[LOGO] The Brink's Company
1801 Bayberry Court
P.O. Box 18100
PRESS RELEASE Richmond, VA 23226-8100 USA
Tel. 804.289.9600
Fax 804.289.9758
Contact: FOR IMMEDIATE RELEASE
Investor Relations
804.289.9709
The Brink's Company
Reports Improved First Quarter 2004 Results
Strong Operating Performance of Security Businesses;
First Quarter Profit for BAX Global on Higher Volumes;
Costs of Former Coal Operations are Reduced
RICHMOND, Va., (May 5, 2004) - The Brink's Company (NYSE: BCO) today
reported income from continuing operations for the first quarter of 2004 of
$17.2 million or $0.32 per diluted share compared to a loss of $3.2 million or
$(0.06) per diluted share in the prior-year period.
Revenue in the first quarter of 2004 increased 18% over last year's
first quarter to $1.1 billion. All business units reported higher revenues, with
Brink's, Incorporated and BAX Global also benefiting from stronger European
currencies relative to the U.S. dollar.
The Company reported operating profit of $33.7 million for the quarter
ended March 31, 2004 up from breakeven in the year earlier period. The strong
operating profit increase reflects significantly improved performance,
particularly in South America and Europe, at Brink's, Incorporated, continued
strong growth and operating efficiency at Brink's Home Security and increased
freight volumes and global supply chain management activities in the Americas
and Asia at BAX Global. Operating profit also benefited from reduced costs of
former coal operations, partially offset by higher corporate expenses.
- more - 1
"We are pleased with the strong performance during the quarter of our
two security businesses, Brink's, Incorporated and Brink's Home Security, and
with the improving trend and positive income contribution from BAX Global," said
Michael T. Dan, Chairman, President and Chief Executive Officer of The Brink's
Company. "The continuing economic recovery in the U.S. benefited BAX Global's
shipping volume, while better conditions in South America and improved results
in Europe helped drive significantly better performance at Brink's, Incorporated
in comparison to the weak results reported a year ago," he added.
Discontinued Operations and Net Income
After-tax income from discontinued operations for the first quarter of
2004 was $8.6 million ($0.15 per diluted share) primarily as a result of the
sale of timber assets. Income from discontinued operations in the first quarter
last year was $1.5 million, or $0.03 per diluted share.
Net income for the first quarter of 2004 was $25.8 million, or $0.47
per diluted share, compared with a net loss of $1.7 million, or $(0.03) per
diluted share in the prior year's period.
First Quarter Business Unit Performance
Brink's, Incorporated ("Brink's")
- ---------------------------------
Brink's revenue of $458.0 million increased 17% for the first quarter
as compared with the prior year's period. International revenue in the current
quarter increased 29% over the first quarter a year ago due to the effects of
currency translation combined with stronger revenues in France, Germany and
Venezuela. International revenue in the first quarter last year was adversely
impacted by weak economic activity including the effects of uncertainty from the
then impending Middle East conflict. North American revenue increased 2% over
the first quarter of 2003.
- more - 2
Brink's operating profit in the quarter ended March 31, 2004 increased
to $32.8 million, up significantly from the $13.1 million recorded in the weak
first quarter last year. The increase in operating profit reflects significantly
better business conditions in South America and the benefit of actions Brink's
took during the first half of 2003 to improve operating performance in Europe.
The operating profit improvement in North America resulted largely from better
performance in coin wrapping and Cash Logistics operations and lower overhead
costs.
Brink's Home Security
- ---------------------
Revenue at Brink's Home Security increased 11% to $82 million in the
first quarter of 2004, 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 first quarter was a record $19.4 million, 16% higher than in the
prior year's first 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 first quarter of 2003 improved
to 6.4% from 6.5% in the year ago quarter. Brink's Home Security added 34,100
new subscribers during the quarter, a 24% increase over the number of new
subscribers added in the first quarter of 2003, and ended the quarter with
854,000 subscribers generating monthly recurring revenue of $24.0 million.
BAX Global
- ----------
Revenue at BAX Global increased to $554.5 million in the first quarter,
20% higher than in the same period last year. International revenue increased
27%, 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 12% in comparison to last year's first quarter due to
higher U.S. shipping volume reflecting an improving economy and growth in supply
chain management activities.
- more - 3
Operating profit at BAX Global improved to $3.1 million for the first
quarter of 2004 from a loss of $5.5 million in the same period in 2003. The
current quarter's performance marks the first time since 1999 that BAX Global
has reported a profit in the seasonally weak first quarter and reflects improved
results from North American operations, continued strong results from logistics
activities in Asia-Pacific and flat operating profit in Europe.
Costs of Former Coal Operations and Corporate Expenses
The Company's costs of former coal operations, which consist primarily
of company-sponsored medical coverage for former miners and their dependents,
declined to $12.5 million in the first quarter of 2004 from $17.3 million in the
prior-year period. The decrease is primarily due to the benefits of the recently
enacted Medicare legislation and the recording of $2.3 million of expected
investment income on assets held in the Company's Voluntary Employees'
Beneficiary Association (VEBA) trust. These assets were allocated to the
Company's coal-related postretirement medical benefit plan on January 1, 2004.
As a result of this allocation, the Company also recorded $4.4 million of
previously unrecognized gains on the VEBA. This one-time pretax gain is
reflected in Interest and other income, net.
Corporate expenses increased in the quarter ended March 31, 2004 to
$9.1 million from $7.0 million in the prior-year period due to an increase in
costs associated with the documentation and testing of internal controls
required by the Sarbanes-Oxley Act of 2002.
Summary
"Overall, The Brink's Company is off to a strong start in 2004.
Brink's, Incorporated continued the solid performance begun in the last half of
2003, although this quarter's results are in comparison to a very weak first
quarter last year," said Mr. Dan. "BAX Global experienced the benefits of
increased economic activity and related increases in shipping in the U.S, while
continuing to build its global supply chain management business. Brink's Home
Security once again posted excellent results, reflecting its constant focus on
disciplined customer acquisition and industry-leading service levels," added Mr.
Dan.
- more - 4
"Looking forward, BAX Global stands to benefit from further
strengthening of economic and business conditions in the U.S. and Europe," said
Mr. Dan. "At Brink's, Incorporated the emphasis will continue to be on seizing
new opportunities and building upon the early success of our value-added service
offerings, including Cash Logistics. Brink's Home Security will focus on
maintaining its industry-leading performance and continuing to grow revenues,
profits and cash flow," said Mr. Dan.
"The proceeds from the sale of our natural resources businesses,
combined with strong operating cash flow, has enabled us to strengthen our
balance sheet. With our strong financial footing, the power of the Brink's
brand, an unwavering commitment to service excellence and our discipline in
operating our businesses, we have both the capacity and capability to grow The
Brink's Company and to build greater economic value for our shareholders," said
Mr. Dan.
- more - 5
This release contains both historical and forward-looking information.
Statements regarding the realization of further growth and better performance in
The Brink's Company through its security and business services operations, among
others, involve forward-looking information which is subject to known and
unknown risks, uncertainties and contingencies. These risks, uncertainties and
contingencies could cause actual results 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, the financial stability 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 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 freight
transportation and global supply chain management 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, May 5, 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 May 14, 2004 by calling 800-642-1687 within North America or
706-645-9291 outside North America. The conference ID for the replay is 7021446.
A webcast replay will be available at www.brinkscompany.com through May 21,
2004.
6
The Brink's Company
and Subsidiaries
Condensed Consolidated Statements of Operations
(In millions, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
2004 2003
- ------------------------------------------------------------------------------------------------------------
Revenues $ 1,094.5 928.9
Expenses:
Operating expenses 929.9 806.6
Selling, general and administrative expenses 134.4 124.8
- ------------------------------------------------------------------------------------------------------------
Total expenses 1,064.3 931.4
Other operating income, net 3.5 2.5
- ------------------------------------------------------------------------------------------------------------
Operating profit 33.7 -
Interest expense (5.8) (6.1)
Interest and other income, net 4.4 1.8
Minority interest (3.3) (0.8)
- ------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations before income taxes 29.0 (5.1)
Provision (benefit) for income taxes 11.8 (1.9)
- ------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations 17.2 (3.2)
Income from discontinued operations, net of tax 8.6 1.5
- ------------------------------------------------------------------------------------------------------------
Net income (loss) $ 25.8 (1.7)
============================================================================================================
Basic net income (loss) per common share:
Continuing operations $ 0.32 (0.06)
Discontinued operations 0.16 0.03
- ------------------------------------------------------------------------------------------------------------
$ 0.48 (0.03)
============================================================================================================
Diluted net income (loss) per common share:
Continuing operations $ 0.32 (0.06)
Discontinued operations 0.15 0.03
- ------------------------------------------------------------------------------------------------------------
$ 0.47 (0.03)
============================================================================================================
See accompanying notes.
7
The Brink's Company
and Subsidiaries
Condensed Consolidated Balance Sheets
(In millions)
March 31, December 31,
2004 2003
- -----------------------------------------------------------------------------------------------------
(Unaudited)
Assets
Cash $ 141.2 128.7
Other current assets 735.9 731.8
Property and equipment, net 862.7 873.2
Goodwill, net 243.2 244.1
Investments held by VEBA (see note 2) - 105.2
Other assets 475.4 465.6
- -----------------------------------------------------------------------------------------------------
Total assets $ 2,458.4 2,548.6
=====================================================================================================
Liabilities and Shareholders' Equity
Current debt $ 90.9 53.0
Other current liabilities 783.6 791.1
Long-term debt 176.1 221.5
Accrued pension costs 96.2 86.6
Other liabilities (see note 2) 790.2 900.8
- -----------------------------------------------------------------------------------------------------
Total liabilities 1,937.0 2,053.0
Shareholders' equity 521.4 495.6
- -----------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 2,458.4 2,548.6
=====================================================================================================
See accompanying notes.
Segment Information
(In millions)
(Unaudited)
Three Months Ended
March 31,
2004 2003
- -----------------------------------------------------------------------------------------------------
Revenues:
Brink's $ 458.0 391.4
Brink's Home Security 82.0 73.9
BAX Global 554.5 463.6
- -----------------------------------------------------------------------------------------------------
Revenues $ 1,094.5 928.9
=====================================================================================================
Operating profit (loss):
Brink's $ 32.8 13.1
Brink's Home Security 19.4 16.7
BAX Global 3.1 (5.5)
- -----------------------------------------------------------------------------------------------------
Business and Security Services 55.3 24.3
Former coal operations (12.5) (17.3)
Corporate (9.1) (7.0)
- -----------------------------------------------------------------------------------------------------
Operating profit $ 33.7 -
=====================================================================================================
See accompanying notes.
8
The Brink's Company
and Subsidiaries
Other Financial Information
(In millions, except as otherwise noted)
(Unaudited)
Three Months Ended
March 31,
2004 2003
- --------------------------------------------------------------------------------
Brink's:
Revenues:
North America $ 180.1 175.8
International 277.9 215.6
- --------------------------------------------------------------------------------
Revenues $ 458.0 391.4
================================================================================
Operating profit:
North America $ 12.9 10.8
International 19.9 2.3
- --------------------------------------------------------------------------------
Operating profit $ 32.8 13.1
================================================================================
Brink's Home Security:
Revenues $ 82.0 73.9
================================================================================
Operating profit:
Recurring services $ 35.1 30.3
Investment in new subscribers (15.7) (13.6)
- --------------------------------------------------------------------------------
Operating profit $ 19.4 16.7
================================================================================
Monthly recurring revenues $ 24.0 21.6
Annualized disconnect rate 6.4% 6.5%
Number of subscribers (in thousands):
Beginning of period 833.5 766.7
Installations 34.1 27.4
Disconnects (13.5) (12.6)
- --------------------------------------------------------------------------------
End of period 854.1 781.5
Average number of subscribers 843.5 774.0
================================================================================
BAX Global:
Revenues:
Americas $ 264.7 236.6
International 309.1 244.3
Eliminations (19.3) (17.3)
- --------------------------------------------------------------------------------
Revenues $ 554.5 463.6
================================================================================
Operating profit (loss):
Americas $ (1.9) (9.7)
International 8.7 7.1
Corporate (3.7) (2.9)
- --------------------------------------------------------------------------------
Operating profit (loss) $ 3.1 (5.5)
================================================================================
Intra-American revenue $ 125.1 110.9
Worldwide expedited freight services:
Revenues $ 415.6 354.0
Weight in pounds 418.0 367.2
================================================================================
See accompanying notes.
9
The Brink's Company
and Subsidiaries
Other Financial Information
(In millions)
(Unaudited)
Three Months Ended
March 31,
2004 2003
- --------------------------------------------------------------------------------------------------------------
Depreciation and amortization:
Brink's $ 19.1 15.6
Brink's Home Security 12.5 11.6
BAX Global 10.7 12.2
Corporate 0.4 0.8
- --------------------------------------------------------------------------------------------------------------
Depreciation and amortization $ 42.7 40.2
==============================================================================================================
Other Brink's Home Security cash flow information:
Impairment charges from subscriber disconnects $ 8.7 7.5
Amortization of deferred revenue (6.1) (5.8)
Deferral of subscriber acquisition costs (current year payments) (4.7) (4.3)
Deferral of revenue from new subscribers (current year receipts) 8.1 6.5
==============================================================================================================
Capital expenditures:
Brink's $ 16.1 16.4
Brink's Home Security 26.7 23.1
BAX Global 6.9 5.8
Corporate 0.3 -
- --------------------------------------------------------------------------------------------------------------
Capital expenditures $ 50.0 45.3
==============================================================================================================
See accompanying notes.
10
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:
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 expenses and cash outflows
related to these operations.
Note 2. Costs of former coal operations included in continuing operations
Three Months Ended
March 31,
(In millions) 2004 2003
- -----------------------------------------------------------------------------------------------
Company-sponsored postretirement benefits other than pensions $ 9.4 12.2
Black lung 1.5 1.5
Pension 0.6 0.1
Administrative, legal and other expenses, net 2.5 2.1
Idle and closed mine expense 0.2 1.9
Gains on sale of property and equipment and other income (1.7) (0.5)
- -----------------------------------------------------------------------------------------------
$ 12.5 17.3
===============================================================================================
Company-sponsored postretirement benefits other than pensions
Effective January 1, 2004, the Company began accounting for the investments held
by its VEBA as plan assets of its coal-related retiree medical plan in
accordance with Statements of Financial Accounting Standards ("SFAS") No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," as a
result of the restriction of the VEBA to only pay obligations of this plan.
Accordingly, the Company has reduced its postretirement benefit expenses by the
expected earnings of the plan assets; $2.3 million in the quarter ended March
31, 2004.
In addition, the carrying value of the VEBA is now reflected as a direct offset
to the liability within postretirement benefits other than pensions which is
included in the liabilities in the attached condensed balance sheet. The
carrying value at March 31, 2004 is approximately $108 million.
The Company's coal-related retiree medical plan is expected to qualify for a
federal subsidy introduced as part of the Medicare Prescription Drug,
Improvement and Modernization Act of 2003. As a result, the Company included an
actuarial gain in the estimate of its December 31, 2003 projected benefit
obligation. This resulted in a $1.5 million reduction in the Company's
postretirement benefit expense in the first quarter of 2004 compared to what it
would have been otherwise. The effect on the full year is expected to be $5.8
million.
Administrative, legal and other expenses, net
Administrative, legal and other expenses, net, are expected to decline as
administrative functions are reduced and residual assets are sold. Expenses
related to residual assets include property taxes, insurance and lease payments.
11
Idle and closed mine expense
Expenses associated with idle and closed mines were significantly lower in 2004
as compared to 2003 as a result of the sale in late 2003 of most remaining
properties.
Gains on sale of property and equipment
Gains or losses on the disposal of coal-related assets which were initially
retained after production and marketing ended are included in continuing
operations as part of the net expenses related to former coal operations.
The Company sold substantially all of its remaining coal-related assets in West
Virginia in the fourth quarter of 2003 for $28.8 million of proceeds, including
$14.8 million of liabilities contractually assumed by the buyer. However, the
transfer of many of these liabilities is not final until the purchaser replaces
the Company's bonds with surety bonds of its own. Accordingly, the Company is
recording gains associated with the sale of these properties as surety bonds are
replaced. During the first quarter of 2004, the Company recorded an approximate
$0.3 million gain related to liability transfers. The Company will record
additional gains of approximately $6 million as remaining bonds are replaced.
The Company sold additional coal-related assets in April 2004 and expects to
record a $2.3 million pretax gain in the second quarter of 2004.
Note 3. Discontinued operations
Three Months Ended
March 31,
(In millions) 2004 2003
- ------------------------------------------------------------------------------------------------
Gain (loss) on sales of:
Timber $ 18.8 -
Gold (0.9) -
Results from operations:
Natural Gas - 3.0
Timber (0.5) 0.2
Gold (1.2) (0.1)
Adjustments to contingent liabilities of former operations (2.9) (0.6)
- ------------------------------------------------------------------------------------------------
Income from discontinued operations before income taxes 13.3 2.5
Income tax expense (4.7) (1.0)
- ------------------------------------------------------------------------------------------------
Income from discontinued operations $ 8.6 1.5
================================================================================================
Gain (loss) on sales
Timber. In December 2003, the Company sold a portion of its timber business for
$5.4 million in cash and recognized a $4.8 million pretax gain in discontinued
operations. The Company received an additional $31.8 million from escrow in
January 2004 for the remaining portion of its timber business. After deducting
the book value of related assets and the payment of $6.2 million in January 2004
to purchase equipment formerly leased, the Company recognized an $18.8 million
pretax gain in discontinued operations in the first quarter of 2004. The Company
expects to recognize up to a $1.9 million pretax gain in the second quarter of
2004 in discontinued operations as the final $1.9 million of cash is released.
12
Gold. In February 2004, the Company completed the sale of its gold operations
for approximately $1.1 million in cash plus the assumption of liabilities and
recognized a $0.9 million loss.
Results of operations
In addition to the sales of timber and gold businesses, the Company sold its
natural gas business in 2003. The results of operations of these businesses
through the date of the related sale have been classified as discontinued
operations for all periods presented.
Adjustments to contingent liabilities of former operations
The Company recognized $2.9 million of additional expense in the first quarter
of 2004 associated with the settlement of legal matters related to its former
coal operations.
Note 4. Interest and other income (expense), net
Three Months Ended
March 31,
(In millions) 2004 2003
- ------------------------------------------------------------------------------
Recognition of gain on investments held by VEBA $ 4.4 -
Interest income 1.1 1.6
Discounts and other fees of accounts receivable
securitization program (0.4) (0.4)
Other, net (0.7) 0.6
- ------------------------------------------------------------------------------
Total $ 4.4 1.8
==============================================================================
As discussed earlier, as of January 1, 2004 the Company restricted the use of
the VEBA to pay only benefits associated with the coal-related postretirement
medical benefits plan. Prior to that time, unrealized gains and losses on
securities still held (not sold and reinvested in other securities) by the VEBA
were recorded in other comprehensive income. With the restriction in the use of
the VEBA, unrealized net gains of $4.4 million were recognized in the first
quarter of 2004 within Interest and other income, net.
Note 5. Share information for EPS
Three Months Ended
March 31,
(In millions) 2004 2003
- ----------------------------------------------------------------------------
Weighted average common shares outstanding:
Basic 53.9 52.6
Diluted 54.4 52.6
============================================================================
13
Note 6. Non-GAAP Reconciliations
Monthly Recurring Revenues
A reconciliation of monthly recurring revenues to reported BHS revenues follows:
Three Months Ended
March 31,
(In millions) 2004 2003
- --------------------------------------------------------------------------------
March:
Monthly recurring revenues ("MRR") (a) $ 24.0 21.6
Amounts excluded from MRR:
Amortization of deferred revenue 2.1 2.0
Other revenues (b) 1.8 1.3
- --------------------------------------------------------------------------------
Revenues on a GAAP basis 27.9 24.9
================================================================================
Revenues (GAAP basis):
March 27.9 24.9
January - February 54.1 49.0
- --------------------------------------------------------------------------------
January - March $ 82.0 73.9
================================================================================
(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 widely used in the industry to assess the amount of recurring
revenues from subscriber fees a home security business produces.
Net Debt and Net Financings
March 31, December 31,
(In millions) 2004 2003
- -------------------------------------------------------------------------------------------
Short-term debt and current maturities of long-term debt $ 90.9 53.0
Long-term debt 176.1 221.5
- -------------------------------------------------------------------------------------------
Debt 267.0 274.5
Less cash and cash equivalents (141.2) (128.7)
- -------------------------------------------------------------------------------------------
Net Debt 125.8 145.8
Securitization facility 73.0 77.0
- -------------------------------------------------------------------------------------------
Net Financings $ 198.8 222.8
===========================================================================================
The Company believes that Net Debt and Net Financings are useful measures of the
Company's financial leverage.
# # #
14