Iron Mountain Incorporated (IRM) Q4 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to Iron Mountain Q4 2013 Earnings Call Webcast. [Operator Instructions] As a reminder, this conference call is being recorded. I'll now introduce your host for today's conference, Melissa Marsden. You may begin.

Thank you, Nicole, and welcome, everyone, to our Fourth Quarter 2013 Earnings Conference Call. I'm Melissa Marsden, Senior Vice President, Investor Relations. And this morning, we'll hear from Bill Meaney, CEO, who will discuss highlights for the quarter and strategic initiatives; followed by Rod Day, CFO, who will cover financial results and guidance. After prepared remarks, we will open up the phone for Q&A. And as is our custom, we have a user-controlled slide presentation available 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 2014 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 a discussion of the major risk factors that could cause our actual results to differ from those in our forward-looking statements. In addition, we use several non-GAAP measures when presenting our financial results. The reconciliation to these non-GAAP measures, as required by Reg G, can be found, again, on the Investor Relations page of our website, as well as in today's press release. Before I turn the call over to Bill Meaney, I'd like to add 2 things. First, registration is now open for our Investor Day to be held on March 26 at the Pierre Hotel in New York. You can find registration details on the Investor Relations website under Events. And second, I'd like to thank Stephen Golden for his years of service to Iron Mountain, Investor Relations. As many of you know, he will be leaving Iron Mountain end of March, and I know you all join me in wishing him well in his future endeavors. Also, Colton Bria [ph], our new Director of IR, is here today and looking forward to working with you moving forward. With that, Bill, care to [ph] begin?

Thank you, Melissa, and good morning to everyone joining us today. Before I discuss the results of the quarter, I want to take a moment to acknowledge the tragic fire that burned one of our record storage facilities outside Buenos Aires earlier this month. We're deeply saddened by the death of the very first responders who rushed to save our facility, as well as their colleagues injured while fighting the blaze. As reported, all Iron Mountain employees who worked in that facility are safe and accounted for. The building was equipped with both fire detection, as well as sprinkler systems, and we continue to work with authorities in participating fully in the investigation to understand what happened. Whilst this -- that is ongoing, our collective thoughts and prayers remain with the brave firefighters and their families and those injured fighting the blaze. I also wish to thank 4 employees of Iron Mountain who rushed into the fire to fight it until they were ordered to leave by the fire brigade. Their display of bravery, selflessness has been moving to all of us, and I am proud to be one of their colleagues. Turning now to performance of our business. We had a strong finish to the year. Financial results for the fourth quarter were in line with our expectations, excluding restructuring charges related to our organizational realignment. In addition, we achieved solid operating results as we advanced our strategy plan -- strategic plan to sustain the durability of our high-return business in developed markets, expanded into high-growth emerging markets and evaluated investment opportunities in promising emerging businesses. Total revenue for the quarter was USD 769 million, excluding charges of $19 million related to our organizational restructuring, which were in line the amount previewed in our third quarter report. Adjusted OIBDA was $214 million and adjusted earnings per share was $0.22 per share for the quarter. The execution of our reorganization went as planned, and we continue to maintain good cost discipline in the wake of these changes. It is early, but we expect the combination of these organizational changes, enhanced enterprise cost controls and the adjusted OIBDA improvement achieved in our International businesses to support our continued high level of profitability. In our International business, all regions ended the year in line with or ahead of expectations to deliver the adjusted OIBDA improvement target of 25% established 3 years ago. To put that into perspective, this achievement represents improvement of roughly USD 100 million in annualized OIBDA over that time frame. Our fourth quarter results were slightly impacted by foreign currency fluctuations and decreases in paper pricing. We continue to monitor these factors as we move into 2014. But at present, the impact is not significant enough to warrant adjustments to our 2014 full year outlook. Overall, business fundamentals for the fourth quarter, excluding restructuring charges, were in line with our expectations and fairly consistent with trends in the recent quarters. Constant dollar storage rental growth for the quarter was quite strong at 4.9%, driven by 12.5% growth in International and consistent 2.2% growth in North America. Total storage rental internal growth was 1.3% in the fourth quarter. This growth rate was impacted by contract renewals and some upfront costs associated with competitive win. Our outlook for storage rental internal growth in 2014 remains consistent with the 2% to 2.5% level we've seen in recent periods. Flow through from acquisition activity earlier in the year was a meaningful growth driver. We continue to view acquisitions as an important element of our strategy to extend our durable storage rental revenue. We closed on more than USD 320 million of transactions globally during the year whilst building a robust pipeline of additional opportunity. In all cases, our M&A activities must exceed our cost capital and follow our return on invested capital guideline. In developed markets, our leading platform of people, properties and services allows us to quickly and accretively integrate acquisitions and achieve targeted returns. During the fourth quarter, we closed on our acquisition of Cornerstone Records Management in the U.S. As we work through the integration of Cornerstone, revenue for the period -- partial period was just shy of our target, whilst OIBDA contribution came in slightly ahead of expectations. Additionally, the first storage facility consolidation from this acquisition occurred in late January, and we have several more plans for the first half of the year, helping us to more quickly realize the integration benefits versus our original plan. As we've noted, we expect this transaction to build attractive bold and economic ROIC of [ph] 10% plus, which translates into the mid-teens in terms of equity returns. In emerging markets, our strategy remains to acquire or partner with local storage companies to expand our market leadership, enhance returns and capture the initial wave of records outsourcing in these markets. These acquisitions also provide new business from local customers and deepen our relationships with multinational customers who increasingly seek the security and efficiency that can be gained by consolidating records and information management with one global provider. Late in the quarter, we completed the acquisition of Databox in China. Whilst a relatively small transaction, this deal provides its platform from which we can thoroughly investigate the broader market opportunity and learn from our new customers and employees. It also provides entry into several key cities, including Shanghai, Beijing, Guangzhou, Chengdu and Chongqing, which are in addition to our current locations in China, mainly Hong Kong and Shenzhen. This transaction is addition to 4 deals we successfully on-boarded in Latin America in 2013, which will bring in roughly USD 60 million in annualized revenue. In all cases, we are on track with our business models, which are based upon exceeding risk-adjusted hurdle rates, which exceed our cost of capital. We have a strong pipeline of additional opportunities in emerging markets. Whilst these markets represent just 10% of our total business today with a 23% increase in constant dollar storage rental growth for the year, they are an important part of our long-term growth strategy and offer significant expansion potential. With regard to emerging businesses, we are on track construction of our first data center outside of Boston and expect to bring it online before the end of the second quarter. As we noted in our 2014 guidance, we expect to invest roughly USD 40 million in this business in 2014, doing so in phases to minimize risk. And our recent wins and pipeline of deals support our capital plan for the year. It's early days, but at present, pricing and returns appear healthy in our target segments. We'll have more on this emerging business in our Investor Day in late March, but we are pleased with the progress we're making and the response from both new as well as our current data protection customers. Let me briefly touch upon our preparations for REIT conversion. Our actual REIT capital and operating expenditures came in within the range we projected back in 2012, and we have successfully completed the internal work necessary to enable us to comply with REIT requirements. Following roughly 6 months of dry run and [ph] testing, we began operating in a manner consistent with being a REIT as of 1 January 2014. License to your appreciation [ph] and thanks to all who have worked tirelessly to get us to this point. By all measures, this is a massive undertaking, and we brought the project in on time and on budget. Of course, we don't control every step of the process, and we don't yet have final written rulings from the IRS on our outstanding private letter ruling or PLR. However, we took these steps to prepare us for a decision, help preserve the related tax benefits for our stockholders for 2014 and to be able to demonstrate REIT compliance on a look-back basis should we ultimately be successful in converting. As I noted on last quarter's call, we don't intend to provide interim updates as to the nature of our communications with the IRS, and we cannot make any assurances that the IRS will ultimately provide us with a favorable ruling on our racking structure or other requests. Once again, the REIT structure does not impact our strategy or how we execute it. It enhances our return. Our strategy continues to be focused on sustaining the durability of the business, maximizing free cash flow and supporting attractive stockholder returns regardless of whether or not we ultimately convert. We generate significant free cash flow, and the amount we have available pursuing strategic investment isn't appreciably different as a REIT or a C-Corp. We have many attractive opportunities to invest to grow the business over the long term and we'll do so prudently, consistent with our capital allocation focus. As we advance our strategic plan, I wish to reiterate that we are committed to enhancing long-term shareholder return under either a REIT or a C-Corp structure. Over the long term, we will strive for consistent, moderate dividend growth whilst permitting the flexibility to pursue high-return investment. As we look out to this year, we are reiterating our guidance, which assumes solid constant dollar revenue growth and adjusted OIBDA growth in line with the long-term goals we've talked about in the past. We see consistent trends for storage rentals in North America and a moderation in the rate of service activity decline. Internationally, we are improving our commercial focus as being a good trajectory as we move into 2014, driven by both organic growth and high-returning acquisition. To summarize, we had a solid quarter punctuated by the closing of additional acquisitions, achievement of further milestones related to the REIT preparedness and progress on the execution of our realignment and implementation of our strategic plan. We believe our plan will help us sustain the durability of the business and support long-term growth. Now I'd like to turn the call over to Rod.

Thanks, Bill, and thank you, everyone, for joining us today. Let's now turn to Slide 3, which highlights key messages of today's review. We had good results in quarter 4 supported by strong constant dollar storage rental growth and international profit gains, as well as benefits from recent acquisitions in Latin America and North America. Storage rental growth grew 5% on a constant dollar basis in the quarter supported by a consistent 2% gain in North America and 13% growth in International. Adjusted OIBDA performance was in line with expectations in Q4, driven by our International business, which achieved its 3-year margin improvement goal, and by sustained cost management. Included in our fourth quarter adjusted OIBDA and adjusted EPS is $19 million restructuring [ph] charges as discussed on our last earnings call. Looking at the full year, our revenue adjusted OIBDA, adjusted EPS results all landed in our guidance ranges. CapEx was a bit higher than originally expected, as we accelerated capital projects from 2014 into 2013. And free cash flow benefited from lower cash taxes due to timing of payments. Today, we are reiterating our 2014 full year guidance put forth at our Q3 earnings call. We continue to expect, call it, constant dollar growth of 2% to 4% of total revenues and 2% to 5% for adjusted OIBDA. Let's move on to Slide 4 to review our financial results in more detail. Slide 4 compares our results for this quarter to the fourth quarter of 2012. Q4 operating results were generally in line with our expectations and consistent with recent trends. Enterprise revenues were 3% on a constant dollar basis, as our International segment continues to produce strong result. International posted 10% constant dollar revenue growth supported by 13% storage rental growth, including benefits from our recent acquisitions in Colombia and Peru. North America posted flat constant dollar revenue growth, as 2% storage rental gains were offset by lower complementary service revenues. FX rate changes reduced revenue growth by approximately 130 basis points in the quarter. Adjusted OIBDA was $214 million, up 3%, excluding the $19 million restructuring charge. A key driver of profit performance was continued improvement in our International segments where adjusted OIBDA, excluding $4 million of restructuring charges, increased 32% year-on-year in Q4. Adjusted EPS for the quarter was $0.15 per share or $0.22 per share, excluding restructuring charges, compared to $0.20 in Q4 2012. Adjusted OIBDA and adjusted EPS, excluding the impact of costs associated with the REIT conversion, which reduced reported EPS by $0.04 per share net of tax. GAAP earnings per share, $0.25, including $40 million of REIT costs, $11 million of other expense and a tax benefit related to foreign dividends, favorable all-in [ph] settlements and released certain valuation reserves. Our structural tax rate for the quarter was 39%. Let's now take a look -- close look at our revenue on Slide 5. Slide 5 shows the components building to our overall revenue growth. For the quarter, storage rental growth of 4.9% on a constant dollar basis drove overall revenue performance. Year-on-year global net volume growth was 5.8%, including a 4.5% benefit from our 2013 acquisition. North America reported 2.2% constant dollar storage rental growth, reflecting relatively flat records for management volume, pricing of just under 1% and benefits from our recent acquisition. North American pricing gains were below recent quarters, reflecting impacts from contract renewals and some upfront costs associated with competitive win. For the full year, pricing gains were 1.3%. International storage rental growth was 12.5% on a constant dollar basis for the quarter, reflecting a 29% growth in emerging markets supported by strong organic growth in [ph] benefits from acquisitions. Internal storage rental growth remained strong with a 6.3% gain in the quarter. Total service revenues, down 40 basis points on a constant dollar basis and International service growth, supported by acquisitions, was offset by North American service declines driven by lower complementary service revenues. Average paper prices declined 13% year-on-year, resulting in a $5 million less revenue in Q4. For the full year, average paper prices were down 10%. Overall, total internal growth was negative 1.1% in Q4 as 1.3% gains in storage rental was more than offset by 4.4% service declines. Let's now move to Slide 6 and review our full year results. Slide 6 looks at our full year 2013 performance compared to 2012. Our results reflect consistent business trends with reported revenue of $3.03 billion, up 2% on a constant dollar basis. Adjusted OIBDA, excluding restructuring charges of $23 million, was up 1% on a constant dollar basis. Adjusted EPS of $1.03 per share, down 15% compared to 2012. This reflects the impact of restructuring charges, full year impact of additional shares issued with a special dividend in November 2012 and higher interest expense. These impacts more than offset lower income tax expense. Capital spending for the year was $223 million, excluding $66 million of real estate and $23 million of REIT conversion capital. As a percent of revenues, CapEx, excluding real estate and REIT CapEx, is 7.4%. Capital spending finished slightly higher than guidance, as we accelerated certain projects, including sustainability projects from 2014 into 2013. Free cash flow for 2013 was $390 million compared to $347 million last year. The year-on-year increase reflects lower cash taxes, which were partially offset by high capital spending. The 2013 adjusted OIBDA and adjusted EPS results here shown excludes $83 million of costs associated with the REIT conversion. These costs reduced [ph] reported EPS by approximately $0.30. In addition to the $23 million of REIT-related capital expenditures [ph], we paid $53 million in taxes towards our D&A REIT capital liability. All told, these items reduced free cash flow by $130 million. We've included a slide outlining the actual and expected REIT costs and related expenditures in the appendix for this presentation. Let's now turn to Slide 7 to review our results by segment. Slide 7 shows the metrics for each of our 3 segments comparing 2013 to 2012. Consistent with our business strategy, we're sustaining higher returns in our North American segments, where we continue to build our International segment, a significant driver of profit and cash flow gain. North America continues to deliver high profit and strong cash. For 2013, our North American business segment reported revenues of $2.2 billion. We sustained adjusted OIBDA margins of 41% as increased storage gross margins and SG&A savings offset restructuring costs and pressures from the lower service revenues. We're also sustaining capital efficiencies. We're spending 5.5% of revenues, including real estate. Our International segment continues to post strong constant dollar revenues, adjusted OIBDA and cash flow gain. Adjusted OIBDA increased 19% on a constant dollar basis, benefiting from solid global growth and cost improvement initiatives in Western European markets. International adjusted OIBDA margins have expanded more than 300 basis points, excluding the impacts of restructuring costs in 2013, as we achieved our goal of 25% International segment margin. Finally, corporate expenses were up compared to prior years driven by the restructuring costs and increase in people and professional fees. Let's now take a look at our debt statistic on Slide 8. Solid cash flow generation enabled us to maintain a sound balance sheet. We are well positioned in terms of cash and financing capacity. At quarter end, liquidity was more than $900 million with $120 million in cash and $820 million in additional borrowing capacity. As discussed on our last call, in the amendment of our credit agreements, we changed our consolidated leverage ratio for compliance purposes to a net total lease adjusted leverage ratio, which is an EBITDAR-based calculation that adds leases [ph] to our total debt. This better aligns with how rating agencies view our leverage. At the end of Q4, that ratio was 5.0 with a requirement not to exceed 6.5. To align with this new calculation, we're establishing a target of net total lease adjusted leverage range of 4 to 5. This equates to our previous range of 3 to 4, excluding lease financing. Our net total lease adjusted leverage ratio of 5.0x, which is at the high end of our target range, has increased over the past 3 years, as planned, to support shareholder payout, expenditures in connection with our proposed conversion to a REIT and recent acquisitions. Further, as previously stated, we expect leverage to temporarily exceed our target range in the short term due to costs associated with REIT conversion. Our strong cash flow for the quarter continued advance on [ph] our cash allocation strategy and our REIT conversion. In 2013, we paid $207 million in cash dividends and $159 million of REIT costs, including REIT-based CapEx and tax payments related to the depreciation of recapture. We are managing our balance sheet consistent with our strategy while advancing financial payout to [ph] shareholders, and we remain well positioned to fund our business plan. Let's now turn to Slide 9 for a review of our 2014 outlook. Slide 9 summarizes our 2014 operating outlook. As I mentioned earlier today, we're reiterating our full year 2014 guidance. We're expecting full year revenues of $3.09 billion to $3.17 billion and adjusted OIBDA of $930 million to $960 million. Our expectations for adjusted EPS and free cash flow remain the same as well. As we have been highlighting, we are incurring significant onetime operating capital costs associated with our potential conversion to a REIT. These costs relate to systems investments, legal and tax work, advisory fees and other miscellaneous costs to implement the proposed structure. We invested to ensure that we met the January 1, 2014, deadline in compliance with all REIT requirements. We have met that deadline. We were able to delay certain costs, primarily associated with additional country conversions, and now expect between $32 million and $47 million being heard [ph] in 2014, and we're tightening our guidance range to $185 million to $200 million of these REIT costs. We are also tightening the range for our depreciation recapture payments to $210 million to $225 million. We report -- we have included a table with these REIT-related costs in the appendix for your reference. That concludes our review. In summary, Q4 was a good quarter supported by strong international performance and the recent acquisition. Our full year performance was in line with our guidance. We continue to execute our business plan with the same high profit and cash flow in North America, driving strong growth and higher return in our International business. We continue to advance work in connection with REIT conversion as part of our long-term approach to enhance value creation for shareholders. Thank you. We'd now be happy to take questions.

[Operator Instructions] Our first question comes from Scott Schneeberger of Oppenheimer. Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division: Could you guys just provide us with some thoughts with regards to the margin kind of bouncing around the quarter? But congratulations on the 25% target achievement. What do you see going forward? What are the -- what could be better to help or be a hindrance as we look out into 2014 and beyond?

Is that question specifically related to International or the business as a whole? Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division: No, the International. I'm sorry if I didn't specify.

Yes, so on International, we expect further improvements in the International margin. Really, it's a continuation of the strategy that we've been having, and it builds leadership positions in the markets in which we operate. And from that, it enabled us to drive high margins off the back of it. So we see continued improvement on that side.

One thing, Scott, just to give you a bit of extra flavor to that is that what we're talking about is in terms of the current portfolio. But the other side of it, which we always say on the International side, is that we're constantly adding new -- well, I shouldn't say new markets, but new acquisitions in the pipeline. So as we -- it's a portfolio play if you will. So in other words that if we look at our most pure market [indiscernible], the markets where we've established some key positions that Rod had alluded to, is those returns already mimic what we see in North America, for instance. When we actually enter a new market and -- or build out our capacity market like what we're doing in Brazil, we see a regular input [ph] in terms of those margins over time. But we also need to understand that as we actually go into new markets that we start at one end of the spectrum and then build it to the other. The only thing I would just say is in all those cases, though, is we go in to the view that we have to exceed even on the initial acquisitions our return on -- our hurdle in terms of return on capital. But over time, even beyond the initial returns on invested capital, we see the returns start mimicking what we get. North America hasn't hit those market leading positions if that makes sense. Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division: Switching up a bit. Service is still moving along. I've realized a little bit of headwind for paper prices. Could you speak a little bit to trends you're seeing with retrievals, with construction? And then also, evident to the special project, that could be picking up, and historically, I think you view that as potentially a precursor for more activity in the business and including [ph] the storage. Just any color you can provide along this line.

Yes, I mean, we did see some moderation in the rate of decline of service activities as we ended [ph] second half of 2013. And that continues. And as we worked our way through into Q4, I think we're nervous about calling it a big fundamental shift in the business in terms of a change in trend. But at least, there was continuation of a slightly more positive sign through Q4.

Yes. And then coming, Scott, to your question about DMS or related service and how it drives storage, I think that there's kind of 2 parts to that. I think, first and foremost, is that our customers are much more interested in solutions that we provide around their whole information management requirement, hence the reason why, over a year ago, we started going to a much more vertical process in terms of how we align our sales force to our customers. We've talked about that on previous calls in terms of the industry verticals that we had. And one of the main reasons for that is to be able to address for our larger enterprise customers those requirements that they have around a total solution. So there, you're absolutely right. I think, especially in emerging markets, we have seen a very strong link in terms of providing those services in additional storage. But I think this is -- it's very much related to our vertical strategy in addressing a solution around information management beyond just storing the physical document or electronic information.

Our next question comes from George Tong of Piper Jaffray.

Storage rental internal growth this quarter decelerated to 1.0% [ph], which is below your 2%-plus growth in prior quarters. Is this something we should be concerned about?

I think what we saw in Q4 was there was a number of pricing actions that we took around some contract wins and some contract renewals, which resulted in a number of payments that we did announce that will be made in the beginning of the contract. We sort of had a slight dampening effect in Q4. I think for the outlook for 2014, we're expecting to get back more to the sort of 2% range we've seen historically.

Got it. That's very helpful. And then switching gears to the Wholesale Data Center business. Could you just give us a little bit of color there in terms of initiatives? How much capital you have planning -- are you planning to allocate, how much customer commitments you have lined up?

Okay. So I think on that, George, is that -- I think we're still consistent with the guidance that we've given previously, that we're allocating about USD 40 million worth of CapEx for 2014. And the way you should think about that is about 80-20. Now the 80% of that is linked to strong or high visibility around customer commitments or requirements. 20% is, what I would call, kind of fundamental infrastructure. So we're still very much driven by making sure that we have customers that are leading the vast majority of our CapEx in that business.

Our next question comes from the line of Kevin McVeigh of Macquarie.

Just to circle back to the core services. What are you modeling for paper prices in '14, number one? And then number two, was there any weather impact? Because it seems like between a $5 million headwind from paper in Q4, there was probably some weather-related impact, I'd imagine, on the service activity levels. It's probably firmer than what those numbers suggest. So I'm trying to reconcile why we're headed into, call it, a bottom, when it seems like fundamentals are improving pretty steadily there.

Maybe I'll start with the paper price. We're not calling really any up or down on that but started off as paper. We saw $133 a ton [ph] in Q4, baked in [ph] our projections. We're going to project that forward as opposed to making extrapolations up or down. SO obviously, if it was to improve, that will good. If it goes down further [indiscernible] is the negative. So that's kind of how we view the outlook. In terms of service...

Yes. And Kevin, on the service side, we did see some weather-related impact. It's the winter that keeps giving in the Northeast, especially tough on, actually, throughout the country. So we have seen some of that, but we don't try to project much into that. I think that the -- I think that's fair to say. But I think also, if you unpack our service revenue to a certain degree, as Rod said previously, if you look at the, what we would call, kind of the retrievals and re-files, which is the kind of the core part of our service revenue, we do see a flattening out of the decreasing trend in that part of the business. The paper trend as -- is probably the biggest single impact in terms of our service revenue for Q4, which Rod highlighted, down from previous year, associated with some specific projects, which are related to our document management services. But you're right to call out that weather has put a certain amount of headwinds on our service revenue in Q4.

Understood. And then, hey, Bill, in terms of the REIT, when is the last -- like what's the last day of 2014 where it can be retroactive to the first of the year? So I guess, said another way, what date does that PLR need to come in where it can still be effective for all of 2014?

I was waiting for a question on the REIT. We finally got it. It's in actually, I believe, October 2015. Rod will keep me honest, because it's when we actually have to file our return for 2014 with all the normal conventions. So it's roughly, I think, October 2015. Is that -- Rod, do you agree with that?

Yes, yes.

Got it. And then just one other thing on that. It looks like on the outlook, you pulled, for lack of a better word, in the Q3 slide deck, kind of the outlook at 2014 to 2016 across the REIT related and other expenditures. Now it's all coming into 2014. What drove that change? Is that just better visibility? Or any -- or am I overanalyzing anything there?

I think you're probably overanalyzing it and anything there [ph]. We're just now showing guidance for 2014. And then assuming that we have a positive ruling from the IRS is there will be ongoing REIT costs associated with not just supporting the normal recording for a REIT but also as we convert more countries from a TRS to a QRS. So I think you're overanalyzing. We're just showing the guidance now for 2014.

Helpful. And then what if -- if you do the E&P, would that be similar in mix in terms of stock versus cash as what you did the first time?

Yes, yes, exactly.

Our next question comes from the line of Andrew Steinerman of JPMorgan. Andrew C. Steinerman - JP Morgan Chase & Co, Research Division: I wanted to go back to storage rental internal growth, which decelerated like a point to the 1.3. I know you anticipate it to go back to 2, 2.5 for 2014. I just don't see why the type of pricing that you're talking about, initial pricing on contract, would only affect one quarter.

I think as Rod kind of alluded to on the first thing, Andrew, was it was related to a few specific large customer renewals and retroactive decreases we had to give associated with that, which we took the impact in Q4. So it's a -- very specific around a couple of large customers. And so we have visibility going out for the rest of the 2014 and can -- those are much more one-off adjustments. Andrew C. Steinerman - JP Morgan Chase & Co, Research Division: Right. And when you're in the renewal environment, even if you have to make those type of adjustments retroactively, are there price escalators built into the out years of the long-term contract that you're seeing recently?

It depends on the contract, Andrew. But you're right to say that, generally, we use the escalators that are high to CPI. But it depends on how long the contract is for and it's a mix. But generally, what you're saying is correct. Andrew C. Steinerman - JP Morgan Chase & Co, Research Division: Okay. And then lastly, when we talk about the fourth quarter, that's mostly just that price retroactivity that you just talked about. When you look at volume growth for storage internal growth, is there much change there?

No. Actually, the volume growth remains on track. It clearly is related to a couple specific, large contract renewals. Andrew C. Steinerman - JP Morgan Chase & Co, Research Division: Okay. And Rod, if you'll entertain this question because I get it a fair bit. It's about AFFO. And I know we talked about it at last Analyst Day, and the company presented around that. When you look at the company free cash flow guide of $300 million to $340 million, what factors should investors take into account when trying to calculate AFFO?

Andrew, Steve here. Look, you're talking about a couple of different things. But the biggest differences between what kind of a basic AFFO would and the way we report our free cash flow is obviously taxes. It is a full burden of taxes in our free cash flow does not exist, to a large extent, in an AFFO calculation. And additionally, the AFFO only subtracts out maintenance CapEx from the cash generated by the business. And in our free cash flow calculation, we subtract maintenance CapEx, as well as normal growth and other sorts of things, excluding the real estate. So those are the 2 big differences between the 2 cash flow base number. Andrew C. Steinerman - JP Morgan Chase & Co, Research Division: Okay. And just -- I know the figure that we used in the past when talking about maintenance CapEx, but is the definition for AFFO different than Iron Mountain's previous comments, older comments on how much of your CapEx is maintenance CapEx?

No, not really. The definition should be the same. We will -- in a REIT scenario, we will likely report it slightly different. We'll indicate what portion of that maintenance CapEx refers specifically to real estate and what portion refers to other on non-real estate assets. This should remain the same.

[Operator Instructions] Our next question comes from the line of Shlomo Rosenbaum of Stifel. Shlomo H. Rosenbaum - Stifel, Nicolaus & Company, Incorporated, Research Division: I just wanted to ask a little bit more about the Cornerstone acquisition, and I understand that the -- usually, the first stage of the acquisition is go ahead and integrate it in order to get the cost synergies. But I was just wondering if there are initiatives right now to kind of broaden the tail space over there and to try and go after the end market, which is not historically kind of a paramount end market?

Shlomo, this is Bill. Yes -- no, I think it's the question. I think that, that was one of the key attractiveness for us on Cornerstone. There were really kind of 2 aspects. One is the operational aspect, which we've highlighted, is that -- and we're actually nicely ahead of plan in terms of being able to get that. The other part was the fact that Cornerstone had a very good representation in the middle market part of the business. In part of our realignment of strategy, which we talked about, I think on the last call and throw in some more detail on the Investor Day, was really that is getting much more focused through the 19 regions that we've set up across North America to go after that middle market, and Cornerstone fits very nicely into that initiative. So that's where their sweet spot was. Shlomo H. Rosenbaum - Stifel, Nicolaus & Company, Incorporated, Research Division: So are you already -- you already started building out kind of the tails over there? Or are we still kind of early stages, it takes time to build the business?

No. We've already done that. In fact, we've already integrated a number of their sales people into our organization, both on the -- boots on the ground, as well as some of the performance management associated with that to go after that market. That's actually already complete. Shlomo H. Rosenbaum - Stifel, Nicolaus & Company, Incorporated, Research Division: Okay, and then just Slide 11, the $500 million to $1 billion of estimated E&P distribution, is that a total number? Or is this kind of an incremental number? Just want to understand that. For 2014.

That's incremental. Shlomo H. Rosenbaum - Stifel, Nicolaus & Company, Incorporated, Research Division: So it should be a total of $500 million to $1 billion that'll come in 2014 and a similar type of mix as to what we saw years ago?

Yes.

Our next question comes from the line of Dan Dolev of Jefferies.

I've got one quick housekeeping question and a follow-up. So would you mind, like in previous quarters, break out North America organic storage growth versus International in Q4?

We don't have enough time. We'll get back to you on it.

Another question, Recall, a big competitor of yours, reported results earlier this week. I think they had about 2.8% constant currency growth excluding M&A. Yours is probably like 1.5% or so lower in the last 2 quarters. Is there -- is that a mix issue? Is there anything else that we should be thinking about when comparing the companies? Any color would be great.

Well, obviously, Recall had less storages in America compared to International relative to what I know -- what we know without bearing on the result.

Yes, yes, because you have to understand, their record, their pure records management size in North America is about 1/10 of ours, so it's -- as Rod said, they're more biased towards the International market.

Our next question comes from the line of Manav Patnaik from Barclays.

I just had a question around the acquisitions pipeline. And obviously, you guys did a fair number, $320 million this year. How should we expect that based on what you're seeing today? Should that annual spend be in the next digit level relative to I think it was the 100 to 150 you guys have guided on the last Investor Day?

I think that the -- Manav, I think that the guidance that we gave at the last Investor Day is the right general expectation. I think at Investor Day, coming up in March, we'll give you a better view in terms of where we think we're going to end up over the next 3 years in terms of our acquisition pipeline because we have built a pretty robust pipeline mainly focused at the emerging markets. So our focus is to primarily grow the emerging markets which tend to be smaller in size but in higher growth areas. So I think that the guidance that we gave last time, I think, still is the right general guidance. And I think we'll give you more color in terms of what the impact of our acquisition pipeline should look like over the next 3 years when we all meet at the end of March.

Okay. And just on the Chinese acquisition, I mean, could you maybe just bring in the size of either that acquisition, your market, your presence relative today and what that could mean?

Yes. Actually, I just came back from China, so I can give you a little bit of an update on that, is that the -- first of all, it's a nice little acquisition. As we said, this is -- it's not massive, but it actually builds out our location across China and gives us a similar footprint as our other, what I would call, international competitors or a little bit bigger than some of our international competitors in China. So we feel pretty good about that. I think that the -- I think it's fair to say right now with our China footprint, we have a footprint that is attractive and meets the requirements of our international clients. But we're still not, what I would call, a buyer for SOEs, state-owned enterprise. And there, there are larger and local competitors that are serving state-owned enterprise markets. So right now, it's early days in China, but we feel good that we've now got a platform that, first of all, can satisfy our international customer base; and second, gives us a lot more intel on the ground in terms of better opportunities. But we're still what I wouldn't call a large book provider of services for the state-owned enterprise.

Okay, fair enough. And just one last one just sort of on the Recall now spinning off. Have you seen any change in strategy or more competition for these acquisitions that you're going after that [ph] at all?

I think, so far, we haven't. I mean, I know they announced a couple of acquisitions this past week. They -- I mean, they were always -- they were a good competitor before they spun out. They're, I'm sure, going to continue to be a good competitor now that they've spun out. So I can't say there'd be any change. I think that they will, I think, like us, be very disciplined in terms of the way that they allocate capital, especially now that they're a public company. So I don't see any major change or anything like that.

[Operator Instructions] Our next question comes from the line of Jay Remig [ph] of Wall Street Journal.

I just wanted to see if you could fill us in on the status on the investigation in the fire at your new warehouse in Buenos Aires and if there's any kind of indication of the cause of that fire, if they're trying to -- if there was possibly arson involved or not. If you could just kind of fill us in how that's going.

I think, first and foremost, is that we've been working with the authorities to assist in any way that we can to their investigation. So is this being led by, obviously, the local authorities. So we don't have any information other than what's already out there that has been released by the authorities. But I think it would be wrong for us to even speculate at this point. We can't really go beyond what we've said, it did have fire detection, fire suppression systems in the operation. We did have security guards on duty 24 hours, so there were people monitoring the facility. But this is clearly a very tragic event, and the only thing I would just add is that nobody spends more than we do in terms of trying to prevent these types of occurrences. But at this point, we're cooperating with the authorities. Like them, we want to find out what the root cause was.

I'm showing no further questions in the queue.

Okay. Well, thank you very much, operator. In summary, we had a good quarter and wrapped up a solid year, underscoring the durability of our storage rental business. We began to execute on our recent organization realignment and advance initiatives to extend the durability of our business. This included acquisitions in both the emerging and the developed markets that will generate attractive returns on our capital as we integrate these businesses into our core and additional investments in the emerging data center business. These initiatives are consistent with our continued focus on prudent capital allocation and maximizing total return, and we believe they will support sustainable long-term growth and allow us to deliver durable returns to our shareholders. We look forward to sharing more details with you at our upcoming Investor Day, and thank you for joining us this morning.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's call, and you may all disconnect. Have a great day, everyone.