-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FwSYnHM7E5IYA3I4fglORg6PvZVH/evr0/97Un6MZ7LYFzoN2oadps/WG79GhZNz CS3pEm3T+b/sHPMfC4DFKw== 0001036050-97-000107.txt : 19970418 0001036050-97-000107.hdr.sgml : 19970418 ACCESSION NUMBER: 0001036050-97-000107 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970402 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970417 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIERCE LEAHY CORP CENTRAL INDEX KEY: 0001020569 STANDARD INDUSTRIAL CLASSIFICATION: PUBLIC WAREHOUSING & STORAGE [4220] STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-09963 FILM NUMBER: 97582915 BUSINESS ADDRESS: STREET 1: 631 PARK AVE CITY: KING OF PRUSSIA STATE: PA ZIP: 19406 BUSINESS PHONE: 6109928200 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ____________________ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): April 2, 1997 ------------- Pierce Leahy Corp. ---------------------------------------------------- (Exact name of registrant as specified in its charter) New York 333-9963 23-2588479 - ---------------------------- ----------- ------------------ (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.) 631 Park Avenue King of Prussia, Pennsylvania 19406 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (610) 992-8200 -------------- ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS ------------------------------------ On April 2, 1997, Pierce Leahy Corp. (the "Company") completed a stock purchase of Records Management Services, Inc. ("RMS"), a provider of records storage and management services with operations in Arizona, California, Illinois, Indiana, Missouri, New Jersey, Ohio, Texas and Utah. The stock purchase was consummated pursuant to a Stock Purchase Agreement dated as of February 27, 1997 between the Company, RMS and certain shareholders of RMS (the "Agreement"). The terms of the stock purchase were negotiated on an arms-length basis. The purchase price was approximately $62 million, including the repayment of certain debt of RMS. The purchase price was financed by a borrowing under the Company's credit facility with Canadian Imperial Bank of Commerce and the several lenders parties thereto. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS ------------------------------------------------------------------ (a) Financial Statements of Businesses Acquired. Consolidated Financial Statements of Records Management Services, Inc.: Report of Independent Public Accountants Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Shareholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements (b) Pro Forma Financial Information. Pro Forma Consolidated Financial Statements (unaudited): Basis of Presentation Pro Forma Consolidated Balance Sheet Pro Forma Consolidated Statement of Operations Notes to Pro Forma Consolidated Financial Statements (c) Exhibits. The following exhibits are filed as part of this Report: 10. Stock Purchase Agreement dated as of February 27, 1997 between the Company, Records Management Services, Inc. and certain shareholders of Records Management Services, Inc. (incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996). -2- INDEPENDENT AUDITORS' REPORT To the Board of Directors of Records Management Services, Inc. and Subsidiaries: We have audited the accompanying consolidated balance sheet of Records Management Services, Inc. and subsidiaries (the "Company") as of September 30, 1996, and the related consolidated statements of operations, shareholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Records Management Services, Inc. and subsidiaries as of September 30, 1996, and the results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. As described in Note 1, the Company changed its method of accounting for customer acquisition costs effective October 1, 1995. DELOITTE & TOUCHE LLP Chicago, Illinois November 22, 1996 (January 10, 1997 as to Note 11) -3- RECORDS MANAGEMENT SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, 1996 1996 ------------- ------------ (UNAUDITED) ASSETS CURRENT ASSETS: Cash.............................................. $ 453,842 $ 176,116 Accounts receivable (net of allowance for doubtful accounts of $51,433 and $51,523)................. 2,117,947 2,370,139 Carton inventory.................................. 120,940 133,444 Deposits.......................................... 179,909 120,120 Deferred income tax benefit (Note 9).............. 20,500 20,500 Other current assets.............................. 45,077 75,297 ----------- ----------- Total current assets............................ 2,938,215 2,895,616 PROPERTY AND EQUIPMENT--Net......................... 6,075,578 6,119,988 OTHER ASSETS: Investment in partnership (Note 3)................ 148,738 148,738 Deferred customer acquisition costs (Note 1)...... 444,905 443,298 Deferred income tax benefit (net of valuation allowance of $76,600) (Note 9)................... 359,300 318,300 Goodwill.......................................... 199,295 192,488 ----------- ----------- Total other assets.............................. 1,152,238 1,102,824 ----------- ----------- TOTAL............................................... $10,166,031 $10,118,428 =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable................................... $ 1,264,004 $ 1,257,884 Accrued liabilities................................ 1,319,690 1,200,627 Notes payable to shareholders (Note 6)............. 225,000 300,000 Current portion of notes payable (Note 6).......... 48,395 50,843 Current portion of capital lease obligations (Note 7)................................................ 288,579 279,500 ----------- ----------- Total current liabilities........................ 3,145,668 3,088,854 BANK REVOLVING CREDIT AND TERM LOANS (Note 6)........ 3,000,001 2,966,668 NOTES PAYABLE (Note 6)............................... 136,399 120,350 CAPITAL LEASE OBLIGATIONS (Note 7)................... 632,913 615,389 SHAREHOLDERS' EQUITY: Common stock and additional paid-in capital, no par; 1,000,000 shares authorized; 384,493 shares outstanding (Note 10)............................. 151,738 151,738 Loan to shareholder for purchase of common stock... (71,899) (71,899) Retained earnings.................................. 3,171,211 3,247,328 ----------- ----------- Total shareholders' equity....................... 3,251,050 3,327,167 ----------- ----------- TOTAL................................................ $10,166,031 $10,118,428 =========== ===========
See notes to consolidated financial statements. -4- RECORDS MANAGEMENT SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED YEAR ENDED DECEMBER 31 SEPTEMBER 30, ---------------------- 1996 1996 1995 ------------- ---------- ---------- (UNAUDITED) REVENUE: Storage................................ $10,533,695 $2,790,142 $2,474,880 Service................................ 6,515,598 1,608,370 1,315,189 ----------- ---------- ---------- 17,049,293 4,398,512 3,790,069 OPERATING EXPENSES: Cost of storage and service, excluding depreciation and amortization......... 10,885,766 2,649,841 2,290,967 Selling, general and administrative.... 5,176,789 1,289,888 1,214,588 Depreciation and amortization.......... 820,274 238,238 208,741 ----------- ---------- ---------- 16,882,829 4,177,967 3,714,296 ----------- ---------- ---------- Operating income..................... 166,464 220,545 75,773 OTHER INCOME (EXPENSE): Interest income........................ 4,113 3,965 2,243 Interest expense....................... (374,594) (107,393) (71,304) Loss on disposal of division........... (225,000) Equity in income of partnership........ 4,834 ----------- ---------- ---------- (590,647) (103,428) (69,057) ----------- ---------- ---------- INCOME (LOSS) BEFORE INCOME TAXES........ (424,183) 117,117 6,716 PROVISION (CREDIT) FOR INCOME TAXES (Note 9)...................................... (125,400) 41,000 2,500 ----------- ---------- ---------- NET INCOME (LOSS)........................ $ (298,783) $ 66,117 $ 4,216 =========== ========== ==========
See notes to consolidated financial statements. -5- RECORDS MANAGEMENT SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
COMMON STOCK AND ADDITIONAL LOAN PAID-IN TO RETAINED CAPITAL SHAREHOLDER EARNINGS TOTAL ---------- ----------- ---------- ---------- BALANCE, OCTOBER 1, 1995........ $ 61,864 $3,469,994 $3,531,858 Issuance of common stock upon exercise of options.......... 89,874 $(71,899) 17,975 Net loss...................... (298,783) (298,783) -------- -------- ---------- ---------- BALANCE, SEPTEMBER 30, 1996..... 151,738 (71,899) 3,171,211 3,251,050 Net income (unaudited)........ 76,117 76,117 -------- -------- ---------- ---------- BALANCE, DECEMBER 31, 1996 (UNAUDITED).................... $151,738 $(71,899) $3,247,328 $3,327,167 ======== ======== ========== ==========
See notes to consolidated financial statements. -6- RECORDS MANAGEMENT SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED YEAR ENDED DECEMBER 31 SEPTEMBER 30, -------------------- 1996 1996 1995 ------------- --------- --------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)........................ $ (298,783) $ 76,117 $ 4,216 Adjustments to reconcile net income (loss) to net cash flows from operating activities: Deferred income tax provision........... (167,400) 41,000 2,500 Depreciation and amortization........... 820,274 238,238 208,741 Equity in income of partnership......... (4,834) Provision for loss on disposal of division............................... 225,000 Changes in: Accounts receivable.................... 1,187 (252,192) 211,460 Carton inventory....................... 3,081 (12,504) (88,216) Deposits and other current assets...... 18,173 29,569 (223,015) Accounts payable....................... 192,400 (6,120) 247,931 Accrued liabilities.................... 357,868 (119,063) (14,776) ---------- --------- --------- Net cash flows from operating activities........................... 1,146,966 (4,955) 348,841 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment....... (1,262,224) (225,693) (516,945) Customer acquisition costs............... (522,950) (25,541) (105,600) Repayment of loans to unconsolidated partnership............................. 91,500 11,500 ---------- --------- --------- Net cash flows from investing activities........................... (1,693,674) (251,234) (611,045) CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (repayments) under term loan and revolving line of credit....... 925,001 (33,333) 237,000 Proceeds from notes payable to shareholders............................ 225,000 75,000 Proceeds from exercise of stock options.. 17,975 Payments under capital leases............ (217,007) (49,603) (16,014) Payment of notes payable................. (13,601) ---------- --------- --------- Net cash flows from financing activities........................... 950,969 (21,537) 220,986 ---------- --------- --------- NET CHANGE IN CASH......................... 404,261 (277,726) (41,218) CASH--Beginning of year.................... 49,581 453,842 49,581 ---------- --------- --------- CASH--End of year.......................... $ 453,842 $ 176,116 $ 8,363 ========== ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for: Interest................................ $ 334,089 $ 117,518 $ 70,179 Income taxes............................ 47,628 67,060 27,070 SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES--Year ended September 30, 1996: The Company incurred equipment capital lease obligations of $630,668. The purchase price of a 1995 acquisition was adjusted, reducing notes payable and goodwill by $30,206. The Company purchased all the tangible assets of McClatchy Business Archives for cash of $150,000 and notes payable of $150,000. The Company issued common stock valued at $89,874 for cash of $17,975 and a note receivable of $71,899.
See notes to consolidated financial statements. -7- RECORDS MANAGEMENT SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED SEPTEMBER 30, 1996 (INFORMATION FOR THE THREE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1995 IS UNAUDITED.) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS--Records Management Services, Inc. (Illinois) (the "Company") is a provider of business records management services including storage, consulting, micro-imaging and contract management services. PRINCIPLES OF CONSOLIDATION--The accompanying financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts, transactions and profits have been eliminated. The Company's 50% interest in an unconsolidated partnership is accounted for by the equity method. INTERIM FINANCIAL STATEMENTS--The consolidated balance sheet as of December 31, 1996 and the consolidated statements of operations and cash flows for the three months ended December 31, 1996 and 1995 are unaudited and, in the opinion of management of the Company, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results for those interim periods. The results of operations for the three months ended December 31, 1996 and 1995 are not necessarily indicative of the results to be expected for the full year. USE OF ESTIMATES--The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. PROPERTY AND EQUIPMENT--Depreciation is computed using accelerated and straight-line methods over the following estimated useful lives: buildings and improvements, 31.5 years; equipment, 3-12 years. GOODWILL--Goodwill represents the excess of purchase price of certain subsidiaries over the fair value of net assets acquired and is amortized on a straight-line basis over ten years. Accumulated amortization was $141,608 at September 30, 1996. CHANGE IN ACCOUNTING PRINCIPLE--Effective October 1, 1995, the Company began capitalizing customer acquisition costs. Costs, net of revenues received for the initial transfer of the records, related to the acquisition of large volume accounts (accounts consisting of 5,000 or more cartons) are capitalized and amortized over the life of the related contract (currently ranging from three to five years). Management believes such treatment to be preferable because it conforms with prevalent industry practice. As of September 30, 1996, acquisition costs of $522,950 have been capitalized, including $105,600 capitalized in the three months ended December 31, 1995; accumulated amortization totaled $78,045 at September 30, 1996. 2. ACQUISITION Effective November 30, 1995, the Company acquired all of the records storage business of McClatchy Business Archives ("McClatchy") of Houston, Texas, for $300,000 in a transaction accounted for as a purchase. The purchase price included $150,000 in cash and a $150,000 note payable to the seller (see Note 6). -8- RECORDS MANAGEMENT SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) YEAR ENDED SEPTEMBER 30, 1996 (INFORMATION FOR THE THREE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1995 IS UNAUDITED.) 3. UNCONSOLIDATED PARTNERSHIP The Company owns a 50% partnership interest in Certified Document Destruction of Illinois ("CDDI"). CDDI provided document destruction services to the Company and others until it sold its business to Crown Recycling & Waste Services, Inc. ("Crown") effective September 30, 1996 for approximately $500,000. The Company's 50% share of the gain recognized on the sale was $53,581 and its 50% share of CDDI's operating loss for fiscal year 1996 was $48,747. In connection with the sale agreement, the Company agreed to provide at least 15 million pounds of material for destruction or disposal by Crown during the five-year period ending September 30, 2001 for a total cost, based on current market prices, of approximately $600,000. 4. DISPOSAL OF GEORGIA DIVISION The Company closed the Georgia division effective September 30, 1996. Existing assets will be transferred to other divisions. Property rental agreements were terminated and approximately $225,000 was accrued at September 30, 1996 for these and other costs. 5. BALANCE SHEET INFORMATION Property and equipment as of December 31, 1996 comprises the following: Land............................................................ $ 164,804 Buildings and improvements...................................... 2,645,666 Equipment....................................................... 9,415,568 ----------- 12,226,038 Accumulated depreciation........................................ (6,150,460) ----------- Property and equipment--net..................................... $ 6,075,578 =========== Accrued liabilities as of September 30, 1996 comprise the following: Payroll......................................................... $ 246,327 Real estate taxes............................................... 272,791 401(k) plan contributions....................................... 335,094 Disposal of Georgia division.................................... 225,000 Other........................................................... 240,478 ----------- Total........................................................... $ 1,319,690 ===========
6. DEBT Effective December 1, 1995, the Company entered into a $2,000,000 secured term loan (the "Term Loan") agreement and a $1,200,000 secured revolving line of credit agreement (the "Line") with a bank. The Term Loan and the Line (collectively, the "Loans") bear interest due monthly at the prime rate plus 1%. The Term Loan also requires monthly principal payments of $11,111. All unpaid principal is due February 1, 1997. At September 30, 1996, total outstanding borrowings were $3,000,001. The Term Loan is secured by first mortgages on certain real estate owned by the Company. The Line is secured by a first priority lien on all of the Company's assets. The Loans are cross-collateralized and cross-defaulted. -9- RECORDS MANAGEMENT SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) YEAR ENDED SEPTEMBER 30, 1996 (INFORMATION FOR THE THREE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1995 IS UNAUDITED.) See Note 11 regarding refinancing of the Loans. The $150,000 note payable issued in connection with the purchase of McClatchy bears interest at 9% per annum and is payable in eight annual installments of principal and interest of $27,101 (see Note 2). The $34,794 balance of a note payable issued in connection with a fiscal year 1995 acquisition is payable upon demand. Annual maturities of notes payable amount to $48,395 for the year ending September 30, 1997 and range from $15,000 to $19,200 for the succeeding four years. In 1996, certain shareholders agreed to loan $300,000 to the Company, of which $225,000 was advanced prior to September 30, 1996. The notes bear interest at 11% per annum and are due on September 30, 1997. 7. LEASING ARRANGEMENTS The Company has operating lease agreements for warehouse space expiring at various dates through 2004. Leases covering a portion of the total leased space are with entities controlled by directors and shareholders of the Company. The leases contain renewal options for additional periods and generally provide for rent adjustments based on changes in the Consumer Price Index and actual real estate taxes and interest. The Company has guaranteed payment of all principal and interest due on a loan payable by Morris West Limited Partnership ("Morris West"), which is owned by certain directors and shareholders of the Company, to LaSalle National Bank in the amount of $640,000. Morris West is one of the related entities from which the Company leases warehouse space. The estimated future minimum rental payments required under the operating leases as of September 30, 1996 are as follows:
RELATED UNRELATED FISCAL YEAR ENTITIES ENTITIES TOTAL ----------- ---------- ---------- ---------- 1997........................................ $ 504,833 $ 913,224 $1,418,057 1998........................................ 314,833 866,368 1,181,201 1999........................................ 241,558 736,601 978,159 2000........................................ 69,833 656,319 726,152 2001........................................ 69,833 656,319 726,152 Thereafter.................................. 151,305 1,460,228 1,611,533 ---------- ---------- ---------- Total................................... $1,352,195 $5,289,059 $6,641,254 ========== ========== ==========
During fiscal year 1996, the Company recorded rent expense totaling $1,638,953, including $732,900 of rent to related entities. -10- RECORDS MANAGEMENT SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) YEAR ENDED SEPTEMBER 30, 1996 (INFORMATION FOR THE THREE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1995 IS UNAUDITED.) The Company has entered into capitalized long-term leasing agreements for shelving and various other equipment with an aggregate cost of $1,181,902 and accumulated amortization of $137,297 at September 30, 1996. The future minimum lease payments under the capitalized leases as of September 30, 1996 are as follows:
FISCAL YEAR ----------- 1997.............................................................. $ 389,591 1998.............................................................. 373,042 1999.............................................................. 268,283 2000.............................................................. 54,730 2001.............................................................. 29,983 --------- 1,115,629 Less amount representing interest................................. 194,137 --------- Present value of future minimum lease payments.................... 921,492 Less principal due in one year.................................... 288,579 --------- Total......................................................... $ 632,913 =========
8. EMPLOYEE BENEFIT PLAN Eligible employees participate in the Records Management Services, Inc. 401(k) Profit Sharing Plan. Company contributions, consisting of a discretionary profit-sharing contribution and a partial matching of employee contributions, totaled approximately $161,000 for the year ended September 30, 1996. 9. INCOME TAXES The components of the income tax benefit for the year ended September 30, 1996 are as follows: Current......................................................... $ 42,000 Deferred........................................................ (186,700) --------- (144,700) Change in valuation allowance................................... 19,300 --------- Total....................................................... $(125,400) ========= A reconciliation of the U.S. federal statutory rate of 35% to the effective rate of tax benefit for the year ended September 30, 1996 is as follows: Statutory rate.................................................. 35.0% Nondeductible expenses.......................................... (2.8) Adjustment of valuation allowance............................... (4.5) Other, net...................................................... 1.9 --------- Effective rate.................................................. 29.6% =========
-11- RECORDS MANAGEMENT SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) YEAR ENDED SEPTEMBER 30, 1996 (INFORMATION FOR THE THREE-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1995 IS UNAUDITED.) The components of deferred tax assets as of September 30, 1996 are as follows: Current: Allowance for doubtful accounts................................. $ 20,500 ======== Long-term: AMT credit carry-forwards....................................... $100,500 Net operating loss carry-forwards............................... 522,100 Accrued expenses................................................ 222,800 Accumulated depreciation........................................ (372,600) Other........................................................... (36,900) Valuation allowance............................................. (76,600) -------- Total......................................................... $359,300 ========
The valuation allowance relates to state operating loss carry-forwards of subsidiaries that have not achieved profitable operations. 10. STOCK OPTIONS In March 1996, the president of the Company exercised an option to purchase 4,993 shares of the Company's common stock at $18.00 per share in exchange for cash of $17,975 (20%) and a note payable in the amount of $71,899 (80%). The note bears interest at 6% per annum and requires monthly payments of principal and interest of $607 from October 1996 until September 2002 when the remaining principal ($51,143) is due. The president of the Company holds two other options, each to purchase 4,993 shares at $12.00 per share. One option expires July 31, 1997, while the other expires September 30, 1998. 11. SUBSEQUENT EVENTS On January 10, 1997, the Company entered into a $2,500,000 secured term loan agreement and a $1,500,000 secured revolving line of credit agreement bearing interest at the prime rate. Proceeds were used to repay the existing Term Loan and Line. The Term Loan requires monthly principal payments of $33,334. All unpaid principal of both loans is due June 30, 1998. The Term Loan is secured by certain equipment of the Company. The Line is secured by the Company's accounts receivable. The loans are cross-collateralized and cross-defaulted. In December 1996, the Company issued another option to the president of the Company to purchase 4,993 shares at $12.00 per share. This option expires November 30, 1999. -12- PIERCE LEAHY CORP. ------------------ PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------- BASIS OF PRESENTATION --------------------- (Unaudited) ----------- The accompanying pro forma consolidated balance sheet as of December 31, 1996 and the related pro forma consolidated statement of operations for the year then ended gives effect to the acquisition of Records Management Services, Inc. ("RMS"), as described in Note 2, as if this transaction had occurred as of December 31, 1996, in the case of the pro forma consolidated balance sheet, and as of January 1, 1996, in the case of the pro forma consolidated statement of operations. It should be noted that the year end of Pierce Leahy Corp. (the "Company") is December 31. Therefore, the Company's historical information relates to the year ended December 31, 1996. The corresponding period for RMS is the fiscal year ended September 30, 1996. The pro forma consolidated financial statements have been prepared by management of the Company and should be read in conjunction with the historical consolidated financial statements of the Company, which have been previously filed in the Company's Form 10-K for the year ended December 31, 1996, and the historical financial statements of RMS, which are included elsewhere in this Form 8-K. The pro forma consolidated financial statements are based on certain assumptions and preliminary estimates which are subject to change. These statements do no purport to be indicative of the consolidated financial position or results of operations of the Company that might have occurred, nor are they indicative of future results. -13- PIERCE LEAHY CORP. ------------------ PRO FORMA CONSOLIDATED BALANCE SHEET--DECEMBER 31, 1996 ------------------------------------------------------- (Unaudited) -----------
Acquisition of -------------- Records Management Services, Inc. --------------------------------- Pro Forma Historical Historical Adjustments (Note 1) (Note 2) (Note 2) Pro Forma ------------- --------------- ------------ ------------- ASSETS CURRENT ASSETS: Cash $ 1,254 $ 454 $ - $ 1,708 Accounts receivable, net 17,828 2,118 - 19,946 Inventories 611 121 - 732 Prepaid expenses and other 688 245 (21) (b) 912 ----------- --------------- ---------- ------------ Total current assets 20,381 2,938 (21) 23,298 ----------- --------------- ---------- ------------ PROPERTY AND EQUIPMENT, net 113,134 6,076 4,424 (a) 123,634 ----------- --------------- ---------- ------------ OTHER ASSETS: Intangible assets, net 97,544 644 50,374 (b) 148,562 Other 3,761 508 (359) (b) 3,910 ----------- --------------- ---------- ------------ Total other assets 101,305 1,152 50,015 152,472 ----------- --------------- ---------- ------------ $ 234,820 $ 10,166 $ 54,418 $ 299,404 =========== =============== ========== ============ LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Current portion of $ 7,310 $ 562 $ (562) (c) $ 7,310 long-term debt Current portion of 466 - - 466 noncompete obligations Accounts payable 6,757 1,264 - 8,021 Accrued expenses 20,563 1,320 - 21,883 Deferred revenues 9,218 - - 9,218 ----------- --------------- ---------- ------------ Total current liabilities 44,314 3,146 (562) 46,898 LONG-TERM DEBT 209,330 3,769 58,231 (c) 271,330 NONCOMPETE OBLIGATIONS 317 - - 317 DEFERRED RENT 2,841 - - 2,841 DEFERRED INCOME TAXES 3,456 - - 3,456 TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (25,438) 3,251 (3,251) (d) (25,438) ----------- --------------- ---------- ------------ $ 234,820 $ 10,166 $ 54,418 $ 299,404 =========== =============== ========== ============
The accompanying notes are an integral part of this statement. -14- PIERCE LEAHY CORP. ------------------ PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS ---------------------------------------------- FOR THE YEAR ENDED DECEMBER 31, 1996 ------------------------------------ Unaudited ---------
Acquisition of Records Management Services, Inc. --------------------------------- Pro Forma Historical Historical Adjustments (Note 1) (Note 2) (Note 2) Pro Forma -------------- -------------- -------------- ----------- REVENUES: Storage $ 75,900 $ 10,534 $ - $ 86,434 Service and storage materials sales 53,848 6,515 - 60,363 -------------- -------------- -------------- ---------- Total revenues 129,748 17,049 - 146,797 -------------- -------------- -------------- ---------- OPERATING EXPENSES: Cost of sales (excluding depreciation and amortization) 73,870 10,886 - 84,756 Selling, general and administrative 20,007 5,172 - 25,179 Non-recurring charges 3,254 225 - 3,479 Depreciation and amortization 12,869 820 1,973 (e) 15,662 -------------- -------------- -------------- ---------- Total operating expenses 110,000 17,103 1,973 129,076 -------------- -------------- -------------- ---------- Operating income 19,748 (54) (1,973) 17,721 INTEREST EXPENSE 17,225 370 4,778 (f) 22,373 -------------- -------------- -------------- ---------- Income (loss) before income taxes 2,523 (424) (6,751) (4,652) INCOME TAXES - (125) 125 - -------------- -------------- -------------- ---------- Income (loss) before 2,523 (299) (6,876) (4,652) extraordinary item EXTRAORDINARY CHARGE--Loss on early extinguishment of debt 2,015 - - 2,015 -------------- -------------- -------------- ---------- NET INCOME (LOSS) $ 508 $ (299) $ (6,876) $ (6,667) =============== ============== ============== ==========
The accompanying notes are an integral part of this statement. -15- PIERCE LEAHY CORP. ------------------ NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------------- (Unaudited) ----------- 1. HISTORICAL: ----------- The historical balances of Pierce Leahy Corp. and its majority-owned subsidiary, Pierce Leahy Command Company (together, the "Company"), represent the consolidated balance sheet as of December 31, 1996 and the consolidated results of operations for the year then ended as reported in the consolidated financial statements which have been previously filed in the Company's Form 10-K. 2. ACQUISITION OF RECORDS MANAGEMENT SERVICES, INC.: ------------------------------------------------- On April 2, 1997, the Company acquired all of the capital stock of Records Management Services, Inc. ("RMS"). Total consideration paid at closing by the Company was approximately $62,000,000, including the repayment of certain debt of RMS. The acquisition has been accounted for using the purchase method of accounting. Under this method the purchase price is allocated to the assets and liabilities of RMS based on the fair values at the acquisition date. Such allocation has been based on estimates that may be revised at a later date. The purchase price exceeded the fair value of the net assets acquired by approximately $48,508,000, which has been recorded as goodwill and will be amortized on a straight-line basis over 30 years. The historical balances for RMS were derived from the historical balance sheet as of September 30, 1996 and the statement of operations for the year then ended, which are included elsewhere in this Form 8-K. The following pro forma adjustments for the acquisition of RMS are reflected in the pro forma consolidated balance sheet as of December 31, 1996 and the pro forma consolidated statement of operations for the year then ended: Unaudited Pro Forma Adjustments to Consolidated Balance Sheet- a. To record the step-up to the estimated fair value of land ($400,000), warehouse equipment ($7,000,000), and buildings ($3,100,000). b. Intangible assets of goodwill ($48,508,000), noncompete agreement ($2,000,000), and other intangibles ($510,000) result from the preliminary allocation of the purchase price. These intangibles are subject to adjustment based on the final allocation of the purchase price to the net assets acquired. Also, pre-existing intangibles ($644,000) and deferred income tax benefits ($380,000) were not allocated value in purchase accounting. -16- c. Reflects the Company's borrowing of $62,000,000 on its U.S. Revolver to fund the acquisition of RMS and the repayment of debt of RMS of $4,331,000. d. Reset the historical equity accounts of RMS. Unaudited Pro Forma Consolidated Statement of Operations- e. To record amortization expense of $1,973,000 relating to goodwill, noncompete agreement, and other intangible assets based upon the estimated useful lives of each intangible, plus depreciation expense of $474,000 relating to the step-up in the value of warehouse equipment and buildings. f. To record additional interest expense on the $62,000,000 of borrowings to fund the aquisition at a weighted average interest rate of approximately 8.3%. -17- SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: April 16, 1997 PIERCE LEAHY CORP. By: /s/ Douglas B. Huntley --------------------------------------------- Douglas B. Huntley, Vice President and Chief Financial Officer -18- EXHIBIT INDEX ------------- Exhibit No. Description of Document - ----------- ----------------------- 10. Stock Purchase Agreement dated as of February 27, 1997 between the Company, Records Management Services, Inc. and certain shareholders of Records Management Services, Inc. (incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996). -----END PRIVACY-ENHANCED MESSAGE-----