Michael T. Dan |
To Our ShareholdersIn many respects, 2003 was a pivotal year for our company. For the last few years, we have been executing a three-part strategy designed to enhance the growth prospects and value of our company through:
After exiting the coal business at the end of 2002, the company continued to divest its noncore businesses throughout 2003 and early 2004, completing the sale of its other natural resources operations – natural gas, timber, gold – and the last significant remaining group of coal properties. With the disposition of substantially all of our natural resources assets, we are now squarely focused on building upon our strong foundation in business and security services. The transformation of our company was marked by an important event in early 2003, when shareholders approved the renaming of our company to The Brink’s Company. On May 5, 2003, exactly 144 years from the day that Perry Brink started his cartage business in Chicago, our common stock began trading on the New York Stock Exchange under its new name with a new ticker symbol – BCO. The new corporate name reflects the company’s position as a global leader in business and security services and draws upon the strength of the Brink’s brand. Brink’s is synonymous with trust, integrity, security, efficiency, and world-class service – hallmarks of the way we do business. In 2003, we also took substantial steps to address the legacy costs of our former coal operations, while improving our overall financial strength and flexibility. The sale of the natural resources assets produced cash of more than $145 million. These proceeds, in combination with strong cash flow from our core businesses, were used to:
The Brink’s Company today is a more focused organization that is poised for greater growth and profitability and that stands to benefit from improvements in the U.S. and global economies. We have a solid position in each of our three business segments, thanks to the strength of our brands, our unwavering commitment to service excellence, and a disciplined financial and operating approach to running our businesses. Our company’s revenues are now almost evenly split between business and security services. Security operations are represented by Brink’s, Incorporated, a global leader in the secure transportation and processing of cash and other valuables, and Brink’s Home Security, which with its disciplined approach to growing earnings and cash flow, became the second largest and fastest growing major residential alarm company in North America during 2003. BAX Global, our global freight transportation and supply chain management solutions company, had nearly $2 billion in revenues and benefited from the global economic recovery. For each of our businesses, the number one priority is providing unsurpassed, premier service while safeguarding people and property – at home, at work, or en route – virtually anywhere in the world. Despite sluggish economies worldwide during most of 2003, each business was profitable, generated positive cash flow, and successfully seized new opportunities for growth and enhanced productivity. Brink’s, IncorporatedBrink’s, Incorporated, which operates in 50 countries on six continents, enhanced its operating performance in key geographic areas while expanding its service offerings and global footprint in 2003. Brink’s strengthened its management team and operational focus in Europe, which resulted in improved performance during the year. Similarly, our diligence, discipline, service focus and patience were rewarded in South America, which achieved better results in 2003 than in the prior year, bolstered by improved economic conditions in major countries in the region. Customers’ needs are constantly evolving and Brink’s anticipates those needs with new and improved services. For example, retailers and financial institutions are continuing to outsource all aspects of how their cash is transported, counted and secured. Brink’s responded to this market dynamic by forming Brink’s Cash Logistics, offering comprehensive cash processing services. Brink’s Cash Logistics is an important part of the future growth and profitability of Brink’s. Brink’s is a truly global security services and transportation company, ranking number one or number two in the majority of the countries where it does business. In 2003, Brink’s continued to build on its strong global presence, expanding its operations in Belgium and Switzerland. Anticipating trends and responding quickly to customers’ needs have produced excellent financial results over the years. Brink’s revenues have increased in each of the last 15 years, and they have nearly doubled from $0.9 billion in 1997 to $1.7 billion in 2003. The company’s operating profit increased to $112.5 million in 2003, up 17% from the prior year despite challenging conditions in Europe and South America. At Brink’s, we take pride in protecting and delivering the precious cargo entrusted to us. But our first priority is protecting the men and women who proudly wear the Brink’s uniform. We work diligently to ensure that our employees return safely to their families every night. However, the world remains a dangerous place. Tragically, we lost five of our valued Brink’s associates who were murdered in the line of duty during 2003. Brink’s Home SecurityBrink’s Home Security, which celebrated its 20th anniversary in 2003, was built on the power of the Brink’s brand name and the expectation of outstanding service that comes with that name. The company posted another stellar year, growing its residential subscriber base by 9% to more than 833,000 households and small businesses in the U.S. and Canada, earning a record operating profit of $71.2 million, growing recurring monthly revenue to more than $23 million, and again improving its customer retention by achieving a customer disconnect rate of just 6.9%. The success of Brink’s Home Security is a testament to our approach to growing and managing this business. Our “Customers for Life” strategy focuses on building our subscriber base by attracting and retaining high quality residential customers who have both solid credit ratings and an appreciation for the value we provide. This approach also allows us to maintain standardized equipment that enhances our response to homeowners’ calls and the overall service experience. In 2003, we further developed our channels for reaching potential new home security customers, through expanded relationships with home builders and inspectors, as well as through high quality dealers in selected markets. BAX GlobalIn 2003, BAX Global continued to build upon its strong position as a global supply chain management and logistics solutions provider. Already a leader in the Asia Pacific market, BAX Global expanded its operations in China, including 140,000 square feet of warehouse space in Xiamen, a major free-trade zone. It also expanded its operations in Europe, opening offices in the Czech Republic and Greece, and launching next-day, door-to-door transportation service for all major business centers in Europe. In the U.S., BAX’s logistics and supply chain management business continued to grow. The company added several major warehouse and distribution customers during the year, including a major document management solutions company that chose BAX to design and manage a new warehouse and distribution center for its parts and supplies operation. With service at the forefront of everything it does, BAX launched new web-based service enhancements in 2003 that allow shippers across the world greater flexibility and access to information in scheduling and tracking global shipments. BAX Global managed through a very difficult domestic shipping environment in 2003, which continued to be characterized by low overnight heavy airfreight volumes, balanced somewhat by growth in BAXSaver®, a time-definite, mode neutral delivery option, and other deferred products. To enhance revenues and bring more overnight shipping volume to its integrated air and ground system, BAX launched a new freight forwarder service, providing wholesale guaranteed airport-to-airport service to other freight forwarders. This innovative arrangement started small in the summer of 2003, but grew quickly, with more than 40 freight forwarders regularly using the BAX Forwarder Network at the end of the year. These efforts, combined with the first signs of better economic conditions during the fourth quarter of 2003, position BAX to begin to demonstrate improved performance from the hard work of its 10,000 employees. BAX’s operating profit for 2003 was $3 million, down from about $18 million in 2002, reflecting the difficult domestic operating environment for the first three quarters of the year. We are encouraged by the higher shipping volumes late in 2003 and early in 2004, and the resulting prospect for improved financial performance. We achieved important goals in 2003 to refocus, grow, and improve the performance and financial strength of our company. At the same time, we continued to operate with a commitment to the highest standards of ethical conduct and corporate governance. With the prospect of better economic conditions, the power of the Brink’s brand, and the tireless efforts of our Board of Directors, our management team, and close to 50,000 service-minded employees worldwide, we stand ready to further strengthen and grow our company. Sincerely, |
|
