To Our Shareholders.

The transformation of The Brink’s Company continues to gain momentum. We begin 2006 as a highly focused, financially strong and globally respected provider of security and risk management services. We expect operating results to improve, and we’re aggressively pursuing growth opportunities on several fronts. We’re excited about the future.

The key to success is execution. In recent years, we’ve exited our former coal and natural resource businesses and have largely overcome the single greatest obstacle to success – our coal-related “legacy” liabilities. In late 2005, we reached an agreement to sell BAX Global and laid out plans for use of the expected proceeds. Investors took note of these achievements and the progress made in refocusing on core strengths. Our share price ended the year at $47.91, up 21% for the year.

Earlier this year, on January 31, we completed the BAX Global divestiture, which generated approximately $1 billion in net proceeds. As promised, we put this cash to work immediately. We reduced debt by $90 million and intend to pay down an additional $95 million. We funded the VEBA (a financing vehicle that pays our coal-related medical benefit obligations) with another $225 million, which will reduce annual expenses by about $17 million. On March 9, we announced that our Board of Directors had approved a plan to return up to $600 million to shareholders through stock repurchases. Our financial position has clearly been strengthened, as evidenced by recent upgrades in our credit ratings.

The next chapter in our transformation – the next test of our ability to execute – is upon us. I assure you that we are sharply focused on improving financial performance and accelerating growth as a “pure play” in the security business.

Focused on Improving Results, Poised for Growth

Our 2005 performance was mixed. A 12% revenue increase in continuing operations was offset by a similar decline in segment operating profit. Income from continuing operations was 74 cents per share, down from $1.29 in 2004.

Much of the profit shortfall was due to disappointing results in Brink’s, Incorporated’s European operations, which absorbed the bulk of $15 million in restructuring and severance expenses. Restructuring efforts are expected to yield $6 million in 2006 savings and $9 million annually thereafter. We expect to deliver improved results in 2006 and beyond.

Cash flow from continuing operations remained strong at $260 million. At year-end, we had about $96 million in cash and $313 million in total debt. With the additional debt reduction noted earlier, we are extremely well-positioned to support internal growth and value-creating acquisitions.

Leveraging the Brand

Every day, customers around the world rely on us to protect their property. The Brink’s name is synonymous with trust, integrity and safety. The major thrust of our growth strategy is to leverage our most valuable asset – the Brink’s brand.

We have reached a critical juncture in the implementation of this strategy. With the sale of BAX Global behind us, we can now focus exclusively on improving and growing our two security businesses – Brink’s, Incorporated and Brink’s Home Security. Each is a firmly established market leader with compelling opportunities to extend the Brink’s brand into new markets. Our brand-leveraging strategy is supported by an exceptionally strong financial foundation. We will exercise discipline in our approach, pursuing only those opportunities that promise to deliver clear operational, financial and strategic benefits.

The continuing transformation of The Brink’s Company will affect all of our constituencies. Customers will reap the benefits of a sharply focused security company that is constantly investing in new services and technologies. Management and employees will be challenged to pursue the opportunities and efficiencies inherent in our transition from a holding company to an integrated operating company. For investors, a more efficient and focused company should be easier to understand and value.

Every day, customers around the world rely on us to protect their property. The Brink’s name is synonymous with trust, integrity and safety. The major thrust of our growth strategy is to leverage our most valuable asset – the Brink’s brand.

Brink’s, Incorporated

Revenues at Brink’s, Incorporated rose 12% in 2005 to $2.2 billion. Operating profit was $111.9 million, down 23%. The decline in operating margin to 5.2% was driven by a variety of factors including higher operating costs, higher safety and security expenses, and substantial restructuring and severance costs. In 2006, we expect percentage sales growth in the high single-digits and operating margins should rebound toward 7%.

Our primary focus is on improving financial performance in Europe. With stronger results in France leading the way, we’re confident that revenue and profits in Europe will rebound during 2006. Our restructuring efforts, particularly in the U.K., Belgium and the Netherlands, should yield tangible dividends in the near term. Improving results in Germany and Ireland is another goal.

The ongoing integration of recent acquisitions should also benefit 2006 results. During 2005, we completed acquisitions in Ireland, the U.K., and Luxembourg. We also entered new markets by acquiring Cash-in-Transit businesses in Hungary, Poland and the Czech Republic, and will continue to use the Brink’s brand to penetrate fast-growing markets in Eastern Europe.

In Latin America, a relatively stable business environment led to solid results in 2005, and we expect continued improvement during 2006. In the Asia-Pacific region, we’re actively seeking opportunities to further establish our brand in China and several other markets.

Our North American operations will continue to use the Brink’s brand to pursue new opportunities with large financial institutions and retail chains. Cost reduction, improved safety and security performance, and technology development are important priorities.
We will continue to pursue opportunities in our traditional armored car operations while expanding further into cash processing, where the potential for revenue and margin growth is very attractive. Our customer base, historically comprised of banks and other financial institutions, is expanding and now includes a growing roster of retail businesses. We’re making steady progress in our efforts to help retailers outsource their cash management functions. We will continue to invest aggressively in new information technologies that strengthen our ability to provide first-rate security and risk management services to a broader array of customers.

Brink’s Home Security

At Brink’s Home Security, 2005 profits were $87.4 million, up 8%. Revenue increased 13% to $392.1 million. The effects of Hurricane Katrina temporarily increased subscriber disconnect rates and suppressed profits. In 2006, revenue and profit growth should exceed 10%.

Brink’s Home Security is the second largest residential monitored alarm company in North America, and a growing player in the commercial market. Our customer base grew 11% in 2005, and now includes more than one million subscribers who generate approximately $29.1 million in monthly recurring revenue (see reconciliation to GAAP on page 33).

As in other markets, the Brink’s name is a valuable asset in the continuing growth of our monitoring business. Trust, integrity, outstanding service and premium product design are routinely expected by our customers. For the third consecutive year, Brink’s Home Security was recognized for call center customer satisfaction excellence under the J. D. Power and Associates Certified Call Center Program^SM.

We are also the only security company in the U.S. to earn Installation Quality (IQ) Certification from the Installation Certification Board. The 2006 start-up of our new monitoring center in Knoxville, Tennessee, will further strengthen our service while improving efficiency and overall productivity.

Our 65 branch locations form the backbone of our success. Alliances with major national home builders and inspection companies, as well as a network of more than 100 security system dealers, are also keys to continued growth in the residential security market. Our growing presence in commercial markets is yet another opportunity to leverage the Brink’s brand.

A New Chapter

The next chapter in the history of The Brink’s Company will be marked by continued change. The external changes of recent years have reshaped our company in many ways. We are more focused and financially stronger than ever. As a result, each of our business units is well-positioned to leverage the Brink’s brand into new markets.

To maximize our opportunities, we must also change internally. The holding company structure, culture and management style no longer make sense. Our goal is to accelerate our transformation into a fully integrated operating organization that is highly efficient and responsive to customer needs. We are finally positioned for a new era of growth, and we intend to take full advantage.

I’ll close by offering my gratitude to our Board of Directors, management team and more than 45,000 employees worldwide for their many contributions. In particular, I would like to recognize the remarkable commitment of our employees, many of whom continue to perform admirably in very trying and often hazardous conditions.

Finally, I thank our shareholders. We remain committed to delivering profitable growth and value over the long term.

Sincerely,

Michael T. Dan
Chairman, President and Chief Executive Officer
The Brink’s Company
March 9, 2006

Michael T. Dan
Chairman, President
and Chief Executive Officer

 

 

 

 

The Brink's Company
Revenues by Business Segment
($ millions)

Brink's, Incorporated  
Brink's Home Security

 

 

 

 

The Brink's Company
Operating Profit by Business Segment
($ millions)

Brink's, Incorporated  
Brink's Home Security

 

 

 

 

The Brink's Company
Net Financings*
($ millions)

* Debt (including short-term and long-term borrowings), plus amount sold under receivables securitization facility, less cash and cash equivalents. See Capitalization in Management's Discussion and Analysis. See reconciliation to GAAP on page 58.