UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-9148
THE BRINK'S COMPANY
(Exact name of registrant as specified in its charter)
Virginia 54-1317776
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
P.O. Box 18100,
1801 Bayberry Court
Richmond, Virginia 23226-8100
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (804) 289-9600
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of each class which registered
------------------- ----------------
The Brink's Company Common Stock, Par Value $1 New York Stock Exchange
Rights to Purchase Series A Participating Cumulative Preferred Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes [X] No [ ]
As of March 1, 2005, there were issued and outstanding 56,734,041 shares of
common stock. The aggregate market value of shares of common stock held by
nonaffiliates, as of June 30, 2004, was $1,843,510,908.
Documents incorporated by reference: Part I, Part II and Part IV
incorporate information by reference from the Annual Report of the Company for
the year ended December 31, 2004. Part III incorporates information by reference
from portions of the Registrant's definitive 2005 Proxy Statement to be filed
pursuant to Regulation 14A.
PART I
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ITEMS 1 AND 2. BUSINESS AND PROPERTIES
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The Brink's Company
The Brink's Company ("the Company"), a Virginia corporation incorporated in
1930, has three operating segments within its "Business and Security Services"
businesses: Brink's, Incorporated ("Brink's"); Brink's Home Security, Inc.
("BHS"); and BAX Global Inc. ("BAX Global").
The Company formerly had operations in natural resource businesses: coal,
natural gas, timber and gold. These businesses have been sold. However, the
Company has retained significant liabilities from these Former Operations.
Financial information related to the Company's operating segments is included in
Note 2 to the consolidated financial statements in the Company's 2004 Annual
Report, which note is herein incorporated by reference.
The Company has approximately 54,000 employees including approximately 38,900 at
Brink's, 3,000 at BHS and 12,000 at BAX Global.
A significant portion of the Company's business is conducted outside the United
States. Because the financial results of the Company are reported in U.S.
dollars, they are affected by changes in the value of the various foreign
currencies in relation to the U.S. dollar. The Company, from time to time, uses
foreign currency forward contracts to hedge certain transactional risks
associated with foreign currencies. The Company is also subject to other risks
customarily associated with doing business in foreign countries, including labor
and economic conditions, political instability, controls on repatriation of
earnings and capital, nationalization, expropriation and other forms of
restrictive action by local governments. The future effects of such risks on the
Company cannot be predicted.
Available Information and Corporate Governance Documents
The Brink's Company's internet address is www.brinkscompany.com. The Company
makes available, free of charge, through its website, its Annual Report on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act as soon as reasonably practicable after the Company electronically
files such information with or furnishes it to the Securities and Exchange
Commission. In addition, the Corporate Governance Policies, Business Code of
Ethics and the charters of the Audit and Ethics, Compensation and Benefits, and
Corporate Governance and Nominating Committees are available on the Company's
website and are available in print, without charge, to any shareholder upon
request by contacting the Corporate Secretary at 1801 Bayberry Court, P. O. Box
18100, Richmond, Virginia 23226-8100.
BUSINESS AND SECURITY SERVICES
Brink's, Incorporated ("Brink's")
General
Brink's is the oldest and largest armored car Company in the U.S. as well as a
market leader in many of the countries in which it operates. Brink's has
operations throughout the world with 38% of its 2004 revenues from its
operations in North America. Brink's in North America serves customers through
160 branches in the U.S. and 45 branches in Canada.
Brink's operations outside North America are located in approximately 50
countries, with concentrations in Europe (43% of Brink's 2004 revenues) and
South America (16% of Brink's 2004 revenues.) In addition, Brink's has growing
operations in the Asia-Pacific region of the world that accounted for 3% of its
2004 revenues. Brink's largest operations outside North America, in terms of
2004 revenues, were located in France, Venezuela, the Netherlands, Brazil,
Germany, the United Kingdom and Colombia. These operations accounted for 79% of
2004 revenues outside of North America.
Brink's ownership interest in subsidiaries and affiliated companies ranged from
20% to 100% at December 31, 2004. In some instances local laws limit the extent
of Brink's ownership interest.
2
Customers
Brink's customers include:
o banks;
o retail and other commercial businesses;
o investment banking and brokerage firms; and
o government agencies, such as a country's central bank.
Services
The major services offered by Brink's include:
o armored car transportation;
o automated teller machine ("ATM") servicing;
o currency and deposit processing, including "Cash Logistics" services;
and the deploying and servicing of safes and safe control devices,
including its patented CompuSafe(R) service,
o coin sorting and wrapping; and
o arranging the secure air transportation of valuables ("Global
Services").
Brink's armored car transportation services generally include secure
transportation of:
o cash between businesses and banks;
o cash, securities and other negotiable items and valuables between commercial
banks, central banks (such as the U.S. Federal Reserve Banks and their
branches and correspondents) and brokerage firms;
o new currency, coins and precious metals for a number of central banks
throughout the world;
o canceled checks between banks or between a clearing house and its member
banks in certain geographic areas.
Brink's provides coin and currency processing (including "Cash Logistics")
services primarily to banks and retail customers. Cash Logistics is a fully
integrated solution that proactively manages the entire cycle of cash from
point-of-sale through deposit at the bank. The process includes transportation,
cashier balancing and reporting, deposit processing and consolidation, and
electronic information exchange. Retail customers use Brink's Cash Logistics
services to count and reconcile coins and currency in Brink's secure
environment, to prepare bank deposit information and to replenish retail
locations' coins and currency in proper denominations.
Through its proprietary cash processing and information systems, Brink's offers
customers the ability to integrate a full range of vault, ATM, transportation,
storage, processing, inventory management and reporting services. Brink's
believes that its cash processing and information systems differentiate its Cash
Logistics services from its competitors.
Brink's CompuSafe(R) services provide retail customers with a proprietary
integrated system for safeguarding and managing cash. Brink's markets its
CompuSafe(R) services to a variety of cash-intensive retail customers, such as
convenience stores, gas stations and restaurants. The service includes
installing a specialized safe in the retail establishment that holds safeguarded
cassettes. The customer's employees deposit currency into the cassettes. The
cassettes can only be removed by Brink's armored car personnel. The cassettes
are then taken to a secure currency room where the contents are verified and
transferred for deposit. Deposit detail can then be electronically reported to
the customer.
For transporting money and other valuables over long distances, Brink's Global
Services offers a combined armored car and secure air transportation service
between many cities around the world. Brink's uses regularly scheduled or
chartered aircraft in connection with its air courier services. Included in
Global Services is a specialized diamond and jewelry secure transportation
operation, with offices in the major diamond and jewelry centers of the world.
Brink's provides individualized services under separate contracts designed to
meet the distinct transportation, security and logistics requirements of its
customers. These contracts are usually for an initial term of at least one year
but continue in effect thereafter until canceled by either party.
3
Competition
Brink's competes with a number of large multinational companies and with many
smaller companies throughout the world.
Primary factors in attracting and retaining customers are security, the quality
of services provided and the price for services. Brink's believes its
competitive advantages include:
o brand name recognition;
o reputation for a high level of service and security;
o proprietary cash processing and information systems;
o high-quality insurance coverage and general financial strength; and
o ability to serve multiple markets for the same customer in many of the
countries in which Brink's has operations.
Brink's believes its cost structure is generally competitive, although Brink's
believes certain competitors may have lower costs as a result of lower wage and
benefit levels for employees or as a result of different security and service
standards.
Brink's growth in revenues from financial institutions and retail businesses is
partially dependent on the growth in the economy and the relative positioning of
customers within their industries. Competitive conditions often cause customers
and potential customers to focus on the cost of all services including armored
car services. Because Brink's management believes that the high level of service
and security provided differentiates Brink's from its competitors, Brink's
resists competing on price alone.
The availability of quality and reliable insurance coverage is an important
factor in the ability of Brink's to obtain and retain customers and to manage
the risks of its business. Brink's purchases insurance coverage for losses in
excess of what it considers prudent deductibles and/or retentions. For losses
below deductible or retention levels, Brink's is self-insured. Brink's insurance
policies cover losses from most causes, with the exception of war, nuclear risk
and certain other exclusions typical for such policies. Brink's generally does
not offer its customers protection from losses arising from excluded clauses.
Insurance is provided by different groups of underwriters at negotiated rates
and terms. Insurance is available to Brink's in major markets although the
premiums charged are subject to fluctuations depending on market conditions. The
loss experience of Brink's and, to a limited extent, other armored carriers
affects premium rates charged to Brink's.
Service Mark, Patents and Copyrights
BRINKS is a registered service mark in the U.S. and certain foreign countries.
The BRINKS mark, name and related marks are of material significance to Brink's
business. Brink's owns patents with respect to certain coin sorting and counting
machines, which expire in 2007 and 2008, respectively. Brink's has patents
associated with its integrated CompuSafe(R) service, that expire in 2015 through
2018. The patents for the CompuSafe(R) device and sorting and counting machines
provide important advantages to Brink's. However, Brink's operations are not
dependent on the existence of the aforementioned patents.
The Company has entered into certain agreements to license the Brink's and the
Brink's Home Security name. Examples include licenses to distributors of
security products (padlocks, home safes, door and window hardware, etc.) offered
for sale to consumers through major retail chains.
Government Regulation
The U.S. operations of Brink's are subject to regulation by the U.S. Department
of Transportation with respect to safety of operations and equipment and
financial responsibility. Intrastate operations in the U.S. and intraprovince
operations in Canada are subject to regulation by state and by Canadian and
provincial regulatory authorities, respectively. Brink's International
operations are regulated to varying degrees by the countries in which they
operate.
Employee Relations
At December 31, 2004, Brink's and its subsidiaries had approximately 38,900
employees, including 10,600 employees in North America, (of whom 2,000 were
classified as part-time employees) and 28,300 employees outside North America.
At December 31, 2004, Brink's was a party to 13 collective bargaining agreements
in North America with various local unions covering approximately 1,600
employees, almost all of whom are employees in Canada and members of unions
affiliated with the International Brotherhood of Teamsters. Three agreements
will expire in 2005 and they are expected to be renegotiated. The remaining
agreements have various expiration dates after 2005 and extending through 2009.
Outside of North America, the branch workforce are members of labor or employee
organizations in the majority of the countries of operation. Brink's believes
that its employee relations are satisfactory.
4
Properties
Brink's has property and equipment in locations throughout the world. Branch
facilities generally have office space, a vault to securely store valuables, and
a garage to house armored vehicles and to serve as vehicle terminals. Many
times, branches have additional space to repair and maintain vehicles.
Brink's owns or leases armored vehicles, panel trucks and other vehicles that
are primarily service vehicles. Brink's armored vehicles are of bullet-resistant
construction and are specially designed and equipped to afford security for crew
and cargo.
The following table discloses leased and owned facilities and vehicles for
Brink's most significant operations as of December 31, 2004.
Facilities Vehicles
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Country Leased Owned Total Leased Owned Total
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U.S 162 21 183 1,692 581 2,273
Canada 40 9 49 337 128 465
Europe 172 21 193 727 1,829 2,556
South America 173 42 215 101 2,315 2,416
Asia Pacific 30 - 30 1 131 132
- --------------------------------------------------------------------------------
Total 577 93 670 2,858 4,984 7,842
================================================================================
Of the leased facilities in North America, 149 facilities are held under
long-term leases. The remaining 53 facilities are held under short-term leases
or month-to-month tenancies.
Approximately 4,600 Brink's-owned CompuSafe(R) devices are located on customers'
premises in North America.
Brink's Home Security ("BHS")
General
BHS believes that it is the second largest provider of monitored security
services for residential and commercial properties in North America. BHS is
primarily engaged in the business of marketing, selling, installing, servicing
and monitoring electronic security systems in owner-occupied, single-family
residences. At December 31, 2004, BHS had approximately 921,000 systems under
monitoring contracts, including approximately 146,000 new subscribers added
during the year. BHS provides services to subscribers located in most
metropolitan areas in 44 states, the District of Columbia and several markets in
two western provinces in Canada.
BHS' typical security system installation consists of sensors and other devices
which are installed at a customer's home or commercial location. The equipment
can be configured to signal intrusion, fire, medical and other alerts. When an
alarm is triggered, a signal is sent by telephone line to BHS' central
monitoring station in Irving, Texas. The monitoring station holds an
Underwriters' Laboratories, Inc. ("UL") listing. UL specifications for service
centers include building integrity, back-up computer and power systems, staffing
and standard operating procedures. In the event of an emergency, such as fire,
tornado, major interruption in telephone or computer service, or any other event
affecting the Irving facility, monitoring operations can be transferred to a
backup facility located in Carrollton, Texas. BHS is in the process of
developing a second customer service, monitoring and computer backup facility to
replace the Carrollton facility.
BHS markets its alarm systems primarily through television and direct mail
advertising, yellow page and internet advertising, alliances with other service
companies, inbound telemarketing and field sales employees. BHS employees
install and service most of the systems; however, dealers and occasionally
subcontractors are utilized in some service areas. BHS does not manufacture the
equipment used in its security systems. Equipment is purchased from a limited
number of suppliers and no interruptions in supply are expected. Equipment
inventories are maintained at each branch office.
BHS has an authorized dealer program to expand its geographic coverage and
leverage its national advertising. The dealer program accounted for 18% of new
installations during 2004 and, as of December 31, 2004, 6% of BHS' total
subscriber base. Approximately 105 dealers were authorized to participate in the
program as of December 31, 2004. BHS requires that its dealers install the same
type of equipment as is installed by its own branches, and adhere to the same
installation quality standards.
In addition to initiating subscriber relationships through its branch and dealer
networks, BHS obtains new residential subscribers through its Brink's Home
Technologies ("BHT") division. BHT markets residential security systems, as well
as a variety of low-voltage security, home networking, communications and
entertainment options, directly to major home builders. New system activations
from BHT accounted for 9% of new subscribers added during 2004.
5
BHS also provides monitored security to residents of apartment and condominium
complexes. These customers currently represent slightly more than 2% of
subscribers.
Although its core business is focused on the monitoring of residential security
systems, BHS also installs and monitors commercial security systems. In addition
to intrusion detection, products and services currently offered to these
customers include nonmonitored closed circuit video and enhanced event
reporting. BHS intends to further build its capabilities in commercial security.
Commercial customers represented approximately 4% of subscribers at year end.
Government Regulation
BHS and its employees are subject to various U.S. Federal, state and local
consumer protection, licensing and other laws and regulations. Most states in
which BHS operates have licensing laws directed specifically toward the alarm
industry. BHS' business relies upon the use of wireline telephone service to
communicate signals. Wireline telephone companies are currently regulated by
both the Federal and state governments. BHS' wholly owned Canadian subsidiary is
subject to the laws of Canada, British Columbia and Alberta.
The alarm service industry experiences a high incidence of false alarms. BHS
believes its false alarm rate compares favorably to other companies' rates. The
high incidence of false alarms in the industry has caused some local governments
to impose assessments, fines and penalties on either subscribers or the alarm
companies. A few municipalities have adopted ordinances under which both permit
and alarm dispatch fees are charged directly to the alarm companies. BHS' alarm
service contracts generally allow BHS to pass these charges on to customers.
Police departments in several U.S. cities are not required to respond to calls
from alarm companies unless an emergency has been visually verified. If more
police departments in the future refuse to automatically respond to calls from
alarm companies without visual verification, this could have an adverse effect
on future results of operations for BHS. In cities that have stopped providing
police response to burglar alarms, BHS has offered its customers the option of
receiving private guard response from guard companies which have contracted with
BHS.
Competition
BHS competes in most major metropolitan markets in the U.S. and several markets
in western Canada through BHS owned branch operations or its authorized dealer
program. The monitored security alarm market has a large number of competitors,
including thousands of local and regional companies. BHS believes it is now the
second largest provider of monitored security services to residential and
commercial properties in North America.
Competition is based on a variety of factors including, company reputation and
service quality, product quality and price. There is substantial competitive
pressure on installation fees. Several significant competitors offer
installation prices which match or are less than BHS' prices; however, many of
the small local competitors in BHS' markets continue to charge significantly
more for installation. Competitive pressure on monitoring rates, while less
intense than on installation fees, is still significant. BHS believes that the
monitoring rates it offers are generally comparable to the rates offered by
other major security companies.
BHS believes its customer retention rate is the highest among the major home
security service companies. BHS believes this favorable retention rate is due to
its focus on selecting new customers with strong credit backgrounds and
providing high quality customer service to its customers.
Employees
BHS has approximately 3,000 employees, none of whom is covered by a collective
bargaining agreement. BHS believes that its employee relations are satisfactory.
Properties
BHS has approximately 63 leased offices and warehouse facilities located
throughout the U.S. and one leased office in Canada. The lease for the central
monitoring station in Irving, Texas ended in February 2005, BHS has notified the
lessor of its intention to purchase the facility under the terms provided in the
lease. This facility also serves as BHS' headquarters and houses most
administrative, technical and marketing services personnel. Additional
administrative personnel are located in a portion of an adjacent building in
office space that is leased for a term ending in 2009. BHS plans to build a
second central monitoring station during 2005. The Irving and second site
facilities are designed to be able to provide backup capability for each other.
The lease for the current backup monitoring center in Carrollton, Texas, ends in
late 2005. BHS intends to shut down the Carrollton backup monitoring center once
the second central monitoring station is operational. BHS leases approximately
1,400 vehicles which are used in the process of installing and servicing its
security systems.
6
BHS retains ownership of most of the approximately 921,000 systems currently
being monitored. When a customer cancels monitoring services, BHS typically
disables the system. In a limited number of cases, BHS removes the equipment.
When a residential customer cancels monitoring services because of an impending
household move, the retention of the BHS system in the residence facilitates the
marketing of monitoring services to the subsequent homeowner.
BAX Global Inc. ("BAX Global")
General
BAX Global provides heavy freight transportation and supply chain management
services on a global basis. BAX Global specializes in the heavy freight market
for business to business shipping.
In North America, BAX Global's air transportation services use a dedicated fleet
of 21 planes with a national sorting hub in Toledo, Ohio. BAX Global's North
American operation also has a ground network that provides transportation on a
regional and national basis.
Outside North America, BAX Global provides transportation services using
available space on commercial carriers and, on occasion, using chartered
aircraft. BAX Global's primary markets outside North America are shipping
Intra-Asia, from Asia to North America and Europe, Intra-Europe and between
North America and Europe.
BAX Global continues to expand its ocean shipping business primarily by
marketing its ocean products to its current air freight and supply chain
management customer base.
Air Transport International, LLC ("ATI"), a wholly owned subsidiary of BAX
Global, provides transportation services in North America to BAX Global and also
provides worldwide charter transportation services to other customers.
BAX Global provides certain transportation customers with supply chain
management services and operates more than 130 logistics warehouse and
distribution facilities in key world markets. BAX Global specializes in
developing supply chain management programs for companies entering new global
markets or consolidating regional activity.
BAX Global's Products
Region offered
--------------
HEAVY FREIGHT TRANSPORTATION SERVICES:
Expedited
---------
o Overnight delivery Worldwide
o Second-day delivery Worldwide
o Wholesale freight forwarding Americas
o Air import and export delivery Worldwide
Nonexpedited
------------
o BAXSaver(TM) Suite of deferred delivery products
(various deferred delivery terms) Americas
o Customs brokerage services Worldwide
o Aircraft charter services Worldwide
o Ocean delivery Worldwide
SUPPLY CHAIN MANAGEMENT SERVICES Worldwide
Heavy Freight Transportation Services
BAX Global offers its North American (U.S., Canada and Mexico) transportation
customers a variety of products and pricing options, such as guaranteed and
standard overnight and second-day delivery as well as deferred delivery
(delivery generally within one to three business days). A variety of value-added
ancillary services, such as shipment tracking, inventory control and management
reports is also offered.
BAX Global began offering a time-definite, guaranteed product to freight
forwarders, freight brokers and international airlines in 2003. BAX Global
primarily markets to small to mid-sized forwarders and provides a higher service
level as compared to common carriage. In 2005, BAX expects to continue to expand
its sales and marketing efforts to this market.
Outside North America, BAX Global offers a variety of services including
standard and expedited freight services, ocean forwarding and door-to-door
delivery.
7
BAX Global also frequently acts as customs broker, facilitating the clearance of
goods through customs at international points of entry. BAX Global has the
ability to link its international network with the North American transportation
infrastructure and customs brokerage capabilities to provide seamless
door-to-door delivery and distribution between global markets and virtually any
city in North America.
BAX Global sells its services primarily through its direct sales force. BAX
Global uses various marketing methods, including print media advertising and
direct marketing campaigns.
BAX Global picks up or receives freight shipments from its customers,
consolidates the freight of various customers into shipments for common
destinations and arranges for the transportation of the consolidated freight.
BAX Global uses either commercial carriers or, in the case of most of its North
American shipments, its own transportation fleet, including its truck network,
and regional and national hub sorting facilities. BAX Global distributes the
shipments at the package's destination. While shipments move long distances on
either common carrier or BAX Global's fleet, the local pickup and delivery of
freight are accomplished principally by independent contractors using trucks
dedicated to the BAX Global network. BAX Global's independent contractors are
required to display BAX Global's logo and colors.
BAX Global has the ability to provide freight service to all North American
business communities as well as to virtually all countries throughout its
network of approximately 500 company-operated stations and agent locations in
133 countries. BAX Global's network is composed primarily of controlled
subsidiaries and, to a lesser extent, agents and sales representatives in
certain non-U.S. locations, typically under short-term contracts. Between
available space on common carriers throughout the world and its North American
network, BAX Global believes that it has sufficient capacity to meet the needs
of its customers.
BAX Global's freight business is tied to the cycles of international trade, with
higher volumes of shipments from August through December than during the other
months of the year. The lowest volume of shipments generally occurs in January
and February.
Including U.S. export and import revenue, BAX Global's international shipments
and logistics services accounted for approximately 77% of its revenues in 2004.
Intra-U.S. shipments accounted for approximately 23% of total revenues in 2004.
BAX Global's network has a worldwide communications and information system which
provides global tracking and tracing of shipments and logistics data for
management information reports, enabling customers to improve efficiency and
control costs. BAX Global's customers are increasingly turning to its online
services offering information management via its website, www.baxglobal.com.
North American Aircraft Operations
BAX Global's wholly owned subsidiary, ATI, is a U.S.-based freight and passenger
airline that operates a certificated fleet of DC-8 aircraft. BAX Global also
operates Boeing 727s under contracts with third parties that provide the
aircraft, crew, maintenance and insurance ("ACMI"). In addition to the aircraft
assigned to BAX Global's North American transportation network, ATI also
provides domestic and international service for the U.S. Government Air Mobility
Command and other charter customers.
The following is a summary of BAX Global's fleet as of December 31, 2004.
BAX Global's
Transportation Charter
Aircraft Network Customers Grounded Total
- ------------------------------------------------------------------------------------------------------------
Cargo:
Leased DC-8 10 2 - 12
ACMI 727 11 - - 11
Owned DC-8 - - 3 3
- ------------------------------------------------------------------------------------------------------------
Cargo 21 2 3 26
Combi-Configured (a):
Leased DC-8 - 1 - 1
Owned DC-8 - 3 2 5
- ------------------------------------------------------------------------------------------------------------
Combi-configured - 4 2 6
- ------------------------------------------------------------------------------------------------------------
Total 21 6 5 32
============================================================================================================
(a) Aircraft configured to accommodate both passengers and cargo for use in
charter business.
8
Of the 21 planes in BAX Global's transportation network, 18 are assigned to
regularly scheduled routes. Generally, three planes are held for use as backups
or are in maintenance. Grounded planes are held for sale or to provide parts for
use in other Company planes.
For aircraft held under long-term lease, BAX Global is responsible for the
normal costs of operating and maintaining the aircraft. In addition, BAX Global
is responsible for all or a portion of any special maintenance or modifications
which may be required by Federal Aviation Administration ("FAA") regulations or
orders (see "Government Regulation" below). BAX Global's ultimate liability for
mandated special maintenance or modifications is generally subject to dollar
limits, specific exclusions and sharing arrangements with the lessors. Over the
last three years, BAX Global spent a total of approximately $80 million on
routine heavy maintenance of its aircraft fleet.
BAX Global is responsible for fuel costs and most other incidental costs such as
landing fees for aircraft operated under ACMI contracts.
See notes 15 and 23 to the consolidated financial statements in the Company's
2004 Annual Report for information regarding future minimum lease payments and
other purchase commitments related to the Company's aircraft. BAX Global's 13
leased aircraft have various expiration dates extending through 2005, and its 11
planes under ACMI contracts have various expiration dates through 2005. Based on
the current state of the aircraft leasing market, BAX Global believes that it
should be able to renew these agreements or enter into new agreements on terms
reasonably comparable to those currently in effect.
The average airframe age of the fleet operated by ATI is in excess of 30 years;
however, the condition of a particular aircraft and its fair market value are
dependent on its maintenance history. Factors other than age, such as cycles
(essentially the number of flights), can have a significant impact on an
aircraft's serviceability. Generally, cargo aircraft tend to have fewer cycles
than passenger aircraft over comparable time periods because they are used for
fewer flights per day and longer flight segments.
Fuel costs are a significant element of the total costs of operating BAX
Global's aircraft fleet. Fuel prices are subject to worldwide and local market
conditions. In order to protect against price increases in jet fuel, from time
to time BAX Global enters into hedging agreements, including swap contracts,
options and collars. BAX Global charges a fuel surcharge in the U.S. to its
customers when fuel costs are higher than the normal historical range.
Supply Chain Management Services
BAX Global's supply chain management business specializes in developing
solutions that include the design, implementation and management of inventory,
distribution and information processes to improve a customer's efficiency and
productivity.
BAX Global operates value-added logistics warehouse and distribution facilities
in key world markets. Companies in the healthcare, retail, automotive, aerospace
and high technology industries have been targeted as businesses with significant
supply chain management needs.
Worldwide revenues from the supply chain management business represented 10% of
BAX Global's total revenues in 2004.
Customers
BAX Global's customers include thousands of large and small industrial and
commercial businesses. Worldwide, BAX Global's top 10 customers accounted for
approximately 14% of total BAX Global revenue in 2004. The Company targets
customers in the aerospace, automotive, healthcare, high technology, retail and
other industries where rapid delivery of high-value products is required.
Competition
The transportation and supply chain management industries have been and are
expected to remain highly competitive. The principal competitive factors in the
transportation industry are price, the ability to provide consistently fast and
reliable delivery of shipments and the ability to provide premium services such
as shipment tracking. The principal competitive factors in the supply chain
industry are price, access to a reliable transportation network, warehousing and
distribution capabilities, and sophisticated information systems.
There is aggressive price competition in the heavy-freight market, particularly
for the business of high volume shippers. BAX Global competes with various types
of transportation companies, including other integrated transportation companies
that operate their own fleets, as well as with freight forwarders, premium
less-than-truckload (or "LTL") carriers, express delivery services, and
passenger airlines.
BAX Global also competes in the U.S. with freight delivery services provided by
ground transportation companies, including trucking firms and surface freight
forwarders that offer specialized time-specific services within limited
geographical areas.
9
BAX Global believes its hub-and-spoke network of aircraft and trucks that serves
the North American market allows it to move freight more reliably than if it
solely used third-party services. The hub, which is located in Toledo, Ohio,
consists of various facilities, including a technologically advanced heavy
freight handling system, which is capable of sorting approximately one million
pounds of freight per hour. BAX Global's hub-and-spoke system feeds much of its
North American import and export business and BAX Global believes it provides a
competitive advantage by offering superior, reliable service to its customers,
shipping to, from or within North America.
As an international freight forwarder, BAX Global competes with government-owned
or subsidized passenger airlines and postal services. In ocean shipping, BAX
Global negotiates global contracts as a freight forwarder and a Non Vessel
Operating ("NVO") Common Carrier, which allows it to compete against other
freight forwarding/NVO companies.
In supply chain management services, BAX Global competes with many third-party
logistics providers.
Employee Relations
BAX Global and its subsidiaries have approximately 12,000 employees worldwide,
of whom about 1,900 are classified as part-time.
As of December 31, 2004, approximately 195 flight crewmembers (captains, first
officers and flight engineers), were represented for purposes of collective
bargaining by the International Brotherhood of Teamsters. This contract expired
in 2004 and is in the process of being renegotiated. Another 125 employees in
the U.S. (principally customer service, clerical and/or dock workers) were
represented by labor unions that in most cases are also affiliated with the
International Brotherhood of Teamsters. BAX Global did not experience any
significant strike or work stoppage in 2004 and believes that its employee
relations are satisfactory.
Government Regulation
The air transportation industry, including BAX Global, is subject to regulation
by the FAA under the Federal Aviation Act of 1958, as amended, and the
Transportation Security Administration ("TSA") under the Aviation and
Transportation Security Act of 2001. The FAA is an agency of the Department of
Transportation ("DOT") and TSA is an agency of the Department of Homeland
Security.
BAX Global is subject to various other requirements and regulations in
connection with its operations, including certain safety and security
regulations of the DOT and other federal and state agencies. BAX Global's
international operations are regulated to varying degrees by the countries in
which they operate.
Properties
BAX Global has approximately 260 company-operated stations (90 domestic and 170
international) and has agency agreements with approximately 115 stations (9
domestic and 106 international). BAX Global's stations are usually located at or
near airports or other transportation corridors. BAX Global operates domestic
stations, which generally include office space and warehousing facilities
located in 39 states, the District of Columbia and Puerto Rico. Nearly all
company-operated stations are leased.
BAX Global operates its main freight-sorting operation and related facilities at
its hub in Toledo, Ohio. This hub is operated under a lease with the
Toledo-Lucas County Port Authority which expires in 2013. The lease provides BAX
Global with rights of renewal for three five-year periods. Other facilities in
the U.S. are held under leases having terms of one to ten years.
BAX Global provides certain transportation customers with supply chain
management services and operates more than 130 leased logistics warehouse and
distribution facilities in key world markets.
BAX Global has, under lease through 2012, a 116,000 square foot corporate office
facility located in Irvine, California.
See "Aircraft Operations" above for information about contracted, leased and
owned aircraft.
10
FORMER OPERATIONS
The Company sold or shut down its coal operations in 2002, sold its natural gas,
timber and gold operations in 2003 and 2004. The Company has retained certain
coal-related liabilities and related expenses. Retained liabilities are
significant and include obligations related to postretirement benefits for
Company-sponsored medical plans, black lung benefits, reclamation and other
costs related to closed mines, Health Benefit Act obligations, workers'
compensation claims and costs of withdrawal from multi-employer pension plans.
The Company expects to have significant ongoing expenses and cash outflow for
retained liabilities relating to its former coal operations. See notes 4, 6, and
23 to the consolidated financial statements, which notes are herein incorporated
by reference.
At December 31, 2004, the Company had approximately 29 employees related to its
former natural resource operations. These employees perform various duties
including reclaiming, maintaining and selling residual assets and managing
retained liabilities related to the former coal operations.
Forward-Looking Information
Certain of the matters discussed herein, including statements regarding foreign
exchange rates and other risks associated with foreign operations, significant
ongoing expenses and cash outflows for retained liabilities related to former
coal operations in the future (including costs related to the administration of
retained liabilities), the introduction of new products and services by BHS in
2005, BHS' continued expansion into the commercial market, the uninterrupted
supply of equipment to BHS, the impact of the refusal of police departments to
respond to calls from alarm companies without visual verification on BHS, the
completion of BHS' second station, the ability of BHS' Irving and second
stations to back each other up, BAX's continued expansion of sales and marketing
efforts to small and mid-sized forwarders, the expected seasonal impact on the
volumes shipped by BAX Global, the ability of BAX Global to renew certain
aircraft leases or enter into new leases on reasonably comparable terms, the
highly competitive nature of the transportation and supply chain management
industries, the renegotiation of union contracts and liability for reclamation
related to the former coal operations, 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 which are anticipated.
Such risks, uncertainties and contingencies, many of which are beyond the
control of the Company, include, but are not limited to, fluctuations in
interest and exchange rates, economic, business and social conditions in the
U.S. and abroad, effectiveness of hedging activities and the ability of
counterparties to perform, actual retirement experience of the former coal
operation's employees, black lung claims incidence, the number of dependents
covered under benefit obligations, coal industry turnover rates, actual medical
and legal costs relating to the benefits, changes in inflation rates (including
the continued volatility of medical inflation), the incidence of false alarms,
the willingness of BHS' customers to pay for private response personnel or other
alternatives to police responses to alarms, the performance of BHS' equipment
suppliers, BHS' ability to cost-effectively develop new systems in a timely
manner, decisions regarding continued support of the developing commercial
business, development delays relating to the second customer service, monitoring
and computer backup facility, including construction, permitting and IT delays,
the market for airplanes of the type used by BAX Global, concessions requested
by Brink's, BAX Global or the applicable union, changes in the scope or method
of remediation or monitoring required under the coal-related permits, the demand
for the Company's products and services, the ability of the Company and its
operations to obtain appropriate insurance coverage at reasonable prices,
pricing and other competitive industry factors, fuel prices, new government
regulations and legislative initiatives, issuance of permits, judicial
decisions, and variations in costs or expenses.
11
ITEM 3. LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
Not applicable.
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
- --------------------------------------------------------------------------------
Not applicable.
12
Executive Officers of the Registrant
The following is a list as of March 1, 2005, of the names and ages of the
executive and other officers of The Brink's Company and the names and ages of
certain officers of its subsidiaries, indicating the principal positions and
offices held by each. There is no family relationship between any of the
officers named.
Name Age Positions and Offices Held Held Since
- ----------------------------------------------------------------------------------------------------------
Executive Officers:
Michael T. Dan 54 President, Chief Executive Officer and Chairman of the Board 1998
James B. Hartough 57 Vice President-Corporate Finance and Treasurer 1988
Frank T. Lennon 63 Vice President-Human Resources and Administration 1985
Austin F. Reed 53 Vice President, General Counsel and Secretary 1994
Robert T. Ritter 53 Vice President and Chief Financial Officer 1998
Other Officers:
Matthew A. P. Schumacher 46 Controller 2001
Arthur E. Wheatley 62 Vice President and Director-Risk Management 1988
Subsidiary Officers:
Robert B. Allen 51 President of Brink's Home Security, Inc. 2001
Joseph L. Carnes 47 President of BAX Global Inc. 2000
Richard M. Gold 54 President of Brink's, Incorporated 2004
==========================================================================================================
Executive and other officers of The Brink's Company are elected annually and
serve at the pleasure of its Board of Directors.
Mr. Dan was elected President, Chief Executive Officer and Director of The
Brink's Company in February 1998 and was elected Chairman of the Board effective
January 1, 1999. He also serves as Chief Executive Officer of Brink's,
Incorporated, a position he has held since July 1993 and as President and Chief
Executive Officer of Brink's Holding Company, a position he has held since
December 31, 1995. He served as President of Brink's, Incorporated from December
2002 until January 2004. He also serves as Chairman of the Board of BAX Global
Inc., a position he has held since February 1998. From August 1992 to July 1993
he served as President of North American operations of Brink's, Incorporated and
as Executive Vice President of Brink's, Incorporated from 1985 to 1992.
Mr. Ritter joined The Brink's Company as Vice President and Chief Financial
Officer in August 1998. From June 1996 to July 1998, he served as Chief
Financial Officer of WLR Foods, Inc. He was a private investor and financial
consultant from April 1995 to May 1996 and was Treasurer at American Cyanamid
Company from March 1991 to January 1994 and Controller from February 1994 to
March 1995.
Messrs. Hartough, Lennon, Reed and Wheatley have served in their present
positions for more than the past five years.
Mr. Schumacher joined the Company as Controller in July 2001. Prior to joining
the Company, he was employed by NL Industries, Inc. as the Assistant Controller
from 1997 through July 2001.
Mr. Allen joined Brink's Home Security, Inc. in August 1999 as Executive Vice
President and Chief Operating Officer. He was promoted to President of Brink's
Home Security, Inc. in March 2001. From January 1997 to August 1999, he held
various positions at Aegis Communications Group (formerly ATC Communications)
including Executive Vice President of Sales and Marketing and Chief Operating
Officer. From 1980 through 1996, he held various domestic and international
positions at Frito-Lay including Vice President of Field Marketing and Country
Manager in Greece and Turkey.
Mr. Carnes was elected President of BAX Global Inc. in May 2000. He joined BAX
Global Inc. as President - U.S. and Canada in September 1999. Prior to joining
BAX Global Inc., he served as Executive Vice President, North America for Fritz
Companies Inc. where he was employed from 1987 to 1999.
Mr. Gold joined Brink's, Incorporated as President on January 1, 2004. Prior to
joining the Company, he was employed by Cummins, Inc. for 23 years. In his last
position, he served as Vice President, General Manager of a Cummins business
unit.
13
PART II
- --------------------------------------------------------------------------------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
- --------------------------------------------------------------------------------
The Company's common stock trades on the New York Stock Exchange under the
symbol "BCO."
The following table provides information about common stock repurchases by the
Company during the quarter ended December 31, 2004.
(d) Maximum Number
(c) Total Number (or Approximate
of Shares Purchased Dollar Value) of
(a) Total Number as Part of Publicly Shares that May Yet
of Shares (b) Average Price Announced Plans be Purchased Under
Period Purchased (1) Paid per Share or Programs the Plans or Programs
- --------------------------------------------------------------------------------------------------------
December 1 through
December 31, 2004 7,816 $ 39.00 - -
========================================================================================================
(1) Stock-for-stock exchanges for payments of exercise cost upon exercises of
stock options.
Reference is made to page 126 of the Company's 2004 Annual Report which is
herein incorporated by reference, for other information required by this item.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
Reference is made to page 127 of the Company's 2004 Annual Report which is
herein incorporated by reference, for information required by this item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
- --------------------------------------------------------------------------------
Reference is made to pages 22 through 73 of the Company's 2004 Annual Report
which is herein incorporated by reference, for information required by this
item.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------------------
The information regarding quantitative and qualitative disclosures about market
risk is included in this report under Item 7.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
Reference is made to pages 74 through 126 of the Company's 2004 Annual Report
which is herein incorporated by reference, for information required by this
item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- --------------------------------------------------------------------------------
Not applicable.
14
ITEM 9A. CONTROLS AND PROCEDURES
- --------------------------------------------------------------------------------
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, the
Company carried out an evaluation, with the participation of the Company's
management, including the Company's Chief Executive Officer and Vice President
and Chief Financial Officer, of the effectiveness of the Company's disclosure
controls and procedures (as defined under Rule 13a-15(e) under the Securities
Exchange Act of 1934) as of the end of the period covered by this report. Based
upon that evaluation, the Company's Chief Executive Officer and Vice President
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective in ensuring that information required to be disclosed
by the Company in the reports that it files or submits under the Securities
Exchange Act of 1934, is recorded, processed, summarized and reported, within
the time periods specified in the SEC's rules and forms, and that such
information is accumulated and communicated to management, including the
Company's Chief Executive Officer and Vice President and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure.
Except for changes put in place to enhance controls related to accounting for
deferred taxes, there has been no change in the Company's internal control over
financial reporting during the quarter ended December 31, 2004, that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
Reference is made to pages 74 through 75 of the Company's 2004 Annual Report,
which are herein incorporated by reference, for Management's Annual Report on
Internal Control over Financial Reporting and the Attestation Report of the
Registered Public Accounting Firm.
ITEM 9B. OTHER INFORMATION
- --------------------------------------------------------------------------------
The Company makes the following disclosure in lieu of furnishing it in a Current
Report on Form 8-K under Item 2.02. "Results of Operations and Financial
Condition."
On March 15, 2005, the Company issued a press release updating its previously
disclosed fourth quarter and year end financial results to reflect the recording
of two non-cash items that result in an increase in reported net income and
earnings per share. A copy of this release is being furnished as Exhibit 99(b)
to this Annual Report on Form 10-K.
15
PART III
- --------------------------------------------------------------------------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- --------------------------------------------------------------------------------
The information required by this Item regarding directors is herein incorporated
by reference to the Company's definitive proxy statement to be filed pursuant to
Regulation 14A within 120 days after December 31, 2004. The information
regarding executive officers is included in this report following Item 4, under
the caption "Executive Officers of the Registrant."
The Company has adopted a Business Code of Ethics that applies to all of the
directors, officers and employees (including the Chief Executive Officer, Chief
Financial Officer and Controller) and has posted the Code on the Company's
website. The Company intends to satisfy the disclosure requirement under Item
5.05 of Form 8-K relating to amendments to or waivers from any provision of the
Business Code of Ethics applicable to the Chief Executive Officer, Chief
Financial Officer or Controller by posting this information on the website. The
internet address is www.brinkscompany.com.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The information required by Item 11 is incorporated by reference to the
Company's definitive proxy statement to be filed pursuant to Regulation 14A
within 120 days after December 31, 2004.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------
The information required by Item 12 is incorporated by reference to the
Company's definitive proxy statement to be filed pursuant to Regulation 14A
within 120 days after December 31, 2004.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
The information required by Item 13 is incorporated by reference to the
Company's definitive proxy statement to be filed pursuant to Regulation 14A
within 120 days after December 31, 2004.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
- --------------------------------------------------------------------------------
The information required by Item 14 is incorporated by reference to the
Company's definitive proxy statement to be filed pursuant to Regulation 14A
within 120 days after December 31, 2004.
16
PART IV
- --------------------------------------------------------------------------------
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
(a) 1. All financial statements - see index to financial statements and
schedules.
2. Financial statement schedules - see index to financial statements and
schedules.
3. Exhibits - see exhibit index.
Undertaking
For the purposes of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned
Registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into Registrant's Registration Statements on Form S-8 Nos.
333-120254, 2-64258, 33-2039, 33-21393, 33-69040, 33-53565, 333-02219,
333-78631, 333-78633, 333-70758, 333-70772, 333-70766 and 333-70762. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
17
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 15, 2005.
The Brink's Company
------------------------------
(Registrant)
By /s/ M. T. Dan
------------------------------
(M. T. Dan,
Chairman, President and
Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated, on March 15, 2005.
Signatures Title
----------------- -----------
R. G. Ackerman* Director
B. C. Alewine* Director
J. R. Barker* Director
M. C. Breslawsky* Director
J. L. Broadhead* Director
J. S. Brinzo* Director
/s/ M. T. Dan Chairman, President and
---------------------------------- Chief Executive Officer
(M. T. Dan) (principal executive officer)
G. Grinstein* Director
R. M. Gross* Director
/s/ R. T. Ritter Vice President
---------------------------------- and Chief Financial Officer
(R. T. Ritter) (principal financial officer and
principal accounting officer)
C. S. Sloane* Director
R. L. Turner* Director
*By /s/ M. T. Dan
-----------------------------
(M. T. Dan, Attorney-in-Fact)
18
Index to Financial Statements and Schedules
Financial Statements:
The consolidated financial statements of The Brink's Company, listed in the
index below which are included in the Company's 2004 Annual Report for the year
ended December 31, 2004, are herein incorporated by reference. With the
exception of the pages listed in the index below and the information
incorporated by reference included in Parts I, II and IV, the 2003 Annual Report
of the Shareholders is not deemed filed as part of this report.
THE BRINK'S COMPANY ANNUAL REPORT
Page Numbers
in 2004
Annual
Report
------------
Management's Discussion and Analysis of
Results of Operations and Financial Condition............22-73
Management's Report on Internal Control over Financial
Reporting................................................74
Reports of Independent Registered Public Accounting Firm....75-76
Consolidated Balance Sheets.................................77
Consolidated Statements of Operations.......................78
Consolidated Statements of Comprehensive Income (Loss)......79
Consolidated Statements of Shareholders' Equity.............80
Consolidated Statements of Cash Flows.......................81
Notes to Consolidated Financial Statements..................82-126
Selected Financial Data.....................................127
Financial Statement Schedules:
Page numbers
In Form 10-K
------------
Report of Independent Registered Public Accounting Firm.....19
Schedule II - Valuation and qualifying accounts.............20
19
Report of Independent Registered Public Accounting Firm
The Board of Directors
The Brink's Company:
Under date of March 15, 2005, we reported on the consolidated balance sheets of
The Brink's Company and subsidiaries (the Company) as of December 31, 2004 and
2003, and the related consolidated statements of operations, comprehensive
income (loss), shareholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 2004, as contained in the 2004 annual
report on Form 10-K. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related financial
statement schedule as included herein. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
Richmond, Virginia
March 15, 2005
20
The Brink's Company
Schedule II - Valuation and Qualifying Accounts
For the Years Ending December 31, 2004, 2003 and 2002
(in millions)
Balance at Charged to Charge to Currency Balance at
Beginning of Costs and Other Translation End of
Period Expenses (a) Deductions (b) Account (c) Adjustment Period
- ------------------------------------------------------------------------------------------------------------------------------------
Allowance for Doubtful Accounts
- -------------------------------
Year Ended December 31, 2002 $ 41.8 4.6 (11.8) - 0.9 35.5
Year Ended December 31, 2003 35.5 (1.1) (7.5) - 0.7 27.6
Year Ended December 31, 2004 27.6 4.0 (5.8) - 0.9 26.7
Valuation Allowance for Deferred Tax Assets
- -------------------------------------------
Year Ended December 31, 2002 $ 10.3 1.5 (0.8) - (2.0) 9.0
Year Ended December 31, 2003 9.0 34.3 (0.6) - 0.8 43.5
Year Ended December 31, 2004 43.5 10.2 (0.6) 0.7 2.0 55.8
(a) Includes amounts charged to loss from discontinued operations.
(b) Amounts written off, less recoveries.
(c) Includes amounts charged to Other Comprehensive Income.
21
Exhibit Index
Each Exhibit listed previously filed document is hereby incorporated by
reference to such document.
Exhibit
Number Description
2(i) Membership Interest Acquisition Agreement Among Air Transport
International LLC and BAX Global Inc., dated February 3, 1998. Exhibit
2 to the Registrant's Current Report on Form 8-K filed May 14, 1998.
2(ii) Share Purchase Agreement, dated as of January 27, 1998, between Brink's
Security International, Inc., acting as Purchaser, and Generale de
Transport et D'Industrie, acting as Seller. Exhibit 10(v) to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1998 (the "1998 Form 10-K").
2(iii) Shareholders' Agreement, dated as of January 10, 1997, between Brink's
Security International, Inc., and Valores Tamanaco, C.A. Exhibit 10(w)
to the 1998 Form 10-K.
3(i) Amended and Restated Articles of Incorporation of the Registrant.
Exhibit 3(i) to the Registrant's Current Report on Form 8-K filed March
2, 2005.
3(ii) Amended and Restated Bylaws of the Registrant. Exhibit 3(ii) to the
Registrant's Current Report on Form 8-K filed March 2, 2005.
4(a) Amended and Restated Rights Agreement dated as of September 1, 2003
between the Registrant and Equiserve Trust Company, N.A., as Rights
Agent, together with Form of Right Certificate. Exhibit 1 to the
Registrant's Amendment No. 4 to Form 8-A/A filed October 9, 2003.
10(a)* Key Employees Incentive Plan, as amended. Exhibit 10(a) to the 1998
Form 10-K.
10(b)* Key Employees' Deferred Compensation Program, as amended and restated
effective January 1, 2005. Exhibit 99.1 to the Registrant's Current
Report on Form 8-K filed November 22, 2004.
10(c)* (i) Pension Equalization Plan as amended. Exhibit 10(e)(I) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997 (the "1997 Form 10-K").
(ii) Amended and Restated Trust Agreement, dated December 1, 1997,
between the Registrant and Chase Manhattan Bank, as Trustee (the
"Trust Agreement"). Exhibit 10(e)(ii) to the 1997 Form 10-K.
(iii) Amendment No. 1 to Trust Agreement, dated as of August 18, 1999.
Exhibit 10(c)(iii) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1999 (the "1999 Form 10-K").
(iv) Amendment No. 2 to Trust Agreement, dated as of July 26, 2001.
Exhibit 10(c)(iv) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 2002 (the "2002 Form 10-K").
(v) Amendment No. 3 to Trust Agreement, dated as of September 18,
2002. Exhibit 10(c)(v) to the 2002 Form 10-K.
(vi) Trust Agreement under the Pension Equalization Plan, Retirement
Plan for Non-Employee Directors and Certain Contractual
Arrangements of The Brink's Company made as of September 16,
1994, by and between the Registrant and Chase Manhattan Bank
(National Association), as Trustee. Exhibit 10(i) to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994 (the "Third Quarter 1994 Form 10-Q").
(vii) Form of letter agreement dated as of September 16, 1994, between
the Registrant and one of its officers. Exhibit 10(e) to the
Third Quarter 1994 Form 10-Q.
(viii) Form of letter agreement dated as of September 16, 1994, between
the Registrant and Participants pursuant to the Pension
Equalization Plan. Exhibit 10(f) to the Third Quarter 1994 Form
10-Q.
(ix) Amendment No. 4 to Trust Agreement, dated as of September 22,
2003. Exhibit 10.1 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 2003 (the "Third Quarter
2003 Form 10-Q").
22
(x) Amendment No. 5 to Trust Agreement, dated as of September 20,
2004. Exhibit 10.1 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 2004.
(xi) Amendment to Pension Equalization Plan. Exhibit 99.3 to the
Registrant's Current Report on Form 8-K filed November 22, 2004.
(xii) Amendment No. 6 t o Trust Agreement, dated as of November 22,
2004. Exhibit 99.4 to the Registrant's Current Report on Form 8-K
filed November 22, 2004.
10(d)* Executive Salary Continuation Plan. Exhibit 10(e) to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1991 (the
"1991 Form 10-K").
10(e)* Non-Employee Directors' Stock Option Plan, as amended and restated as of
January 14, 2000. Exhibit 10(e) to the 1999 Form 10-K.
10(f)* 1988 Stock Option Plan, as amended and restated as of January 14, 2000.
Exhibit 10(f) to the 1999 Form 10-K.
10(g)* Management Performance Improvement Plan, as amended and restated.
Exhibit 99 to the Registrant's Current Report on Form 8-K filed March 2,
2005.
10(h)* Form of change in control agreement replacing all prior change in
control agreements and amendments and modifications thereto, between the
Registrant (or a subsidiary) and various officers of the Registrant.
Exhibit 10(l)(ii) to the 1997 Form 10-K.
10(i)* Form of Indemnification Agreement entered into by the Registrant with
its directors and officers. Exhibit 10(l) to the 1991 Form 10-K.
10(j)* (i) Retirement Plan for Non-Employee Directors, as amended. Exhibit
10(g) to the Third Quarter 1994 Form 10-Q.
(ii) Form of letter agreement dated as of September 16, 1994, between
the Registrant and its Non-Employee Directors pursuant to
Retirement Plan for Non-Employee Directors. Exhibit 10(h) to the
Third Quarter 1994 Form 10-Q.
10(k)* Form of severance agreement between the Registrant (or a subsidiary) and
various of the Registrant's officers. Exhibit 10(o)(ii) to the 1997 Form
10-K.
10(l)* Directors' Stock Accumulation Plan, as amended and restated effective
January 1, 2005. Exhibit 99.2 to the Registrant's Current Report on Form
8-K filed November 22, 2004.
10(m)* Plan for Deferral of Directors' Fees, as amended and restated effective
January 1, 2005. Exhibit 99.5 to the Registrant's Current Report on Form
8-K filed November 22, 2004.
10(n) (i) Lease dated as of April 1, 1989, between Toledo-Lucas County Port
Authority (the "Authority"), as Lessor, and Burlington, as
Lessee. Exhibit 10(i) to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1989 (the "Second
Quarter 1989 Form 10-Q").
(ii) Lease Guaranty Agreement dated as of April 1, 1989, between
Burlington (formerly Burlington Air Express Management Inc.), as
Guarantor, and the Authority. Exhibit 10(ii) to the Second
Quarter 1989 Form 10-Q.
(iii) Trust Indenture dated as of April 1, 1989 between the Authority
and Society Bank & Trust (formerly, Trustcorp. Bank, Ohio), as
Trustee (the "Trustee"). Exhibit 10(iii) to the Second Quarter
1989 Form 10-Q.
(iv) Assignment of Basic Rent and Rights Under a Lease and Lease
Guaranty dated as of April 1, 1989 from the Authority to the
Trustee. Exhibit 10(iv) to the Second Quarter 1989 Form 10-Q.
(v) Open-End First Leasehold Mortgage and Security Agreement dated as
of April 1, 1989 from the Authority to the Trustee. Exhibit 10(v)
to the Second Quarter 1989 Form 10-Q.
(vi) First Supplement to Lease dated as of January 1, 1990, between
the Authority and Burlington, as Lessee. Exhibit 10 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1990.
(vii) Revised and Amended Second Supplement to Lease dated as of
September 1, 1990, between the Authority and Burlington. Exhibit
10(i) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1990 (the "Third Quarter 1990 Form
10-Q").
23
(viii) Amendment Agreement dated as of September 1, 1990, among City of
Toledo, Ohio, the Authority, Burlington and the Trustee. Exhibit
10(ii) to the Third Quarter 1990 Form 10-Q.
(ix) Assumption and Non-Merger Agreement dated as of September 1,
1990, among Burlington, the Authority and the Trustee. Exhibit
10(iii) to the Third Quarter 1990 Form 10-Q.
(x) First Supplemental Indenture between Toledo-Lucas County Port
Authority, and Society National Bank, as Trustee, dated as of
March 1, 1994. Exhibit 10.1 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1994 (the "First
Quarter 1994 Form 10-Q").
(xi) Third Supplement to Lease between Toledo-Lucas County Port
Authority, as Lessor, and Burlington Air Express Inc., as Lessee,
dated as of March 1, 1994. Exhibit 10.2 to the First Quarter 1994
Form 10-Q.
(xii) Fourth Supplement to Lease between Toledo-Lucas County Port
Authority, as Lessor, and Burlington Air Express Inc., as Lessee,
dated as of June 1, 1991. Exhibit 10.3 to the First Quarter 1994
Form 10-Q.
(xiii) Fifth Supplement to Lease between Toledo-Lucas County Port
Authority, as Lessor, and Burlington Air Express Inc., as Lessee,
dated as of December 1, 1996. Exhibit 10(r)(xiii) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996.
10(o) (i) Credit Agreement, dated as of December 20, 2002, among BAX
Global Inc., Brink's, Incorporated and the Registrant, as
Borrowers and Guarantors, and ABN AMRO Bank, N.V. Exhibit 10(q)
(i) to the 2002 Form 10-K.
(ii) Guaranty between BAX Global, as Guarantor, and ABN AMRO Bank,
N.V. Exhibit 10(q)(ii) to the 2002 Form 10-K.
(iii) Guaranty between Brink's, Incorporated, as Guarantor, and ABN
AMRO Bank, N.V. Exhibit 10(q)(iii) to the 2002 Form 10-K.
(iv) Guaranty between the Registrant, as Guarantor, and ABN AMRO Bank,
N.V. Exhibit 10(q)(iv) to the 2002 Form 10-K.
10(p)* (i) Employment Agreement dated as of May 4, 1998, between the
Registrant and Michael T. Dan. Exhibit 10(a) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1998 (the "Third Quarter 1998 Form 10-Q").
(ii) Amendment No. 1 to Employment Agreement between the Registrant
and Michael T. Dan. Exhibit 10 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2002.
10(q)* Executive Agreement dated as of May 4, 1998, between the Registrant
and Michael T. Dan. Exhibit 10(b) to the Third Quarter 1998 Form 10-Q.
10(r)* Executive Agreement dated as of August 7, 1998, between the Registrant
and Robert T. Ritter. Exhibit 10(c) to the Third Quarter 1998 Form 10-Q.
10(s)* Severance Agreement dated as of August 7, 1998, between the Registrant
and Robert T. Ritter. Exhibit 10(d) to the Third Quarter 1998 Form 10-Q.
10(t) Trust Agreement for The Brink's Company Employee Welfare Benefit Trust.
Exhibit 10(t) to the 1999 Form 10-K.
10(u) (i) Note Purchase Agreement dated as of January 18, 2001, between
the Registrant and the Purchasers listed on Schedule A thereto.
Exhibit 10(u)(i) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 2000 (the "2000 Form 10-K").
(ii) Form of Series A Promissory Note. Exhibit 10(u)(ii) to the 2000
Form 10-K.
(iii) Form of Series B Promissory Note. Exhibit 10(u)(iii) to the 2000
Form 10-K.
10(v) (i) Receivables Purchase Agreement dated as of December 15, 2000,
among BAX Funding Corporation, BAX Global Inc., Liberty Street
Funding Corp. and the Bank of Nova Scotia. Exhibit 10(v)(i) to
the 2000 Form 10-K.
(ii) Purchase and Sale Agreement dated as of December 15, 2000, among
the Originators named therein, BAX Funding Corporation and BAX
Global Inc. Exhibit 10(v)(ii) to the 2000 Form 10-K.
24
10(w) (i) Note Purchase Agreement dated as of April 11, 2002 between the
Registrant and the Purchasers set forth on the signature page.
Exhibit 10(a)(i) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 2002 (the "First Quarter
2002 Form 10-Q").
(ii) Form of Promissory Note. Exhibit 10(a)(ii) to the First Quarter
2002 Form 10-Q.
10(x) (i) $43,160,000 Bond Purchase Agreement, dated September 17, 2003,
among the Peninsula Ports Authority of Virginia, Dominion
Terminal Associates, Pittston Coal Terminal Corporation and the
Registrant. Exhibit 10.2(i) to the Third Quarter 2003 Form 10-Q.
(ii) Loan Agreement between the Peninsula Ports Authority of Virginia
and Dominion Terminal Associates, dated September 1, 2003.
Exhibit 10.2(ii) to the Third Quarter 2003 Form 10-Q.
(iii) Indenture and Trust between the Peninsula Ports Authority of
Virginia and Wachovia Bank, National Association ("Wachovia"), as
trustee, dated September 1, 2003. Exhibit 10.2(iii) to the Third
Quarter 2003 Form 10-Q.
(iv) Parent Company Guaranty Agreement, dated September 1, 2003, made
by the Registrant for the benefit of Wachovia. Exhibit 10.2(iv)
to the Third Quarter 2003 Form 10-Q.
(v) Continuing Disclosure Undertaking between the Registrant and
Wachovia, dated September 24, 2003. Exhibit 10.2(v) to the Third
Quarter 2003 Form 10-Q.
(vi) Coal Terminal Revenue Refunding Bond (Dominion Terminal
Associates Project - Brink's Issue) Series 2003. Exhibit 10.2(vi)
to the Third Quarter 2003 Form 10-Q.
10(y) $150,000,000 Credit Agreement, dated as of November 18, 2004, between
the Registrant and ABN AMRO Bank N.V. Exhibit 99.1 to the Registrant's
Current Report on Form 8-K filed November 18, 2004.
10(z) $400,000,000 Credit Agreement among The Brink's Company, as Parent
Borrower, the Subsidiary Borrowers referred to therein, certain of
Parent Borrower's Subsidiaries, as Guarantors, Various Lenders,
Barclays Bank plc, as Co-Arranger and Documentation Agent, Bank of
America, N.A., as Syndication Agent, Banc of America Securities LLC, as
Co-Arranger, Scotiabanc Inc. and Wachovia Bank, National Association,
as Co-Arrangers and Syndication Agents, JPMorgan Chase Bank, as
Administrative Agent, and J.P. Morgan Securities Inc., as Sole Lead
Arranger and Bookrunner, dated as of October 15, 2004. Exhibit 99.1 to
the Registrant's Current Report on Form 8-K filed October 18, 2004.
10(aa) Share Transfer Agreement, dated February 2, 2005, between Group 4
Securitas Holdings Limited, as Seller, and Brink's Limited, as Buyer.
10(bb) Share Transfer Agreement, dated February 2, 2005, between Group 4
Securicor Holdings Limited, Securicor International BV and Brink's
Luxembourg S.A. and Brink's, Incorporated.
13 Parts of the 2004 Annual Report of the Registrant.
21 Subsidiaries of the Registrant.
23 Consent of independent auditors.
24 Powers of attorney.
31 Rule 13a-14(a)/15d-14(a) Certifications.
32 Section 1350 Certifications.
99(a)* Amendment to Pension-Retirement Plan relating to preservation of assets
of the Pension-Retirement Plan upon a change in control. Exhibit 99 to
the Registrant's Annual Report on Form 10-K for the year ended December
31, 1992.
99(b) Press Release, dated March 15, 2005, issued by the Registrant.
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*Management contract or compensatory plan or arrangement.
25