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Summary of Significant Accounting Policies | 6 Months Ended
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Jun. 30, 2018
Accounting Policies [Abstract] |
Cash and Cash Equivalents | This Note 2 to Notes to Condensed Consolidated Financial Statements provides information and disclosure regarding certain of our significant accounting policies and should be read in conjunction with Note 2 to Notes to Consolidated Financial Statements included in our Annual Report, which may provide additional information with regard to the accounting policies set forth herein and other of our significant accounting policies. a. Cash, Cash Equivalents and Restricted Cash Cash and cash equivalents include cash on hand and cash invested in highly liquid short-term securities, which have remaining maturities at the date of purchase of less than 90 days. Cash and cash equivalents are carried at cost, which approximates fair value. At December 31, 2017 and June 30, 2018, we had approximately $22,167 and $17,703, respectively, of restricted cash held by certain financial institutions related to bank guarantees. b. Goodwill and Other Intangible Assets and Liabilities Goodwill Since December 31, 2017, there have been no changes to our accounting polices related to the accounting for goodwill. As of December 31, 2017 and June 30, 2018, no factors were identified that would alter our October 1, 2017 goodwill impairment analysis. 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 values. Our reporting units as of December 31, 2017 are described in detail in Note 2.h. to Notes to Consolidated Financial Statements included in our Annual Report. The goodwill associated with acquisitions completed during the first six months of 2018 (which are described in Note 4) has been incorporated into our reporting units as they existed as of December 31, 2017. During the first quarter of 2018, as a result of changes in the management of our businesses included in our Other International Business segment, we reassessed the composition of our reporting units. As a result of this reassessment, we determined that our business in South Africa, which was previously being managed in conjunction with our businesses in Northern and Eastern Europe and Middle East and India as a part of our former Northern and Eastern Europe and Middle East, Africa and India (“NEE and MEAI”) reporting unit, was now being managed in conjunction with our businesses included in our Australia and New Zealand reporting unit. This newly formed reporting unit, which consists of (i) the businesses included in our former Australia and New Zealand reporting unit and (ii) our business in South Africa is referred to as the Australia, New Zealand and South Africa (“ANZ-SA”) reporting unit. The former NEE and MEAI reporting unit is now referred to as the Northern and Eastern Europe and Middle East and India ("NEE and MEI") reporting unit. The changes in the carrying value of goodwill attributable to each reportable operating segment for the six months ended June 30, 2018 are as follows:
| North American Records and Information Management Business |  | North American Data Management Business |  | Western European Business |  | Other International Business |  | Global Data Center Business |  | Corporate and Other Business |  | Total Consolidated
Gross Balance as of December 31, 2017 | $ | 2,474,829 |  |  | $ | 551,726 |  |  | $ | 453,537 |  |  | $ | 846,721 |  |  | $ | — |  |  | $ | 60,048 |  |  | $ | 4,386,861 |
Non-deductible goodwill acquired during the year | — |  |  | — |  |  | — |  |  | 5,330 |  |  | 443,368 |  |  | — |  |  | 448,698 |
Fair value and other adjustments(1) | (376 | ) |  | — |  |  | — |  |  | 7,797 |  |  | — |  |  | 4,704 |  |  | 12,125 |
Currency effects | (9,257 | ) |  | (2,527 | ) |  | (9,353 | ) |  | (43,373 | ) |  | (2 | ) |  | (590 | ) |  | (65,102 | )
Gross Balance as of June 30, 2018 | $ | 2,465,196 |  |  | $ | 549,199 |  |  | $ | 444,184 |  |  | $ | 816,475 |  |  | $ | 443,366 |  |  | $ | 64,162 |  |  | $ | 4,782,582 |
Accumulated Amortization Balance as of December 31, 2017 | $ | 205,383 |  |  | $ | 53,875 |  |  | $ | 57,048 |  |  | $ | 288 |  |  | $ | — |  |  | $ | — |  |  | $ | 316,594 |
Currency effects | (327 | ) |  | (82 | ) |  | (237 | ) |  | — |  |  | — |  |  | — |  |  | (646 | )
Accumulated Amortization Balance as of June 30, 2018 | $ | 205,056 |  |  | $ | 53,793 |  |  | $ | 56,811 |  |  | $ | 288 |  |  | $ | — |  |  | $ | — |  |  | $ | 315,948 |
Net Balance as of December 31, 2017 | $ | 2,269,446 |  |  | $ | 497,851 |  |  | $ | 396,489 |  |  | $ | 846,433 |  |  | $ | — |  |  | $ | 60,048 |  |  | $ | 4,070,267 |
Net Balance as of June 30, 2018 | $ | 2,260,140 |  |  | $ | 495,406 |  |  | $ | 387,373 |  |  | $ | 816,187 |  |  | $ | 443,366 |  |  | $ | 64,162 |  |  | $ | 4,466,634 |
Accumulated Goodwill Impairment Balance as of December 31, 2017 | $ | 85,909 |  |  | $ | — |  |  | $ | 46,500 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,011 |  |  | $ | 135,420 |
Accumulated Goodwill Impairment Balance as of June 30, 2018 | $ | 85,909 |  |  | $ | — |  |  | $ | 46,500 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,011 |  |  | $ | 135,420 |
_______________________________________________________________________________
(1) | Total fair value and other adjustments include $12,125 in net adjustments primarily related to property, plant and equipment, customer relationship intangible assets and deferred income taxes and other liabilities.
Finite-lived intangible assets and liabilities i. Customer Relationship Intangible Assets Customer relationship intangible assets, which are acquired through either business combinations or acquisitions of customer relationships, are amortized over periods ranging from 10 to 30 years and are included in depreciation and amortization in the accompanying Condensed Consolidated Statements of Operations. The value of customer relationship intangible assets is calculated based upon estimates of their fair value. ii. Customer Inducements Prior to the adoption of ASU 2014-09, free intake costs to transport boxes to one of our facilities, which include labor and transportation costs ("Free Move Costs"), were capitalized and amortized over periods ranging from 10 to 30 years. The amortization of Free Move Costs is included in depreciation and amortization in the accompanying Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2017. Subsequent to the adoption of ASU 2014-09, Free Move Costs are considered a Contract Fulfillment Cost (as defined in Note 2.c.) and, therefore, are now deferred and amortized over three years, consistent with the transfer of the performance obligation to the customer to which the asset relates. See Note 2.c. for information regarding the accounting for Free Move Costs, which are now a component of Intake Costs (as defined in Note 2.c.), following the adoption of ASU 2014-09. Payments that are made to a customer's current records management vendor in order to terminate the customer's existing contract with that vendor, or direct payments to a customer ("Permanent Withdrawal Fees"), are amortized over periods ranging from 5 to 15 years and are included in storage and service revenue in the accompanying Condensed Consolidated Statements of Operations. Our accounting for Permanent Withdrawal Fees did not change as a result of the adoption of ASU 2014-09. Free Move Costs (prior to the adoption of ASU 2014-09) and Permanent Withdrawal Fees are collectively referred to as "Customer Inducements". If the customer terminates its relationship with us, the unamortized carrying value of the Customer Inducement intangible asset is charged to expense or revenue. However, in the event of such termination, we generally collect, and record as income, permanent removal fees that generally equal or exceed the amount of the unamortized Customer Inducement intangible asset. iii. Data Center Intangible Assets and Liabilities Finite-lived intangible assets associated with our data center business consist of the following: Data Center In-Place Lease Intangible Assets and Data Center Tenant Relationship Intangible Assets Data Center In-Place Lease Intangible Assets (“Data Center In-Place Leases”) and Data Center Tenant Relationship Intangible Assets (“Data Center Tenant Relationships") are acquired through either business combinations or asset acquisitions in our data center business. These intangible assets reflect the value associated with acquiring a data center operation with active tenants as of the date of acquisition. The value of Data Center In-Place Leases is determined based upon an estimate of the economic costs (such as lost revenues and unreimbursed operating expenses during the lease-up period, tenant improvement costs, commissions, legal expenses and other costs to acquire new data center leases) avoided by acquiring a data center operation with active tenants that would have otherwise been incurred if the data center operation was purchased vacant. Data Center In-Place Leases are amortized over the weighted average remaining term of the acquired data center leases and are included in depreciation and amortization in the accompanying Condensed Consolidated Statements of Operations. The value of Data Center Tenant Relationships is determined based upon an estimate of the economic costs avoided upon lease renewal of the acquired tenants, based upon expectations of lease renewal. Data Center Tenant Relationships are amortized over the weighted average remaining anticipated life of the relationship with the acquired tenant and are included in depreciation and amortization in the accompanying Condensed Consolidated Statements of Operations. Data Center In-Place Leases and Data Center Tenant Relationships are included in Customer relationships, customer inducements and data center lease-based intangibles in the accompanying Condensed Consolidated Balance Sheets. Data Center Above-Market and Below-Market In-Place Lease Intangible Assets Data Center Above-Market In-Place Lease Intangible Assets (“Data Center Above-Market Leases”) and Data Center Below-Market In-Place Lease Intangible Assets (“Data Center Below-Market Leases”) are acquired through either business combinations or asset acquisitions in our data center business. We record Data Center Above-Market Leases and Data Center Below-Market Leases at the net present value of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of the fair market lease rates for each corresponding in-place lease. Data Center Above-Market Leases and Data Center Below-Market Leases are amortized over the remaining non-cancellable term of the acquired in-place lease to storage revenue in the accompanying Condensed Consolidated Statements of Operations. Data Center Above-Market Leases are included in Customer relationships, customer inducements and data center lease-based intangibles in the accompanying Condensed Consolidated Balance Sheets. Data Center Below-Market Leases are included in Other long-term liabilities in the accompanying Condensed Consolidated Balance Sheets. The components of our finite-lived intangible assets related to customer relationship value, customer inducements and data center lease-based intangible assets and liabilities as of December 31, 2017 and June 30, 2018 are as follows:
| December 31, 2017 |  | June 30, 2018
| Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount
Assets: |  |  |  |  |  |  |  |  |  |  |
Customer relationship intangible assets | $ | 1,704,105 |  |  | $ | (395,278 | ) |  | $ | 1,308,827 |  |  | $ | 1,690,147 |  |  | $ | (436,076 | ) |  | $ | 1,254,071 |
Customer inducements(1) | 140,030 |  |  | (66,981 | ) |  | 73,049 |  |  | 57,555 |  |  | (35,430 | ) |  | 22,125 |
Data center lease-based intangible assets(2) | 19,314 |  |  | (643 | ) |  | 18,671 |  |  | 276,936 |  |  | (22,583 | ) |  | 254,353 |
| $ | 1,863,449 |  |  | $ | (462,902 | ) |  | $ | 1,400,547 |  |  | $ | 2,024,638 |  |  | $ | (494,089 | ) |  | $ | 1,530,549 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |
Data center below-market leases | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 12,338 |  |  | $ | (761 | ) |  | $ | 11,577 |
_______________________________________________________________________________
(1) | The gross carrying amount, accumulated amortization and net carrying amount of customer inducements as of December 31, 2017 includes Free Move Costs, which were capitalized as Customer Inducements prior to the adoption of ASU 2014-09. Subsequent to the adoption of ASU 2014-09, Free Move Costs are considered Contract Fulfillment Costs and Customer Inducements consist exclusively of Permanent Withdrawal Fees. Contract Fulfillment Costs are included in Other, a component of Other Assets, Net, in the accompanying Condensed Consolidated Balance Sheet as of June 30, 2018. See Note 2.c. for information regarding Contract Fulfillment Costs included in our Condensed Consolidated Balance Sheet as of June 30, 2018.
(2) | Includes Data Center In-Place Leases, Data Center Tenant Relationships and Data Center Above-Market Leases.
Other finite-lived intangible assets, including trade names, noncompetition agreements and trademarks, are capitalized and amortized over a weighted average of four years and are included in depreciation and amortization in the accompanying Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2017 and 2018. The other finite-lived intangible assets as of December 31, 2017 and June 30, 2018 are as follows:
| December 31, 2017 |  | June 30, 2018
| Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount
Other finite-lived intangible assets (included in other assets, net) | $ | 20,929 |  |  | $ | (10,728 | ) |  | $ | 10,201 |  |  | $ | 20,365 |  |  | $ | (12,611 | ) |  | $ | 7,754 |
Amortization expense associated with finite-lived intangible assets, revenue reduction associated with the amortization of Permanent Withdrawal Fees and net revenue reduction associated with the amortization of Data Center Above-Market Leases and Data Center Below-Market Leases for the three and six months ended June 30, 2017 and 2018 are as follows:
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2017 |  | 2018 |  | 2017 |  | 2018
Amortization expense included in depreciation and amortization associated with: |  |  |  |  |  |  |  |
Customer relationship and customer inducement intangible assets |  | $ | 24,611 |  |  | $ | 28,813 |  |  | $ | 47,410 |  |  | $ | 57,619 |
Data center in-place leases and tenant relationships |  | — |  |  | 7,563 |  |  | — |  |  | 18,401 |
Other finite-lived intangible assets |  | 1,173 |  |  | 1,659 |  |  | 3,489 |  |  | 2,844 |
Revenue reduction associated with amortization of: |  |  |  |  |  |  |  |
Permanent withdrawal fees |  | $ | 2,748 |  |  | $ | 2,968 |  |  | $ | 5,906 |  |  | $ | 5,553 |
Data center above-market leases and data center below-market leases |  | — |  |  | 1,293 |  |  | — |  |  | 2,372 |
. Revenues In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09. ASU 2014-09 provides guidance for management to reassess revenue recognition as it relates to: (1) transfer of control, (2) variable consideration, (3) allocation of transaction price based on relative standalone selling price, (4) licenses, (5) time value of money, and (6) contract costs. We adopted ASU 2014-09 as of January 1, 2018 using the modified retrospective method for all of our customer contracts, whereby the cumulative effect of applying ASU 2014-09 is recognized at the date of initial application. At January 1, 2018, we recognized the cumulative effect of initially applying ASU 2014-09 as an adjustment to the opening balance of (distributions in excess of earnings) earnings in excess of distributions, resulting in a decrease of $30,233 to stockholders' equity. The reduction of (distribution in excess of earnings) earnings in excess of distributions represents the net effect of (i) the write-off of Free Move Costs, net (which were capitalized and amortized prior to the adoption of ASU 2014-09) based upon the net book value of the Free Move Costs as of December 31, 2017, (ii) the recognition of certain Contract Fulfillment Costs, specifically Intake Costs (each as defined below) and commission assets, (iii) the recognition of deferred revenue associated with Intake Costs billed to our customers (as discussed below), and (iv) the deferred income tax impact of the aforementioned items. As we adopted ASU 2014-09 on a modified retrospective basis, the comparative Condensed Consolidated Balance Sheet as of December 31, 2017, the Condensed Consolidated Statements of Operations and the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2017 and the Condensed Consolidated Statement of Equity and the Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2017 have not been restated to reflect the adoption of ASU 2014-09 and reflect our revenue policies in place at that time, as disclosed in Note 2.l. to Notes to Consolidated Financial Statements included in our Annual Report. Storage rental and service revenues are recognized in the month the respective storage rental or service is provided, and customers are generally billed on a monthly basis on contractually agreed-upon terms. The performance obligation is a series of distinct services (as determined for purposes of ASU 2014-09, a “series”) that have the same pattern of transfer to the customer that is satisfied over time. For those contracts that qualify as a series, we have a right to consideration from the customer in an amount that corresponds directly with the value of the underlying performance obligation transferred to the customer to date. This concept is known as "right to invoice" and we are applying the "right to invoice" practical expedient to all revenues, with the exception of storage revenues in our data center business. For all of our businesses, with the exception of the storage component of our data center business, each purchasing decision is fully in the control of the customer and, therefore, consideration beyond the current reporting period is variable and allocated to the specific period, which is consistent with the practical expedient above. Our data center business features storage rental provided to the customer at contractually specified rates over a fixed contractual period. The storage rental revenue related to the storage component of our data center business is recognized on a straight-line basis over the contract term. The revenue related to the service component of our data center business is recognized in the period the data center access or related services are provided. Total data center revenues represent approximately 5% of our total consolidated revenues for the six months ended June 30, 2018. The costs associated with the initial movement of customer records into physical storage and certain commissions are considered costs to obtain or fulfill customer contracts (“Contract Fulfillment Costs”). The following describes each of these Contract Fulfillment Costs recognized under ASU 2014-09: Intake Costs (and associated deferred revenue) Prior to the adoption of ASU 2014-09, intake costs incurred but not charged to a customer to transport records to our facilities (or Free Move Costs, as described in Note 2.b.), which include labor and transportation costs, were capitalized and amortized as a component of depreciation and amortization in our Consolidated Statements of Operations. The initial movement of customer records into physical storage must take place prior to initiation of the storage of records and is not considered a separate performance obligation and, therefore, the costs of the initial intake of customer records into physical storage (“Intake Costs”) represent a contract fulfillment cost for the storage of records as the earnings process does not commence until a customer’s records or other assets are in our possession. Accordingly, upon the adoption of ASU 2014-09, all Intake Costs, regardless of whether or not the services associated with such initial moves are billed to the customer or are provided to the customer at no charge, will be deferred and amortized as a component of depreciation and amortization in our Consolidated Statements of Operations over three years, consistent with the transfer of the performance obligation to the customer to which the asset relates. Similarly, in instances where such Intake Costs are billed to the customer, the associated revenue will be deferred and recognized over the same three year period. Commissions Prior to the adoption of ASU 2014-09, commissions we paid related to our long-term storage contracts were expensed as incurred. Upon the adoption of ASU 2014-09, certain commission payments that are directly associated with the fulfillment of long-term storage contracts are capitalized and amortized as a component of depreciation and amortization in our Consolidated Statements of Operations over three years, consistent with the transfer of the performance obligation to the customer to which the asset relates. Certain direct commission payments associated with contracts with a duration of one year or less are expensed as incurred under the practical expedient which allows an entity to expense as incurred an incremental cost of obtaining a contract if the amortization period of the asset that the entity otherwise would have recognized is one year or less. The Contract Fulfillment Costs recorded as a result of the adoption of ASU 2014-09 as of January 1, 2018 and June 30, 2018 are as follows:
|  |  |  | January 1, 2018 (Date of Adoption of ASU 2014-09) |  |  | June 30, 2018
Description |  | Location in Balance Sheet |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount |  |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount
Commissions asset |  | Other (within Other Assets, Net) |  | $ | 42,072 |  |  | $ | (21,173 | ) |  | $ | 20,899 |  |  |  | $ | 48,833 |  |  | $ | (28,355 | ) |  | $ | 20,478 |
Intake Costs asset |  | Other (within Other Assets, Net) |  | 31,604 |  |  | (14,954 | ) |  | 16,650 |  |  |  | 35,643 |  |  | (20,135 | ) |  | 15,508 |
Amortization expense associated with the commissions asset and Intake Costs asset for the three and six months ended June 30, 2018 are as follows:
| Three Month Ended June 30, 2018 |  | Six Months Ended June 30, 2018
Commissions asset |  | $ | 3,793 |  |  |  | $ | 7,380 |
Intake Costs asset |  | 2,891 |  |  |  | 5,621 |
Deferred revenue liabilities associated with billed Intake Costs recorded as a result of the adoption of ASU 2014-09 as of January 1, 2018 and June 30, 2018 are as follows:
Description |  | Location in Balance Sheet |  | January 1, 2018 (Date of Adoption of ASU 2014-09) |  | June 30, 2018
Deferred revenue - Current |  | Deferred revenue |  | $ | 9,671 |  |  | $ | 10,140 |
Deferred revenue - Long-term |  | Other Long-term Liabilities |  | 9,877 |  |  | 7,467 |
The following table presents certain components of our Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2018 as reported and as if we had not adopted ASU 2014-09 on January 1, 2018:
| Three Months Ended June 30, 2018 |  | Six Months Ended June 30, 2018
| As Reported |  | If ASU 2014-09 was not adopted |  | As Reported |  | If ASU 2014-09 was not adopted
Revenues | $ | 1,060,823 |  |  | $ | 1,057,608 |  |  | $ | 2,103,281 |  |  | $ | 2,098,872 |
Operating Income | $ | 203,359 |  |  | $ | 201,664 |  |  | $ | 367,918 |  |  | $ | 366,983 |
Income from Continuing Operations | $ | 93,903 |  |  | $ | 92,208 |  |  | $ | 139,517 |  |  | $ | 138,582 |
Per Share Income from Continuing Operations - Basic | $ | 0.33 |  |  | $ | 0.32 |  |  | $ | 0.49 |  |  | $ | 0.48 |
Per Share Income from Continuing Operations - Diluted | $ | 0.33 |  |  | $ | 0.32 |  |  | $ | 0.49 |  |  | $ | 0.48 |
. Stock-Based Compensation We record stock-based compensation expense, utilizing the straight-line method, for the cost of stock options, restricted stock units ("RSUs"), performance units ("PUs") and shares of stock issued under our employee stock purchase plan ("ESPP") (together, "Employee Stock-Based Awards"). There have been no significant changes to our accounting policies, assumptions and valuation methodologies related to the accounting for our Employee Stock-Based Awards as disclosed in Note 2.n. to Notes to Consolidated Financial Statements included in our Annual Report. Stock-based compensation expense for Employee Stock-Based Awards for the three and six months ended June 30, 2017 was $8,543 ($5,945 after tax or $0.02 per basic and diluted share) and $15,092 ($10,530 after tax or $0.04 per basic and diluted share), respectively. Stock-based compensation expense for Employee Stock-Based Awards for the three and six months ended June 30, 2018 was $8,689 ($8,032 after tax or $0.03 per basic and diluted share) and $16,073 ($14,865 after tax or $0.05 per basic and diluted share), respectively. As of June 30, 2018, unrecognized compensation cost related to the unvested portion of our Employee Stock-Based Awards was $57,429 and is expected to be recognized over a weighted-average period of 2.2 years. Stock-based compensation expense for Employee Stock-Based Awards included in the accompanying Condensed Consolidated Statements of Operations is as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2017 |  | 2018 |  | 2017 |  | 2018
Cost of sales (excluding depreciation and amortization) | $ | 27 |  |  | $ | 29 |  |  | $ | 55 |  |  | $ | 58 |
Selling, general and administrative expenses | 8,516 |  |  | 8,660 |  |  | 15,037 |  |  | 16,015 |
Total stock-based compensation | $ | 8,543 |  |  | $ | 8,689 |  |  | $ | 15,092 |  |  | $ | 16,073 |
Stock Options A summary of stock option activity for the six months ended June 30, 2018 is as follows:
| Stock Options
Outstanding at December 31, 2017 | 3,671,740 |
Granted | 846,517 |
Exercised | (118,304 | )
Forfeited | (23,334 | )
Expired | (4,260 | )
Outstanding at June 30, 2018 | 4,372,359 |
Options exercisable at June 30, 2018 | 2,409,054 |
Options expected to vest | 1,844,046 |
Restricted Stock Units The fair value of RSUs vested during the three and six months ended June 30, 2017 and 2018 is as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2017 |  | 2018 |  | 2017 |  | 2018
Fair value of RSUs vested | $ | 2,047 |  |  | $ | 676 |  |  | $ | 16,073 |  |  | $ | 16,006 |
A summary of RSU activity for the six months ended June 30, 2018 is as follows:
| RSUs
Non-vested at December 31, 2017 | 1,071,469 |
Granted | 701,259 |
Vested | (455,224 | )
Forfeited | (53,080 | )
Non-vested at June 30, 2018 | 1,264,424 |
Performance Units Under our various equity compensation plans, we may also make awards of PUs. For the majority of outstanding PUs, the number of PUs earned is determined based on our performance against predefined targets of revenue and return on invested capital ("ROIC") and, beginning with PUs granted in 2018, Adjusted EBITDA (as defined in Note 7). The number of PUs earned may range from 0% to 200% of the initial award. The number of PUs earned is determined based on our actual performance as compared to the targets at the end of a three-year performance period. Certain PUs that we grant will be earned based on a market condition associated with the total return on our common stock in relation to either (i) a subset of the Standard & Poor's 500 Index (for certain PUs granted prior to 2017), or (ii) the MSCI United States REIT Index (for certain PUs granted in 2017 and thereafter), rather than the revenue, ROIC and Adjusted EBITDA targets noted above. The number of PUs earned based on the applicable market condition may range from 0% to 200% of the initial award. The majority of our PUs are earned based on our performance against revenue, ROIC and, beginning with PUs granted in 2018, Adjusted EBITDA targets during their applicable performance period; therefore, we forecast the likelihood of achieving the predefined revenue, ROIC and Adjusted EBITDA targets in order to calculate the expected PUs to be earned. We record a compensation charge based on either the forecasted PUs to be earned (during the performance period) or the actual PUs earned (at the three-year anniversary of the grant date) over the vesting period for each of the awards. The fair value of PUs based on our performance against revenue, ROIC and Adjusted EBITDA targets is the excess of the market price of our common stock at the date of grant over the purchase price (which is typically zero). For PUs earned based on a market condition, we utilize a Monte Carlo simulation to fair value these awards at the date of grant, and such fair value is expensed over the three-year performance period. As of June 30, 2018, we expected 85%, 100% and 100% achievement of the predefined revenue, ROIC and Adjusted EBITDA targets associated with the awards of PUs made in 2016, 2017 and 2018, respectively. The fair value of earned PUs that vested during the three and six months ended June 30, 2017 and 2018 is as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2017 |  | 2018 |  | 2017 |  | 2018
Fair value of earned PUs that vested | $ | — |  |  | $ | — |  |  | $ | 905 |  |  | $ | 3,033 |
A summary of PU activity for the six months ended June 30, 2018 is as follows:
| Original PU Awards |  | PU Adjustment(1) |  | Total PU Awards
Non-vested at December 31, 2017 | 717,878 |  |  | (250,067 | ) |  | 467,811 |
Granted | 353,507 |  |  | — |  |  | 353,507 |
Vested | (79,121 | ) |  | — |  |  | (79,121 | )
Forfeited/Performance or Market Conditions Not Achieved | (12,368 | ) |  | (49,881 | ) |  | (62,249 | )
Non-vested at June 30, 2018 | 979,896 |  |  | (299,948 | ) |  | 679,948 |
_______________________________________________________________________________
(1) | Represents an increase or decrease in the number of original PUs awarded based on either the final performance criteria or market condition achievement at the end of the performance period of such PUs or a change in estimated awards based on the forecasted performance against the predefined targets.
. Income (Loss) Per Share—Basic and Diluted Basic income (loss) per common share is calculated by dividing income (loss) by the weighted average number of common shares outstanding. The calculation of diluted income (loss) per share is consistent with that of basic income (loss) per share but gives effect to all potential common shares (that is, securities such as stock options, RSUs or PUs) that were outstanding during the period, unless the effect is antidilutive. The calculation of basic and diluted income (loss) per share for the three and six months ended June 30, 2017 and 2018 is as follows:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2017 |  | 2018 |  | 2017 |  | 2018
Income (loss) from continuing operations | $ | 83,148 |  |  | $ | 93,903 |  |  | $ | 141,992 |  |  | $ | 139,517 |
Less: Net income (loss) attributable to noncontrolling interests | 2,492 |  |  | 142 |  |  | 2,874 |  |  | 610 |
Income (loss) from continuing operations (utilized in numerator of Earnings Per Share calculation) | $ | 80,656 |  |  | $ | 93,761 |  |  | $ | 139,118 |  |  | $ | 138,907 |
(Loss) income from discontinued operations, net of tax | $ | (2,026 | ) |  | $ | (360 | ) |  | $ | (2,363 | ) |  | $ | (822 | )
Net income (loss) attributable to Iron Mountain Incorporated | $ | 78,630 |  |  | $ | 93,401 |  |  | $ | 136,755 |  |  | $ | 138,085 |
Weighted-average shares—basic | 264,217,000 |  |  | 285,984,000 |  |  | 264,036,000 |  |  | 285,622,000 |
Effect of dilutive potential stock options | 395,044 |  |  | 237,708 |  |  | 428,403 |  |  | 243,636 |
Effect of dilutive potential RSUs and PUs | 318,375 |  |  | 347,543 |  |  | 405,640 |  |  | 415,929 |
Weighted-average shares—diluted | 264,930,419 |  |  | 286,569,251 |  |  | 264,870,043 |  |  | 286,281,565 |
Earnings (losses) per share—basic: |  |  |  |  |  |  |  |  |  |  |
Income (loss) from continuing operations | $ | 0.31 |  |  | $ | 0.33 |  |  | $ | 0.53 |  |  | $ | 0.49 |
(Loss) income from discontinued operations, net of tax | (0.01 | ) |  | — |  |  | (0.01 | ) |  | — |
Net income (loss) attributable to Iron Mountain Incorporated(1) | $ | 0.30 |  |  | $ | 0.33 |  |  | $ | 0.52 |  |  | $ | 0.48 |
Earnings (losses) per share—diluted: |  |  |  |  |  |  |  |  |  |  |
Income (loss) from continuing operations | $ | 0.30 |  |  | $ | 0.33 |  |  | $ | 0.53 |  |  | $ | 0.49 |
(Loss) income from discontinued operations, net of tax | (0.01 | ) |  | — |  |  | (0.01 | ) |  | — |
Net income (loss) attributable to Iron Mountain Incorporated(1) | $ | 0.30 |  |  | $ | 0.33 |  |  | $ | 0.52 |  |  | $ | 0.48 |
Antidilutive stock options, RSUs and PUs, excluded from the calculation | 2,701,129 |  |  | 3,272,502 |  |  | 2,597,692 |  |  | 3,257,322 |
_______________________________________________________________________________ (1) Columns may not foot due to rounding. . Income Taxes We provide for income taxes during interim periods based on our estimate of the effective tax rate for the year. Our estimate of the effective tax rate for the year ending December 31, 2018 reflects the impact of the Tax Reform Legislation (as defined below). Discrete items and changes in our estimate of the annual effective tax rate are recorded in the period they occur. Our effective tax rate is subject to variability in the future due to, among other items: (1) changes in the mix of income between our qualified REIT subsidiaries ("QRSs") and our domestic taxable REIT subsidiaries ("TRSs"), as well as among the jurisdictions in which we operate; (2) tax law changes; (3) volatility in foreign exchange gains and losses; (4) the timing of the establishment and reversal of tax reserves; and (5) our ability to utilize net operating losses that we generate. Our effective tax rates for the three and six months ended June 30, 2017 were 18.1% and 16.2%, respectively. The primary reconciling items between the then current federal statutory tax rate of 35.0% and our overall effective tax rate for the three months ended June 30, 2017 were the benefit derived from the dividends paid deduction and differences in the rates of tax at which our foreign earnings are subject. The primary reconciling items between the then current federal statutory tax rate of 35.0% and our overall effective tax rate for the six months ended June 30, 2017 were the benefit derived from the dividends paid deduction, differences in the rates of tax at which our foreign earnings are subject and a release of valuation allowances on certain of our foreign net operating losses of $7,511 as a result of the merger of certain of our foreign subsidiaries. Our effective tax rates for the three and six months ended June 30, 2018 were 21.9% and 16.5%, respectively. The primary reconciling items between the current federal statutory tax rate of 21.0% and our overall effective tax rate for the three months ended June 30, 2018 were the benefit derived from the dividends paid deduction and the impact of differences in the tax rates at which our foreign earnings are subject, including foreign exchange gains and losses in different jurisdictions with different tax rates. The primary reconciling items between the current federal statutory tax rate of 21.0% and our overall effective tax rate for the six months ended June 30, 2018 were the benefit derived from the dividends paid deduction, a discrete tax benefit of approximately $14,000 associated with the resolution of a tax matter (as disclosed in Note 7 to Notes to Consolidated Financial Statements included in our Annual Report), and the impact of differences in the tax rates at which our foreign earnings are subject, including foreign exchange gains and losses in different jurisdictions with different tax rates. On December 22, 2017, legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Legislation”) was enacted into law in the United States. The Tax Reform Legislation amends the Internal Revenue Code of 1986, as amended (the “Code”), to reduce tax rates and modify policies, credits and deductions for businesses and individuals. The components of the Tax Reform Legislation are described in detail in Note 7 to Notes to Consolidated Financial Statements included in our Annual Report. One of the primary components of the Tax Reform Legislation was a reduction in the United States corporate federal income tax rate from 35.0% to 21.0% for taxable years beginning after December 31, 2017. The Tax Reform Legislation also imposes a transition tax (the “Deemed Repatriation Transition Tax”) on a mandatory deemed repatriation of post-1986 undistributed foreign earnings and profits not previously subject to United States tax as of November 2, 2017 or December 31, 2017, whichever is greater (the “Undistributed E&P”), as of the last taxable year beginning before January 1, 2018. The Deemed Repatriation Transition Tax varies depending on whether the Undistributed E&P is held in liquid (as defined in the Tax Reform Legislation) or non-liquid assets. A participation deduction against the deemed repatriation will result in a Deemed Repatriation Transition Tax on Undistributed E&P of 15.5% if held in cash and liquid assets and 8.0% if held in non-liquid assets. The Deemed Repatriation Transition Tax applies regardless of whether or not an entity has cash in its foreign subsidiaries and regardless of whether the entity actually repatriates the Undistributed E&P back to the United States. Our estimate of the amount of Undistributed E&P deemed repatriated under the Tax Reform Legislation in our taxable year ending December 31, 2017 is approximately $186,000 (the “Estimated Undistributed E&P”). We will opt to include the full amount of Estimated Undistributed E&P in our 2017 taxable income, rather than spread it over eight years (as permitted by the Tax Reform Legislation). Accordingly, included in our REIT taxable income for 2017 was approximately $82,000 related to the deemed repatriation of Undistributed E&P (the “Deemed Repatriation Taxable Income”). The Estimated Undistributed E&P includes certain assumptions made by us regarding the cumulative earnings and profits of our foreign subsidiaries, as well as the characterization of such Estimated Undistributed E&P (liquid versus non-liquid assets). We are currently performing additional analysis to determine the actual amount of Undistributed E&P associated with our foreign subsidiaries, as well as the characterization of such Undistributed E&P, and anticipate this analysis will continue until we file our 2017 United States federal income tax return. We do not believe this will have an impact on our provision for income taxes or our qualification as a REIT. However, it may impact our shareholder dividend reporting. . Fair Value Measurements Our financial assets or liabilities that are carried at fair value are required to be 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 of the fair value hierarchy 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 assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2017 and June 30, 2018, respectively, are as follows:
|  |  |  | Fair Value Measurements at December 31, 2017 Using
Description |  | Total Carrying Value at December 31, 2017 |  | Quoted prices in active markets (Level 1) |  |  |  | Significant other observable inputs (Level 2) |  |  |  | Significant unobservable inputs (Level 3)
Money Market Funds(1) |  | $ | 585,000 |  |  | $ | — |  |  |  |  | $ | 585,000 |  |  |  |  | $ | — |
Time Deposits(1) |  | 24,482 |  |  | — |  |  |  |  | 24,482 |  |  |  |  | — |
Trading Securities |  | 11,784 |  |  | 11,279 |  |  | (2) |  | 505 |  |  | (3) |  | — |
Derivative Assets(4) |  | 1,579 |  |  | — |  |  |  |  | 1,579 |  |  |  |  | — |
Derivative Liabilities(4) |  | 2,329 |  |  | — |  |  |  |  | 2,329 |  |  |  |  | — |
|  |  |  | Fair Value Measurements at June 30, 2018 Using
Description |  | Total Carrying Value at June 30, 2018 |  | Quoted prices in active markets (Level 1) |  |  |  | Significant other observable inputs (Level 2) |  |  |  | Significant unobservable inputs (Level 3)
Time Deposits(1) |  | $ | 5,759 |  |  | $ | — |  |  |  |  | $ | 5,759 |  |  |  |  | $ | — |
Trading Securities |  | 11,265 |  |  | 10,529 |  |  | (2) |  | 736 |  |  | (3) |  | — |
Derivative Assets(4) |  | 318 |  |  | — |  |  |  |  | 318 |  |  |  |  | — |
Derivative Liabilities(4) |  | 3,413 |  |  | — |  |  |  |  | 3,413 |  |  |  |  | — |
Interest Rate Swap Agreements Assets(5) |  | 2,203 |  |  | — |  |  |  |  | 2,203 |  |  |  |  | — |
_______________________________________________________________________________
(1) | Money market funds and time deposits are measured based on quoted prices for similar assets and/or subsequent transactions. At December 31, 2017, we had money market funds with 12 "Triple A" rated money market funds and time deposits with seven global banks. At June 30, 2018, we had no money market funds and time deposits with seven global banks.
(2) | Certain trading securities are measured at fair value using quoted market prices.
(3) | Certain trading securities are measured based on inputs other than quoted market prices that are observable.
(4) | Derivative assets and liabilities relate to short-term (six months or less) foreign currency contracts that we have entered into to hedge certain of our foreign exchange intercompany exposures, as more fully disclosed in Note 3. We calculate the value of such forward contracts by adjusting the spot rate utilized at the balance sheet date for translation purposes by an estimate of the forward points observed in active markets.
(5) | We have entered into interest rate swap agreements to hedge certain of our interest rate exposures, as more fully disclosed in Note 3. The interest rate swap agreements are designated as cash flow hedges and are measured based on inputs other than quoted market prices that are observable.
Disclosures are required in the financial statements for items measured at fair value on a non-recurring basis. There were no material items that are measured at fair value on a non-recurring basis at December 31, 2017 and June 30, 2018, other than those disclosed in Note 2.s. to Notes to Consolidated Financial Statements included in our Annual Report and the acquisitions that occurred during the six months ended June 30, 2018. The fair value of our long-term debt, which was determined based on either Level 1 inputs or Level 3 inputs, is disclosed in Note 5. Long-term debt is measured at cost in our Condensed Consolidated Balance Sheets as of December 31, 2017 and June 30, 2018. . Accumulated Other Comprehensive Items, Net The changes in accumulated other comprehensive items, net for the three and six months ended June 30, 2017, respectively, are as follows:
| Three Months Ended June 30, 2017 |  | Six Months Ended June 30, 2017
| Foreign Currency Translation Adjustments |  | Total |  | Foreign Currency Translation Adjustments |  | Total
Beginning of Period | $ | (161,239 | ) |  | $ | (161,239 | ) |  | $ | (212,573 | ) |  | $ | (212,573 | )
Other comprehensive income (loss): |  |  |  |  |  |  |
Foreign currency translation adjustments(1) | 7,649 |  |  | 7,649 |  |  | 58,983 |  |  | 58,983 |
Total other comprehensive income (loss) | 7,649 |  |  | 7,649 |  |  | 58,983 |  |  | 58,983 |
Balance as of June 30, 2017 | $ | (153,590 | ) |  | $ | (153,590 | ) |  | $ | (153,590 | ) |  | $ | (153,590 | )
______________________________________________________________
(1) | During the three and six months ended June 30, 2017, approximately $29,100 of cumulative translation adjustments associated with our businesses in Russia and Ukraine was reclassified from accumulated other comprehensive items, net and was included in the gain on sale associated with the Russia and Ukraine Divestment (as defined and discussed more fully in Note 10).
The changes in accumulated other comprehensive items, net for the three and six months ended June 30, 2018, respectively, are as follows:
| Three Months Ended June 30, 2018 |  | Six Months Ended June 30, 2018
| Foreign Currency Translation Adjustments |  | Fair Value Adjustments for Interest Rate Swap Agreements |  | Total |  | Foreign Currency Translation Adjustments |  | Fair Value Adjustments for Interest Rate Swap Agreements |  | Total
Beginning of Period | $ | (73,897 | ) |  | $ | (185 | ) |  | $ | (74,082 | ) |  | $ | (103,989 | ) |  | $ | — |  |  | $ | (103,989 | )
Other comprehensive (loss) income: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency translation adjustments | (135,756 | ) |  | — |  |  | (135,756 | ) |  | (105,664 | ) |  | — |  |  | (105,664 | )
Fair value adjustments for interest rate swap agreements | — |  |  | 2,388 |  |  | 2,388 |  |  | — |  |  | 2,203 |  |  | 2,203 |
Total other comprehensive (loss) income | (135,756 | ) |  | 2,388 |  |  | (133,368 | ) |  | (105,664 | ) |  | 2,203 |  |  | (103,461 | )
Balance as of June 30, 2018 | $ | (209,653 | ) |  | $ | 2,203 |  |  | $ | (207,450 | ) |  | $ | (209,653 | ) |  | $ | 2,203 |  |  | $ | (207,450 | )
. Other (Income) Expense, Net (including Foreign Currency) Other (income) expense, net for the three and six months ended June 30, 2017 and 2018 consists of the following:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2017 |  | 2018 |  | 2017 |  | 2018
Foreign currency transaction losses (gains), net | $ | 20,199 |  |  | $ | (18,624 | ) |  | $ | 16,035 |  |  | $ | 3,161 |
Other, net | (39,565 | ) |  | (432 | ) |  | (41,765 | ) |  | (2,066 | )
| $ | (19,366 | ) |  | $ | (19,056 | ) |  | $ | (25,730 | ) |  | $ | 1,095 |
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 include gains or losses related to (i) borrowings in certain foreign currencies under our Former Revolving Credit Facility (as defined and discussed in Note 4 to Notes to Consolidated Financial Statements included in our Annual Report) and the Revolving Credit Facility (as defined and discussed more fully in Note 5), (ii) our Euro Notes (as defined and discussed more fully in Note 5), (iii) certain foreign currency denominated intercompany obligations of our foreign subsidiaries to us and between our foreign subsidiaries, which are not considered permanently invested, and (iv) amounts that are paid or received on the net settlement amount from forward contracts (as more fully discussed in Note 3). Other, net for the three and six months ended June 30, 2017 includes a gain of $38,869 associated with the Russia and Ukraine Divestment (see Note 10). . New Accounting Pronouncements Recently Adopted Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09. We adopted ASU 2014-09 on January 1, 2018 using the modified retrospective method. See Note 2.c. for information regarding the impact of the adoption of ASU 2014-09 on our consolidated financial statements. In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"). ASU 2016-01 requires that most equity investments be measured at fair value, with subsequent changes in fair value recognized in net income, while eliminating the available-for-sale classification for equity securities with readily determinable fair values and the cost method for equity investments without readily determinable fair values. ASU 2016-01 also impacts financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. We adopted ASU 2016-01 on January 1, 2018. ASU 2016-01 did not have an impact on our consolidated financial statements. In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"). ASU 2017-12 amends the hedge accounting recognition and presentation requirements as outlined in Accounting Standards Codification Topic 815 with the objective of improving the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements and enhance the transparency and understandability of hedge transactions. In addition, ASU 2017-12 simplifies the application of the hedge accounting guidance. We adopted ASU 2017-12 on January 1, 2018. ASU 2017-12 did not have a material impact on our consolidated financial statements. Other As Yet Adopted Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 will require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. ASU 2016-02 also will require certain qualitative and quantitative disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 will be effective for us on January 1, 2019. We have established a cross functional project team responsible for the assessment and implementation of ASU 2016-02. We have also entered into an agreement for the use of a lease accounting software solution that will support us in meeting the accounting and reporting requirements specific to ASU 2016-02. We are currently evaluating the impact ASU 2016-02 will have on our consolidated financial statements.

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