Good morning. My name is Bonnie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Iron Mountain Q2 Earnings Call Webcast. [Operator Instructions] I would now like to turn the call over to Mr. Stephen Golden, Vice President of Investor Relations. Please go ahead, sir.

Thank you, and welcome, everyone, to our 2011 second quarter earnings conference call. Joining me this morning are Richard Reese, our Chairman and CEO; and Brian McKeon, our CFO. After their prepared remarks, we'll open up to questions for your Q&A. Per our custom, we have a user-controlled slide presentation on the Investor Relations page of our website at www.ironmountain.com. Referring now to Slide 2. Today's earnings call and slide presentation will contain a number of forward-looking statements, most notably, our outlook for our 2011 financial performance. All forward-looking statements are subject to risks and uncertainties. Please refer to today's press release, the Safe Harbor language on this slide and our most recently filed annual report on Form 10-K for discussion of the major risk factors that could cause our actual results to be materially different from those contemplated in our forward-looking statements. As you know, we use several non-GAAP measures when presenting our financial results. Adjusted OIBDA, adjusted EPS and free cash flow before acquisitions and investments, among others, are metrics we speak to frequently and ones we believe to be important in evaluating our overall financial performance. We provide additional information and the reconciliations of these non-GAAP measures to the appropriate GAAP measures as required by Reg G at the Investor Relations page of our website as well as in today's press release. Also, please note that all of the financial results presented in today's materials reflect discontinued operations treatment, the digital businesses we sold and the expected sale of our New Zealand operations. All historical results have been restated to conform to this presentation. With that, I would like to introduce our Chairman and CEO, Richard Reese.

Thanks, Stephen, and good morning, and welcome to our call. This morning, I'll be intentionally brief in that it's summer time, we've had a good quarter, but there's nothing really extraordinary to talk much about. So I'll kind of run through it fairly quickly, then Brian will go through the numbers and some of the details. And then, of course, we will take your questions and answers. Q2 was a good quarter, in line with our expectations. We're on target for the year, and frankly, on target to -- it's a good start for our 3-year plan in terms of the financial performance that we laid out a few months ago. The trends are pretty much in line with Q1, so there's not -- as I said, not a lot specifically to talk about. Reported revenues were up 5% in total that were led by International, internal growth at 4% and North American internal growth at 1%. Our storage trends remain stable at internal growth of 3% on storage. As we've been talking about for quite some time, we've seen a moderation in our storage trends. Some of that is economic, and some of that is continued secular pressure. But we've seen stabilization, and that stabilization trends have continued into the quarter. Churn, it's sitting around 7% in organic additions, in the same range of the last 7 quarters, in fact, in around 7%. New sales at about 2% up of -- which is a moderate improvement, and been improving slowly over the last quarter 2. As you know, we've focused our business since the sell of our digital business on our core business and that we are seeing some benefits of focus and some benefits of getting the sales force really focused back into these core services. As we've…

Thanks, Richard, and good morning, everybody. We'll be going through the slides as usual. Slide 3 highlights the key messages from today's review. Our continuing operations delivered solid performance in Q2, keeping us on track towards our full year goals. Results were supported by solid storage revenue growth and improved profit performance in our International business. The quarter revenue growth was 5%, with business trends largely consistent with those that we discussed last quarter. Storage revenues increased 6%, or 3% on an internal growth basis. Global record management net volume was 2%, supported by solid gains in International markets and positive growth in North America. Service revenue internal growth was 1% as strong gains in hybrid services as well as benefits from higher paper prices and increased fuel surcharges offset continued weakness in core service activity levels. Profit and cash flow performance was solid and in line with our expectations, supported by strong gains in our International segment. Adjusted OIBDA was $227 million, up 2% on an operating basis excluding $10 million of fees associated with the recent proxy contest. Adjusted EPS was $0.29 per share, including the $0.03 impact of the $10 million in proxy fees, and free cash flow was $140 million on a year-to-date basis. Our full year guidance for our continuing operations is very similar to the outlook that we shared in our Q1 conference call. We are revising our guidance to reflect the discontinued operations treatment resulted from the sale of our digital businesses and the expected divestiture of our New Zealand operations. The results of these 2 businesses have been removed from our P&L results and collapsed into a single line, labeled income or loss from discontinued operations. All of our historical information has been restated to reflect this presentation. Attached to this presentation…

[Operator Instructions] Our first question comes from Kevin McVeigh of Macquarie.

Brian, could you give me -- remind us of the split of the Digital impact between the Storage business and service? Is it all in storage or service, or is it a combination of both?

It's a combination of both, Kevin. So we had -- keep in mind that the -- there certainly was a storage component to it, but particularly for the backup businesses, the archiving business, but the eDiscovery business was -- much of that would be under flow through or competitor -- complementary revenue line. So it was a mix.

And was it kind of 70:30, 60:40 in terms of percentages, or...

Why don't we get that for you, and we'll comment on it in a moment. We'll just look that up for you.

Super. And then I just wanted to spend a minute, if we could, on kind of the capital structure. Given the strength of the balance sheet on a go-forward basis, it still seems you're pretty well geared towards fixed debt, things like that. And just given the strength of the free cash flow, is there any difference in terms of approach as you think about uses of free cash flow on a go-forward basis or the leverage on the balance sheet? I mean, I know you've tweaked that the leverage ratios a little bit more recently, but just given the strength of the free cash flow on a go-forward basis, how are you thinking about that capital structure?

Kevin, this is Richard. I think when we put forth our 3-year plan, you'll note that we -- that part of that plan is increasing our leverage to the midpoint of our range, to approximately 3.5x from about 2.8x, a little under 3x now. And I think that's a comfort level we have to operate the business, and that's the level in which, between that increase in the level and our free cash flow, we're going to distribute the $2.2 billion of cash over the next 3 years. And so, I think we're sort of set for how we're going to use free cash flow and leverage for that timeframe. Having said that, we'll always reevaluate, and we do reevaluate our capital structure from time to time. We are a business that, if you look out in the future, should generate substantial free cash flow and should continue to be able to distribute substantial cash to our shareholders over a long period of time. We've also spoken that we would be -- have interest in acquisitions in our core space, and there are acquisitions out there. By and large, they're relatively small, and by and large, we will do them if they make sense to us from a return on investment basis to help accrete returns, so it's if there are very good financial attractions. They're not things that we would consider to be strategic, okay, so to speak. And there's a couple of larger relative to the physical business that are rumored hanging around out there, and we don't know if they're out there or not, and we would have to see what our appetite would be for pieces or parts or all or none of still some kind of things. But net-net, none of those, nothing we would think about will get in the way of our commitment to distribute the $2.2 billion nor should it get in the way of our ability to distribute significant cash flow beyond the 3-year time period.

Then, Kevin, let me -- I just have a couple of comments on. First, answer your question, it's a 70:30 split, 70% storage. And I think at the beginning of the question, you asked about fixed and variable interest. We're a bit higher than our ideal range. I think over time, in terms of fix floating, we've got a very annuity-based business that aligns well with the fixed commitment structure on debt, but I think over time we probably will be looking to have our fixed component more in the 70% to 80% range, but I think we're comfortable what we are currently, and that's an opportunity for us over time.

Our next question comes from Andrew Steinerman of JPMorgan. Andrew Steinerman - JP Morgan Chase & Co: You did start talking about core service, and we're back to flat, and I definitely heard the fuel's charge is helpful here. Could you just go over the trajectory for core service, and is this something that it's pickup and delivery we can't really influence, or is this something that we can influence?

Andrew, it really was more similar than different. Fuel gave us about a point in growth on the -- actually 2 points of growth on the core service line in the quarter, it was 1.5. So if you adjust for that, it really was very similar to the numbers we had in Q1, so I wouldn't point to this as a change...

And Andrew, by nature, the we separate our services for communication purposes between core and complementary is the things that we put in the core are services that we cannot influence. These are specifically demand-driven by customers' activity. You can't make them retrieve a file or box or tape or call us to shred a bin or so forth. That's totally related to their activity. The kinds of revenues we put in the complementary services category are the kinds of things we can go out and stimulate the sale process and so forth. And that is in fact why we define them that way. Andrew Steinerman - JP Morgan Chase & Co: But Richard, I've heard you say new boxes are more active, and so as you're able to ramp up, new boxes, they should influence core.

I think that's true. But remember, the denominator is so big, and there's always a time lag thing kind of thing, we haven't seen it yet. I fully expect, to be clear, that the core service softness trend we see will change. And I expect there are 2 or 3 things going on in it, and they'll change, and I expected it'll at least flatten and maybe rise a little bit off of a so-called new normal in a certain position. We just haven't found it yet.

Our next question comes from Gary Bisbee of Barclays Capital.

I guess, just first, what were the tax consequences of the Digital sales? Is there a big tax hit, or is most of that proceeds flowing through?

Yes. No, we did have a tax impact. I think the cash tax payment was over $50 million, and that's reflected in the discontinued operations.

Okay, and then with the International, I think I heard you say volumes were up 6%, but the internal growth was up 4%. Is that, that part of the volumes were from the small M&A activity, or is it more just that the service areas were weaker than the core storage?

I'm trying to follow your question. The difference between the 6% to 4%, or are you trying to get color on the 4%?

No. Difference the 6% and the 4%.

We did have some acquisitions. We had Poland in there, and some [ph] acquisition in Greece as well. So it was acquisitions, and the overall numbers, they were solid. We had a 5% storage internal growth. The service number was down a bit. We were lapping the high project revenues in Europe, specifically in Italy last year, and that was constraining the number a bit.

We had a major project in Italy that wound down. That's the kind of revenue that will show in our comp services stuff, which, as you know, can be pretty lumpy at times.

And then just the last question, I guess, any commentary on why you didn't repurchase stock? Was it just sort of when you were -- when you either had...

We entered into this prepaid variable repurchase program, and the way that works is we do an upfront payment commitment with banking partners, but it doesn't get -- until it gets completed, it takes 2 to 3 months to complete the program, the shares don't get delivered. So effectively, we did repurchase $250 million, and it will be done in the coming days.

We just haven't gotten the final accounting and delivered the shares. Therefore, we don't reflect it through our numbers.

Right. So it doesn't show up in Q2. But that was what the 7 million to 8 million share reference was, that's effectively what was repurchased in the quarter.

And if we enter into such a transaction, which we did, we are otherwise not trading in the market around it.

Yes, okay. But some of the volume in the quarter was them buying the stock on your behalf. You just haven't shown that in your numbers yet?

Yes, that's correct.

And by the way, it's a little bit of a black-box process. They don't really tell us what's going on. You don't really know till the end. So we're making estimates.

Our next question comes from Andrew Wittmann of Baird. Andrew Wittmann - Robert W. Baird & Co. Incorporated: Just to, I guess, jump on that last question a little bit more, still there's, I'd say, kind of a fair ways to go until getting to the $1.2 billion first hurdle here. You guys are saying you're generally on track, but it looks like things are going to need to accelerate. Can you just talk about, I guess, your plan from here? And would you consider another one of these accelerated share repurchases again? Or are you able to tack on another one of those again after this first $250 million is done?

We're not able to do anything until it's done. And we have considerations on what we've got to do next, and shortly, we'll be discussing that with our committee and our Board as to the next step. And there's other backup plans in place and so forth. It's a fairly complex process you have to go through. As you recognize, we can't do anything until we get on open window of clear sky, blue sky insider knowledge perspective whether we can put a program in place or not. So I don't think we can comment on exactly which tools we will use, except to say that it's our expectation to continue and stay in the market on a fairly regular basis. And your comment that we might be behind, we don't see it that way. When we map it out, I'd say we're right pretty much on plan and trying to do this on a fairly consistent, steady basis.

Out of the $1.2 billion, you've got about $200 million covered by the dividend and the variable program, and the first step was $250 million...

So we got $750 million to go.

And we feel we're on good track.

And recognize, I know this is obvious, but I have to -- I want to continue to repeat it, is the $1.2 billion is an artificial date that we agreed to, and we will commit to doing it. But we've also agreed and committed to another $1 billion to find it. So we're not trying to push to a first year date and then wrap it up and walk on. This has got to be a continuing way of life for us. I just threw this 3-year period because we said earlier, we expect to have significant free cash flow in the fourth, fifth, sixth, seventh, eighth, tenth, and twentieth year. And in all scenarios, we can see a substantial amount of cash flow excess of the business needs. In other words, we're not starving the business. We want to make sure the business is well taken care of, but in excess of the business need, we will be returning cash to shareholders. And therefore, when you've got that significant amount of capital, we're trying to do this in a pretty programmatic basis, trying to make sure we don't make any big mistakes. But you know, we're not just trading in and out and so forth. So you'd expect to see a lot of steady distribution here. Andrew Wittmann - Robert W. Baird & Co. Incorporated: And just then just on the view of International disposition potential, you kind of mentioned, Richard, that the process of evaluating what might go and what might stay is done. Can you give us maybe a bit more insight, not specific markets, obviously, but maybe in terms of maybe a range of total capital proceeds that you might expect to see with which you've identified so far?

Well, the process -- I wouldn't want to say we made final decisions. I guess what I'm saying is I've seen enough analysis. They have a pretty much gut for what's going to happen, how's that? And in fact, we're going to review a lot of that with our board coming up, so we've got some final work to do. But the short answer to your basic question was, is this going to be a significant series of capital-raising events? The answer is no. There's more opportunity in our portfolio to focus the strategies and drive improvement, and we're going to, by and large, continue doing that.

[Operator Instructions] Our next question comes from Shlomo Rosenbaum of Stifel, Nicolaus. Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.: I just want to ask, it's been about 3 months since you laid out the targets as to what I think you'll do over the next 3 years. I was wondering from an operational perspective, internationally, do you guys feel better about the opportunity to increase the profitability of that business, or do you feel the same or do you feel worse? In other words, after 3 months of review, where do you stand in terms of the confidence of being able to do that plan?

We feel very good about it. As we noted in the quarter, the International profit improvement was a key driver of our results. We had margins up year-on-year 110 basis points. We're on track for about a 200-basis-point improvement this year, which is consistent with what we talked about. That doesn't reflect changes in our portfolio. So there may be opportunities that emerge from that. We've continued to advance the plans with the team, we feel very good about it. The growth remains solid. The business is performing well. So I feel confident that, that's going to be a key driver of results, and we're on track for our plan. I'd also highlight just overall in the company, if you take out the proxy costs, at midpoint, our margins outlook for this year, adjusted OIBDA I think is just shy of 31%. So we're moving well towards the 32%. It was one of the benchmarks we put out there as a goal by 2013, and International's going to help us to achieve our goals in International that'll put us on good track for that objective.

I'd like to stress that your question is, we're into it 3 months, how do we feel about it? It leads me to believe that you might be thinking about it wrong, and so let me -- from our perspective, at least. And that is, it's not like we woke up 3 months ago and fired a gun and said you guys take a big right turn. We'd actually been working with International and developing the plans of that well before we made these announcements. And in fact, they already had a head start on a lot of the work, which is why you're seeing 150 basis points coming up this quarter. These are not the kind of things where you can just do them overnight. They take a lot of prepping, and if you go back and listen and look at our numbers, you'll see us talking about investment in International prior to this. As I said, their whole business plan for this year already had the 200 basis points in it, because we'd already started them down that strategy and that path. The other thing here that is the shift in International, though, is the International had some initiatives in the projects going partially related in the hybrid business and so forth, trying to drive and build some growth platforms for the future that were not panning out as fast as we thought. And we've asked them and refocus that, and they have, and that's part of and will help contribute to this sort of stuff. And it's part of just focusing international on, again, on the core business, just like we've done in North America. Let's look less at shiny objects and look more back at our core business, because the sense we have come to understand was that we are walking past the core business just a little too fast and leaving good opportunity, good return opportunity on the table and not going after it aggressively. And I think if you go out and talk to customers, if you go out and listen to the marketplace, I think you'll hear is Iron Mountain is awake again in the core business. And that's what I want them to hear, and that's what we want to do, because there's good business out there, and it's a big battleship, takes a long time to turn. But it's turning. Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.: And just in terms of the divestiture potential internationally, I wasn't clear as to whether you were saying that there are further potential divestitures or you're saying that New Zealand is pretty much it.

I won't say New Zealand is pretty much it. I won't be that definitive. What I am saying is anything would occur won't be significant, okay, in terms of financial impact.

The question was directed at is this going to be a major source of fund?

No, it will not. Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.: I'm looking besides source of funds in terms of just margin improvement potential.

No, I don't think you'll see -- I don't think the portfolio view is going to have big shifts of margin. The 700 basis points we're going after is going to be the big shift in margin. I don't know that that's all, by the way, but for the next 2.5 years, it will be the big shift. Look, and I guess, I would tell you, though, that as much as I've said we've been working a lot on this before we announced it, I guess I would stress one thing. We didn't hold back anything. We don't have a lot of money in our pocket. Not a lot of -- we've got some reasonable cushion here, don't get me wrong. We're not totally crazy. But we came forth and said, "Look, these are the things you can do." And everybody stretched and feeling stretched pretty good. Everybody's saying they think they can do it, but there's nobody got a lot of sandbag, and I don't have a big bucket of capital of earnings in our pocket that we can dump out and protect ourselves with. We'll continue looking, and there may be some other good opportunities, we'll go looking for it. But this is the plan we expect to execute and we will execute, and we'll deliver the cash, and we'll still have a good business at the end and continue delivering cash after that. That's what we want to do, and I think we're pretty comparable we can do that. Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.: And then kind of a housekeeping. In terms of the share count for next quarter, should we assume the 7 million to 8 million goes out over the 2 months of the quarter? Is that a fair way to do it for weighted average?

Yes, well, we're expecting it to conclude in early August. So, that's midpoint, I guess, for the quarter. Shlomo Rosenbaum - Stifel, Nicolaus & Co., Inc.: Okay, and then in terms of the talk about strategically trying to monetize the real estate assets. I understand there's a special committee out there. I just want to know if there have been -- I'm obviously not looking for definitive answers on anything, but are there a lot more ideas beyond just the reconversion that have been coming up?

Yes. There is a variety of ideas and structures. They fall into -- they tend to fall in some very unique categories, which I won't go through with you, okay? But we're in a stage of value generation. I mean, we're actually running a formal process. We've had lots of meetings, interviewing lots of advisers. We started to choose advisers to help us. We are going to spend some serious money on this, which is why we're going to tell you about it each quarter for a couple, few quarters till it's done, because it is a onetime kind of event. But yes, there are some ideas, and they have -- as I predicted earlier, they all come with a range of benefit and range of complexity and a range of risk. But it tends to work out those with the highest risk -- generally those with the highest risk generally have the highest complexity and generally have the highest benefit, okay, as you might expect. But yes, there's a range of stuff that we're looking at. And we will narrow that down. We're going through a process of narrowing it down and then focus on a best view, if I might say. And I don't know how many will be in the best view category, and really try to drive them to the ground and see if they makes any sense. Unfortunately -- you can make a decision on some of them fairly quickly that don't make sense or that won't work or anything else. But some of them, the devil is absolutely in the details, and there's an enormous amount of assumptions and modeling and people to talk to and so forth, and we're going through that.

Our next question comes from Scott Schneeberger of Oppenheimer. Scott Schneeberger - Oppenheimer & Co. Inc.: A couple -- I'll try and be quick. The first one, just following up on the outsource share repurchase program. Do you guys intend, once that's completed in early August, to press release and mention your intention for what comes next? Or do we wait until the third quarter call there?

To a degree, it depends on what we decide to do. I would say that there's a few different tools here, and some things may result in a public announcement, but look, if we're doing things like open market purchases or 10b5-1 programs or things like that, our practice is not to comment on that. So I think what you should take away is that we've got a -- we are executing against the payout plan. We're making good track, and we're committed to delivering against it, and you should expect us -- the share repurchases, we said all along, is our preferred tool, and we'll continue to evaluate that. But we may or may not do a press announcement. Scott Schneeberger - Oppenheimer & Co. Inc.: And then 2 more, and I'll ask them both up front. In core storage, could you just comment on pricing, just the competitive environment you're seeing there and how that's evolving? I think you mentioned North America plus 2% year-over-year. Just thoughts there. And then the second question is, with regard to core services, I think you mentioned you have 2 or 3 things going on there. I'm particularly interested in destructions, I think you said, have stabilized. But if we can just go a level deeper on both of those topics.

Pricing, similar, plus 2%. As we mentioned, North America Records Management, that's where we've been. That's pretty much what we've got in our planned numbers as well, and so feel good about that. When you mentioned that churn has stabilized, that the combination of destructions, permanent withdrawals and terminations. Destructions are in a similar range. That will bounce up and down. It's driven by customer events. But it's been more in a stable range, similar range in recent quarters. We have seen some improvement on permanent withdrawals and terminations, reflecting we've got a real focus on customer service, and...

And that improvement, by the way, is a reduction in the rate of terminations and withdrawals, which the positive is, is your storage balances are higher. The negative is you don't recognize the service revenue in a fairly good service line.

It's about 7% globally, not all that different by region, to be honest with you. And it seemed to be in a similar range. So it's stable. I wouldn't be signaling improvement. Scott Schneeberger - Oppenheimer & Co. Inc.: And one more quick one, if I can sneak it in. The $6 million revenue impact from the complex repricing, is that -- any more color there? And is that something that we may see occur again, or is that really a onetime thing?

No, that absolutely should be a onetime thing.

So thank you very much. We appreciate your joining us this morning. As I said in the beginning, this was a good quarter. I do want to clarify a statement I made earlier, for those who haven't figured out, I don't really have too much of a script here. I'm pretty free-form, so I'd sometimes trip up in my words. As I was talking about the foundational dividend, and I made the statement that not necessarily grow with free cash flow, I don't want to imply that we're not intending to grow the dividend. We absolutely -- it is our intent. But you can expect that it's our intent that as our business continues to do well, our dividends will continue to rise. So I just want to make sure that nobody read that as a change in intent and change in the outlook and so forth. But other than that, as I said, it's a good quarter, and we hope and believe the rest of the year will show similar kinds of result as we go forward. Our business has stabilized, and we're now looking forward as we focus on the core to really making this thing hum, and I think we'll be able to do that. So again, thank you very much. I hope you enjoy the rest of your summer.

Thank you, this concludes today's conference call. You may now disconnect.