鐵山公司 (IRM) 2002 Q2 法說會逐字稿

Please stand by.

We are about to begin.

Good day, everyone, and welcome to the Iron Mountain second quarter 2002 earnings conference call.

Today's call is being recorded and simultaneously broadcast on the Internet at www.IronMountain.com and click on the investor relations site.

With us today is the chairman and chief executive officer, Richard Reese and the chief financial officer John Kenny.

At this time I'd like to turn the conference over to Richard Reese.

Please go ahead.

Good morning and thank you everyone for joining us. the format of today's call will follow many others in the past.

I'll give you a brief commercial for in case there is any first time participants, then John will comment on the financial performance and then I'll come back and comment on the results as well as talk a little bit about the future and then we'll take your questions and answers.

But first before we start the commercial, I'll ask John to make a few statements about how much attention you should pay to this.

What rich is referring to, the Safe Harbor language which you can see on slide 1 if you have access to the power point slide that accompanied this call.

But in brief let me say that this conference call will contain certain forward looking statements that involve a number of risks and uncertainties, forward looking statements include our third quarter and full year 2002 financial performance outlook and statements regarding our goals, beliefs, strategies, objectives, plans or current expectations.

You should be aware that certain factors may affect us in the future and could cause the actual results to be materially different from those contemplated in these forward looking statements.

Such factors are enumerated in today's press release which is available on our web site and in our shelf prospectus dated February 11, 2002.

Iron Mountain undertakes no obligation to reduce publicly result any revision of these forward look statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Thank you, John.

Iron Mountain is the global leader in records and information management services.

We now have operations in 80 U.S. markets, nine in Canada, 25 in Europe and 10 in Latin America.

We have consistently managed three stage strategic plan set over six years ago.

Phase 1 of that plan involved establishing Leer ship in broad market access in each of our core business lines.

We've accomplished those goals.

Our phase 2 objective is market penetration through direct selling to new customers to convert primary demand and capture share.

And the third phase which we had not yet fully to execute fund we will seek to penetrate these customer and drive margins.

We are successful executing against this plan and have had established clear global leadership.

Our services continue to become more important to our customers as we have placed or self in the middle three significant markets trends.

They are better control of risk through corporate records management and records management and archive businesses that we operate are right in the middle of that disaster recovery protection, off-site data, [inaudible] initiatives.

And information and personal information privacy and that of course is our confidential construction services business. [Inaudible.] Now let me turn to John who will go through his normal financial analysis.

And then, as I said, I'll come back and comment and then we'll take your questions.

Thanks, Richard.

By the way, as is our custom, we've posted a brief slide presentation of the highlights of the quarter on our web site.

But on the assumption that most of you will not be viewing the slides in real time, I will try to describe them fully in my remarks.

You can forward through obviously the cover slide and slide 1 Safe Harbor language.

Let's begin our analysis of results in slide 2 which is a comparison of revenue and adjusted EBITDA for the second quarter of 2002 versus 2001.

Total revenues for the second quarter of 2002 was $323.5 million, an increase of 10 percent over 2001.

Adjusted EBITDA before development expenses for new technology base services for the quarter was 89.1 million dollars, an increase of 16 percent over 2001.

Margins expanded by 140 basis points to 27.6 percent of revenues. the increase in margins came in roughly equal parts from cost of goods sold and SG and A. As gross margins also expanded by 70 basis points.

Slide 3 is essentially the year to date version of slide 2, and you can see that the growth dynamics for revenue and EBITDA are very similar to that which we enjoyed in the quarter.

Moving on to slide 4, slide 4 is a more detailed comparison of some of the major P and L line items for the second quarter of 2002 versus the same period in 2001.

Please note for that for the purpose of this slide we are comparing reported results without any adjustments for revenues and expenses associated with our digital services development efforts.

Growth margins, as I mentioned, expanded by 70 basis points for the quarter versus Q2, 2001 primarily due to better labor management and transportation efficiencies.

In addition, utility costs were down versus prior year while increases in our property casualty and health care insurance costs were more than offset by all these efficiencies.

Moving down the income statement, SG and A expenses excluding digital as a percent of revenue decreased by approximately 70 basis points from last year's levels.

This decrease was primarily due to the leveraging of overhead which more than offset an increased investment of sales and marketing. the growth of depreciation expense expense is out pacing all other line items due to elevated levels of capital spending over the last three years, especially in ITSS which has shorter lives.

We take a conservative stance with regard to writing off these ITSS as the vast majority of them are depreciated over three to five years.

These investments were made to build the infrastructure needed to support a larger enterprise and to accomplish the integration of our many acquisitions.

Further, spending for our digital services consists mostly of capital investment and hardware and software assets.

Depreciation arising from assets in our digital business contributed more than $800,000 to total depreciation expense this quarter, adding about 400 basis points to the year over year growth in this line item.

We will discuss all aspects of capital spending more fully in an upcoming slide.

Reported amortization changed meaningfully due to the adoption of the new regulations regarding treatment of intangible assets. and lastly, interest expense is lower this year in absolute terms than last year.

I will speak more about this later in my presentation.

At slide 5 is the year to date version of slide 4 and has very similar dynamic at work as you can see.

Moving on to slide 6 which provides net income and per share data for Q2 in the first half of 2002.

In the second quarter of 2002 we reported net income before extraordinary item of $20 million or 23 cents per share on the diluted basis.

This is compared to a net loss before extraordinary item of $5 million or 6 cents per share in 2001.

While much of this improvement is attributable to growth and increased margins, there are two exogenous factors at work which I will address.

As a result of the new accounting rules regarding good will and other intangible assets, we stopped amortizing good will effective January 1st of this year.

Included in the results of Q2, 2001 is 15.1 million of good will amortization that would not have been reported had these rules been effective last year.

Giving effect to the change in the accounting rules and the resulting changes in the calculation of the income tax provision, net income before extraordinary item for Q2, 2001 would have been 11.$5 million or 13 cents per share on a diluted basis. the other income and expense line on our income statement contains various nonroutine items such as noncash, foreign currency gains and losses, and gains and losses on dispositions of property. the foreign currency gains and losses relate primarily to intercompany accounts we have with our international subsidiaries.

This quarter other income includes a $6 million foreign currency gain resulting from the translation of these intercompany accounts, and this adds about 4 cents to our earnings per share.

Last quarter we had a $300,000 loss on foreign exchange and in Q2, 2001 we had an excess gain of $7 million.

In the past our Canadian subsidiary which has U.S. dollar denominated public debt has been another major source of foreign exchange volatility.

However, we recently implemented a hedging program to mitigate this.

We are now looking to reduce the excess fluctuations due to the intercompany accounts and we'll keep you informed about our progress there.

Additionally, this quarter we realized that $2 million gain on the sale of our European headquarters building which added about 1 cent to earnings per share.

We will point out and discuss the major components of other income and expense so you can better assess the quality of our earnings on a year over year basis.

I spoke during our Q1 earnings call about the elimination of good will amortization.

We reported that [inaudible] with the new accounting rules related to intangible assets, the company undertook a detailed review of the more than 1.7 billion dollars of total good will on our balance sheet which arose from over 100 acquisitions closed in the past six years.

We reaffirmed the value of these assets, except for our investment in South America, which has been impaired due primarily to the severe deterioration of the economy and the devaluation of the currency in Argentina.

We announced then our intent to quantify this charge during Q2 and have done so by taking a $6.4 million net write down.

Now, in accordance with the transition provisions of this new accounting standard for measuring good will impairment, we will take the write down in the first quarter of 2002 as the cumulative effect of change in accounting principal and file an amended quarterly report on Form 10(q) A to reflect this noncash charge.

As a result, our first quarter net income becomes 6.1 million or 7 cents per diluted share.

Moving on to slide 7, slide 7 details our internal growth rate for the second quarter of 2002 and the preceding 13 quarters.

Total revenue growth for Q2 was 10.3 percent, of which approximately 89 percent was generated internally.

Or putting it another way, the internal growth rate came in at 9.1 percent.

Storage revenue growth for the quarter was 8.6 percent, up slightly from the first quarter. the internal growth rate for services - for service revenue was 9.8 percent, a two-thirds of which is composed off of core recurring services which grew at 12.1 percent and the remaining complimentary services grew at 5.7 percent.

Over the longer term, we would expect service revenue growth to out pace storage growth as has been our pattern in three of the last four years.

We have a lot of additional service offerings to present to our large customer base, and have a revenue organization increasingly enabled and structured to pursue that revenue opportunity.

We reiterate our 2002 forecast 8 percent to 11 percent internal growth for the year.

We expect growth in the second half to be somewhat higher than the first half and to exceed 9 percent, although we do expect some quarter to quarter fluctuation, in part due to the uneven nature of the service revenue stream last fall.

Moving on, slide 8 is a summary debt capitalization table as of the end of 2001 and 2002.

Our total debt outstanding June 30th, 202 stood at 1.5 billion dollars.

We had 130 million dollars drawn under our 400 million dollars revolver, and a cash balance of about 26 million dollars.

Over the last year and a half, we have engineered a number of refinancing events in which we were able to meaningfully extend maturities while reducing our weighted average interest rate more than 100 basis points.

Approximately 85 percent of our debt is fixed with respect to interest rates and our current Bond leverage ratio is 4.6 times EBITDA.

This ratio is down nearly 60 basis points from the end of 2001 and is approaching the levels we were at prior to the Pierce-Leahey merger.

We are comfortable operating the business in our target leverage range of 4.5 to 5.5 times EBITDA.

This business will naturally deliver each year in the absence of an extraordinary investment activity.

This may be an opportune time for me to address the issue of synthetic leasing, an issue that has gotten a lot of attention in the financial markets due to some company's abuses.

We have used a variety of techniques to manage our real estate needs, including a modestamount of synthetic leases.

About 6 percent of our properties with aggregate value of less than $175 million, have been financed in this manner.

While some companies may have used these techniques to keep debt off their balance sheet, this has never been our objective the reasons we use synthetic lease structures are, firstly, it's cheaper than traditional third-party leases.

Secondly, we maintain operational and financial control over the properties. and lastly, and most importantly, it preserves our financial flexibility as we buildup our portfolio over time.

Our disclosure on this malter matter has always been robust.

In short, all of our stakeholders are well informed.

Our senior creditors are the major source of this capital and have always included these leases in the calculation of the bank covenant ratios.

If these leases were recharacterized, the impact would be small.

There would be no change in our overall cash flow. and our annual depreciation expense would increase by only 3 cents per share.

Our Bond leverage ratio would rise to 5.1 times EBITDA, well below the level permitted by any of our public debt and comfortably within our target operating range.

In slide 9 we talk about capital spending and investments and we organize our presentation into two major categories.

Capital used to drive the internal growth of the business and discretionary expenditures in real estate and on our digital initiatives.

Capital spending for the second quarter of 2002 was 43 million dollars for our core businesses and $4 million for our digital initiatives.

On a year to date basis, these investments total 97 million dollars and $8 million respectively.

You may notice an up tick in digital spending about which Richard will speak in a moment.

Our overall outlook is for second half capital spending to run below the levels of the first half of the year.

Also, as we have discussed, we bring real estate onto our balance sheet from time to time for a variety of reasons which can create some lumpiness in our capital spending.

I wish to point out that we also dispose of redundant or exit I have real estate from time to time, as is the case with the $6 million sale of the U.K. building about which I spoke earlier.

We expect we will sell other real estate over the next 18 months and realize about 12 million dollars in considerations.

We view real estate as a discretionary expenditure as we feel we can unlock that capital opportunistically to reduce our long term occupancy costs.

Let me remind you that we are also spending heavily in the restructuring of acquisitions or what we call the acquisition bubble spending.

We estimate that we will spend about 20 million in this regard in 2002 and expect it will trail off into 2003.

Our longer term view for total capex is that spending will flatten and remain in the same absolute dollar range over the next two to three years as the business continues to grow.

This contributes to our belief that we will generate meaningful levels of free cash flow going forward. the outlook for the other major drivers of cash flow also support that forecast.

That is to say, the EBITDA should grow over 10 percent per year adding 40 to $50,000,000 per year to cash flow.

Interest expense should trend to flat over that time frame [inaudible].

Cash taxes should stay at very low levels as we work through our NOL of over 250 million dollars.

So our outlook for increasing free cash flow is bright. an important observation today is that we're funding our internal growth with cash flow from operations.

We are not reliant on the capital markets to pursue our core business strategy. by the way, regarding acquisitions, we have not acquired any businesses since our last earnings release in April.

So on a year to date basis we have closed four transactions with aggregate consideration of almost $15 million.

Slide 10 provides financial modeling guidance for the third quarter and the full year 2002.

I apologize for repeating this for those of you that have access to the press release and/or the slides.

But as a reminder these projections do not include any revenue or expenses associated with the development of our technology based service offerings.

Based on our strong first half performance and stable outlook, we have raised the low end of our ranges for both EBITDA and revenue as follows: We expect our revenue for the year to be in the 1.275 billion dollars to 1.305 billion dollars range and adjusted EBITDA to be in the $342 million to $356 million range.

For the third quarter of 2002, we expect revenue to be in the $318 million to $328 million range and for adjusted EBITDA to be in the $8 5 million to $90 million range.

We expect our capital spending will land between $175 and $2 100 million for the year, and not including capex associated with possible future acquisitions and our digital initiatives. and as I stated earlier, our internal growth rate for 2002 is expected to be in the range of 8 percent to 11 percent.

Lastly, spending through the P and L on the development of our new technology base services, net of any recorded revenue, should be between $5 million and $7 million for the year.

And capital spending in this area should fall between $10 million and $12 million for the year.

Thank you for putting up with all that and now I will turn it back to Richard.

Thank you, John.

As I think I did last time or the time before, I may stick my neck out and walk on the wire a little bit and vary from the script.

I really have three four things to talk to you about.

I want to go quickly through operations review, but three other subjects I want to cover. the first one being I want to close the chapter on the Pierce-Leahey integration today because it's done a great job ask we'll tell you about it, tell you where additional businesses are and complete about some of my personal thoughts with corporate governance and what it means to Iron Mountain and you as our shareholder.

So let me quickly tell you about the operations as you heard all the numbers from John, the business is running as we forecasted, margins better than we forecasted.

Really coming from our field operations doing a good job as we have slowed the acquisition integration that we have been telling you for a long time when we take our eye off of acquisitions and we focus on the internal side of this business and rationalize what we're doing, we can drive margins.

We have done so.

I've continued to caution you, though, that for the balance of the year you may see fluctuations.

Not dramatic ones, maybe, half a point or something like that.

But it won't march up every quarter.

You're not going to get 140 basis points every quarter as we did this quarter but we're pleased with our field performance.

Some of this will have to do with we choose to invest in the second half, turn loose of the purse strings a little bit which we may do invest in other things because the business is running well.

We see it, we know it and we're going to do good things with the results of that.

So we feel good about that and by the way, we can continue to invest and turn loose the purse strings and still meet our 30 sent long term margin.

We have no reasonable concerns about getting there. from a revenue perspective for the quarter total growth at 10.3 ask internal growth at 9.1 is roughly in the range of what we've said.

Internal growth is up slightly and in particular the North American box business but only slightly.

As you know for a few quarters we had a bit of a downward trend line internal growth in that particular business.

For the last two quarters the trend appears to be flat and may be up a bit but nothing in this business move in a hurry so it's a little early to call how fast up is or so forth.

Our core services revenue growth was up 100 basis points to 12.1 percent.

This I remind you is a service that is directly related to our storage operations.

As I said before, it's a bit like your utility.

If you're in business you need your information you use it.

So it move with activity of our customers as our customers have to access information and support their business activities.

Our complementary services line, on the other hand, was basically flat, up 10 basis points over last quarter to 5.7 percent growth.

This is the revenue category only 14 percent of our revenue, but on the margin pretty sensitive to short term spending controls of our customers. and our observation is corporate America is still holding on fairly tight to their wallet, but we do get some sense of a loosening.

There are projects that are starting to be turned loose and released.

So we see things in moving back in a positive direction.

But I don't see anything, you know, rapid rise.

That's sort of our general theme.

I think we see things getting better but sort of slowly up from here as we look out at our customers.

Our sales force remains stable.

In fact heads on board are up two from the end of last quarter with 377 in North America and 456 worldwide.

North American box business is another way of shows improved performance contained 95 percent of their quota for this quarter and have a very strong forward pipeline and are feeling very optimistic about the balance of the year.

Again, as we have to say over and over we do good things today and you see don't see if for six to 12 months.

There is a long time lag for things like that.

So on the revenue side we continue to believe we're at the Nate of our growth.

Trough we previously ask youked we remain confident about our forecast for the balance of the year.

But as I said earlier, nothing changes rapid in this business in and you are forecast relatively [Inaudible] pretty much for today's level.

So basically in summary, we like what's going on in our operations.

We see a lot of positive things going on, not everything is perfect, never will be, but we're feeling pretty good about where we are and when we look out at the economy, had at all the other things going on, I guess we feel things are more positive assuming we don't get a double dip in the economy.

We're feeling more positive than we did say last quarter but we're not ready to hoot and holler and jump up and down ask and so forth.

I think it's going to be fairly slow coming out and that's just our general view of the economy.

Last night John told me they forecast the economy prudential to do so.

My response was I'm probably as accurate as anybody else.

So you can believe or not believe, who knows.

That's just our gut feel.

On the business development front John said there is no activity of relevance this quarter so I'm going to pass that.

Let me move to the Pierce-Leahey integration.

As you know, we had a merger with Pierce-Leahey back in2000 and we told you then was going to be a long job to get it integrate and had put together.

Basically we want to close the chap on that.

Our operational people, field operations did a great job during this quarter.

In North America we completed the field operational system conversion star safety system.

And we did it six months ahead of schedule and we think all the people who work hard in fact we had a little celebration down in Pennsylvania two weeks ago to thank some of the people who travel for a couple years constantly to make that happen.

It was a tremendous job.

So from all perspectives, there will be some expenses bleeding through the second half of the year, but less than half a million dollar in so-called merger related line item expenses. and then after that it's gone.

And you won't hear about it and you won't see it in the financial statements after this year.

In the beginning we forecasted this integration line item to run about $15 million and it looks like we're going to do it for about $14 million.

So we're feeling good if the organization's performance [With the] and are pleased and maybe even a bit surprised at our ability to forecast it as accurately as we did.

So it's been a great chapter in Iron Mountain's history.

It strengthened our business substantially increased our global footprint, strategic position.

It took a lot of work.

But it's basically behind us and you're not going to hear us talk about it any more.

Now let me move on to some more future and positive things and [inaudible] services development project for those who haven't listened a lot we view that separately from our core business and try too give you enough data to understand the core business so this investment we're making here does not give us the place to hide as we frankly improve our margins and so forth.

This quarter a lot of positive things happened and starting with we achieved some of our second major milestone in developing the business. the first one of course being developing the product or services in the first place.

In the second major milestone is we now have signed significant customers in all of our product areas.

We have multiple product areas here and in fact so far we've got 100 customers who have signed contracts for our services.

So we're starting to see customers from small to large and it varies over across the map in terms of revenue size and so forth.

Actually signing contracts now we're going to the hard work of getting them connected and making it happen, service delivery.

I think we're going to find ourselves soon if not opportunity bound, meaning more opportunities than we have sales force to chase and then after that we'll probably go to cycle, sell more than we can do and then we'll go back and forth a little while until we get it tuned and working well.

Revenue for the quarter, though, actual reported revenue for all digital services $238,000, which is up from 82,000 last quarter, still not seeing significant revenue hit. the future annual value of the customers who have signed is excess of two and a half million dollars.

As I said, it's not the revenue is not yet significant, but the prospects are looking better and in fact so is the prospect list and so forth.

Corporate spending has some impact here, a lot of customers interested.

It is a long and slow decision cycle partly because this is new and partly because people don't have budgets for some of this stuff, but on the other hand in certain markets and certain segments there's a lot of compliance issues regulation issues and just plain risk management issues that are pushing people to deal with this on certain products and other products has to do with we can save them money and that always makes good sense.

We are also seeing interesting cross over effect of our digital services on our core physical businesses.

We now through developing our digital technology have created technology and a skilled set of people to solve a producer broader range of our customers information and management problems and this is creating opportunity in our physical business.

Along with additional revenue we signed contracts on, we can expect to realize approximately this year another 1.2 million of additional revenues in our physical business.

That would range anywhere from five conversions to some scanning projects to more hard copy storage to more disaster recovery support services.

So what we're seeing is the ditch will allow us to dig deeper even on the physical side which is what we had hoped but we're starting to actually see that come into play.

Now, John mentioned that I would talk to you a little bit about us upping our spending a little bit in the capital side and we have and let me explain that at little bit and give you the impact of what's happened.

We decided to accelerate a new product 2003 product plan into this year.

It's a product for E statement arc I'veing. a product we estimate the market opportunity is a couple billion dollars give or take. and we basically did it when he knew it was a product we wanted to do, product road map for 2003 but the reason we did it this year is we actually were able to sign a major customer contract and it was a real contract not promises, but a real contract expected to generate approximately million and a half dollars of annual revenue.

We felt that it made sense to go ahead and get the product started since the development of that product could be sold to other customers and so forth.

So therefore we increased our capital spending forecast for about $2 million to continue the development of that product over what we originally projected. by the way in John's forecast for the our net spending for operating statement for the balance of this year, we've actually lowered our spending thereby a couple million dollars.

They're not related, but it so happens that one went one way and one going the other.

So, you know, we still believe, by the way, having said all these optimistic things, that this is going to be build slowly.

So I don't want anybody jumping up and down and going crazy for we're not.

We really have a lot of work cut out for our self.

I will tell you from a personal and this is a purely personal statement, as I have said around here, I no longer lose sleep at night worrying about whether we are spending money developing services that we won't reap a good return on.

I've crossed that point.

I can see it, I can see the customer reaction, I can see the pipeline.

I can't, you know, I can't count the money yet, but from my experience in the business and just gut reaction, we will realize an appropriate return on additional developments on the investments we've made. by the way, though, I'm not ready to declare victory because it's still not clear yet the tremendous up side, and I'm talking multi billion dollars opportunity that we envision.

It's still not clear if that's within our grasp and it's not clear how fast that market will develop.

So we can't declare victory until we've actually hit those targets or until we can see it and frankly have done it.

So optimism for this area continues to grow.

We have a lot of work to grow, a lot of work to balance and we will be telling you more about it in the future.

Now, I'd like to turn my discussion and to make some personal remarks, having talked about how the business and operating and what we think, I'd like to make the first few personal rakes about my view and frankly I guess it's not just my view it's the view of the management team and for that matter I believe the collective view of our board of directors given how we behave about how we think about corporate governance at Iron Mountain.

Given all the related things going on in the marketplace and all the noise out there, I believe that our shareholders as well as our employees sort of deserve to know how we approach some of these current issues.

I'm going to make a few comments and we can take your questions later.

First let me just make the obvious comment, but one that I think for me needs to be said, that as a CEO I don't think all CEO apps are bad but I will tell you that those that are bad, they need to be punished.

So I personally support severe punishment, and not sure that the laws recently passed, although they're a nice step in the right direction, not sure they're enough.

Having said that, I believe that over regulation frankly is not a solution.

It will only create more gray areas for lawyers to help people hide in which is a lot of what's been going on if you look around carefully.

My belief dishonest people will be dishonest regardless of the regulations.

On the other hand, I think there are some issues where such as stock option accounting rules that should be clarified so that all companies should - can report on a similar basis. and my personal opinion again is, though, the only real solution I can see for myself as an investor is to put my money with people who have a track record of transparency and honesty.

Our financial reporting philosophy has always been one to correctly characterize the performance of our business and of disclosing as much relevant data as possible to allow our shareholders to make their own judgments about our performance.

After all, we're shareholders too and what is good for other shareholders is good for us and that's the way we look at it.

We do our best to try to tell you what we think it is relevant.

We recognize we just dump that on you, we can hide things like a needle in a hey stack.

John spent significant work, had I staff spent significant work making sure that not only the numbers we put out there are accurate but hope they're relevant and useful to you.

We cannot tell you how to make judgments.

That's up to you to do.

As the company that's growing rapidly over ten fold in size, we have always known that one of our key business risks was losing control of the numbers.

Therefore we focus on these issues from the beginning and have tried to build great core competencies in our accounting shops.

Invest heavily ahead of the growth and use systems and skills when many times by the way even shareholders ask questions, why it are we spending so much doing all this.

We did it so we wouldn't have the kinds of problems you see today.

It's not an area where we've ever taken short^cut.

We have a strong audit committee has has been meeting regularly 8 times a year for many years.

It is composed of three independent directors who are financially sophisticated and experienced business people.

They have offered us great support in keeping us focused on the right issues.

We also have a good internal audit function that reports to the audit committee.

Our board is composed of 10 members only two from current management, John and I. One is our ex-CFO.

The rest are experienced business people and many have a significant equity holding in Iron Mountain that was not created through stock option grants but rather through the investment of capital.

As a group they're significant shareholders.

They hold us to a high standard and are clearly independent in their judgment and their actions.

Last on the subject of corporate governance, let me speak about our use of stock options.

I've said earlier that I support clarified accounting rules, but for us stock options in general we don't believe [inaudible] and I'll tell you why.

We believe they should be correctly beinged for as a business expense.

We also believe all companies should do it the same way for comparability.

Until a definitive position is adopted to give us all guidance, we will starting with the filing of our 10(q) for this quarter add to our disclosure each quarter the same information that we have historically reported annually and accordance with FAS 123 which shows the impact on earnings on the stock option expense use black mode he will for valuation.

This will allow shareholders to understand the impact on our earns of our option grants and make their judgment as to relevancy. for exam P, for the year to date this year basically the additional expense would have been $1.7 million and this is 1 percent of our EBITDA and 5 percent of our earnings per share.

As far as our philosophy for using options as a compensation tool, I also want to share my views.

First, I'm totally in favor of it.

When used correctly I believe that options are a good way to reward employees for focusing on building shareholder value. the tripped options is using them correctly.

Where we differ from most companies is our approach.

It starts with the fact that I as a CEO do not currently hold nor take any options.

That is partly because whether we came public I had already earned a significant equity stake in the company both through options held for 15 years and by investing personal capital.

I saw no reason or me to take more.

That allows me the luxury of not being conflicted when I think about using options as part of our reward system.

It's not a zero sum game between me and the rest of the employees or me and the shareholders.

And I being a shareholder feel that I can more fairly represent the shareholders and my by the way, interest.

I have spent a significant amount of time trying to understand options as a compensation tool.

It's a complicated subject, one by the way that I don't find many people do understand as an aside, I said on a few board.

It amazees me even sophisticated venture capitalists think about options.

It's just a candy store in a variety of ways. to me it's a financial tool.

It is money, it is real money, and it's meaningful to our employees, meaningful to shareholders.

But it's complicated even after a lot of study.

I am no expert.

However, we deal with options as part of our compensation system and we constantly monitor the competitive market for all of our compensation tools, whether they be cash, base salaries, bonuses or options to make sure we reward our people correctly.

I think we've done this reasonably well.

As of year-end our option pool of stock reserve for grant is six and a half percent of the total, and about of that about 70 percent has been granted about 30 percent roughly is still available to be granted.

I am reinforced in my view that we have done well by recent analysis published by an investment house that compared the potential earnings impact of options if they were counted as expense for 34 business services companies.

Iron Mountain was ranked as one of the top three companies among the 34 in our use of options.

We achieved this partly by what we believe is a fair balance of shale sharing the rewards with our employ tease and partly because as the CEO I am not consuming the lion's share of the option pool as in the case of some companies.

So some of the good results come from good execution and some from the luck of the circumstance.

Regardless of the path that other companies take, I see no reason for us to fix something that is not broken.

We plan to continue stock options as part our reward system and we will ten to enhance our reporting where useful and of course we will conform to any you standards that is set in the future.

I hope in this in my comments I've answered any questions that you may have had.

I do welcome your input on these subjects as well as any other that you will that you feel will be important to you as a stakeholder in iron mountain so please contact me or any way you feel comfortable doing so.

Having done that, I'd like to now ask the operator to open it up for questions and answers. 11:52:19

Today's will be conducted electronically.

If you'd like to ask a question you may do so by pressing the star key followed by the digit 1 on your touch-tone telephone.

Once again that is star 1 for a question.

We'll first go to Arnie Irschner [phonetic] with CJS Securities.

I guess without letting Richard get wild here, I assume you plan to sign the oath that your statements are clear.

First is we are not required to do so.

We didn't hit the size targets.

We thought about it, but no, we don't plan to do that.

We stand by our financial disclosure we've already made.

We signed the 10(k) so we basically think we have done it.

We keep a lot of focus on what we're doing.

And we don't see any reason why, quite frankly, this is an interim kind of thing. and as far as I can tell it's superseded by the laws signed yesterday and of course we will sign those certifications that come out of that.

Again, you covered almost all my questions in pretty good detail, but one thing I think you didn't comment on is creep of your existing clients.

Arnie, that hasn't changed.

It's still right around 4 percent.

We think we've seen stabilization of the incoming rate. the gross new additions seems to be stabilizing around 11 percent.

So we're keeping our eye on it, but no meaningful change from last report.

And last call you commented at length about your sales force and the ability they had of adding new clients.

Can you expand on that this quarter?

Yeah, give me a second.

Let me find it.

Your question was how many accounts do we have basically?

As I said last quarter was a record for you.

Actually this quarter I'm looking at one, two, three, three years and two quarters worth of data and scan ag crosses top it's the highest number on there.

It was more than last quarter. last quarter was - we're having business and they're doing pretty well but it will be a lodge time before you see it coming through the statements.

Again, congratulations on the great performance in the tough environment.

Thanks.

Next question is from David Gold, Sidony and Company [phonetic].

Hi, good morning.

Just quickly, curious if you could comment a little bit on real estate utilization and any changes there during the quarter?

Yeah.

Actually it's picked up to about 80 percent.

We're in a very active period of completing in some new bouts of buildings and whatnot.

So it's moving in the right direction.

Okay, great. and then Richard, it looks to me like you've added about 50 salespeople during the quarter is that about right?

No, I think our total head count net is up about two, I think.

Let me make sure to look at that.

No, I said it was up two.

Worldwide it is up two worldwide. in North America.

North America it's up about 5.

5, yep.

I must have been looking.

Have you seen [inaudible] strength or weakness in any of the overseas markets that would be notable?

Europe is doing well, as it has been and continues to do so.

Argentina is a mess and Brazil is worrisome in that there's, you know, an election coming up and a lot of concern about which way it's going to go and what that's going to mean in to inflation and currencies and things like that which is calling some price pressure in just a variety of mixed-matched.

Mexico and Europe are the bright spots.

South America is struggling and Canada has always looked like the U.S. in terms of growth [inaudible].

Gotcha.

Very good.

Thanks a lot and congratulations.

Thanks.

Next question comes from Amanda Temper [phonetic], J.P. Morgan.

Hi, good morning.

I guess it's almost afternoon now.

I wanted to ask a couple questions on the digital side which it sounds like the numbers are low, the growth is exciting in these early days.

And you said you have 100 customers and the pipeline looks good.

Can you comment at all on the pipeline and Richard, given the increasing confidence you have, at what point would you maybe be a little more confident to say that the multi billion super up side opportunity might actually be a reality?

Well, I can answer that a variety of ways. [inaudible] the closer we really believe it's a reality, [inaudible].

Can't tell you about it for competitive reasons.

You may never hear me declare victory until I've got the money in the bank.

In term of the pipeline, a number of accounts in the pipeline is up about 39 percent over last quarter and the revenue opportunity that we're talking about is up about 20 percent over last quarter.

You know, so like I say, we're feeling better about it, but look, it's - what will happen here is if we see revenue, we will spend more money on salespeople and chase it.

So it's not going to hit our bottom line.

What we're going to do is try to keep our net spend rate within a reasonable level basically.

Build the business.

But, Amanda, we're pursuing a set of qualified leads, the total is about 500 prospects, potential customers.

And our rate of generation of proposals is growing very robust.

Ask what about the conversion?

I guess it's probably too early to talk about that.

Amanda, we've got statistics, but it's too early to quote.

You share it on this form.

Okay.

And I probably wouldn't tell you any^way.

Of course.

It's cost us a lot of money for what we're learning here and I'm not sure [inaudible] a better way.

That's fine.

On the cross sell part of the digital which is interesting, you said you got 1.2 million in the quarter on your - on the physical side of your business.

We didn't recognize the revenue. the contracts we signed will generate that over the next couple quarters.

Sure, okay.

Sorry.

Now, that is that in the organic growth, the 9 percent and over 9 percent in the back half that you're looking, or is that kind of up said grave I that we may expect to see over time?

Well, -

I know it's small, but as it grows it could be bigger.

Over time, yes, it will help our organic growth rate, but some of it is storage, physical item and some of it is additional kinds of service, labor base service programs.

But to that question as well.

To that question as well, the $300,000 or so of revenue we enjoyed from pure digital services in this quarter does not enter into our internal growth calculations.

Well, right, right.

Just housekeeping, you said you had 4 percent crease in the quarter, about total internal growth of 9 percent.

Could you help me fill in roughly what you got in price and what was in new sales to get you from the 4 to the 9?

Yeah.

That's since we have 6 P and L, 6 or 7 danger P and L units around the world, that's not a simple question.

But suffice it to say that in the box business in North America, four Crete, a little less than three new sales and some around 1 percent in price yielded something, you know, yielded growth for that business unit between 7 and 8, and then most of our other major business units are enjoying growth rates are above that, so it averaged it up to 9.

Okay.

Okay, great.

Thank you very much.

You're welcome.

Next question comes from Alexi [inaudible] with Bear Stearns.

Great.

Just a couple questions if I may, just from a housekeeping perspective.

Where are accounts payable for the quarter and how do you see working capital trending for the balance of the year and then I've got a couple follow-ups.

Accounts payable are actually down for the quarter for reasons I don't yet fully understand, probably some lumpy large invoices that moved between periods.

We're looking for numbers while he's thinking.

Maybe I should go on to the next question.

Go ahead while we find the numbers.

Also just on the services side, if you can give us a better sense as to really what's driving the greater share obviously of total revenue.

I mean, do you see that really accelerating over the next couple quarters?

You mean service growing faster than storage?

Yes.

I think that's a gradual long term trend, because what happens is as customers - there's a variety.

Some of them is as we penetrate them further they send you more active records, in other words newer records which are more active and some of it has to do with the more we cross sell and we start to add even more value to our customers, the more they pay us to do additional service things and, you know, add value to the program, not just storing item. and so we think we can enhance our revenue growth rate. and even by the way, service is growing faster than storage in our comp services line is really pretty sluggish.

When the economy comes back, comp services line could easily double or better.

I mean we could see quarters where comp services could be 12, 15 percent and it's running 5.6 or something like that.

That's only 14 percent of revenue, but when you add 10 points, 10 percentage points on 14 percent of revenue you get 1.4 percent total growth.

It could be significant to us.

In terms of debt leverage, I mean that seems to be coming down quite nicely, you know, debt to EBITDA.

I mean chances are you'll probably be in the three times unit before long.

You've talked about your range between power and a half and five and a half.

I mean, do you see it at some point operating somewhere in the three times and is this?

And also related to that question a good 85 percent of your capex has historically been success based which would allow you to deliver very rapidly if need be.

Does that still hold?

Is that something in the unlikely event that you had to deliver rapidly you could still do -

Absolutely.

It's not only could we meaningfully - to put the business in maintenance mode with just cash for the reason you say, as well as if you weren't managing for growth, we would have far less investment through the P and L and revenue generation.

So the business and maintenance mode would generate impressive levels of precash flow.

As regards our maintenance of leverage ratio, that's a high class problem in our view.

If we perform as we expect without change in our financing strategy, we would deliver meaningfully. and while we continue to contemplate what actions we would take to maximize shareholder value, we would want to make it happen first and then we'll react to it second.

Thank you very much.

You're welcome.

Next question comes from Andrew Stennerman [phonetic] with Bear Stearns.

Hi, guys.

Great job on the quarter and outlook.

Could you give us a quick update on paper prices and how it affects your business and sort of how much can it help us going forward?

Yeah.

Last year paper prices seemed to hit a Nateer at about $75 a ton.

They've prepped up over the course of the last six months to their current levels around 90 bucks a ton. and every $10 in paper price to us is roughly $1.5 million of revenue and EBITDA.

In the ten year average is about $110 a ton.

Thanks a lot.

You're welcome.

Greg?

Yes.

I'm sorry.

And we next go to Chris Madison with Mass Capital Management.

Hi, guys.

Congratulations on a solid quarter.

I'm trying to build just a model back here on the envelope.

You mentioned the level of 200 change in million.

In your estimates for future growth, when does that [inaudible] sort of go away?

You'll be using it pretty quickly, won't you?

We expect to be di minimis cash income taxpayers for the next four to five years.

That's how long it lasts?

Yes because we're still adding access to the business that are necessary to fuel the growing. and the tax timing of those depreciation of those assets is faster obviously than gap. and so.

So the mismatch benefit.

So as I look through the income statement and the cash statement for this quarter I know this is just in isolation, it looks like you literally take no [inaudible] add back would be even more than you account for in the income statement. you pay no income taxes to the government, then?

That's true.

Federal. and for your foreseeable next three or four years that NOL will be plenty, you'll never be a cash taxpayer?

As you can see from our K over the last few years, our cash tax has ranged between 2 and $5 million a year.

Some of that is foreign tax.

Sure, di minimis compared 0 your operating income.

Correct.

Just inability to perfectly tune your infrastructure to bring your tax to zero.

We have franchise taxes, overseas tax he.

That's I nice benefit because you're a large operating income generator.

You pay no tax.

Okay.

That clarifies.

For the 42 million of core capex -

43 actually.

43 of cap core exfor the quarter I know you do this N K but just for the quarter can you break it down just the major components, top three or four components?

Yeah, it's first of all, there's - for the quarter it was just a couple million dollars of real estate which was a small building or land acquisition. the other 41 million, 13 million is IT.

That's a heavy quarter for us.

We actually took advantage of some deals and accelerated some hardware spending.

We're more likely to run about 10 million-and-a-quarter there going forward. the bulk of the 26 million is storage systems, and that includes shelving systems and other building improvements that take a generic building shell and make it appropriate for our usage such as security systems and fire.

So it's 43 that you consider core, that you'll continue to grow the business but that number should remain nominally about constant, and that's where you get to significant free cash flow generator even with growth?

That's correct.

Because within those numbers are - within those numbers, particularly in IT and storage systems, our investments in restructuring acquisitions we made were approaching the sunset of those restructuring events and therefore that will come out of the numbers and that's what gives us the confidence to project, you know, capital over the next two to three years being in the roughly the same trading range as it has been last year.

So an '03 capex number, you'll get at 175 to 200 again even the low end of that range?

At this point there is a $10 million tail on the acquisition restructuring into that period, and I guess I would say 157 to 200.

Is a fair range?

Commentary on what the range would be.

It's not going to be like 50 million up or down way wore the other from that number.

That's right.

Ask what about networking capital investment at this 8 to 10 percent intrinsic growth rate?

Historically we have not consumed working capital in part as we grow our business, in part, because the - the majority of our service revenue is built in advance.

Although this is [inaudible] a company that is growing through acquisitions and whatnot.

It is does president easily yield to analysis and we're continuing to study it.

I don't think we're a meaningful consumer of work work capital.

And you have no [inaudible] so your only relative cash use is our cash interest at about 130?

Yeah.

Well, cash, whatever our gap interest is for the year, cash interest is about 5 million less than gap interest.

Yeah.

So 125, 130, 200 capex.

So for you to generate actual free cash flow it's 330 is about your break even on a cash basis?

Of what people call EBITDA?

That's correct.

About 330.

So if you go from that range, you are now to 10 percent of above that next year with no additional investment that should all drop to the bottom line?

That's the theory.

Okay.

So the capex - okay.

I'm just trying to figure out because debtex went up - what's confusing debtex you went up 30 million this quarter, didn't it?

Net debt?

Yes.

I don't have that number.

How much -

30 - I'm just taking it right off the press release.

I'm trying to net back your capex number against the adjusted EBITDA number you gave net of your capex and your interest and come up with - generating 10 million cash this quarter, but that came up 30.

There is also some purchase reserve spending associated with [Capex] he the restructuring of acquisitions that runs through the balance sheet to the equity count as opposed through the P and L.

Inaudible]

I'd be happen happy to drill this further.

I don't want to take -

We've been on for an hour and 10 minutes.

Believe me.

Could I follow-up with you on that later?

Otherwise my model doesn't net.

Be happy to.

Thank you: Next.

Next go to Harry Kalligan [phonetic] with Goldman Sachs.

Good morning. [Inaudible] your accretence [phonetic] [inaudible] I know we've been on a long time.

Just on Europe, we were wondering if you could give us an update on profitability there if it's picking up from the 19 percent EBITDA margins you were talking about in the first quarter and also to plans for systems integration there, what kind of time period we should think about?

And then secondly just for clay if I clarification if you could give us cash flow from operations and cash selector investing [inaudible]?

That's because our funds flow statement isn't perfected.

There's a lot of work to do to take foreign currency into account, whatnot.

So it is not final in our shop. with regard to Europe, the Q2 margins were roughly the same as Q1, but that is up so they're 18, 19 percent.

That is up meaningfully from last year.

But we are actually this quarter bringing on line a very large, very efficient new building in London that will, as part of a complex that will eventually hold 8 million cartons and it has - it's a U.S. style building with U.S. style economics and it is will be our flagship in London.

As a result we're going to take a red burn that could cause our margins to be flat to maybe slightly down in the near term, but we're laying the investment in place by bringing that building on to see the margins into the mid 20s within the next two or three years.

Okay.

Sorry.

Are the systems, is that consistent integration process also underway now?

You mentioned that before.

Yep.

I think - I've forgotten, but I think they're targeted - it's either for December or January, February.

Actually we're running [inaudible] in London but we're running two system.

So it's to put them together.

They're targeted to get that done.

And I think before the year-end we're going to do Germany and I think we're going to do Spain.

All within balance of this year and maybe a little slop over to next year then it will be done.

Great.

Thanks.

Uh-huh.

Next go to David Swarey [phonetic] with Merrill Lynch.

David Moran [phonetic], Merrill Lynch.

Hey, David.

John, how are you going guys?

UNKNOWN SPEAKER:

Listen good job on another solid quarter.

Couple of quick questions.

I can't believe it.

You got no acquisitions in the pipeline?

We didn't say we have none in the pipeline. [inaudible].

But look, we're not aggressively out seeking acquisitions.

We're buying companies that make sense.

Right.

And we're not out shaking the trees that heavily, and we're responding to the market a little bit.

So we're not driven to have to buy companies.

We buy companies that make sense.

If we're to look, though, is Europe still more likely than Latin America for the next purchase, or are we still building the [inaudible] business?

Still building strategy business in the U.S., still looking for a few good deals in Europe.

We're cautious, cautious in Latin America.

May be something here and there, but cautious down there.

John, I really appreciate you mentioning synthetic leases.

There is about been some noise around that.

Can you talk to maybe worst case scenario say you bring all that on the books, it's really not a meaningful event given the credits to the company, rent talking about [inaudible] interest expense increase, marginal, you know, increase in leverage, but you'd also be putting assets on the books as well, correct?

Right. by the way, you should know that our senior creditors which are the source of the vast majority of this, have committed a total of $200 million.

We've undergone 175 and by the end of the year we'll draw in the 200.

We assume at the end of that source of capital for us, but if we put it on the books, what happens is debt goes up by that amount.

Operating rent becomes interest dollar for dollar.

Right.

So no change to cash flow. and then what enters our P and L for the first time is depreciation of those assets which would be a 3 sent per share event. [inaudible] webcast cut off]

Leverage ratio as I said earlier would increase by about 50 basis points from our current 4.6 times to 5.1.

Yeah, I've got you [inaudible] for by the end of year if you did it.

That's today. the end of the year it should be level.

You need to know that this has always been treated these leases have always been treated as debt under our senior credit covenants.

And the rating agencies capitalize all these obligations, so no surprises there. and we always look at our bond ratio with this Boeing ways.

We're never going to wake up and be surprised if there's a FAS rule change.

It sounds great. and just last question, the safe keeper plus, president operating leverage getting there, could you remind me, EBITDA margin targets 28, 30 percent still on the horizon?

30 percent by '06.

Thanks very much, gentlemen.

You're we will can.

Thompson with CNB C world markets.

Congratulations, guys.

Thanks.

A couple of things.

Now that you've got the systems integrated with Pierce-Leahey, can you describe I guess two things, what sort of products you could develop that you could provide to your clients to give them better control over the boxes they store with you, you know, you mentioned better controls risk. and then your use of a system to give you maybe better utilization of Europe capacity, unused capacity in your warehouses and your transportation network?

Well, I'll take them backwards in reverse order.

In terms of utilization, absolutely.

Before you convert a system, if you're running two systems platform in the same city you're running two businesses and space is not fungible on two system.

Putting all inventories and customer in one system you can create more fungible space create more utilization.

Same thing on [inaudible] dispatching and transportation network.

We didn't - this wasn't a big bang that we turned it all on this quarter.

We've been rolling through and therefore we've been driving margins up slowly, you know, but steadily.

What you're seeing is the completion of that and you're seeing starting to dig a little deeper into some things.

In terms of customer value, there's a ton of things.

Some I'll tell you about and some I won't for competitive reasons.

But it starts with the fact that we are the only company that can provide a single point of contact, provide a single database for customers on a global basis. for that matter in the U.S. basis but we can do it on a global basis, to manage their inventory and manage their processes and really create a process driven records management system rather than just [Inaudible [T everybody to do what they want to do. and that's real valuable.

If you study hard the lawsuits and the Anderson Enrons and all that sort of stuff you will come to see the issues are not maybe they did something wrong or didn't do anything wrong, but they didn't do things consistently.

Records may have been proven to be reliable in the eyes of the court has to be consistently applied and you cannot consistently apply something if you're dealing with dozens of vendors and dozens of databases and you don't know where you are, you don't have a good system driven process control.

So now that all the data is on one place we can deal with those issues for customers.

In addition to that, we are enhancing our web products and in fact we're working on a whole new web quarter it's going to come out in pieces.

We've had some customer focus groups who give us good excitement for what we're doing, but we're going to give them better search, better, just whole different ways of thinking about how they can access the data, how they can give it to us. and then after that we're going to enhance the control techniques that we understand and know about, allow them to put more system process in it.

So now that the basic theme is now that we've quit, focused on conversions, go back to focus on platform, focus on developing the products for customers.

We've had a pin up demand among ourselves of things we knew we think do, but until you have one database it didn't matter. and so we really focus on getting that out of the way now we're going to focus on driving other stuff. and then it really goes from there across to the ability to deal with your programs that are multi media bases, multiple location bases and to control what you're doing.

All this towards saving customers Monday and giving more disciplined process and get better retention management which gives them better risk management and risk management is the big money in a bad records management program.

And I would tell you that a bad records management program, and we are hearing this from our customers, it is a bit of a surrogate or bad corporate ethics.

You just don't want to get caught having your records destroyed incorrectly at a wrong time and so forth.

Okay.

Great.

Thanks.

Next question will come from Franco Tornelli [phonetic] with William Blair.

Hi, guys.

In the interest of time, I'll follow-up with you off line.

Thanks.

We'll next go to Edward Hatareno [phonetic] with Blaylock [phonetic].

Good morning.

One quick question.

On interest expense it seems with acquisitions minimal and level capex debts sort of flattens out and goes down and interest expense follows?

That's right.

Thanks very much.

You're welcome.

Thanks.

Next go to Eric sell with ethic capital.

Hi.

Over the long run, as you see, you know, invested capital sort of flattening out, how do you see your ROI C after tax assuming that L L's burn off?

What's your target for return of invested capital five, six years out?

What's your calculation metric?

Are you talking about earnings divided by capital, are you talk cash to cash?

Cash to cash ultimately.

I just want to look at EBITDA margin times 1, whatever amount of tax rate. and then you can net out the tax shield from the interest.

We should take that off line because we haven't done sufficient thinking of it along the lines that you're -

What you calculated is not the way we do would do it.

We'd be happy to do it with you.

Secondly on the cash flow, where do you see free cash flow operatinging minus capex being this year and then next year as sort of come out to close to break even this year 60 million next.

Is that close to right?

I think break even this year is right and I think you're high.

Next year although we haven't issued guidance for next year, we'll perfect our view of that between now and/or our November investor day and speak to that issue.

Okay.

Thanks.

And our final question, Gary Brode [phonetic] with Roman Capital.

Just a real quick question regarding all the free cash flow that you were talking about since you're not going to be increasing your capex so much.

At what point would you consider investing some of that free cash flow and stock buy back?

We would consider doing anything that we think makes good shareholder value over the long term, but I would not expect that you'd see us buying stock in the next year or two.

But you never can tell.

Okay.

But some of that has more to do with our current financing structure and covenants how much we could or could not do. for next year we'll plan to look at it.

Thank you.

Yep.

No further questions at this time.

I'd like to turn the conference back to Richard Reese.

All right.

Thank you and it's been a long turn, so I'll get real quick.

As we said in the beginning the business is performinging as we forecasted and we are focused on the things we can control and we think we are - we can continue to perform as we are forecasting and frankly pretty optimistic about our business in total.

I would tell you that John and I will be presenting next week actually, August 7th, in Boston at Adams, Harkness and Hill, 22nd Annual Summer Seminar at the Marriott Long Wharf Hotel in Boston.

At 5 o'clock on August the seventh and just to remind you that Iron Mountain investor day will be held this year on November 21st in New York City and you can watch for your invitation if you are interested in coming or not on our database, please contact us so we can make sure to get you an invitation.

We do appreciate your continued support of shareholders.

As I try to say in our corporate governance section just a little bit, we will continue to try to do what we think is best in term of all of our shareholders as a group collectively, and we're going to run this business for good economics and for the benefit of all stakeholders which are our customers, shareholders and our employees.

We recognize that the market is a little crazy out there.

We're not stupid nor have our head in the sand.

But we don't plan to be forced by irrational behavior of others to do irrational things ourselves.

We believe we have acted rationally.

If you disagree with that, we would love to know it.

But we certainly can make mistakes, but we try not to do it in an irrational fashion and we're going to continue to behave in that way.

We think our business is going to run pretty good and we've had a pretty good summer, it's going to get better.

So thank you very much.

This does conclude today's Iron Mountain second quarter 2002 conference call. Thank you again for your participation.