Pierce Leahy Corporation

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Pierce Leahy Corporation

631 Park Avenue
King of Prussia, Pennsylvania 19406
(610) 992-8200
Fax: (610) 992-8324
Web site: http://www.pierceleahy.com

Public Company
1948 as Leahy & Co.
Employees: 2,500
Sales: $183.5 million (1997)
Stock Exchanges: New York
Ticker Symbol: PLH
SICs: 4225 General Warehousing & Storage

Pierce Leahy Corporation, which calls itself North Americas Filing Cabinet, is a full-service provider of records management and related services and the largest such company in North America, based on the volume of records under management. The company helps clients determine what records they need to keep, and then stores those using whatever type of media clients want to use, including paper, computer tapes, optical disks, microfilm, video tapes, and x-rays. To give customers prompt access to all this material, the company also retrieves and delivers records and offers imaging, facilities management, and consulting services. As of May 1998, Pierce Leahy managed more than 65 million cubic feet of records in its some 200 facilities in the United States and Canada for over 30,000 customers.

The Beginnings of Records Management: 1930-50

President Franklin D. Roosevelt helped create the need for the records management industry by dramatically increasing the size of the federal government, first with his New Deal programs and then with the defense bureaucracy related to World War II. Roosevelt recognized the problems he was creating and wanted to use the Pentagon, which he hated architecturally, to store records after the war. But Roosevelts interest was primarily archival; in 1934 he signed the legislation establishing the U.S. National Archives.

It was a contemporary of Roosevelts, Emmett J. (Ed) Leahy, who first began thinking about the economic consequences of all these government records and investigating ways to manage the whole records process. Leahy started testing his ideas, first while working at the U.S. Archives, and then as director of records coordination for the Navy Department during the war.

Looking for ways to make records work more cost-efficiently, Leahy introduced the concept of high-density storage in records centers, thus reducing the amount of floor space needed for inactive records. Other initiatives included management of active files, guide and form paragraphs and letters (called correspondence management), and microfilming important and voluminous records as well as those needed for security reasons. During his four years at the Department of the Navy, Leahys innovations saved the Navy $21 million and earned him the Navy Commendation Ribbon.

After the war, Leahy continued to work in the field as a consultant with a private company, developing the concept of a life cycle for records and producing statistics on the costs of recordkeeping. While assisting the first Commission on the Organization of the Executive Branch of Government from 1947 through 1949, Leahy pushed for the separation of records management, which he viewed as concerned with economics, effectiveness, and efficiency, from historical archiving. His efforts in this area resulted in the establishment of a new agency, the Federal Records Administration as part of the General Services Administration, not the National Archives.

In 1948, Leahy formed his own business, Leahy & Co., to advise local governments, including New York City, how to keep their records from ballooning. The following year, when he showed Eastern Airlines president Eddie Rickenbacker how that company was wasting money on inefficient recordkeeping, Eastern become Leahys first corporate client. Other companies followed, and Leahys client list soon included du Pont, Bethlehem Steel, and the Aluminum Company of America (Alcoa).

From Consulting to Storage: 1951-70

In 1951, with his consulting business reporting profits of $100,000, Leahy started Leahy Business Archives, a records storage business. This was the first company in the industry offering private companies a means to store their inactive records. Leahy considered records storage an economic issue, and he established his new company in New York City, where space was at a premium. Leahy served as president of his two companies and continued to promote records management until his death in 1964 at age 54.

The cost of space was not the only consideration driving companies to store their records during the early years of the Cold War. Iron Mountain Atomic Storage used the possibility of a nuclear conflict in the marketing of its bomb-proof storage facilities, located in an abandoned iron mine near Hudson, New York. Western States Underground Storage Vaults offered storage space in an old Southern Pacific railroad tunnel south of San Francisco and had a picture of a mushroom-shaped cloud over the city on its first brochure.

As new records storage companies were opening, Leo W. Pierce, Sr., founded L.W. Pierce Co., Inc. in 1957, to supply filing systems and related equipment to businesses in and around Philadelphia. In 1969, he established a subsidiary, Pierce Business Archives, when Scott Paper Co. asked him to help sort out and organize the mess in the basement, according to a 1984 article in Duns Business Month. Once the records had been organized, Scott Paper asked Pierce to store them. The company began as a $9,000 operation in, logically, the basement of Pierces home.

Over the next two decades, Pierces businesses expanded primarily through internal growth. During this period, Leahy Business Archives was bought by the Britannia Security Group plc of London and served as its U.S. data management division.

Expansion of Off-Site Recordkeeping: 1970s-80s

Through the early 1970s, companies (and their legal departments), considered records management simply a way to keep important papers organized. But as government agencies, both federal and state, wrote more regulations, as employee benefits expanded, and as the fear of litigation grew, companies found it was not enough to store records for their own protection. Now a company needed to store its records to protect the company itself against lawsuits and to comply with government regulations. The demand for storage increased dramatically. In 1982, Pierce had revenues of over $4 million.

Leahy Business Archives and Pierce Business Archives were among a handful of large companies in the records storage business; most were small, local operations. By 1984, Leahy had 11 facilities in the Northeast, Texas, and Illinois, and was storing four billion pieces of paper for 1,200 clients. Storage costs ranged from $2 to $4 per cubic foot a year. Pierce had 1,100 clients for whom they stored 4.2 billion pieces of paper in ten facilities throughout Pennsylvania, New York, New Jersey, and Connecticut. Clients paid $2.28 to $2.40 per cubic foot annually. Both companies offered same-day retrieval to stored records, which were now keyed by computer.

Each document is indexed and its description and location stored in a Sperry Univac 90/30 mainframe computer. With the computer indexing and records storage, a document can be located in five minutes or less, Leo Pierce explained to Modern Office Technology in 1985. Companies made some 1,500 requests for stored documents each day, and if received before 3:30 p.m., Pierce would deliver it the morning of the next business day. Emergency requests were filled in three hours or less.

In marketing their services, both Pierce and Leahy focused on the cost savings of a storage company over in-house, off-site storage managed by the client. With companies increasingly needing to cut costs, this approach helped convince clients to contract out their records storage activities. Microfilm is a wonderful product, especially when used to store active records, Pierce said in the Modern Office Technology article. However, he estimated that for what a company paid to microfilm the contents of a four-drawer file cabinet they could store the same amount of paper for 30 years. Thus, since most records were kept for only five years, the company was wasting money microfilming.

One other factor also contributed to the increased demand for records storage: the computer. Although early in the 1980s, magazine articles were predicting that computers would herald the paperless office, desktop publishing and other software programs actually made it easier for companies to generate even more paper.

In 1988, Britannia Security acquired Instar, Inc., a records storage company based in Massachusetts, and merged it with Leahy Business Archives. The new subsidiary was named Leahy-Instar Inc.

Company Perspectives

Our Mission To serve our customers with unsurpassed integrity, maintaining an outstanding reputation as the information management industry leaders, and to foster both personal and professional growth within our staff by recognizing the unique contribution each individual makes to our success, as well as to our uncompromising commitment to quality.

Growing the Company: 1989-96

By the end of the 1980s, Leo Pierce had started planning for his retirement. L.W. Pierce & Co. and the archives storage subsidiary were in good financial shape, and Pierce had designated his son Peter, one of eight children, as his successor, naming him president of the company in 1984. But Leo Pierce saw changes coming in the business as liability insurance costs soared and customers began demanding more services. It was evident to him that small operations would have a hard time making it in the coming years and that the records storage business was ripe for consolidation. Pierce Archives had become one of the industrys larger firms by concentrating on adding new customers and increasing the storage capacity of existing clients. Leo and Peter Pierce agreed that the time had come to add acquisitions to their growth strategy.

In 1989, Britannia Security decided to concentrate on its security operations, to get out of the data management business, and to put Leahy Business Archives on the market. The following year, Britannia sold Leahy Business Archives to Pierce for nearly $39 million, most of which was in cash. The acquisition doubled the size of Pierce, which was reincorporated as Pierce Leahy Corporation. The company now had branches in Connecticut, New Jersey, Maryland, Massachusetts, Rhode Island, Florida, Texas, California, and Illinois.

Pierce Leahy waited two years before making another acquisition, and then, in April 1992, the company bought Muhlenhaupt Records Management and proceeded to go on a spending spree. Between 1992 and the end of 1996, Pierce Leahy bought and integrated 25 more companies, adding some 12.4 million cubic feet of records. Among the purchases, in 1995, was Command Records Services, Ltd., Canadas leading records management company, for approximately $25 million. The new acquisition became Pierce Leahy Command. In January 1995, Leo Pierce retired as chief executive officer, although he remained chairman of the board. Peter Pierce assumed the CEO responsibilities.

The acquisitions placed a great deal of debt on the company, beginning with $30 to $40 million in financing for the Leahy Business Archives purchase. In 1996, Pierce Leahy issued $200 million in notes and arranged for $110 million in bank credit. That year, Pierce Leahy had revenues over $100 million for the first time and a net loss of $1 million.

From Storage to Records Management: The 1990s

The companys name change in 1990 to Pierce Leahy Corporation reflected more than the combining of two businesses. By eliminating the reference to business archives, the change acknowledged the desire by the industry, at least for the larger companies, to be perceived as offering more than just storage facilities for corporate records.

In 1991, the company began a two and one-half year, $8 million development project, and two years later introduced its core management information system, Pierce Leahy User Solution (PLUS). The PLUS computer system offered the only centralized system for records management in North America. Using PLUS, the company was able to locate, on a real-time basis, each unit of a customers records, no matter where they were stored. Customers could also use a common, centralized database to access their records and information about those records, on-line. The company found PLUS reduced costs through centralization, improved customer service levels, and made it easier and less expensive to integrate the companies it acquired.

During the decade, the term records management became more prevalent in magazine articles and marketing materials, and document retention, one step in the process of records management, replaced records storage. The entire process, originally described by Ed Leahy, included six steps: creation, indexing, filing, retrieval, retention, and destruction.

To help clients, the company offered a series of services. As company President Peter Pierce explained it, We begin at the beginning, looking at how and why documents, records and files are created. We examine the procedures and systems in an effort to streamline, and where appropriate, eliminate record-keeping burdens for our clients.

Following that, the company might install an active records management system to monitor every step in the life of the document and track paper, microfilm, microfiche, and any other type of storage media. Or, through its facility management division, Pierce Leahy might operate a customers file room or storage facility. It also offered imaging and micrographic services and would even sell a customer storage containers. Still, the management of inactive records remained the largest segment of the companys business.

In 1996, to help pay down some of the debt from its purchases, the company issued $200 million in public notes without offering stock to the public. Revenues for the year passed the $100 million level, reaching $129.7 million, but the company had a net loss of over $1 million.

The Race for Number One: 1997 and Beyond

Pierce Leahy continued its three-prong growth strategy: new sales; increased use by current customers by selling additional services; and acquisitions. Companies continued to cut costs by outsourcing functions, including records management, and Pierce Leahy went after that business. The company estimated that, in 1997, only 25 percent of the records management market had been outsourced. Pierce Leahys primary growth target, however, remained acquisitions. In the first six months of 1997, the company bought eight more records management companies, adding some 7.2 million cubic feet of records.

With the company owing more than $250 million in long-term debt, the family took Pierce Leahy public in July, offering $110 million in stock (about one-third of the company) and $120 million in notes. Of the proceeds from the stock offering, $70 million went to pay off the notes issued in 1996. The rest went to the family for its shares. The money from the new notes was used to pay off the companys big bank debt.

The year saw records under storage increase by 45 percent to 58.8 million cubic feet, with 5.2 million from new customers, 2.9 million added by existing customers, and 10.3 million from 17 acquisitions. Revenues for the year reached $183.5 million, with a net loss of $15.1 million.

Acquisitions, including that of a Canadian competitor, continued in 1998. As it approached the 21st century, Pierce Leahy had a diverse client base, annual and multiyear contracts, and a customer retention rate of 98 percent. Its reputation and low-cost service made it a strong candidate to attract a good portion of the 75 percent of all records management in North America currently being done in-house.

Principal Subsidiaries

Pierce Leahy Command Company (Canada); Monarch Box, Inc.; Advanced Box, Inc.

Further Reading

Brickley, Peg, Montco Records Firm Grows with Acquisitions and IPO, Philadelphia Business Journal, March 31, 1997.

_____, Pierce Leahy Scores with Its IPO, Philadelphia Business Journal, July 11, 1997, p. 3.

Filing: Cheaper by the Billion, Modern Office Technology, February 1985, p. 70.

Gray, Patricia Bellew, Howard Ross Wants You, Money, February 12, 1998.

Hill, Andrew, Britannia Security Sells US Data Division for 39 Million Dollars, Financial Times (London), November 28, 1989, p. 32.

Instar to Be Acquired by Leahy in Records Storage Deal, PR News-wire, March 9, 1988.

The Money Trail, Barrons, June 30, 1997.

Moore Sells Records Management Subsidiary, Business Wire, November 2, 1995.

Narod, Susan, Cutting the Cost of Keeping Paper, Duns Business Month, August 1984, p. 64.

Nickolaison, Ray, Retaining Records Is Costly, But Needed, Office, March 1993, p. 14.

Pemberton, J. Michael, Emmett Leahy: Patron Saint of Records Management?, Records Management Quarterly, Association of Records Managers and Administrators, April 1993, p. 56.

Pollack, Andrew, Computer Disaster: Business Seeks Antidote, New York Times, August 24, 1983, p. A1.

Polzer, Karl, Would Your Companys Records Survive Disaster?, Boston Business Journal, June 13, 1988, p. 8B.

Roberts, Jamie Cohen, Archive Strikes Gold in Basements of Business, Philadelphia Business Journal, June 25, 1990, p. 6B.

Seeking Security Underground, Business Week, December 4, 1978, p. 2B

Shepherd, Ritchenya A., Deal Makers: Pierce Leahy Corp. Goes Public with $230 Million, Stock and Note Offering, Legal Intelligencer, August 22, 1997, p. 1.

Solutions Today, King of Prussia, Penn.: Pierce Leahy Corp., 1997.

We Set New Records for Service Every Day, King of Prussia, Penn.: Pierce Leahy Corp., 1996.

Ellen D. Wernick