participating employees were granted options to acquire our common stock. As there were no shares remaining in the Plan on December 31, 2002, a new employee stock purchase plan (the "2003 Plan"), which provides for the purchase of up to 750,0001,125,000 shares of our common stock was approved by our shareholders in May 2003 and commenced operations on July 1, 2003. During each offering period, participating employees accumulate after-tax payroll contributions, up to a maximum of 15% of their compensation, to pay the exercise price of their options. At the end of the offering period, outstanding options are exercised, and each employee's accumulated contributions are used to purchase our common stock. The price for shares purchased under the Plan was, and under the 2003 Plan is, 85% of their market price at either the beginning or the end of the offering period, whichever was or is lower. There were 186,152, 160,119240,179, 133,072 and 88,715348,320 shares purchased under the Plan and the 2003 Plan for the years ended December 31, 2001, 2002, 2003 and 2003,2004, respectively. The number of shares available for grantpurchase at December 31, 20032004 was 661,285.643,608.

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16. Subsequent Events

        In February 2004, we completed the acquisition of Mentmore plc's 49.9% equity interest in IME for total consideration of 82,500 British pounds sterling ($154,000) in cash from proceeds of our 7¹/4% notes issued in January 2004. Included in this amount is the repayment of all trade and working capital funding owed to Mentmore by IME. Completion of the transaction gives us 100% ownership of IME, affording us full access to all future cash flows and greater strategic and financial flexibility. This transaction should have no impact on revenue or operating income since we already fully consolidate IME's financial results. Since we will be using the purchase method of accounting for this acquisition, 49.9% of the net assets of IME will be adjusted to reflect their fair market value if different from their current carrying value.

        In March 2004, IME and certain of its subsidiaries entered into a credit agreement (the "IME Credit Agreement") with a syndicate of European lenders. The IME Credit Agreement provides for maximum borrowing availability in the principal amount of 210,000 British pounds sterling, including a 100,000 British pounds sterling revolving credit facility(which includes the ability to borrow in certain other foreign currencies), a 100,000 British pounds sterling term loan, and a 10,000 British pounds sterling overdraft protection line. The revolving credit facility matures on March 2, 2009. The term loan facility is payable in three installments; two installments of 20,000 British pounds sterling on March 2, 2007 and 2008, respectively, and the final payment of the remaining balance on March 2, 2009. The interest rate on borrowings under the IME Credit Agreement is based on LIBOR and varies depending on IME's choice of interest rate period, plus an applicable margin. The IME Credit Agreement includes various financial covenants applicable to the results of IME, which may restrict IME's ability to incur indebtedness under the IME Credit Agreement and with third parties. Each of IME's subsidiaries will either guarantee the obligations or pledge shares to secure the IME Credit Agreement. We have not guaranteed or otherwise provided security for the IME Credit Agreement nor have any of our U.S., Canadian, Mexican and South American subsidiaries.

        In March 2004, IME borrowed approximately 147,000 British pounds sterling under the IME Credit Agreement, including the full amount of the term loan. IME used those proceeds to repay us 135,000 British pounds sterling related to our initial financing of the acquisition of the European operations of Hays IMS. We expect to use those proceeds to: (1) pay down approximately $104,000 of real estate term loans, (2) settle all obligations associated with terminating our two cross currency swaps used to hedge the foreign currency impact of our intercompany financing with IME, and (3) to pay down amounts outstanding under our Amended and Restated Credit Agreement. After the initial balance, IME's availability under the IME Credit Agreement, based on its current level of external debt and the leverage ratio under the IME Credit Agreement, was approximately 9,000 British pounds sterling.

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REPORT OF THE INDEPENDENT AUDITORS


To the Board of Directors of
Iron Mountain Europe Limited:

        We have audited the accompanying consolidated balance sheetssheet of Iron Mountain Europe Limited as of October 31, 2002 and 2003, and the related consolidated statements of operations, stockholders' equity and comprehensive (loss)/income and cash flows for the threetwo years ended October 31, 2003. These consolidated financial statements are the responsibility of the management of Iron Mountain Europe Limited. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Iron Mountain Europe Limited at October 31, 2002 and 2003 and the consolidated results of their operations and their consolidated cash flows for the threetwo years ended October 31, 2003, in conformity with generally accepted accounting principles in the United States of America.

/s/ RSM ROBSON RHODES LLP

Chartered Accountants
Birmingham, England

March 8, 2004

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        This is a copy of the audit report previously issued by Arthur Andersen LLP in connection with Iron Mountain Incorporated's filing of an Annual Report on Form 10-K for the year ended December 31, 2001. This audit report has not been reissued by Arthur Andersen LLP in connection with this Annual Report on Form 10-K for the year ended December 31, 2003. See Exhibit 23.3 to the December 31, 2002 Annual Report on Form 10-K filed with the SEC for further discussion.


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors of
Iron Mountain Incorporated:

        We have audited, in accordance with auditing standards generally accepted in the United States, the consolidated financial statements of Iron Mountain Incorporated (a Pennsylvania corporation) for each of the three years in the period ended December 31, 2001 and have issued our report thereon dated February 22, 2002 (except with respect to Note 17, as to which the date is March 15, 2002). Our audits were made for the purpose of forming an opinion on those basic financial statements taken as a whole. The supplemental schedule listed in the accompanying index is the responsibility of Iron Mountain Incorporated's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and regulations under the Securities Exchange Act of 1934 and is not a required part of the basic financial statements. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

/s/ ARTHUR ANDERSEN LLP

Boston, Massachusetts
February 22, 2002
(Except with respect to Note 17,
as to which the date is March 15, 2002)

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Schedule II


IRON MOUNTAIN INCORPORATED
Valuation and Qualifying Accounts
(In thousands)

Year Ended December 31,		Balance at Beginning of the Year			Charged to Expense			Other Additions(1)			Deductions			Balance at End of the Year
Allowance for doubtful accounts:
2001		$	15,989		$	8,499		$	846		$	(8,248	)	$	17,086

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(1)

Includes allowance of businesses acquired during the year as described in Note 7 to Notes to Consolidated Financial Statements and the impact associated with currency translation adjustments.

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SIGNATURES


        Pursuant to the requirements of Section 13 or 15(d) 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.

		IRON MOUNTAIN INCORPORATED
		By:		/s/  C. RICHARD REESE       C. Richard Reese Chairman of the Board, Chief Executive Officer and President
Dated: March 11, 200416, 2005

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name		Title		Date
/s/  C. RICHARD REESE       C. Richard Reese		Chairman of the Board of Directors, Chief Executive Officer and President		March 11, 200416, 2005
/s/  JOHN F. KENNY, JR.       John F. Kenny, Jr.		Executive Vice President, Chief Financial Officer and Director		March 11, 200416, 2005
/s/  JEAN A. BUA       Jean A. Bua		Senior Vice President and Corporate Controller (Chief Accounting Officer)		March 11, 200416, 2005
/s/  CLARKE H. BAILEY       Clarke H. Bailey		Director		March 11, 200416, 2005
/s/  CONSTANTIN R. BODEN       Constantin R. Boden		Director		March 11, 200416, 2005
/s/  KENT P. DAUTEN       Kent P. Dauten		Director		March 11, 2004
/s/  EUGENE B. DOGGETT       Eugene B. Doggett		Director		March 11, 200416, 2005
/s/  B. THOMAS GOLISANO       B. Thomas Golisano		Director		March 11, 200416, 2005
/s/  ARTHUR D. LITTLE       Arthur D. Little		Director		March 11, 200416, 2005
/s/  VINCENT J. RYAN       Vincent J. Ryan		Director		March 11, 200416, 2005

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INDEX TO EXHIBITS


        Certain exhibits indicated below are incorporated by reference to documents we have filed with the Commission. Exhibit numbers in parentheses refer to the exhibit numbers in the applicable filing (which are identified in the footnotes appearing at the end of this index). Each exhibit marked by a pound sign (#) is a management contract or compensatory plan.

Exhibit		Item		Exhibit
2.1		Purchase Agreement, dated November 13, 2000, by and among Iron Mountain Canada Corporation, Iron Mountain Records Management, Inc. ("IMRM"), FACS Records Storage Income Fund, FACS Records Centre Inc. and 3796281 Canada Inc.		(2.1)(19)(18)
2.2		Asset Purchase and Sale Agreement, dated February 18, 2000, by and among IMRM, Data Storage Center, Inc., DSC of Florida, Inc., DSC of Massachusetts, Inc., and Suddath Van Lines, Inc.		(2.1)(16)(15)
2.3		Amendment No. 1 to Asset Purchase and Sale Agreement, dated May 1, 2000, by and among IMRM, Data Storage Center, Inc., DSC of Florida, Inc., DSC of Massachusetts, Inc., Suddath Van Lines, Inc. and Suddath Family Trust U/A 11/8/79.		(2.1)(17)(16)
2.4		Agreement and Plan of Merger, dated as of October 20, 1999, by and between the Company and Pierce Leahy.		(2)(10)
2.5		Agreement, dated July 12, 2003, between Hays plc and Iron Mountain Europe Limited (portions of which have been omitted pursuant to a request for confidential treatment).		(2.1)(27)(26)
3.1		Amended and Restated Articles of Incorporation of the Company.Company, as amended.		(Annex D)(3.1) (14)(28)
3.2		Amended and Restated BylawsBy-laws of the Company.Company, as amended.		(Annex E)(3.2) (14)(28)
3.3		Declaration of Trust of IM Capital Trust I, dated as of December 10, 2001 among the Company, The Bank of New York, The Bank of New York (Delaware) and John P. Lawrence, as trustees.		(4.15)(22)(21)
3.4		Certificate of Trust of IM Capital Trust I.		(4.17)(22)(21)
4.1		Indenture for 81/4% Senior Subordinated Notes due 2011, dated April 26, 1999, by and among the Company, certain of its subsidiaries and The Bank of New York, as trustee.		(10.1)(7)
4.2		Indenture for 83/4% Senior Subordinated Notes due 2009, dated October 24, 1997, by and among the Company, certain of its subsidiaries and The Bank of New York, as trustee.		(4.1)(2)
4.3		Indenture for 81/8% Senior Notes due 2008, dated as of April 7, 1998, by and among Iron Mountain Canada Corporation, as issuer, the Company and The Bank of New York, as trustee.		(4.1(c))(13)
4.4		Indenture for 85/8% Senior Subordinated Notes due 2008, dated as of April 3, 2001, among the Company, the Guarantors named therein and The Bank of New York, as trustee.		(4.1)(20)(19)
4.5		First Supplemental Indenture, dated as of April 3, 2001, among the Company, the Guarantors named therein and The Bank of New York, as trustee.		(4.2)(20)(19)
4.6		Second Supplemental Indenture, dated as of September 14, 2001, among the Company, the Guarantors named therein and The Bank of New York, as trustee.		(4.7)(23)(22)
4.7		Senior Subordinated Indenture for 73/4% Senior Subordinated Notes due 2015 and 65/8% Senior Subordinated Notes due 2016, dated as of December 30, 2002, among the Company, the Guarantors named therein and The Bank of New York, as trustee.		(4.7)(26)(25)




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4.8		First Supplemental Indenture, dated as of December 30, 2002, among the Company, the Guarantors named therein and the Trustee.		(4.8)(26)(25)
4.9		Second Supplemental Indenture, dated as of June 20, 2003, among the Company, the Guarantors named therein and the Trustee.		Filed herewith as Exhibit 4.9(4.9) (27)
4.10		Form of stock certificate representing shares of Common Stock, $.01 par value per share, of the Company.		(4.1)(15)(14)
9		Amended and Restated Voting Trust Agreement, dated as of February 28, 1998, by and among the Company, certain shareholders of the Company and Leo W. Pierce, Sr. and J. Peter Pierce, as trustees.(#)		(9.0)(12)






10.1		Employment Agreement, dated as of February 1, 2000, by and between the Company and J. Peter Pierce.(#)		(10.5)(16)
10.2		Letter Agreement, dated as of June 27, 2000, by and between the Company and J. Peter Pierce. (#)		(10.6)(19)(15)
10.3		Iron Mountain Incorporated Executive Deferred Compensation Plan, as amended.(#)		(10.7)(19)(18)
10.4		Nonqualified Stock Option Plan of Pierce Leahy Corp.(#)		(10.3)(11)
10.5		Iron Mountain Incorporated 1997 Stock Option Plan, as amended.(#)		(10.9)(19)(18)
10.6		Iron Mountain/ATSI 1995 Stock Option Plan.(#)		(10.2)(3)
10.7		Iron Mountain Incorporated 1995 Stock Incentive Plan, as amended.(#)		(10.3)(6)
10.8		Iron Mountain Incorporated 2002 Stock Incentive Plan.(#)		(10.8)(26)(25)
10.9		Form of Iron Mountain Incorporated Amended and Restated Non-Qualified Stock Option Agreement.(#)		Filed herewith as Exhibit 10.9
10.10		Form of Iron Mountain Incorporated Incentive Stock Option Agreement.(#)		Filed herewith as Exhibit 10.10
10.11		Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Non-Qualified Stock Option Agreement.(#)		Filed herewith as Exhibit 10.11
10.12		Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Amended and Restated Iron Mountain Non-Qualified Stock Option Agreement.(#)		Filed herewith as Exhibit 10.12
10.13		Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Incentive Stock Option Agreement.(#)		Filed herewith as Exhibit 10.13
10.14		Form of Iron Mountain Incorporated 1995 Stock Incentive Plan Non-Qualified Stock Option Agreement.(#)		Filed herewith as Exhibit 10.14
10.15		Form of Iron Mountain Incorporated 1997 Stock Option Plan Stock Option Agreement.(#)		Filed herewith as Exhibit 10.15
10.16		Form of Iron Mountain Incorporated 1997 Stock Option Plan Stock Option Agreement.(#)		Filed herewith as Exhibit 10.16
10.17		Form of Iron Mountain Incorporated 2002 Stock Incentive Plan Stock Option Agreement.(#)		Filed herewith as Exhibit 10.17
10.18		Form of Iron Mountain Incorporated 2002 Stock Incentive Plan Stock Option Agreement.(#)		Filed herewith as Exhibit 10.18
10.19		Fifth Amended and Restated Credit Agreement dated as of March 15, 2002 among the Company, certain lenders party thereto and JPMorgan Chase Bank, as Administrative Agent.		(10.10)(23)(22)
10.1010.20		Amended and Restated Registration Rights Agreement, dated as of June 12, 1997, by and among the Company and certain shareholders of the Company.(#)		(10.1)(1)
10.1110.21		Strategic Alliance Agreement, dated as of January 4, 1999, by and among the Company, Iron Mountain (U.K.) Limited, Britannia Data Management Limited and Mentmore Abbey plc.		(10.2)(5)
10.1210.22		Lease Agreement, dated as of October 1, 1998, between Iron Mountain Statutory Trust—1998 and IMRM.		(10.20)(4)
10.1310.23		Amendment No. 1 and Consent to Lease Agreement, dated March 15, 2002, between Iron Mountain Statutory Trust—1998 and IMIM		(10.1)(24)(23)
10.1410.24		Unconditional Guaranty, dated as of October 1, 1998, from the Company to Iron Mountain Statutory Trust—1998.		(10.21)(4)
10.1510.25		Amendment and Consent to Unconditional Guaranty, dated as of July 1, 1999, between the Company and Iron Mountain Statutory Trust—1998 and consented to by the lenders listed therein and the Bank of Nova Scotia, as Agent Bank for such lenders.		(10.1)(8)
10.1610.26		Amendment No. 2 and Consent to Unconditional Guaranty, dated as of October 22, 1999, between the Company and Iron Mountain Statutory Trust—1998, and consented to by the lenders listed therein and the Bank of Nova Scotia, as Agent Bank for such lenders.		(10.17)(23)(22)
10.1710.27		Amendment No. 3 and Consent to Unconditional Guaranty, dated as of January 31, 2000, between the Company and Iron Mountain Statutory Trust—1998, and consented to by the lenders listed therein and the Bank of Nova Scotia, as Agent Bank for such lenders.		(10.18)(23)(22)

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10.1810.28		Amendment No. 4 and Consent to Unconditional Guaranty, dated as of August 15, 2000, between the Company and Iron Mountain Statutory Trust—1998, and consented to by the lenders listed therein and the Bank of Nova Scotia, as Agent Bank for such lenders.		(10.3)(18)(17)
10.19




10.29		Amendment No. 5 and Consent to Unconditional Guaranty, dated as of March 15, 2002 between the Company and Iron Mountain Statutory Trust—1998, and consented to by the lenders listed therein and the Bank of Nova Scotia, as Agent Bank for such lenders.		(10.2)(24)(23)
10.2010.30		Guaranty Letter, dated December 31, 2002, to Scotiabanc, Inc. from Iron Mountain Information Services, Inc., as Lessee and the Company as Guarantor.		(10.20)(26)(25)
10.2110.31		Amended and Restated Agency Agreement, dated October 1, 1998, by and between Iron Mountain Statutory Trust—1998 and IMRM.		(10.22)(4)
10.2210.32		Lease Agreement, dated as of July 1, 1999, by and between Iron Mountain Statutory Trust—1999 and IMRM.		(10.2)(9)
10.2310.33		Amendment No. 1 and Consent to Lease Agreement, dated March 15, 2002, between Iron Mountain Statutory Trust—1999 and IMIM.		(10.3)(24)(23)
10.2410.34		Agency Agreement, dated as of July 1, 1999, by and between Iron Mountain Statutory Trust—1999 and IMRM.		(10.1)(9)
10.2510.35		Unconditional Guaranty, dated as of July 1, 1999, from the Company to Iron Mountain Statutory Trust—1999.		(10.3)(9)
10.2610.36		Amendment No. 1 and Consent to Unconditional Guaranty, dated as of October 22, 1999, between the Company and Iron Mountain Statutory Trust—1999, and consented to by the lenders listed therein and Wachovia Capital Investments, Inc., as Agent Bank for such lenders.		(10.24)(23)(22)
10.2710.37		Amendment No. 2 and Consent to Unconditional Guaranty, dated as of January 31, 2000, between the Company and Iron Mountain Statutory Trust—1999,and consented to by the lenders listed therein and Wachovia Capital Investments, Inc., as Agent Bank for such lenders.		(10.25)(23)(22)
10.2810.38		Amendment No. 3 and Consent to Unconditional Guaranty, dated as of August 16, 2000, between the Company and Iron Mountain Statutory Trust—1999, and consented to by the lenders listed therein and Wachovia Capital Investments, Inc., as Agent Bank for such lenders.		(10.2)(18)(17)
10.2910.39		Amendment No. 4 to Unconditional Guaranty, dated as of March 20, 2001 between the Company and Iron Mountain Statutory Trust—1999, and consented to by the lenders listed therein and Wachovia Capital Investments, Inc., as Agent Bank for such lenders.		(10.4)(24)(23)
10.3010.40		Amendment No. 5 and Unconditional Consent to Guaranty, dated as of March 15, 2002 between the Company and Iron Mountain Statutory Trust—1999, and consented to by the lenders listed therein and Wachovia Capital Investments, Inc., as Agent Bank for such lenders.		(10.5)(24)(23)
10.3110.41		Guaranty Letter, dated December 31, 2002, to BTM Capital and JH Equity Realty Investors, Inc., from Iron Mountain Information Services, Inc., as Lessee and the Company as Guarantor.		(10.31)(26)(25)
10.3210.42		Master Lease and Security Agreement, dated as of May 22, 2001, between Iron Mountain Statutory Trust—2001, as Lessor, and IMRM, as Lessee.		(10.1)(21)(20)
10.3310.43		Amendment No. 1 to Master Lease and Security Agreement, dated as of November 1, 2001 between Iron Mountain Statutory Trust—2001, as Lessor, and IMRM, as Lessee.		(10.28)(23)(22)




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10.3410.44		Amendment to Master Lease and Security Agreement and Unconditional Guaranty, dated March 15, 2002, between Iron Mountain Statutory Trust—2001, IMIM and the Company.		(10.6)(24)(23)
10.3510.45		Unconditional Guaranty, dated as of May 22, 2001, from the Company, as Guarantor, to Iron Mountain Statutory Trust—2001, as Lessor.		(10.2)(21)(20)
10.3610.46		Subsidiary Guaranty, dated as of May 22, 2001, from certain subsidiaries of the Company as guarantors, for the benefit of Iron Mountain Statutory Trust—2001 and consented to by Bank of Nova Scotia.		(10.36)(26)(25)
10.3710.47		Guaranty Letter, dated December 31, 2002, to Scotiabanc, Inc. from Iron Mountain Information Services, Inc., as Lessee and the Company as Guarantor.		(10.37)(26)(25)
10.3810.48		Master Construction Agency Agreement, dated as of May 22, 2001, between Iron Mountain Statutory Trust—2001, as Lessor, and IMRM, as Construction Agent.		(10.3)(21)(20)
10.39






10.49		First Amendment, dated as of July 9, 2003, to the Fifth Amended and Restated Credit Agreement, dated as of March 15, 2002, among the Company, certain lenders party thereto and J.P. Morgan Chase Bank, as Administrative Agent.		(10.1)(27)(26)
10.4010.50		Multi-Currency Term, Revolving Credit Facilities Agreement, dated as of March 2004, among Iron Mountain Europe Limited, certain lenders party thereto, Barclays Capital and The Governor and Company of the Bank of Scotland, as arrangers, and The Bank of Scotland as the facility agent, security trustee and letter of credit issuing bank.		(10.40) (27)
10.51		Sixth Amended and Restated Credit Agreement dated as of April 2, 2004 among the Company, Iron Mountain Canada Corporation, certain lenders party thereto, Fleet National Bank, as Syndication Agent, Wachovia Bank, National Association and The Bank of Nova Scotia, as Co-Documentation Agents, J.P. Morgan Securities Inc., as arranger and bookrunner, JPMorgan Chase Bank, Toronto Branch as Canadian Administrative Agent and JPMorgan Chase Bank, as Administrative Agent.		(10.1) (29)
10.52		Seventh Amended and Restated Credit Agreement dated as of July 8, 2004 among the Company, Iron Mountain Canada Corporation, certain lenders party thereto, Fleet National Bank, as Syndication Agent, Wachovia Bank, National Association and The Bank of Nova Scotia, as Co-Documentation Agents, J.P. Morgan Securities Inc., as lead arranger and bookrunner, JPMorgan Chase Bank, Toronto Branch as Canadian Administrative Agent and JPMorgan Chase Bank, as Administrative Agent.		(10.1) (30)
10.53		Letter Agreement, dated December 8, 2004 and revised December 16, 2004, between Iron Mountain Records Management and Peter Delle Donne regarding severance benefits.		Filed herewith as Exhibit 10.4010.53
12		Statement re: Computation of Ratios.		Filed herewith as Exhibit 12
16		Letter from Arthur Andersen LLP to the Securities and Exchange Commission, dated June 19, 2002, regarding the change in the Company's certifying accountant.		(16.1)(25)(24)
21		Subsidiaries of the Company.		Filed herewith as Exhibit 21
23.1		Consent of Deloitte & Touche LLP (Iron Mountain Incorporated, Pennsylvania).		Filed herewith as Exhibit 23.1
23.2		Consent of RSM Robson Rhodes LLP (Iron Mountain Europe Limited).		Filed herewith as Exhibit 23.2
23.3		Notice Regarding Consent of Arthur Andersen LLP.		(23.3)(26)(25)
31.1		Certification required by Rule 13a-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as amended.		Filed herewith as Exhibit 31.1
31.2		Certification required by Rule 13a-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as amended.		Filed herewith as Exhibit 31.2
32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.		Furnished herewith as Exhibit 32.1
32.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.		Furnished herewith as Exhibit 32.2

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(1)

Filed as an Exhibit to Iron Mountain/DE's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, filed with the Commission, File No. 0-27584.



(2)

Filed as an Exhibit to Iron Mountain/DE's Current Report on Form 8-K dated October 30, 1997, filed with the Commission, File No. 0-27584.



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(3)

Filed as an Exhibit to Iron Mountain/DE's Current Report on Form 8-K dated March 9, 1998, filed with the Commission, File No. 0-27584.



(4)

Filed as an Exhibit to Iron Mountain/DE's Registration Statement No. 333-67765, filed with Commission on November 23, 1998.



(5)

Filed as an Exhibit to Iron Mountain/DE's Current Report on Form 8-K dated January 19, 1999, filed with the Commission, File No. 0-27584.



(6)

Filed as an Exhibit to Iron Mountain/DE's Current Report on Form 8-K dated April 16, 1999, filed with the Commission, File No. 0-27584.





(7)

Filed as an Exhibit to Iron Mountain/DE's Current Report of Form 8-K dated May 11, 1999, filed with the Commission, File No. 0-27584.



(8)

Filed as an Exhibit to Iron Mountain/DE's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, filed with the Commission, File No. 0-27584.



(9)

Filed as an Exhibit to Iron Mountain/DE's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, filed with the Commission, File No. 1-14937.



(10)

Filed as an Exhibit to Pierce Leahy's Current Report on Form 8-K, dated October 20, 1999, filed with the Commission, File No.1-13045.



(11)

Filed as an Exhibit Amendment No. 1 to Pierce Leahy's Registration Statement No. 333-9963, filed with the Commission on October 4, 1996.



(12)

Filed as an Exhibit to Pierce Leahy's Annual Report on Form 10-K for the year ended December 31, 1997, filed with the Commission, File No. 333-09963.



(13)

Filed as an Exhibit to Pierce Leahy's Registration Statement No. 333-58569, filed with the Commission on July 6, 1998.



(14)

Filed as an Annex or Exhibit to Amendment No. 1 to Pierce Leahy's Registration Statement No. 333-91577, filed with the Commission on December 13, 1999.



(15)

Filed as an Exhibit to the Company's Current Report on Form 8-K dated February 1, 2000, filed with the Commission, File No. 1-13045.



(16)(15)

Filed as an Exhibit to the Company's Annual Report on Form 10-K405 for the year ended December 31, 1999, filed with the Commission, File No. 1-13045.



(17)(16)

Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000, filed with the Commission, File No. 1-13045.



(18)(17)

Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000, filed with the Commission, File No. 1-13045.



(19)(18)

Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, filed with the Commission, File No. 1-13045.



(20)(19)

Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, filed with the Commission, File No. 1-13045.



(21)(20)

Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, filed with the Commission, File No. 1-13045.



(22)(21)

Filed as an Exhibit to the Company's Registration Statement No. 333-75068, filed with the Commission on December 13, 2001.



(23)(22)

Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Commission, File No. 1-13045.



(24)(23)

Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, filed with the Commission, File No. 1-13045.



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(25)(24)

Filed as an Exhibit to the Company's Current Report on Form 8-K dated June 19, 2002, filed with the Commission, File No. 1-13045.



(26)(25)

Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 2002, filed with the Commission, File No. 1-13045.



(27)(26)

Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, filed with the Commission, File No. 1-13045.



(27)

Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 2003, filed with the Commission, File No. 1-13045.



(28)

Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, filed with the Commission, File No. 1-13045.



(29)

Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, filed with the Commission, File No. 1-13045.



(30)

Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, filed with the Commission, File No. 1-13045.