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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
[ ] 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 (I.R.S. Employer
incorporation or organization) Identification No.)
1801 Bayberry Court, Richmond, Virginia 23226-8100
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (804) 289-9600
--------------
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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes X No
--- ---
As of November 3, 2003, 54,253,423 shares of $1 par value common stock were
outstanding.
1
Part I - Financial Information
The Brink's Company
and subsidiaries
Consolidated Balance Sheets
(In millions, except per share amounts)
September 30, December 31,
2003 2002
- ---------------------------------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 155.4 102.3
Accounts receivable, net 552.7 540.0
Prepaid expenses and other 79.1 58.4
Deferred income taxes 95.0 81.3
- ---------------------------------------------------------------------------------------------------------------------
Total current assets 882.2 782.0
Property and equipment, net 861.2 871.2
Goodwill, net 238.5 227.9
Voluntary Employees' Beneficiary Association trust 99.9 18.2
Deferred income taxes 317.5 349.3
Other assets 204.9 211.3
- ---------------------------------------------------------------------------------------------------------------------
Total assets $ 2,604.2 2,459.9
=====================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 52.0 41.8
Current maturities of long-term debt 15.9 13.3
Accounts payable 276.9 261.9
Accrued liabilities 514.4 476.3
- ---------------------------------------------------------------------------------------------------------------------
Total current liabilities 859.2 793.3
Long-term debt 286.6 304.2
Accrued pension costs 120.9 122.6
Postretirement benefits other than pensions 473.8 471.7
Deferred revenue 129.3 127.0
Deferred income taxes 28.7 28.4
Other liabilities 231.5 231.5
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities 2,130.0 2,078.7
Commitments and contingent liabilities (Note 9)
Shareholders' equity:
Common stock, par value $1 per share:
Authorized: 100.0 shares;
Issued and outstanding: 2003 and 2002 - 54.3 shares 54.3 54.3
Capital in excess of par value 379.6 383.0
Retained earnings 263.4 213.1
Accumulated other comprehensive loss (208.5) (236.2)
Employee benefits trust, at market value (14.6) (33.0)
=====================================================================================================================
Total shareholders' equity 474.2 381.2
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 2,604.2 2,459.9
=====================================================================================================================
See accompanying notes to consolidated financial statements.
2
The Brink's Company
and subsidiaries
Consolidated Statements of Operations
(In millions, except per share amounts)
(Unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
2003 2002 2003 2002
- -------------------------------------------------------------------------------------------------------------------
Revenues $ 1,005.2 946.5 2,905.4 2,752.3
Expenses:
Operating expenses 858.9 794.4 2,504.3 2,308.1
Selling, general and administrative
expenses 131.4 120.9 382.8 346.9
- -------------------------------------------------------------------------------------------------------------------
Total expenses 990.3 915.3 2,887.1 2,655.0
Other operating income, net 7.0 2.3 14.9 5.0
- -------------------------------------------------------------------------------------------------------------------
Operating profit 21.9 33.5 33.2 102.3
Interest expense (6.6) (5.3) (19.6) (17.1)
Interest and other income, net 0.7 0.2 6.7 (0.1)
Stabilization Act compensation - 5.9 - 5.9
Minority interest (2.8) (0.6) (5.4) (1.8)
- -------------------------------------------------------------------------------------------------------------------
Income from continuing operations
before income taxes 13.2 33.7 14.9 89.2
Provision for income taxes 2.1 13.0 2.7 32.9
- -------------------------------------------------------------------------------------------------------------------
Income from continuing operations 11.1 20.7 12.2 56.3
Income (loss) from discontinued operations,
net of tax 38.9 1.4 42.2 (7.0)
- -------------------------------------------------------------------------------------------------------------------
Net income $ 50.0 22.1 54.4 49.3
===================================================================================================================
Basic net income (loss) per
common share:
Continuing operations $ 0.21 0.38 0.23 1.06
Discontinued operations 0.73 0.03 0.80 (0.13)
- -------------------------------------------------------------------------------------------------------------------
$ 0.94 0.41 1.03 0.93
- -------------------------------------------------------------------------------------------------------------------
Diluted net income (loss) per
common share:
Continuing operations $ 0.21 0.38 0.23 1.05
Discontinued operations 0.73 0.03 0.80 (0.13)
- -------------------------------------------------------------------------------------------------------------------
$ 0.94 0.41 1.03 0.92
===================================================================================================================
See accompanying notes to consolidated financial statements.
3
The Brink's Company
and subsidiaries
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
Nine Months
Ended September 30,
2003 2002
- ------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 54.4 49.3
Adjustments to reconcile net income to net cash provided
by operating activities:
(Income) loss from discontinued operations, net of tax (42.2) 7.0
Depreciation and amortization 126.9 112.0
Impairment charges from subscriber disconnects 26.0 24.8
Amortization of deferred revenue (18.9) (18.0)
Aircraft heavy maintenance expense 15.8 22.8
Deferred income taxes (6.5) 9.9
Provision for uncollectible accounts receivable (2.3) 5.5
Pension expense, net of contributions 18.7 (19.7)
Other operating, net 8.3 17.0
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable 7.5 (42.5)
Prepaid and other current assets (16.6) (5.5)
Accounts payable and accrued liabilities 25.6 53.7
Deferred subscriber acquisition costs (13.7) (12.9)
Deferred revenue from new subscribers 20.7 20.2
Other, net (4.7) (6.2)
Discontinued operations, net 14.6 (53.9)
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 213.6 163.5
- ------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (147.1) (139.0)
Aircraft heavy maintenance expenditures (17.7) (24.0)
Proceeds from:
Disposal of natural gas business 81.2 -
Disposal of property and equipment 14.4 3.4
Notes receivable and royalties related to sale of former coal operations 26.0 -
Contributions to Voluntary Employees' Beneficiary Association trust (82.0) -
Acquisitions (8.1) -
Other, net (1.3) 0.5
Discontinued operations, net (4.7) (15.7)
- ------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (139.3) (174.8)
- ------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Long term debt:
Additions 81.4 293.0
Repayments (108.6) (237.1)
Deferred financing cost (0.4) (1.5)
Short-term borrowings, net 3.7 9.6
Dividends (3.7) (4.1)
Redemption of preferred shares - (10.8)
Repurchase of common shares - (0.3)
Other (0.1) 1.4
- ------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (27.7) 50.2
- ------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 6.5 (2.7)
- ------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 53.1 36.2
Cash and cash equivalents at beginning of period 102.3 86.7
- ------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 155.4 122.9
==================================================================================================================
See accompanying notes to consolidated financial statements.
4
THE BRINK'S COMPANY
and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of presentation and accounting changes
The Brink's Company (along with its subsidiaries, the "Company") has
three operating segments within its "Business and Security Services"
businesses:
o Brink's, Incorporated ("Brink's")
o Brink's Home Security, Inc. ("BHS")
o BAX Global Inc. ("BAX Global")
The Company also has significant assets, including approximately $100
million of assets held by its Voluntary Employees' Beneficiary
Association trust ("VEBA"), and liabilities associated with its former
coal operations and expects to have significant ongoing expenses and
cash outflows related to former coal operations.
As discussed in more detail below, the Company sold its natural gas
business in the third quarter of 2003, sold a portion of its gold
assets in the fourth quarter of 2003, and has agreed to sell its timber
business and substantially all of its remaining coal properties located
in West Virginia. The timber and coal transactions are expected to
close in late 2003.
In May 2003, the shareholders of The Pittston Company approved a
proposal to change the name to "The Brink's Company" and the Company's
shares now trade on the New York Stock Exchange under the symbol "BCO."
The Company's shares previously traded on the New York Stock Exchange
under the symbol "PZB."
The Company's unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in
the United States of America ("GAAP") for interim financial reporting
and applicable quarterly reporting regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the
information and notes required by GAAP for complete financial
statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair
presentation have been included. Certain prior period amounts have been
reclassified to conform to the current period's financial statement
presentation. Operating results for the interim periods of 2003 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2003. For further information, refer to the
Company's Annual Report on Form 10-K for the year ended December 31,
2002.
In January 2003, the Financial Accounting Standards Board ("FASB")
issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of
Variable Interest Entities." FIN 46 provided guidance on the
identification of entities for which control is achieved through means
other than through voting rights ("variable interest entities") and how
to determine when and which business enterprises should consolidate
variable interest entities. Variable interest entities created after
January 31, 2003 are assessed for consolidation using the new
interpretation. Under FIN 46 and subsequent statements which
temporarily delayed implementation of FIN 46, variable interest
entities in which the Company holds a variable interest that it
acquired before February 1, 2003 will be assessed for consolidation in
the fourth quarter 2003. The Company is analyzing the impact of this
interpretation, and based on progress made to date, the interpretation
is not expected to have a material effect on the Company's consolidated
financial statements.
5
2. Earnings per share
Three Months Nine Months
Ended September 30, Ended September 30,
(In millions) 2003 2002 2003 2002
------------------------------------------------------------------------------------------------------------
Numerator:
Income from continuing operations $ 11.1 20.7 12.2 56.3
Preferred stock dividends - (0.2) - (0.5)
Premium on redemption of preferred
stock (a) - (0.6) - (0.6)
------------------------------------------------------------------------------------------------------------
Numerator for basic and diluted income
per share from continuing operations $ 11.1 19.9 12.2 55.2
============================================================================================================
Denominator:
Basic weighted average
common shares outstanding 53.3 52.2 53.0 52.0
Effect of dilutive stock options 0.1 0.3 - 0.3
------------------------------------------------------------------------------------------------------------
Diluted weighted average
common shares outstanding 53.4 52.5 53.0 52.3
============================================================================================================
Antidilutive stock options excluded
from computation 3.0 1.1 3.4 1.1
============================================================================================================
(a) Represents the excess of cash paid to holders over the carrying
value of the preferred shares redeemed in 2002.
Unallocated shares of the Company's common stock held by The Brink's
Company Employee Benefits Trust (the "Trust") are treated as treasury
shares for earnings per share purposes. Accordingly, such shares are
excluded from earnings per share calculations. As of September 30, 2003
and 2002, 0.8 million shares and 1.9 million shares, respectively, were
held by the Trust.
The Company accounts for its stock-based compensation plans using the
intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" and related
interpretations. Accordingly, since options are granted with an
exercise price equal to the market price of the stock on the date of
grant, the Company has not recognized any compensation expense related
to its stock option plans.
6
Had compensation costs for stock-based compensation plans been
determined based on the fair value of awards at the grant dates
consistent with the optional recognition provision of SFAS No. 123,
"Accounting for Stock Based Compensation," net income per share would
have been the pro forma amounts indicated below:
Three Months Nine Months
(In millions, except Ended September 30, Ended September 30,
per share amounts) 2003 2002 2003 2002
------------------------------------------------------------------------------------------------------------
Net income:
As reported $ 50.0 22.1 54.4 49.3
Less: stock-based compensation
expense determined under fair value
method, net of related tax effects (1.0) (1.6) (3.3) (3.2)
------------------------------------------------------------------------------------------------------------
Pro forma $ 49.0 20.5 51.1 46.1
============================================================================================================
Net income per share:
Basic, as reported $ 0.94 0.41 1.03 0.93
Basic, pro forma 0.92 0.38 0.97 0.87
Diluted, as reported $ 0.94 0.41 1.03 0.92
Diluted, pro forma 0.92 0.38 0.97 0.86
------------------------------------------------------------------------------------------------------------
The fair value of each stock option grant is estimated at the time of
the grant using the Black-Scholes option-pricing model. Pro forma net
income and net income per share disclosures are computed by amortizing
the estimated fair value of the grants over option vesting periods.
During third quarter of 2003, the Company granted options to purchase
0.6 million shares of the Company's stock with an weighted-average
exercise price of $15.24 per share. The assumptions used and the
resulting weighted-average grant-date estimates of fair value for
options granted are as follows:
Three Months
-----------------------------------------------------------------
Ended September 30,
2003
-----------------------------------------------------------------
Assumptions:
Expected dividend yield 0.5%
Expected volatility 37%
Risk-free interest rate 2.3%
Expected term (in years) 4.0
Fair value estimates:
In millions $ 3.0
Per share $ 4.69
-----------------------------------------------------------------
3. Discontinued operations
The Company closed the sale of its natural gas business in August 2003
and received approximately $81 million in net cash proceeds. At the
effective date of sale, the natural gas business had approximately $24
million carrying value of net assets.
In July 2003, the Company agreed to sell its timber business for
approximately $38 million in cash. The sale of the timber business is
contingent upon various closing conditions and is expected to close in
late 2003. At September 30, 2003, the timber business had approximately
$7 million in the carrying value of net assets and approximately $5
million in future operating lease obligations that are not expected to
transfer to the buyers.
7
Discontinued operations in the third quarter of 2003 includes an
after-tax gain on the sale of the natural gas business. The after-tax
results of operations for the natural gas and timber businesses have
been reclassified from continuing operations to discontinued operations
for all periods presented. In the first half of 2003, the Company
recorded a charge in discontinued operations related to a revision of
the estimated withdrawal liabilities for coal-related multi-employer
pension plans. In 2002, the Company revised its estimate of coal
operating losses to be incurred during the disposal period.
Summary of Discontinued Operations
Three Months Ended Nine Months Ended
September 30, September 30,
(in millions) 2003 2002 2003 2002
------------------------------------------------------------------------------------------------------------
Gain on sale of natural
gas business $ 57.3 - 57.3 -
Pretax profit (loss):
Natural gas 2.3 2.3 11.2 6.6
Timber 0.1 (0.2) 0.3 (0.7)
Adjustments to coal
contingent liabilities (0.1) - (3.6) -
Coal operating losses during
the disposal period - - - (15.0)
------------------------------------------------------------------------------------------------------------
59.6 2.1 65.2 (9.1)
Income taxes (20.7) (0.7) (23.0) 2.1
------------------------------------------------------------------------------------------------------------
Total $ 38.9 1.4 42.2 (7.0)
============================================================================================================
The following table shows selected financial information for the
Company's natural gas and timber businesses for the third quarter and
first nine months of 2003 and 2002.
Three Months Ended Nine Months Ended
September 30, September 30,
(In millions) 2003 2002 2003 2002
------------------------------------------------------------------------------------------------------------
Natural gas
Revenue $ 1.6 1.6 7.4 4.8
Income before income taxes 2.3 2.3 11.2 6.6
============================================================================================================
Timber
Revenue $ 5.5 5.6 16.0 15.2
Income before income taxes 0.1 (0.2) 0.3 (0.7)
============================================================================================================
9
4. Costs of former operations included in continuing operations
Prior to 2003, expenses related to former coal operations were
classified as part of discontinued operations. In 2003, the Company
began recognizing coal-related expenses as a part of continuing
operations.
Three Months Ended Nine Months Ended
September 30, September 30,
(In millions) 2003 2003
---------------------------------------------------------------------------------------------------
Company-sponsored postretirement
benefits other than pensions $ 12.5 37.2
Black lung 1.4 4.3
Pension (0.4) (0.7)
Administrative, legal and other
expenses, net 2.6 6.4
Idle and closed mine expense and
other income 1.1 4.5
---------------------------------------------------------------------------------------------------
$ 17.2 51.7
---------------------------------------------------------------------------------------------------
In October 2003, the Company reached a definitive agreement to sell
substantially all of its coal properties in West Virginia. Consummation
of the proposed transaction is subject to typical closing conditions.
5. Voluntary Employees' Beneficiary Association trust
The Company contributed $50 million in the third quarter of 2003 and
$32 million in the second quarter of 2003 to its Voluntary Employees'
Beneficiary Association trust ("VEBA"), and at September 30, 2003, the
Company's VEBA held approximately $100 million. The VEBA is designed to
tax efficiently fund certain retiree medical liabilities, primarily for
retired coal miners and their dependents.
Beginning in the fourth quarter of 2003, the VEBA's assets are invested
primarily using actively managed accounts with asset allocation targets
of 70% equity securities and 30% fixed income securities. Prior to the
fourth quarter of 2003, assets had been invested solely in fixed income
instruments. Investments held by the VEBA are currently classified as
available-for-sale and are reported at fair value. Unrealized gains and
losses are currently recognized in other comprehensive income and
realized gains and losses are recognized in earnings. Because the new
asset allocation is more likely to result in larger market value
fluctuations, the Company expects its earnings and other comprehensive
income could be affected in the fourth quarter.
The Company is exploring alternatives which may permit it to account
for the VEBA assets in accordance with SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions". The
accounting for assets, such as the VEBA, under SFAS No. 106 is similar
to the accounting for pension trusts under SFAS No. 87, "Employer's
Accounting for Pensions".
10
6. Costs associated with exit activities
In 2003, management initiated a plan to close the Brink's, Incorporated
corporate headquarters in Darien, Connecticut and relocate employees to
either the Brink's, Incorporated U.S. headquarters in Coppell, Texas or
The Brink's Company headquarters in Richmond, Virginia. The following
summarizes the 2003 expense, payments and liability for such costs and
the total amount of expense expected to be incurred:
One-time Contract
Termination Termination
(In millions) Benefits Costs Other Total
---------------------------------------------------------------------------------------------------------
Balance at December 31, 2002 $ - - - -
Expense 1.5 - 2.7 4.2
Payments (0.7) - (1.9) (2.6)
---------------------------------------------------------------------------------------------------------
Balance at September 30, 2003 $ 0.8 - 0.8 1.6
=========================================================================================================
By the time the plan is completed, a total expense of approximately
$5-6 million is expected to have been incurred including approximately
$2 million in one-time termination benefits, approximately $1 million
in contract termination costs and approximately $2-3 million for other
costs. In the third quarter of 2003, $3.3 million was recognized as a
component of selling, general and administrative costs ($4.2 million in
the first nine months of 2003).
In International operations at Brink's, Incorporated approximately $4.1
million of one-time termination benefits were paid and expensed in the
nine months ended September 30, 2003 associated with European work
force reductions.
7. Supplemental cash flow information
Nine Months
Ended September 30,
(In millions) 2003 2002
----------------------------------------------------------------------------------------------------------
Cash paid for:
Interest $ 18.9 17.6
Income taxes, net of refunds 17.5 7.6
==========================================================================================================
Depreciation of property and equipment $ 121.2 107.2
Amortization of BHS deferred subscriber acquisition costs 5.7 4.8
----------------------------------------------------------------------------------------------------------
Total depreciation and amortization $ 126.9 112.0
==========================================================================================================
11
8. Comprehensive income
Three Months Nine Months
Ended September 30, Ended September 30,
(In millions) 2003 2002 2003 2002
-----------------------------------------------------------------------------------------------------------
Net income $ 50.0 22.1 54.4 49.3
Other comprehensive income (loss),
net of reclasses and taxes:
Foreign currency translation
adjustments 3.0 (9.2) 25.2 0.8
Deferred benefit (expense) on
cash flow hedges (2.0) (0.2) 2.6 (0.8)
Unrealized losses on
marketable securities (0.2) (0.1) (0.1) (0.2)
-----------------------------------------------------------------------------------------------------------
Comprehensive income $ 50.8 12.6 82.1 49.1
===========================================================================================================
9. Contingencies
The Company is defending various potentially significant civil suits.
Although the Company is defending these cases vigorously and believes
that its defenses have merit, it is possible that one or more of these
suits ultimately may be decided in favor of the plaintiffs. If so, the
Company expects that the ultimate amount of unaccrued losses could
range from $0 to $40 million.
At September 30, 2003, the present value of the Company's obligations
for coal equipment operating leases and advance minimum royalty
obligations that are expected to be transferred to purchasers was
approximately $8 million. The Company expects to transfer substantially
all of these obligations to the purchaser of its West Virginia coal
properties. To the extent that obligations are not transferred to
purchasers, the Company may need to record additional expense.
The Company will continue to record adjustments to contingent assets
and liabilities for former coal operations within discontinued
operations.
At September 30, 2003, the liability recorded for the Company's United
Mine Workers of America ("UMWA") Combined Benefit Fund obligations
under the Coal Industry Retiree Health Benefit Act of 1992 was $168.4
million, reflecting the recorded liability at December 31, 2002 less
payments made since the end of 2002. This liability will be adjusted as
new historical data is received and assumptions used to estimate the
liability change. The Company normally revises its estimated liability
in the fourth quarter each year when it receives the annual actuarial
evaluation.
The Company participates in the UMWA 1950 and 1974 pension plans at
defined contribution rates, but expects to ultimately withdraw from
these plans. At September 30, 2003, the Company's estimated withdrawal
liabilities were $38.0 million. The Company's estimate of the
obligation is based on several factors, including funding status and
benefit levels of the plans and the date the Company is determined to
have completely withdrawn from the plans. Since these factors may
change over time, the ultimate withdrawal obligation, if any, could
change materially.
12
The Company has also recorded estimated liabilities for other
contingent liabilities, including those for expected settlement of
coal-related workers' compensation claims and certain reclamation
obligations. Annual actuarial and engineering valuations of these
liabilities are typically completed in the fourth quarter each year.
In 1999, the U.S. District Court of the Eastern District of Virginia
entered a final judgment in favor of certain of the Company's
subsidiaries, ruling that the Federal Black Lung Excise Tax ("FBLET")
is unconstitutional as applied to export coal sales. Through September
30, 2003, the Company had received refunds including interest of $27.2
million, including $2.8 million received in 2003. The Company continues
to pursue the refund of other FBLET payments. Due to uncertainty as to
the ultimate receipt of additional amounts, if any, which could amount
to as much as $18 million (before income taxes), as well as the timing
of any additional FBLET refunds, the Company has not currently recorded
receivables for such additional FBLET refunds.
13
The Brink's Company
and Subsidiaries
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Summary
The Brink's Company (along with its subsidiaries, the "Company") has three
operating segments within its "Business and Security Services" businesses:
o Brink's, Incorporated ("Brink's")
o Brink's Home Security, Inc. ("BHS")
o BAX Global Inc. ("BAX Global")
The major services offered by Brink's include armored car transportation,
automated teller machine ("ATM") replenishment and servicing, currency and
deposit processing, coin sorting and wrapping, arranging the secure air
transportation of valuables ("Global Services") and the deploying and servicing
of safes and safe control devices, including its patented CompuSafe(R) service.
BHS is primarily engaged in the business of marketing, selling, installing,
monitoring and servicing electronic security systems in owner-occupied,
single-family residences in North America. BAX Global provides transportation
and supply chain management services on a global basis, specializing in the
heavy freight market for business-to-business shipping.
The Company also has significant assets, including approximately $100 million of
assets held by its Voluntary Employees' Beneficiary Association trust ("VEBA"),
and liabilities associated with its former coal operations and expects to have
significant ongoing expenses and cash outflows related to former coal
operations.
As discussed in more detail below, the Company sold its natural gas business in
the third quarter of 2003, sold the majority of its gold assets in the fourth
quarter of 2003, and has agreed to sell its timber business and substantially
all of its remaining coal properties located in West Virginia. The timber and
coal transactions are expected to close in late 2003.
Throughout this report, the reference to constant currency is made so that a
segment can be viewed without the impacts of changing foreign currency exchange
rates, facilitating a comparative view of business growth. In the third quarter
and first nine months of 2003 the U.S. dollar generally weakened against other
currencies, so growth at constant currency exchange rates was lower than growth
at actual currency exchange rates. Changes in foreign currency exchange rates
have not materially affected period-to-period comparisons of operating profit.
14
RESULTS OF OPERATIONS
Consolidated
Three Months Nine Months
Ended September 30, % Ended September 30, %
(Dollars in millions) 2003 2002 Change 2003 2002 Change
- ------------------------------------------------------------------------------------------------------------------
Revenues:
Brink's $ 427.2 387.6 10 $ 1,229.3 1,188.7 3
BHS 78.9 72.2 9 229.3 209.6 9
BAX Global 493.3 483.3 2 1,430.3 1,343.0 7
- ------------------------------------------------------------------------------------------------------------------
Business and Security
Services 999.4 943.1 6 2,888.9 2,741.3 5
Other Operations 5.8 3.4 71 16.5 11.0 50
- ------------------------------------------------------------------------------------------------------------------
Revenues $ 1,005.2 946.5 6 $ 2,905.4 2,752.3 6
==================================================================================================================
Operating profit (loss):
Brink's $ 33.4 16.1 107 $ 68.0 67.6 1
BHS 18.1 14.2 27 52.5 45.0 17
BAX Global (5.3) 9.9 NM (13.3) 6.4 NM
- ------------------------------------------------------------------------------------------------------------------
Business and Security
Services 46.2 40.2 15 107.2 119.0 (10)
Former coal operations (17.2) - NM (51.7) - NM
Corporate and other (7.1) (6.7) (6) (22.3) (16.7) (34)
- ------------------------------------------------------------------------------------------------------------------
Operating profit $ 21.9 33.5 (35) $ 33.2 102.3 (68)
==================================================================================================================
Income (loss) from:
Continuing operations $ 11.1 20.7 (46) $ 12.2 56.3 (78)
Discontinued operations 38.9 1.4 NM 42.2 (7.0) NM
- ------------------------------------------------------------------------------------------------------------------
Net Income $ 50.0 22.1 126 $ 54.4 49.3 10
==================================================================================================================
Income from continuing operations was lower in the third quarter and first nine
months of 2003 principally due to significant expenses associated with former
coal operations recorded in continuing operations beginning in 2003. In 2002,
these types of expenses were included within discontinued operations. Operating
profit from Business and Security Services improved in the third quarter over
the 2002 period as improved performance at Brink's and BHS were partially offset
by lower results at BAX Global. Operating profit from Business and Security
Services in the nine months in 2003 was lower than the 2002 period primarily
because of lower results at BAX Global.
Operating profit at Brink's in the third quarter improved from the prior year on
better international earnings. Brink's operating profit in the first quarter of
last year reflected the benefit of special euro currency-related processing and
transportation work. BAX Global's results in North America are below last year's
level primarily as a result of lower shipments through its largely fixed-cost
Intra-American air transportation network.
Discontinued operations in the third quarter of 2003 include an after-tax gain
on the sale of the natural gas business. The after-tax results of operations for
the natural gas and timber businesses have been reclassified from continuing
operations to discontinued operations for all periods presented. In the first
half of 2003, the Company recorded a charge in discontinued operations related
to a revision of the estimated withdrawal liabilities for coal-related
multi-employer pension plans. In 2002, the Company revised its estimate of coal
operating losses to be incurred during the disposal period.
15
Brink's, Incorporated
Three Months Nine Months
Ended September 30, % Ended September 30, %
(Dollars in millions) 2003 2002 Change 2003 2002 Change
- ------------------------------------------------------------------------------------------------------------------
Revenues:
North America (a) $ 179.6 175.6 2 $ 531.2 516.7 3
International 247.6 212.0 17 698.1 672.0 4
- ------------------------------------------------------------------------------------------------------------------
Revenues $ 427.2 387.6 10 $ 1,229.3 1,188.7 3
==================================================================================================================
Operating profit:
North America (a) $ 14.3 13.0 10 $ 35.6 37.1 (4)
International 19.1 3.1 NM 32.4 30.5 6
- ------------------------------------------------------------------------------------------------------------------
Segment operating profit $ 33.4 16.1 107 $ 68.0 67.6 1
==================================================================================================================
Operating margin: (%) (%) (%) (%)
North America (a) 8.0 7.4 6.7 7.2
International 7.7 1.5 4.6 4.5
Total 7.8 4.2 5.5 5.7
==================================================================================================================
Depreciation and amortization $ 17.5 15.9 10 $ 50.5 45.7 11
Capital expenditures 19.3 21.6 (11) 54.2 55.1 (2)
==================================================================================================================
(a) Includes U.S. and Canada.
Improved revenues and operating profit for the quarter at Brink's reflected
better results in all regions, with the largest improvements in Europe and South
America. The slightly higher results in the first nine months of 2003 were
primarily due to higher International operating profit, partially offset by
lower North American operating profit. Year-to-date International operating
profit increased over the prior year period, despite the higher profit levels
achieved in the first quarter of 2002 associated with special euro currency
processing and transportation work.
North America
North American operating profits were 10% higher in the third quarter of 2003
versus the prior year on a 2% increase in revenues (1% increase in revenues on a
constant currency basis). The improvement in operating profit was primarily due
to a $4.7 million gain on the sale of operating assets and improved performance
from the cash logistics operations, partially offset by $3.3 million of
severance and other costs associated with the closure of its former headquarters
in Darien, Connecticut, and higher employee benefit expenses.
In 2003, management initiated a plan to close Brink's corporate headquarters in
Darien, Connecticut and relocate employees to either Brink's U.S. headquarters
in Coppell, Texas, or The Brink's Company headquarters in Richmond, Virginia. As
a result, approximately $5-6 million of severance and other costs are expected
to be incurred in the U.S. during 2003, of which $3.3 million were recognized in
the third quarter ($4.2 million in the first nine months of 2003).
The increase in employee benefit costs in 2003 included higher expense from the
Company's primary U.S. pension plan and higher health care costs for active
employees.
16
North American operating profits were 4% lower in the first nine months of 2003
over the same period of 2002 on a 3% increase in revenues (2% increase in
revenues on a constant currency basis) in the first nine months of 2003. Lower
year-to-date operating profit in North America was primarily due to the higher
employee benefit, severance and other costs mentioned above, offset by the gain
on the sale of operating assets and improved performance in the cash logistics
operations.
International
International operating profits were $16 million higher in the third quarter of
2003 versus the 2002 period on a 17% increase in revenues (8% increase in
revenues on a constant currency basis). Improved results in the quarter included
higher local currency revenues and operating profits in Europe and South America
as discussed in more detail below. International operating profits for the nine
month period were 6% higher than the 2002 period on a 4% increase in revenues
(1% decrease in revenues on a constant currency basis). Improvements in local
currency revenues and operating profit in South America and Asia Pacific in the
year-to-date 2003 period over 2002 were offset by lower European revenues and
operating profits. European revenue and operating profits in the first-quarter
of 2002 benefited from the special euro currency processing and transportation
work associated with the introduction of the euro on January 1, 2002.
European operating profit in the third quarter of 2003 improved from 2002
reflecting improvements in a number of countries, and the benefits of management
and operational changes, particularly in France and Germany. European revenues
on a constant currency basis were higher generally due to better performance and
partially because of additional revenues associated with an acquisition in
Belgium. Europe's operating profit for the first nine months of 2003 was below
the same period last year primarily due to the absence of the euro work
performed in the first quarter of 2002 and approximately $4.1 million in
severance expense incurred in 2003 associated with European workforce
reductions. Although the economies in Europe continue to be sluggish, European
operating results for the remainder of 2003 are expected to continue to benefit
from management changes and workforce reductions made to align resources to meet
business needs.
In South America, operating profit in the third quarter of 2003 was higher than
in the same quarter last year reflecting better performance in Venezuela.
Venezuela is Brink's largest operation in South America. Favorable market
conditions and lower labor costs as a percentage of revenue benefited
Venezuela's performance in 2003. South America's operating profit in the first
nine months of 2003 was higher than the same period last year primarily due to
the improved results in Venezuela, partially offset by lower operating
performance in Brazil (Brink's second largest operation in South America) as a
result of the continuing difficult economic and operating conditions. Overall,
economic conditions in South America seem to be improving, although the
conditions remain volatile.
Asia Pacific operating profits in the third quarter and first nine months of
2003 were higher than for the same periods last year primarily due to improved
results in Australia and Hong Kong.
17
Brink's Home Security
Three Months Nine Months
Ended September 30, % Ended September 30, %
(Dollars in millions) 2003 2002 Change 2003 2002 Change
- -------------------------------------------------------------------------------------------------------------------
Revenues $ 78.9 72.2 9 $ 229.3 209.6 9
- -------------------------------------------------------------------------------------------------------------------
Operating profit:
Recurring services (a) $ 31.7 26.5 20 $ 93.4 81.1 15
Investment in new subscribers (b) (13.6) (12.3) 11 (40.9) (36.1) 13
- -------------------------------------------------------------------------------------------------------------------
Segment operating profit $ 18.1 14.2 27 $ 52.5 45.0 17
===================================================================================================================
Operating margin 22.9% 19.7% 22.9% 21.5%
Monthly Recurring Revenues (c) $ 22.7 20.5 11
===================================================================================================================
Cash flow information:
Depreciation and amortization (d) $ 12.1 11.3 7 $ 35.5 32.0 11
Impairment charges from
subscriber disconnects 9.9 9.4 5 26.0 24.8 5
Amortization of deferred revenue (e) (6.7) (6.2) 8 (18.9) (18.0) 5
Deferred subscriber acquisition costs
(current year payments) (4.8) (4.5) 7 (13.7) (12.9) 6
Deferred revenue from new subscribers
(current year receipts) 7.5 6.9 9 20.7 20.2 2
Capital expenditures (25.9) (22.3) 16 (71.9) (63.0) 14
===================================================================================================================
(a) Reflects operating profit generated from the existing subscriber base plus
the amortization of deferred revenues, less the amortization of deferred
subscriber acquisition costs (primarily direct selling expenses).
(b) Primarily marketing and selling expenses, net of the deferral of direct
selling expenses, incurred in the acquisition of new subscribers.
(c) See "Reconciliation of Non-GAAP Measures-Monthly Recurring Revenues."
(d) Includes amortization of deferred subscriber acquisition costs.
(e) Includes amortization of deferred revenue related to active subscriber
accounts as well as acceleration of amortization of deferred revenue
related to subscriber disconnects.
The increase in BHS revenues for the third quarter and first nine months of 2003
versus the comparable 2002 periods was primarily due to an 8% larger average
subscriber base as well as 2% higher average monitoring rates in each period.
The slight increase in average monitoring rates is primarily due to changes in
the customer base. The above factors also contributed to an 11% increase in
Monthly Recurring Revenues for September 2003 as compared to September 2002.
Segment operating profit increased $3.9 million for the third quarter and $7.5
million for the first nine months of 2003 from the same periods of 2002 as
higher profit from recurring services was partially offset by an increased
investment in new subscribers. Higher profit from recurring services was
primarily due to increased revenues and improved service margins, partially
offset by higher costs associated with the larger subscriber base.
18
Subscriber Information
Three Months Nine Months
Ended September 30, % Ended September 30, %
(Subscriber data in thousands) 2003 2002 Change 2003 2002 Change
- -----------------------------------------------------------------------------------------------------------------
Number of subscribers:
Beginning of period 795.6 738.6 766.7 713.5
Installations 32.6 26.8 22 88.3 77.7 14
Disconnects (15.0) (14.7) 2 (41.8) (40.5) 3
- -----------------------------------------------------------------------------------------------------------------
End of period 813.2 750.7 8 813.2 750.7 8
=================================================================================================================
Average number of subscribers 804.3 744.2 8 788.8 732.1 8
Annualized disconnect rate 7.4% 7.9% 7.1% 7.4%
=================================================================================================================
Installations increased 22% for the third quarter and 14% for the first nine
months of 2003 as compared to the same periods of 2002 primarily as a result of
growth in traditional as well as newer customer acquisition channels. BHS
believes its 2003 annualized disconnect rates of 7.4% for the quarter and 7.1%
year-to-date improved over the comparable periods of 2002 largely due to the
cumulative effect of having improved its subscriber selection and retention
processes in recent years and its high quality customer service. Disconnect
rates are typically higher in the second and third quarters of the year because
of an increase in residential moves during summer months.
On October 1, 2003, the national "Do Not Call" list was implemented. Although
most of its new subscribers are attracted through other means, a portion of BHS'
new installations are initiated by calls to potential customers. Since there are
other ways to initiate a sale, the impact, if any, that the "Do Not Call" list
will have on BHS' ability to attract new subscribers, or the costs to attract
new subscribers cannot be determined at present.
Reconciliation of Non-GAAP Measures - Monthly Recurring Revenues
Nine Months
Ended September 30,
(In millions) 2003 2002
- -----------------------------------------------------------------------------
September:
Monthly Recurring Revenues ("MRR") (a) $ 22.7 20.5
Amounts excluded from MRR:
Amortization of deferred revenue 2.1 1.9
Other revenues (b) 1.6 1.6
- -----------------------------------------------------------------------------
Revenues on a GAAP basis $ 26.4 24.0
=============================================================================
Revenues on a GAAP basis:
September $ 26.4 24.0
January - August 202.9 185.6
- -----------------------------------------------------------------------------
January - September $ 229.3 209.6
=============================================================================
(a) MRR is calculated based on the number of subscribers at period end
multiplied by the average fee per subscriber received in the last month of
the period for contracted monitoring and maintenance services.
(b) Revenues that are not pursuant to monthly contractual billings
The Company believes the presentation of MRR is useful to investors because the
measure is widely used in the industry to assess the amount of recurring
revenues from subscriber fees a home security business produces.
19
BAX Global
Three Months Nine Months
Ended September 30, % Ended September 30, %
(Dollars in millions) 2003 2002 Change 2003 2002 Change
- ------------------------------------------------------------------------------------------------------------------
Revenues:
Americas $ 238.7 255.8 (7) $ 708.9 729.1 (3)
International 273.2 245.2 11 775.9 664.6 17
Eliminations/other (18.6) (17.7) (5) (54.5) (50.7) (7)
- ------------------------------------------------------------------------------------------------------------------
Revenues $ 493.3 483.3 2 $ 1,430.3 1,343.0 7
==================================================================================================================
Operating profit (loss):
Americas $ (11.3) 4.0 NM $ (31.6) (10.3) NM
International 8.9 9.3 (4) 24.3 25.4 (4)
Other (2.9) (3.4) 15 (6.0) (8.7) 31
- ------------------------------------------------------------------------------------------------------------------
Segment operating profit (loss) $ (5.3) 9.9 NM $ (13.3) 6.4 NM
==================================================================================================================
Operating Margin: (%) (%) (%) (%)
Americas (4.7) 1.6 (4.5) (1.4)
International 3.3 3.8 3.1 3.8
Total (1.1) 2.0 (0.9) 0.5
==================================================================================================================
Depreciation and amortization $ 11.9 10.5 13 $ 36.0 32.0 13
Capital expenditures 5.6 6.0 (7) 18.6 15.8 18
==================================================================================================================
Intra-American revenue $ 118.1 124.9 (5) $ 336.1 349.3 (4)
Worldwide expedited freight
services:
Revenues $ 370.3 375.3 (1) 1,078.0 1,038.9 4
Weight in pounds 391.3 398.1 (2) 1,141.6 1,118.6 2
==================================================================================================================
In the third quarter of 2003, BAX Global's operating results were $15.2 million
below the same quarter last year on a 2% increase in revenues (1% decrease in
revenues on a constant currency basis). For the nine months ended September 30,
2003, BAX Global's operating results were $19.7 million below the same period
last year on a 7% increase in revenues (2% increase in revenues on a constant
currency basis). Results were lower as the effects of lower volumes and a shift
from expedited deliveries to deferred products in the Intra-American network
were only partially offset by increased air export volumes and supply chain
management activity in Asia Pacific.
Americas
BAX Global's third quarter 2003 operating loss in the Americas region was $15.3
million higher than the same 2002 period on a 7% decrease in revenues. The
operating loss in the nine-month period in 2003 was $21.3 million higher than in
the same period of 2002 on 3% lower revenues. A decrease in Intra-American
volumes of higher-yielding overnight and second day airfreight, more than offset
an increase in volumes for freight with deferred delivery and volumes related to
BAX Global's new wholesale freight forwarding product. Deferred delivery
shipments are generally transported via truck on BAX Global's North American
ground transportation network or, if space is available, the shipments may be
transported on its Intra-American air transportation network. Management
believes that much of the shift from expedited to deferred shipments is likely
to continue. However, in an improving economy the absolute weight of expedited
freight is likely to increase.
20
U.S. air export revenues reflect the benefit of a portion of the surcharges
charged by airlines being passed to customers. U.S. air export volumes were
slightly higher in the 2003 periods over 2002, while revenue per pound,
excluding surcharges, declined in the 2003 periods as compared to the same
periods of 2002. Growth in the U.S. supply chain management business increased
revenues in the third quarter and first nine months of 2003 as compared to the
same period of 2002 due to the addition of new customers as well as increased
activity for existing customers. BAX Global's revenues and operating results in
the third quarter of 2003 were also adversely affected by lower third-party
aircraft charter activity compared to the prior year period.
The 2003 operating loss in the Americas includes higher expense from the
Company's primary U.S. pension plan as well as higher health care costs in the
2003 periods. Heavy maintenance expense was $6.3 million lower in the first nine
months of 2003 compared to the same 2002 period primarily due to adjustments
made in the first half of 2003 in conjunction with the renegotiation of certain
return provisions of its aircraft lease agreements and the completion of a study
of the lease agreements. Lower flight hours as a result of lower third-party
aircraft charter activity also reduced heavy maintenance expense in the third
quarter of 2003.
International
International operating profits decreased 4% for the third quarter compared to
the 2002 period on an 11% increase in revenues (6% increase in revenues on a
constant currency basis). International operating profit decreased 4% for the
first nine months of 2003 compared to the 2002 period on 17% higher revenues (9%
increase in revenues on a constant currency basis). A decrease in operating
profits in the Atlantic region was partially offset by improved profits in Asia
Pacific. Reduced demand and competitive market pressures in the Atlantic region
continue with the weak European economy resulting in lower export volumes and
flat import volumes compared with the 2002 quarter. The effects of the weak
European economy are expected to continue into at least the fourth quarter of
2003. Revenues and operating profit for the three and nine months ended
September 30, 2003 benefited from an increase in Asia Pacific air export volumes
within the Asia Pacific region and to the U.S.. In addition, Asia Pacific's
results benefited from growth in supply chain management operations, including
the effects of an expansion of operations in China during the first nine months
of 2003 as well as increased activity from existing customers.
Other
Other operating loss decreased $0.5 million in the quarter and $2.7 million in
the first nine months of 2003 versus the prior year periods partially due to
foreign currency exchange transaction gains.
Former coal operations
Prior to 2003, expenses related to former coal operations were classified as
part of discontinued operations. In 2003, the Company began recognizing
coal-related expenses as a part of continuing operations.
Costs of former coal operations included in continuing operations
Three Months Ended Nine Months Ended
September 30, September 30,
(In millions) 2003 2003
- ------------------------------------------------------------------------------
Company-sponsored postretirement
benefits other than pensions $ 12.5 37.2
Black lung 1.4 4.3
Pension (0.4) (0.7)
Administrative, legal and other
expenses, net 2.6 6.4
Idle and closed mine expense and
other income 1.1 4.5
- ------------------------------------------------------------------------------
$ 17.2 51.7
==============================================================================
21
Administrative, legal and other expenses, net, are expected to decline as
administrative functions are reduced and residual assets sold. Expenses related
to residual assets include property taxes, insurance and lease payments. In
October 2003, a definitive agreement to sell substantially all of the Company's
coal properties in West Virginia was reached. Consummation of the proposed
transaction is subject to typical closing conditions.
The Company has a Voluntary Employees' Beneficiary Association trust ("VEBA")
with approximately $100 million of assets at September 30, 2003 available to pay
for certain of the Company's benefit obligations related to former coal
employees.
The Company has contingent liabilities associated with its former coal
operations. The Company expects certain of the estimated values of such
liabilities to be revised in the fourth quarter as a result of information
received from third parties.
Corporate expenses and other
Corporate expenses and other include the results of operations from the
Company's gold business. Corporate expenses and other increased $0.4 million and
$5.6 million for the three and nine months ended September 30, 2003 primarily as
a result of higher benefit related expenses. In addition, in the first nine
months of 2003, increased revenue from the remaining gold operations was more
than offset by the increased costs of mining.
In October 2003, the Company sold its 23.3% interest in MPI Mines Ltd., an
Australian minerals exploration and development Company with interests in gold
and nickel, for approximately $19 million in cash. A gain of approximately $10
million will be reported as other operating income in continuing operations in
the fourth quarter of 2003.
Corporate expenses in the fourth quarter of 2003 and in 2004 are expected to
include additional costs resulting from compliance with Section 404 of the
Sarbanes-Oxley Act of 2002.
Foreign operations
The Company operates in more than 100 countries, each with a local currency
other than the U.S. dollar. Because the financial results of the Company are
reported in U.S. dollars, its results are affected by changes in the value of
the various foreign currencies in relation to the U.S. dollar. Changes in
exchange rates may also affect transactions which are denominated in currencies
other than the functional currency. The diversity of foreign operations helps to
mitigate a portion of the impact that foreign currency fluctuations in any one
country may have on the Company's consolidated results. The Company, from time
to time, uses foreign currency forward contracts to hedge transactional risks
associated with foreign currencies. Translation adjustments of net monetary
assets and liabilities denominated in the local currency relating to operations
in countries with highly inflationary economies are included in net income,
along with all transaction gains or losses for the period.
Brink's Venezuelan subsidiary was considered to be operating in a highly
inflationary economy during 2002. However, Venezuela was no longer treated as
having a highly inflationary economy effective January 1, 2003. It is possible
that the economy in Venezuela may be considered highly inflationary again at
some time in the future.
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, if any, of such risks on the Company cannot be
predicted.
22
Selling, general and administrative expenses
Selling, general and administrative expenses is a component of each segment's
previously discussed operating profit. Selling, general and administrative
expenses increased $10.5 million for the third quarter and $35.9 million in the
first nine months of 2003 as compared to the same periods of 2002 primarily due
to the inclusion in 2003 of administrative costs related to former coal
operations, higher reported expense as a result of the strengthening of certain
currencies relative to the U.S. dollar, primarily in Europe, and higher
benefit-related costs.
Other operating income, net
Other operating income, net, which is a component of each operating segment's
previously discussed operating profit, includes the Company's share of net
earnings or losses of unconsolidated affiliates, royalty income and gains and
losses from foreign currency exchange. The increase in other operating income
for the three and nine month periods of 2003 is primarily attributable to a $4.7
million gain on the sale of operating assets. The nine months ended September
30, 2003 also included $1.1 million higher foreign currency exchange
transactions and $1.6 million in gains from the sale of residual assets of the
former coal operations.
Interest expense
Interest expense increased $1.3 million in the third quarter and $2.5 million in
the first nine months of 2003 as compared to the same periods of 2002 primarily
due to the inclusion of interest expense related to Dominion Terminal Associates
("DTA") in the 2003 periods. In conjunction with the disposal of its coal
operations, the Company transferred its interest in the operations of DTA, a
coal terminal in Newport News, Virginia, but retained contingent obligations of
related debt. Since the Company no longer has an interest in DTA, its related
$43.2 million guarantee of the underlying debt was reclassified to long-term
debt from noncurrent liabilities at December 31, 2002. In prior periods, the
cost associated with the bonds was included in discontinued operations. In
addition, 2003 interest expense was higher due to the accretion of interest
related to former coal operations' retained leases and minimum royalty
agreements partially offset by a decrease in U.S. borrowings and lower interest
rates.
Interest and other income, net
Interest and other income, net increased $0.5 million in the third quarter and
$6.8 million in the first nine months of 2003 over the same 2002 periods. The
increase is primarily attributable to a $2.6 million second-quarter 2003 gain
related to a $19.8 million prepayment of the notes and royalties receivable
collected as part of the consideration in the sale of its former Virginia coal
operations as well as the interest income, that in 2002 was included as part of
discontinued operations, from the Company's Voluntary Employees' Beneficiary
Association trust ("VEBA").
Stabilization Act compensation
Stabilization Act compensation of $5.9 million received in the third quarter of
2002 represents amounts received by the Company from the U.S. government
pursuant to the Air Transportation Safety and System Stabilization Act.
Income taxes
The effective tax rate for continuing operations for the first nine months of
2003 was 18.1%, compared to 36.9% for the same period of 2002. The 2003
provision for income taxes is less than the 35% U.S. statutory income tax rate
primarily due to the resolution of tax issues from prior years, partially offset
by return to accrual adjustments and state income taxes. The 2002 provision for
income taxes was higher than the 35% U.S. statutory income tax rate primarily
due to state income taxes, partially offset by lower taxes on certain foreign
earnings. The Company's effective tax rate may fluctuate materially from period
to period due to changes in the expected geographical mix of earnings and other
factors.
23
Discontinued operations
In July 2003, the Company agreed to sell its timber business for approximately
$38 million in cash. The sale of the timber business is contingent upon various
closing conditions and is expected to close in late 2003. At September 30, 2003,
the timber business had approximately $7 million in the carrying value of net
assets and approximately $5 million in future operating lease obligations that
are not expected to transfer to the buyers.
The Company closed the sale of its natural gas business in August 2003 and
received approximately $81 million in net cash proceeds. At the effective date
of sale, the natural gas business had approximately $24 million carrying value
of net assets.
24
LIQUIDITY AND CAPITAL RESOURCES
Cash flows before financing activities increased $85.6 million in the first nine
months of 2003 compared to the first nine months of 2002. Cash provided by
operating activities improved primarily due to a 2002 contribution to the
Company's U.S. Pension Plan. Cash flows from investing activities improved
primarily because of amounts collected related to the sale of the coal and
natural gas businesses, partially offset by contributions to the Company's
Voluntary Employees' Beneficiary Association trust ("VEBA").
Summary of cash flow information:
Nine Months
Ended September 30,
(In millions) 2003 2002
- ---------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Continuing operations:
Before changes in operating assets and liabilities $ 180.2 210.6
Changes in assets and liabilities, including working capital 18.8 6.8
Discontinued operations:
Natural gas and timber 14.6 7.9
Coal - (61.8)
- ---------------------------------------------------------------------------------------------------------------------
Operating activities 213.6 163.5
- ---------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Continuing operations:
Capital expenditures (147.1) (139.0)
Aircraft heavy maintenance expenditures (17.7) (24.0)
Proceeds from sale of natural gas business 81.2 -
Notes receivable and royalties related to sale of former coal operations 26.0 -
Contributions to VEBA (82.0) -
Other 5.0 3.9
Discontinued operations:
Natural gas and timber (4.7) (3.4)
Coal - (12.3)
- ---------------------------------------------------------------------------------------------------------------------
Investing activities (139.3) (174.8)
- ---------------------------------------------------------------------------------------------------------------------
Cash flows before financing activities $ 74.3 (11.3)
=====================================================================================================================
Operating activities
Cash provided by operating activities was $50.1 million higher in the first nine
months of 2003 compared to the same period in 2002 primarily due to a $35.1
million contribution the Company made to its U.S. pension plan in 2002 and
higher cash outflows in 2002 related to former coal operations. Cash provided by
operating activities was also higher due to an increase in the amount of cash
provided by operating activities at Brink's and BHS, partially offset by lower
amounts provided by BAX Global. In addition, the former natural gas business
provided higher cash from operating activities on higher natural gas prices.
The Company's former coal operations were sold or shut down in December 2002.
Approximately $61.8 million of coal-related cash outflows from operating
activities were classified as discontinued operations in the 2002 statements of
cash flows, including approximately $45.2 million related to obligations the
Company ultimately retained. In 2003, cash outflows of $43.1 million for these
retained obligations are included in continuing operations. Besides the payments
related to retained obligations, the Company's former coal operations used $16.6
million of cash in the first nine months of 2002 largely due to the poor
performance of the Company's mining operations in the face of difficult industry
conditions.
25
In October 2003, the Company made a $20 million voluntary contribution to its
primary U.S. pension plan.
Investing activities
Cash used by investing activities in the first nine months of 2003 was lower
than for the same period in 2002 as the $81 million of cash proceeds from the
2003 sale of the natural gas business and the realization in 2003 of $26 million
of cash related to the prior-year sale of the Company's former Virginia coal
operations were partially offset by an $82 million contribution to the Company's
VEBA in 2003.
Investing activities also had approximately $11 million of higher proceeds from
the sale of operating assets, primarily at Brink's, offset by approximately $8
million of cash used for acquisitions, also primarily at Brink's.
Nine Months
Ended September 30,
2003 2002
- ----------------------------------------------------------------------------
Capital expenditures:
Brink's $ 54.2 55.1
Brink's Home Security 71.9 63.0
BAX Global 18.6 15.8
- ----------------------------------------------------------------------------
Business and Security Services 144.7 133.9
Corporate and other 2.4 5.1
- ----------------------------------------------------------------------------
Capital expenditures $ 147.1 139.0
- ----------------------------------------------------------------------------
Capital expenditures for the first nine months of 2003 were $8.1 million higher
than for the same period in 2002 primarily due to an increase in subscriber
installations at BHS as well as an increase in spending on information
technology projects at BAX Global.
Aircraft heavy maintenance expenditures decreased $6.3 million during the first
nine months of 2003 to $17.7 million as compared to the same period of 2002 due
to fewer engine overhauls in 2003 and the timing of maintenance. The Company
expects to spend between $20 million and $25 million on aircraft heavy
maintenance in 2003.
Capital expenditures in 2003 are currently expected to range from $200 million
to $210 million versus the approximately $200 million spent in 2002. The
increase is largely due to a higher level of customer installations at BHS.
In October 2003, the Company sold its 23.3% interest in MPI Mines Ltd. for
approximately $19 million in cash. Subsidiaries of the Company have entered into
definitive agreements regarding the sale of its timber and West Virginia coal
assets and, subject to the satisfaction of typical closing conditions, the
Company expects the sales to be consummated in late 2003.
26
Business segment cash flows
The Company's cash flows before financing activities for each of the operating
segments are presented below:
Nine Months
Ended September 30,
(In millions) 2003 2002
- -------------------------------------------------------------------------------------------------------------------
Cash flows before financing activities:
Brink's $ 77.3 54.3
BHS 34.1 33.6
BAX Global (16.7) 10.5
Corporate, other operations and former coal operations:
Proceeds from sale of natural gas business 81.2 -
Notes receivable and royalties related to sale of former coal operations 26.0 -
Contributions to VEBA (82.0) -
Contributions to U.S. pension plan - (35.1)
Other (55.5) (5.0)
Discontinued operations:
Natural gas and timber 9.9 4.5
Coal - (74.1)
- -------------------------------------------------------------------------------------------------------------------
Cash flows before financing activities $ 74.3 (11.3)
===================================================================================================================
Cash flows before financing activities at Brink's increased due to a
year-over-year reduction in the amount of cash used for working capital needs
and $9 million higher proceeds from the sale of operating assets, partially
offset by $7 million in cash outflows primarily related to an acquisition in
Belgium. Higher working capital needs in 2002 were primarily driven by larger
accounts receivable balances in France.
The slight increase in BHS' cash flows before financing activities is primarily
due to higher operating results partially offset by an increase in capital
expenditures reflecting the growth in installations.
Cash flows before financing activities at BAX Global decreased $27.2 million
reflecting lower operating results in 2003. An increase in the cash used to
cover working capital needs included the net effects of increasing levels of
non-U.S. receivables and accounts payable in 2003, primarily in the Asia Pacific
region as a result of its higher sales volume. Lower expenditures for aircraft
heavy maintenance were partially offset by higher capital expenditures at BAX
Global.
The increase in cash out flows for other corporate, other operations and former
coal operations for the nine months ended September 30, 2003 reflected cash
spent in 2003 associated with retained liabilities of the former coal operations
(these types of payments were included in discontinued operations in 2002).
Discontinued operations' cash flow before financing activities for the 2002
period reflected cash spent associated with retained liabilities and operating
losses resulting from weak coal market conditions. Higher natural gas prices in
2003 improved the natural gas business' cash flows compared to 2002.
Financing activities
Net cash flows used by financing activities were $27.7 million for 2003 compared
with net cash flows provided of $50.2 million in 2002. The Company's cash
provided by financing activities typically comes from short-term borrowings or
from net borrowings under the Company's revolving bank credit facility,
discussed below. The Company also borrowed an additional $20 million in the
second quarter of 2002 under longer-term issuances of senior notes.
27
The Company has an unsecured $350 million credit agreement with a syndicate of
banks under which it may borrow on a revolving basis over a three-year term
ending September 2005. Approximately $203.8 million was available for borrowing
under this facility on September 30, 2003. At September 30, 2003, Net Debt
(short-term debt plus the current and noncurrent portions of long-term debt,
less cash) was $199.1 million compared to $257.0 million at December 31, 2002.
Financings, Net of Cash (which equals Net Debt plus receivables sold in BAX
Funding's asset securitization facility) were $260.1 million at September 30,
2003 and $329.0 million at December 31, 2002. The Company believes the
presentation of Net Debt and Financings, Net of Cash, are useful measures of the
Company's financial leverage.
In September 2003, at the Company's request, the Peninsula Ports Authority of
Virginia issued a new series of bonds to replace the previous bonds related to
Dominion Terminal Associates, a deep water coal terminal in which the Company no
longer has an interest. The Company continues to guarantee payment of the $43.2
million of the new bonds and ultimately will have to pay for the retirement of
the new bonds in accordance with the terms of the guarantee. The new bonds bear
a fixed interest rate of 6.0% (versus a fixed interest rate of 7.375% for the
previous bonds) and mature in 2033. The new bonds may mature prior to 2033 upon
the occurrence of certain specified events such as the determination that the
bonds are taxable or the failure of the Company to abide by the terms of its
guarantee.
The Company has three unsecured multi-currency revolving bank credit facilities
with a total of $110 million in available credit, of which approximately $31
million was available at September 30, 2003 for additional borrowing. Various
foreign subsidiaries maintain other secured and unsecured lines of credit and
overdraft facilities with a number of banks. Amounts outstanding under these
agreements are included in short-term borrowings.
The U.S. bank credit agreement, the agreements under which the senior notes were
issued and the multi-currency revolving bank credit facilities each contain
various financial and other covenants. These financial covenants limit the
Company's total indebtedness, provide for minimum coverage of interest costs,
and require the Company to maintain a minimum level of net worth. A failure to
comply with the terms of any one of these loan agreements could result in the
acceleration of the repayment terms in that agreement as well as in the
Company's other agreements. At September 30, 2003, the Company was in compliance
with all financial covenants contained in the above-mentioned agreements and
facilities.
The Company believes it has adequate sources of liquidity to meet its near-term
requirements.
At September 30, 2003, the Company had the authority to purchase up to 1.0
million shares of the Company's common stock under a share repurchase program
authorized by the Board of Directors with an aggregate purchase price of $19.1
million. No purchases were made in the first nine months of 2003.
During the first nine months of 2003 and 2002, the Company paid cash dividends
of $3.7 million and $3.6 million, respectively, on the Company's common stock.
Future dividends, if any, on the Company's common stock are dependent on the
earnings, financial condition, cash flow and business requirements of the
Company, as determined by the Board. On October 31, 2003, the Board declared a
regular quarterly dividend of $0.025 per share on the Company's common stock.
The Company paid $0.5 million of dividends on its preferred stock in the first
nine months of 2002. The preferred stock was redeemed for $10.8 million in cash
in the third quarter of 2002.
Contingencies
The Company is defending various potentially significant civil suits. Although
the Company is defending these cases vigorously and believes that its defenses
have merit, it is possible that one or more of these suits ultimately may be
decided in favor of the plaintiffs. If so, the Company expects that the ultimate
amount of unaccrued losses could range from $0 to $40 million.
28
At September 30, 2003, the present value of the Company's obligations for coal
equipment operating leases and advance minimum royalty obligations that are
expected to be transferred to purchasers was approximately $8 million. The
Company expects to transfer substantially all of these obligations to the
purchaser of its West Virginia coal properties. To the extent that obligations
are not transferred to purchasers, the Company may need to record additional
expense.
The Company will continue to record adjustments to coal-related contingent
assets and liabilities within discontinued operations.
At September 30, 2003, the liability recorded for the Company's UMWA Combined
Benefit Fund obligations under the Coal Industry Retiree Health Benefit Act of
1992 was $168.4 million, reflecting the recorded liability at December 31, 2002
less payments made since the end of 2002. This liability will be adjusted as new
historical data is received and assumptions used to estimate the liability
change. The Company normally revises its estimated liability in the fourth
quarter each year when it receives the annual actuarial evaluation.
The Company participates in the United Mine Workers of America ("UMWA") 1950 and
1974 pension plans at defined contribution rates, but expects to ultimately
withdraw from these plans. At September 30, 2003, the Company's estimated
withdrawal liabilities were $38.0 million. The Company's estimate of the
obligation is based on several factors, including funding status and benefit
levels of the plans and the date the Company is determined to have completely
withdrawn from the plans. Since these factors may change over time, the ultimate
withdrawal obligation, if any, could change materially.
The Company has also recorded estimated liabilities for other contingent
liabilities, including those for expected settlement of coal-related workers'
compensation claims and certain reclamation obligations. Annual actuarial and
engineering valuations of these liabilities are typically completed in the
fourth quarter each year.
In 1999, the U.S. District Court of the Eastern District of Virginia entered a
final judgment in favor of certain of the Company's subsidiaries, ruling that
the Federal Black Lung Excise Tax ("FBLET") is unconstitutional as applied to
export coal sales. Through September 30, 2003, the Company has received refunds
including interest of $27.2 million, including $2.8 million received in 2003.
The Company continues to pursue the refund of other FBLET payments. Due to
uncertainty as to the ultimate receipt of additional amounts, if any, which
could amount to as much as $18 million (before income taxes), as well as the
timing of any additional FBLET refunds, the Company has not currently recorded
receivables for such additional FBLET refunds.
Annual goodwill impairment review
Under the guidance of Statement of Financial Accounting Standards No. 142
"Goodwill and Other Intangible Assets," the Company assesses its goodwill for
impairment annually or whenever events or changes in circumstances indicate that
the carrying value may not be recoverable. The Company's annual impairment
review occurs during the fourth quarter of each year. The Company estimates the
fair value of Brink's and BAX Global, the two reporting units that have
goodwill, primarily using estimates of future cash flows. The fair value of the
reporting unit is compared to its carrying value to determine if any impairment
exists. Any impairment loss recognized by the Company would be recorded as an
operating expense.
Annual revaluation of benefit plan obligations
With the assistance of actuaries, the Company revalues its estimates of various
assets and liabilities related to its benefit plans, including pensions,
postretirement, and black lung obligations annually. The Company typically
revalues its obligations in the fourth quarter of each year.
29
Recent accounting announcements
In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities."
FIN 46 provided guidance on the identification of entities for which control is
achieved through means other than through voting rights ("variable interest
entities") and how to determine when and which business enterprises should
consolidate variable interest entities. Variable interest entities created after
January 31, 2003 are assessed for consolidation using the new interpretation.
Under FIN 46 and subsequent statements which temporarily delayed implementation
of FIN 46, variable interest entities in which the Company holds a variable
interest that it acquired before February 1, 2003 will be assessed for
consolidation in the fourth quarter 2003. The Company is analyzing the impact of
this interpretation, and based on progress made to date, the interpretation is
not expected to have a material effect on the Company's consolidated financial
statements.
Market risks and hedging and derivative activities
The Company has activities in more than 100 countries and a number of different
industries. These operations expose the Company to a variety of market risks,
including the effects of changes in foreign currency exchange rates and interest
rates. In addition, the Company consumes and sells certain commodities in its
businesses, exposing it to the effects of changes in the prices of such
commodities. These financial and commodity exposures are monitored and managed
by the Company as an integral part of its overall risk management program. The
diversity of foreign operations helps to mitigate a portion of the impact that
foreign currency rate fluctuations in any one country may have on the Company's
consolidated results. The Company's risk management program considers this
favorable diversification effect as it measures the Company's exposure to
financial markets and as appropriate, seeks to reduce the potentially adverse
effects that the volatility of certain markets may have on its operating
results. The Company sold its natural gas business in the third quarter of 2003
and as a result no longer enters into derivatives for natural gas revenues.
Other than this, the Company has not had any material change in its market risk
exposures since December 31, 2002.
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 timely alerting them to material information
relating to the Company required to be included in the Company's periodic SEC
filings.
There has been no change in the Company's internal control over financial
reporting during the quarter ended September 30, 2003, that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
Forward-looking information
Certain of the matters discussed herein, including statements regarding the
expectation of significant ongoing expenses and cash outflows related to former
coal operations, the sales of the Company's timber business and the coal
properties in West Virginia, the timing and amount of costs associated with the
closing of Brink's corporate headquarters in Connecticut, the benefits to
Brink's European operating results during the remainder of 2003 of management
changes and work force reductions, economic and operating conditions in South
America and their impact on Brink's operating results, the impact of the
National "Do Not Call" list on BHS, seasonal fluctuations in BHS' disconnect
rate, the duration of the shift from expedited to deferred delivery, the
continuing effects of the weak European economy on BAX Global's financial
condition, the anticipated decline of administrative, legal and other expenses,
net, associated with the former coal operations, the inclusion in corporate
expenses in the fourth quarter of 2003 and in 2004 of costs resulting from the
implementation of Section 404 of the Sarbanes Oxley Act of 2002, the possibility
that the Venezuelan economy might be considered highly inflationary again,
changes in the Company's effective tax rate, expenditures in 2003 for aircraft
heavy maintenance, anticipated capital expenditures in 2003, the expected
maturity date of the 2003 bond issuance, the adequacy of sources of liquidity to
meet the Company's near-term requirements, potential losses arising out of civil
suits, the assumption by purchasers of the timber operations and the West
Virginia coal assets of various obligations associated with those assets,
potential increases in expense if obligations are not transferred as expected to
purchasers of residual coal assets, the timing of and liability for withdrawal
from pension plans associated with the exit from the coal business, expected
adjustments to estimates of other contingent liabilities, the amount and timing
of additional FBLET refunds, if any, and the impact of FIN 46 on the Company's
consolidated financial statements 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.
30
Such risks, uncertainties and contingencies, many of which are beyond the
control of the Company, include, but are not limited to, the timing of the
pass-through of costs relating to the disposal of coal assets by third parties
and governmental authorities, actual retirement experience of coal employees,
black lung claims incidence, the number of dependents of coal employees for whom
benefits are provided, coal industry employee turnover rates, actual medical and
legal costs relating to benefits, changes in inflation rates (including the
continued volatility of medical inflation), fluctuations in interest rates, the
satisfaction of conditions to closing in the agreements for the purchase of the
timber business and the coal properties in West Virginia, including the
willingness of third parties to provide necessary consents and the ability to
obtain necessary insurance and bonding, ongoing contractual obligations relating
to the Connecticut office, costs associated with transitioning the Connecticut
workforce to Texas and Virginia, the ability of Brink's management to
effectively address economic and other pressures in Europe, the costs associated
with Brink's European work force reductions, government reforms and initiatives
in South America, strategic decisions by Brink's competitors with respect to
their South American operations, the number of people who participate in the "Do
Not Call" program, the success of various legal challenges to the "Do Not Call"
program and the legislative response to these challenges, BHS' ability to market
through channels other than outbound telemarketing, the number of BHS customers
who move during the fourth quarter, the ability of BAX Global's customers to
satisfy their obligations through the use of deferred delivery, changes in
European economies, the size and timing of rate and cost increases, if any, at
BAX Global, the timing of sales of the residual coal assets, the ability of
purchasers of those assets to assume various liabilities, acceptance of
replacement bonds by governmental authorities, costs associated with reducing
the administrative functions supporting the former coal operations, the
willingness of lessors to consent to lease assignments, the amount of work
performed in the fourth quarter of 2003 and in 2004 in connection in Section 404
of the Sarbanes Oxley Act, social, political or economic changes in Venezuela,
changes in the expected geographical mix of earnings, significant increases in
the utilization of leased aircraft, changes in the use of the coal terminal, the
unanticipated need for significant liquidity, the ability and willingness of the
Company's lenders to provide liquidity, discovery of new facts relating to the
civil suits, the addition of claims or changes in damages sought by the adverse
parties, decisions by the courts, whether interim or final, during the course of
the suits, positions taken by various governmental entities with respect to the
claims for FBLET refunds, determinations made by the Company or its advisors
during the ongoing analysis of the impact of FIN 46, the sizing and timing of
the Company's hedging relationships, overall economic and business conditions,
foreign currency exchange rates, the impact of continuing initiatives to control
costs and increase profitability, pricing and other competitive industry
factors, fuel prices, new government regulations, legislative initiatives,
including initiatives with respect to medicare coverage of prescription drugs,
judicial decisions, variations in costs or expenses and the ability of
counterparties to perform.
31
Part II - Other Information
---------------------------
Item 2. Changes in Securities and Use of Proceeds
- ------
(a) On September 1, 2003, the Company and Equiserve Trust Company,
N.A., as rights agent, executed an Amended and Restated Rights
Agreement (the "Amended Rights Agreement"), which removed the
provisions that the amendment and redemption of the rights
upon and after the date that there is a beneficial owner of
more than 15% of the common stock, par value $1.00 per share,
of the Company requires the concurrence of a majority of the
disinterested directors then in office. The foregoing
description of the Amended Rights Agreement does not purport
to be complete and is qualified in its entirety by reference
to the Amended Rights Agreement which has been filed with the
Securities and Exchange Commission as an exhibit to the
Company's Form 8-A/A dated October 9, 2003.
32
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) Exhibits:
Exhibit
Number
-------
10.1 Amendment No. 4, dated as of September 22, 2003, to
the Amended and Restated Trust Agreement, dated
December 1, 1997, between the Registrant and J.P.
Morgan Chase & Co. (formerly Chase Manhattan Bank) in
connection with the Registrant's Pension Equalization
Plan.
10.2 (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.
(ii) Loan Agreement between the Peninsula Ports
Authority of Virginia and Dominion Terminal
Associates, dated September 1, 2003.
(iii) Indenture and Trust between the Peninsula
Ports Authority of Virginia and Wachovia
Bank, National Association ("Wachovia"), as
trustee, dated September 1, 2003.
(iv) Parent Company Guaranty Agreement, dated
September 1, 2003, made by the Registrant
for the benefit of Wachovia.
(v) Continuing Disclosure Undertaking between
the Registrant and Wachovia, dated September
24, 2003.
(vi) Coal Terminal Revenue Refunding Bond
(Dominion Terminal Associates Project -
Brink's Issue) Series 2003.
31.1 Certification of Michael T. Dan, Chief Executive
Officer (Principal Executive Officer) of The Brink's
Company, pursuant to Rules 13a-14(a) and 15d-14(a)
promulgated under the Securities Exchange Act of
1934, as amended, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Robert T. Ritter, Vice President and
Chief Financial Officer (Principal Financial Officer)
of The Brink's Company, pursuant to Rules 13a-14(a)
and 15d-14(a) promulgated under the Securities
Exchange Act of 1934, as amended, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Michael T. Dan, Chief Executive
Officer (Principal Executive Officer) of The Brink's
Company, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
32.2 Certification of Robert T. Ritter, Vice President and
Chief Financial Officer (Principal Financial Officer)
of The Brink's Company, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
33
(b) Reports on Form 8-K:
(i) Report on Form 8-K filed on July 21, 2003, announcing
the execution of definitive agreements for the sale
of the natural gas and timber business of various of
the Registrant's indirect subsidiaries; and
(ii) Report on Form 8-K furnished on July 31, 2003,
providing the Registrant's earnings press release for
the second quarter of 2003 pursuant to Item 12 of
Form 8-K.
34
SIGNATURE
---------
Pursuant to the requirements 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.
THE BRINK'S COMPANY
November 14, 2003 By: /s/ Robert T. Ritter
------------------------
Robert T. Ritter
(Vice President -
Chief Financial Officer)