鐵山公司 (IRM) 2007 Q4 法說會逐字稿

Mr.

Golden, you may proceed.

[Audio begins in progress] this call each year focus on the year of 2007 rather than the quarter.

Brian will give you in-depth detail both on the year and the quarter.

But I thought I would review for you, just try to put some things in context.

And then, after Brian goes through the details, I will come back and have a few personal comments on the announcement we made about the shifts in the roles within the company.

So let's get started and talk about the year.

Did you know -- hopefully, you have seen the press releases and you've seen that 2007 was a strong year for us both in revenue and OIBDA growth.

Revenue up 16% and that was driven by internal growth of 10% at the top hinge of our forecasted range, plus a very strong acquisition year, which I will comment more about a little later.

In addition to that, we had strong service growth revenue at 10 -- 12% internal growth..

And that was a combination as it has been often lately of strong complementary services in the project space as well as, of course, increasing recycled paper prices from our shredding business.

But the complementary service that I want to remind you does swing around.

It typically represents about 13% of our revenue mix historically and it can move up and down.

You will see reflected in our guidance for 2008, a little slower complementary service year that is primarily driven off of high comps we are coming off of, and Brian again will give you those details.

We' re not sending any signals about the business relative to the to the coming year performance.

And I think the message you should read in our guidance in what we are today is this business is performing well and it is business as usual going into '08.

It's just the way we see it right now.

Our OIBDA growth was 15% for the year, excluding some one-time gains.

It was a good year of operations.

We completed about 20 -- not about 20 acquisitions or 20 deals at nearly half a billion dollars.

This was a very high year for us in acquisition spend.

And I do not believe that we will spend that amount of money in '08.

We don't see that in our pipeline or in our thoughts in any form or fashion.

Time will tell, but we don't see that coming.

We did make some positive strides in capital efficiency in the business, which is one of our long-term goals.

And Cap Ex efficiency, that is capital expenditures as a percentage of revenue, was increased from 15.2% or decreased to -- excuse me, went from 15.8% in '06 to 15.2% in '07.

So we are making strides on all fronts frankly in the business.

Our balance sheet remained strong.

We've put in this year a global treasury program which gave us some increased flexibility in how we borrow money and where we're moving around, as well as lowered our total lending cost.

We also exercised in, as you know, a bad credit market.

Our $300 million accordion feature of our senior credit line in November on virtually the same terms as we have had refinanced in last April, that leaves us in a very good position.

We have about a little under half a billion dollars of availability under our capacity of our lines and no significant debt maturities until 2012.

So our balance sheet is strong, as you know.

And I want to remind everybody we do want to leveraged business.

We intend to maintain a leveraged business.

And it is all about managing prudent leverage currently, that is our leverage ratio as all in is about four and a half times the total debit -- debt to OIBDA.

So we are well positioned to fund our strategies as we see the opportunities and we drive our agenda going forward.

So Iron Mountain is in a good position.

We had a great year financially and we are really well positioned for a good year here in 2008.

But we did a lot more than just made the bottom line.

As we told you in Investor Day, we are committed to some long-term growth revenue and OIBDA growth metrics which we will repeat over and over.

We operated within those range.

We will expect to operate in those range year-in and year-out.

That does not mean quarter-in and quarter-out, but year-in and year-out we'd expect to do that.

But we also expect to continue to build our business strategically.

And I am very pleased by the results in terms strategic development throughout the year.

So let me go through some of that to give you a sense of how the business has changed and postured.

For many that have heard me speak and have followed the company a long time until I am thrown down until I am blue in the face about a three-phase strategy, I am sure many of you can repeat it better than I can.

And I am not going to repeat it in depth right now, except to tell you that -- and to remind those that first phase, we used acquisition to build of products and markets; the second phase, we built a world-class selling organization that is the envy of many, to go out and sell new products or sell to those customers and penetrate them.

And of course, we talked at length for some years about moving in the capitalization phase and I can say without exception -- except well -- without -- except for minor exceptions, places like China and parts of Asia, we are in the capitalization phase pretty much everywhere in the world.

And what that means is really a different approach to business where we maximize on our core businesses.

And that is penetration as well as efficiency and driving into where we spend our money, how we invest our money and driving deeper into customers as well a driving efficiency in our operation.

And then of course, global expansion.

Take that core opportunity and expand our global footprint.

We are -- we have a broad footprint of about 38 countries around the globe.

And we continue to be somewhat strategic and somewhat opportunistic as how we enter countries around the globe, but truly, we are getting down to the short list now.

As I said, China before we've got small footprints in four cities.

We'll continue to add footprints.

But right now, they are not costing us a lot of money.

It's a long line -- laying long lines for the future.

It will be a tremendous market in the long term.

But our opportunity is set in India right now that is right in front of us and doing well.

And opportunities set in other parts of of the world and still in Europe is doing well for us.

So, we feel good about what we have done there.

In this other phase -- in addition to capitalizing in this last phase of capitalization phase and difference in maximizing the core and expanding on the core, it is about now new services, laying out the lines for the long term.

As you know, we started an additional new business which is one of our main new services, but it is main new service.

And for that reason, we call it out as a separate line of business.

But I should remind you we have other new services that are doing well for years.

Our shredding business is and rocking and rolling.

Our DMS business is rocking and rolling.

So we've laid out lots of opportunity sets, and they are all starting to hum and perform on all cylinders for us.

And of course, our additional business maintains leadership in the software and the service arm.

In this case, storage as a service business, a model that we feel very good about, a model that is attracting more competitors which is validating the investments we have been making a long time.

And there is a reason why they are coming in, it is because it is a great market opportunity and we are pleased that we have started early.

We've learned a lot and we're doing well there.

So let's talk a bit about that.

Maximizing the core, as I've said, solid leadership in North American Physical, 13% revenue and OIBDA growth while integrating 10 acquisitions.

And that sounds easy given that for those tracks that we have done, 20 or so a year for a long time, but one of those tens was ArchivesOne.

ArchivesOne was the largest independent records management company left outside of Iron Mountain.

And that was an overlap for 17 cities.

The work required to deliver the margins that we did and deliver the revenue growth we did, and to integrate 17 cities over this is a great job.

Also, we had several new entrants.

Well, I can speak about the market.

We see in the North American market, there are several new entrants coming in as a second round of of roll-ups coming.

There is at least four groups of large capital that were taking a run and trying to roll up the business which we think is a good thing.

That will frankly flush out some more opportunities.

There are not though any large targets, but there a places we will continue to invest money.

We remain a buyer.

We will continue to invest money where we see good returns.

And in many cases, we have the upper hand in the transaction, the ability to integrate, the ability to draw up more value.

And in some cases, we don't.

So we are going to be prudent and smart about how we invest money.

But we are open for business in North America and we want to make sure the market out there hears and understands that.

Internal growth in North America is solid at 9%.

It is all across the board.

We did really well.

Shredding, though, really helped drive us.

And they were in 19% in the quarter after a modest start in the year.

And that business, as we said, is doing well.

In fact, we have a shredding business that we have not been in.

We are on our -- starting into our eighth year in this business.

And it is worldwide now.

It is about a quarter of a billion dollars and it is growing very well honestly and very attractive margins and good returns.

We also had made significant investments in investing where the market is moving in our core physical businesses.

And that is about security and chain of custody.

In fact in 2007, we invested about $46 million of capital investment and about $5 million to the Op Ex, improving the quality of what we do for customers, and really stepping up the gap between us and our competition.

This includes things like system modernization, which is an ongoing process.

It will take some time, more transportation and productivity and engineering initiatives and so forth.

It improves quality of our services, improves quality of our security.

And a good part of that went into security, our new in-control transportation platform which hands us some competitive advantages over anybody out there.

So, all in all, North America is doing a great job.

They are not only maintaining good growth and good margin.

They are enhancing and improving their business.

And they are digging deeper and deeper.

And frankly, we've got a long way to go.

We -- there's lots opportunity in that business, both on the growth side as well as the margins side.

On these foot space expansion globally, it continues to work our international business.

It grew 25% on an internal growth rate of 12.

Latin America and Asia Pac both did well.

They are smaller businesses, although Latin America in their own eyes has just grown up to be beautiful business and they are just doing a super job down there.

And we continue to expand our presence in Continental Europe.

And we are not finished in Europe, but we are pretty much finished.

There's still a few cities that it will make sense for us to get in there.

In addition to that, it's not just about the footprint.

It's about building out a management team.

It's about building out people who can take that footprint and take it back to the strategy of maximizing on the core.

This would create and add to the core, and then you have to maximize in the core.

It is the cycle you have to go through.

We have made tremendous progress in that space.

And we like what we see going on in there.

We have some challenges.

It is not like the world is perfect in reality.

If it were, life would be too simple and other people would be doing this.

And we have some select challenges, particularly in the UK that have had great results.

But their storage growth rate is not where we like them to be.

Some are related to increased destructions and withdrawals.

Part of that is outside of our control and a normal phenomenon of what we've seen in the US, and that is some of our large financial services of companies, banks, and so forth go for a while of not doing any destructions.

And then, as they have put in place the compliance regime to really respond to the new world that they have to operate in, they they go back and do catch up.

By the way, just so you understand, that is not only a normal thing.

It is a thing we sell services, encourage people how to do that.

We have a consulting practice of teaching them.

And in certain cases, we stimulated a lot of this.

And so it's not something that we worry about.

It's, in effect, something we make money on every step of the way, both on the consulting side as well as it allows us to churn our asset base a little better.

And it's one of the things that will contribute to the increase on return on assets and so forth.

Volume growth continues to do well there, but it is not what we want it to be at this stage and we think we can make it work.

Looking forward to box growth rate, in the UK it is about 5%.

And that takes storage to about 9%.

On and off, we think we've got some upside there that we can work on.

We entered 11 new countries, I would say, this year.

And so we really did do a lot of footprint work.

I know you've heard about them.

But just review on what goes through all of them, a good number in Southeast Asia to some joint venture over there.

Through a joint venture, we went into Russia.

We started in Moscow.

We are now in Moscow and St.

Petersburg.

By the way, just a comment, and this is just a stupid American talking or I would say the ignorant American talking.

But when you look at some of those markets, when you look at cities in Russia and cities and China that the stupid American does not even know the name and you start looking at the market opportunity and the dynamics, it blows your mind.

The upside opportunity of laying these long lines over the long term is going to be phenomenal.

It just blows me away of what I see over there and when I see an opportunity now.

That is not going to happen in 2008.

Let's just be careful.

We are laying long lines.

And the good news is, through a joint venture structure, we are not investing significant capital.

We are able to lay long lines and we are going be there as that market evolves and be there to take advantage of it.

Other markets entered, Denmark, Turkey.

These came through joint ventures.

And then of course, acquisitions and some additional fold-ins and work in the UK, Italy , France, Ireland, and the Netherlands, increasing our presence and just building more scale in some of those markets.

And as you know, scale in Europe is on of the issues we've been working on.

Scale drives efficiency, efficiency drives margin, and so forth and so on and so, both to internal growth which is strong along Continental Europe, as well as do additional tuck-in acquisitions.

We are kind of investing to drive our returns up and make these even better businesses along the continent out there.

So far this year, we have done one shredding transaction in Australia as we expand our footprint in that business.

We today provide shredding in all of North America, some parts of South America, Australia, New Zealand, and the UK.

And we will continue to look for a targeted basis select market opportunities where it makes sense to enter.

It is not a business that will necessarily make sense in every part of the world because different parts of the world have a different perspective on the value of their information and whether they'll pay to have it shredded or not.

But where there is a value recognition and we see the opportunity, we will make that happen.

So a lot of work done.

And we are very pleased by what we see there.

Some work left to be done, but not big in footprint, but more now into maximizing on those businesses as we go.

Let me talk about the biggest new service offering that we have been working on some years.

And what the people just want to focus on, I am sure, is our digital business.

That segment had a very good year.

Revenue up 17%, no ordinary double.

It is free cash flow positive as a business, so it's already generating a slight amount of excess cash flow in and above what we are reinvesting back into it.

I'm not sure I'll always be able to say that in terms of what we invest in it year after year, but it will get increasingly more positive.

So it's a good strong business.

We've built some leadership and there's some attractive targeted segments.

And I stress the concept of targeted segments to remind those we are a storage and a service play, but we're not covering, we're not trying to do everything.

We are not all things to all people.

We are sticking to what we know, which is back-up and archives.

And that's something we have a precision of leadership of brand and expertise.

And we have an enormous amount of intellectual property with a significant number of patents in that space.

And we intend to leverage that intellectual property and knowledge as we go forward that it will give us advantages in that business.

Both our business -- frankly, if you look at all that business, there is three of them in it.

There is intellectual property management escrow business, there is the digital archive and there is the back-up business.

Back-up still seems -- is the one that leads the pack.

The archive business, we are making good progress on starting to commercialize.

We are not there yet and sort of our new technologies, but our old technology base continues to grow significantly.

And we've made great progress of reducing the cost of operations on that.

So we are pleased with the progress they are doing there.

We've driven scale in the business which, as many of you remember, was my goal.

I have said many times this will be a large market.

It will attract a large number of competitors, but the key is just getting to scale because once you get to scale, you can be profitable.

If we've reached scale, we've reached the profitability, and we can see ways to enhance our profitability.

We've been strengthening the team and particularly we've added some key people in the technology space and used a new chief technology officer who is a very experienced gentlemen who has got a real track record of building technology companies.

And we did a significant acquisition in our digital space last year with the company of Stratify.

I could talk for hours, but I won't, about what I believe is the upside and the real value we've got with Stratify.

But netted all out, it is intellectual property.

It is a team of very strong people led by Ramana Venkata and a lot of the people I won't name because it will take me hours.

A very strong footprint both in technology as well as process management both in the US and in India The ability to work 7/24 to solve customers' problems, where we increased the speed and reduced the cost and complexity of the eDiscovery which we hear from our customers is one of their largest problems and pain points.

And that is managing them makes their day.

So we're very excited about that and great to have them on the team.

Other new services that I've talked about that sometimes get lost, one of them is the Stratify which is the eDiscovery which fits into our digital space.

It broadens our total suite of discovery services.

We are probably the only vendor that can start with storing your information, physical and digital in fact, and then make sure that in a total unbroken chain of custody, that information is prepared for and discovered with the some of the best technology on the planet to do that, and lower your cost while you do it.

So we put that together with our physical business because discovery is a combination of integrating digital and physical information and bring it to be on a system where lawyers can work with it.

And we are pretty excited about that.

Other things we have done during the year is we bought a small technology company called Accutrac.

That brings us some technology in the records management space.

Frankly, it will help us avoid some investment we would have done ourselves.

And we are busy about integrating that in our platform and expanding on it.

We will invest more into it to make it a core part of our service offering.

Net of it, what it does is it gives us a greater tool chest to solving customer problems that links them tighter in with us in the records management space.

And we will build off of that and embed a lot more of our expertise.

And it gives us a vehicle to be able to charge for our expertise and get paid for that expertise, not just to give it away as part of our services and so forth.

We also did a transaction in the medical space.

Health care is one of our strongest verticals where we had a leadership, but we bought out a company by the name of RMS who has a -- who would create a fairly unique product model, business model that is an enhancement of our service offering But we saw what they were doing.

We thought it was creative.

We copied it, we liked it, and then we bought it.

It's just that simple.

Okay?

And in that, we've got a great team of people that enhanced us.

They have solution, here again without me going into great detail, that really gets deeper into the hospital and makes it a much deeper relationship.

It just is a much more holistic approach to solving a major set of problems with hospitals.

On the back of that, you will notice we recently announced a joint relationship with Hewlett Packard for our digital businesses.

This is a case now of marrying our medical space and expertise with our digital prowess with a partner with HP, and it goes like this.

HP has some tremendous technology in that space that is used to back up, create the disaster recovery copy and/or take offsite and archive, and you can actually get a two for one value proposition for a hospital and drain down or reduce their own site storage costs dramatically for their medical images archives.

For the layman that means CAT scans, MRIs, and so forth.

It is probably the fastest growing segment of digital data in the word.

It'd be a toss-up between that and probably e-mail.

But it's a huge market opportunity.

We are partners with HP and not using the technology, but it is a partnership in which we and the HP sales force will sell into this platform.

And we are the service providers.

So it's not the classic partnership where we buy their stuff and get to call it a partnership.

This is a much deeper and much stronger relationship.

And we are pretty excited about that.

We just started in the market.

We've got a good pipeline.

And I think we've got about two customers up and running.

So it's very early on.

Excited as I am about this, this is a storage and a service business.

What does that mean?

It's an annuity business.

That's the good news.

The bad news is it takes up a long time to ramp up revenue recognition.

Because in this business, once you do it, it just goes on forever.

And what we just added is a major leg.

And over time, we'll continue to add to the flywheel of the business.

And then last but not least is the DMS business, something we started internally within Iron Mountain about three or four years ago.

We've created it with dedicated leadership.

And then its focus on integrating and leveraging our expertise on the digital side, the physical side and finding the pain points for integration of two is important to our customer.

That's our competitive advantage, where we can make the two work together.

And we've created the platform.

We've invested in the technology.

In this case, we didn't have to invent it.

We can use a lot of the people's technologies, but we've built an infrastructure, we've built a knowledge set, and we've got a nice business that going well and a robust pipeline of opportunity set there.

So what does that mean for this year, for 2008?

Well, I won't go through the map because it all adds up in all kinds of ways.

But basically, the guidance we've put it forward and the same guidance we gave in Investor Day, adjusted for the Stratify acquisition.

It is guidance that delivers within our long-term objectives we've set forth.

And we expect to do that year in and year out.

We feel good about the year.

The question you might ask is how do we think of the economy.

We are not seeing it right now.

Historically, to remind those -- we might see it if there is a recession.

But historically, it usually would -- and service revenue is primarily and primarily in the complementary services space as customers have deferable projects.

It will also possibly hit us in some of our software sales space.

There are some things that we did that customers license software and complementary services can defer.

But what we are talking about would be an impact on our growth rate.

It would be relatively small.

That would be my forecast, if at all, and we are not yet seeing it.

And we feel strong about it that in our guidance we still believe that we will operate within the range that we are putting forth, that we have put forth, and we will put forth regardless of the economy.

That's our expectation as we sit today.

So we are and we remain a resilient business, but of course we are not immune.

And that's where we stand at the business.

It was a great year.

I appreciate the support of everybody.

I will speak more about the transition after Brian talks, but let me get off the stage and give it to Brian.

Thank

Thanks, Richard.

Good morning, everybody.

I am on page three, the agenda slide.

Just to start.

Q4 was a solid quarter for Iron Mountain as we finished the year in line with our long-term financial goals.

Our agenda today is going to begin with a focus of our Q4 and full year P&L results.

And as part of that review, we'll discuss the key drivers of the Q4 results within the context of our four-year performance.

We'll also go through cash flow performance, capital spending trends and our year-end debt position.

And I will conclude with an update of the preliminary 2008 guidance we provided in Investor Day last October and share our outlook for the first quarter.

Slide four highlights the key messages from today's review.

Q4 caps a solid year of financial performance for Iron Mountain.

For the full year, we had strong 16% revenue growth with gains across our portfolio, supported by 10% internal growth and benefits from our major acquisitions.

With drew a 14% OIBDA growth for the year, excluding gains on disposition of assets, comparable OIBDA grew 15%.

We also saw improved capital efficiency in 2007.

We're very pleased with this performance, which is on track with our long-term goals.

In terms of our performance in the quarter, we achieved strong revenue growth in Q4, above the high end of our guidance range.

Total revenue growth of 19% was supported by solid internal growth of 10%, including stronger than forecasted project revenues and favorable effects impacts.

Additionally, $3 million of revenue was contributed by our Stratify acquisition that closed in December.

This revenue was not included in our original guidance for Q4 or for the full year 2007.

For the quarter, OIBDA was within our forecasted range, as benefits from revenue upsize were offset by impacts from business mix and increased investments.

We were also impacted by year-end accruals for items such as workers' compensation, medical claims, payroll taxes, and incentive compensation, which cumulatively were about $5 million above our forecast.

In addition, the $2 million insurance gain we forecasted for the quarter was mostly offset by the write-off of some internally developed software assets following the Accutrac acquisition.

Let's move on looking at the details of our performance on slide five.

Slide five compares results for this quarter to Q4 of 2006.

Overall, we had another solid revenue quarter, supported by balanced growth across our key business units which drove the overall increase of 19%.

Our largest segment, North America Physical, posted 17% growth overall.

Internal revenue growth was solid at 9%, supported by increasing growth in our secure shredding business and continued strength in special project revenues.

Overall growth continues to benefit from the ArchivesOne and RMS acquisitions.

Our internal physical business was up 29% overall.

Internal growth was 13%, driven by high levels of complementary service revenue growth, including benefits from a large public sector contract which will be ending in 2008.

The international segment also benefited from acquisitions that are strengthening our global footprint and from favorable foreign exchange changes which together added 16% to revenue gains.

We also continued to make progress in expanding digital segment, supported by strong growth in storage revenues, particularly in PC and distributor server back up and from benefits from the addition of Stratify.

In Q4, these gains offset relatively lower software license sales compared to strong prior year levels and expected impacts this year from declining market demand for data restoration projects.

Revenue gains helped drive a solid 17% year-on-year improvement in gross profit.

Gross margins were off moderately for the quarter, compared to the same prior year period.

Key factors these low level of performance included business mix, as labor and transportation tends the services such as shredding and DMS are growing faster than storage and acquisitions.

SG&A growth was 20% in the quarter, up slightly versus prior year levels, at 28.9% of revenues.

Cost was driven by increased investment in the face of stronger revenue growth and the impact of higher compensation and benefit accruals noted earlier.

Included in OIBDA for Q4 of 2006 and Q4 of 2007 are net gains on the disposition of assets of $10 million and $1 million, respectively.

Excluding these gains from both years, OIBDA grew 15% year over year.

Depreciation was $61million and amortization was $8 million, slightly above expectations due to the Stratify acquisition, the finalization of purchase accounting for ArchivesOne and the acceleration of depreciation driven by certain planned building moves.

Operating income was $115 million for Q4 2007, flat to the prior year due to the increase in depreciation and amortization I just spoke of, and a $10 gain on asset sales reported in Q4 of '06 that were not repeated in 2007.

Slide six breaks down our overall revenue growth.

It shows internal growth by major service line, as well as the impact of acquisitions and foreign exchange which have added about 9% and 6% to our growth rates for the fourth quarter on full year, respectively.

Overall, we continue to drive strong internal revenue growth, up 10% for the quarter and the year.

ON a full-year basis, our core and total internal growth rates continue to track within our forecasted ranges.

Storage internal growth continues as expected with a slightly lower growth rate in Q4, impacted by somewhat softer than targeted performance in our UK business.

Core service remained strong, led by year-on-year improvements in our North America Physical segment, including higher growth rates in our shredding services revenues.

Complementary service continues to track above the high end of our range, which contributes to strong overall internal growth performance this quarter.

The key factors driving high complementary revenue growth are the continued strength in recycled paper prices and higher levels of special projects and activity in Q4 across key geographies.

In Europe, we realized about $25 million in revenues this year from two large public sector projects.

As one of these is complete and the other is winding down, this will set up some lapping challenges in 2008.

As we've noted in the past, these types of changes can lead to larger swings in complementary revenue performance year to year.

Further, it is our complementary revenue that is most likely to be impacted by a slowing economy as companies may look to cut costs by deferring or cancelling their discretionary special projects.

We continue to target solid complementary service growth from special projects, but given these factors, we expect growth rates on the front to moderate next year.

Moving on with a review of Q4 P&L performance, slide seven bridges our Q4 operating income to net income and EPS results.

Q4 results on these fronts were impacted by some select factors and comparisons to prior year one-time items.

As discussed, operating income for the quarter was flat at $115 million, impacted by comparisons to prior year results that included a $10 million gain on asset dispositions and increases in depreciation and amortization.

D&A grew $15 million versus prior levels in Q4, reflecting increased Cap Ex spending, the Stratify acquisition, the finalization of purchase accounting for ArchivesOne, and the acceleration of depreciation driven by planned building moves.

Our Q4 interest expense increased compared to Q4 2006 as expected, driven primarily by increased debt for acquisitions, most notable ArchivesOne, RMS, and Stratify.

Other expense was $6 million or $0.02 per share in Q4, primarily reflecting losses related to foreign exchange rate fluctuations as we mark our intercompany debt to market.

Net income and EPS growth were impacted by an effective tax rate that exceeded our structural tax rate by nearly 8 points.

As noted on our last call, our estimated structural tax rate for Q4 was approximately 37%.

We also noted that we would likely see continued volatility in effective tax rate relate to FX changes and other discrete items.

That was the case in Q4.

The entire increase in our effective tax rate over our structural tax rate this quarter was driven by the impact of foreign currency fluctuations during the quarter.

The FX impact to the effective tax rate decreased our EPS by about $0.03 per share.

Excluding impacts from discrete factors, we estimate our structural tax rate for 2008 to be approximately 36%.

Turning to slide eight, let's look at our full year performance.

You can see that in 2007, we posted strong results.

Overall balance growth across our key businesses and services lines, as well as favorable benefits from foreign exchange fluctuations this year supported strong midteens revenue and OIBDA gains.

Comparable OIBDA grew 15%, when excluding gains on asset dispositions which were $5.4 million in 2007 and $10 million in 2006.

Net income was up 19%, aided by a lower effective tax rate in 2007.

Through the implementation of our global treasury program, we lowered our structural rate to 37% in '07.

Our ETR was further reduced by benefits from FX changes and other discrete items which added about $0.07 EPS this year.

We are pleased with this performance which tracked with our strategic and financial goals for the year and is in line with our long-term objectives.

Let's shift now to reviewing drivers of our cash flow performance.

Slide nine summarizes our capital spending for the year.

It highlights our full year results compared to 2006 and our last outlook which was issued on our Q3 earnings call.

Our 2007 Cap Ex was $415 million, within our forecast range, including $46 million for real estate.

Consistent with our long-term financial goals, we drove improved efficiency in our overall Cap Ex spend, with Cap Ex as a percentage of revenues down moderately in 2007 to 15.2%.

Note that some of this efficiency is related to business mix as we continue to see strong growth in the new services which are less capital intensive that our core physical business.

This capital efficiency offsets the relatively lower margin characteristics of these services, resulting in attractive incremental returns on investment.

Our spending excluding real estate came in at $368 million, which was slightly over the top end of our projections.

This is due primarily to the acceleration of certain projects around year end, particularly with respect to racking and IT projects, including chain of custody and system modernization initiatives.

As a reminder, these amounts represent Cap Ex that was incurred and was accrued during the year.

Much of the Q4 Cap Ex was committed late in the quarter with actual cash payments scheduled to occur in the first quarter of 2008.

This factor benefited our 2007 cash flow which I'll speak to more in the next slide.

Slide 10 highlights our cash flow performance for the year compared to 2006.

For 2007, we generated $148 million of free cash flow before acquisitions and discretionary investments in real estate.

The year-on-year increase in cash flow reflects strong profit gains, approximately $33 million of insurance proceeds related to the London fire and relatively low cash paid for Cap Ex in Q4 due to timing impacts which resulted in a $60 million year-end Cap Ex equal balance.

As noted, these Cap Ex timing impacts will be reflected in our Q1 2008 cash flows.

Looking ahead to 2008, we expect free cash flow before acquisitions and discretionary investments in real estate to be approximately $25 to $75 million.

The major difference between the 2007 and 2008 free cash flow is Cap Ex.

Along with the 10% increase we're forecasting for 2008, we have the $60 million Cap Ex accrual I just spoke of being paid in Q1.

Additionally, we're forecasting a higher level of cash taxes in our '08 outlook.

We're becoming a federal taxpayer in 2008 as we've consumed virtually all of our NOLs.

For the year, we expect to pay approximately $50 million in cash taxes, compared to the $34 million we paid in 2007.

Keep in mind that free cash flee is best looked at on a full-year basis as the timing of certain cash events is not consistent throughout the year.

For example, the first quarter is historically our lowest cash flow quarter, will be impacted by the Cap Ex accrual and the payment of annual bonuses.

Now let's turn to slide seven to review our debt statistics.

In terms of our debt portfolio, we ended 2007 with solid progress across our key metrics as you can see in the slide.

Interest is down slightly to 7.4% and we're 75% fixed.

Consolidated leverage is at 4.5 times, within our target range of 4 to 5 times OIBDA.

Maturity is now at 7.3 years with no meaningful repayment obligations until 2012.

Our liquidity is also strong.

In November, we exercised the accordion feature embedded within our senior credit agreement.

As a result, we increased our available senior credit by $300 million, representing $190 million of additional capacity on a revolving credit facility and a $110 million of additional senior term loans.

As of December 31, 2007, we had more than $485 million of cash and availability under a revolving credit facility.

Now let's move to slide 13 which begins the discussion of our 2008 guidance.

Our performance objectives for 2008 were developed within the long-term financial framework we shared at Investor Day, shown here in the left hand chart.

Looking ahead to 2008, our guidance remains consistent with these goals, which were based around key themes.

First, we're biased for growth and intend to invest against the range of attractive growth opportunities we see for Iron Mountain.

Secondly, we're committed to driving consistently strong revenue in OIBDA gains as we advance our expansion strategy.

And finally, we will drive strong incremental returns on the investment, supported by improved capital efficiency over the next five years.

For 2008, we are targeting moderate gains in terms of capital spending as a percentage of revenues despite some significant play in investments and data center capacity.

The only significant change for our 2008 outlook is the addition of the Stratify acquisition that we closed last December.

As we noted in our last call, we expect Stratify to generate in the range of $40 million in revenues without being accretive to profits in 2008 due to the impact of acquisition immigration costs.

Let's now turn to slide 14 and take a closer look at our 2008 guidance.

Here you can see the current revenue and OIBDA growth ranges we are now expecting for 2008, compared to the rangers outlined at Investor Day.

Again, the only significant adjustment is the inclusion of the expected results of the Stratify acquisition.

Please note that OIBDA growth rates are adjusted for impacts from gains or losses on assets positions.

Our Cap Ex outlook in dollars is unchanged, as the impact of Cap Ex being accelerated into 2007 more that offset the additional Cap Ex associated with Stratify.

As a reminder, included in the 2008 outlook is approximately $20 million for expanded data center capacity to support the future growth of our digital business.

That's our Cap Ex outlook.

We are committed to driving performance in these ranges despite potential impacts from tougher economic conditions.

While we expect to weather an economic downturn better than most, we are not immune to the recessionary environment and we may see the effects of a slowing economy on some of our more discretionary revenue streams such as special projects and other ancillary services.

Let's move on to slide 15 and take a closer look at our revenue expectations.

The table on slide 15 shows our expectations for internal growth and total growth in 2008 including impacts from FX and acquisitions.

Overall, we are projecting revenue gains in the 10% to 13% range, supported by 7% to 9% internal growth.

We are targeting solid core revenue growth in 2008 in line with our 2007 performance and our long-term objectives.

We do expect lower growth in complementary services this year.

This outlook reflects difficult comparisons to 2007 with respect to special projects, particularly in North America and in Europe and recycled paper revenues as we expect the price to be more stable in 2008.

Note that the impact of the European public sector project lapping -- that issue alone is about 5 percentage points in our complementary services growth rate and nearly a point on our overall internal growth rate.

Despite these impacts, we're targeting a strong overall growth consistent with our long-term financial goals.

Let's look at these growth projections by business segment.

Slide 16 highlights our expectations for internal growth rates across the three business segments.

For our North America Physical business, we're expecting 2008 internal growth to be within the 7% to 9% range.

This outlook reflects consistent performance in core revenue growth, supported by continued strength in our shredding services business.

Offsetting these gains are difficult comps and complementary services, particularly special project and recycled paper revenues.

For international physical segment, we are projecting internal growth in the 6% to 8% range.

2007 was a good year in international, supported by high growth rates and complementary services, reflecting benefits from two large government projects.

As we have already discussed, one of these projects has ended and the other is ending shortly, thereby setting up lapping issues for the year.

Additionally, we are working to drive the UK's growth rates to more appropriate levels.

Finally, we are expecting to see improvement in the internal growth rate of our worldwide digital segment.

And digital data protection business continues to perform very well overall and we are looking for expansion in the growth rates of our digital archiving and intellectual property management services.

Moving on to slide 17, we can see how the growth ranges were driving towards translate into dollars for the full year as well as for Q1.

For the full year 2008, we are expecting revenues to be in the range of $3 billion to $3.08 billion, OIBDA to be in the range of $763 to $791 million, and CAp Ex to be between $440 and $480 million.

As noted, internal growth is expected to be between 7% and 9%.

Please note that our first quarter and full year guidance includes expectations for a $3 million charge on a planned asset disposition.

When considering the Q1 guidance, remember that in the first quarter we'll be feeling the dilutive impact of the Stratify acquisition and the other major acquisitions completed after the first quarter of 2007, primarily ArchivesOne, RMS, Accutrac, and [Avalier].

Q1 OIBDA will also be impacted by some carry-over impacts from investments initiated in the fourth quarter.

Note that OIBDA in the first quarter is historically impacted by a higher mix of labor and transportation intensive service revenues, seasonally higher energy costs, and a fully-loaded payroll taxes on exempted compensation expense.

Finally, on slide 18 we present our expectations for the full P&L below the OIBDA line for the full year 2008.

An important item to note is the tax rate.

We are expecting our structural tax rate to be 36% for 2008.

As we said earlier, we will likely see continued variability in the effective tax rate related to FX changes and other discrete items such as tax flow changes and changes to our tax reserves.

As discussed earlier, FX changes added about $0.07 per share to EPS in 2007.

We also saw $0.02 per share net benefit in 2007 from net gains and asset dispositions.

Our 2008 EPS guidance assumes no benefits from discrete tax items and as noted, assumes $3 million or $0.01 per share negative impact from a planned asset disposition charge in Q1.

Thanks and I will turn the call back over to Richard.

Thank you, Brian.

And before we go to questions, [Ian] and of course Bob is here with me.

We want to make just a couple of comments about the announcement as we exercise our succession plan with Iron Mountain.

First is a couple of key questions.

What is happening and why and why now?

And I will try to answer those very briefly.

What is happening is Tuesday night I informed the board that I thought it was the appropriate time that we exercise a a succession plan that we had built out over time.

And that plan would be that Bob would take on the role as President and Chief Executive Officer of the company, and I would move to the role of Executive Chairman.

The title of Executive Chairman now will speak to myself.

It is pretty easy to talk about what Bob is going to do and for everybody's clarity, he will run the company, not me.

But as the Executive Chairman, I will be a full time employee of the company.

I am not going anywhere until they throw me out and they haven't decided to do that yet.

But I wanted to focus my time -- and it is hard to be on the hot seat of the CEO and stay totally focused on the key issues that I think are important, that I think I have the most leverage at this stage of the company and this stage my career to focus on.

One of them is product.

And in that case, embracing and inculcating our products with the 26 years of knowledge that -- not just me personally, but my organization has built up.

And I want to stress this, it's not just me personally but I kind of know where all the knowledge -- most of the knowledge pockets are in and I'm going to start pulling them together and help organize those because it's going to be a real key factor of us really taking our competitive advantage and really getting that out in the marketplace.

And of course, focus on customers.

I have done a lot of customer work in the last year or two.

I want to do more.

That's a great leap -- loop into the product space and it is also a useful use of my time and talent.

And then last and certainly not the least, is advising the board and as its chairman, leading it and help leading the company to the next phase of our business, but also being and adviser to Bob.

For those who haven't been watching carefully, you will note that Bob and I have been working in a partnership with the last couple of years with this eventuality without a certain date at all, but with the eventuality of this doing is mine.

And I will tell you that I haven't made an important decision without discussing it and getting his advice and counsel since he has been here for that matter, but I don't expect he will make an important decision for the next few years without my advice and counsel.

Well, I mean go ahead Bob.

Well, it is interesting just sitting here listening to you.

We have known each other five years and we've been working together day and night, nearly every day for three and a half years.

We've built up a team together.

We've refined our strategy and our execution plans together.

And you have been teaching me the business.

I've been learning the business from a lot of people specifically you.

So, this is not news to us.

No.

And I don't think it is not news to our organization.

That's the message we are getting and we both started to roll it out starting late last night and into this morning.

I want to stress a couple of messages to you.

This is a normal succession.

I think we are doing it for the right time and the right reasons.

The question you might ask is -- why not now?

Why wasn't it a year ago?

Why isn't it two years from now?

I will be 62-years-old in about a week-and-a-half or two weeks, something like that.

But I've still got more energy than most, but not what I used to have, quite candidly.

And the speed of the pack is always at the pace of the leader.

I can look forward to a declining energy because I can look back to I have had declining energy.

And this company needs a leader that has got significant energy to take it forward because the opportunity is just too big not to go get.

And I am not about to let us miss the opportunity.

So why now?

It's a right time for me, the right time for the company because I know some significant things that need to be done that I want to focus on.

And [Audio Difficulties].

And I can tell you he's ready for three reasons.

[Audio Difficulties] Operator, I hope you [Audio Difficulties].

We are getting tremendous feedback on our line.

[Audio Difficulties]

Yes, sir, I am hearing that.

Do you hear the feedback, operator.

Yes, sir.

Can you do anything about it?

I am trying now, sir.

[Audio Difficulties]

Operator, can you hear us now?

It sound like a Verizon commercial.

[Audio Difficulties] Operator?

Yes, sir.

We are going to hang up and dial you right back.

If you'll ask the participants to please give them a technical difficulty notice and put them on hold.

We'll make sure -- Can you hear me clearly now?

Operator?

I gather the operator cannot hear us.

If everybody out there can hear us, we're going to hang up and come back.

We apologize, but it's not our fault.

We are live again?

[Audio Difficulties]

Operator?

Okay.

I have been told you can hear me.

I apologize.

But then again, we didn't do it.

And let me finish and then we will get on with it because I realize that time has gotten long.

I was explaining to you what I was going to do and why.

And I was explaining to you why timing is now.

It is partly for me personally, but it is mostly about it is the right time for the company.

And last but certainly not least is Bob is ready and I do want to spend a second explaining my decision to recommend Bob for this role.

By the way, I did make that decision and the board did agree, of course.

But there is really three ways I'll look at it.

Bob is a better executor than I am.

It's just that simple and that's what the company needs for the next evolution because the company is much more complex.

So it needs a different way of thinking about it.

For those who've watched this carefully, you'll see that his influence and execution has made us a better company.

And I expect he will continue to enhance that.

Bob has built out a significant team because he is good at doing that and we have the right people to go forward.

He has learned the business.

He has got the intellects of curiosity to learn the business.

And he has learned it.

Does he know it as well as I've known it?

No and he never will.

And that's fine because it took me 26 years.

But he has learned what it takes and he has the the important side of it.

Last and most important, he is the right kind of human being.

He fits the culture of Iron Mountain and he fits the culture of what I believe is important to at least our long-term shareholders, and that is he understands the balance of value creation, of running the balance between the shareholders, employees, and customers and the fact that you have to actually meet the needs of all of those, and he does that.

And he flies the mission.

That's the other thing.

That's the term I use, but one thing I've learned in my long years is what really cuts the really, really good people from just -- the great people from the good people is when you have a problem, when you have an issue, a lot of managers -- and I see this in our customers all the time, they like to phone it in and they like to delegate it.

But if it's important, the CEO flies the mission and shows up.

And Bob has that in his soul.

And for all those reasons, he is the right guy.

And I am not going anywhere and I do think those that have sent e-mails, both employees as well as shareholders -- but most likely I didn't read the message.

I've got a full-time job.

I am hanging around to work until I am not needed any longer.

And right now, I think they need me, so I am here to stay.

With that, let me turn it over to Bob.

Just a couple of comments, Richard.

Thanks to your partnership.

I appreciate your confidence, the confidence of the board of directors and the senior team in taking on this role.

I do look forward to seeing more of you and being more external in this new role.

I will be more external with our customers as well as with our investors and working with you in the years to come.

What Brian had said, what I have said, what Richard has said, what I want you to know more than anything else is that we are unshakeably committed to providing consistent long-term financial performance.

And I look forward to reporting to you on that and working with you in the years to come.

With that, hopefully the technology is working well.

We are getting some messages that we can't hear the operator is asking for Q&A.

I'm going to turn it over to the operator and hope that she asks for your questions.

(OPERATOR INSTRUCTIONS) Your first question comes from the line of David Gold with Sidoti.

Please proceed.

Hi.

Good morning.

Hi, David.

Good morning.

A couple of questions for you.

First, Bob, the plan right now -- Richard, too -- for Bob to maintain the to maintain the roles of President and COO as well.

The COO position, David, will not be back or filled really because we've built out the team.

We feel very good about the P& L leaders that we have in the Americas, Europe digital, Asia Pac, Latin Americas for the teams we've built out.

Yes, in fact, we created -- if you go back and remember in time, Bob was president of North American and I asked him to step into the COO role.

I specifically created that role to put him in a position of -- I tested him, quite frankly, but more importantly for him to learn.

And he certainly passed the passed the test and he certainly learned, but that was not a long-term role in our minds.

I see.

And as far as president, keeping it.

Yes, he will be the President and Chief Executive Officer.

I will be the Executive Chairman.

Perfect.

Then a question for Brian on the first quarter margin softness that is embedded in the guidance.

I guess, if I look at the year, guidance implies 25 to say, 26.5% , 27% margin.

For the first quarter, it looks like you're implying 22% to 24%.

I'm just curious if you can sort of add in to that.

And I know Stratify hitched it a little bit, but it doesn't seem like it should hitch it that much.

A, you can give some color on that, what is specific to the first quarter is dragging you down.

And B, a sense of presumedly, the expectation would be for ramp-up throughout the rest of the year to get to the

We were trying to talk a bit about this on the call.

But there is some normal seasonality in the business where in the first quarter you have things like higher impact from energy costs or mix of businesses, more labor cost effective and you have things like the full one pack of [IC], includes the payroll taxes.

It is normal seasonality that goes on.

And this year, year-on-year as well, we do have the impact of the a couple of factors.

One is the diluted impact of acquisition.

It is not just Stratify, but some of the other that we completed after Q1 last year.

And we do have some carry-over investment spent.

We initiated some investments in Q4 and we will see some of those impacts carrying over into Q1.

One other one-time item to note which we did try to highlight in the call was we do expect the $3 million charge in Q1 related to a sale of a building.

So sum all of those up and that will explain the Q1 numbers.

Look, we are very much committed to delivering full-year performance.

That's what we're focused on and we're committed to delivering results in that range.

Okay.

And then, I guess I am wondering if [specifically Stratify] was -- given year-on-year adjustment for the seasonality, it's basically significantly down year-to-year.

And on the acquisition front, presumable, you'd be expected to make some pretty decent progress over the year.

And again, I'd adjust out the $3 million we mentioned, the one time loss and really the balance of Delta is the comp -- the sum total of acquisition impacts and some of the carry-over investments done effect.

Okay.

Fair.

And then, just one other.

In the fourth quarter, the year-end comp benefit adjustment.

Presumably over time we'd think that that would be an every-year factor.

And I guess I'm just curious, have there been changes in compensation particularly this year or was it just a particularly good year and wouldn't accrue as much throughout the year and have to catch up.

I want to be clear.

It wasn't one adjustment.

It was a number of smaller adjustments in a variety of areas.

It is not unusual for us to make year-end kind of true to these estimates.

It just happened that the adjustments all kind of moved in one way and they sum to a meaningful number.

So this was different than our forecast.

It was $5 million.

Without that, we would have been at the high end of the arbiter range.

We were surprised by that, if you will, but it's not an the issue within the business.

It's just the sum total of a number of adjustment that were made at year-end.

Fair enough.

Thank you all.

Thanks, David.

And your next question comes from the line of Michel Morin with Merrill Lynch.

Please proceed.

Yes, good morning.

A couple of quick questions.

The first, the minority interest was lost this quarter.

That's the first loss in a very long time.

Is that a result of some of the recent investments that have been made and is that something we should assume will continue for the foreseeable future?

We are investing in international growth and we do expect some negative impact from those investments as we build out these businesses, as Richard has talked quite a bit about it.

See, it's long-term build for our storage business and we will see great yield from those investments over time.

So I think what you are seeing is just some of that impact.

Okay.

And then a similar kind question.

In the asset disposition, usually those have entailed gains.

Is there anything specific here that makes this one a bit different than others?

Talk about the Q1 impact that you've singled out.

Nothing unusual.

We do see -- occasionally, we'll see book losses on asset dispositions as well.

And this is normal activity in terms of changing where we're locating our facilities, and we're going to see if the clause is related to a move that we're going to make early next year or early this year.

In terms of the planned building moves moves that you talked about in the release, is that also associated with the acquisitions, the recent acquisitions?

No, that was -- you are referring to some of the higher D&A in Q4, and that wasn't specific to acquisitions but just some adjustments we made on depreciation and amortization related to some building moves.

Okay.

Thanks very much.

Thank you.

And your next question comes from the line of Andrew Steinerman with Bear Stearns.

Please proceed.

Hi, gentlemen.

It is sort of the same subject of how do we connect full year margins of being steady with first quarter margins being dragged by those three things -- seasonality, dilution for acquisitions and investments.

And if you could just sort of quantify which pieces of those will start going away if the second or third or fourth quarter, I think it would be a little clearer.

I thought I heard the kind of the investment part will continue to carry forward.

Yes, I think we're just in context.

We are focused very much in our full year objectives, Andrew.

And I think some of the impacts that we will see through the year will start to get through some of the lapping of the dilutive impact of the acquisitions that were done later in the year.

I think we'll see relatively bigger impact from investment spend growth year-on-year early in 2008.

Those will be factors contributing.

But we are comfortable with our full year outlook and very much committed to delivering performance in that range.

Right, and to make a full year of steady margins with margins being down so much in the first quarter, you really have to kind of get margins ramping pretty much starting right after the first quarter.

We are comfortable with what our full year outlook implies and we're committed to delivering the full year number.

Okay.

And just one more clarification.

When we talk about gross margins, I heard and I've seen the press release that's sort of mixed, went against the company.

Citing secure shredding and DMS, are those businesses really big enough by themselves that faster growth would be so significant in terms of gross margins?

I think they are reasonably significant parts of our business.

And in terms of the relative mix and what we had on the year-on-year basis, we continue to see that stronger service growth as a bigger -- service as a bigger part of the mix relative to storage.

And that had some dilutive impact on our gross margins in Q4.

I would have thought International growth would have been an important mix factor than shredding growth, for when you think about gross margins.

Well, we had a strong service growth in international markets as well so you know that effect will win.

Okay.

Thanks for all the clarification.

I appreciate it.

Thank you, Andrew.

And your final question comes from the line of Scott Schneeberger with Oppenheimer.

Please proceed.

Hey, good afternoon.

Could you -- you guys keep alluding to these increased investments, could you give a little bit of color and better impact on fourth quarter and in the first -- it sounds like they are going to taper off in the second half as you've mentioned, but could give us a little more color into what they are in?

No, we talked a bit about this as we - on our last call.

Talking about some of the things that we're advancing in our - in terms of our phasing for Q4, but we're investing an increased systems capability, including a support -- a roll out of Oracle financials.

In international markets, we're rolling out time and attended systems to better manage our labor costs.

We got investments in software systems to improve our management to transportation and chain of custody.

And we continue to invest again for security capability to meet customer requirements So the sum total of those, those are the big themes.

We had talked that we're going to do some phasing into Q4 this year, some of that is carrying over into Q1.

That's impacting our outlook.

And we are investing heavily in security because we believe that our investments will trump all of our competitors combined and that we will be able to expect value for that in the out years once those investments are made

Okay.

Thanks.

In the shredding business, could you speak to what your expectations are for used paper prices year-over-year with what ever granularity you can provide us..

Obviously, I'm looking for something conservative and a comparison.

And then as a follow up to that, how is a competitive environment?

And do you believe that you can get pricing on servicing if you see a slide in the newspaper prices?

Thanks.

Why don't I take the first one and then maybe ask Richard and/or Bob to comment on the competitive environment.

The paper prices are turning in the $200 type range and we have seen that flatten off a bit and we're basically projecting a maintenance of those kind of levels going into the balance at year end.

And so, we will see less benefit from growth and paper prices this year.

And that had a meaningful benefit towards the 2007 growth rate.

So that is some of the explanation in terms of why the complementary revenue growth won't be as high as it was this year.

And the paper price market -- the paper market itself is undergoing structural changes that are good for our long-term -- that are good long term.

And the truth is we have never been through recession under the solid structure.

Structural changes is an enormous amount of the volume now.

And the recycle paper market is going offshore to China to the mills over there and it is their primary source of feed stock.

It used to be -- five years ago when we were -- or even I guess seven years when we started the business or something like that, and the majority of the paper stayed in the US and one of that is toilet paper, but a lot of it goes offshore and because of that it has just driven the prices up because there is a worldwide shortage of fiber.

What a recession won't do with that, if we have such a recession, it remains unknown.

And we are just trying to be conservative, and certainly not consider it going higher.

On your other question about if paper prices come down, will service prices go up?

Historically what we have seen there is yes.

Because we have seen service prices come down as paper prices went up.

Historically, you will see it turn around but there will always be the classic lag.

And there was a lag coming into it.

As paper prices rose, it took awhile for service prices to come off and there will be a lag the other way if paper prices come down.

Last time I saw this, when paper prices took a big dip, what you saw was a lot of small vendors go out in the business and a lot of recyclers pull back out on the business.

But business though has changed in some other way since then.

And that is there is a lot of different markets, and I won't go through them.

And I don't mean geographic markets, but segments and how you think about it.

We are focused and we couple of segments.

One in particular is the large multicity customer that was buying the service and the compliance offering because we're using and leveraging our footprint to do that.

And we think it's a different value proposition and by the way, a tightly priced market and but a very high volume market.

Okay.

Thanks.

One final one.

I realize energy prices are going to be seasonally high in the first quarter.

And obviously, they are up a good bit in the first quarter year-over-year.

Could you give us any thoughts on how that affects you overall as a percent of revenue and what you are looking for for the year?

Thanks.

Our energy costs are basically in the range of 2% to 3% of our revenues and so that can have an impact.

We do have some ability to recover changes in revenue costs through things like fuel surcharges with our customers.

And we have baked I think a reasonable outlook on energy cost and that is factored into our guidance.

And to give you some sense of values.

There is rough numbers.

But about half our energy costs goes towards rolling, transportation.

And about half of it goes towards our building and so forth.

And as Brian said, not everywhere in the world yet but we're getting there.

But certainly in North America, we're rolling this out.

We have got -- we have been put in place over the last year or so as we renew contracts and so forth.

And energy, a gas hedge, against prices up and down.

It is a fair deal it's a fair deal for customers on the transportation side.

Great.

Thanks very much.

And you have a follow-up from line of Michael Morin with Merrill Lynch.

Please proceed.

Please proceed.

Yes.

Thanks for taking this last question.

Richard, I think in your comments, you mentioned that you're seeing another round, round two, of the roll up in the US.

Can you elaborate a bit more on that?

Is this coming from private equity investors?

And you seemed to think that it's a net positive for you, and I struggle a little bit to understand how that can be.

Well, look, our toughest competitors are the local guys.

There's nobody tougher than a large [burner] period.

Okay?

Nobody.

So, the more that we should take out, the better our competitor is, quite candidly.

What's driving it is the great business.

There's - yes, it's private equity.

There are three or four groups that will probably come in to leverage these companies.

I would expect that they will be the driver of good returns.

The more intelligent capital that comes into business that is return-oriented, the better it is for everybody.

And so, yes, that we see it's all the way round.

Don't disrespect them as competitors in all of it.

Except that I would just tell you that the private owners are always our toughest competitors.

Alright.

Thanks very much.

At this time there are no further questions.

I would like to turn the call back over to Mr.

Richard Reese for closing remarks.

I haven't noticed but I think Franco Turrinelli, did he follow up or wanted to ask a question?

We got a strange communication platform going here.

Yes, sir.

He removed himself from the line.

That's great.

Okay.

I'm sorry to do that, but I just wanted to make sure everybody had an opportunity.

First, I apologize for being long.

I committed some time ago to keep these calls to an hour and I broke my commitment and I apologize.

But we did have a lot to cover given the announcements and given the year end.

Just in summary, business is running well.

Anybody, I understand you want to look in the numbers and everything else.

But we are committed to running this business and hitting our annual targets and hitting our long-term targets.

I've never seen the business in a better position than it is today.

I am pleased with how it's operating.

I'm happy with what we are doing and we are making real progress continuously.

We are well positioned for the year 2008.

And we are committed to delivering you the results and I think we have the team in place to do it.

So I do appreciate your support.

I want to reiterate more than one last time, though, I am still planning to be around.

So I hopefully will see many of you.

You will occasionally see me out in front of shareholders.

I can't avoid it for have a little fun every now and then.

So I look forward to seeing you occasionally, less often but occasionally.

Thank you for your support.

And I will talk to you next quarter.

Thank you.

Thank you for your participation in today's conference.

This concludes the presentation.

You may now disconnect.

And have a great day.