RICHMOND, Va., July 31 /PRNewswire-FirstCall/ -- The Brink's Company
(NYSE: BCO), a global leader in security-related services, reported
second-quarter income from continuing operations of $49 million or $1.04 per
share, up from $33 million or 70 cents per share in last year's second
quarter. The company reported higher results at both of its operating units
-- Brink's, Incorporated ("Brink's") and Brink's Home Security ("BHS").
Earnings were also helped by a lower effective tax rate.
Second-quarter revenue was $932 million, up 20% (11% on a constant
currency basis) from $779 million in the second quarter of 2007. Operating
profit rose 26% (20% on a constant currency basis) to $75 million, up from $59
million last year, due mainly to profit growth in Brink's Latin American and
European operations, which more than offset lower profits in Brink's North
America. Profits at BHS improved due to higher average monitoring rates and
continued growth in the subscriber base. BHS is expected to be spun off as an
independent publicly traded company in the fourth quarter.
Michael T. Dan, chairman, president and chief executive officer of The
Brink's Company, said: "We are pleased with second-quarter results. Despite
economic headwinds, the diversity of our global operations enabled us to
deliver solid earnings growth. Revenues were up in all regions, even after
excluding the effect of changes in currency exchange rates. Profit growth at
Brink's, Incorporated was driven by our international operations. Results
were especially strong in Latin America, where profits were boosted by the
currency conversion project in Venezuela and improved operating performance in
Brazil and Chile. Results in Europe also improved. The positive impact from
international operations was partially offset by disappointing results in
North America, where we are facing higher costs in a challenging economic
environment. The year-to-date operating profit margin at Brink's was 8.5%.
Our full-year goal, which is to deliver organic revenue growth in the
high single-digit percentage range with an operating margin of approximately
9%, has become more challenging but remains achievable. The global diversity
of our operations, our investments in technology and value-added services, and
successful execution of our cost reduction efforts should drive sustainable
revenue and profit growth. However, if the current weakness in the U.S.
economy persists or spreads further into global markets, improving margins
will become a greater challenge."
"Brink's Home Security once again achieved solid growth in revenue,
operating profit, monthly recurring revenue and subscribers. Despite the weak
housing market, we continue to expect BHS to deliver 10% or better annual
growth in revenue and operating profit while growing the subscriber base in
the high single-digit percentage range. We remain on track and expect to
complete the spin-off of BHS in the fourth quarter of this year."
Business Unit Performance: Second-Quarter 2008 Versus 2007
Brink's, Incorporated ("Brink's")
Brink's, the company's secure transportation and cash management unit, had
second-quarter revenue of $798 million, up 21% (11% on a constant currency
basis) from $659 million in the year-ago quarter. Operating profit rose 23%
(14% on a constant currency basis) to $53 million, up from $43 million last
year. The operating profit margin was 6.6% versus 6.5% last year. The
increase in operating profit was due primarily to solid growth in
international operations.
Capital expenditures during the quarter totaled $39 million, bringing
year-to-date expenditures to $70 million. Full-year capital spending at
Brink's is expected to be between $165 million and $175 million.
Brink's International
Second-quarter revenue from international operations was $563 million, up
28% (14% on a constant currency basis) from $440 million in 2007, reflecting
increases in all regions. Operating profit rose 48% (36% on a constant
currency basis) to $42 million, up from $28 million last year, due primarily
to higher profits in Latin American and European operations. The operating
profit margin for international operations was 7.4%, up from 6.4% in last
year's second quarter.
EMEA (Europe, Middle East, Africa): Second-quarter revenue for EMEA was
$352 million, up 23% (6% on a constant currency basis) from $287 million in
2007. Operating profit increased due to improved performance throughout the
region.
Latin America: Second-quarter revenue in Latin America increased 40% (30%
on a constant currency basis) to $194 million, up from $138 million in 2007.
Operating profit increased significantly over last year as continued profit
growth in Venezuela was supplemented by higher profits in Brazil and Chile.
Revenues from the currency conversion project in Venezuela, which totaled
approximately $12 million in the second quarter and $47 million for the
year-to-date period, are expected to decline in the third quarter as the
project nears completion.
Asia-Pacific: Second-quarter revenue in Asia-Pacific rose 14% to $17
million versus $15 million last year. Operating profit declined due to lower
results in Australia.
Brink's North America
Second-quarter revenue in North America was $235 million, up 7% from $219
million last year. Operating profit was $11 million, down 26% from $15
million in the year-ago quarter. The operating profit margin for the quarter
was 4.6%, down from 6.7% in last year's second quarter. The profit decline
was due to several factors including higher labor, fuel and legal settlement
expenses. A portion of the additional labor costs were related to spending on
IT and commercial resources, which should drive future revenue and profit
growth.
Brink's Home Security ("BHS")
Second-quarter revenue at BHS rose 12% to $134 million, up from $119
million in 2007 due primarily to continued growth in the subscriber base and
higher average monitoring rates. BHS ended the quarter with approximately
1.27 million subscribers, up 8% from the year-ago level. Monthly recurring
revenue rose 12% to $39 million (see Non-GAAP Reconciliations for a
reconciliation of monthly recurring revenue to reported revenue).
Operating profit was $36 million, up 15% from $31 million last year as
higher profits from recurring services offset increased investment in new
subscribers. The second-quarter operating profit margin was 26.5%, up from
25.8% in 2007. This year's operating profit includes a $2.5 million benefit
related to an accounting correction for deferred revenue and expenses. Last
year's results include $1.9 million of income from the settlement of insurance
claims related to Hurricane Katrina.
BHS installed approximately 44,200 systems for new customers during the
quarter versus approximately 45,200 installations in the year-ago quarter.
The decline in installations reflects the effects of ongoing weakness in the
housing market and the overall economy.
BHS had 22,300 disconnects during the quarter, down from 23,300 last year.
The annualized disconnect rate was 7.1%, down from 8.0% in the year-ago
quarter. Last year's higher disconnect rate was due to technical adjustments
to the subscriber count. The full-year disconnect rate in 2008 is expected to
range between 6.5% and 7.0%.
Second-quarter capital expenditures at BHS totaled $44 million, bringing
year-to-date expenditures to $90 million. Total capital spending at BHS in
2008 is expected to be between $185 million and $195 million.
Corporate Expenses
Total corporate expense in the second quarter was $13 million, up from $11
million in 2007. In the 2008 quarter, the company incurred approximately $3
million of expenses related to the tax-free spin-off of BHS. For the full
year expenses related to strategic reviews, proxy matters and the spin-off are
expected to range between $17 million and $20 million.
Costs Related to Former Operations Included in Continuing Operations
Second-quarter expenses related to former operations were $200,000, down
from nearly $4 million in 2007 due primarily to lower pension and
postretirement medical expenses.
Taxes
The effective income tax rate of 24.6% for the quarter was significantly
lower than the year-ago rate of 36.7% due primarily to a release of valuation
allowances in non-U.S. tax jurisdictions and higher income generated in
non-U.S. jurisdictions that have lower tax rates. The effective tax rate for
the full-year is expected to be between 31% and 34%.
Discontinued Operations
Second-quarter income from discontinued operations was $200,000 or one
cent per share versus a loss of $5 million or 10 cents per share in the second
quarter of 2007.
Net Income
Second-quarter net income, which includes results from continuing and
discontinued operations, was $49 million or $1.05 per share versus $28 million
or 60 cents per share in 2007.
Recent Events
On May 30, the company announced that Brink's Home Security Holdings, Inc.
filed with the Securities and Exchange Commission (SEC) a registration
statement on Form 10 in connection with the planned tax-free spin-off of
Brink's Home Security. The Form 10 includes preliminary details regarding the
spin-off, which is expected to be completed in the fourth quarter of 2008.
The filing was amended in a revised filing on July 18. The registration
statement is subject to further change and is available at the SEC's website
(http://www.sec.gov) under the name of Brink's Home Security Holdings, Inc.
During the quarter, the company purchased 229,000 shares of its common
stock for $15.7 million or $68.48 per share under the $100 million share
repurchase authorization announced in 2007. In total, the company has
repurchased 883,800 shares under this authorization for a total of $56.3
million or $63.67 per share.
This release contains both historical and forward-looking information.
Words such as "anticipates," "estimates," "expects," "projects," "intends,"
"plans," "believes," "may," "should" and similar expressions may identify
forward-looking information. Forward-looking information in this release
includes, but is not limited to, expected revenue growth, cash flow and
earnings for The Brink's Company and its subsidiaries in 2008, including
organic revenue growth and operating profit margin at Brink's and revenue,
operating profit and subscriber growth at BHS, efforts to improve revenue and
profit growth at Brink's, maintaining improvements in Europe and improving
results in North America, combating competitive environments and higher costs
in the United States and France, anticipated revenues from the currency
conversion project in Venezuela, expected capital expenditures for 2008,
ongoing weakness in the housing market, the disconnect rate at BHS, the timing
and other expected characteristics of the spin-off of BHS, expected expenses
in 2008 related to strategic reviews, proxy matters and the spin-off and the
anticipated annual effective tax rate for 2008. The forward-looking
information in this release is subject to known and unknown risks,
uncertainties and contingencies, which could cause actual results, performance
or achievements to differ materially from those that are anticipated.
These 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 ability of the Company to complete a successful spin-off of
BHS, the satisfaction of all conditions in order to complete a spin-off of
BHS, demand for the services of Brink's and BHS, the implementation of
investments in technology and value-added services and cost reduction efforts
and their impact on revenue and profit growth, the ability to identify and
execute further cost and operational improvements and efficiencies in the core
businesses, the impact of continuing initiatives to control costs and increase
profitability, the ability of the businesses to cost effectively match
customer demand with appropriate resources, the willingness of Brink's and
BHS' customers to absorb fuel surcharges and other future price increases and
the actions of competitors, the Company's ability to identify strategic
opportunities and integrate them successfully, acquisitions and dispositions
made in the future, Brink's ability to integrate recent acquisitions,
corporate expenses due to the implementation of the spin-off decision and
shareholder initiatives, decisions by the Company's Board of Directors,
Brink's ability to complete currency conversion cash handling services in
Venezuela successfully and without adverse operational issues, regulatory and
labor issues and higher security threats in European countries, the impact of
actions responding to current market conditions in the United States, France
and other European countries, the return to profitability of operations in
jurisdictions where Brink's has recorded valuation adjustments, the input of
governmental authorities regarding the non-payment of customs duties and
value-added tax, the stability of the Venezuelan economy and changes in
Venezuelan policy regarding exchange rates for dividend remittances,
variations in costs or expenses and performance delays of any public or
private sector supplier, service provider or customer, the ability of the
Company and its subsidiaries to obtain appropriate insurance coverage at
reasonable prices, positions taken by insurers with respect to claims made and
the financial condition of insurers, safety and security performance, Brink's
loss experience, changes in insurance costs, risks customarily associated with
operating in foreign countries including changing labor and economic
conditions, political instability, restrictions on repatriation of earnings
and capital, nationalization, expropriation and other forms of restrictive
government actions, costs associated with information technology and other
ongoing contractual obligations, BHS' ability to maintain subscriber growth,
the number of household moves, the level of home sales or new home
construction, potential instability in housing credit markets, the performance
of BHS' equipment suppliers and dealers, BHS' ability to cost-effectively
develop or incorporate new systems in a timely manner, decisions regarding
continued support of the developing commercial business, the ability of the
home security industry to dissuade law enforcement and municipalities from
refusing to respond to alarms, the willingness of BHS' customers to pay for
private response personnel or other alternatives to police responses to
alarms, estimated reconnection experience at BHS, costs associated with the
purchase and implementation of cash processing and security equipment, changes
in the scope or method of remediation or monitoring of the Company's former
coal operations, the timing of the pass-through of certain costs to third
parties and the timing of approvals by governmental authorities relating to
the disposal of the coal assets, changes to estimated liabilities and assets
in actuarial assumptions due to payments made, investment returns, annual
actuarial revaluations, and periodic revaluations of reclamation liabilities,
the funding levels, accounting treatment, investment performance and costs of
the company's pension plans and the VEBA, whether the Company's assets or the
VEBA's assets are used to pay benefits, projections regarding the number of
participants in and beneficiaries of the Company's employee and retiree
benefit plans, black lung claims incidence, the number of dependents of mine
workers for whom benefits are provided, actual retirement experience of the
former coal operation's employees, actual medical and legal expenses relating
to benefits, changes in inflation rates (including medical inflation) and
interest rates, changes in mortality and morbidity assumptions, mandatory or
voluntary pension plan contributions, discovery of new facts relating to civil
suits, the addition of claims or changes in relief sought by adverse parties,
the cash, debt and tax position and growth needs of the Company, the demand
for capital by the Company and the availability and cost of such capital, the
satisfaction or waiver of limitations on the use of proceeds contained in
various of the Company's financing arrangements, the nature of the Company's
hedging relationships, the financial performance of the Company, utilization
of third-party advisors and the ability of the Company to hire and retain
corporate staff, changes in employee obligations, overall domestic and
international economic, political, social and business conditions, capital
markets performance, the strength of the U.S. dollar relative to foreign
currencies, foreign currency exchange rates, changes in estimates and
assumptions underlying the Company's critical accounting policies, anticipated
return on assets, inflation, the promulgation and adoption of new accounting
standards and interpretations, seasonality, pricing and other competitive
industry factors, labor relations, fuel and copper prices, new government
regulations and interpretations of existing regulations, legislative
initiatives, judicial decisions, issuances of permits, variations in costs or
expenses and the ability of counterparties to perform. 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 security-related
services that operates two businesses: Brink's, Incorporated and Brink's Home
Security. Brink's, Incorporated is the world's premier provider of secure
transportation and cash management services. Brink's Home Security is one of
the largest and most successful residential alarm companies in North America.
The Brink's Company expects to spin-off Brink's Home Security in the fourth
quarter of 2008. For more information, please visit The Brink's Company
website at http://www.brinkscompany.com or call toll free 877-275-7488.
Conference Call
The Brink's Company will host a conference call today, July 31, at 11:00
a.m. eastern time to discuss this press release. Interested parties can listen
to the conference call by dialing (877) 407-0778 (domestic) or (201) 689-8565
(international), or via live webcast at http://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 14, 2008, by calling (877) 660-6853
(domestic) or (201) 612-7415 (international). The conference account number
is 286 and the conference ID for the replay is 290626. A webcast replay will
also be available at http://www.brinkscompany.com.
The Brink's Company
and subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
(In millions, except per share 2008 2007 2008 2007
amounts)
Revenues $ 931.7 778.7 1,852.3 1,519.2
Expenses:
Cost of revenues 712.0 602.4 1,393.7 1,167.1
Selling, general and administrative
expenses 145.5 120.6 286.1 233.0
Total expenses 857.5 723.0 1,679.8 1,400.1
Other operating income (expense), net 0.4 3.5 (0.6) 4.4
Operating profit 74.6 59.2 171.9 123.5
Interest expense (3.3) (3.0) (5.8) (5.5)
Interest and other income, net 3.0 2.1 5.1 3.7
Income from continuing
operations before income taxes
and minority interest 74.3 58.3 171.2 121.7
Provision for income taxes 18.3 21.4 52.3 46.7
Minority interest 7.5 3.8 22.4 10.8
Income from continuing operations 48.5 33.1 96.5 64.2
Income (loss) from discontinued 0.2 (4.8) 2.3 (7.2)
operations, net of tax
Net income $ 48.7 28.3 98.8 57.0
Basic earnings per common share:
Continuing operations $ 1.05 0.71 2.09 1.38
Discontinued operations 0.01 (0.10) 0.05 (0.16)
Net income 1.06 0.61 2.14 1.23
Diluted earnings per common share:
Continuing operations $ 1.04 0.70 2.07 1.37
Discontinued operations 0.01 (0.10) 0.05 (0.15)
Net income 1.05 0.60 2.12 1.21
Weighted-average common shares
outstanding:
Basic 46.0 46.5 46.2 46.4
Diluted 46.5 47.1 46.7 47.0
THE BRINK'S COMPANY
and subsidiaries
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
(In millions) 2008 2007 2008 2007
Segment Information
Revenues:
Brink's $ 797.8 659.3 1,590.6 1,285.1
Brinks Home Security 133.9 119.4 261.7 234.1
Revenues $ 931.7 778.7 1,852.3 1,519.2
Operating profit:
Brink's $ 52.6 42.9 134.6 93.9
Brinks Home Security 35.5 30.8 67.5 59.0
Business segments 88.1 73.7 202.1 152.9
Corporate (13.3) (10.9) (29.4) (22.5)
Former operations (0.2) (3.6) (0.8) (6.9)
Operating profit $ 74.6 59.2 171.9 123.5
Supplemental Financial Information
Brink's:
Revenues:
International $ 563.1 440.2 1,125.6 854.8
North America 234.7 219.1 465.0 430.3
Revenues $ 797.8 659.3 1,590.6 1,285.1
Operating profit:
International $ 41.7 28.2 110.3 60.9
North America 10.9 14.7 24.3 33.0
Operating profit $ 52.6 42.9 134.6 93.9
Brink's Home Security:
Revenues $ 133.9 119.4 261.7 234.1
Operating profit:
Recurring services $ 60.2 52.5 117.0 103.3
Investment in new
subscribers (24.7) (21.7) (49.5) (44.3)
Operating profit $ 35.5 30.8 67.5 59.0
Monthly recurring revenues (a) $ 39.3 35.1
Annualized disconnect rate 7.1 % 8.0 % 6.6 % 7.1 %
Number of subscribers (in thousands):
Beginning of period 1,249.6 1,153.2 1,223.9 1,124.9
Installations 44.2 45.2 88.8 91.0
Disconnects (22.3) (23.3) (41.2) (40.8)
End of period 1,271.5 1,175.1 1,271.5 1,175.1
Average number of subscribers 1,261.4 1,165.6 1,248.9 1,151.9
(a) see "Non-GAAP Reconciliations" below.
THE BRINK'S COMPANY
and subsidiaries
Supplemental Financial Information (continued)
(Unaudited)
SELECTED CASH FLOW INFORMATION
Three Months Ended Six Months Ended
June 30, June 30,
(In millions) 2008 2007 2008 2007
Depreciation and amortization:
Brink's $ 31.2 26.0 60.9 50.7
Brink's Home Security 21.8 19.1 42.4 37.6
Corporate 0.1 0.1 0.2 0.3
Depreciation and amortization $ 53.1 45.2 103.5 88.6
Capital expenditures:
Brink's $ 38.8 31.1 70.3 57.3
Brink's Home Security:
Security systems 42.4 41.6 85.6 82.7
Other 1.9 2.9 4.5 5.2
Corporate 0.1 - 0.1 0.1
Capital expenditures $ 83.2 75.6 160.5 145.3
Other Brink's Home Security cash flow
information:
Impairment charges from subscriber
disconnects $ 12.8 13.1 24.7 24.3
Amortization of deferred revenue (11.4) (8.7) (20.0) (16.7)
Deferral of subscriber acquisition
costs (current year payments) (5.8) (6.3) (12.1) (12.1)
Deferral of revenue from new
subscribers (current year receipts) 11.6 12.1 23.6 24.2
THE BRINK'S COMPANY
and subsidiaries
Non-GAAP Reconciliations
(Unaudited)
Monthly Recurring Revenues
The following table reconciles MRR to revenues, its closest GAAP
counterpart:
Six Months Ended
June 30,
(In millions) 2008 2007
June:
Monthly recurring revenues ("MRR")(a) $ 39.3 35.1
Amounts excluded from MRR:
Amortization of deferred revenue (b) 3.4 3.1
Other revenues (c) 1.0 2.2
Revenues on a GAAP basis $ 43.7 40.4
Revenues (GAAP basis):
June $ 43.7 40.4
January - May 218.0 193.7
January - June $ 261.7 234.1
(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) Includes amortization of deferred revenue related to active subscriber
accounts as well as recognition of deferred revenue related to subscriber
accounts that disconnect.
(c) Revenues that are not pursuant to monthly contractual billings,
including revenues from such sources as ad-hoc field service calls, product
sales and installation fees not subject to deferral, terminated contract
penalty billings for breached contracts, pass-through revenue (alarm permit
fees, false alarm fines, etc.) and partial month revenues recognized from
customers who disconnected during the last month of the period and are
therefore not included in MRR. This amount is reduced for adjustments
recorded against revenue (primarily customer goodwill credits and other
billing adjustments), and for the amount included in MRR for new customers
added during the last month of the period for those portions of the month for
which revenues were not recognized for such customers.
The company uses MRR, a non-GAAP measure, to evaluate performance. 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 monitored security alarm business
produces. This supplemental non-GAAP information should be reviewed in
conjunction with the company's consolidated statements of operations.
The Brink's Company
and subsidiaries
Non-GAAP Reconciliations (continued)
(Unaudited)
Net Debt (Cash) reconciled to GAAP measures
June 30, December 31,
(In millions) 2008 2007
Short-term debt $ 9.3 12.4
Long-term debt 170.1 100.2
Debt 179.4 112.6
Less cash and cash equivalents (246.3) (196.4)
Net Debt (Cash) $ (66.9) (83.8)
Net Debt (Cash) is utilized by management as a measure of the company's
financial leverage and the company believes that investors also may find Net
Debt (Cash) to be helpful in evaluating the financial leverage of the company.
This supplemental non-GAAP information should be reviewed in conjunction with
the company's consolidated balance sheets in the company's report on Form 10-Q
for the period ended June 30, 2008.
The Brink's Company
and subsidiaries
Non-GAAP Reconciliations (continued)
(Unaudited)
Brink's, Incorporated Organic Revenue Growth
Three Months % change Six Months % change
Ended from prior Ended from prior
(In millions) June 30, period June 30, period
2006 revenues $ 575.9 1,124.3
Effects on revenue of:
Organic Revenue Growth 48.5 8 96.2 8
Acquisitions and
dispositions, net 6.5 1 12.8 1
Changes in currency exchange
rates 28.4 5 51.8 5
2007 revenues 659.3 14 1,285.1 14
Effects on revenue of:
Organic Revenue Growth 66.4 10 162.3 13
Acquisitions and
dispositions, net 6.4 1 14.1 1
Changes in currency exchange
rates 65.7 10 129.1 10
2008 revenues $ 797.8 21 1,590.6 24
The supplemental Brink's, Incorporated Organic Revenue Growth information
presented above is non-GAAP financial information that management uses to
evaluate results of existing operations without the effects of acquisitions,
dispositions and currency exchange rates. The company believes that this
information may be helpful to investors in understanding the performance of
the company's operations. The limitation of this measure is that the effects
of acquisitions, dispositions and changes in values of foreign currencies
cannot be completely separated from changes in prices (which include the
effects of inflation) and volume of a unit's base business. This supplemental
non-GAAP information does not affect net income or any other reported amounts.
This supplemental non-GAAP information should be reviewed in conjunction with
the company's consolidated statements of operations.
Contact:
Investor Relations
804.289.9709
SOURCE The Brink's Company
Investor Relations of The Brink's Company, +1-804-289-9709
