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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-Q

(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2008
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from                             to

Commission file number 1-13045

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IRON MOUNTAIN INCORPORATED
(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or other Jurisdiction of Incorporation or Organization)		23-2588479 (I.R.S. Employer Identification No.)
745 Atlantic Avenue, Boston, MA 02111 (Address of Principal Executive Offices, Including Zip Code)
(617) 535-4766 (Registrant's Telephone Number, Including Area Code)

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        Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a small reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý

Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company o

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

        Number of shares of the registrant's Common Stock at May 1, 2008: 201,039,252

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IRON MOUNTAIN INCORPORATED

Index

			Page
PART I—FINANCIAL INFORMATION
Item 1—Unaudited Consolidated Financial Statements
	Consolidated Balance Sheets at December 31, 2007 and March 31, 2008 (Unaudited)		3
	Consolidated Statements of Operations for the Three Months Ended March 31, 2007 and 2008 (Unaudited)		4
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2008 (Unaudited)		5
	Notes to Consolidated Financial Statements (Unaudited)		6
Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations			34
Item 3—Quantitative and Qualitative Disclosures About Market Risk			48
Item 4—Controls and Procedures			49
PART II—OTHER INFORMATION
Item 1A—Risk Factors			50
Item 2—Unregistered Sales of Equity Securities and Use of Proceeds			50
Item 6—Exhibits			50
Signatures			51

2

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Part I.     Financial Information

Item 1.    Unaudited Consolidated Financial Statements

IRON MOUNTAIN INCORPORATED

CONSOLIDATED BALANCE SHEETS

(In Thousands, except Share and Per Share Data)

(Unaudited)

						December 31, 2007			March 31, 2008
				ASSETS
Current Assets:
	Cash and cash equivalents					$	125,607		$	107,424
	Accounts receivable (less allowances of $19,246 and $18,656, respectively)						564,049			586,458
	Deferred income taxes						41,465			59,352
	Prepaid expenses and other						91,275			107,023
		Total Current Assets					822,396			860,257
Property, Plant and Equipment:
	Property, plant and equipment						3,522,525			3,574,326
	Less—Accumulated depreciation						(1,186,564	)		(1,239,995	)
		Net Property, Plant and Equipment					2,335,961			2,334,331
Other Assets, net:
	Goodwill						2,574,292			2,559,512
	Customer relationships and acquisition costs						480,403			478,102
	Deferred financing costs						34,030			32,673
	Other						60,839			61,704
		Total Other Assets, net					3,149,564			3,131,991
		Total Assets				$	6,307,921		$	6,326,579
			LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
	Current portion of long-term debt					$	33,440		$	25,790
	Accounts payable						208,672			151,222
	Accrued expenses						329,221			301,278
	Deferred revenue						194,344			203,015
		Total Current Liabilities					765,677			681,305
Long-term Debt, net of current portion							3,232,848			3,279,217
Other Long-term Liabilities							89,990			93,147
Deferred Rent							63,636			68,263
Deferred Income Taxes							351,226			360,230
Commitments and Contingencies (see Note 9)
Minority Interests							9,089			9,876
Stockholders' Equity:
	Preferred stock (par value $0.01; authorized 10,000,000 shares; none issued and outstanding)						—			—
	Common stock (par value $0.01; authorized 400,000,000 shares; issued and outstanding 200,693,217 shares and 200,966,683 shares, respectively)						2,007			2,010
	Additional paid-in capital						1,209,512			1,217,524
	Retained earnings						509,875			543,357
	Accumulated other comprehensive items, net						74,061			71,650
		Total Stockholders' Equity					1,795,455			1,834,541
		Total Liabilities and Stockholders' Equity				$	6,307,921		$	6,326,579

The accompanying notes are an integral part of these consolidated financial statements.

3

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IRON MOUNTAIN INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, except Per Share Data)

(Unaudited)

				Three Months Ended March 31,
				2007			2008
Revenues:
	Storage			$	352,165		$	404,317
	Service and storage material sales				280,347			345,067
		Total Revenues			632,512			749,384
Operating Expenses:
	Cost of sales (excluding depreciation and amortization)				295,005			347,751
	Selling, general and administrative				180,505			222,228
	Depreciation and amortization				57,172			69,530
	Loss on disposal/writedown of property, plant and equipment, net				37			3,545
		Total Operating Expenses			532,719			643,054
Operating Income					99,793			106,330
Interest Expense, Net					50,335			60,019
Other Income, Net					(7,723	)		(6,035	)
		Income Before Provision for Income Taxes and Minority Interest			57,181			52,346
Provision for Income Taxes					22,083			18,272
Minority Interest in Earnings of Subsidiaries, Net					391			592
		Net Income		$	34,707		$	33,482
Net Income per Share—Basic				$	0.17		$	0.17
Net Income per Share—Diluted				$	0.17		$	0.16
Weighted Average Common Shares Outstanding—Basic					199,230			200,871
Weighted Average Common Shares Outstanding—Diluted					201,416			203,421

The accompanying notes are an integral part of these consolidated financial statements.

4

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IRON MOUNTAIN INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

			Three Months Ended March 31,
			2007			2008
Cash Flows from Operating Activities:
	Net income		$	34,707		$	33,482
Adjustments to reconcile net income to cash flows from operating activities:
	Minority interests in earnings of subsidiaries, net			391			592
	Depreciation			51,768			61,396
	Amortization (includes deferred financing costs and bond discount of $1,511 and $1,247, respectively)			6,915			9,381
	Stock compensation expense			2,476			5,007
	Provision for deferred income taxes			2,162			7,272
	Loss on early extinguishment of debt			1,721			—
	Loss on disposal/writedown of property, plant and equipment, net			37			3,545
	Loss (Gain) on foreign currency and other, net			2,113			(3,462	)
Changes in Assets and Liabilities (exclusive of acquisitions):
	Accounts receivable			(4,895	)		(24,255	)
	Prepaid expenses and other current assets			(354	)		1,297
	Accounts payable			(6,135	)		(17,731	)
	Accrued expenses, deferred revenue and other current liabilities			8,866			(4,865	)
	Other assets and long-term liabilities			2,193			862
	Cash Flows from Operating Activities			101,965			72,521
Cash Flows from Investing Activities:
	Capital expenditures			(80,755	)		(93,787	)
	Cash paid for acquisitions, net of cash acquired			(19,312	)		(3,779	)
	Additions to customer relationship and acquisition costs			(3,267	)		(2,781	)
	Proceeds from sales of property and equipment and other, net			7,775			31
	Cash Flows from Investing Activities			(95,559	)		(100,316	)
Cash Flows from Financing Activities:
	Repayment of revolving credit and term loan facilities and other debt			(574,285	)		(294,728	)
	Proceeds from revolving credit and term loan facilities and other debt			142,284			302,895
	Net proceeds from sales of senior subordinated notes			435,818			—
	Debt financing (repayment to) and equity contribution from (distribution to) minority stockholders, net			(410	)		(71	)
	Proceeds from exercise of stock options and employee stock purchase plan			3,642			1,866
	Excess tax benefits from stock-based compensation			2,295			970
	Payment of debt financing costs and stock issuance costs			(508	)		(120	)
	Cash Flows from Financing Activities			8,836			10,812
Effect of Exchange Rates on Cash and Cash Equivalents				870			(1,200	)
Increase (Decrease) in Cash and Cash Equivalents				16,112			(18,183	)
Cash and Cash Equivalents, Beginning of Period				45,369			125,607
Cash and Cash Equivalents, End of Period			$	61,481		$	107,424
Supplemental Data:
Cash Paid for Interest			$	45,043		$	62,684
Cash Paid for Income Taxes			$	6,659		$	8,043
Non-Cash Investing Activities:
	Capital Leases		$	—		$	17,338
	Capital Expenditures		$	21,666		$	21,850

The accompanying notes are an integral part of these consolidated financial statements.

5

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(1) General

        The interim consolidated financial statements are presented herein without audit and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair presentation. Interim results are not necessarily indicative of results for a full year.

        The consolidated balance sheet presented as of December 31, 2007 has been derived from our audited consolidated financial statements. The unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been omitted pursuant to those rules and regulations, but we believe that the disclosures are adequate to make the information presented not misleading. The consolidated financial statements and notes included herein should be read in conjunction with the annual consolidated financial statements and notes for the year ended December 31, 2007 included in our Annual Report on Form 10-K dated February 29, 2008.

(2) Summary of Significant Accounting Policies

        a.     Principles of Consolidation

        The accompanying financial statements reflect our financial position and results of operations on a consolidated basis. Financial position and results of operations of Iron Mountain Europe Limited ("IME"), our European subsidiary, are consolidated for the appropriate periods based on its fiscal year ended October 31. All intercompany account balances have been eliminated or presented to reflect the underlying economics of the transactions.

        b.     Foreign Currency Translation

        Local currencies are considered the functional currencies for our operations outside the United States, with the exception of certain foreign holding companies, whose functional currency is the U.S. dollar. All assets and liabilities are translated at period-end exchange rates, and revenues and expenses are translated at average exchange rates for the applicable period, in accordance with Statement of Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation." Resulting translation adjustments are reflected in the accumulated other comprehensive items component of stockholders' equity. The gain or loss on foreign currency transactions, calculated as the difference between the historical exchange rate and the exchange rate at the applicable measurement date, including those related to (a) our 7¹/4% GBP Senior Subordinated Notes due 2014, (b) our 6³/4% Euro Senior Subordinated Notes due 2018, (c) the borrowings in certain foreign currencies under our revolving credit agreements, and (d) certain foreign currency denominated intercompany obligations of our foreign subsidiaries to us and between our foreign subsidiaries, are included in other expense (income), net, on our consolidated statements of operations. The total of such net gain amounted to $47 and $5,931 for the three months ended March 31, 2007 and 2008, respectively.

6

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

        c.     Goodwill and Other Intangible Assets

        We apply the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets." Under SFAS No. 142, goodwill and intangible assets with indefinite lives are not amortized but are reviewed annually for impairment or more frequently if impairment indicators arise. Separable intangible assets that are not deemed to have indefinite lives are amortized over their useful lives.

        We have selected October 1 as our annual goodwill impairment review date. We performed our annual goodwill impairment review as of October 1, 2007 and noted no impairment of goodwill. In making this assessment, we rely on a number of factors including operating results, business plans, economic projections, anticipated future cash flows, transactions and market place data. There are inherent uncertainties related to these factors and our judgment in applying them to the analysis of goodwill impairment. As of March 31, 2008, no factors were identified that would alter this assessment. When changes occur in the composition of one or more reporting units, the goodwill is reassigned to the reporting units affected based on their relative fair value. Our reporting units at which level we performed our goodwill impairment analysis as of October 1, 2007 were as follows: North America (excluding Fulfillment), Fulfillment, U.K., Continental Europe, Worldwide Digital Business (excluding Iron Mountain Intellectual Property Management, Inc. ("IPM")), IPM, South America, Mexico and Asia Pacific.

        Goodwill valuations have been calculated using an income approach based on the present value of future cash flows of each reporting unit. This approach incorporates many assumptions including future growth rates, discount factors, expected capital expenditures and income tax cash flows. Changes in economic and operating conditions impacting these assumptions could result in goodwill impairments in future periods.

        The changes in the carrying value of goodwill attributable to each reportable operating segment for the three month period ended March 31, 2008 are as follows:

		North American Physical Business			International Physical Business			Worldwide Digital Business			Total Consolidated
Balance as of December 31, 2007		$	1,717,700		$	597,195		$	259,397		$	2,574,292
Deductible Goodwill acquired during the period			1,387			—			—			1,387
Nondeductible Goodwill acquired during the period			—			97			—			97
Fair value and other adjustments, net of tax(1)			(4,707	)		(597	)		(543	)		(5,847	)
Currency effects			(9,025	)		(1,392	)		—			(10,417	)
Balance as of March 31, 2008		$	1,705,355		$	595,303		$	258,854		$	2,559,512

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(1)

Fair value and other adjustments primarily includes adjustments to record deferred tax liabilities of approximately $(5,449) and finalization of customer relationship and property, plant and equipment (primarily racking) allocations from preliminary estimates previously recorded of approximately $(1,628).

7

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

        The components of our amortizable intangible assets at March 31, 2008 are as follows:

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(1)

Included in other assets, net in the accompanying consolidated balance sheet.

        d.     Stock-Based Compensation

        We adopted SFAS No. 123R, "Share-Based Payment," ("SFAS No. 123R") effective January 1, 2006 using the modified prospective method. We record stock-based compensation expense, utilizing the straight-line method, for the cost of stock options and restricted stock (together, "Employee Stock-Based Awards").

        Stock-based compensation expense, included in the accompanying consolidated statements of operations, for the three months ended March 31, 2007 and 2008 was $2,476 ($1,930 after tax, or $0.01 per basic and diluted share) and $5,007 ($2,734 after tax, or $0.01 per basic and diluted share), respectively, for Employee Stock-Based Awards.

        SFAS No. 123R requires that the benefits associated with the tax deductions in excess of recognized compensation cost be reported as a financing cash flow. This requirement reduces reported operating cash flows and increases reported financing cash flows. As a result, net financing cash flows included $2,295 and $970 for the three months ended March 31, 2007 and 2008, respectively, from the benefits of tax deductions in excess of recognized compensation cost. We used the short form method to calculate the Additional Paid-in Capital ("APIC") pool. The tax benefit of any resulting excess tax deduction increases the APIC pool. Any resulting tax deficiency is deducted from the APIC pool.

Stock Options

        Under our various stock option plans, options were granted with exercise prices equal to the market price of the stock on the date of grant. The majority of our options become exercisable ratably over a period of five years and generally have a contractual life of 10 years, unless the holder's employment is terminated. Beginning in 2007, certain of the options we issue become exercisable ratably over a period of ten years and have a contractual life of 12 years, unless the holder's employment is terminated. As of March 31, 2008, 10-year vesting options represent 11.6% of total outstanding options. Our directors are considered employees under the provisions of SFAS No. 123R.

        The weighted average fair value of options granted for the three months ended March 31, 2007 and 2008 was $10.22 and $9.40 per share, respectively. The values were estimated on the date of grant

8

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

using the Black-Scholes option pricing model. The following table summarizes the weighted average assumptions used for grants in the respective period:

        Expected volatility was calculated utilizing daily historical volatility over a period that equates to the expected life of the option. The risk-free interest rate was based on the U.S. Treasury interest rates whose term is consistent with the expected life of the stock options. Expected dividend yield was not considered in the option pricing model since we do not pay dividends and have no current plans to do so in the future. The expected life (estimated period of time outstanding) of the stock options granted was estimated using the historical exercise behavior of employees.

        A summary of option activity for the three months ended March 31, 2008 is as follows:

		Options		Weighted Average Exercise Price			Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2007		11,996,635		$	21.01
Granted		667,347			28.40
Exercised		(269,216	)		7.13
Forfeited		(124,928	)		23.20
Expired		(41,939	)		6.75
Outstanding at March 31, 2008		12,227,899		$	21.73		7.6		$	57,593
Options exercisable at March 31, 2008		4,790,316		$	15.25		5.8		$	53,604

        The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2007 and 2008 was approximately $7,166 and $6,556, respectively. The aggregate fair value of stock options vested during the three months ended March 31, 2007 and 2008 was approximately $1,985 and $6,910, respectively.

Restricted Stock

        Under our various stock option plans, we may also issue grants of restricted stock. We granted restricted stock in July 2005, which had a 3-year vesting period, and December 2006 and December 2007, which had a 5-year vesting period. The fair value of restricted stock is the excess of the market price of our common stock at the date of grant over the exercise price, which is zero. Included in our stock-based compensation expense for the three months ended March 31, 2007 and 2008 is a portion of the cost related to restricted stock granted in July 2005, December 2006 and December 2007.

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

        A summary of restricted stock activity for the three months ended March 31, 2008 is as follows:

        The total fair value of shares vested for the three months ended March 31, 2007 and 2008 was $245 and $0, respectively.

Employee Stock Purchase Plan

        We offer an employee stock purchase plan in which participation is available to substantially all U.S. and Canadian employees who meet certain service eligibility requirements (the "ESPP"). The ESPP provides a way for our eligible employees to become stockholders on favorable terms. The ESPP provides for the purchase of our common stock by eligible employees through successive offering periods. We generally have two 6-month offering periods, the first of which begins June 1 and ends November 30 and the second begins December 1 and ends May 31. During each offering period, participating employees accumulate after-tax payroll contributions, up to a maximum of 15% of their compensation, to pay the exercise price of their options. Participating employees may withdraw from an offering period before the purchase date and obtain a refund of the amounts withheld as payroll deductions. At the end of the offering period, outstanding options are exercised, and each employee's accumulated contributions are used to purchase our common stock. The price for shares purchased under the ESPP is 95% of the fair market price at the end of the offering period, without a look back feature. As a result, we recognize no compensation cost for this plan. The ESPP was amended and approved by our stockholders on May 26, 2005 to increase the number of shares from 1,687,500 to 3,487,500. In the three months ended March 31, 2007 and 2008, there were no offering periods which ended under the ESPP and no shares were issued. The number of shares available for purchase at March 31, 2008 was 1,375,532.

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        As of March 31, 2008, unrecognized compensation cost related to the unvested portion of our Employee Stock-Based Awards was $73,721 and is expected to be recognized over a weighted-average period of 5.0 years.

        We generally issue shares for the exercises of stock options, issuance of restricted stock and issuance of shares under our ESPP from unissued reserved shares.

10

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

        e.     Income Per Share—Basic and Diluted

        In accordance with SFAS No. 128, "Earnings per Share," basic net income per common share is calculated by dividing net income by the weighted average number of common shares outstanding. The calculation of diluted net income per share is consistent with that of basic net income per share but gives effect to all potential common shares (that is, securities such as options, warrants or convertible securities) that were outstanding during the period, unless the effect is antidilutive.

        The following table presents the calculation of basic and diluted net income per share:

        f.      Revenue

        Our revenues consist of storage revenues as well as service and storage material sales revenues. Storage revenues consist of periodic charges related to the storage of materials or data (generally on a per unit basis). Service and storage material sales revenues are comprised of charges for related service activities and courier operations and the sale of software licenses and storage materials. Included in service and storage materials sales are related core service revenues arising from: (a) the handling of records including the addition of new records, temporary removal of records from storage, refiling of removed records, destruction of records, and permanent withdrawals from storage; (b) courier operations, consisting primarily of the pickup and delivery of records upon customer request; (c) secure shredding of sensitive documents; and (d) other recurring services including maintenance and support contracts. Our complementary services revenues, included in service and storage material sales, arise from special project work, including data restoration, providing fulfillment services, consulting services and product sales, including software licenses, specially designed storage containers, magnetic media including computer tapes and related supplies.

        We recognize revenue when the following criteria are met: persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable, and collectability of the resulting receivable is reasonably assured. Storage and service revenues are recognized in the month the respective storage or service is provided and customers are generally billed on a monthly basis on contractually agreed-upon terms. Amounts related to future storage or prepaid service contracts,

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

including maintenance and support contracts, for customers where storage fees or services are billed in advance are accounted for as deferred revenue and recognized ratably over the applicable storage or service period or when the service is performed. Storage material sales are recognized when shipped to the customer (as title has passed to the customer) and include software license sales. Sales of software licenses to distributors are recognized at the time a distributor reports that the software has been licensed to an end-user and all revenue recognition criteria have been satisfied.

        g.     Allowance for Doubtful Accounts and Credit Memo Reserves

        We maintain an allowance for doubtful accounts and credit memos for estimated losses resulting from the potential inability of our customers to make required payments and disputes regarding billing and service issues. When calculating the allowance, we consider our past loss experience, current and prior trends in our aged receivables and credit memo activity, current economic conditions, and specific circumstances of individual receivable balances. We consider accounts receivable to be delinquent after such time as reasonable means of collection have been exhausted. We charge-off uncollectible balances as circumstances warrant, generally, no later than one year past due.

        h.     Income Taxes

        Our effective tax rates for the three months ended March 31, 2007 and 2008 were 38.6% and 34.9%, respectively. We provide for income taxes during interim periods based on our estimate of the effective tax rate for the year. Discrete items and changes in our estimate of the annual effective tax rate are recorded in the period they occur.

        We account for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the tax and financial reporting basis of assets and liabilities and for loss and credit carryforwards. Valuation allowances are provided when recovery of deferred tax assets is not considered more likely than not.

        In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"), an interpretation of SFAS No. 109, which clarifies the accounting for uncertainty in income taxes recognized in a company's financial statements in accordance with SFAS No. 109. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We adopted the provisions of FIN 48 on January 1, 2007.

        The evaluation of a tax position in accordance with FIN 48 is a two-step process. The first step is a recognition process whereby the company determines whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The second step is a measurement process whereby a tax position that meets the more likely than not recognition threshold is calculated to determine the amount of benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

12

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

        The provisions of FIN 48 are to be applied to all tax positions upon initial adoption of this standard. Only tax positions that meet the more likely than not recognition threshold at the effective date may be recognized or continue to be recognized upon adoption of FIN 48. The cumulative effect of applying the provisions of FIN 48 should be reported as an adjustment to the opening balance of retained earnings for that fiscal year.

        We adopted the provisions of FIN 48 on January 1, 2007 and, as a result, we recognized a $16,606 increase in the reserve related to uncertain tax positions, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings. Additionally, we grossed-up deferred tax assets and the reserve related to uncertain tax positions in the amount of $7,905 related to the federal tax benefit associated with certain state reserves.

        We have elected to recognize interest and penalties associated with uncertain tax positions as a component of the provision for income taxes in the accompanying consolidated statements of operations. We recorded $656 and $250 for interest and penalties for the three months ended March 31, 2007 and 2008, respectively.

        i.      Fair Value Measurements

        In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles in the United States and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements, and is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Under SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115" ("SFAS No. 159"), entities are permitted to choose to measure many financial instruments and certain other items at fair value that previously were not required to be measured at fair value. We did not elect the fair value measurement option under SFAS No. 159 for any of these financial assets or liabilities.

        Relative to SFAS No. 157, the FASB issued FASB Staff Positions 157-1 ("FSP 157-1") and 157-2 ("FSP 157-2"). FSP 157-1 amends SFAS No. 157 to exclude SFAS No. 13, "Accounting for Leases," and its related interpretive accounting pronouncements that address leasing transactions, while FSP 157-2 delays the effective date of the application of SFAS No. 157 to fiscal years beginning after November 15, 2008 for all non-financial assets and non-financial liabilities that are recognized or disclosed at fair value in the financial statements on a non-recurring basis.

13

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

        We adopted SFAS No. 157 on January 1, 2008, the first day of fiscal year 2008, with the exception of the application of the statement to non-financial assets and non-financial liabilities. Although the adoption of SFAS No. 157 did not impact our financial condition, results of operations, or cash flows, we are now required to provide additional disclosures as part of our financial statements. Non-financial assets and non-financial liabilities for which we have not applied the provisions of SFAS No. 157 include those measured at fair value in goodwill impairment testing, asset retirement obligations initially measured at fair value and those initially measured at fair value in business combinations. We have various financial instruments that must be measured under the new fair value standard including certain marketable securities and derivatives. We currently do not have non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis. Our financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. A financial asset or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:

        Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.

        Level 2—Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

        Level 3—Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

        The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of March 31, 2008:

					Fair Value Measurements at March 31, 2008 Using
Description		Total Carrying Value at March 31, 2008			Quoted prices in active markets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)
Available for Sale Securities(1)		$	7,135		$	7,135		$	—		$	—
Derivative Liabilities(2)			1,038			—			1,038			—

---

(1)

Available for sale securities are measured at fair value using quoted market prices.

(2)

Derivatives are measured at fair value using market prices for the underlying hedged item in active markets.

14

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

        j.      New Accounting Pronouncements

        In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations" ("SFAS No. 141R"), and SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statement—an amendment to ARB No. 51" ("SFAS No. 160"). SFAS No. 141R and SFAS No. 160 will require (a) more of the assets acquired and liabilities assumed to be measured at fair value as of the acquisition date, (b) liabilities related to contingent consideration to be remeasured at fair value in each subsequent period, (c) an acquirer to expense as incurred acquisition-related costs, such as transaction fees for attorneys, accountants and investment bankers, as well as, costs associated with restructuring the activities of the acquired company, and (d) noncontrolling interests in subsidiaries initially to be measured at fair value and classified as a separate component of equity. SFAS No. 141R is effective and provided for prospective application for fiscal years beginning after December 15, 2008. SFAS No. 160 is required to apply retrospectively in comparative financial statements for fiscal years beginning after December 15, 2008. The impact of SFAS No. 141R and SFAS No. 160 is dependent upon the level of future acquisitions; however, they will generally result in (1) increased operating costs associated with the expensing of transaction and restructuring costs, as incurred, (2) increased volatility in earnings related to the fair valuing of contingent consideration through earnings in subsequent periods, and (3) increased depreciation, amortization and equity balances associated with the fair valuing of noncontrolling interests and their classification as a separate component of consolidated stockholders' equity.

        In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities—an Amendment of SFAS No. 133" ("SFAS No. 161"). SFAS No. 161 enhances required disclosures regarding derivatives and hedging activities, including enhanced disclosures regarding how: (a) an entity uses derivative instruments; (b) derivative instruments and related hedged items are accounted for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"); and (c) derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. Specifically, SFAS No. 161 requires:

•

Disclosure of the objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation;



•

Disclosure of the fair values of derivative instruments and their gains and losses in a tabular format;



•

Disclosure of information about credit-risk-related contingent features; and



•

Cross-reference from the derivative footnote to other footnotes in which derivative-related information is disclosed.

        SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008 and early adoption is permitted. We do not expect the adoption of SFAS No. 161 to have a material impact on our disclosures.

15

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(2) Summary of Significant Accounting Policies (Continued)

        k.     Use of Estimates

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements and for the period then ended. On an on-going basis, we evaluate the estimates used, including those related to accounting for acquisitions, allowance for doubtful accounts and credit memos, impairments of tangible and intangible assets, income taxes, stock-based compensation and self-insured liabilities. We base our estimates on historical experience, actuarial estimates, current conditions and various other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities and are not readily apparent from other sources. Actual results may differ from these estimates.

(3) Comprehensive Income

        SFAS No. 130, "Reporting Comprehensive Income," requires presentation of the components of comprehensive income, including the changes in equity from non-owner sources such as unrealized gains (losses) on hedging transactions, securities and foreign currency translation adjustments. Our total comprehensive income is as follows:

(4) Derivative Instruments and Hedging Activities

        SFAS No. 133 requires that every derivative instrument be recorded in the balance sheet as either an asset or a liability measured at its fair value. Periodically, we acquire derivative instruments that are intended to hedge either cash flows or values which are subject to foreign exchange or other market price risk, and not for trading purposes. We have formally documented our hedging relationships, including identification of the hedging instruments and the hedged items, as well as our risk management objectives and strategies for undertaking each hedge transaction. Given the recurring nature of our revenues and the long term nature of our asset base, we have the ability and the preference to use long term, fixed interest rate debt to finance our business, thereby preserving our

16

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(4) Derivative Instruments and Hedging Activities (Continued)

long term returns on invested capital. We target approximately 75% of our debt portfolio to be fixed with respect to interest rates. Occasionally, we will use interest rate swaps as a tool to maintain our targeted level of fixed rate debt. In addition, we will use borrowings in foreign currencies, either obtained in the U.S. or by our foreign subsidiaries, to naturally hedge foreign currency risk associated with our international investments. Sometimes we enter into currency swaps to temporarily hedge an overseas investment, such as a major acquisition, while we arrange permanent financing or to hedge our exposures due to foreign currency exchange movements related to our intercompany accounts with and between our foreign subsidiaries.

        In June 2006, IME entered into a floating for fixed interest rate swap contract with a notional value of 75,000 British pounds sterling and was designated as a cash flow hedge. This swap agreement hedged interest rate risk on IME's British pounds multi-currency term loan facility. The notional value of the swap declined to 60,000 British pounds sterling in March 2007 to match the remaining term loan amount outstanding as of that date and was terminated in the second quarter of 2007. For the three months ended March 31, 2007, we recorded additional interest income of $907 resulting from interest rate swap cash settlements and changes in fair value.

        In September 2006, we entered into a forward contract program to exchange U.S. dollars for 55,000 in Australian dollars ("AUD") and 20,200 in New Zealand dollars ("NZD") to hedge our intercompany exposure in these countries. These forward contracts settle on a monthly basis, at which time we enter into new forward contracts for the same underlying AUD and NZD amounts, to continue to hedge movements in AUD and NZD against the U.S. dollar. At the time of settlement, we either pay or receive the net settlement amount from the forward contract and recognize this amount in other expense (income), net in the accompanying statement of operations as a realized foreign exchange gain or loss. We have not designated these forward contracts as hedges. These forward contracts were not renewed in the third quarter of 2007. We recorded a realized loss in connection with these forward contracts of $1,861 for the three months ended March 31, 2007. At the end of each month, we mark the outstanding forward contracts to market and record an unrealized foreign exchange gain or loss for the mark-to-market valuation. For the three months ended March 31, 2007, we recorded an unrealized foreign exchange gain of $155 in other (income) expense, net in the accompanying statement of operations.

        In January 2007, we entered into forward contracts to exchange 124,368 U.S. dollars for 96,000 Euros and 194,000 Canadian dollars ("CAD") for 127,500 Euros to hedge our intercompany exposures with Canada and our subsidiaries whose functional currency is the Euro. In March 2007, in conjunction with the issuance of CAD denominated senior subordinated notes, the CAD for Euro swap was not renewed and was replaced with additional U.S. for Euro swaps. These forward contracts were not renewed in the third quarter of 2007. In May 2007, we entered into forward contracts to exchange 146,096 U.S. dollars for 73,600 in British pounds sterling to hedge our intercompany exposures with IME. These forward contracts settle on a monthly basis, at which time we may enter into new forward contracts for the same underlying amounts to continue to hedge movements in the underlying currencies. At the time of settlement, we either pay or receive the net settlement amount from the forward contract and recognize this amount in other expense (income), net in the accompanying statement of operations as a realized foreign exchange gain or loss. We have not designated these

17

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(4) Derivative Instruments and Hedging Activities (Continued)

forward contracts as hedges. We recorded a realized gain in connection with these forward contracts of $7,385 and $1,435 for the three months ended March 31, 2007 and 2008, respectively. At the end of each month, we mark the outstanding forward contracts to market and record an unrealized foreign exchange gain or loss for the mark-to-market valuation. For the three months ended March 31, 2007 and 2008, we recorded an unrealized foreign exchange loss of $151 and $1,038, respectively, in other (income) expense, net in the accompanying statement of operations.

        In the third quarter of 2007, we designated a portion of our 6³/4% Euro Senior Subordinated Notes due 2018 issued by IMI as a hedge of net investment of certain of our Euro denominated subsidiaries. As a result, we recorded $18,868 ($12,076, net of tax) of foreign exchange losses related to the mark to marking of such debt to currency translation adjustments which is a component of accumulated other comprehensive items, net included in stockholders' equity for the three months ended March 31, 2008.

(5) Acquisitions

        We account for acquisitions using the purchase method of accounting, and accordingly, the results of operations for each acquisition have been included in our consolidated results from their respective acquisition dates. Cash consideration for the various 2008 acquisitions was primarily provided through borrowings under our credit facilities and cash equivalents on-hand. The unaudited pro forma results of operations for the period ended March 31, 2008 are not presented due to the insignificant impact of the 2008 acquisitions on our consolidated results of operations.

        A summary of the consideration paid for acquisitions in 2008 and the allocation of the purchase price is as follows:

---

(1)

Included in cash paid for acquisitions in the consolidated statements of cash flows for the three months ended March 31, 2008 is additional purchase price consideration of $529 for acquisitions completed in prior years.

(2)

The weighted average lives of customer relationship assets associated with acquisitions in 2008 were 30 years.

(3)

Consisted primarily of accounts payable, accrued expenses and notes payable.

18

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(5) Acquisitions (Continued)

        Allocation of the purchase price for the 2008 acquisitions was based on estimates of the fair value of net assets acquired, and is subject to adjustment. The purchase price allocations of certain 2007 and 2008 transactions are subject to finalization of the assessment of the fair value of property, plant and equipment, intangible assets (primarily customer relationship assets), operating leases, restructuring purchase reserves, deferred revenue and deferred income taxes. We are not aware of any information that would indicate that the final purchase price allocations will differ meaningfully from preliminary estimates.

        In connection with each of our acquisitions, we have undertaken certain restructurings of the acquired businesses. The restructuring activities include certain reductions in staffing levels, elimination of duplicate facilities and other costs associated with exiting certain activities of the acquired businesses. The estimated cost of these restructuring activities were recorded as costs of the acquisitions and were provided in accordance with EITF No. 95-3, "Recognition of Liabilities in Connection with a Purchase Business Combination." We finalize restructuring plans for each business no later than one year from the date of acquisition. Unresolved matters at March 31, 2008 primarily include completion of planned abandonments of facilities and severance contracts in connection with certain acquisitions.

        The following is a summary of reserves related to such restructuring activities:

---

(1)

Includes adjustments to goodwill as a result of management finalizing its restructuring plans.

        At March 31, 2008, the restructuring reserves related to acquisitions consisted of lease losses on abandoned facilities ($2,751), severance costs ($128), and other exit costs ($1,544). These accruals are expected to be used prior to March 31, 2009, except for lease losses of $1,840, severance costs of $86, and other exit costs of $100, all of which are based on contracts that extend beyond one year.

19

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(6) Long-term Debt

        Long-term debt consists of the following:

		December 31, 2007						March 31, 2008
		Carrying Amount			Fair Value			Carrying Amount			Fair Value
New Revolving Credit Facility(1)		$	394,156		$	394,156		$	402,313		$	402,313
New Term Loan Facility(1)			408,500			408,500			407,475			407,475
81/4% Senior Subordinated Notes due 2011(2)(3)			71,809			71,790			71,814			71,611
85/8% Senior Subordinated Notes due 2013(2)(3)			447,981			453,844			447,975			452,353
71/4% GBP Senior Subordinated Notes due 2014(2)(3)			299,595			281,619			299,265			257,368
73/4% Senior Subordinated Notes due 2015(2)(3)			437,680			437,366			437,452			433,411
65/8% Senior Subordinated Notes due 2016(2)(3)			316,047			302,534			316,171			304,800
71/2% CAD Senior Subordinated Notes due 2017 (the "Subsidiary Notes")(2)(4)			178,395			172,151			171,203			160,930
83/4% Senior Subordinated Notes due 2018(2)(3)			200,000			210,750			200,000			207,500
8% Senior Subordinated Notes due 2018(2)(3)			49,692			50,000			49,699			49,500
63/4% Euro Senior Subordinated Notes due 2018(2)(3)			372,719			353,054			400,097			346,494
Real Estate Mortgages(5)			7,381			7,381			7,915			7,915
Seller Notes(5)			8,329			8,329			8,200			8,200
Other(5)			74,004			74,004			85,428			85,428
Total Long-term Debt			3,266,288						3,305,007
Less Current Portion			(33,440	)					(25,790	)
Long-term Debt, Net of Current Portion		$	3,232,848					$	3,279,217

---

(1)

The capital stock or other equity interests of most of our U.S. subsidiaries, and up to 66% of the capital stock or other equity interests of our first tier foreign subsidiaries, are pledged to secure these debt instruments, together with all intercompany obligations of foreign subsidiaries owed to us or to one of our U.S. subsidiary guarantors. The fair value of this long-term debt approximates the carrying value (as borrowings under these debt instruments are based on current variable market interest rates as of December 31, 2007 and March 31, 2008).

(2)

The fair values of these debt instruments is based on quoted market prices for these notes on December 31, 2007 and March 31, 2008, respectively.

(3)

Collectively referred to as the Parent Notes. Iron Mountain Incorporated ("IMI") is the direct obligor on the Parent Notes, which are fully and unconditionally guaranteed, on a senior subordinated basis, by substantially all of its direct and indirect wholly owned U.S. subsidiaries (the "Guarantors"). These guarantees are joint and several obligations of the Guarantors. Iron Mountain Canada Corporation ("Canada Company") and the remainder of our subsidiaries do not guarantee the Parent Notes.

(4)

Canada Company is the direct obligor on the Subsidiary Notes, which are fully and unconditionally guaranteed, on a senior subordinated basis, by IMI and the Guarantors. These guarantees are joint and several obligations of IMI and the Guarantors.

(5)

We believe the fair value of this debt approximates its carrying value.

20

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(6) Long-term Debt (Continued)

        We recorded a charge to other expense (income), net of $1,721 in the first quarter of 2007 related to the early retirement of a portion of the IMI term loans, representing the write-off of a portion of our deferred financing costs.

        On April 16, 2007, we entered into a new credit agreement (the "New Credit Agreement") to replace both the IMI revolving credit and term loan facilities of $750,000 and the IME revolving credit and term loan facilities of 200,000 British pounds sterling. On November 9, 2007, we increased the aggregate amount available to be borrowed under the New Credit Agreement from $900,000 to $1,200,000. The New Credit Agreement consists of revolving credit facilities, where we can borrow, subject to certain limitations as defined in the New Credit Agreement, up to an aggregate amount of $790,000 (including Canadian dollar and multi-currency revolving credit facilities) (the "new revolving credit facility"), and a $410,000 term loan facility (the "new term loan facility"). Our subsidiaries, Canada Company and Iron Mountain Switzerland GmbH, may borrow directly under the Canadian revolving credit and multi-currency revolving credit facilities, respectively. Additional subsidiary borrowers may be added under the multi-currency revolving credit facility. The new revolving credit facility terminates on April 16, 2012. With respect to the new term loan facility, quarterly loan payments of approximately $1,000 are required through maturity on April 16, 2014, at which time the remaining outstanding principal balance of the new term loan facility is due. The interest rate on borrowings under the New Credit Agreement varies depending on our choice of interest rate and currency options, plus an applicable margin. IMI guarantees the obligations of each of the subsidiary borrowers under the New Credit Agreement, and substantially all of our U.S. subsidiaries guarantee the obligations of IMI and the subsidiary borrowers. The capital stock or other equity interests of most of our U.S. subsidiaries, and up to 66% of the capital stock or other equity interests of our first tier foreign subsidiaries, are pledged to secure the New Credit Agreement, together with all intercompany obligations of foreign subsidiaries owed to us or to one of our U.S. subsidiary guarantors. We recorded a charge to other expense (income), net of approximately $5,703 in the second quarter of 2007 related to the early retirement of the IMI and IME revolving credit facilities and term loans, representing the write-off of deferred financing costs. As of March 31, 2008, we had $402,313 of outstanding borrowings under the new revolving credit facility, of which $179,750 was denominated in U.S. dollars and the remaining balance was denominated in CAD 227,500; we also had various outstanding letters of credit totaling $36,924. The remaining availability, based on IMI's leverage ratio, which is calculated based on the last 12 months' earnings before interest, taxes, depreciation and amortization ("EBITDA"), and other adjustments as defined in the New Credit Agreement and current external debt, under the new revolving credit facility on March 31, 2008, was $350,763. The interest rate in effect under the new revolving credit facility and new term loan facility were approximately 5.8% and 4.6%, respectively, as of March 31, 2008. For the three months ended March 31, 2007 and 2008, we recorded commitment fees of $450 and $343, respectively, based on the unused balances under our revolving credit facilities.

        The New Credit Agreement, our indentures and other agreements governing our indebtedness contain certain restrictive financial and operating covenants, including covenants that restrict our ability to complete acquisitions, pay cash dividends, incur indebtedness, make investments, sell assets and take certain other corporate actions. The covenants do not contain a rating trigger. Therefore, a change in our debt rating would not trigger a default under the New Credit Agreement and our indentures and

21

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(6) Long-term Debt (Continued)

other agreements governing our indebtedness. Our revolving credit and term loan facilities, as well as our indentures, use EBITDA based calculations as primary measures of financial performance, including leverage ratios. IMI's revolving credit and term leverage ratio was 4.5 and 4.4 as of December 31, 2007 and March 31, 2008, respectively, compared to a maximum allowable ratio of 5.5. Similarly, our bond leverage ratio, per the indentures, was 5.1 and 5.2 as of December 31, 2007 and March 31, 2008, respectively, compared to a maximum allowable ratio of 6.5. Noncompliance with these leverage ratios would have a material adverse effect on our financial condition and liquidity. We were in compliance with all debt covenants in material agreements as of March 31, 2008.

(7) Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors

        The following data summarizes the consolidating Company on the equity method of accounting as of December 31, 2007 and March 31, 2008 and for the three months ended March 31, 2007 and 2008.

        The Parent Notes and the Subsidiary Notes are guaranteed by the subsidiaries referred to below as the "Guarantors." These subsidiaries are 100% owned by the Parent. The guarantees are full and unconditional, as well as joint and several.

22

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(7) Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)

        Additionally, the Parent guarantees the Subsidiary Notes which were issued by Canada Company. Canada Company does not guarantee the Parent Notes. The other subsidiaries that do not guarantee the Parent Notes or the Subsidiary Notes are referred to below as the "Non-Guarantors."

				December 31, 2007
				Parent			Guarantors			Canada Company			Non- Guarantors			Eliminations			Consolidated
Assets
Current Assets:
	Cash and Cash Equivalents			$	—		$	27,955		$	15,529		$	82,123		$	—		$	125,607
	Accounts Receivable				—			365,626			33,900			164,523			—			564,049
	Intercompany Receivable				910,450			—			56,773			—			(967,223	)		—
	Other Current Assets				1,036			91,763			3,680			36,789			(528	)		132,740
		Total Current Assets			911,486			485,344			109,882			283,435			(967,751	)		822,396
Property, Plant and Equipment, Net					—			1,506,261			184,993			644,707			—			2,335,961
Other Assets, Net:
	Long-term Notes Receivable from Affiliates and Intercompany Receivable				1,991,357			1,000			—			—			(1,992,357	)		—
	Investment in Subsidiaries				1,682,963			1,404,005			—			—			(3,086,968	)		—
	Goodwill, Net				—			1,750,477			205,182			618,633			—			2,574,292
	Other				30,064			323,493			15,601			206,595			(481	)		575,272
		Total Other Assets, Net			3,704,384			3,478,975			220,783			825,228			(5,079,806	)		3,149,564
		Total Assets		$	4,615,870		$	5,470,580		$	515,658		$	1,753,370		$	(6,047,557	)	$	6,307,921
Liabilities and Stockholders' Equity
	Intercompany Payable			$	—		$	942,323		$	—		$	24,900		$	(967,223	)	$	—
	Current Portion of Long-term Debt				4,889			12,439			533			15,579			—			33,440
	Total Other Current Liabilities				61,250			472,865			36,878			161,772			(528	)		732,237
	Long-term Debt, Net of Current Portion				2,749,423			13,130			423,051			47,244			—			3,232,848
	Long-term Notes Payable to Affiliates and Intercompany Payable				1,000			1,991,357			—			—			(1,992,357	)		—
	Other Long-term Liabilities				3,853			385,647			23,821			92,012			(481	)		504,852
	Commitments and Contingencies
	Minority Interests				—			—			—			9,089			—			9,089
	Stockholders' Equity				1,795,455			1,652,819			31,375			1,402,774			(3,086,968	)		1,795,455
		Total Liabilities and Stockholders' Equity		$	4,615,870		$	5,470,580		$	515,658		$	1,753,370		$	(6,047,557	)	$	6,307,921

23

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(7) Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)

				March 31, 2008
				Parent			Guarantors			Canada Company			Non- Guarantors			Eliminations			Consolidated
Assets
Current Assets:
	Cash and Cash Equivalents			$	—		$	24,801		$	1,290		$	81,333		$	—		$	107,424
	Accounts Receivable				—			375,451			35,298			175,709			—			586,458
	Intercompany Receivable				943,808			—			50,417			—			(994,225	)		—
	Other Current Assets				101			124,857			2,564			38,853			—			166,375
		Total Current Assets			943,909			525,109			89,569			295,895			(994,225	)		860,257
Property, Plant and Equipment, Net					—			1,488,594			181,798			663,939			—			2,334,331
Other Assets, Net:
	Long-term Notes Receivable from Affiliates and Intercompany Receivable				2,022,200			1,000			—			—			(2,023,200	)		—
	Investment in Subsidiaries				1,718,419			1,438,846			—			—			(3,157,265	)		—
	Goodwill, Net				—			1,746,614			196,908			615,990			—			2,559,512
	Other				29,002			322,825			14,718			206,400			(466	)		572,479
		Total Other Assets, Net			3,769,621			3,509,285			211,626			822,390			(5,180,931	)		3,131,991
		Total Assets		$	4,713,530		$	5,522,988		$	482,993		$	1,782,224		$	(6,175,156	)	$	6,326,579
Liabilities and Stockholders' Equity
	Intercompany Payable			$	—		$	991,350		$	—		$	2,875		$	(994,225	)	$	—
	Current Portion of Long-term Debt				4,904			2,604			446			17,836			—			25,790
	Total Other Current Liabilities				63,631			400,807			27,939			163,138			—			655,515
	Long-term Debt, Net of Current Portion				2,805,601			12,921			399,239			61,456			—			3,279,217
	Long-term Notes Payable to Affiliates and Intercompany Payable				1,000			2,022,200			—			—			(2,023,200	)		—
	Other Long-term Liabilities				3,853			405,446			22,893			89,914			(466	)		521,640
	Commitments and Contingencies
	Minority Interests				—			—			—			9,876			—			9,876
	Stockholders' Equity				1,834,541			1,687,660			32,476			1,437,129			(3,157,265	)		1,834,541
		Total Liabilities and Stockholders' Equity		$	4,713,530		$	5,522,988		$	482,993		$	1,782,224		$	(6,175,156	)	$	6,326,579

24

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(7) Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)

				Three Months Ended March 31, 2007
				Parent			Guarantors			Canada Company			Non- Guarantors			Eliminations			Consolidated
Revenues:
	Storage			$	—		$	254,130		$	18,560		$	79,475		$	—		$	352,165
	Service and Storage Material Sales				—			187,518			19,566			73,263			—			280,347
		Total Revenues			—			441,648			38,126			152,738			—			632,512
Operating Expenses:
	Cost of Sales (Excluding Depreciation and Amortization)				—			194,604			20,504			79,897			—			295,005
	Selling, General and Administrative				(41	)		130,035			7,102			43,409			—			180,505
	Depreciation and Amortization				21			38,700			2,514			15,937			—			57,172
	Loss (Gain) on Disposal/Writedown of Property, Plant and Equipment, Net				—			21			(5	)		21			—			37
		Total Operating Expenses			(20	)		363,360			30,115			139,264			—			532,719
Operating Income					20			78,288			8,011			13,474			—			99,793
Interest Expense (Income), Net					45,481			(1,370	)		2,215			4,009			—			50,335
Other Expense (Income), Net					8,788			(6,491	)		4			(10,024	)		—			(7,723	)
	(Loss) Income Before Provision for Income Taxes and Minority Interest				(54,249	)		86,149			5,792			19,489			—			57,181
Provision for Income Taxes					—			16,961			2,167			2,955			—			22,083
Equity in the Earnings of Subsidiaries, Net of Tax					(88,956	)		(18,854	)		—			—			107,810			—
Minority Interest in (Losses) Earnings of Subsidiaries, Net					—			—			(348	)		739			—			391
		Net Income		$	34,707		$	88,042		$	3,973		$	15,795		$	(107,810	)	$	34,707

25

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(7) Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)

				Three Months Ended March 31, 2008
				Parent			Guarantors			Canada Company			Non- Guarantors			Eliminations			Consolidated
Revenues:
	Storage			$	—		$	284,382		$	23,607		$	96,328		$	—		$	404,317
	Service and Storage Material Sales				—			219,978			26,091			98,998			—			345,067
		Total Revenues			—			504,360			49,698			195,326			—			749,384
Operating Expenses:
	Cost of Sales (Excluding Depreciation and Amortization)				—			225,449			22,797			99,505			—			347,751
	Selling, General and Administrative				45			161,800			9,251			51,132			—			222,228
	Depreciation and Amortization				32			46,023			3,529			19,946			—			69,530
	Loss (Gain) on Disposal/Writedown of Property, Plant and Equipment, Net				—			3,245			(9	)		309			—			3,545
		Total Operating Expenses			77			436,517			35,568			170,892			—			643,054
Operating (Loss) Income					(77	)		67,843			14,130			24,434			—			106,330
Interest Expense (Income), Net					52,361			(1,576	)		8,080			1,154			—			60,019
Other Expense (Income), Net					8,574			(1,846	)		—			(12,763	)		—			(6,035	)
(Loss) Income Before Provision for Income Taxes and Minority Interest					(61,012	)		71,265			6,050			36,043			—			52,346
Provision for Income Taxes					—			12,690			2,054			3,528			—			18,272
Equity in the Earnings of Subsidiaries, Net of Tax					(94,494	)		(34,938	)		—			—			129,432			—
Minority Interest in Earnings of Subsidiaries, Net					—			—			—			592			—			592
		Net Income		$	33,482		$	93,513		$	3,996		$	31,923		$	(129,432	)	$	33,482

26

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(7) Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)

				Three Months Ended March 31, 2007
				Parent			Guarantors			Canada Company			Non- Guarantors			Eliminations			Consolidated
Cash Flows from Operating Activities:				$	(41,848	)	$	113,884		$	7,297		$	22,632		$	—		$	101,965
Cash Flows from Investing Activities:
	Capital expenditures				—			(58,567	)		(206	)		(21,982	)		—			(80,755	)
	Cash paid for acquisitions, net of cash acquired				—			(14,466	)		—			(4,846	)		—			(19,312	)
	Intercompany loans to subsidiaries				41,943			28			—			—			(41,971	)		—
	Additions to customer relationship and acquisition costs				—			(20	)		(97	)		(3,150	)		—			(3,267	)
	Proceeds from sales of property and equipment and other, net				—			55			—			7,720			—			7,775
		Cash Flows from Investing Activities			41,943			(72,970	)		(303	)		(22,258	)		(41,971	)		(95,559	)
Cash Flows from Financing Activities:
	Repayment of revolving credit and term loan facilities and other debt				(403,582	)		(2,674	)		(165,524	)		(2,505	)		—			(574,285	)
	Proceeds from revolving credit and term loan facilities and other debt				109,000			—			18,194			15,090			—			142,284
	Net proceeds from sales of senior subordinated notes				289,058			—			146,760			—			—			435,818
	Debt financing (repayment to) and equity contribution from (distribution to) minority stockholders, net				—			—			—			(410	)		—			(410	)
	Intercompany loans from parent				—			(42,427	)		(6,602	)		7,058			41,971			—
	Proceeds from exercise of stock options and employee stock purchase plan				3,642			—			—			—			—			3,642
	Excess tax benefits from stock-based compensation				2,295			—			—			—			—			2,295
	Payment of debt financing and stock issuance costs				(508	)		—			—			—			—			(508	)
		Cash Flows from Financing Activities			(95	)		(45,101	)		(7,172	)		19,233			41,971			8,836
Effect of exchange rates on cash and cash equivalents					—			—			(69	)		939			—			870
(Decrease) Increase in cash and cash equivalents					—			(4,187	)		(247	)		20,546			—			16,112
Cash and cash equivalents, beginning of period					—			16,354			762			28,253			—			45,369
Cash and cash equivalents, end of period				$	—		$	12,167		$	515		$	48,799		$	—		$	61,481

27

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(7) Selected Consolidated Financial Statements of Parent, Guarantors, Canada Company and Non-Guarantors (Continued)

				Three Months Ended March 31, 2008
				Parent			Guarantors			Canada Company			Non- Guarantors			Eliminations			Consolidated
Cash Flows from Operating Activities				$	(44,381	)	$	93,837		$	(1,562	)	$	24,627		$	—		$	72,521
Cash Flows from Investing Activities:
	Capital expenditures				—			(66,418	)		(2,146	)		(25,223	)		—			(93,787	)
	Cash paid for acquisitions, net of cash acquired				—			(3,265	)		—			(514	)		—			(3,779	)
	Intercompany loans to subsidiaries				12,483			(3,769	)		—			—			(8,714	)		—
	Investment in subsidiaries				(90	)		(90	)		—			—			180			—
	Additions to customer relationship and acquisition costs				—			(1,888	)		(155	)		(738	)		—			(2,781	)
	Proceeds from sales of property and equipment and other, net				—			115			—			(84	)		—			31
		Cash Flows from Investing Activities			12,393			(75,315	)		(2,301	)		(26,559	)		(8,534	)		(100,316	)
Cash Flows from Financing Activities:
	Repayment of revolving credit and term loan facilities and other debt				(262,025	)		(10,206	)		(19,172	)		(3,325	)		—			(294,728	)
	Proceeds from revolving credit and term loan facilities and other debt				291,267			97			6,564			4,967			—			302,895
	Debt financing (repayment to) and equity contribution from (distribution to) minority stockholders, net				—			—			—			(71	)		—			(71	)
	Intercompany loans from parent				—			(11,657	)		2,551			392			8,714			—
	Equity contribution from parent				—			90			—			90			(180	)		—
	Proceeds from exercise of stock options and employee stock purchase plan				1,866			—			—			—			—			1,866
	Excess tax benefits from stock-based compensation				970			—			—			—			—			970
	Payment of debt financing and stock issuance costs				(90	)		—			(30	)		—			—			(120	)
		Cash Flows from Financing Activities			31,988			(21,676	)		(10,087	)		2,053			8,534			10,812
Effect of exchange rates on cash and cash equivalents					—			—			(289	)		(911	)		—			(1,200	)
Decrease in cash and cash equivalents					—			(3,154	)		(14,239	)		(790	)		—			(18,183	)
Cash and cash equivalents, beginning of period					—			27,955			15,529			82,123			—			125,607
Cash and cash equivalents, end of period				$	—		$	24,801		$	1,290		$	81,333		$	—		$	107,424

28

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(8) Segment Information

        We have six operating segments, as follows:

•

North American Physical Business—throughout the United States and Canada, the storage of paper documents, as well as all other non-electronic media such as microfilm and microfiche, master audio and videotapes, film, X-rays and blueprints, including healthcare information services, vital records services, service and courier operations, and the collection, handling and disposal of sensitive documents for corporate customers ("Hard Copy"); the storage and rotation of backup computer media as part of corporate disaster recovery plans, including service and courier operations ("Data Protection"); secure shredding services ("Shredding"); and the storage, assembly, and detailed reporting of customer marketing literature and delivery to sales offices, trade shows and prospective customers' sites based on current and prospective customer orders, which we refer to as the "Fulfillment" business



•

Worldwide Digital Business—information protection and storage services for electronic records conveyed via telecommunication lines and the Internet, including online backup and recovery solutions for server data and personal computers, as well as email archiving, eDiscovery services and third party technology escrow services that protect intellectual property assets such as software source code



•

Europe—information protection and storage services throughout Europe, including Hard Copy, Data Protection and Shredding



•

South America—information protection and storage services throughout South America, including Hard Copy and Data Protection



•

Mexico—information protection and storage services throughout Mexico, including Hard Copy, Data Protection and Shredding



•

Asia Pacific—information protection and storage services throughout Australia and New Zealand, including Hard Copy, Data Protection and Shredding; and in certain cities in India, Singapore, Hong Kong-SAR, China, Indonesia, Malaysia, Sri Lanka and Taiwan, including Hard Copy and Data Protection

        The South America, Mexico, Asia Pacific and Europe operating segments have been aggregated given their similar economic characteristics, products, customers and processes and reported as one reportable segment, "International Physical Business." The Worldwide Digital Business does not meet the quantitative criteria for a reportable segment; however, management determined that it would disclose such information on a voluntary basis.

29

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(8) Segment Information (Continued)

        An analysis of our business segment information and reconciliation to the consolidated financial statements is as follows:

		North American Physical Business			International Physical Business			Worldwide Digital Business			Total Consolidated
Three Months Ended March 31, 2007
Total Revenues		$	444,998		$	149,492		$	38,022		$	632,512
Depreciation and Amortization			35,182			15,681			6,309			57,172
Contribution			124,219			27,239			5,544			157,002
Total Assets			3,611,167			1,428,024			230,540			5,269,731
Expenditures for Segment Assets(1)			65,905			33,168			4,261			103,334
Three Months Ended March 31, 2008
Total Revenues			504,479			191,182			53,723			749,384
Depreciation and Amortization			43,072			18,602			7,856			69,530
Contribution			131,265			41,752			6,388			179,405
Total Assets			4,161,038			1,720,958			444,583			6,326,579
Expenditures for Segment Assets(1)			59,137			32,641			8,569			100,347

---

(1)

Includes capital expenditures, cash paid for acquisitions, net of cash acquired, and additions to customer relationship and acquisition costs in the accompanying consolidated statements of cash flows.

        The accounting policies of the reportable segments are the same as those described in Note 2 except that certain corporate and centrally controlled costs are allocated primarily to our North American Physical Business and Worldwide Digital Business segments. These allocations, which include human resources, information technology, finance, rent, real estate property taxes, medical costs, incentive compensation, stock option expense, worker's compensation, 401(k) match contributions and property, general liability, auto and other insurance, are based on rates and methodologies established at the beginning of each year. Included in the corporate costs allocated to our North American Physical Business segment are certain costs related to staff functions, including finance, human resources and information technology, which benefit the enterprise as a whole. These costs are primarily related to the general management of these functions on a corporate level and the design and development of programs, policies and procedures that are then implemented in the individual segments, with each segment bearing its own cost of implementation. Management has decided to allocate these costs to the North American Physical Business segment as further allocation is impracticable.

        Contribution for each segment is defined as total revenues less cost of sales (excluding depreciation and amortization) and selling, general and administrative expenses (including the costs allocated to each segment as described above). Internally, we use Contribution as the basis for evaluating the performance of and allocating resources to our operating segments.

30

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(8) Segment Information (Continued)

        A reconciliation of Contribution to income before provision for income taxes and minority interest on a consolidated basis is as follows:

(9) Commitments and Contingencies

        a.     Leases

        We are a party to numerous operating leases. No material changes in the obligations associated with these leases have occurred since December 31, 2007. See our Annual Report on Form 10-K dated February 29, 2008 for amounts outstanding at December 31, 2007.

        b.     Litigation

        On September 19, 2007, a container storing back-up electronic media belonging to one of our customers, the Louisiana Office of Student Financial Assistance ("LOSFA"), was lost while being transported to the customer's office. We immediately undertook and continue to engage in efforts to locate the media and we promptly notified LOSFA and appropriate law enforcement authorities. Recently, in response to a public reward offer, the container was returned to us and we have been provided with information to the effect that the media was discarded; however, to date, the media has not been found. Beginning on October 15, 2007, LOSFA issued one or more press releases and other public communications advising of the loss, indicating that personally identifiable information was on the media and advising persons who might be affected as to how to protect themselves against possible identity theft and fraud. LOSFA has demanded that we indemnify it in connection with any losses arising from the lost media. In late October 2007 and early November 2007, actions seeking to represent a purported class of allegedly affected individuals were filed in state courts in Louisiana in the 18th Judicial District for the Parish of West Baton Rouge (West Baton Rouge), in the Civil District Court for the Parish of Orleans (New Orleans), and in the United States District Court for the Eastern District of Louisiana (Eastern District of Louisiana). These actions seek monetary damages under various theories of liability as a result of the lost media. We removed the first of those actions (West Baton Rouge) to the United States District Court for the Middle District of Louisiana where, subsequently, it was voluntarily dismissed. We removed the second action (New Orleans) to the United States District Court for the Eastern District of Louisiana, where it was consolidated with the third

31

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(9) Commitments and Contingencies (Continued)

such action (Eastern District of Louisiana). We have formally answered the complaints in these two remaining actions, denying liability and asserting various affirmative defenses and we have moved for summary judgment in our favor on all claims. That motion is pending. We have also notified our insurers and intend to continue to defend these cases vigorously. As of March 31, 2008, we have not provided any loss reserves associated with these matters.

        We are involved in litigation from time to time in the ordinary course of business with a portion of the defense and/or settlement costs being covered by various commercial liability insurance policies purchased by us. In the opinion of management, no material legal proceedings are pending to which we, or any of our properties, are subject. We record legal costs associated with loss contingencies as expenses in the period in which they are incurred.

        c.     London Fire

        In July 2006, we experienced a significant fire in a leased records and information management facility in London, England that resulted in the complete destruction of the facility and its contents. The London Fire Brigade issued a report in which it was concluded that the fire resulted from human agency, i.e., arson, and its report to the Home Office concluded that the fire resulted from a deliberate act. The London Fire Brigade also concluded that the installed sprinkler system failed to control the fire due to the primary fire pump being disabled prior to the fire and the standby fire pump being disabled in the early stages of the fire by third-party contractors. We have received notices of claims from customers or their subrogated insurance carriers under various theories of liabilities arising out of lost data and/or records as a result of the fire. Certain of those claims have resulted in litigation in courts in the United Kingdom. We deny any liability in respect of the London fire and we have referred these claims to our primary warehouse legal liability insurer, which has been defending them to date under a reservation of rights. Certain of the claims have also been settled for nominal amounts, typically one to two British pounds sterling per carton, as specified in the contracts, which amounts have been or will be reimbursed to us from our primary property insurer. On or about April 12, 2007, a firm of British solicitors representing 31 customers and/or their subrogated insurers filed a Claim Form in the (U.K.) High Court of Justice, Queen's Bench Division, seeking unspecified damages in excess of 15,000 British pounds sterling on account of the records belonging to those customers that were destroyed in the fire. On or about April 20, 2007, another firm of British solicitors representing 21 customers and/or their subrogated insurer also filed a Claim Form in the same court seeking provisional damages of approximately 15,000 British pounds sterling on account of the records belonging to those customers that were destroyed in the fire. Both of those matters are being held in abeyance by agreement between the claimants and the solicitors appointed by our primary warehouse legal liability carrier and some of them have been settled for nominal amounts. However, many of these claims, including larger ones, remain outstanding. On or about October 17, 2007, our primary warehouse legal liability carrier, in the name of our subsidiary Iron Mountain (U.K.) Limited, filed a Claim Form with the (U.K.) High Court of Justice, Queen's Bench Division, Commercial Court, against The Virgin Drinks Group Limited, a customer who had records destroyed in the fire, seeking a declaration to the effect that our liability to that customer is limited to a maximum of one British pound sterling per carton of lost records and, in any event, to a maximum of 500 British pound sterling

32

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IRON MOUNTAIN INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands, Except Share and Per Share Data)

(Unaudited)

(9) Commitments and Contingencies (Continued)

in the aggregate, in accordance with the parties' contract. Detailed Particulars of Claim and Particulars of Virgin Drinks' counterclaim in respect of that matter have been filed and served.

        We believe we carry adequate property and liability insurance. We do not expect that this event will have a material impact to our consolidated results of operations or financial condition. Revenues from this facility represented less than 1% of our consolidated enterprise revenues. We recorded approximately $8,833 to other (income) expense, net in the first quarter of 2007 related to recoveries associated with settlement of the business interruption portion of our insurance claim. We utilize cash received from our insurance carriers to fund capital expenditures and for general working capital needs. Recoveries from the insurance carriers related to business personal property claims are reflected in our statement of cash flows under proceeds from sales of property and equipment and other, net included in investing activities section when received. Recoveries from the insurance carriers related to business interruption claims are reflected in our statement of cash flows as a component of net income included in the operating activities section when received.

(10) Subsequent Events

        Subsequent to the first quarter of 2008, we acquired a business in North America that provides Hard Copy, Shredding and Data Protection services, and the remaining 28% minority interest in our Brazilian business, and established operations in Switzerland through a minority-owned joint venture, for total cash consideration of approximately $43,000.

33

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IRON MOUNTAIN INCORPORATED

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

        The following discussion and analysis of our financial condition and results of operations for the three months ended March 31, 2008 should be read in conjunction with our consolidated financial statements and notes thereto for the three months ended March 31, 2008, included herein, and for the year ended December 31, 2007, included in our Annual Report on Form 10-K for the year ended December 31, 2007.

FORWARD-LOOKING STATEMENTS

        We have made statements in this Quarterly Report on Form 10-Q that constitute "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements concern our operations, economic performance, financial condition, goals, beliefs, future growth strategies, investments, objectives, plans and current expectations. The forward-looking statements are subject to various known and unknown risks, uncertainties and other factors. When we use words such as "believes," "expects," "anticipates," "estimates" or similar expressions, we are making forward-looking statements. Although we believe that our forward-looking statements are based on reasonable assumptions, our expected results may not be achieved, and actual results may differ materially from our expectations. Important factors that could cause actual results to differ from expectations include, among others: (1) the cost to comply with current and future legislation, regulations and customer demands relating to privacy issues; (2) the impact of litigation that may arise in connection with incidents in which we fail to protect our customer's information; (3) changes in the price for our services relative to the cost of providing such services; (4) changes in customer preferences and demand for our services; (5) in the various digital businesses in which we are engaged, the cost of capital and technical requirements, demand for our services or competition for customers; (6) our ability or inability to complete acquisitions on satisfactory terms and to integrate acquired companies efficiently; (7) the cost or potential liabilities associated with real estate necessary for our business; (8) the performance of business partners upon whom we depend for technical assistance or management and acquisition expertise outside the U.S.; (9) changes in the political and economic environments in the countries in which our international subsidiaries operate; (10) claims that our technology violates the intellectual property rights of a third party; and (11) other trends in competitive or economic conditions affecting our financial condition or results of operations not presently contemplated. You should not rely upon forward-looking statements except as statements of our present intentions and of our present expectations, which may or may not occur. Other risks may adversely impact us, as described more fully under "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2007. You should read these cautionary statements as being applicable to all forward-looking statements wherever they appear. Except as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers are also urged to carefully review and consider the various disclosures we have made in this document, as well as our other periodic reports filed with the Securities and Exchange Commission (the "SEC").

Non-GAAP Measures

Operating Income Before Depreciation and Amortization, or OIBDA

        OIBDA is defined as operating income before depreciation and amortization expenses. OIBDA Margin is calculated by dividing OIBDA by total revenues. We use multiples of current and projected OIBDA in conjunction with our discounted cash flow models to determine our overall enterprise valuation and to evaluate acquisition targets. We believe OIBDA and OIBDA Margin provide current and potential investors with relevant and useful information regarding our ability to generate cash flow

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to support business investment and our ability to grow revenues faster than operating expenses. These measures are an integral part of the internal reporting system we use to assess and evaluate the operating performance of our business. OIBDA does not include certain items that we believe are not indicative of our core operating results, specifically: (1) minority interest in earnings (losses) of subsidiaries, net; (2) other (income) expense, net; (3) income from discontinued operations and loss on sale of discontinued operations; and (4) cumulative effect of change in accounting principles. OIBDA also does not include interest expense, net and the provision for income taxes. These expenses are associated with our capitalization and tax structures, which we do not consider when evaluating the operating profitability of our core operations. Finally, OIBDA does not include depreciation and amortization expenses, in order to eliminate the impact of capital investments, which we evaluate by comparing capital expenditures to incremental revenue generated and as a percentage of total revenues. OIBDA and OIBDA Margin should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with accounting principles generally accepted in the Unites States of America ("GAAP"), such as operating or net income or cash flows from operating activities (as determined in accordance with GAAP).

Reconciliation of OIBDA to Operating Income and Net Income (in thousands):

Critical Accounting Policies

        Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements and for the period then ended. On an on-going basis, we evaluate the estimates used, including those related to accounting for acquisitions, allowance for doubtful accounts and credit memos, impairment of tangible and intangible assets, income taxes, stock-based compensation and self-insured liabilities. We base our estimates on historical experience, actuarial estimates, current conditions and various other assumptions that we believe to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities and are not readily apparent from other sources.

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Actual results may differ from these estimates. Our critical accounting policies include the following, which are listed in no particular order:

•

Accounting for Acquisitions  



•

Allowance for Doubtful Accounts and Credit Memos  



•

Impairment of Tangible and Intangible Assets  



•

Accounting for Internal Use Software  



•

Income Taxes  



•

Stock-Based Compensation  



•

Self-Insured Liabilities  

        Further detail regarding our critical accounting policies can be found in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the notes included in our Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the SEC on February 29, 2008. Management has determined that no material changes concerning our critical accounting policies have occurred since December 31, 2007.

Recent Accounting Pronouncements

        In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations" ("SFAS No. 141R"), and SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statement—an amendment to ARB No. 51" ("SFAS No. 160"). SFAS No. 141R and SFAS No. 160 will require (a) more of the assets acquired and liabilities assumed to be measured at fair value as of the acquisition date, (b) liabilities related to contingent consideration to be remeasured at fair value in each subsequent period, (c) an acquirer to expense as incurred acquisition-related costs, such as transaction fees for attorneys, accountants and investment bankers, as well as, costs associated with restructuring the activities of the acquired company, and (d) noncontrolling interests in subsidiaries initially to be measured at fair value and classified as a separate component of equity. SFAS No. 141R is effective and provided for prospective application for fiscal years beginning after December 15, 2008. SFAS No. 160 is required to apply retrospectively in comparative financial statements for fiscal years beginning after December 15, 2008. The impact of SFAS No. 141R and SFAS No. 160 is dependent upon the level of future acquisitions; however, they will generally result in (1) increased operating costs associated with the expensing of transaction and restructuring costs, as incurred, (2) increased volatility in earnings related to the fair valuing of contingent consideration through earnings in subsequent periods, and (3) increased depreciation, amortization and equity balances associated with the fair valuing of noncontrolling interests and their classification as a separate component of consolidated stockholders' equity.

        In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities—an Amendment of SFAS No. 133" ("SFAS No. 161"). SFAS No. 161 enhances required disclosures regarding derivatives and hedging activities, including enhanced disclosures regarding how: (a) an entity uses derivative instruments; (b) derivative instruments and related hedged items are accounted for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"; and (c) derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. Specifically, SFAS No. 161 requires:

•

Disclosure of the objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation;



•

Disclosure of the fair values of derivative instruments and their gains and losses in a tabular format;

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•

Disclosure of information about credit-risk-related contingent features; and



•

Cross-reference from the derivative footnote to other footnotes in which derivative-related information is disclosed.

        SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008 and early adoption is permitted. We do not expect the adoption of SFAS No. 161 to have a material impact on our disclosures.

Overview

        The following discussions set forth, for the periods indicated, management's discussion and analysis of results. Significant trends and changes are discussed for the three month period ended March 31, 2008 within each section.

Results of Operations

Comparison of Three Months Ended March 31, 2008 to Three Months Ended March 31, 2007 (in thousands):

		Three Months Ended March 31,
								Dollar Change			Percentage Change
		2007			2008
Revenues		$	632,512		$	749,384		$	116,872		18.5	%
Operating Expenses			532,719			643,054			110,335		20.7	%
Operating Income			99,793			106,330			6,537		6.6	%
Other Expenses, Net			65,086			72,848			7,762		11.9	%
Net Income		$	34,707		$	33,482		$	(1,225	)	(3.5	)%
OIBDA(1)		$	156,965		$	175,860		$	18,895		12.0	%
OIBDA Margin(1)			24.8	%		23.5	%

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(1)

See "Non-GAAP Measures—Operating Income Before Depreciation and Amortization, or OIBDA" for definition, reconciliation and a discussion of why we believe these measures provide relevant and useful information to our current and potential investors.

REVENUES

        Our consolidated storage revenues increased $52.2 million, or 14.8%, to $404.3 million for the three months ended March 31, 2008 from $352.2 million for the three months ended March 31, 2007. The increase is primarily attributable to internal revenue growth (8%), resulting from solid net carton volume growth and the net result of pricing actions, acquisitions (4%), and foreign currency exchange rate fluctuations (3%).

        Consolidated service and storage material sales revenues increased $64.7 million, or 23.1%, to $345.1 million for the three months ended March 31, 2008 from $280.3 million for the three months ended March 31, 2007. The increase is attributable to acquisitions (10%), internal revenue growth (10%), which was driven primarily by continued growth in shredding revenue in North America and Europe, as well as strong project revenue in Europe, higher recycled paper revenues, and solid revenue growth in storage-related services, and foreign currency exchange rate fluctuations (4%).

        For the reasons stated above, our consolidated revenues increased $116.9 million, or 18.5%, to $749.4 million for the three months ended March 31, 2008 from $632.5 million for the three months ended March 31, 2007. Internal revenue growth was 9% for both the three months ended March 31,

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2007 and 2008. We calculate internal revenue growth in local currency for our international operations. Acquisitions contributed 1% and 7% to consolidated revenues for the three months ended March 31, 2007 and 2008, respectively. Foreign currency exchange rate fluctuations, based on an analysis of weighted average rates for the comparable periods, increased our revenues 2% and 3% for the three months ended March 31, 2007 and 2008, respectively, and were primarily due to the strengthening of the British pound sterling and Euro against the U.S. dollar in the first quarter of 2007, and due mainly to the strengthening of the Canadian Dollar, Euro, British pound sterling and Australian dollar against the U.S. dollar in the first quarter of 2008.

Internal Growth—Eight-Quarter Trend

		2006						2007								2008
		Second Quarter		Third Quarter		Fourth Quarter		First Quarter		Second Quarter		Third Quarter		Fourth Quarter		First Quarter
Storage Revenue		11	%	11	%	10	%	9	%	9	%	8	%	8	%	8	%
Service and Storage Material Sales Revenue		8	%	3	%	10	%	10	%	11	%	16	%	12	%	10	%
Total Revenue		9	%	7	%	10	%	9	%	10	%	12	%	10	%	9	%

        Our internal revenue growth rate represents the weighted average year over year growth rate of our revenues after removing the effects of acquisitions, foreign currency exchange rate fluctuations and the impact of the fire in one of our London, England facilities. Over the past eight quarters, the internal growth rate of our storage revenues has decreased from a high of 10% to 11% in 2006 to 8% to 9%. Our storage revenue internal growth rate has moderated over the past six quarters as the result of a growing revenue base and an increase in destructions and permanent withdrawals in our North American Physical Business segment from the lower levels experienced in 2006. Storage revenue internal growth in our U.K. business has also been running slightly below our targets due to recently increased levels of destructions and permanent withdrawals. Strong growth rates in Latin America, Asia Pacific and in our digital services business further supported consolidated internal growth. Net carton volume growth is a function of the rate at which new cartons are added by existing and new customers, offset by the rate of carton destructions and other permanent removals.

        The internal growth rate for service and storage material sales revenue is inherently more volatile than the storage revenue internal growth rate due to the more discretionary nature of the services we offer, such as large special projects, data products and carton sales, and the price of recycled paper. These revenues are often event driven and impacted to a greater extent by economic downturns as customers defer or cancel the purchase of these services as a way to reduce their short-term costs, and may often be difficult to replicate in future periods. As a commodity, recycled paper prices are subject to the volatility of that market.

        The internal growth rate for service and storage material sales revenues reflects the following: (1) growth in North American storage-related service revenues, increased special project revenues and higher recycled paper revenues; (2) two large public sector contracts in Europe, one that was completed in the third quarter of 2007 and one that will be completed in 2008; (3) continued growth in our secure shredding operations; and (4) a large data restoration project completed by our digital services business in the third quarter of 2005, which created a difficult comparable for the growth rate in the third quarter of 2006.

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OPERATING EXPENSES

Cost of Sales

        Consolidated cost of sales (excluding depreciation and amortization) is comprised of the following expenses (in thousands):

		Three Months Ended March 31,											% of Consolidated Revenues
																	Percentage Change (Favorable)/ Unfavorable
								Dollar Change			Percentage Change
		2007			2008								2007		2008
Labor		$	140,917		$	166,685		$	25,768		18.3	%	22.3	%	22.2	%	(0.1	)%
Facilities			91,861			104,828			12,967		14.1	%	14.5	%	14.0	%	(0.5	)%
Transportation			29,937			37,389			7,452		24.9	%	4.7	%	5.0	%	0.3	%
Product Cost of Sales			13,983			14,911			928		6.6	%	2.2	%	2.0	%	(0.2	)%
Other			18,307			23,938			5,631		30.8	%	2.9	%	3.2	%	0.3	%
		$	295,005		$	347,751		$	52,746		17.9	%	46.6	%	46.4	%	(0.2	)%

Labor

        For the three months ended March 31, 2008 as compared to the three months ended March 31, 2007, labor expense decreased slightly as a percentage of consolidated revenues, mainly as a result of higher recycled paper revenue and strong growth in our digital service businesses, which have higher gross margins. These benefits more than offset the impact of revenue mix, as labor-intensive services such as secure shredding and Document Management Solutions ("DMS") continue to grow at a faster rate than our storage revenues.

Facilities

        Facilities costs as a percentage of consolidated revenues decreased to 14.0% as of March 31, 2008 from 14.5% as of March 31, 2007. The largest component of our facilities cost is rent expense, which increased in dollar terms by $7.5 million, and increased as a percentage of consolidated storage revenues from 12.6% for the three months ended March 31, 2007 to 12.9% for the three months ended March 31, 2008. The dollar increase in rent is mainly driven by the timing of new real estate, which may include duplicative rent and the use of temporary space related to moving out of substandard facilities obtained through acquisitions, while the decrease as a percentage of total revenue relates to the expansion of our secure shredding operations, which incurs lower rent and facilities costs than our core physical business. Facilities costs increased in dollar terms due to increased costs of utilities of $2.8 million and property taxes and insurance of $1.6 million related to rising costs and an increased number of facilities.

Transportation

        Our transportation expenses, which are influenced by several variables including total number of vehicles, owned versus leased vehicles, use of subcontracted couriers, fuel expenses, maintenance and insurance, increased as a percentage of consolidated revenues for the three months ended March 31, 2008 compared to the three months ended March 31, 2007. The expansion of our secure shredding operations, which incurs higher transportation costs than our core physical business, contributed to the increase in dollar terms, as well as rising fuel costs, which contributed $3.0 million of the increase, and the use of couriers and leased vehicles which combined contributed $2.8 million.

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Product Cost of Sales and Other

        Product and other cost of sales, which includes cartons, media and other service, storage and supply costs, are highly correlated to complementary revenue streams. The increase in product cost of sales in dollar terms for the three months ended March 31, 2008 compared to the three months ended March 31, 2007, primarily reflects the effect of an increase in carton and media sales.

Selling, General and Administrative Expenses

        Selling, general and administrative expenses are comprised of the following expenses (in thousands):

		Three Months Ended March 31,											% of Consolidated Revenues
																	Percentage Change (Favorable)/ Unfavorable
								Dollar Change			Percentage Change
		2007			2008								2007		2008
General and Administrative		$	90,753		$	112,057		$	21,304		23.5	%	14.3	%	15.0	%	0.7	%
Sales, Marketing & Account Management			58,420			70,425			12,005		20.5	%	9.2	%	9.4	%	0.2	%
Information Technology			30,936			38,324			7,388		23.9	%	4.9	%	5.1	%	0.2	%
Bad Debt Expense			396			1,422			1,026		259.1	%	0.1	%	0.2	%	0.1	%
		$	180,505		$	222,228		$	41,723		23.1	%	28.5	%	29.7	%	1.2	%

General and Administrative

        The increase in general and administrative expenses for the three months ended March 31, 2008 compared to the three months ended March 31, 2007 is mainly attributable to increased compensation expense of $10.5 million, as well as increases in related facility costs of $2.8 million and other overhead of $1.7 million, all of which reflect the increased headcount related to acquisition integration, and increased stock option expense of $1.9 million over the first quarter of 2007.

Sales, Marketing & Account Management

        The majority of our sales, marketing and account management costs are labor-related and are comprised mainly of compensation and commissions. These costs are primarily driven by the headcount in each of these departments, which, on average, was higher throughout the three months ended March 31, 2008 compared to the three months ended March 31, 2007. Compensation expense and commissions increased $6.7 million and $3.3 million, respectively, from the first quarter of 2007 compared to the first quarter of 2008.

Information Technology

        Information technology expenses increased as a percentage of consolidated revenues for the three months ended March 31, 2008 compared to the three months ended March 31, 2007. The dollar increase in information technology expenses is primarily related to a $5.6 million increase in compensation expense, and represents an investment in infrastructure and product development. Additionally, we wrote-off $0.9 million of previously deferred costs, primarily internal labor costs, associated with internal use software development costs that were discontinued prior to being implemented in 2008.

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Depreciation, Amortization, and Loss on Disposal/Writedown of Property, Plant and Equipment, Net

        Consolidated depreciation and amortization expense increased $12.4 million to $69.5 million (9.3% of consolidated revenues) for the three months ended March 31, 2008 from $57.2 million (9.0% of consolidated revenues) for the three months ended March 31, 2007. Depreciation expense increased $9.6 million for the three months ended March 31, 2008 compared to the three months ended March 31, 2007, primarily due to the additional depreciation expense related to recent capital expenditures and acquisitions, including storage systems, which include racking, building and leasehold improvements, computer systems hardware and software, and buildings. Amortization expense increased $2.8 million for the three months ended March 31, 2008 compared to the three months ended March 31, 2007, primarily due to amortization of intangible assets, such as customer relationship intangible assets and intellectual property acquired through business combinations. We expect that amortization expense will continue to increase as we acquire new businesses and reflect the full year impact of acquisitions completed in the latter part of 2007.

        Consolidated loss on disposal/writedown of property, plant and equipment, net of $3.5 million for the three months ended March 31, 2008, consisted primarily of a $2.3 million impairment of an owned storage facility, which we decided to exit in the first quarter of 2008.

OPERATING INCOME

        As a result of all the foregoing factors, consolidated operating income increased $6.5 million, or 6.6%, to $106.3 million (14.2% of consolidated revenues) for the three months ended March 31, 2008 from $99.8 million (15.8% of consolidated revenues) for the three months ended March 31, 2007.

OIBDA

        As a result of all the foregoing factors, consolidated OIBDA increased $18.9 million, or 12.0%, to $175.9 million (23.5% of consolidated revenues) for the three months ended March 31, 2008 from $157.0 million (24.8% of consolidated revenues) for the three months ended March 31, 2007.

OTHER EXPENSES, NET

Interest Expense, Net

        Consolidated interest expense, net increased $9.7 million to $60.0 million (8.0% of consolidated revenues) for the three months ended March 31, 2008 from $50.3 million (8.0% of consolidated revenues) for the three months ended March 31, 2007 primarily due to increased borrowings to fund acquisitions, offset by a decrease in our weighted average interest rate to 7.1% as of March 31, 2008 from 7.6% as of March 31, 2007.

Other Income, Net (in thousands)

        Foreign currency gains of $5.9 million based on period-end exchange rates were recorded in the three months ended March 31, 2008, primarily due to the strengthening of the Euro and the Chilean peso, and the weakening of the British pound sterling and Canadian dollar against the U.S. dollar

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compared to December 31, 2007, as these currencies relate to our intercompany balances with and between our Canadian and European subsidiaries, and British pounds sterling and Euro denominated debt held by our U.S. parent company.

        Other, net in the three months ended March 31, 2007 consisted of $8.9 million of business interruption insurance proceeds pertaining to the fire in one of our London, England facilities, offset by $1.7 million write-off associated with deferred financing costs related to the early extinguishment of U.S. term loans.

Provision for Income Taxes

        Our effective tax rates for the three months ended March 31, 2007 and 2008 were 38.6% and 34.9%, respectively. The decrease is primarily attributable to the net impact of foreign currency gains. We provide for income taxes during interim periods based on our estimate of the effective tax rate for the year. Discrete items and changes in our estimate of annual effective tax rate are recorded in the period they occur.

        Our effective tax rate is subject to future variability due to, among other items: (a) changes in the mix of income from foreign jurisdictions; (b) tax law changes; (c) volatility in foreign exchange gains and (losses); and (d) the timing of the establishment and reversal of tax reserves. We are subject to income taxes in both the U.S. and numerous foreign jurisdictions. We are subject to examination by various tax authorities in jurisdictions in which we have significant business operations. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in changes in our estimates.

Minority Interest

        Minority interest in earnings of subsidiaries, net resulted in a charge to income of $0.4 million (0.1% of consolidated revenues) and $0.6 million (0.1% of consolidated revenues) for the three months ended March 31, 2007 and 2008, respectively. This represents our minority partners' share of earnings in our majority-owned international subsidiaries that are consolidated in our operating results.

NET INCOME

        As a result of all the foregoing factors, for the three months ended March 31, 2008, consolidated net income decreased $1.2 million, or 3.5%, to $33.5 million (4.5% of consolidated revenues) from net income of $34.7 million (5.5% of consolidated revenues) for the three months ended March 31, 2007.

Segment Analysis (in thousands)

        The results of our various operating segments are discussed below. Our reportable segments are North American Physical Business, International Physical Business and Worldwide Digital Business. See Note 8 of Notes to Consolidated Financial Statements. Our North American Physical Business, which consists of the United States and Canada, offers the storage of paper documents, as well as all other non-electronic media such as microfilm and microfiche, master audio and videotapes, film, X-rays and blueprints, including healthcare information services, vital records services, service and courier operations, and the collection, handling and disposal of sensitive documents for corporate customers ("Hard Copy"); the storage and rotation of backup computer media as part of corporate disaster recovery plans, including service and courier operations ("Data Protection"); secure shredding services ("Shredding"); and the storage, assembly, and detailed reporting of customer marketing literature and delivery to sales offices, trade shows and prospective customers' sites based on current and prospective customer orders, which we refer to as the "Fulfillment" business. Our International Physical Business segment offers information protection and storage services throughout Europe, South America, Mexico

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and Asia Pacific, including Hard Copy, Data Protection and Shredding. Our Worldwide Digital Business offers information protection and storage services for electronic records conveyed via telecommunication lines and the Internet, including online backup and recovery solutions for server data and personal computers, as well as email archiving, third party technology escrow services that protect intellectual property assets such as software source code, and electronic discovery services for the legal market that offers in-depth discovery and data investigation solutions.

North American Physical Business

		Three Months Ended March 31,
								Dollar Change			Percentage Change
		2007			2008
Segment Revenue		$	444,998		$	504,479		$	59,481		13.4	%
Segment Contribution(1)		$	124,219		$	131,265		$	7,046		5.7	%
Segment Contribution(1) as a Percentage of Revenue			27.9	%		26.0	%

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(1)

See Note 8 of Notes to the Consolidated Financial Statements for definition of Contribution and for the basis on which allocations are made and a reconciliation of Contribution to income before provision for income taxes and minority interest on a consolidated basis.

        During the three months ended March 31, 2008, revenue in our North American Physical Business segment increased 13.4% over the same period last year, primarily due to solid internal growth supported by increased secure shredding revenues and higher recycled paper revenues, and acquisitions, primarily ArchivesOne, which contributed $11.5 million, or approximately 3%. In addition, favorable currency fluctuations during the three months ended March 31, 2008 in Canada resulted in increased revenue, as measured in U.S. dollars, of 2% when compared to the three months ended March 31, 2007. Contribution as a percent of segment revenue decreased in the three months ended March 31, 2008 due mainly to increased occupancy costs such as utilities, property taxes and insurance, and higher costs associated with the acquisition of new real estate and moving out of substandard facilities obtained through acquisitions, offset by strong service revenue growth. In addition, contribution was impacted by increased transportation expenses, such as rising fuel costs, and selling, general and administrative expenses, as discussed above.

        Included in our North American Physical Business segment are certain costs related to staff functions, including finance, human resources and information technology, which benefit the enterprise as a whole. These costs are primarily related to the general management of these functions on a corporate level and the design and development of programs, policies and procedures that are then implemented in the individual segments, with each segment bearing its own cost of implementation. Management has decided to allocate these costs to the North American Physical Business segment as further allocation is impracticable.

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International Physical Business

		Three Months Ended March 31,
								Dollar Change			Percentage Change
		2007			2008
Segment Revenue		$	149,492		$	191,182		$	41,690		27.9	%
Segment Contribution(1)		$	27,239		$	41,752		$	14,513		53.3	%
Segment Contribution(1) as a Percentage of Revenue			18.2	%		21.8	%

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(1)

See Note 8 of Notes to the Consolidated Financial Statements for definition of Contribution and for the basis on which allocations are made and a reconciliation of Contribution to income before provision for income taxes and minority interest on a consolidated basis.

        Revenue in our International Physical Business segment increased 27.9% during the three months ended March 31, 2008 over the same period last year, primarily due to internal growth of 12% and acquisitions in Europe. Further, favorable currency fluctuations during the three months ended March 31, 2008, primarily in Europe, resulted in increased revenue, as measured in U.S. dollars, of approximately 10% compared to the three months ended March 31, 2007. Contribution as a percent of segment revenue increased in the current period primarily due to higher-margin special projects, in particular a large public sector contract in Europe that will be completed in 2008, as well as the impact of increased leverage associated with certain start-up international investments that continue to benefit from increased revenue.

Worldwide Digital Business

		Three Months Ended March 31,
								Dollar Change			Percentage Change
		2007			2008
Segment Revenue		$	38,022		$	53,723		$	15,701		41.3	%
Segment Contribution(1)		$	5,544		$	6,388		$	844		15.2	%
Segment Contribution(1) as a Percentage of Revenue			14.6	%		11.9	%

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(1)

See Note 8 of Notes to the Consolidated Financial Statements for definition of Contribution and for the basis on which allocations are made and a reconciliation of Contribution to income before provision for income taxes and minority interest on a consolidated basis.

        During the three months ended March 31, 2008, revenue in our Worldwide Digital Business segment increased 41.3% over the same period last year, due to strong internal growth of 13% and the acquisition of Stratify Inc. ("Stratify") in December 2007. The increase in internal growth is primarily attributable to growth in digital storage revenue from our online backup service offerings, offset by a large license sale and data restoration projects that occurred in the first quarter of 2007 and did not repeat in the first quarter of 2008. Contribution as a percent of segment revenue decreased due to the increased level of compensation expense and other merger-related costs associated with the recent acquisition of Stratify.

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Liquidity and Capital Resources

        The following is a summary of our cash balances as of, and cash flows for the three months ended, March 31, 2007 and 2008 (in thousands):

        Net cash provided by operating activities was $72.5 million for the three months ended March 31, 2008, compared to $102.0 million for the three months ended March 31, 2007. The decrease resulted primarily from an increase in working capital, which represents the net change in operating assets and liabilities, exclusive of acquisitions, which was driven by an increase in accounts receivable, a decrease in accounts payable and accrued expenses, offset by an increase in deferred revenue, and a decrease in net income, including $8.9 million of business interruption insurance income related to the fire in one of our London, England facilities recognized in 2007 that did not repeat in 2008, offset by an increase in non-cash items, such as depreciation and amortization, deferred income taxes, and losses on disposal/write-down of plant, property and equipment, net, and foreign currency gains and losses.

        Due to the nature of our businesses, we make significant capital expenditures and additions to customer acquisition costs. Our capital expenditures are primarily related to growth and include investments in storage systems, information systems and discretionary investments in real estate. Cash paid for our capital expenditures and additions to customer acquisition costs during the three months ended March 31, 2008 amounted to $93.8 million and $2.8 million, respectively. For the three months ended March 31, 2008, capital expenditures, net and additions to customer acquisition costs were funded with cash flows provided by operating activities, borrowings under our revolving credit facilities and cash equivalents on-hand. Excluding acquisitions, we expect our capital expenditures to be between $440 million and $480 million in the year ending December 31, 2008. Included in our estimated capital expenditures for 2008 is $40 million to $50 million of opportunity-driven real estate purchases.

        Net cash provided by financing activities was $10.8 million for the three months ended March 31, 2008. During the three months ended March 31, 2008, we had gross borrowings under our revolving credit and term loan facilities and other debt of $302.9 million, $1.9 million of proceeds from the exercise of stock options and $1.0 million of excess tax benefits from stock-based compensation. We used the proceeds from these financing transactions to repay revolving credit and term loan facilities and other debt ($294.7 million) and to fund acquisitions and capital expenditures.

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        We are highly leveraged and expect to continue to be highly leveraged for the foreseeable future. Our consolidated debt as of March 31, 2008 was comprised of the following (in thousands):

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(1)

The capital stock or other equity interests of most of our U.S. subsidiaries, and up to 66% of the capital stock or other equity interests of our first tier foreign subsidiaries, are pledged to secure these debt instruments, together with all intercompany obligations of foreign subsidiaries owed to us or to one of our U.S. subsidiary guarantors.



(2)

Collectively referred to as the Parent Notes. Iron Mountain Incorporated ("IMI") is the direct obligor on the Parent Notes, which are fully and unconditionally guaranteed, on a senior subordinated basis, by substantially all of its direct and indirect wholly owned U.S. subsidiaries (the "Guarantors"). These guarantees are joint and several obligations of the Guarantors. Iron Mountain Canada Corporation ("Canada Company") and the remainder of our subsidiaries do not guarantee the Parent Notes.



(3)

Canada Company is the direct obligor on the Subsidiary Notes, which are fully and unconditionally guaranteed, on a senior subordinated basis, by IMI and the Guarantors. These guarantees are joint and several obligations of IMI and the Guarantors.

        Our revolving credit and term loan facilities, as well as our indentures, use earnings before interest, taxes, depreciation and amortization ("EBITDA") based calculations as primary measures of financial performance, including leverage ratios. IMI's revolving credit and term leverage ratio was 4.5 and 4.4 as of December 31, 2007 and March 31, 2008, respectively, compared to a maximum allowable ratio of 5.5. Similarly, our bond leverage ratio, per the indentures, was 5.1 and 5.2 as of December 31, 2007 and March 31, 2008, respectively, compared to a maximum allowable ratio of 6.5. Noncompliance with these leverage ratios would have a material adverse effect on our financial condition and liquidity.

        Our ability to pay interest on or to refinance our indebtedness depends on our future performance, working capital levels and capital structure, which are subject to general economic, financial, competitive, legislative, regulatory and other factors which may be beyond our control. There can be no assurance that we will generate sufficient cash flow from our operations or that future financings will be available on acceptable terms or in amounts sufficient to enable us to service or refinance our indebtedness, or to make necessary capital expenditures.

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        On April 16, 2007, we entered into a new credit agreement (the "New Credit Agreement") to replace both the IMI revolving credit and term loan facilities of $750 million and the IME revolving credit and term loan facilities of 200 million British pounds sterling. On November 9, 2007, we increased the aggregate amount available to be borrowed under the New Credit Agreement from $900 million to $1.2 billion. The New Credit Agreement consists of revolving credit facilities where we can borrow, subject to certain limitations as defined in the New Credit Agreement, up to an aggregate amount of $790 million (including Canadian dollar and multi-currency revolving credit facilities) (the "new revolving credit facility"), and a $410 million term loan facility (the "new term loan facility"). Our subsidiaries, Canada Company and Iron Mountain Switzerland GmbH, may borrow directly under the Canadian revolving credit and multi-currency revolving credit facilities, respectively. Additional subsidiary borrowers may be added under the multi-currency revolving credit facility. The new revolving credit facility terminates on April 16, 2012. With respect to the new term loan facility, quarterly loan payments of approximately $1.0 million are required through maturity on April 16, 2014, at which time the remaining outstanding principal balance of the new term loan facility is due. The interest rate on borrowings under the New Credit Agreement varies depending on our choice of interest rate and currency options, plus an applicable margin. IMI guarantees the obligations of each of the subsidiary borrowers under the New Credit Agreement, and substantially all of our U.S. subsidiaries guarantee the obligations of IMI and the subsidiary borrowers. The capital stock or other equity interests of most of our U.S. subsidiaries, and up to 66% of the capital stock or other equity interests of our first tier foreign subsidiaries, are pledged to secure the New Credit Agreement, together with all intercompany obligations of foreign subsidiaries owed to us or to one of our U.S. subsidiary guarantors.

        As of March 31, 2008, we had $402.3 million of outstanding borrowings under the new revolving credit facility, of which $179.8 million was denominated in U.S. dollars and the remaining balance was denominated in Canadian dollars (CAD 227.5 million); we also had various outstanding letters of credit totaling $36.9 million. The remaining availability, based on IMI's leverage ratio, which is calculated based on the last 12 months' earnings before interest, taxes, depreciation and amortization, other adjustments as defined in the New Credit Agreement and current external debt, under the new revolving credit facility on March 31, 2008, was $350.8 million. The interest rate in effect under the new revolving credit facility and new term loan facility were approximately 5.8% and 4.6%, respectively, as of March 31, 2008.

        The New Credit Agreement, our indentures and other agreements governing our indebtedness contain certain restrictive financial and operating covenants, including covenants that restrict our ability to complete acquisitions, pay cash dividends, incur indebtedness, make investments, sell assets and take certain other corporate actions. The covenants do not contain a rating trigger. Therefore, a change in our debt rating would not trigger a default under the New Credit Agreement and our indentures and other agreements governing our indebtedness. We were in compliance with all debt covenants in material agreements as of March 31, 2008.

        Subsequent to the first quarter of 2008, we acquired a business in North America that provides Hard Copy, Shredding and Data Protection services, and the remaining 28% minority interest in our Brazilian business, and established operations in Switzerland through a minority-owned joint venture, for total cash consideration of approximately $43 million. We funded these acquisitions with cash and cash equivalents on-hand and borrowings under the New Credit Agreement.

        We expect to meet our cash flow requirements for the next twelve months from cash generated from operations, existing cash, cash equivalents, borrowings under the New Credit Agreement and other financings, which may include secured credit facilities, securitizations and mortgage or capital lease financings. We expect to meet our long-term cash flow requirements using the same means described above, as well as the potential issuance of debt or equity securities as we deem appropriate. See Note 6 to Notes to Consolidated Financial Statements.

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Net Operating Loss Carryforwards

        We have federal net operating loss carryforwards which begin to expire in 2019 through 2022 of $59.8 million at March 31, 2008 to reduce future federal taxable income, if any. We also have an asset for state net operating loss of $24.7 million (net of federal tax benefit), which begins to expire in 2008 through 2025, subject to a valuation allowance of approximately 98%.

Inflation

        Certain of our expenses, such as wages and benefits, insurance, occupancy costs and equipment repair and replacement, are subject to normal inflationary pressures. Although to date we have been able to offset inflationary cost increases through increased operating efficiencies and the negotiation of favorable long-term real estate leases, we can give no assurance that we will be able to offset any future inflationary cost increases through similar efficiencies, leases or increased storage or service charges.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

        Given the recurring nature of our revenues and the long term nature of our asset base, we have the ability and the preference to use long term, fixed interest rate debt to finance our business, thereby helping to preserve our long term returns on invested capital. We target approximately 75% of our debt portfolio to be fixed with respect to interest rates. Occasionally, we will use interest rate swaps as a tool to maintain our targeted level of fixed rate debt. See Notes 4 and 6 to Notes to Consolidated Financial Statements.

        As of March 31, 2008, we had $828.1 million of variable rate debt outstanding with a weighted average variable interest rate of 7.2%, and $2,476.9 million of fixed rate debt outstanding. As of March 31, 2008, 75% of our total debt outstanding was fixed. If the weighted average variable interest rate on our variable rate debt had increased by 1%, our net income for the three months ended March 31, 2008 would have been reduced by $1.1 million. See Note 6 to Notes to Consolidated Financial Statements included in this Form 10-Q for a discussion of our long-term indebtedness, including the fair values of such indebtedness as of March 31, 2008.

Currency Risk

        Our investments in IME, Canada Company, Iron Mountain Mexico, SA de RL de CV, Iron Mountain South America, Ltd., Iron Mountain Australia Pty Ltd., Iron Mountain New Zealand Ltd. and our other international investments may be subject to risks and uncertainties related to fluctuations in currency valuation. Our reporting currency is the U.S. dollar. However, our international revenues and expenses are generated in the currencies of the countries in which we operate, primarily the Euro, Canadian dollar and British pound sterling. Declines in the value of the local currencies in which we are paid relative to the U.S. dollar will cause revenues in U.S. dollar terms to decrease and dollar-denominated liabilities to increase in local currency.

        The impact on our earnings is mitigated significantly by the fact that most operating and other expenses are also incurred and paid in the local currency. We also have several intercompany obligations between our foreign subsidiaries and IMI and our U.S.-based subsidiaries. In addition, Iron Mountain Switzerland GmbH and our foreign subsidiaries and IME also have intercompany obligations between them. These intercompany obligations are primarily denominated in the local currency of the foreign subsidiary.

        We have adopted and implemented a number of strategies to mitigate the risks associated with fluctuations in currency valuations. One strategy we utilize is for IMI to borrow in foreign currencies to hedge our intercompany financing activities. Finally, on occasion, we enter into currency swaps to

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temporarily or permanently hedge an overseas investment, such as a major acquisition, to lock-in certain transaction economics. We have implemented these strategies for our four foreign investments in the U.K., Continental Europe, Canada and Asia Pacific. Specifically, through our 150 million British pounds sterling denominated 7¹/4% Senior Subordinated Notes due 2014 and our 255 million 6³/4% Euro Senior Subordinated Notes due 2018, we effectively hedge most of our outstanding intercompany loans denominated in British pounds sterling and Euros. Canada Company has financed its capital needs through direct borrowings in Canadian dollars under the New Credit Agreement and its 175 million CAD denominated 7¹/2% Senior Subordinated Notes due 2017. This creates a tax efficient natural currency hedge. In addition, in January, 2007 we entered into forward contracts to exchange 124.4 million U.S. dollars for 96 million Euros and 194 million CAD for 127.5 million Euros to hedge our intercompany exposures with Canada and our subsidiaries whose functional currency is the Euro. In March 2007, in conjunction with the issuance of CAD denominated senior subordinated notes, the CAD for Euro swap was not renewed and was replaced with additional U.S. for Euro swaps. These forward contracts were not renewed in the third quarter of 2007. In the third quarter of 2007, we designated a portion of our 6³/4% Euro Senior Subordinated Notes due 2018 issued by IMI as a hedge of net investment of certain of our Euro denominated subsidiaries. As a result, for the year ended December 31, 2007 and three months ended March 31, 2008, we recorded $6.1 million ($3.9 million, net of tax) and $18.9 million ($12.1 million, net of tax), respectively, of foreign exchange losses related to the "marking-to-market" of such debt to currency translation adjustments which is a component of accumulated other comprehensive items, net included in stockholder's equity. In May 2007, we entered into forward contracts to exchange 146.1 million U.S. dollars for 73.6 million in British pounds sterling to hedge our intercompany exposures with IME. These forward contracts settle on a monthly basis, at which time we may enter into new forward contracts for the same underlying amounts to continue to hedge movements in the underlying currencies. At the time of settlement, we either pay or receive the net settlement amount from the forward contract and recognize this amount in other expense (income), net in the accompanying statement of operations as a realized foreign exchange gain or loss. We have not designated these forward contracts as hedges. We recorded a realized gain in connection with these forward contracts of $8.0 million for the year ended December 31, 2007 and $1.4 million for the three months ended March 31, 2008, respectively. At the end of each month, we mark the outstanding forward contracts to market and record an unrealized foreign exchange gain or loss for the mark-to-market valuation. As of March 31, 2008, we recorded an unrealized foreign exchange loss of $1.0 million in other expense (income), net in the accompanying statement of operations. As of March 31, 2008, except as noted above, our currency exposures to intercompany balances are unhedged.

        The impact of devaluation or depreciating currency on an entity depends on the residual effect on the local economy and the ability of an entity to raise prices and/or reduce expenses. Due to our constantly changing currency exposure and the potential substantial volatility of currency exchange rates, we cannot predict the effect of exchange fluctuations on our business. The effect of a change in foreign exchange rates on our net investment in foreign subsidiaries is reflected in the "Accumulated Other Comprehensive Items, net" component of stockholders' equity.

Item 4.    Controls and Procedures

        The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These rules refer to the controls and other procedures of a company that are designed to ensure that information is recorded, processed, summarized and communicated to management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding what is required to be disclosed by a company in the reports that it files under the Exchange Act. As of March 31, 2008 (the "Evaluation Date"), we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of

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our disclosure controls and procedures. Based upon that evaluation, our chief executive officer and chief financial officer have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective.

        There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II.    Other Information

Item 1A.    Risk Factors

        There are no material changes from the risk factors previously disclosed under "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2007.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

        There was no common stock repurchased or sales of unregistered securities for the first quarter ended March 31, 2008.

Item 6.    Exhibits

(a)   Exhibits

Exhibit No.		Description
10.1		Criteria under the 2003 Senior Executive Incentive Plan, as amended. (Incorporated by reference to Iron Mountain Incorporated's Current Report on Form 8-K dated March 12, 2008.)
10.2		Criteria under the 2006 Senior Executive Incentive Plan. (Incorporated by reference to Iron Mountain Incorporated's Current Report on Form 8-K dated March 12, 2008.)
12		Statement re: Computation of Ratios.
31.1		Rule 13a-14(a) Certification of Chief Executive Officer.
31.2		Rule 13a-14(a) Certification of Chief Financial Officer.
32.1		Section 1350 Certification of Chief Executive Officer.
32.2		Section 1350 Certification of Chief Financial Officer.

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SIGNATURES

        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.

		IRON MOUNTAIN INCORPORATED
May 9, 2008 (DATE)		BY:	/s/  BRIAN P. MCKEON       Brian P. McKeon Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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