The Brink’s Company was able to focus entirely on its strong core in business and security services in 2004, following the divestiture of its remaining natural resources businesses throughout 2003 and early 2004.
Our employees’ dedication to delivering service excellence combined with the benefit from improving conditions in key markets around the world enabled the Company to post its best operating performance in several years.
For our three businesses – Brink’s, Incorporated, Brink’s Home Security and BAX Global – the top priority remained providing unsurpassed service while safeguarding people and property. Each of the Company’s businesses performed very well, generating solid improvement in revenues, profits and cash flow. These results were also a reflection of enhanced productivity and success in seizing new growth opportunities through deepening customer relationships and providing value-added solutions.
The Brink’s Company’s revenues increased by 18% to $4.7 billion in 2004, reflecting improved operating performance and the favorable impact of foreign exchange rates. This solid top-line growth led to operating profit of $190 million, nearly double the profit in 2003. In addition to better business performance, we continued to manage downward the liabilities and costs associated with former coal operations. Earnings from continuing operations were strong at $1.82 per diluted share, up sharply from $0.34 per share earned in 2003.
Solid operating performance resulted in continued strong cash flow, which was used to reinvest in the businesses and further strengthen our financial position to support future growth. We reduced net debt levels even while addressing liabilities, including those associated with former coal operations. In 2004, we:
- Reduced net financings by more than $120 million;
- Contributed $50 million to the Voluntary Employees’ Beneficiary Association trust (VEBA), the funding vehicle for retiree medical legacy costs of the former coal operations, bringing the year-end market value to more than $170 million; and
- Contributed $11 million to the Company’s U.S. pension plan.
Brink’s, Incorporated
Brink’s, Incorporated is recognized as the leader in secure valuables transportation and logistics solutions worldwide with an unmatched global footprint that encompasses more than 50 countries on six continents. Throughout 2004, Brink’s enhanced its operating performance in key geographic areas while expanding its service offerings and presence in several markets around the world. Since the beginning of 2004, Brink’s has built on its strong foundation in Europe with acquisitions in Greece and Ireland. In early 2005, Brink's acquired security operations in the U.K. and Luxembourg. These initiatives stand to bolster Brink’s positionin its traditional cash and valuables transportation and processing operations, as well as high-end guarding services in Europe.
Brink’s revenues increased to $1.9 billion in 2004, up 14% from the prior year. Operating profit grew 29% to $145 million, with an improved margin of 7.5%. Most of the growth came from international operations which reaped the benefits from improving economies and operating enhancements as well as from the weaker U.S. dollar. In particular, South America experienced economic stability, led by Venezuela. Performance in Europe was stronger, reflecting improved results in France, overall better market conditions and acquisitions.
Brink’s success is linked to anticipating and meeting the growing, changing needs of our diverse customer base. In the early 1990s, our customers were primarily banking and financial institutions. With the introduction of value-added CompuSafe® and Cash Logistics services and a stronger emphasis on developing relationships with customers to ensure that we meet their needs, a greater proportion of Brink’s business now comes from retail firms. Cash Logistics services, which provide comprehensive cash management, grew again in 2004 to more than 10% of Brink’s revenues as financial institutions and retailers continued to outsource cash transportation, processing and secure storage.
At Brink’s, our first priority is to protect our people. We work diligently to ensure that our employees return safely to their families every night. Tragically, we lost seven of our valued Brink’s associates due to attacks in the line of duty during 2004.
Brink’s Home Security
In 2004, Brink’s Home Security strengthened its solid market position as the second largest residential monitored alarm company in North America, ending the year with a customer base of more than 920,000 subscribers. The strong and consistent growth of this business since its inception in 1983 has been driven by solid execution of its business model, which emphasizes outstanding service every step of the way. This devotion to great customer care has not gone unnoticed. Brink’s Home Security was recognized in 2004 for call center customer satisfaction excellence under the J. D. Power and Associates Certified Call Center ProgramSM.
Brink’s Home Security posted another excellent year, growing its residential subscriber base by more than 10% and again improving its customer retention by achieving a disconnect rate of just 6.6%. On the financial side, the company also had a year of outstanding performance, increasing its revenues by 11% to $346 million and earning record operating profit of $81 million.
In 2004, Brink’s Home Security continued to build its channels for reaching potential new home security customers through major national home builders and inspection companies, as well as by utilizing a network of more than 100 high-quality dealers in selected markets. We also increased organizational attention on the attractive small business and commercial markets, formalizing our internal strategy and building resources to more aggressively pursue opportunities in this area.
BAX Global
BAX Global continued to build upon its position as a leading global supply chain management and logistics solutions provider. At the same time, higher levels of commerce worldwide and continued strength in Asian markets produced greater need for BAX Global’s full range of freight transportation and logistics services, leading to significantly improved profitability.
The effect of a strengthening economy was particularly evident in the U.S., as the shipping environment improved markedly throughout the year and raised demand for expedited delivery products. BAX Global was able to leverage its integrated air and ground system to take advantage of these better market conditions. A telling sign of the market’s rebound was the strong growth in BAX Global’s Freight Forwarder Network, which provides wholesale guaranteed airport-to-airport transportation. At the end of 2004, the first full year of operation for the network, the number of freight forwarders regularly using the service had more than doubled to over one hundred.
Already a leader in the Asia-Pacific market, BAX Global expanded its operations in China in 2004, forming new subsidiaries in the major manufacturing centers of Guangzhou and Shanghai to serve major global customers. The world’s attention has recently been focused on the parts of Asia-Pacific devastated by the massive tsunami that struck in late 2004. While Bax Global’s operations were not directly impacted, it was proud to be part of the world’s outpouring of support for the victims. Some of BAX Global's stations in the region helped support relief efforts, and BAX Global's subsidiary, Air Transport nternational, flew needed supplies to hard-hit areas.
In Europe, BAX Global’s logistics and supply chain management business continued to grow. To meet the increasing needs of customers in a region experiencing the early stages of an economic recovery, the company added several dedicated logistics facilities in 2004.
Better economic conditions and the dedication of 12,000 BAX Global employees combined to produce a positive year financially. Revenues grew by more than 20% to $2.4 billion in 2004 and operating profit was $56 million, up dramatically from $3 million in 2003. Building upon the increase in shipping volumes and the growing market for third-party logistics providers, BAX Global is focused on further reducing the asset intensity of the operations and producing higher profit levels that bring the business closer to the goal of earning a better return for our shareholders.
The Brink’s Company made important strides in 2004 to further grow profitability and improve its performance and financial strength, while holding fast to a long-standing commitment to the highest standards of ethical conduct, corporate governance and transparency.
To sustain our growth and market leadership, we will continue to invest in our businesses. We expect our capital outlays in 2005 to increase about 30%, with a significant portion of this investment going to support the acquisition and servicing of additional subscribers at Brink’s Home Security and information technology enhancements at Brink’s, Incorporated and BAX Global.
The Brink’s Company is poised for additional growth, improved operating results and greater financial strength. Our businesses are sustained by strong brands, disciplined execution of sound strategies, service excellence and an increasing focus on technology-enabled solutions.
I am grateful to our Board of Directors, our management team and the 54,000 quality-minded employees worldwide for their hard work and commitment to furthering The Brink’s Company’s position as a recognized global leader in security, service and solutions.
Sincerely,
Michael T. Dan
Chairman, President and Chief Executive Officer
The Brink’s Company
March 14, 2005
“Solid operating performance resulted in continued strong cash flow, which we used to reinvest in the businesses and further strengthen our financial position to support future growth.”
Michael T. Dan
Chairman, President
and Chief Executive Officer
