[LOGO] The Brink's Company
1801 Bayberry Court
P.O. Box 18100
Richmond, VA 23226-8100 USA
Tel. 804.289.9600
Fax 804.289.9758
PRESS RELEASE
Contact: FOR IMMEDIATE RELEASE
Investor Relations
804.289.9709
The Brink's Company
Reports Improved Second Quarter 2004 Preliminary Results
BAX Global Posts Strong Profit Increase on Higher Volumes;
Security Businesses Contribute Solid Operating Performance
RICHMOND, Va., (August 4, 2004) - The Brink's Company (NYSE: BCO) today
reported after-tax income from continuing operations for the second quarter of
2004 of $13.8 million or $0.25 per diluted share compared to $5.6 million or
$0.11 per diluted share in the prior-year period.
As discussed more fully below, the Company is investigating certain unpaid
customs duties and value-added taxes and expects it may revise the earnings for
the second quarter of 2004 as reported herein when it files its Form 10-Q next
week. Information contained in this press release does not give effect to any
such revisions.
Revenue in the second quarter of 2004 increased 18% over last year's second
quarter to $1.1 billion, reflecting improvement from all business units.
Revenues at Brink's, Incorporated and BAX Global also benefited from stronger
European currencies relative to the U.S. dollar.
The Company reported operating profit of $39.1 million for the quarter
ended June 30, 2004, up from $13.2 million in the year earlier period. The
strong operating profit increase reflects improved performance in both North
America and International operations at Brink's, Incorporated, continued strong
growth and operating efficiency at Brink's Home Security, and increased freight
volumes in the Americas and Asia at BAX Global. Operating profit also benefited
from a reduction in costs from former coal operations including the benefits of
gains on the sale of coal-related assets. This was partially offset by higher
corporate expenses.
-more- 1
"We are pleased with the overall solid performance of our business and
security services operations," said Michael T. Dan, Chairman, President and
Chief Executive Officer of The Brink's Company. "BAX Global posted strong profit
gains as the Americas returned to profitability. The turnaround is now being
driven by increased shipping volume tied to the U.S. economic recovery. Brink's,
Incorporated again saw improvement. Meanwhile, strong execution produced another
record-setting quarter at Brink's Home Security," he added.
Duties and Value-Added Taxes
The Company recently discovered that one of its non-U.S. Brink's,
Incorporated business units has not paid approximately $3 million, before
interest, of foreign duties and value-added taxes with respect to the
importation of various goods and services used in the normal course of its
operations. The Company has been advised by local counsel that there may be
civil and criminal penalties and interest imposed for the non-payment of these
customs duties and value-added taxes. Although the business unit has not been
notified by any governmental authority that it may be subject to any penalties
and interest related to this matter, the potential penalties, if any are ever
assessed against the business unit, could be up to $85 million (excluding
interest). The investigation is ongoing and the Company has begun implementing
changes to prevent similar situations in the future. The above estimates are
based on the investigation to date and could change materially.
The financial information presented herein does not reflect any adjustments
that may be necessary to accrue for these taxes, duties, penalties and interest
because the Company has not completed its assessment. The Company expects that
it may materially revise its results for the second quarter of 2004 to reflect
some or all of these items when it files its Form 10-Q. It expects to file the
Form 10-Q by the August 9, 2004 deadline.
-more- 2
Provision for Income Taxes
The higher than normal provision for income taxes for the three-month
period ended June 30, 2004 included a net charge of approximately $5.2 million
primarily related to a valuation allowance. The allowance offsets the tax
benefit of previously recorded net operating losses in a European subsidiary of
BAX Global as a result of continued weak performance there in the face of slow
European economies.
Discontinued Operations
After-tax income from discontinued operations for the second quarter of
2004 was $6.0 million ($0.11 per diluted share) primarily as a result of a
reduction in the estimated value of withdrawal obligations associated with
coal-related multi-employer pension plans, as well as the recording of the final
gain on the sale of the timber business. In the prior-year period, the Company
recorded after-tax income from discontinued operations of $0.5 million related
to the reclassified results of former natural gas, timber and gold operations,
offset by a change in the value of the withdrawal liability.
Net Income
Net income for the second quarter of 2004 was $19.8 million, or $0.36 per
diluted share, up from $6.1 million, or $0.11 per diluted share, in the prior
year's period.
-more- 3
First-Half Results
For the six months ended June 30, 2004, revenues were $2.2 billion
compared with $1.9 billion in the first six months of 2003. Net income for the
first half of 2004 was $45.6 million, or $0.83 per diluted share, compared with
$4.4 million, or $0.08 per diluted share, a year ago.
Second Quarter Business Unit Performance
Brink's, Incorporated ("Brink's")
- ---------------------------------
Brink's revenue of $465.3 million increased 13% for the second quarter as
compared with the prior year's period. International revenue in the quarter
increased 21% over the second quarter a year ago due to the net benefit of
currency translation combined with stronger revenues in France, Greece (where
the Company has acquired additional security interests) and South America. North
American revenue increased 3% over the second quarter of 2003, mainly due to
higher revenues in Canada.
Brink's operating profit in the quarter ended June 30, 2004 increased to
$26.6 million, up from the $21.5 million recorded in the second quarter last
year. The increase in operating profit reflects 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 from better performance in coin wrapping,
Cash Logistics, and Global Services, partially offset by lower results from
armored car operations.
Brink's Home Security
- ---------------------
Revenue at Brink's Home Security increased 12% to $85.9 million in the
second 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 second quarter was a record $19.8 million, 12% higher than in the
prior year's second quarter. An increase in operating profit from recurring
services resulted primarily from the growth of the subscriber base and improved
service operations.
-more- 4
The annualized disconnect rate for the second quarter of 2004 was 7.2%,
unchanged from the year-ago quarter. Brink's Home Security added 35,600 new
subscribers during the quarter, a 26% increase over the number of new
subscribers added in the second quarter of 2003, and ended the quarter with
approximately 874,100 subscribers generating monthly recurring revenue of $24.5
million.
BAX Global
- ----------
Revenue at BAX Global increased to $580.3 million in the second quarter,
23% higher than in the same period last year. International revenue increased
24%, reflecting stronger Asia-Pacific activity, and the effects of the weaker
U.S. dollar relative to European and some Asia-Pacific currencies. In the
Americas region, revenue increased 20% in comparison to last year's second
quarter due to a recovery in U.S. shipping volume, including an increase in
higher priced expedited freight reflecting an improving economy. Revenues in the
Americas also benefited from growth in BAX Global's freight forwarder service
launched in June 2003.
-more- 5
Operating profit at BAX Global improved to $12.4 million for the second
quarter of 2004 from a loss of $2.5 million in the same period in 2003. The
current quarter's performance reflects improved results from North American
operations, continued strong results from logistics and freight forwarding
activities in Asia-Pacific and flat operating profit in Europe. BAX Global's
improved operating performance was partially offset by higher corporate expenses
from currency transaction losses and overhead costs.
Costs of Former Coal Operations and Corporate Expenses
The Company's costs of former coal operations, which consist primarily of
costs for Company-sponsored medical coverage for former miners and their
dependents, declined to $10.1 million in the second quarter of 2004 from $17.2
million in the prior-year period. The decrease is due to the benefits of the
Medicare legislation enacted earlier this year, lower idle and closed mine
expenses, the recording of $2.3 million of expected earnings on assets held in
the Company's Voluntary Employees' Beneficiary Association (VEBA) trust, and
gains on asset sales.
Corporate expenses increased in the quarter ended June 30, 2004 to $9.6
million from $6.3 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.
-more- 6
Funding of VEBA and Pension Plan
The Company plans to make a cash contribution of $50 million to its VEBA
trust during the third quarter of 2004, which will bring the balance in the VEBA
to more than $155 million. In July 2004 the Company made a voluntary
contribution of $11 million to its U.S. pension plan. These contributions
reflect the Company's continued commitment to use its strong cash flow to
tax-efficiently manage its liabilities.
Summary
"The Brink's Company posted another solid quarter across its three
operating units, with each benefiting from growth in their basic businesses,
better economic conditions, and ongoing efforts to enhance operations and
service levels," said Mr. Dan.
"We are continuing our investigation into the unpaid taxes and duties and
we are determined to take the appropriate actions to remedy the situation," said
Mr. Dan.
"Looking forward, we are focused on ways to grow further, both by seizing
opportunities from better economies and by continuing to pursue profitable
sources of additional revenues by delivering the products, services and
solutions that our customers need," he added. "BAX Global stands to continue to
gain from an improving business environment in the U.S. and Europe. At Brink's,
Incorporated, the emphasis will continue to be on maintaining discipline in our
traditional business lines while expanding our value-added service offerings,
particularly Cash Logistics. Brink's Home Security will focus on maintaining its
industry-leading service levels to drive continued growth in revenues, profits
and cash flow," said Mr. Dan.
-more- 7
This release contains both historical and forward-looking information.
Statements regarding potential accruals and revisions to second quarter results,
the realization of further growth in the business and security services
operations and the impact on BAX Global of improvements in U.S. and European
business environments, 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 evaluation of remedial alternatives, guidance received from
third parties, the impact of governmental inquiries, if any, the impact of
operational improvements in the security operations and the timing of any such
impact, the ability of the businesses to meet demand appropriately, 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, August 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 August 13, 2004 by calling 800-642-1687 within North
America or 706-645-9291 outside North America. The conference ID for the replay
is 8955779. A webcast replay will be available at www.brinkscompany.com through
August 20, 2004.
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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,
2004 2003 2004 2003
- ------------------------------------------------------------------------------------------------------------------------
Revenues $1,131.5 960.6 2,226.0 1,889.5
Expenses:
Operating expenses 957.6 827.6 1,887.5 1,634.2
Selling, general and administrative expenses 137.5 125.3 271.9 250.1
- ------------------------------------------------------------------------------------------------------------------------
Total expenses 1,095.1 952.9 2,159.4 1,884.3
Other operating income, net 2.7 5.5 6.2 8.0
- ------------------------------------------------------------------------------------------------------------------------
Operating profit 39.1 13.2 72.8 13.2
Interest expense (5.0) (6.7) (10.8) (12.8)
Interest and other income (expense), net (0.1) 4.1 4.3 5.9
Minority interest (2.1) (1.8) (5.4) (2.6)
- ------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes 31.9 8.8 60.9 3.7
Provision for income taxes 18.1 3.2 29.9 1.3
- ------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 13.8 5.6 31.0 2.4
Income from discontinued operations, net of tax 6.0 0.5 14.6 2.0
- ------------------------------------------------------------------------------------------------------------------------
Net income $ 19.8 6.1 45.6 4.4
========================================================================================================================
Basic net income per common share:
Continuing operations $ 0.25 0.11 0.57 0.05
Discontinued operations 0.11 - 0.27 0.03
- ------------------------------------------------------------------------------------------------------------------------
$ 0.36 0.11 0.84 0.08
========================================================================================================================
Diluted net income per common share:
Continuing operations $ 0.25 0.11 0.57 0.05
Discontinued operations 0.11 - 0.26 0.03
- ------------------------------------------------------------------------------------------------------------------------
$ 0.36 0.11 0.83 0.08
========================================================================================================================
The above information may be materially revised. Please see Duties and
Value-Added Taxes above.
9
The Brink's Company
and Subsidiaries
Supplemental Financial Information
(In millions)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
2004 2003 2004 2003
- -----------------------------------------------------------------------------------------------------------------------
SEGMENT INFORMATION
Revenues:
Brink's $ 465.3 410.7 923.3 802.1
Brink's Home Security 85.9 76.5 167.9 150.4
BAX Global 580.3 473.4 1,134.8 937.0
- -----------------------------------------------------------------------------------------------------------------------
Revenues $ 1,131.5 960.6 2,226.0 1,889.5
=======================================================================================================================
Operating profit (loss):
Brink's $ 26.6 21.5 59.4 34.6
Brink's Home Security 19.8 17.7 39.2 34.4
BAX Global 12.4 (2.5) 15.5 (8.0)
- -----------------------------------------------------------------------------------------------------------------------
Business and Security Services 58.8 36.7 114.1 61.0
Former coal operations (10.1) (17.2) (22.6) (34.5)
Corporate (9.6) (6.3) (18.7) (13.3)
- -----------------------------------------------------------------------------------------------------------------------
Operating profit $ 39.1 13.2 72.8 13.2
=======================================================================================================================
The above information may be materially revised. Please see Duties and
Value-Added Taxes above.
SELECTED CASH FLOW INFORMATION
Depreciation and amortization:
Brink's $ 19.4 17.4 38.5 33.0
Brink's Home Security 12.6 11.8 25.1 23.4
BAX Global 10.6 11.9 21.3 24.1
Corporate and other - 0.7 0.4 1.5
- -----------------------------------------------------------------------------------------------------------------------
Depreciation and amortization $ 42.6 41.8 85.3 82.0
=======================================================================================================================
Capital expenditures:
Brink's $ 16.2 18.5 32.3 34.9
Brink's Home Security 29.4 22.9 56.1 46.0
BAX Global 3.8 7.2 10.7 13.0
Corporate 0.1 - 0.4 -
- -----------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 49.5 48.6 99.5 93.9
=======================================================================================================================
Other Brink's Home Security cash flow information:
Impairment charges from subscriber disconnects $ 10.2 8.6 18.9 16.1
Amortization of deferred revenue (6.6) (6.4) (12.7) (12.2)
Deferral of subscriber acquisition costs
(current year payments) (4.7) (4.6) (9.4) (8.9)
Deferral of revenue from new subscribers
(current year receipts) 8.7 6.7 16.8 13.2
=======================================================================================================================
10
The Brink's Company
and Subsidiaries
Supplemental Financial Information (continued)
(In millions)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
2004 2003 2004 2003
- ------------------------------------------------------------------------------------------------------------------
Brink's:
Revenues:
North America $ 180.9 175.8 361.0 351.6
International 284.4 234.9 562.3 450.5
- ------------------------------------------------------------------------------------------------------------------
Revenues $ 465.3 410.7 923.3 802.1
==================================================================================================================
Operating profit:
North America $ 13.0 10.5 25.9 21.3
International 13.6 11.0 33.5 13.3
- ------------------------------------------------------------------------------------------------------------------
Operating profit $ 26.6 21.5 59.4 34.6
==================================================================================================================
Brink's Home Security:
Revenues $ 85.9 76.5 167.9 150.4
==================================================================================================================
Operating profit:
Recurring services $ 35.7 31.4 70.8 61.7
Investment in new subscribers (15.9) (13.7) (31.6) (27.3)
- ------------------------------------------------------------------------------------------------------------------
Operating profit $ 19.8 17.7 39.2 34.4
==================================================================================================================
Monthly recurring revenues $ 24.5 22.2
Annualized disconnect rate 7.2% 7.2% 6.8% 6.9%
Number of subscribers (in thousands):
Beginning of period 854.1 781.5 833.5 766.7
Installations 35.6 28.3 69.7 55.7
Disconnects (15.6) (14.2) (29.1) (26.8)
- ------------------------------------------------------------------------------------------------------------------
End of period 874.1 795.6 874.1 795.6
Average number of subscribers 864.5 788.3 854.0 781.1
==================================================================================================================
BAX Global:
Revenues:
Americas $ 279.3 233.6 544.0 470.2
International 321.3 258.4 630.4 502.7
Eliminations (20.3) (18.6) (39.6) (35.9)
- ------------------------------------------------------------------------------------------------------------------
Revenues $ 580.3 473.4 1,134.8 937.0
==================================================================================================================
Operating profit (loss):
Americas $ 6.1 (10.6) 4.2 (20.3)
International 11.2 8.3 19.9 15.4
Corporate (4.9) (0.2) (8.6) (3.1)
- ------------------------------------------------------------------------------------------------------------------
Operating profit (loss) $ 12.4 (2.5) 15.5 (8.0)
==================================================================================================================
Intra-America revenue $ 133.7 107.1 258.8 218.0
Worldwide expedited freight services:
Revenues $ 437.2 353.7 852.8 707.7
Weight in pounds 443.9 368.6 861.9 735.8
==================================================================================================================
The above information may be materially revised. Please see Duties and
Value-Added Taxes above.
11
The Brink's Company
and Subsidiaries
Supplemental Financial Information (continued)
(In millions)
(Unaudited)
COSTS OF FORMER COAL OPERATIONS INCLUDED IN CONTINUING OPERATIONS
Three Months Six Months
Ended June 30, Ended June 30,
2004 2003 2004 2003
- ------------------------------------------------------------------------------------------------------------------------
Company-sponsored postretirement benefits other
than pensions $ 9.2 12.5 18.6 24.7
Black lung 1.2 1.4 2.7 2.9
Pension 0.5 (0.4) 1.1 (0.3)
Administrative, legal and other expenses, net 1.8 1.7 4.3 3.8
Idle and closed mine expense 0.2 2.9 0.4 4.8
Gains on sale of property and equipment and other income (2.8) (0.9) (4.5) (1.4)
- ------------------------------------------------------------------------------------------------------------------------
$ 10.1 17.2 22.6 34.5
========================================================================================================================
INCOME FROM DISCONTINUED OPERATIONS
Three Months Six Months
Ended June 30, Ended June 30,
2004 2003 2004 2003
- ------------------------------------------------------------------------------------------------------------------------
Gain (loss) on sales of:
Timber $ 1.9 - 20.7 -
Gold - - (0.9) -
Results from operations:
Natural Gas - 5.9 - 8.9
Timber - - (0.5) 0.2
Gold - (1.8) (1.2) (1.9)
Adjustments to contingent liabilities of former operations:
Withdrawal liability 8.1 (3.0) 8.1 (3.0)
Other (0.7) - (3.6) (0.6)
- ------------------------------------------------------------------------------------------------------------------------
Income from discontinued operations before income taxes 9.3 1.1 22.6 3.6
Income tax expense 3.3 0.6 8.0 1.6
- ------------------------------------------------------------------------------------------------------------------------
Income from discontinued operations $ 6.0 0.5 14.6 2.0
========================================================================================================================
12
The Brink's Company
and Subsidiaries
Supplemental Financial Information (continued)
(In millions)
(Unaudited)
Non-GAAP Reconciliations
Monthly Recurring Revenues
A reconciliation of monthly recurring revenues to reported BHS revenues follows:
Six Months
Ended June 30,
(In millions) 2004 2003
- -----------------------------------------------------------------------------
June:
Monthly recurring revenues ("MRR") (a) $ 24.5 22.2
Amounts excluded from MRR:
Amortization of deferred revenue 2.4 2.2
Other revenues (b) 2.5 1.4
- -----------------------------------------------------------------------------
Revenues on a GAAP basis 29.4 25.8
=============================================================================
Revenues (GAAP basis):
June 29.4 25.8
January - May 138.5 124.6
- -----------------------------------------------------------------------------
January - June $ 167.9 150.4
=============================================================================
(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 widely used in the industry to assess the amount of recurring
revenues from subscriber fees that a home security business produces.
Net Debt and Net Financings
June 30, December 31,
(In millions) 2004 2003
- ----------------------------------------------------------------------------------------------
Short-term debt and current maturities of long-term debt $ 74.1 53.0
Long-term debt 163.2 221.5
- ----------------------------------------------------------------------------------------------
Debt 237.3 274.5
Less cash and cash equivalents (145.4) (128.7)
- ----------------------------------------------------------------------------------------------
Net Debt 91.9 145.8
Securitization facility 50.0 77.0
- ----------------------------------------------------------------------------------------------
Net Financings $ 141.9 222.8
==============================================================================================
The Company believes that Net Debt and Net Financings are useful measures of the
Company's financial leverage.
# # #
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