[LOGO] The Brink's Company
1801 Bayberry Court
P.O. Box 18100
Richmond, VA 23226-8100 USA
PRESS RELEASE Tel. 804.289.9600
Fax 804.289.9760
Contact: FOR IMMEDIATE RELEASE
Investor Relations
804.289.9709
The Brink's Company
Reports Fourth Quarter and Full Year 2003 Results
Strong Fourth Quarter Operating Performance Reflects Contribution from
All Business Units; Higher Volumes in U.S. Lift BAX Global;
Exit from Natural Resources Businesses Essentially
Complete; Update on Coal-Related Liabilities
RICHMOND, Va., (February 4, 2004) - The Brink's Company (NYSE: BCO) today
reported higher revenues and operating profit for the quarter ended December 31,
2003 compared to the fourth quarter of 2002. Revenue in the fourth quarter of
2003 increased 12% over last year's fourth quarter to $1.11 billion. All
business units reported higher revenues, with Brink's, Incorporated and BAX
Global benefiting from stronger European currencies relative to the U.S. dollar.
The Company reported operating profit of $64.2 million for the quarter ended
December 31, 2003, up $34.3 million from the prior year period, with positive
contributions from each of its three Business and Security Services business
units.
The strong operating profit increase in the quarter just ended reflects a
combination of improved performance in Europe and South America at Brink's,
Incorporated, continued robust growth at Brink's Home Security, and the effects
of increased domestic heavy freight volumes at BAX
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Global. It also includes a $10.4 million pre-tax gain ($7.0 million after tax)
on the sale of the Company's investment in an Australian gold and nickel
company.
Income from continuing operations for the fourth quarter of 2003 was $4.3
million, or $0.08 per share, which included higher tax expense from deferred tax
valuation allowances of $22 million partially offset by the previously mentioned
one-time gain of $7.0 million (after tax). For the same period a year ago,
income from continuing operations was $13.1 million, or $0.25 per share.
The Company reported a loss from discontinued operations during the quarter
just ended of $29.3 million ($0.55 per share) versus a loss of $36.3 million
($0.69 per share) in 2002. Most of the losses in both years related to annual
revisions to estimated coal-related liabilities. As a result, the net loss for
the fourth quarter of 2003 was $25.0 million, or $0.47 per share, compared with
a net loss of $23.2 million, or $0.44 per share in the prior-year period.
"We continued to achieve strong performance in our Brink's Home Security
business and saw significant improvement in international operations at Brink's,
Incorporated," said Michael T. Dan, Chairman, President and Chief Executive
Officer of The Brink's Company. "The start of an economic recovery in the U.S.
benefited BAX Global's shipping volume, while its worldwide logistics activity
and operations in Asia continued to perform very well," he added.
For the full year ended December 31, 2003, income from continuing
operations was $18.2 million, or $0.34 per share, compared with $69.4 million,
or $1.30 per diluted share in 2002. Income from continuing operations was lower
in 2003 than in 2002 largely due to an increase in costs from former coal
operations of about $50 million before tax and the tax valuation allowances
recorded in the fourth quarter of 2003. These negative effects were partially
offset by the much stronger performance of Brink's, Incorporated and Brink's
Home Security in 2003. The $50 million increase in costs from former coal
operations resulted from the inclusion of such costs in continuing operations in
2003. The same costs for 2002 had been recorded previously within discontinued
operations.
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In 2003, gains on the disposition of the Company's natural resource
businesses were partially offset by the effects of higher estimated coal-related
liabilities. Operating losses of the coal business and higher estimated
coal-related liabilities accounted for most of the 2002 loss from discontinued
operations.
Net income for 2003 was $29.4 million, or $0.55 per diluted share, compared
with $26.1 million, or $0.48 per diluted share a year ago. The year-over-year
reduction in income from continuing operations was more than offset by the gain
included in discontinued operations from the sale of the natural resources
businesses.
Fourth Quarter Business Unit Performance
Brink's, Incorporated ("Brink's")
- ---------------------------------
Brink's revenue of $459.7 million increased 18% during the fourth quarter
as compared with the prior year's period. Although more than half of the
increase resulted from the effects of the weaker U.S. dollar, all major
geographic regions contributed to the operational increase. International
revenue in the fourth quarter of 2003 was up 29% over the prior year period due
to the effects of currency translation combined with stronger revenues in
France, Belgium, Venezuela and Colombia. North American revenue increased 4%
over the fourth quarter of 2002.
Brink's operating profit in the quarter ended December 31, 2003 increased
to $44.5 million, more than 50% higher than the fourth quarter a year ago. The
increase in operating profit reflects significantly better business conditions
in South America, the benefit of actions Brink's took earlier in the year to
improve operating performance in Europe, and better results in North America.
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Brink's Home Security
- ---------------------
Revenue at Brink's Home Security increased more than 11% to $81.1 million
in the fourth quarter as compared to the same period last year due to growth in
the subscriber base and higher per subscriber monthly revenues. Operating profit
in the fourth quarter was a record $18.7 million, 18% higher than in the prior
year's fourth quarter. An increase in operating profit from recurring services
resulted primarily from the growth of the subscriber base and improved service
operations.
The annualized disconnect rate for the fourth quarter of 2003 was 6.4%,
unchanged from the year ago quarter. The Company added 33,600 new subscribers
during the quarter, a 20% increase over the number of new subscribers added in
the fourth quarter of 2002.
BAX Global
- ----------
Worldwide revenue at BAX Global increased to $568.9 million in the fourth
quarter, 8% higher than in the same period last year. International revenue
increased 12%, reflecting the effects of the weaker U.S. dollar relative to
European and some Asia Pacific currencies and stronger Asia Pacific activity. In
the Americas region, revenue increased 2% in comparison to last year's fourth
quarter, due to higher U.S. shipping volume, an increase in third-party air
charter activity, and strong growth in supply chain management.
Operating profit at BAX Global improved to $16.3 million for the fourth
quarter of 2003 from $11.2 million in the same period in 2002. The increase
reflects improved results from North American operations and continued strong
results from logistics activities in Asia Pacific, partially offset by lower
operating profit in Europe.
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Full Year 2003 Business Unit Performance
Brink's, Incorporated ("Brink's")
- ---------------------------------
For the twelve months ended December 31, 2003, worldwide revenues for
Brink's increased 7% to $1.69 billion, with more than half of the increase
resulting from the effects of the weak U.S. dollar. International revenues rose
10% year-over-year as a revenue decline in South America was more than offset by
double-digit revenue growth in Asia Pacific and Europe. The positive effect on
revenue of the weaker U.S. dollar versus European currencies was partially
offset by the effects of the decline in currency values in some South American
countries. North American revenues increased 3% to $716.2 million for the year
2003 compared to 2002.
Brink's operating profit for 2003 was $112.5 million, up from $96.1 million
in the prior year. North American operating profit improved slightly, while
International operating profit improved 35% due to much stronger results in
South America and Asia Pacific. Operating profit in Europe was about even with
2002, despite the significant boost to earnings in the first quarter of 2002
from the transition to the euro.
Brink's Home Security
- ---------------------
Revenue at Brink's Home Security increased by 10% year-over-year in 2003 to
$310.4 million, primarily due to growth in the subscriber base and higher
monitoring fees. Operating profit was a record $71.2 million for 2003, up 17%
over the prior year. Subscriber retention continued to improve, with the annual
subscriber disconnect rate dropping to 6.9% in 2003 from 7.1% in 2002. Brink's
Home Security added 121,900 new subscribers during 2003 and had 833,500
subscribers at year end 2003, an increase of 9% over the prior year.
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BAX Global
- ----------
BAX Global's 2003 revenues increased to $2.00 billion compared to $1.87
billion in 2002. International revenue was up mainly due to the positive effect
of the weaker U.S. dollar relative to European currencies and greater logistics
activity in Asia. Revenue in the Americas was down 1%, primarily reflecting
lower North American shipping activity in the first nine months of 2003,
partially offset by growth in logistics services. Operating profit for 2003 was
$3.0 million compared to $17.6 million in 2002. The lower results were due to
operating losses in the Americas, and lower operating profit in Europe
reflecting the effects of soft economic conditions, partially offset by higher
operating profits in Asia.
Strategic Initiatives Completed
The Company has essentially completed its strategic goal of exiting its
remaining natural resources operations in 2003, realizing cash proceeds since
January 1, 2003 of approximately $175 million, including:
o Monetization in April of the non-cash proceeds received from prior
sales of coal assets for $26 million;
o Sale of its natural gas business in August for $81 million;
o Liquidation of all of its shares in an Australian gold and nickel
mining and exploration company in October for approximately $19
million;
o Sale of a majority of its remaining West Virginia coal assets in
November for $14 million, and
o Closing on the sale of its timber operation in December for a total
of $39 million, receiving $5 million in cash in 2003. The Company has
recently received an additional $32 million from the escrow
accounts established in the December closing.
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The proceeds from these asset sales were used by the Company in 2003
to reduce its liabilities and strengthen its balance sheet by:
o Adding $82 million to its Voluntary Employees' Beneficiary
Association trust (VEBA), the funding vehicle for the retiree medical
liabilities associated with its former coal operations;
o Contributing $20 million to its primary pension plan covering U.S.
employees and retirees, and
o Reducing net financings by more than $100 million.
Update on Coal-Related Liabilities
The Company reassesses the liabilities associated with its former coal
operations annually during the fourth quarter with the assistance of its
advisors. During the quarter just ended, the Company increased the value of its
liability associated with expected future withdrawal obligations from
coal-related multi-employer pension plans by $14 million to reflect an increase
in the underfunded status of the underlying plans. The Company also increased
the amount of its Health Benefit Act liabilities by approximately $31 million
primarily to reflect an increase in its share of the liability for the
unassigned pool within the fund which provides benefits under the Act. Both of
these increases were reflected as charges within Discontinued Operations.
The net present value of the Company-sponsored retiree medical liabilities,
which reflects the discounted value of future medical benefits for former coal
employees, is expected to increase over last year end's value due to the
reduction in market interest rates. However, this effect will be at least offset
as a result of recently enacted legislation providing a prescription drug
benefit to Medicare-eligible individuals.
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Summary
"Overall, The Brink's Company had a good year in 2003. Given the
challenging economic conditions here and abroad, all three of our businesses
performed well, and we achieved our strategic goal of exiting the remaining
natural resources businesses, using the cash proceeds to address the
coal-related liabilities and strengthen our balance sheet," said Mr. Dan. "We
begin 2004 as a stronger, more focused company, positioned to leverage the
excellent market position of our Business and Security Services companies to
achieve further growth and even better performance," he added.
"At Brink's, Incorporated our people have worked hard to maintain market
discipline, strong security and safety, and the great service levels our
customers have come to expect, all while delivering solid operating performance.
The strong results at Brink's Home Security are a testament to the continued
excellent execution on the part of the management team, and the skill and hard
work of more than 2,600 employees. We expect they will continue this record of
achievement. BAX Global continued to build on its successes in Asia and in
global logistics and supply chain management, while working through challenging
conditions in the heavy freight transportation sector here and in Europe. They
are starting to see the benefit of an improving U.S. economy and are in a solid
position to gain momentum toward consistently profitable operations from further
strengthening of the domestic economy," added Mr. Dan.
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This release contains both historical and forward-looking information.
Statements regarding expected future withdrawal obligations from coal-related
multi-employer pension plans, the Company's share of liabilities for the
unassigned pool under the Health Benefit Act, the value of future medical
benefit obligations, the impact of recently enacted legislation, the realization
of further growth and better performance in the security and business services
operations, continued achievement at Brink's Home Security and BAX Global's
ability to gain momentum toward consistently profitable operations, 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 Brink's Home
Security to continue to maintain its subscriber growth and low disconnect rate,
the impact of the national "Do Not Call" list on Brink's Home Security's ability
to market its services, the return of customers to overnight shipping, the
ability to identify and execute cost and operational improvements in the core
businesses, IT costs and costs associated with ongoing contractual obligations,
pension plan and other employee obligations, labor relations, safety and
security performance, overall domestic and international economic, political,
social and business conditions, capital markets performance, the strength of the
U.S. dollar relative to foreign currencies, interest rates, inflation, new
government regulations and legislative initiatives (including local initiatives
relating to police response to alarms), domestic and international demand for
services of the subsidiaries of The Brink's Company, bankruptcies of companies
with payment obligations under the Health Benefit Act, 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 and transportation solutions. 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, February 4, at 11:00 a.m. eastern
time to discuss this press release. Interested parties can listen to the
conference call by dialing (800) 392-9565 within North America or (706) 634-5450
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 February 13, 2004 by calling (800) 642-1687 within
North America or (706) 645-9291 outside North America. The conference ID for the
replay is 1326503. A webcast replay will be available at www.brinkscompany.com
through February 20, 2004.
9
The Brink's Company
and Subsidiaries
Condensed Consolidated Statements of Operations
(In millions, except per share amounts)
(Unaudited)
Three Months Ended Years Ended
December 31, December 31,
2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------
Revenues $ 1,109.7 992.5 3,998.6 3,733.8
Expenses:
Operating expenses 916.7 837.5 3,404.2 3,136.1
Selling, general and administrative expenses 139.9 125.9 520.6 470.6
- ------------------------------------------------------------------------------------------------------------------------------
Total expenses 1,056.6 963.4 3,924.8 3,606.7
Gain on sale of equity interest 10.4 - 10.4 -
Other operating income, net 0.7 0.8 15.6 5.2
- ------------------------------------------------------------------------------------------------------------------------------
Operating profit 64.2 29.9 99.8 132.3
Interest income 1.9 0.8 6.2 3.1
Interest expense (6.0) (5.9) (25.4) (23.0)
Stabilization Act compensation - - - 5.9
Other income (expense), net - (2.7) 2.3 (5.2)
Minority interest (3.6) (1.5) (9.0) (3.3)
- ------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 56.5 20.6 73.9 109.8
Provision for income taxes 52.2 7.5 55.7 40.4
- ------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 4.3 13.1 18.2 69.4
Income (loss) from discontinued operations,
net of tax (29.3) (36.3) 11.2 (43.3)
- ------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (25.0) (23.2) 29.4 26.1
==============================================================================================================================
Basic net income (loss) per common share:
Continuing operations $ 0.08 0.25 0.34 1.31
Discontinued operations (0.55) (0.69) 0.21 (0.83)
- ------------------------------------------------------------------------------------------------------------------------------
$ (0.47) (0.44) 0.55 0.48
- ------------------------------------------------------------------------------------------------------------------------------
Diluted net income (loss) per common share:
Continuing operations $ 0.08 0.25 0.34 1.30
Discontinued operations (0.55) (0.69) 0.21 (0.82)
- ------------------------------------------------------------------------------------------------------------------------------
$ (0.47) (0.44) 0.55 0.48
==============================================================================================================================
See accompanying notes.
10
The Brink's Company
and Subsidiaries
Condensed Consolidated Balance Sheets
(In millions)
December 31, December 31,
2003 2002
- -----------------------------------------------------------------------------------------------------------------------
(Unaudited)
Assets
Cash $ 128.7 102.3
Other current assets 731.8 679.7
Property and equipment, net 872.2 871.2
Goodwill, net 244.1 227.9
Voluntary Employees' Beneficiary Association trust 105.2 18.2
Other assets 466.6 560.6
- -----------------------------------------------------------------------------------------------------------------------
Total assets $ 2,548.6 2,459.9
=======================================================================================================================
Liabilities and Shareholders' Equity
Current debt $ 53.0 55.1
Other current liabilities 791.1 738.2
Long-term debt 221.5 304.2
Accrued pension costs 86.8 122.6
Other liabilities 900.6 858.6
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 2,053.0 2,078.7
Shareholders' equity 495.6 381.2
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 2,548.6 2,459.9
=======================================================================================================================
See accompanying notes.
Segment Information
(In millions)
(Unaudited)
Three Months Ended Years Ended
December 31, December 31,
2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------------
Revenues:
Brink's $ 459.7 391.2 1,689.0 1,579.9
Brink's Home Security 81.1 72.8 310.4 282.4
BAX Global 568.9 528.5 1,999.2 1,871.5
- -----------------------------------------------------------------------------------------------------------------
Revenues $ 1,109.7 992.5 3,998.6 3,733.8
=================================================================================================================
Operating profit (loss):
Brink's $ 44.5 28.5 112.5 96.1
Brink's Home Security 18.7 15.9 71.2 60.9
BAX Global 16.3 11.2 3.0 17.6
- -----------------------------------------------------------------------------------------------------------------
Business and Security Services 79.5 55.6 186.7 174.6
Former coal operations (17.8) (19.2) (69.5) (19.2)
Gain on sale of equity interest 10.4 - 10.4 -
Corporate (7.9) (6.5) (27.8) (23.1)
- -----------------------------------------------------------------------------------------------------------------
Operating profit $ 64.2 29.9 99.8 132.3
=================================================================================================================
See accompanying notes.
11
The Brink's Company
and Subsidiaries
Other Financial Information
(In millions, except as otherwise noted)
(Unaudited)
Three Months Ended Years Ended
December 31, December 31,
2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------------------------------
Brink's:
Revenues:
North America $ 185.0 178.2 716.2 694.9
International 274.7 213.0 972.8 885.0
- ------------------------------------------------------------------------------------------------------------------------
Revenues $ 459.7 391.2 1,689.0 1,579.9
- ------------------------------------------------------------------------------------------------------------------------
Operating profit:
North America $ 17.8 15.1 53.4 52.2
International 26.7 13.4 59.1 43.9
- ------------------------------------------------------------------------------------------------------------------------
Segment operating profit $ 44.5 28.5 112.5 96.1
- ------------------------------------------------------------------------------------------------------------------------
Brink's Home Security:
Revenues $ 81.1 72.8 310.4 282.4
- ------------------------------------------------------------------------------------------------------------------------
Operating profit:
Recurring services $ 32.5 28.4 125.9 109.5
Investment in new subscribers (13.8) (12.5) (54.7) (48.6)
- ------------------------------------------------------------------------------------------------------------------------
Segment operating profit $ 18.7 15.9 71.2 60.9
- ------------------------------------------------------------------------------------------------------------------------
Monthly recurring revenues $ 23.3 21.1
Annualized disconnect rate 6.4% 6.4% 6.9% 7.1%
Number of subscribers (in thousands):
Beginning of period 813.2 750.7 766.7 713.5
Installations 33.6 28.1 121.9 105.8
Disconnects (13.3) (12.1) (55.1) (52.6)
- ------------------------------------------------------------------------------------------------------------------------
End of period 833.5 766.7 833.5 766.7
Average number of subscribers 823.5 759.5 797.5 739.0
- ------------------------------------------------------------------------------------------------------------------------
BAX Global:
Revenues:
Americas $ 267.1 260.8 976.0 989.9
International 322.4 287.1 1,098.3 951.7
Eliminations/other (20.6) (19.4) (75.1) (70.1)
- ------------------------------------------------------------------------------------------------------------------------
Revenues $ 568.9 528.5 1,999.2 1,871.5
- ------------------------------------------------------------------------------------------------------------------------
Operating profit (loss):
Americas $ 0.7 (4.8) (30.9) (15.1)
International 16.9 18.4 41.2 43.8
Other (1.3) (2.4) (7.3) (11.1)
- ------------------------------------------------------------------------------------------------------------------------
Segment operating profit (loss) $ 16.3 11.2 3.0 17.6
- ------------------------------------------------------------------------------------------------------------------------
Intra-American revenue $ 128.5 119.3 464.6 468.6
Worldwide expedited freight services:
Revenues $ 423.0 413.4 1,501.0 1,452.4
Weight in pounds 455.9 433.4 1,575.8 1,530.3
- ------------------------------------------------------------------------------------------------------------------------
See accompanying notes.
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The Brink's Company
and Subsidiaries
Other Financial Information
(In millions)
(Unaudited)
Three Months Ended Years Ended
December 31, December 31,
2003 2002 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization:
Brink's $ 20.1 15.6 70.6 61.3
Brink's Home Security 12.4 11.9 47.9 43.9
BAX Global 11.0 12.4 47.0 44.4
Corporate 0.5 0.2 2.5 0.3
- ----------------------------------------------------------------------------------------------------------------------------
Depreciation and amortization $ 44.0 40.1 168.0 149.9
============================================================================================================================
Other BHS cash flow information:
Impairment charges from subscriber disconnects $ 8.3 7.5 34.3 32.3
Amortization of deferred revenue (6.1) (5.9) (25.0) (23.9)
Deferred subscriber acquisition costs
(current year payments) (4.7) (4.8) (18.4) (17.7)
Deferred revenue from new subscribers
(current year receipts) 7.5 6.9 28.2 27.1
============================================================================================================================
Capital expenditures:
Brink's $ 26.7 24.2 80.9 79.3
Brink's Home Security 26.1 23.9 98.0 86.9
BAX Global 5.0 11.3 23.6 27.1
Corporate 0.1 0.1 0.2 0.1
- ----------------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 57.9 59.5 202.7 193.4
============================================================================================================================
See accompanying notes.
13
The Brink's Company
and Subsidiaries
Notes to Financial Information
(Unaudited)
Note 1. Organization
The Brink's Company (along with its subsidiaries, the "Company") has
three operating segments within its "Business and Security Services"
businesses:
o Brink's, Incorporated ("Brink's")
o Brink's Home Security, Inc. ("BHS")
o BAX Global Inc. ("BAX Global")
The Company has significant liabilities associated with its former coal
operations and expects to have significant ongoing net expenses and
cash outflows related to former coal operations. At December 31, 2003,
the Company had approximately $105 million of assets held by a
Voluntary Employees' Beneficiary Association trust ("VEBA") available
to repay a portion of these liabilities.
As discussed in notes 3 and 4, each of the Company's former natural
resource operations have been reclassified to discontinued operations
as a result of either an expected or completed sale. Amounts are
subject to final audit.
Note 2. Former coal operations included in continuing operations
Prior to 2003, ongoing expenses related to former coal operations were
classified as part of discontinued operations. In 2003, the Company
began recognizing ongoing expenses related to its former coal
operations as a part of continuing operations. In addition, the Company
records adjustments to coal-related contingent liabilities within
discontinued operations. See note 4.
In 2002 the Company reclassified $43.3 million (original cost) of
coal-related assets to continuing operations and recognized a $14.1
million impairment loss. The Company also accrued $5.1 million of
losses in 2002 on advance minimum royalty agreements that were not
expected to be assumed by purchasers.
Costs of former coal operations included in continuing operations
Three Months Ended Years Ended
December 31, December 31,
(In millions) 2003 2002 2003 2002
--------------------------------------------------------------------------------------------------
Company-sponsored postretirement
benefits other than pensions $ 12.6 - 49.8 -
Black lung 1.7 - 6.0 -
Pension (0.3) - (0.8) -
Administrative, legal and other
expenses, net 3.9 - 10.1 -
Idle and closed mine expense 0.3 - 7.3 -
Other income (0.4) - (2.9) -
Impairment of long-lived assets - 14.1 - 14.1
Loss on advance minimum royalty
agreements - 5.1 - 5.1
--------------------------------------------------------------------------------------------------
$ 17.8 19.2 69.5 19.2
==================================================================================================
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Note 3. Sales of natural resource businesses and other significant
investing cash flow activities
In the second quarter of 2003, the Company accepted $26.0 million in
full settlement of the notes receivable and royalty agreements received
as part of the consideration in the 2002 sale of its former Virginia
coal operations. It recorded a gain of $2.6 million in the second
quarter of 2003, which is included in other nonoperating income
(expense), net.
The Company sold its natural gas business in August 2003 for $81.2
million in cash and recognized a $56.2 million pretax gain in
discontinued operations.
In October 2003, the Company sold its 23.3% equity interest in MPI
Mines Ltd. for approximately $18.8 million in cash, and recognized a
$10.4 million pretax gain in continuing operations.
During November 2003, the Company sold substantially all of its
remaining coal-related assets in West Virginia for $14.0 million in
cash plus the assumption of reclamation and other liabilities for total
proceeds of $28.8 million. A gain is expected to be recognized in 2004
as liabilities related to reclamation are transferred to the buyer.
In December 2003, the Company sold a portion of its timber business for
approximately $5.4 million in cash and recognized a $4.8 million pretax
gain in discontinued operations. The Company sold the remaining portion
of its timber business in January 2004 for $31.8 million in cash and
will recognize an approximate $19 million of additional pretax gain in
the first quarter 2004 in discontinued operations. An additional $1.9
million of cash is being held in escrow until June 2004 pending the
completion of certain remaining background title work. The Company paid
$6 million in January 2004 to settle operating leases for equipment
purchased by the buyer.
In 2003, the Company contributed $82 million to its VEBA. The VEBA is
designed to tax efficiently fund certain retiree medical liabilities,
primarily for retired coal miners and their dependents. The total value
of the VEBA at December 31, 2003 was approximately $105 million.
Note 4. Discontinued operations
The results of operations for the coal, natural gas, timber and gold
businesses have been reclassified to discontinued operations.
The Company adjusted certain of the contingent liabilities related to
former operations based on annual actuarial and engineering studies
completed in the fourth quarter of 2003.
15
Summary of Discontinued Operations
Three Months Ended Years Ended
December 31, December 31,
(in millions) 2003 2002 2003 2002
----------------------------------------------------------------------------------------------------------
Gain (loss) on sale of:
Natural gas $ (1.1) - 56.2 -
Timber 4.8 - 4.8 -
Coal - 13.2 - 13.2
Results from operations:
Natural gas (0.1) 2.4 11.2 9.0
Timber (0.3) (0.3) (0.2) (1.0)
Gold (1.6) (7.6) (4.1) (7.6)
Coal operating losses during
the disposal period - (13.1) - (28.1)
Adjustments to contingent liabilities
of former operations:
Withdrawal liabilities (14.0) (26.8) (17.0) (26.8)
Health Benefit Act liabilities (31.3) (24.0) (31.3) (24.0)
Reclamation liabilities (3.2) - (3.2) -
Recovery of environmental costs 5.3 - 5.3 -
Other (2.1) - (2.5) -
----------------------------------------------------------------------------------------------------------
(43.6) (56.2) 19.2 (65.3)
Income taxes 14.3 19.9 (8.0) 22.0
----------------------------------------------------------------------------------------------------------
$ (29.3) (36.3) 11.2 (43.3)
==========================================================================================================
In 2003, the Company increased its estimated withdrawal liabilities for
coal-related multi-employer pension plans by $17 million ($14 million
in the fourth quarter) bringing the total estimated liability to $52
million at December 31, 2003. The actual withdrawal liability, if any,
is subject to several factors including funding and benefit levels and
the date that the Company is determined to have completely withdrawn
from the plans.
In the fourth quarter 2003, the Company increased its estimated
obligations under the Coal Industry Retiree Health Benefits Act of 1992
(the "Health Benefit Act") by $31.3 million. The increase reflects
changes in the estimates of the undiscounted liability. The increase in
the estimate is primarily due to an increase in the amount of estimated
future cost for unassigned beneficiaries of the Combined Fund.
In the fourth quarter of 2003, the Company reached an agreement with a
third party that sets the allocation of past costs related to the
recovery of environmental costs, and as a result, recognized a $5.3
million pretax gain. The matter relates to the remediation of the
Company's formerly owned petroleum terminal facility in Jersey City,
New Jersey.
The Company's contingent liabilities could change materially in the
future.
16
Presented below are the Company's quarterly income per share from
continuing and discontinued operations in 2002 and 2003 reflecting the
2003 reclassifications of the Company's natural gas, timber and gold
operations to discontinued operations.
Net income (loss) per common share:
2003 Quarters Full Year
1st 2nd 3rd 4th 2003
------------------------------------------------------------------------------------------------------
Basic and diluted
Continuing operations $ (0.06) 0.11 0.22 0.08 0.34
Discontinued operations 0.03 - 0.72 (0.55) 0.21
------------------------------------------------------------------------------------------------------
Net income (loss) $ (0.03) 0.11 0.94 (0.47) 0.55
======================================================================================================
2002 Quarters Full Year
1st 2nd 3rd 4th 2002
------------------------------------------------------------------------------------------------------
Basic
Continuing operations $ 0.33 0.33 0.39 0.25 1.31
Discontinued operations (0.18) 0.03 0.02 (0.69) (0.83)
------------------------------------------------------------------------------------------------------
Net income (loss) $ 0.15 0.36 0.41 (0.44) 0.48
======================================================================================================
Diluted
Continuing operations $ 0.33 0.33 0.39 0.25 1.30
Discontinued operations (0.18) 0.03 0.02 (0.69) (0.82)
------------------------------------------------------------------------------------------------------
Net income (loss) $ 0.15 0.36 0.41 (0.44) (0.48)
======================================================================================================
Note 5. Other significant items affecting earnings
Brink's, Incorporated's North American operating income in 2003
includes a $5.5 million ($0.8 million in the fourth quarter) gain on
the sale of operating assets. Approximately $5.4 million in 2003 ($1.2
million in the fourth quarter) of costs associated with the closure of
its former headquarters in Darien, Connecticut are included in selling,
general and administrative expenses.
Stabilization Act compensation of $5.9 million received in third
quarter 2002 represents amounts received by the Company from the U.S.
government pursuant to the Air Transportation Safety and System
Stabilization Act.
Note 6. Income taxes
The Company's income tax provision in the fourth quarter and full year
2003 includes $22.0 million of expense related to establishing new
valuation allowances against certain deferred tax assets. The valuation
allowances were required due to the Company's assessment that these
assets did not meet the more-likely-than-not recognition criteria of
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes."
The Company's effective tax rate, excluding the valuation allowances,
was higher in the fourth quarter and full year 2003 compared to the
2002 periods as a result of adjustments made to the Company's deferred
tax assets and liabilities based on an analysis completed in the fourth
quarter of 2003 and other adjustments related to the reconciliation of
its 2002 tax provision to its tax returns. In 2002 and 2003, the
Company also reversed contingency accruals related to favorable
settlements of issues relating to the Company's U.S. federal tax
returns.
17
Note 7. Share information for EPS
Three Months Ended Years Ended
December 31, December 31,
(In millions) 2003 2002 2003 2002
---------------------------------------------------------------------
Weighted average common
shares outstanding:
Basic 53.5 52.4 53.1 52.1
Diluted 53.8 52.6 53.2 52.4
====================================================================
The Company redeemed its preferred stock in the third quarter of 2002.
Dividends paid to preferred stockholders prior to the redemption and a
$0.6 million premium on the redemption of the preferred stock reduced
diluted earnings per share from continuing operations by $0.02 per
share the full year of 2002.
Note 8. Non GAAP Reconciliations
(a) A reconciliation of monthly recurring revenues to reported BHS
revenues follows:
Years Ended
December 31,
(In millions) 2003 2002
-----------------------------------------------------------------------
December:
Monthly recurring revenues ("MRR") (a) $ 23.3 21.1
Amounts excluded from MRR:
Amortization of deferred revenue 2.0 2.0
Other revenues (b) 2.4 1.2
-----------------------------------------------------------------------
Revenues on a GAAP basis 27.7 24.3
=======================================================================
Revenues (GAAP basis):
December 27.7 24.3
January - November 282.7 258.1
-----------------------------------------------------------------------
January - December $ 310.4 282.4
=======================================================================
(a) MRR is calculated based on the number of subscribers at period end
multiplied by the average fee per subscriber received in the last
month of the period for contracted monitoring and maintenance
services.
(b) 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.
18
(b) A reconciliation of the pretax gain related to sale of the
Company's investment in an Australian gold and nickel company to
the gain on sale after-tax follows:
Three Months and
(In millions) Year Ended December 31, 2003
-----------------------------------------------------------------------
Gain on sale of investment, before tax $ 10.4
Income tax (3.4)
-----------------------------------------------------------------------
Gain on sale of investment, after tax $ 7.0
=======================================================================
The Company believes the presentation of the gain on sale of
investment, after-tax, is useful to investors to assess the effect on
income from continuing operations, an after-tax measure.
(c)
December 31,
(In millions) 2003 2002
----------------------------------------------------------------
Current debt $ 53.0 55.1
Long-term debt 221.5 304.2
----------------------------------------------------------------
Total debt 274.5 359.3
Less cash (128.7) (102.3)
----------------------------------------------------------------
Net debt 145.8 257.0
Securitization facility 77.0 72.0
----------------------------------------------------------------
Net financings $ 222.8 329.0
================================================================
The Company believes the presentation of net financings is a useful
measure of the Company's financial leverage.
# # #
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