[LOGO] The Brink's Company
1801 Bayberry Court
P.O. Box 18100
Richmond, VA 23226-8100 USA
Tel. 804.289.9600
Fax 804.289.9760
Contact: FOR IMMEDIATE RELEASE
Investor Relations
804.289.9709
The Brink's Company
Reports Second Quarter Results
RICHMOND, Va., (July 31, 2003) - The Brink's Company (NYSE: BCO) reported income
from continuing operations of $8.0 million, or $0.15 per share for the quarter
ended June 30, 2003. For the same period one year ago, income from continuing
operations was $19.1 million, or $0.36 per share.
Revenue in the second quarter of 2003 increased 6% over last year's
second quarter to $975.2 million. All business units achieved higher revenues,
with Brink's, Incorporated and BAX Global benefiting from stronger European
currencies relative to the U.S. dollar.
Operating profit in the quarter just ended was $17.3 million after
deducting $17.2 million of costs associated with retained obligations of the
former coal operations. Operating profit of $35.6 million in last year's second
quarter did not include expenses related to the former coal operations for 2002
since such costs had been recorded previously within discontinued operations. In
the current period, increased year-over-year operating profits at Brink's,
Incorporated, Brink's Home Security, and Other Operations were offset by lower
operating profit at BAX Global, which was affected by poor economic conditions
in the United States and Europe.
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1
The Company recorded a loss from discontinued operations in the second
quarter of 2003 of $1.9 million (after tax), or $(0.04) per share, stemming from
a revised estimate of the value of a contingent liability of the former coal
operations. As a result, net income for the quarter ended June 30, 2003 was $6.1
million, or $0.11 per share, compared with $19.1 million, or $0.36 per share in
the prior year period.
For the six months ended June 30, 2003, revenues were $1.9 billion
compared with $1.8 billion in the last six months of 2002. Net income for the
first half of 2003 was $4.4 million, or $0.08 per share, compared with $27.2
million, or $0.51 per diluted share a year ago.
"Despite challenging economic conditions, we were able to achieve
continued strong performance in our Brink's Home Security business and improve
performance in international operations at Brink's, Incorporated", said Michael
T. Dan, President and Chief Executive Officer of The Brink's Company. "However,
results at BAX Global continued to reflect the impact of lower domestic
overnight heavy freight volume," he added.
Second Quarter Business Unit Performance
Brink's, Incorporated ("Brink's")
- ---------------------------------
Worldwide revenue of $410.7 million reflected an increase of 4% during
the second quarter as compared with the prior year's period. International
revenue this quarter was up 6% over the level of the second quarter a year ago,
primarily due to the effects of the strengthening of European currencies
compared to the U.S. dollar. This positive effect on revenue was partially
offset by the effect of a stronger U.S. dollar relative to South American
currencies. North American revenue increased 2% over the second quarter of 2002.
-- more --
2
Brink's operating profit in the quarter ended June 30, 2003 increased
9% to $21.5 million from last year's second quarter, reflecting improved
international operations. International performance in the second quarter of
2003 benefited from cost realignment in European operations as well as improved
results in Asia/Pacific and South America. Operating profit in North American
declined $2.9 million versus the prior year as increased profits in cash
logistics were more than offset by the impact of higher employee benefit costs
in the U.S. and costs associated with the closure of the Darien, Connecticut
office. Costs associated with the Darien office closure and the realigning of
resources in European operations approximated $2 million in the quarter.
Brink's Home Security
- ---------------------
Revenue increased 9% to $76.5 million in the second quarter as compared
to the same period last year due primarily to growth in the subscriber base.
Operating profits of $17.7 million in the second quarter were 13% higher than
those recorded in the prior year's quarter. An increase in operating profit from
recurring services resulted primarily from the growth of the subscriber base, a
lower disconnect rate and more efficient service operations.
The annualized disconnect rate for the current year's quarter improved
to 7.2% compared to 7.5% a year earlier. The Company added more than 28,000 new
subscribers during the quarter, a 10% increase over the number of new
subscribers in the second quarter last year. At June 30, 2003, Brink's Home
Security had more than 795,000 subscribers.
-- more --
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BAX Global
- ----------
Worldwide revenue at BAX Global increased to $473.4 million in the
second quarter, 7% higher than the same period last year. International revenue
increased 17% reflecting the effects of the weaker U.S. dollar and stronger Asia
Pacific activity. In the Americas region, revenue decreased 3% in comparison to
last year as lower U.S. volume combined with the effect of a shift towards
deferred products from overnight shipments more than offset higher revenues in
supply chain management activities.
BAX Global reported an operating loss of $2.5 million for the second
quarter of 2003 compared to operating profit of $3.2 million in the same period
in 2002. The effect on operating
profit of higher revenue was offset by the impact on reported costs of the
weaker U.S. dollar and higher transportation costs and of the reduced margin
resulting from lower overnight freight volumes.
Other Operations
- ----------------
Other Operations, which reflects the Company's interests in natural
gas, timber and gold mining operations, reported revenue of $14.6 million in the
second quarter as compared to $10.4 million a year ago. The operating profit for
the quarter was $4.1 million, up from $2.1 million a year earlier, due primarily
to higher pricing for natural gas.
Costs of Former Coal Operations
- -------------------------------
The former coal operations recorded $17.2 million (pretax) of net
expenses in the quarter ended June 30, 2003, primarily related to medical and
other benefits of former coal employees.
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VEBA Funding
As announced on July 21, 2003, the Company reached definitive
agreements to sell its natural gas and timber businesses for approximately $119
million in cash, with the gas transaction expected to close in the third quarter
of 2003, and the timber transaction expected to close in the fourth quarter of
this year.
"With the anticipated third quarter closing of the gas sale, we will
earmark $50 million of the proceeds to fund the Company's Voluntary Employees'
Beneficiary Association ("VEBA"). This will raise the amount of assets in the
VEBA to $100 million and further underscore our commitment to funding the VEBA.
We remain committed to making additional contributions to the VEBA to bring it
to an appropriate level over time as taxes and other considerations dictate,"
said Michael Dan.
2003 Perspective and Outlook
"As we evaluate the year at the half-way mark, we are pleased with our
success in achieving several important milestones, including reaching agreements
to sell our gas and timber businesses, addressing the liabilities associated
with our former coal operations through additional funding of the VEBA, and
strengthening the operating performance of Brink's and Brink's Home Security for
continued growth," said Michael Dan.
During the first half of 2003, the Company made operational and
management changes at Brink's Europe and began consolidating Brink's U.S.
operations. At the same time, efforts to profitably manage subscriber growth and
maintain high service levels continued at Brink's Home Security. "We expect
Brink's, Incorporated to perform at least as well this year as it did last year,
even with the costs of consolidating the U.S. operations, and for Brink's Home
Security to continue its growth in revenue and profits," said Michael Dan.
-- more --
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In discussing the performance of BAX Global, Mr. Dan said, "Our
operations have been impacted by poor economic conditions in the United States
and in Europe and a shift away from heavy freight shipped via overnight air in
the United States. It is not clear when these factors will improve."
At the time of its first quarter 2003 earnings announcement, the
Company said that subject to the uncertainties clouding the outlook for the
world's economies, the impact of sales of non-strategic operations and the
effects of any actions it might take to align resources to business needs, it
believed its full-year earnings per share from continuing operations would be
near the low end of a $1.10 - $1.30 range. With the achievement of agreements to
sell its timber and natural gas businesses, the Company now expects to
reclassify all historical and prospective results of most of the natural
resource businesses from continuing operations to discontinued operations. The
Company has also developed current estimates of the costs to realign resources
in Brink's, Incorporated to improve operating performance. As a result of these
two factors, the earnings range provided by the Company is no longer relevant.
Moreover, the Company's ultimate full-year 2003 earnings from continuing
operations may be further impacted by the near-term performance of BAX Global in
the face of continuing economic weakness.
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* * * * *
This release contains both historical and forward-looking information.
Statements regarding improvements in Brink's, Incorporated's full-year
performance for 2003, continued revenue and profit growth for Brink's Home
Security, the continued worsening of the U.S. and European economies and a shift
away from shipments of heavy freight via overnight air, expectations regarding
full-year earnings, consummation of the sales of the gas and timber businesses
and plans to make additional contributions to the VEBA, among others, involve
forward-looking information which is subject to known and unknown risks,
uncertainties and contingencies, which could cause actual results, performance
or achievements to differ materially from those that are anticipated. Such
risks, uncertainties and contingencies, many of which are beyond the control of
The Brink's Company and its subsidiaries, include, but are not limited to, the
impact of operational improvements in the security operations and the timing of
any such impact, the ability of companies to maintain adequate inventories and
meet customer demands without using overnight air delivery service for heavy
freight, the ability of Brink's Home Security to continue to maintain its
subscriber growth and low disconnect rate, the ability to identify and execute
cost and operational improvements in the core businesses, the satisfaction of
closing conditions typical for gas and timber transactions, such as the receipt
of necessary consents from various third parties and the ability to obtain
insurance, the Company's tax position, the accounting treatment relating to the
timber and gas transactions, actual costs associated with the realignment of
resources at Brink's, Incorporated, including severance and relocation costs, IT
costs and cost associated with ongoing contractual obligations, pension plan and
other funding obligations, labor relations, safety and security performance, new
government regulations and legislative initiatives, overall domestic and
international economic, political, social and business conditions, capital
markets performance, increases in insurance costs and limitations on the
availability of various types of insurance, the strength of the U.S. dollar
relative to foreign currencies, interest rates, inflation, domestic and
international demand for services of the subsidiaries of The Brink's Company,
pricing and other competitive factors, variations in costs or expenses and
performance delays of any public or private sector supplier, service provider or
customer. The information included in this release is representative only as of
the date of this release, and The Brink's Company undertakes no obligation to
update any information contained in this release.
About The Brink's Company
The Brink's Company (NYSE: BCO) is a global leader in business and security
services. The Company's three main businesses are Brink's, Incorporated, the
world's premier provider of secure transportation and cash management services;
Brink's Home Security, one of the largest and most successful residential alarm
companies in North America; and BAX Global, an industry leader in global supply
chain management. For more information, please visit The Brink's Company website
at www.brinkscompany.com, or call toll free 877-275-7488.
Conference Call
The Company will host a conference call today, July 31, at 11:00 a.m. eastern
time to discuss this press release. Interested parties can listen to the
conference call by dialing (800) 314-7867 within North America or (719) 867-0640
from outside North America, or via live webcast at www.brinkscompany.com. Please
dial in at least five minutes prior to the start of the call. Dial-in replay
will be available through August 8, 2003 by calling (888) 203-1112 within North
America or (719) 457-0820 outside North America and entering confirmation number
462026. A webcast replay will be available at www.brinkscompany.com through
August 15, 2003.
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The Brink's Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
(Unaudited)
Three Months Six Months
Ended June 30 Ended June 30
2003 2002 2003 2002
- ---------------------------------------------------------------------------------------------------------------------
Revenues $ 975.2 919.1 1,916.5 1,818.6
Expenses:
Operating expenses 839.9 768.0 1,656.8 1,525.4
Selling, general and administrative expenses 126.3 117.7 252.1 226.6
- ---------------------------------------------------------------------------------------------------------------------
Total expenses 966.2 885.7 1,908.9 1,752.0
Other operating income, net 8.3 2.2 12.8 6.1
- ---------------------------------------------------------------------------------------------------------------------
Operating profit 17.3 35.6 20.4 72.7
Interest expense (6.8) (5.8) (13.0) (11.8)
Minority interest (1.8) (0.1) (2.6) (1.2)
Other income (expense), net 4.2 - 6.0 (0.4)
- ---------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 12.9 29.7 10.8 59.3
Provision for income taxes 4.9 10.6 4.1 21.1
- ---------------------------------------------------------------------------------------------------------------------
Income from continuing operations 8.0 19.1 6.7 38.2
Loss from discontinued operations, net of tax (1.9) - (2.3) (11.0)
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 6.1 19.1 4.4 27.2
=====================================================================================================================
Basic net income (loss) per common share:
Continuing operations $ 0.15 0.36 0.13 0.73
Discontinued operations (0.04) - (0.05) (0.21)
- ---------------------------------------------------------------------------------------------------------------------
$ 0.11 0.36 0.08 0.52
- ---------------------------------------------------------------------------------------------------------------------
Diluted net income (loss) per common share:
Continuing operations $ 0.15 0.36 0.13 0.73
Discontinued operations (0.04) - (0.05) (0.22)
- ---------------------------------------------------------------------------------------------------------------------
$ 0.11 0.36 0.08 0.51
=====================================================================================================================
See accompanying notes.
8
The Brink's Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
June 30 December 31
2003 2002
- --------------------------------------------------------------------------------
(Unaudited)
Assets
Current assets $ 824.2 782.0
Property and equipment, net 893.6 871.2
Goodwill, net 235.0 227.9
Other assets 603.6 578.8
- --------------------------------------------------------------------------------
Total assets $ 2,556.4 2,459.9
================================================================================
Liabilities and shareholders' equity
Current liabilities $ 818.7 793.3
Long-term debt 299.5 304.2
Accrued pension costs 135.5 122.6
Other liabilities 881.9 858.6
- --------------------------------------------------------------------------------
Total liabilities 2,135.6 2,078.7
Shareholders' equity 420.8 381.2
- --------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 2,556.4 2,459.9
================================================================================
See accompanying notes.
SEGMENT INFORMATION
(In millions)
(Unaudited)
Three Months Six Months
Ended June 30 Ended June 30
2003 2002 2003 2002
- ---------------------------------------------------------------------------------------------
Revenues:
Brink's $ 410.7 394.4 802.1 801.1
Brink's Home Security 76.5 70.2 150.4 137.4
BAX Global 473.4 444.1 937.0 859.7
- ---------------------------------------------------------------------------------------------
Business and Security Services 960.6 908.7 1,889.5 1,798.2
Other Operations 14.6 10.4 27.0 20.4
- ---------------------------------------------------------------------------------------------
Revenues $ 975.2 919.1 1,916.5 1,818.6
=============================================================================================
Operating profit (loss):
Brink's $ 21.5 19.8 34.6 51.5
Brink's Home Security 17.7 15.6 34.4 30.8
BAX Global (2.5) 3.2 (8.0) (3.5)
- ---------------------------------------------------------------------------------------------
Business and Security Services 36.7 38.6 61.0 78.8
Other Operations 4.1 2.1 7.4 4.5
Former coal operations (17.2) - (34.5) -
General corporate expense (6.3) (5.1) (13.5) (10.6)
- ---------------------------------------------------------------------------------------------
Operating profit $ 17.3 35.6 20.4 72.7
=============================================================================================
See accompanying notes.
9
The Brink's Company and Subsidiaries
OTHER FINANCIAL INFORMATION
(In millions, except as otherwise noted)
(Unaudited)
Three Months Six Months
Ended June 30 Ended June 30
2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------------------
Brink's:
Revenues:
North America $ 175.8 172.8 351.6 341.1
International 234.9 221.6 450.5 460.0
- ------------------------------------------------------------------------------------------------------------
Revenues $ 410.7 394.4 802.1 801.1
============================================================================================================
Operating profit:
North America $ 10.5 13.4 21.3 24.1
International 11.0 6.4 13.3 27.4
- ------------------------------------------------------------------------------------------------------------
Segment operating profit $ 21.5 19.8 34.6 51.5
============================================================================================================
Brink's Home Security:
Revenues $ 76.5 70.2 150.4 137.4
============================================================================================================
Operating profit:
Recurring services $ 31.4 27.7 61.7 54.6
Investment in new subscribers (13.7) (12.1) (27.3) (23.8)
- ------------------------------------------------------------------------------------------------------------
Segment operating profit $ 17.7 15.6 34.4 30.8
============================================================================================================
Monthly recurring revenues $ 22.2 20.1
Annualized disconnect rate 7.2% 7.5% 6.9% 7.1%
Number of subscribers (in thousands):
Beginning of period 781.5 726.5 766.7 713.5
Installations 28.3 25.8 55.7 50.9
Disconnects (14.2) (13.7) (26.8) (25.8)
- ------------------------------------------------------------------------------------------------------------
End of period 795.6 738.6 795.6 738.6
Average number of subscribers 788.3 732.6 781.1 726.1
============================================================================================================
BAX Global:
Revenues:
Americas $ 233.6 241.3 470.2 473.3
International 258.4 220.4 502.7 419.4
Eliminations/other (18.6) (17.6) (35.9) (33.0)
- ------------------------------------------------------------------------------------------------------------
Revenues $ 473.4 444.1 937.0 859.7
============================================================================================================
Operating profit (loss):
Americas $ (10.6) (3.8) (20.3) (14.3)
International 8.3 9.6 15.4 16.1
Other (0.2) (2.6) (3.1) (5.3)
- ------------------------------------------------------------------------------------------------------------
Segment operating profit (loss) $ (2.5) 3.2 (8.0) (3.5)
============================================================================================================
Intra-U.S. revenue $ 107.1 115.7 218.0 224.4
Worldwide expedited freight services:
Revenues $ 353.7 343.2 707.7 663.6
Weight in pounds 375.9 371.8 750.3 720.5
============================================================================================================
See accompanying notes.
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The Brink's Company and Subsidiaries
OTHER FINANCIAL INFORMATION
(In millions)
(Unaudited)
Three Months Six Months
Ended June 30 Ended June 30
2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------
Depreciation and amortization:
Brink's $ 17.4 15.4 33.0 29.8
Brink's Home Security 11.8 10.5 23.4 20.7
BAX Global 11.9 10.7 24.1 21.5
- ------------------------------------------------------------------------------------------------
Business and Security Services 41.1 36.6 80.5 72.0
- ------------------------------------------------------------------------------------------------
Other Operations 2.0 1.1 4.0 2.3
General corporate 0.1 0.1 0.2 0.1
- ------------------------------------------------------------------------------------------------
Depreciation and amortization $ 43.2 37.8 84.7 74.4
================================================================================================
Other BHS cash flow information:
Impairment charges from subscriber disconnects $ 8.6 8.1 16.1 15.4
Amortization of deferred revenue (6.4) (6.1) (12.2) (11.8)
Deferred subscriber acquisition costs
(current year payments) (4.6) (4.3) (8.9) (8.4)
Deferred revenue from new subscribers
(current year receipts) 6.7 6.6 13.2 13.3
================================================================================================
Capital expenditures:
Brink's $ 18.5 18.7 34.9 33.5
Brink's Home Security 22.9 20.6 46.0 40.7
BAX Global 7.2 5.2 13.0 9.8
- ------------------------------------------------------------------------------------------------
Business and Security Services 48.6 44.5 93.9 84.0
- ------------------------------------------------------------------------------------------------
Other Operations 2.7 2.0 4.7 3.6
General corporate - - 0.1 -
- ------------------------------------------------------------------------------------------------
Capital expenditures $ 51.3 46.5 98.7 87.6
================================================================================================
See accompanying notes.
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The Brink's Company and Subsidiaries
NOTES TO FINANCIAL INFORMATION
(Unaudited)
(1) On May 2, 2003, the shareholders of The Pittston Company approved a
proposal to change the Company's name to The Brink's Company. The name
change became effective on May 5, 2003. Prior to May 5, 2003, The
Pittston Company traded on the New York Stock Exchange under the symbol
"PZB." Beginning on May 5, 2003, The Brink's Company trades on the New
York Stock Exchange under the symbol "BCO." The Brink's Company and its
subsidiaries are referred to herein as the "Company".
The Company has three operating segments within its "Business and
Security Services" businesses: Brink's, Incorporated ("Brink's"),
Brink's Home Security, Inc. ("BHS") and BAX Global Inc. ("BAX Global").
The fourth operating segment is Other Operations, which consists of the
Company's gold, timber and natural gas operations. The Company also has
significant assets and liabilities associated with its former coal
operations and expects to have significant ongoing expenses and cash
outflows related to former coal operations.
(2) During July 2003, a subsidiary of the Company entered into definitive
agreements to sell its natural gas and timber businesses for combined
proceeds of approximately $119 million. The Company expects to report
these businesses as discontinued operations in its consolidated
financial statements beginning with the third quarter of 2003. The
natural gas transaction is expected to close in the third quarter of
2003 and the timber transaction is expected to close by the end of
2003.
The assets expected to be transferred in the sale of the natural gas
and timber businesses are included in the Company's consolidated
balance sheet as of June 30, 2003 and are as follows:
(In millions) Natural gas Timber
------------------------------------------------------------------
Current assets $ - 2.5
Property and equipment, net 22.1 2.3
------------------------------------------------------------------
Net book value to be transferred $ 22.1 4.8
==================================================================
(3) During the fourth quarter of 2002, the Company completed its planned
exit of the coal business by selling or shutting down its remaining
coal operations. In the first quarter of 2003, the Company began
recognizing certain expenses related to its former coal operations as a
part of continuing operations. Prior to 2003, these expenses were
classified as part of the Company's loss from discontinued operations.
12
Expenses included in continuing operations in the three and six month
period ended June 30, 2003 related to the Company's former coal
operations were as follows:
Three Months Six Months
Ended June 30 Ended June 30
(In millions) 2003 2003
-----------------------------------------------------------------------------------
Former coal operations:
Company-sponsored postretirement
benefits other than pensions $ 12.5 24.7
Black lung 1.4 2.9
Pension (0.4) (0.3)
Administrative, legal and other expenses, net 1.7 3.8
Idle and closed mine expense and other income 2.0 3.4
-----------------------------------------------------------------------------------
$ 17.2 34.5
===================================================================================
In addition to the above, the Company will continue to record
adjustments to coal-related contingent liabilities within discontinued
operations. In the second quarter of 2003, the Company recorded a
charge in discontinued operations of $1.9 million (after-tax) related
to a change in the estimated withdrawal liabilities for coal-related
multi-employer pension plans. This change in estimate reflects updated
data received from third parties during the quarter.
(4) In April 2003, the Company accepted $19.8 million in full settlement of
the notes receivable and royalty obligations received as part of the
consideration in the sale of its former Virginia coal operations. The
Company recognized a $2.6 million pretax gain, classified as part of
other income (expense), net, on the settlement in the second quarter of
2003.
(5)
Three Months Six Months
Ended June 30 Ended June 30
(In millions) 2003 2002 2003 2002
--------------------------------------------------------------------
Weighted average common
shares outstanding:
Basic 53.0 52.0 52.8 51.9
Diluted 53.0 52.5 52.9 52.2
====================================================================
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(6) A reconciliation of monthly recurring revenues to reported BHS revenues
follows:
Six Months
Ended June 30
(In millions) 2003 2002
-------------------------------------------------------------------
June:
Monthly recurring revenues ("MRR") $ 22.2 20.1
Amounts excluded from MRR:
Amortization of deferred revenue 2.2 2.0
Other revenues (a) 1.4 1.9
-------------------------------------------------------------------
Revenues on a GAAP basis 25.8 24.0
===================================================================
Revenues (GAAP basis):
June 25.8 24.0
January - May 124.6 113.4
-------------------------------------------------------------------
January - June $ 150.4 137.4
===================================================================
(a) Revenues that are not pursuant to monthly contractual billings.
The Company believes the presentation of MRR is useful to investors
because the measure is used to assess the amount of recurring revenues
a home security business produces.
(7) Certain prior period amounts have been reclassified to conform to the
current period's financial statement presentation.
# # #
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