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| BCO > SEC Filings for BCO > Form 10-Q on 30-Oct-2009 | All Recent SEC Filings |
30-Oct-2009
Quarterly Report
The Brink's Company offers transportation and logistics management services for cash and valuables throughout the world. These services include armored car transportation, automated teller machine ("ATM") replenishment and servicing, currency deposit processing and cash management services. Cash management services include cash logistics services ("Cash Logistics"), deploying and servicing safes and safe control devices (e.g., our patented CompuSafeŽ service), coin sorting and wrapping, integrated check and cash processing services ("Virtual Vault Services"), arranging secure transportation of valuables over long distances and around the world ("Global Services"), and guarding services, including airport security.
Management allocates resources to and makes operating decisions for our
operations on a geographic basis. As a result, our reportable segments are
International and North America. Prior to the spin-off of Brink's Home Security
Holdings, Inc. ("BHS") in October 2008, our reportable segments were Brink's,
Incorporated and BHS. Our International segment includes three distinct regions:
Europe, Middle East, and Africa ("EMEA"), Latin America and Asia Pacific. Our
North America segment includes operations in the U.S. and Canada.
RESULTS OF OPERATIONS
Overview
Three Months Nine Months
Ended September 30, Ended September 30,
(In millions) 2009 2008 2009 2008
Income attributable to Brink's:
Continuing operations $ 33.4 29.5 71.6 93.1
Discontinued operations 1.0 18.5 6.1 53.7
Net income attributable to Brink's $ 34.4 48.0 77.7 146.8
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The income items in the table above are reported after taxes and income attributable to noncontrolling interests.
Income from continuing operations attributable to Brink's increased 13% in the third quarter of 2009 versus the year-ago quarter due primarily to a gain related to our recent acquisition in India (see note 8 to the consolidated financial statements) and lower corporate expenses. The increase was partially offset by lower International operating profit, excluding the India-acquisition gain, a profit decline in North America and a higher effective income tax rate. Lower profits in cash-in-transit ("CIT") operations and lower contribution margin from Global Services operations affected results in both our segments. Former operations expense increased due primarily to higher retirement plan expenses.
Income from continuing operations attributable to Brink's declined 23% in the first nine months of 2009 versus the year-ago period due primarily to lower results from International operations, higher retirement plan expenses related to former operations and a higher effective income tax rate, partially offset by lower corporate expenses, the India-acquisition gain and higher operating profit in North America.
Income from discontinued operations in the first nine months of 2009 consisted primarily of gains related to Federal Black Lung Excise Tax ("FBLET") refunds, partially offset by a charge related to a litigation matter at a former subsidiary. Income from discontinued operations in 2008 primarily included the results of BHS.
Our full-year 2009 organic revenue growth rate is expected to remain in the low single-digit percentage range with a segment operating margin, excluding the acquisition gain, to be at the low end of the range between 7.0% and 7.5%. See Reconciliation of Results Excluding Acquisition-related Gain to GAAP Measures on page 29.
Given the uncertain economic climate, our initial target for 2010 is to grow organic revenue in the low-to-mid single-digit percentage range and improve the segment operating margin by 50 basis points.
Consolidated Review
Three Months Nine Months
Ended September 30, % Ended September 30, %
(In millions) 2009 2008 change 2009 2008 change
Revenues:
International $ 579.2 575.8 1 1,620.8 1,701.4 (5 )
North America 222.6 237.6 (6 ) 665.4 702.6 (5 )
Revenues $ 801.8 813.4 (1 ) 2,286.2 2,404.0 (5 )
Operating profit:
International $ 65.2 56.3 16 120.0 166.6 (28 )
North America 10.4 11.8 (12 ) 37.9 36.1 5
Segment operating
profit 75.6 68.1 11 157.9 202.7 (22 )
Corporate expense (10.1 ) (18.8 ) (46 ) (16.9 ) (43.3 ) (61 )
Former operations
income (expense) (4.6 ) 0.5 NM (11.7 ) (0.3 ) 200 +
Operating profit 60.9 49.8 22 129.3 159.1 (19 )
Interest expense (2.8 ) (3.0 ) (7 ) (8.3 ) (8.8 ) (6 )
Interest and other
income 1.2 4.5 (73 ) 7.2 9.6 (25 )
Income from
continuing operations
before tax 59.3 51.3 16 128.2 159.9 (20 )
Provision for income
taxes 20.6 14.3 44 37.7 36.9 2
Income from
continuing operations 38.7 37.0 5 90.5 123.0 (26 )
Income from
discontinued
operations 1.0 18.5 (95 ) 6.1 53.7 (89 )
Net income 39.7 55.5 (28 ) 96.6 176.7 (45 )
Less net income
attributable to
noncontrolling
interests (5.3 ) (7.5 ) (29 ) (18.9 ) (29.9 ) (37 )
Net income
attributable to
Brink's 34.4 48.0 (28 ) 77.7 146.8 (47 )
Amounts attributable
to Brink's:
Income from
continuing operations 33.4 29.5 13 71.6 93.1 (23 )
Income from
discontinued
operations 1.0 18.5 (95 ) 6.1 53.7 (89 )
Net income
attributable to
Brink's $ 34.4 48.0 (28 ) 77.7 146.8 (47 )
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Revenues - 2009 Versus 2008
Third Quarter. Revenues declined 1%, reflecting a decrease in North American
revenues that was partially offset by higher revenues from International
operations. Revenues grew 2% on a constant-currency basis due primarily to the
inclusion of incremental revenues from Latin American operations acquired in
January 2009, and an increase of average selling prices in most regions
(including the effects of inflation in several Latin American countries),
partially offset by lower volumes due to the continuing global
recession. Third-quarter 2008 revenues included $4 million related to the
currency conversion project in Venezuela, which was completed in the fourth
quarter of 2008.
Nine-Month Period. Revenues decreased 5% due primarily to unfavorable changes in foreign currency exchange rates caused by the stronger U.S. dollar. Revenues grew 3% on a constant-currency basis due to the inclusion of incremental revenues from Latin American operations acquired in January 2009 and increased selling prices (including the effects of inflation in several Latin American countries), partially offset by lower volumes in CIT and Global Services operations. Revenues for the first nine months of 2008 included $50 million related to the currency conversion project.
Operating Profit - 2009 Versus 2008
Third Quarter. Segment operating profit increased 11% due primarily to a $13.9
million gain related to the acquisition of a controlling interest of a CIT and
Global Services operation in India (see note 8 to the consolidated financial
statements) and cost reductions throughout the company, partially offset by
continued weakness in CIT operations and lower contribution margin from Global
Services operations. Excluding the impact of the acquisition-related gain,
profits declined. The decline reflects continued pressure on CIT service
frequency as customers respond to the effects of ongoing economic weakness and
lower volume of Cash Logistics operations. The decline in contribution margin
from Global Services operations is due mainly to a severe contraction in the
volume of high-margin diamond and jewelry shipments.
Corporate expense declined due primarily to lower foreign currency transaction losses, a reduction in general and administrative expense and a $1.7 million increase in royalty income from the licensing agreement with BHS.
Expenses from former operations increased due to higher costs related to our primary U.S. retirement plans.
Nine-Month Period. Segment operating profit declined 22% due primarily to lower margins in International operations. The decline was partially offset by the gain related to the acquisition in India, improved results in North America and company-wide cost reductions. The negative margin comparison in International operations reflects the inclusion in 2008 results of profits from the monetary conversion project that was completed in 2008, continued pressure on service frequency and higher foreign currency transaction losses.
Corporate expense declined due primarily to lower foreign currency transaction losses, an increase of $5.0 million in royalty income from the licensing agreement with BHS, the inclusion in last year's results of $4.8 million of costs related to strategic reviews and proxy matters, a $2.7 million gain on the sale of real estate, reversals of long-term incentive accruals and a reduction in general and administrative expense.
Higher expenses related to former operations were driven by increased retirement expenses, partially offset by a $4.2 million gain related to the sale of coal assets.
Segment Operating Results
COMPARISON OF RESULTS FOR THE THIRD QUARTER
Three Months Ended Percentage
September 30, Change
(In millions) 2008 Constant-Currency Change Currency Change 2009 As Reported Constant-Currency
Revenues:
EMEA $ 356.9 (20.3 ) (12.2 ) 324.4 (9 ) (6 )
Latin America 200.8 45.4 (11.3 ) 234.9 17 23
Asia Pacific 18.1 1.9 (0.1 ) 19.9 10 10
International 575.8 27.0 (23.6 ) 579.2 1 5
North America 237.6 (12.8 ) (2.2 ) 222.6 (6 ) (5 )
Revenues $ 813.4 14.2 (25.8 ) 801.8 (1 ) 2
Operating profit:
International $ 56.3 11.0 (2.1 ) 65.2 16 20
North America 11.8 (1.3 ) (0.1 ) 10.4 (12 ) (11 )
Segment operating profit $ 68.1 9.7 (2.2 ) 75.6 11 14
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International
Revenues increased 1% (5% on a constant-currency basis) from the prior-year
period. The 5% constant-currency increase reflected higher revenues in Latin
America and Asia-Pacific primarily due to incremental revenues from recently
acquired operations in both regions as well as price increases in Latin America,
including the effects of inflation. These increases were partially offset by
lower volumes in CIT and Global Services operations in EMEA.
Operating profit increased 16% due primarily to a gain related to the acquisition of a controlling interest in a CIT and Global Services operation in India. The profit increase was partially offset by lower service frequency in CIT operations and reduced contribution margin from Global Services operations resulting from weak diamond and jewelry markets.
EMEA. Revenues decreased 9% (6% on a constant-currency basis) to $324.4 million. The 6% constant-currency decline was due primarily to the loss of certain guarding contracts and lower diamond and jewelry volumes. The reduction in revenues was also attributable to generally lower economic activity and price declines. The continued weakness in the high-margin diamond and jewelry markets, and the decrease in service frequency, along with the continued pressure on pricing, led to the decline in operating profit.
Latin America. Revenues increased 17% (23% on a constant-currency basis) to $234.9 million. The 23% constant-currency increase was due primarily to incremental revenues from Brazilian operations acquired in January 2009 ("Sebival"), higher volumes across the region and normal inflationary price increases. The recently acquired operations of Sebival generated revenues of $20 million. Operating profit declined due to the inflationary price increases not fully recovering cost increases, the inclusion in last year's results of income from the currency conversion project in Venezuela and unfavorable changes in foreign currency exchange rates, partially offset by incremental profits from Sebival's operations.
Asia-Pacific. Revenues increased 10% (10% on a constant-currency basis) to $19.9 million. The 10% increase was due mainly to incremental revenues from third-quarter acquisitions in India and China. Operating profit increased substantially due to the gain related to the acquisition in India. The acquisition gain was partially offset by lower diamond and jewelry volume and pricing pressures.
North America
Revenues decreased 6% (5% on a constant-currency basis) to $222.6
million. Revenues decreased 5% on a constant-currency basis as higher average
selling prices were offset by lower CIT and Global Services volumes in the
U.S. There is a growing use of check-imaging equipment in ATMs, which
has resulted in fewer service stops for these ATMs. Operating profit decreased
12% or $1.4 million due primarily to lower volumes in the U.S., reflecting lower
service frequency, and continued weakness in the high-margin diamond and jewelry
markets, partially offset by higher average selling prices.
During the quarter, we installed approximately 300 units for our CompuSafeŽ high-margin service, bringing 2009 installs up to approximately 2,300 units. This is a 30% increase in the installed base since the end of 2008. Our installed base now stands at approximately 9,800 units. The slowdown in third-quarter installs was expected, as certain customers accelerated third quarter orders into the second quarter. We expect the pace of installations to increase in the fourth quarter and believe we are on track to meet our goal of 3,200 installs for the year. In 2008, revenues from our CompuSafeŽ service represented approximately 5% of North America's revenues.
COMPARISON OF RESULTS FOR THE NINE-MONTH PERIOD
Nine Months Ended Percentage
September 30, Change
(In millions) 2008 Constant-Currency Change Currency Change 2009 As Reported Constant-Currency
Revenues:
EMEA $ 1,040.8 (1.0 ) (116.4 ) 923.4 (11 ) -
Latin America 605.9 99.0 (60.9 ) 644.0 6 16
Asia Pacific 54.7 1.5 (2.8 ) 53.4 (2 ) 3
International 1,701.4 99.5 (180.1 ) 1,620.8 (5 ) 6
North America 702.6 (20.2 ) (17.0 ) 665.4 (5 ) (3 )
Revenues $ 2,404.0 79.3 (197.1 ) 2,286.2 (5 ) 3
Operating profit:
International $ 166.6 (39.5 ) (7.1 ) 120.0 (28 ) (24 )
North America 36.1 2.7 (0.9 ) 37.9 5 8
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International
Revenues declined 5% (increased 6% on a constant-currency basis). The 6%
constant-currency increase was due primarily to incremental revenues from
operations acquired in January 2009 and price increases (driven by inflation) in
Latin America. Revenues improved in Latin America despite the inclusion in 2008
results of $50 million of revenues related to the currency conversion project.
Operating profit declined 28% due primarily to the absence of last year's profitable currency conversion project, the negative impact of the continuing global economic slowdown on pricing and service frequency, and higher foreign currency transaction losses. The decline was partially offset by the gain related to the acquisition in India.
EMEA. Revenues decreased 11% (remained flat on a constant-currency basis) to $923.4 million. Revenues remained flat on a constant-currency basis as growth from Global Services' commodities business was offset by the loss of certain guarding contracts and lower diamond and jewelry volumes. Operating profit declined significantly versus the year-ago period due to the continued weakness in the high-margin diamond and jewelry markets, $4 million of accounting corrections recorded in Belgium in the second quarter, and the continued pressure on pricing and volume declines. The declines reflect lower economic activity and pricing pressure in most European countries. Management changes and restructuring activities resulted in $9.1 million of severance and other costs in 2009.
Latin America. Revenues increased 6% (16% on a constant-currency basis) to $644.0 million. Revenues increased 16% on a constant-currency basis due mainly to incremental revenues from a Brazilian operation acquired in January 2009 and normal inflationary price increases in several countries. The recently acquired operations of Sebival provided revenues of approximately $52 million. Operating profit declined due primarily to the absence of profits from the currency conversion project, the inflationary price increases not fully recovering cost increases and an increase in foreign currency transaction losses, partially offset by incremental profits from Sebival's operations.
Asia-Pacific. Revenues decreased 2% (increased 3% on a constant-currency basis) to $53.4 million. The 3% constant-currency increase was due mainly to incremental revenues from third-quarter acquisitions in India and China. Operating profit increased due to the gain related to the recent acquisition in India and higher volumes in lower margin commodity shipments. The profit increases were partially offset by lower diamond and jewelry volume, pricing pressures and unfavorable foreign exchange rates.
North America
Revenues decreased 5% (3% on a constant-currency basis) to $665.4
million. Revenues decreased 3% on a constant-currency basis as higher average
selling prices were offset by lower volumes. Operating profit increased 5% or $2
million due primarily to higher average selling prices, lower net fuel expenses,
and lower legal settlement expenses. The profit increase was partially offset by
lower service frequency and higher pension and other employee benefit
expenses. In addition, there was a $2.0 million curtailment gain in the first
quarter of 2008 related to the freezing of the Canadian postretirement benefit
plan.
Supplemental Revenue Analysis - Revenues by Service Line
Three Months Ended Percentage
September 30, Change
Revenues Constant-
from Currency
2008 without Currency Constant- without
(In Currency Conversion 2008 as Currency Currency Constant- Currency
millions) Conversion (a) Reported Change Change 2009 As Reported Currency Conversion
Revenues
from:
Core
services $ 426.9 1.2 428.1 3.9 (17.4 ) 414.6 (3 ) 1 1
Value-added
services 272.6 2.8 275.4 26.6 (3.6 ) 298.4 8 10 11
Other
security
services 109.9 - 109.9 (16.3 ) (4.8 ) 88.8 (19 ) (15 ) (15 )
Total
revenues $ 809.4 4.0 813.4 14.2 (25.8 ) 801.8 (1 ) 2 2
Nine Months Ended Percentage
September 30, Change
Revenues Constant-
from Currency
2008 without Currency Constant- without
(In Currency Conversion 2008 as Currency Currency Currency
millions) Conversion (a) Reported Change Change 2009 As Reported Constant- Currency Conversion
Revenues
from:
Core
services $ 1,249.8 15.2 1,265.0 62.5 (94.7 ) 1,232.8 (3 ) 5 6
Value-added
services 787.9 35.1 823.0 34.5 (70.7 ) 786.8 (4 ) 4 9
Other
security
services 316.0 - 316.0 (17.7 ) (31.7 ) 266.6 (16 ) (6 ) (6 )
Total
revenues $ 2,353.7 50.3 2,404.0 79.3 (197.1 ) 2,286.2 (5 ) 3 6
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(a) Venezuela changed its national currency from the bolivar to the bolivar fuerte on January 1, 2008, and Brink's performed additional cash handlingservices to assist in the conversion. The project was completed in 2008.
Our primary services include:
Core services
ˇ Cash-in-transit ("CIT") armored car transportation
ˇ Automated teller machine ("ATM") replenishment and servicing
Value-added services
ˇ Global Services - arranging secure long-distance transportation of valuables
ˇ Cash Logistics - money processing, supply chain management of cash; from point-of-sale through transport, vaulting and bank deposit
Other security services
ˇ Guarding services, including airport security
We typically provide customized services under separate contracts designed to meet the distinct needs of customers. Contracts usually cover an initial term of at least one year and in many cases one to three years, and generally remain in effect thereafter until canceled by either party.
Supplemental Revenue Analysis - Organic Revenue Growth
Three Months % change Nine Months % change
Ended
Ended September
(In millions) September 30, from prior period 30, from prior period
2007 Revenues $ 692.7 1,977.8
Effects on revenue of:
Organic Revenue Growth (a) 80.3 12 242.6 12
Acquisitions and dispositions 1.7 - 15.8 1
Changes in currency exchange rates 38.7 5 167.8 9
2008 Revenues 813.4 17 2,404.0 22
Effects on revenue of:
Organic Revenue Growth (a) (13.0 ) (2 ) 13.3 1
. . .
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