Iron Mountain Out of Digital Business, for Sale

Iron Mountain Incorporated announced a strategic plan to enhance stockholder value. In addition, the Company reached an agreement with Elliott Management Corporation to support one of Elliott’s nominees at the 2011 Annual Meeting of Stockholders and to add another independent director following the meeting.

Comprehensive Strategic Plan
By executing on its strategic plan, Iron Mountain will be able to drive higher returns on invested capital (ROIC) and increase the return of capital to stockholders through:

• Sustaining its leadership in the attractive North America business
• Significantly improving its international portfolio
• Exploring strategic alternatives for its digital business
• Committing to total stockholder payouts of approximately $2.2 billion through 2013, including approximately $1.2 billion of capital returned over the next 12 months through a combination of share repurchases and dividends
• Forming a Special Committee to evaluate financing, capital, and tax strategies including conversion into a REIT

Sets Plan for Significant Improvement in ROIC
By executing on these initiatives, Iron Mountain expects to achieve after-tax ROIC of 11% in 2013, up from 7.7% in 2010. These gains will be driven by a combination of higher profitability levels and lower capital intensity. Specifically, the Company seeks to achieve Adjusted OIBDA margins of 32% while lowering its capital spending (excluding real estate) to approximately 6% of revenue by 2013.

"Over the years we have built a great global business with strong operating performance, record cash flows and a strong balance sheet," said Richard Reese, Iron Mountain’s Chairman and Chief Executive Officer. "Driven by our focus on operational excellence, since 2006 Iron Mountain has increased Adjusted OIBDA and Free Cash Flow1 at compounded annual growth rates of 12% and 68%, respectively, well ahead of our solid 7% revenue growth. In addition, we initiated a stockholder payout program in 2010, comprised of a $350 million share repurchase program and a quarterly dividend which was increased by 200% in December to an annual rate of $0.75 per share.

"Consistent with our focus on stockholder value creation, our Board and management team regularly review our business portfolio and capital allocation priorities. We are proud of what we have accomplished at Iron Mountain, and we are always working to improve our returns. By concentrating on our core strengths, optimizing our International portfolio and increasing our commitment to stockholder payouts, we believe we can further enhance stockholder value."

Sustaining Leadership
in Attractive North America Business
Iron Mountain’s North American platform demonstrates the power of its business model. By offering premium services and solutions, Iron Mountain has attained an industry leadership position. Customers recognize Iron Mountain’s superior value proposition, which drives significant recurring revenues and substantial cash flows. In addition, through productivity initiatives and pricing optimization, Iron Mountain’s North American business generates record margins. The Company will continue to invest efficiently in North America, including in its sales effort, to sustain cash flows and tap the large unvended opportunity in this market.

"Since 2007, Iron Mountain has driven significant improvements in North America’s gross margin (+800 basis points) and Adjusted OIBDA margins (+800 basis points)," said Mr. Reese. "In addition, the Company has reduced the segment’s capital expenditures2 as a percentage of revenues from 10.7% in 2007 to an estimated 4.3% in 2011. We are committed to making efficient and productive investments in the North America business to sustain our leadership position and continue generating the highly attractive cash flows that support our stockholder payouts."

Optimizing the International Portfolio
Iron Mountain plans to further optimize its International portfolio through targeted, market-specific initiatives that enhance the portfolio’s average ROIC. In mature markets where Iron Mountain already has a leadership position, the Company is driving optimization by continuing to apply its proven best practices from the North America business. In mature markets where Iron Mountain does not have a leadership position, the Company will implement improvement plans and will evaluate exit alternatives if the Company is unable to achieve its targeted returns. In emerging markets, Iron Mountain will continue to invest to support profitable growth and market leadership. Finally, in the BRIC countries, the Company is focusing on developing Brazil and furthering its joint venture efforts in Russia, India and China. Successful implementation of this strategy is expected to drive a 700 basis point improvement in Adjusted OIBDA margins and increase after-tax ROIC by 500 basis points to 8% in the International business by 2013.

Mr. Reese commented: "With our top North America enterprise customers doing business with Iron Mountain around the world, our International portfolio is key to our overall value proposition. Simply put, our top customers demand global service. Given that the International portfolio has the same attractive fundamentals as our North America business, we see a great opportunity to drive significant revenue growth, margin expansion and higher returns on invested capital. As market leadership drives returns, our goal remains to achieve #1 or #2 positions in all of our markets."

Exploring Strategic Alternatives
for the Digital Business
Iron Mountain is exploring strategic alternatives for its digital business, including a potential sale of the Company’s digital archiving, eDiscovery and online backup and recovery solutions.

Mr. Reese said: "We first entered the digital business 10 years ago as a natural extension of our core services to address a clear customer need. Recently however, our digital business has faced a number of challenges resulting from a rapidly changing environment. In light of these factors, our Board and management undertook a strategic review of the digital business beginning last Fall and concluded that the Company could not continue investing in technology development and meet its return requirements and that exploring strategic alternatives for the digital business was in the best interest of Iron Mountain’s stockholders. As we move forward, Iron Mountain will continue to deliver technology services to solve our customers’ digital information management challenges through partnerships."

The Company noted that there can be no assurance that the exploration of strategic alternatives for the digital business will result in any transaction.

Increasing Return of Capital to Stockholders
Iron Mountain’s Board of Directors has committed to stockholder payouts of approximately $2.2 billion through 2013, with approximately $1.2 billion of capital returned to stockholders within the next 12 months through a combination of share buybacks, ongoing quarterly dividends and potential one-time dividends.

Iron Mountain announced its initial dividend in February 2010, which was increased by 200% in December 2010. Iron Mountain currently pays an annual dividend of $0.75 per share and intends to grow the dividend as earnings and Free Cash Flow expand. In addition, the Company plans to operate around the mid-point of its target leverage ratio range of 3x – 4x EBITDA (as defined in its senior credit agreement).

Mr. Reese said: "Our commitment to significant stockholder payouts demonstrates the Board’s confidence in our ability to grow our business profitably as we execute on our comprehensive strategic plan to enhance stockholder value."

Settlement Agreement
Iron Mountain has reached an agreement with Elliott Associates, L.P. and Elliott International, L.P. (together Elliott) in connection with the 2011 Annual Meeting of Stockholders, which is scheduled to be held on June 10, 2011. Under the terms of the Settlement Agreement, Iron Mountain has agreed to nominate Allan Z. Loren, one of Elliott’s nominees, to the Company’s Board of Directors at the 2011 Annual Meeting. The Company has also agreed to appoint an additional, independent director to be mutually agreed upon by Iron Mountain, Elliott, and Davis Selected Advisers L.P., Iron Mountain’s largest stockholder. To facilitate the Settlement Agreement, Constantin R. Boden has decided to retire from Iron Mountain’s Board after more than 20 years of service, effective at the upcoming Annual Meeting. As such, after the addition of Mr. Loren and the new independent director candidate to be appointed after the completion of an independent search process, the Iron Mountain Board will continue to be comprised of 12 directors.

Elliott has agreed to withdraw its slate of director nominees and vote all of its shares in favor of the Company’s slate at the 2011 Annual Meeting. Additionally, Elliott has agreed to abide by certain standstill provisions.

Iron Mountain’s Board has also agreed to form a Special Committee, chaired by Mr. Reese, to evaluate ways to maximize value through alternative financing, capital, and tax strategies, including making its first priority to evaluate a conversion to a REIT. The Special Committee’s members will include Mr. Loren upon his election to the Board and the new independent director candidate to be appointed, as well as other directors yet to be named. The conclusion of the evaluation process to potentially convert to a REIT is expected to take place within 12 months of the 2011 Annual Meeting.

Furthermore, Iron Mountain’s Board has agreed to amend the charter of the Finance Committee to increase its mandate to include the review of material capital allocation decisions and strategic opportunities for maximizing stockholder value. The Finance Committee will be renamed the Strategic Planning and Capital Allocation Committee.

"On behalf of Iron Mountain’s Board, I am pleased to nominate Allan Loren for election to our Board. Allan is highly qualified and brings a significant amount of information management experience to Iron Mountain," said Kent Dauten, Lead Independent Director of Iron Mountain’s Board. "I would also like to thank Constantin Boden for his more than 20 years of service on our Board."

"We are confident that this agreement with Elliott is in the best interest of the Company and our stockholders," said Mr. Reese. "I am personally committed to the execution of our plan including a thorough review of value creating opportunities, which includes an expedient evaluation of a potential REIT conversion."

"Elliott is pleased to have helped contribute to this beneficial outcome. After reviewing with the Board and management the actions already taken and those underway, as well as their strategic plan for the future, we support today’s announcement. The strategic proposals detailed today are aimed at increasing stockholder value and we look forward to continuing our dialogue with the Company as the plan progresses," said Scott Tagliarino, Director of Global Communications at Elliott.

"We strongly support the Board of Directors’ plan to increase stockholder value with the actions announced today," said Ken Charles Feinberg, portfolio manager at Davis Advisors. "We applaud the Board for being responsive to shareholders and commend them for being exemplars of excellent corporate governance."