form_10-k.htm
 



 

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)
x   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
  EXCHANGE ACT OF 1934
  For the fiscal year ended December 31, 2009

OR

o   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 001-09148

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.)
 
         
 
P.O. Box 18100,
     
 
1801 Bayberry Court
     
 
Richmond, Virginia
 
23226-8100
 
 
(Address of principal executive offices)
 
(Zip Code)
 
         
 
Registrant’s telephone number, including area code
 
(804) 289-9600
 
         
 
Securities registered pursuant to Section 12(b) of the Act:
     
     
Name of each exchange on
 
 
Title of each class
 
which registered
 
 
The Brink’s Company Common Stock, Par Value $1
 
New York Stock Exchange
 
         
 
Securities registered pursuant to Section 12(g) of the Act:  None
     

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes  x   No  o
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes  o     No  x
 
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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  x    No  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).        Yes  o       No  o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  x    Accelerated filer  o    Non-accelerated filer  o    Smaller reporting company  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  o    No  x
 
As of February 22, 2010, there were issued and outstanding 47,872,426 shares of common stock.  The aggregate market value of shares of common stock held by non-affiliates as of June 30, 2009, was $1,319,269,250.
 
Documents incorporated by reference:  Part III incorporates information by reference from portions of the Registrant’s definitive 2010 Proxy Statement to be filed pursuant to Regulation 14A.
 
 


 
 

 



THE BRINK’S COMPANY

FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2009

TABLE OF CONTENTS

PART I
   
Page
Item 1.
Business
2
Item 1A.
Risk Factors
10
Item 1B.
Unresolved Staff Comments
15
Item 2.
Properties
15
Item 3.
Legal Proceedings
15
Item 4.
Submission of Matters to a Vote of Security Holders
15
     
 
Executive Officers of the Registrant
16  
     
 
PART II
 
     
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
 
 
Purchases of Equity Securities
17
Item 6.
Selected Financial Data
19
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
20
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
63
Item 8.
Financial Statements and Supplementary Data
65
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
109
Item 9A.
Controls and Procedures
109
Item 9B.
Other Information
109
     
 
PART III
 
     
Item 10.
Directors, Executive Officers and Corporate Governance
110
Item 11.
Executive Compensation
110
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
110
Item 13.
Certain Relationships and Related Transactions, and Director Independence
110
Item 14.
Principal Accountant Fees and Services
110
     
 
PART IV
 
     
Item 15.
Exhibits and Financial Statement Schedules
111


 
1

 


PART I


ITEM 1.  BUSINESS

The Brink’s Company (along with its subsidiaries, “we,” “our,” “Brink’s” or the “Company”), based in Richmond, Virginia, is a leading provider of secure transportation, cash logistics and other security-related services to banks and financial institutions, retailers, government agencies, mints, jewelers and other commercial operations around the world.  Brink’s is the oldest and largest secure transportation and cash logistics company in the U.S., and a market leader in many other countries.  Our international network serves customers in more than 50 countries and employs approximately 59,400 people.  Our operations include approximately 875 facilities and 10,500 vehicles.  Our globally recognized brand, global infrastructure, expertise in security and logistics and history and heritage are important competitive advantages.  Seventy-one percent (71%) of our $3 billion in revenues are from outside North America.  Over the past several years, we have changed from a conglomerate (with operations in the U.S. monitored home security, heavy-weight freight transportation, coal and other natural resource industries) into a company focused solely on the security industry.

Financial information related to The Brink’s Company, our two reporting segments (International and North America) and amounts not allocated to segments is included in the consolidated financial statements on pages 65-108.  Management evaluates performance and allocates resources to its segments based on operating profit or loss, excluding corporate allocations.

A significant portion of our business is conducted outside of the United States.  Financial results are reported in U.S. dollars and are affected by fluctuations in the relative value of foreign currencies.  Our business is also subject to other risks customarily associated with operating in foreign countries including changing labor and economic conditions, political instability, restrictions on repatriation of earnings and capital, as well as nationalization, expropriation and other forms of restrictive government actions.  The future effects of these risks cannot be predicted.  Additional information about risks associated with our foreign operations is provided on pages 10, 41 and 64.

We have significant liabilities associated with our retirement plans, a portion of which has been funded.  These liabilities increased $465 million in 2008 primarily as a result of a significant decline in the value of the investments of these plans.  The liabilities were $242 million lower at the end of 2009, primarily as a result of a voluntary $150 million contribution we made to our primary U.S. retirement plan in 2009.  See pages 48-50 and 54-58 for more information on these liabilities.  Additional risk factors are described on pages 10-14.

Available Information and Corporate Governance Documents
The following items are available free of charge on our website (www.brinkscompany.com) as soon as reasonably possible after filing or furnishing them with the Securities and Exchange Commission:
·  
Annual reports on Form 10-K
·  
Quarterly reports on Form 10-Q
·  
Current reports on Form 8-K, and amendments to those reports

In addition, the following documents are also available free of charge on our website:
·  
Corporate governance policies
·  
Business Code of Ethics
·  
The charters of the following Board Committees:  Audit and Ethics, Compensation and Benefits, and Corporate Governance and Nominating.

Printed versions of these items will be mailed free of charge to shareholders upon request.  Such requests can be made by contacting the Corporate Secretary at 1801 Bayberry Court, P. O. Box 18100, Richmond, Virginia 23226-8100.

 
2

 


General

Our 2009 segment operating profit was $213 million on revenues of $3.1 billion, resulting in a segment operating profit margin of 6.8%.
                                             
   
Our operations are located around the world and most of our revenues (71%) and segment operating profit (73%) are earned outside of North America.




 

 
3

 


International operations has three regions: Europe, Middle East, and Africa (“EMEA”); Latin America and Asia Pacific.  On a combined basis, international operations generated 2009 revenues of $2.2 billion (71% of total) and segment operating profit of $157 million (73% of total).

Brink’s EMEA, which generated $1.3 billion or 40% of total 2009 revenues, operates 258 branches in 22 countries.  Its largest operations are in France, the Netherlands and Germany.  In 2009, France accounted for $615 million or 49% of EMEA revenues (20% of total).

Brink’s Latin America, which generated $905 million or 29% of total 2009 revenues, operates 217 branches in nine countries.  Its largest operations are in Venezuela, Brazil and Colombia.  In 2009, Venezuela accounted for $376 million or 42% of Latin American revenues (12% of total). Brazil accounted for $258 million or 28% of Latin American revenues (8% of total) in 2009.

Brink’s Asia-Pacific operates 97 branches in nine countries, and accounted for $79 million or 2% of total 2009 revenues.

North American operations include 181 branches in the U.S. and 52 branches in Canada.  North American operations generated 2009 revenues of $894 million (29% of total) and segment operating profit of $56 million (27% of total).

Brink’s also serves customers in countries in which we do not operate branches.  Through our investments in unconsolidated equity affiliates as well as our Global Services network, Brink’s operates in over 50 countries.

The largest eight Brink’s operations (U.S., France, Venezuela, Brazil, the Netherlands, Colombia, Canada and Germany) accounted for $2.5 billion or 79% of total 2009 revenues.

(In millions)
 
2009
   
% total
   
% change
   
2008
   
% total
   
% change
   
2007
   
% total
   
% change
 
                                                       
Revenues by region:
                                                     
                                                       
EMEA:
                                                     
France
  $ 615       20       (12 )   $ 698       22       11     $ 629       23       15  
Other
    642       20       (3 )     661       21       18       563       21       23  
Total
    1,257       40       (7 )     1,359       43       14       1,192       44       19  
                                                                         
Latin America:
                                                                       
Venezuela (a)
    376       12       7       351       11       56       225       8       31  
Brazil
    258       8       33       194       6       20       161       6       36  
Other
    271       9       6       256       8       23       208       8       27  
Total
    905       29       13       801       25       35       594       22       31  
                                                                         
Asia Pacific
    79       2       10       72       2       15       63       2       (7 )
Total International
    2,241       71       -       2,232       70       21       1,849       68       21  
                                                                         
North America
    894       29       (4 )     932       30       5       886       32       7  
                                                                         
Total Revenues
  $ 3,135       100       (1 )   $ 3,164       100       16     $ 2,735       100       16  
 
Amounts may not add due to rounding.

(a)
2009 Venezuela revenues were $138 million on an adjusted basis, or 5%, of Brink’s $2.9 billion consolidated adjusted revenues in 2009.  Adjusted revenues are not reported under U.S. GAAP, and present Venezuela revenues at the less-favorable parallel market currency exchange rate.  The adjustments are described in detail and are reconciled to our GAAP results on pages 39-40.

Geographic financial information related to revenues and long-lived assets is included in the consolidated financial statements on page 82.

Brink’s ownership interests in subsidiaries and affiliated companies ranged from 36% to 100% at December 31, 2009.  In some instances, local laws limit the extent of Brink’s ownership interest.


 
4

 


Services
Our primary services include:
·  
Cash-in-transit (“CIT”) armored car transportation
·  
Automated teller machine (“ATM”) replenishment and servicing
·  
Global Services – arranging secure long-distance transportation of valuables
·  
Cash Logistics – supply chain management of cash
·  
Guarding services, including airport security

Brink’s typically provides customized services under separate contracts designed to meet the distinct needs of customers.  Contracts usually cover an initial term of at least one year and range up to five years, depending on the service.  The contracts generally remain in effect after the initial term until canceled by either party.

Core Services (55% of total revenue in 2009)
CIT and ATM Services are core services we provide to customers throughout the world. Core services generated approximately $1.7 billion of revenues in 2009.

CIT  We have been serving customers since 1859.  Our success in CIT is driven by a combination of rigorous security practices, high quality customer service, risk management expertise and logistics expertise.  CIT services generally include the secure transportation of:
·  
cash between businesses and banks
·  
cash, securities and other valuables between commercial banks, central banks, and investment banking and brokerage firms
·  
new currency, coins and precious metals for central banks

ATM Services  We manage nearly 77,000 ATM units worldwide for banks and other cash dispensing operators.  We provide cash replenishment, monitoring and forecasting capabilities, deposit pick-up and processing services.  Advanced online tools deliver consolidated electronic reports for simplified reconciliation.

Value-Added Services (33% of total revenue in 2009)
Our core services, combined with our brand and global infrastructure, provide a substantial platform from which we offer additional value-added services. Value-added services generated approximately $1.0 billion of revenues in 2009.

Global Services  With operations spanning more than 50 countries, Brink’s is a leading global provider of secure long-distance logistics for valuables including diamonds, jewelry, precious metals, securities, currency, high-tech devices, electronics and pharmaceuticals.  We typically employ a combination of armored car and secure air transportation to leverage our extensive global network.  Our specialized diamond and jewelry operation has offices in the major diamond and jewelry centers of the world.

Cash Logistics  Brink’s offers a fully integrated approach to managing the supply chain of cash, from point-of-sale through transport, vaulting, bank deposit and related credit.  Cash Logistics services include:
·  
money processing and cash management services
·  
deploying and servicing “intelligent” safes and safe control devices, including our patented CompuSafe® service
·  
integrated check and cash processing services (“Virtual Vault”)
·  
check imaging services

Money processing services generally include counting, sorting and wrapping currency.  Other currency management services include cashier balancing, counterfeit detection, account consolidation and electronic reporting.  Retail and bank customers use Brink’s to count and reconcile coins and currency, prepare bank deposit information, and replenish coins and currency in specific denominations.

Brink’s offers a variety of advanced technology applications including online cash tracking, cash inventory management, check imaging for real-time deposit processing, and a variety of other web-based information tools that enable banks and other customers to reduce costs while improving service to their customers.


 
5

 

Brink’s CompuSafe® service offers customers an integrated, closed-loop system for preventing theft and managing cash.  We market CompuSafe® services to a variety of cash-intensive customers such as convenience stores, gas stations, restaurants, retail chains and entertainment venues.  Our service includes the installation of a specialized safe in the customer’s facility.  The customer’s employees deposit currency into the safe’s cassettes, which can only be removed by Brink’s personnel.  Upon removal, the cassettes are transported to a secure location where contents are verified and transferred for deposit.  Our CompuSafe service system features currency recognition counterfeit detection technology, multi-language touch screens and electronic interface between point-of-sale, back-office systems and external banks.  Our electronic reporting interface with external banks enables our CompuSafe service customers to receive same-day credit on their cash balances, even if the cash remains on the customer’s premises.

Virtual Vault services combine CIT, Cash Logistics, vaulting and electronic reporting technologies to help banks expand into new markets while minimizing investment in vaults and branch facilities.  In addition to secure storage, we process deposits, provide check imaging and reconciliation services, and electronically transmit debits and credits.

We believe the quality and scope of our cash processing and information systems differentiate our Cash Logistics services from competitive offerings.

Payment Services   We provide bill payment acceptance and processing services to utility companies and other billers. Consumers can pay their bills at our payment locations or payment locations that we operate on behalf of billers and bank customers.

Other Security Services (12% of total revenue in 2009)
Security and Guarding   We protect airports, offices, warehouses, stores, and public venues with electronic surveillance, access control, fire prevention and highly trained patrolling personnel.  Other security services generated approximately $0.4 billion of revenues in 2009.

Our guarding services are generally offered in European markets including France, Germany, Luxembourg and Greece.  A significant portion of this business involves long-term contracts related primarily to guarding services at airports. Generally, other guarding contracts are for a one-year period, the majority of which are extended.  Our security officers are typically stationed at customer sites, and responsibilities include detecting and deterring specific security threats.

Growth Strategy
We are pursuing various growth strategies, which we categorize as follows:
·  
Organic Growth Strategy
1.  
Continue to develop and expand our portfolio of high-margin services (for example, Cash Logistics and Global Services)
2.  
Penetrate new geographies with strong growth potential for our existing service offerings
·  
Adjacency Growth Strategy – enter new security-related markets where we can create value for customers with our brand, capabilities and other competitive advantages
·  
Acquisitions to supplement organic growth – acquire businesses that meet internal metrics for projected growth, profitability and return on investment

Industry and Competition
Brink’s competes with large multinational, regional and smaller companies throughout the world.  Our largest multinational competitors are Group 4 Securicor plc (headquartered in the U.K.), Loomis AB, formerly a division of Securitas AB (Sweden), Prosegur, Compania de Seguridad, S.A. (Spain) and Garda World Security Corporation (Canada).

We believe the primary factors in attracting and retaining customers are security expertise, service quality and price.  Our competitive advantages include:
·  
brand name recognition
·  
reputation for a high level of service and security
·  
risk management and logistics expertise
·  
global infrastructure and customer base
·  
proprietary cash processing and information systems
·  
proven operational excellence
·  
high-quality insurance coverage and general financial strength

Our cost structure is generally competitive, although certain competitors may have lower costs due to a variety of factors including lower wages, less costly employee benefits, or less stringent security and service standards.

 
6

 


Although Brink’s faces competitive pricing pressure in many markets, we resist competing on price alone.  We believe our high levels of service and security differentiate us from competitors.

The availability of high-quality and reliable insurance coverage is an important factor in our ability to attract and retain customers and manage the risks inherent in our business.  Brink’s is self-insured for much of the liability related to potential losses of cash or valuables while such items are in our possession.  However, we purchase insurance coverage for losses in excess of what we consider to be prudent levels of self-insurance.  Our insurance policies cover losses from most causes, with the exception of war, nuclear risk and certain other exclusions typical in such policies.

Insurance for security is provided by different groups of underwriters at negotiated rates and terms.  Premiums fluctuate depending on market conditions.  The security loss experience of Brink’s and, to a limited extent, other armored carriers affects our premium rates.

Revenues are generated from charges per service performed or based on the value of goods transported.  As a result, revenues are affected by the level of economic activity in various markets as well as the volume of business for specific customers.  CIT contracts usually cover an initial term of at least one year and in many cases one to three years, and generally remain in effect thereafter until canceled by either party.  Contracts for Cash Logistics are typically longer.  Costs are incurred when preparing to serve a new customer or to transition away from an existing customer.  Operating profit is generally stronger in the second half of the year, particularly in the fourth quarter, as economic activity is typically stronger during this period.

As part of the spin-off of our former monitored home security business, Brink’s Home Security Holdings, Inc. (“BHS”), we agreed not to compete with BHS in the United States, Canada and Puerto Rico with respect to certain activities related to BHS’s security system monitoring and surveillance business until October 31, 2013.

Service Mark and Patents
BRINKS is a registered service mark in the U.S. and certain foreign countries.  The BRINKS mark, name and related marks are of material significance to our business.  We own patents expiring in 2011 and 2012 for certain coin sorting and counting machines.  We also own patents for safes, including our integrated CompuSafe® services which expire between 2015 and 2022.  These patents provide important advantages to Brink’s.  However, Brink’s operations are not dependent on the existence of these patents.

We have agreed to license the Brink’s name.  An example is a license to a distributor of security products (padlocks, door hardware, etc.) offered for sale to consumers through major retail chains.

We entered into a Brand Licensing Agreement in connection with the spin-off of BHS. Under the agreement, BHS licenses the rights to use certain trademarks, including trademarks that contain the word “Brink’s” in the United States, Canada and Puerto Rico.  In exchange for these rights, BHS has agreed to pay a licensing fee equal to 1.25% of its net revenues during the period after the spin-off until the expiration date of the agreement.  The license is terminable by BHS upon 30 days notice and will expire on October 31, 2011.  Based on public statements by Tyco International, Ltd. ("Tyco"), we expect that this license will be terminated prior to September 2010 in connection with the pending acquisition of BHS by Tyco.



 
7

 


Government Regulation
Our U.S. operations are subject to regulation by the U.S. Department of Transportation with respect to safety of operations, equipment and financial responsibility.  Intrastate operations in the U.S. are subject to state regulation.  Our International operations are regulated to varying degrees by the countries in which we operate.

Employee Relations
At December 31, 2009, our company had approximately 59,400 employees, including approximately 12,000 employees in North America (of whom approximately 1,800 were classified as part-time employees) and approximately 47,400 employees outside North America.  At December 31, 2009, Brink’s was a party to 5 collective bargaining agreements in North America with various local unions covering approximately 1,000 employees, almost all of whom are employees in Canada and members of unions affiliated with the Canadian Auto Workers (Ontario).  The agreements have various expiration dates in 2010.  Outside of North America, approximately 62% of branch employees are members of labor or employee organizations.  We believe our employee relations are satisfactory.

ACQUISITIONS

Sebival
Brazilian CIT and payment processing business
On January 8, 2009, we acquired 100% of the capital stock and voting interests in Sebival-Seguranca Bancaria Industrial e de Valores Ltda. and Setal Servicos Especializados, Tecnicos e Auxiliares Ltda. (“Sebival”) for approximately $47.6 million in cash. Both of the businesses which comprise Sebival were controlled by the same owner and the acquisition expands our operations into the midwestern region of Brazil.

Brink’s Arya
Indian CIT and Global Services business
On September 1, 2009, we acquired additional shares of Brink’s Arya (“Arya”), increasing our ownership in Arya from 40% to 78%. The consideration paid for the additional 38% interest was $22.2 million.

In connection with the acquisition of 38% of Arya’s shares, we also agreed to purchase the remaining 22% of the shares we do not currently hold for approximately $12.8 million. This purchase is subject to the satisfaction of certain conditions which are expected to be met by September 1, 2011.  We consider Arya as 100% owned for accounting purposes and included the fixed purchase price in non-current liabilities.

Arya is a cash handling and secure logistics company based in Mumbai, India, and this acquisition expands our presence in one of the largest cash services markets in Asia.

Other acquisitions
In the first quarter of 2009, we acquired a controlling interest in a Panama armored transportation operation, which was previously 49% owned.

In the first quarter of 2009, we also acquired 80% ownership of a secure logistics company based in Moscow, Russia. The relatively small acquisition increases our presence in a region that has long-term growth potential.

In the third quarter of 2009, we acquired a majority stake in ICD Limited (“ICD”), a premium provider of commercial security services in the Asia-Pacific region.  ICD designs, installs, maintains and manages high-quality commercial security systems.  With principal operations in China, ICD also has offices in Hong Kong, India, Singapore and Australia.  ICD employs approximately 200 people and had 2008 revenue of $12 million.

See note 6 to the consolidated financial statements for more information.


 
8

 


DISCONTINUED OPERATIONS

Brink’s Home Security Holdings, Inc.
On October 31, 2008, we completed the 100% spin-off of BHS.  BHS offered monitored security services in North America primarily for owner-occupied, single-family residences.  To a lesser extent, BHS offered security services for commercial and multi-family properties.  BHS typically installed and owned the on-site security systems and charged fees to monitor and service the systems.

In connection with the spin-off, we entered into certain agreements with BHS to define responsibility for obligations arising before and after the spin-off, including obligations relating to liabilities of the businesses, employees, taxes and intellectual property.  We entered into a Brand Licensing Agreement with BHS.  Under the agreement, BHS licenses the rights to use certain trademarks, including trademarks that contain the word “Brink’s” in the United States, Canada and Puerto Rico.  In exchange for these rights, BHS has agreed to pay a licensing fee equal to 1.25% of its net revenues during the period after the spin-off until the expiration date of the agreement.  The license is terminable by BHS upon 30 days notice and will expire on October 31, 2011.  Based on public statements by Tyco International, Ltd. ("Tyco"), we expect that this license will be terminated prior to September 2010 in connection with the pending acquisition of BHS by Tyco.

We also entered into a Non-Compete Agreement with BHS, which will expire on October 31, 2013, pursuant to which we agreed not to compete with BHS in the United States, Canada and Puerto Rico with respect to certain restricted activities specified in the Non-Compete Agreement in which BHS currently is, or is currently planning to be, engaged.

We contributed $50 million in cash to BHS at the time of the spin-off and forgave all the existing intercompany debt owed by BHS to us and our subsidiaries as of the distribution date.

Former Coal Business
We have significant liabilities related to retirement medical plans of our former coal operations, a portion of which have been funded.  Some of the obligations have not been funded.  We expect to have ongoing expense and future cash outflow for these liabilities.  See notes 3, 17 and 21 to the consolidated financial statements for more information.

 
9

 



ITEM 1A.  RISK FACTORS

We are exposed to risk in the operation of our businesses.  Some of these risks are common to all companies doing business in the industries in which we operate and some are unique to our business.  In addition, there are risks associated with investing in our common stock.  These risk factors should be considered carefully when evaluating the company and its businesses.

The weak economy is expected to have a negative impact on demand for our services.

Global economic conditions have deteriorated significantly, and demand for our services has been negatively impacted in regions where we provide our services.  For example, demand for our services is significantly affected by the amount of discretionary consumer and business spending, which historically has displayed significant cyclicality.  Further deterioration in general global economic conditions would have a negative impact on our financial condition, results of operations and cash flows, although it is difficult to predict the extent and the length of time the economic downturn will affect our business.

The inability to access capital or significant increases in the cost of capital could adversely affect our business.

Our ability to obtain adequate and cost effective financing depends on our credit ratings as well as the liquidity of financial markets. A negative change in our ratings outlook or any downgrade in our current investment-grade credit ratings by our rating agencies could adversely affect our cost and/or access to sources of liquidity and capital. Additionally, such a downgrade could increase the costs of borrowing under available credit lines. Disruptions in the capital and credit markets could adversely affect our ability to access short-term and long-term capital. Our access to funds under short-term credit facilities is dependent on the ability of the participating banks to meet their funding commitments. Those banks may not be able to meet their funding commitments if they experience shortages of capital and liquidity. Longer disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation, reduced alternatives or failures of significant financial institutions could adversely affect our access to capital needed for our business.

We have significant retirement obligations. Poor investment performance of retirement plan holdings could unfavorably affect our liquidity and results of operations.

We have substantial pension and retiree medical obligations, a portion of which have been funded.  The amount of these obligations is significantly affected by factors that are not in our control, including interest rates used to determine the present value of future payment streams, investment returns, medical inflation rates, participation rates and changes in laws and regulations.  Our liabilities for these plans increased significantly in 2008 primarily as a result of a decline in value of plan investments.  To improve the funded status of The Brink’s Company Pension-Retirement Plan, we made a voluntary $150 million cash and stock contribution in 2009.  The funded status of the plan was approximately 83% as of December 31, 2009.  We expect that we will be required to make significant contributions to The Brink’s Company Pension-Retirement Plan in the next several years.  This could adversely affect our liquidity and our ability to use our resources to make acquisitions and to otherwise grow our business.  The net periodic costs of our retirement plans in 2009 were  adversely affected by the investment losses sustained in 2008 and we anticipate that costs in future years will continue to be affected as the unrecognized losses are recognized into earnings.  If these investments have additional losses, our future cash requirements and costs for these plans will be further adversely affected.

We have significant operations outside the United States.

We currently operate in more than 50 countries.  Approximately three-quarters of our revenue in 2009 came from operations outside the U.S.  We expect revenue outside the U.S. to continue to represent a significant portion of total revenue.  Business operations outside the U.S. are subject to political, economic and other risks inherent in operating in foreign countries, such as:

·  
the difficulty of enforcing agreements, collecting receivables and protecting assets through foreign legal systems;
·  
trade protection measures and import or export licensing requirements;
·  
difficulty in staffing and managing widespread operations;
·  
required compliance with a variety of foreign laws and regulations;
·  
varying permitting and licensing requirements in different jurisdictions;
·  
changes in the general political and economic conditions in the countries where we operate, particularly in emerging markets;
·  
threat of nationalization and expropriation;
·  
higher costs and risks of doing business in a number of foreign jurisdictions;
·  
limitations on the repatriation of earnings;

 
10

 

·  
fluctuations in equity, revenues and profits due to changes in foreign currency exchange rates, including measures taken by governments to influence currency exchange rates; and
·  
inflation levels exceeding that of the U.S.

We are exposed to certain risks when we operate in countries that have high levels of inflation, including the risk that:

·  
the rate of price increases for services will not keep pace with cost inflation;
·  
adverse economic conditions may discourage business growth which could affect demand for our services;
·  
the devaluation of the currency may exceed the rate of inflation and reported U.S. dollar revenues and profits may decline; and
·  
these countries may be deemed “highly inflationary” for U.S. GAAP purposes.

We try to manage these risks by monitoring current and anticipated political and economic developments and adjusting operations as appropriate.  Changes in the political or economic environments of the countries in which we operate could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We operate in highly competitive industries.  

We compete in industries that are subject to significant competition and pricing pressures.  We face significant pricing pressures from competitors in most markets.  Because we believe we have competitive advantages such as brand name recognition and a reputation for a high level of service and security, we resist competing on price alone.  However, continued pricing pressure could impact our customer base or pricing structure and have an adverse effect on our business, financial condition, results of operations and cash flows.

Our earnings and cash flow could be materially affected by increased losses of customer valuables.

We purchase insurance coverage for losses of customer valuables for amounts in excess of what we consider prudent deductibles and/or retentions.  Insurance is provided by different groups of underwriters at negotiated rates and terms.  Coverage is available to us in major insurance markets, although premiums charged are subject to fluctuations depending on market conditions.  Our loss experience and that of other armored carriers affects premium rates charged to us.  We are self-insured for losses below our coverage limits and recognize expense up to these limits for actual losses.  Our insurance policies cover losses from most causes, with the exception of war, nuclear risk and various other exclusions typical for such policies.  The availability of high-quality and reliable insurance coverage is an important factor in order for us to obtain and retain customers and to manage the risks of our business.  If our losses increase, or if we are unable to obtain adequate insurance coverage at reasonable rates, our financial condition, results of operations and cash flows could be materially and adversely affected.

Restructuring charges may be required in the future.

There is a possibility we will take restructuring actions in one or more of our markets in the future to reduce expenses if a major customer is lost or if recurring operating losses continue.  These actions could result in significant restructuring charges at these subsidiaries, including recognizing impairment charges to write down assets, and recording accruals for employee severance and operating leases.  These charges, if required, could significantly affect results of operations and cash flows.

We depend heavily on the availability of fuel and the ability to pass higher fuel costs to customers.

Fuel prices have fluctuated significantly in recent years.  In some periods, our operating profit has been adversely affected because we are not able to immediately offset the full impact of higher fuel prices through increased prices or fuel surcharges.  We do not have any long-term fuel purchase contracts, and have not entered into any other hedging arrangements that protect against fuel price increases.  A significant increase in fuel costs and an inability to pass increases on to customers or a shortage of fuel could adversely affect our results of operations and cash flows.

We operate in regulated industries.

Our U.S. operations are subject to regulation by the U.S. Department of Transportation with respect to safety of operations and equipment and financial responsibility.  Intrastate operations in the U.S. are subject to regulation by state regulatory authorities and interprovincial operations in Canada are subject to regulation by Canadian and provincial regulatory authorities.  Our international operations are regulated to varying degrees by the countries in which we operate.

Changes in laws or regulations could require a change in the way we operate, which could increase costs or otherwise disrupt operations.  In addition, failure to comply with any applicable laws or regulations could result in substantial fines or revocation of our operating permits and licenses.  If laws and regulations were to change or we failed to comply, our business, financial condition, results of operations and cash flows could be materially and adversely affected.

 
11

 


We have retained obligations from the sale of BAX Global.

In January 2006 we sold BAX Global.  We retained some of the obligations related to these operations, primarily for taxes owed prior to the date of sale and for any amounts paid related to one pending litigation matter for which we have accrued a loss reserve of $13 million.  In addition, we provided indemnification customary for these sorts of transactions.  Future unfavorable developments related to these matters could require us to record additional expenses or make cash payments in excess of recorded liabilities.  The occurrence of these events could have a material adverse affect on our financial condition, results of operations and cash flows.

We are subject to covenants for credit facilities.

We have credit facilities with financial covenants, including a limit on the ratio of debt to earnings before interest, taxes, depreciation, and amortization, limits on the ability to pledge assets, limits on the use of proceeds of asset sales and minimum coverage of interest costs.  Although we believe none of these covenants are presently restrictive to operations, the ability to meet the financial covenants can be affected by changes in our results of operations or financial condition.  We cannot provide assurance that we will meet these covenants.  A breach of any of these covenants could result in a default under existing credit facilities.  Upon the occurrence of an event of default under any of our credit facilities, the lenders could cause amounts outstanding to be immediately payable and terminate all commitments to extend further credit.  The occurrence of these events would have a significant impact on our liquidity and cash flows.

Our growth strategy may not be successful.
 
One element of our growth strategy is to strengthen our brand portfolio and expand our geographic reach through selective acquisitions.  Acquisitions present risks of failing to achieve efficient and effective integration, strategic objectives and anticipated revenue improvements and cost savings. There can be no assurance
 
·  
that we will be able to acquire attractive businesses on favorable terms,
·  
that all future acquisitions will be accretive to earnings,
·   
or that future acquisitions will be rapidly and efficiently integrated into existing operations.

 
Our effective income tax rate could change.

We operate in more than 50 countries, all of which have different income tax laws and associated income tax rates.  Our effective income tax rate can be significantly affected by changes in the mix of pretax earnings by country and the related income tax rates in those countries.  In addition, our effective income tax rate is significantly affected by the ability to realize deferred tax assets, including those associated with net operating losses.  Changes in income tax laws, income apportionment, or estimates of the ability to realize deferred tax assets, could significantly affect our effective income tax rate, financial position and results of operations.

We have certain environmental and other exposures related to our former coal operations.

We may incur future environmental and other liabilities that are presently unknown in connection with our former coal operations.

Our performance could be negatively impacted by the spin-off of BHS, which was completed in 2008.

In connection with the BHS spin-off, we received both a private letter ruling from the Internal Revenue Service (the “IRS”) and a favorable opinion from Cravath, Swaine & Moore LLP that the spin-off qualifies for tax-free treatment under Section 355 of the Internal Revenue Code of 1986, as amended.  However, the IRS could subsequently determine that the spin-off should be treated as a taxable transaction.  If the spin-off fails to qualify for tax-free treatment, it could have a material adverse tax impact on us as well as on our shareholders.  We also entered into certain agreements with BHS that could potentially affect our ability to conduct our operations in the manner most advantageous to us until the expiration of such agreements.  We have agreed to license certain trademarks that contain the word “Brink’s” to BHS until October 31, 2011, subject to earlier termination.  We also have agreed not to compete with BHS in the United States, Canada and Puerto Rico with respect to certain activities related to BHS’s security system monitoring and surveillance business until October 31, 2013.


 
12

 

We may be exposed to certain regulatory and financial risks related to climate change.
   
Growing concerns about climate change may result in the imposition of additional environmental regulations to which we are subject.  Some form of federal regulation may be forthcoming with respect to greenhouse gas emissions (including carbon dioxide (CO2)) and/or "cap and trade" legislation.  The outcome of this legislation may result in new regulation, additional charges to fund energy efficiency activities or other regulatory actions.  Compliance with these actions could result in the creation of additional costs to us, including, among other things, increased fuel prices or additional taxes or emission allowances. We may not be able to recover the cost of compliance with new or more stringent environmental laws and regulations from our customers, which could adversely affect our business.  Furthermore, the potential impacts of climate change and related regulation on our customers are highly uncertain and may adversely affect our operations.


Forward-Looking Statements

This document contains both historical and forward-looking information.  Words such as “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes,” “may,” “should” and similar expressions may identify forward-looking information.  Forward-looking information in this document includes, but is not limited to, statements regarding expected revenue growth and earnings for The Brink’s Company, including organic revenue growth and segment operating profit margin in 2010, the anticipated termination of the BHS license, the pursuit of growth through acquisitions in our core market and in other markets, the growth of our Cash Logistics services, our cost structure, the seasonality of our operating profit, employee relations, significant liabilities and ongoing expenses and future cash outflows related to retirement medical plans of former coal operations, customer demand for our services, expected non-segment income and expenses, potential changes in foreign currency exchange rates, the anticipated effective tax rate for 2010 and our future tax position, expenses related to former operations, expected trademark royalties from BHS, the impact of exchange rates, the anticipated effect of translating our Venezuelan operations at the parallel market rate rather than the official rate and designating Venezuela as “highly inflationary” for accounting purposes, projected contributions, expense and payouts for the U.S. retirement plans and the non-U.S. pension plans and the expected long-term rate of return and funded status of the primary U.S. pension plan, expected future contributions to the UMWA plans, capital expenditures in 2010 and future trends for capital expenditures, future depreciation and amortization, future payment of bonds issued by the Peninsula Ports Authority of Virginia, the ability to meet liquidity needs, estimated contractual obligations for the next five years and beyond, contractual indemnities associated with the sale of BAX Global and the spin-off of BHS, the outcome of pending litigation and the anticipated financial impact of the disposition of these matters, future realization of deferred tax assets, the impairment of goodwill, future amortizations into net periodic pension cost, estimated discount rates, the assumed inflation rate for a number of the Company’s benefit plans, the impact of accounting rule changes, the likelihood of losses due to non-performance by parties to hedging instruments, the use of earnings from foreign subsidiaries and equity affiliates, future recognition of unrecognized tax benefits and uncertain tax positions, minimum repayments of long-term debt and minimum future lease payments, and expected future cash payments and expense levels for black lung obligations.  Forward-looking information in this document is subject to known and unknown risks, uncertainties, and contingencies, which could cause actual results, performance or achievements to differ materially from those that are anticipated.

These risks, uncertainties and contingencies, many of which are beyond our control, include, but are not limited to the impact of the global economic slowdown on our business opportunities, access to the capital and credit markets, the recent market volatility and its impact on the demand for our services, the implementation of investments in technology and value-added services and cost reduction efforts and their impact on revenue and profit growth, the ability to identify and execute further cost and operational improvements and efficiencies in our core business, the willingness of our customers to absorb fuel surcharges and other future price increases, the actions of competitors, our ability to identify strategic opportunities and integrate them successfully, acquisitions and dispositions made in the future, our ability to integrate recent acquisitions, regulatory and labor issues and higher security threats, the impact of turnaround actions responding to current conditions in Europe, the return to profitability of operations in jurisdictions where we have recorded valuation adjustments, the stability of the Venezuelan economy and changes in Venezuelan policy regarding exchange rates, fluctuations in value of the Venezuelan bolivar fuerte, the effect of translating our Venezuelan operations at the parallel market rate rather than the official rate and designating Venezuela as “highly inflationary” for accounting purposes, variations in costs or expenses and performance delays of any public or private sector supplier, service provider or customer, our ability to obtain appropriate insurance coverage, positions taken by insurers with respect to claims made and the financial condition of insurers, safety and security performance, our loss experience, changes in insurance costs, risks customarily associated with operating in foreign countries including changing labor and economic conditions, currency devaluations, safety and security issues, political instability, restrictions on repatriation of earnings and capital, nationalization, expropriation and other forms of restrictive government actions, costs associated with the purchase and implementation of cash processing and security equipment, the timing of the termination of the BHS license, changes in the scope or method of remediation or monitoring of our former coal operations, the timing of the pass-through of certain costs to third parties and the timing of approvals by governmental authorities relating to the disposal of the coal assets, changes to estimated liabilities and assets in actuarial assumptions due to payments made, investment returns, annual actuarial revaluations, and periodic revaluations of reclamation liabilities, the funding requirements, accounting treatment, investment performance and costs and expenses of our retirement plans and other employee benefits, whether Company assets or retirement plan assets are used to pay benefits, projections regarding the number of participants in and beneficiaries of our employee and retiree benefit plans, mandatory or voluntary retirement plan contributions,

 
13

 

black lung claims incidence, the number of dependents of mine workers for whom benefits are provided, actual retirement experience of the former coal operation’s employees, actual medical and legal expenses relating to benefits, changes in inflation rates (including medical inflation) and interest rates, changes in mortality and morbidity assumptions, discovery of new facts relating to civil suits, the addition of claims or changes in relief sought by adverse parties, our cash, debt and tax position and growth needs, our demand for capital and the availability and cost of such capital, the nature of our hedging relationships, changes in employee obligations, overall domestic and international economic, political, social and business conditions, capital markets performance, the strength of the U.S. dollar relative to foreign currencies, foreign currency exchange rates, changes in estimates and assumptions underlying our critical accounting policies, as more fully described in the section “Application of Critical Accounting Policies” but including the likelihood that net deferred tax assets will be realized, discount rates, expectations of future performance, the timing of deductibility of expenses, inflation, the promulgation and adoption of new accounting standards and interpretations, including SFAS 166, now part of FASB ASC Topic 860, Transfers and Servicing, SFAS 167, now part of FASB ASC Topic 810, Consolidation, ASU 2009-13, and ASU 2009-14, anticipated return on assets, inflation, seasonality, pricing and other competitive industry factors, labor relations, new government regulations and interpretations of existing regulations, legislative initiatives, judicial decisions, issuances of permits, variations in costs or expenses and the ability of counterparties to perform.  The information included in this document is representative only as of the date of this document, and The Brink’s Company undertakes no obligation to update any information contained in this document.

 
14

 


ITEM 1B.  UNRESOLVED STAFF COMMENTS

Not applicable.


ITEM 2.  PROPERTIES

We have property and equipment in locations throughout the world.  Branch facilities generally have office space to support operations, a vault to securely process and store valuables and a garage to house armored vehicles and serve as a vehicle terminal.  Many branches have additional space to repair and maintain vehicles.

We own or lease armored vehicles, panel trucks and other vehicles that are primarily service vehicles.  Our armored vehicles are of bullet-resistant construction and are specially designed and equipped to provide security for the crew and cargo.

The following table discloses leased and owned facilities and vehicles for Brink’s most significant operations as of December 31, 2009.

   
Facilities
   
Vehicles
 
Region
 
Leased
   
Owned
   
Total
   
Leased
   
Owned
   
Total
 
                                     
U. S.
    174       25       199       2,118       293       2,411  
Canada
    40       13       53       442       86       528  
North America
    214       38       252       2,560       379       2,939  
                                                 
EMEA
    229       48       277       863       2,877       3,740  
Latin America
    193       50       243       450       2,868       3,318  
Asia Pacific
    103       -       103       2       512       514  
International
    525       98       623       1,315       6,257       7,572  
                                                 
Total
    739       136       875       3,875       6,636       10,511  

During 2009, we installed approximately 2,800 units, net of dispositions, for our CompuSafe® service.  This is a 37% increase in the installed base since the end of 2008.  Our installed base now stands at approximately 10,300 units.  In 2009, revenues from our CompuSafe® service represented approximately 7% of North America’s revenues.


ITEM 3.  LEGAL PROCEEDINGS

We are involved in various lawsuits and claims in the ordinary course of business.  We are not able to estimate the range of losses for some of these matters.  We have recorded accruals for losses that are considered probable and reasonably estimable.  We do not believe that the ultimate disposition of any of these matters will have a material adverse effect on our liquidity, financial position or results of operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.


 
15

 

Executive Officers of the Registrant

The following is a list as of February 15, 2010, of the names and ages of the executive and other officers of The Brink’s Company indicating the principal positions and offices held by each.  There are no family relationships among any of the officers named.

Name
Age
 
Positions and Offices Held
Held Since
Executive Officers:
       
Michael T. Dan
59
 
President, Chief Executive Officer and Chairman of the Board
1998
Joseph W. Dziedzic
41
 
Vice President and Chief Financial Officer
2009
Frank T. Lennon
68
 
Vice President and Chief Administrative Officer
2005
McAlister C. Marshall, II
40
 
Vice President and General Counsel
2008
Matthew A. P. Schumacher
51
 
Controller
2001
         
Other Officers:
       
Jonathan A. Leon
43
 
Treasurer
2008
Lisa M. Landry
44
 
Vice President - Tax
2009
Michael J. McCullough
39
 
Secretary
2009
Arthur E. Wheatley
67
 
Vice PresidentRisk Management and Insurance
1988

Executive and other officers of The Brink’s Company are elected annually and serve at the pleasure of its board of directors.

Mr. Dan was elected President, Chief Executive Officer and Director of The Brink’s Company in February 1998 and was elected Chairman of the Board effective January 1, 1999.  He also serves as Chief Executive Officer of Brink’s, Incorporated, a position he has held since July 1993.  From August 1992 to July 1993 he served as President of North American operations of Brink’s, Incorporated and as Executive Vice President of Brink’s, Incorporated from 1985 to 1992.

Mr. Dziedzic is the Vice President and Chief Financial Officer of The Brink’s Company.  Mr. Dziedzic was hired on May 25, 2009 and appointed to this position on August 1, 2009.  Before joining The Brink’s Company, Mr. Dziedzic was Chief Financial Officer for GE Aviation Services, a producer, seller and servicer of jet engines, turboprop and turbo shaft engines and related replacement parts, from March 2006 to May 2009.  Prior to this position, Mr. Dziedzic was Manager-Global Financial Planning & Analysis for GE Energy, a provider of products and services related to energy production, distribution and management, from January 2003 to February 2006.
 
Mr. Lennon was appointed Vice President and Chief Administrative Officer in 2005.  Prior to this position, he was the Vice President, Human Resources and Administration of The Brink’s Company from 1990 through 2005.
 
Mr. Marshall was appointed Vice President and General Counsel of The Brink’s Company in September 2008 and also held the office of Secretary from September 2008 to July 2009.   Prior to joining The Brink’s Company, Mr. Marshall was the Vice President, General Counsel and Secretary at Tredegar Corporation, a manufacturer of plastic films and aluminum extrusions, from October 2006 to September 2008.  Prior to this position, Mr. Marshall was the Assistant General Counsel and Secretary for The Brink’s Company from July 2006 to September 2006.  Prior to this position, Mr. Marshall was the Assistant General Counsel and Director-Corporate Governance and Compliance for The Brink’s Company from July 2004 to July 2006.  Prior to this position, Mr. Marshall was the Assistant General Counsel for The Brink’s Company from July 2000 to July 2004.

Messrs. Schumacher and Wheatley have served in their present positions for more than the past five years.

Ms. Landry was appointed Vice President-Tax of The Brink’s Company on July 10, 2009.  Prior to this position, Ms. Landry was Director of Taxes and Chief Tax Counsel of The Brink’s Company from December 2006 to July 2009.  Prior to this position, Ms. Landry was Senior Tax Counsel of The Brink’s Company from March 2004 to December 2006.

Mr. Leon is the Treasurer of The Brink’s Company.  Mr. Leon was hired in June 2008 and appointed to this position in July 2008. Before joining The Brink’s Company, Mr. Leon was the Assistant Treasurer for Universal Corporation, a leaf tobacco merchant and processor, from January 2007 to June 2008.  Prior to this position, Mr. Leon was the Assistant Treasurer for The Brink’s Company from July 2005 to January 2007.  Prior to this position, Mr. Leon had held various financial management positions with The Brink’s Company from February 1998 to July 2005.

Mr. McCullough was appointed Secretary of The Brink’s Company on July 10, 2009.  Prior to this position, Mr. McCullough was Assistant General Counsel and Director of Corporate Governance and Compliance of The Brink’s Company from October 2006 to July 2009, and served as Assistant Secretary from July 2007 to July 2009.  Prior to this position, Mr. McCullough had held various internal counsel positions with The Brink’s Company from July 2003 to October 2006.

 
16

 


 
 
PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock trades on the New York Stock Exchange under the symbol “BCO.”  As of February 17, 2010, there were approximately 2,000 shareholders of record of common stock.

The dividends declared and the high and low prices of our common stock for each full quarterly period within the last two years are as follows:

   
2009 Quarters
   
2008 Quarters
 
   
1st
   
2nd
   
3rd
   
4th
   
1st
   
2nd
   
3rd
   
4th
 
                                                 
Dividends declared per common share
  $ 0.1000       0.1000       0.1000       0.1000     $ 0.1000       0.1000       0.1000       0.1000  
Stock prices:
                                                               
High
  $ 32.36       31.28       30.66       26.89     $ 70.11       74.61       71.48       61.32  
Low
    20.73       25.79       25.00       22.23       49.04       65.23       57.68       18.19  

We completed the spin-off of BHS on October 31, 2008.  See note 16 to the consolidated financial statements for a description of limitations of our ability to pay dividends in the future.

 
17

 



The following graph compares the cumulative 5-year total return provided to shareholders on The Brink’s Company’s common stock relative to the cumulative total returns of the S&P Midcap 400 index and the S&P Midcap 400 Commercial Services & Supplies Index. The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2004, through December 31, 2009.
 

         
Source – Research Data Group, Inc.

Comparison of Five-Year Cumulative Total Return Among
Brink’s Common Stock, the S&P MidCap 400 Index and
the S&P Midcap 400 Commercial Services & Supplies Index (1)

   
Years Ended December 31,
 
   
2004
   
2005
   
2006
   
2007
   
2008
   
2009
 
                                     
The Brink's Company
  $ 100.00       121.56       162.82       153.03       215.76       198.27  
S&P Midcap 400 Index
    100.00       112.55       124.17       134.08       85.50       117.46  
S&P Midcap 400 Commercial Services & Supplies Index
  $ 100.00       103.86       122.68       140.56       95.71       114.63  
Copyright © 2010, Standard & Poor's, a division of The McGraw-Hill Companies, Inc. All rights reserved.
 
 
(1)
For the line designated as “The Brink’s Company” the graph depicts the cumulative return on $100 invested in The Brink’s Company’s common stock.  For the S&P Midcap 400 Index and the S&P Midcap 400 Commercial Services & Supplies Index, cumulative returns are measured on an annual basis for the periods from December 31, 2004, through December 31, 2009, with the value of each index set to $100 on December 31, 2004. Total return assumes reinvestment of dividends and the reinvestment of proceeds from the sale of the shares received related to the spin-off of our former monitored security business on October 31, 2008. We chose the S&P Midcap 400 Index and the S&P Midcap 400 Commercial Services & Supplies Index because we are included in these indices, which broadly measure the performance of mid-size companies in the United States market.


 
18

 


ITEM 6. SELECTED FINANCIAL DATA

Five Years in Review

(In millions, except per share amounts)
 
2009
   
2008
   
2007
   
2006
   
2005
 
                               
Revenues and Income
                             
                               
Revenues
  $ 3,135.0       3,163.5       2,734.6       2,354.3       2,113.3  
Segment operating profit
    213.4       271.9       223.3       184.1       119.5  
Non-segment (a)
    (46.6 )     (43.4 )     (62.3 )     (73.4 )     (82.0 )
Operating profit
    166.8       228.5       161.0       110.7       37.5  
                                         
Income attributable to Brink’s:
                                       
Income (loss) from continuing operations
    195.7       131.8       78.4       53.1       (3.3 )
Income from discontinued operations (b)
    4.5       51.5       58.9       534.1       151.1  
Cumulative effect of change in accounting principle (c)
    -       -       -       -       (5.4 )
Net income attributable to Brink’s
  $ 200.2       183.3       137.3       587.2       142.4  
                                         
Financial Position
                                       
                                         
Property and equipment, net
  $ 549.5       534.0       1,118.4       981.9       867.4  
Total assets
    1,879.8       1,815.8       2,394.3       2,188.0       3,036.9  
Long-term debt, less current maturities
    172.3       173.0       89.2       126.3       251.9  
Brink’s shareholders’ equity
    534.9       214.0       1,046.3       753.8       837.5  
                                         
Supplemental Information
                                       
                                         
Depreciation and amortization
  $ 135.1       122.3       110.0       93.0       88.0  
Capital expenditures
    170.6       165.3       141.8       113.8       107.8  
                                         
Earnings (loss) per share attributable to Brink’s common shareholders
                                       
                                         
Basic:
                                       
Continuing operations
  $ 4.14       2.85       1.68       1.06       (0.06 )
Discontinued operations (b)
    0.10       1.11       1.27       10.69       2.69  
Cumulative effect of change in accounting principle (c)
    -       -       -       -       (0.10 )
Net income
  $ 4.23       3.96       2.95       11.75       2.53  
                                         
Diluted:
                                       
Continuing operations
  $ 4.11       2.82       1.67       1.05       (0.06 )
Discontinued operations (b)
    0.10       1.10       1.25       10.58       2.69  
Cumulative effect of change in accounting principle (c)
    -       -       -       -       (0.10 )
Net income
  $ 4.21       3.93       2.92       11.64       2.53  
                                         
Cash dividends
  $ 0.4000       0.4000       0.3625       0.2125       0.1000  
                                         
Weighted-average Shares
                                       
                                         
Basic
    47.2       46.3       46.5       50.0       56.3  
Diluted
    47.5       46.7       47.0       50.5       56.3  
(a)  
Includes amounts not allocated to segment results.
(b)  
Income from discontinued operations reflects the operations and gains and losses, if any, on disposal of our former home security, and air freight businesses, as well as the domestic cash handling operations in the United Kingdom.  Expenses related to postretirement obligations are recorded as a component of continuing operations after the respective disposal dates.  Adjustments to contingent liabilities are recorded within discontinued operations.
(c)  
Our 2005 results of operations include a noncash after-tax charge of $5.4 million or $0.10 per diluted share to reflect the cumulative effect of a change in accounting principle pursuant to the adoption of FIN 47, Accounting for Conditional Asset Retirement Obligations, which is now part of FASB ASC Topic 410, Asset Retirement and Environmental Obligations.


 
19

 


ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



THE BRINK’S COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2009

 
     TABLE OF CONTENTS
 
     
   
Page
OPERATIONS
21
     
RESULTS OF OPERATIONS
 
 
Consolidated Review
23
 
Segment Operating Results
26
 
Non-segment Income (Expense)
32
 
Other Operating Income (Expense)
33
 
Nonoperating Income and Expense
34
 
Income Taxes
35
 
Noncontrolling Interests
36
 
Income from Discontinued Operations
37
 
Summary of Selected Results and Outlook
38
 
Adjusted Results – Reconciled to Amounts Reported under GAAP
39
 
Foreign Operations
41
     
LIQUIDITY AND CAPITAL RESOURCES
 
 
Overview
42
 
Summary Cash Flow Information
42
 
Operating Activities
43
 
Investing Activities
43
 
Financing Activities
44
 
Capitalization
45
 
Off Balance Sheet Arrangements
47
 
Contractual Obligations
48
 
Contingent Matters
51
     
APPLICATION OF CRITICAL ACCOUNTING POLICIES
 
 
Deferred Tax Asset Valuation Allowance
52
 
Goodwill, Other Intangible Assets and Property and Equipment Valuations
53
 
Retirement and Postemployment Benefit Obligations
54
 
Foreign Currency Translation
59
     
RECENT ACCOUNTING PRONOUNCEMENTS
60
 

 
20

 


OPERATIONS


The Brink’s Company

The Brink’s Company offers transportation and logistics management services for cash and valuables throughout the world.  These services include armored car transportation, automated teller machine (“ATM”) replenishment and servicing, currency deposit processing and cash management services.  Cash management services include cash logistics services (“Cash Logistics”), deploying and servicing safes and safe control devices (e.g. our patented CompuSafe® service), coin sorting and wrapping, integrated check and cash processing services (“Virtual Vault Services”), arranging secure transportation of valuables over long distances and around the world (“Global Services”),  providing bill payment acceptance and processing services to utility companies and other billers (“Payment Services”), and guarding services (including airport security).

Overview of Results
2009 versus 2008
Our revenues and operating profit declined in 2009.  Our segment margin declined in an environment that was extremely difficult for customers in the banking, retail, and diamond and jewelry sectors.   The operating profit decline was primarily due to a highly profitable monetary conversion project in Venezuela in 2008, a $23 million repatriation charge and higher retirement expenses, partially offset by a $14 million gain on an acquisition in India.   The $23 million repatriation charge was the result of our decision to repatriate 76 million bolivar fuertes from our Venezuelan operations at the parallel market rate.  In addition, newly acquired businesses helped revenues and operating profit in 2009.

2008 versus 2007
Brink’s delivered strong full-year results, despite an extremely challenging business environment that worsened as the year progressed, especially in the diamond and jewelry segment of our Global Services business.    The biggest contributor to the revenue increase in 2008 was $51 million related to the completed currency conversion project in Venezuela.  Operating profit improved due primarily to the currency conversion project in Venezuela and a gain from a sale of coal assets.

Outlook for 2010
We expect 2010 organic revenue growth in the low-to-mid single-digit percentage range from our 2009 revenue (Adjusted), and a segment operating profit margin between 7.0% and 7.5%.  We define organic revenue growth as revenue growth excluding changes in revenue for newly acquired or disposed businesses, and changes in revenue due to changes in currency exchange rates.  See page 38 for a summary of our 2010 Outlook.

General Overview
Management allocates resources to and makes operating decisions on a geographic basis. Our reportable segments include International and North America operations.  Our International segment includes three distinct regions: EMEA, Latin America and Asia Pacific. Our North America segment includes operations in the U.S. and Canada.

We believe that Brink’s has significant competitive advantages including:
·  
brand name recognition
·  
reputation for a high level of service and security
·  
risk management and logistics expertise
·  
global infrastructure and customer base
·  
proprietary cash processing and information systems
·  
proven operational excellence
·  
high-quality insurance coverage and general financial strength

We focus our time and resources on service quality, protecting and strengthening our brand, and addressing our risks.  We are a premium provider of services in most of the markets we serve.  Our marketing and sales efforts are enhanced by the “Brink’s” brand, so we seek to protect and build its value.  Since our services focus on handling, transporting, protecting, and managing valuables, we strive to understand and manage risk.  Overlaying our approach is an understanding that we must be disciplined and patient enough to charge prices that reflect the value provided, the risk assumed and the need for an adequate return for our investors.

Business environments around the world change constantly.  We must adapt to changes in competitive landscapes, regional economies and each customer’s level of business.  We balance underlying business risk and the effects of changing demand on the utilization of our resources.  As a result, we operate largely on a decentralized basis so local management can react quickly to changes in the business environment.


 
21

 


We measure financial performance on a long-term basis.  The key financial measures are:
·  
Return on capital
·  
Revenue and earnings growth
·  
Cash flow generation

These and similar measures are critical components of our incentive compensation plans and performance evaluations.

Because of our emphasis on managing risks while providing a high level of service, we focus our marketing and selling efforts on customers who appreciate the value and breadth of our services, information and risk management capabilities, and financial strength.

In order to earn an adequate return on capital, we focus on the effective and efficient use of resources as well as appropriate pricing levels.  We attempt to maximize the amount of business that flows through our branches, vehicles and systems in order to obtain the lowest costs possible without compromising safety, security or service.  Due to our higher investment in people and processes, we generally charge higher prices than competitors that do not provide the same level of service and risk management.
 
The industries we serve have been consolidating.  As a result, the demands and expectations of customers in these industries have grown.  Customers are increasingly seeking suppliers, such as Brink’s, with broad geographic solutions, sophisticated outsourcing capabilities and financial strength.

Operating results may vary from period to period.  Since revenues are generated from charges per service performed or based on the value of goods transported, they can be affected by both the level of economic activity and the volume of business for specific customers.  As contracts generally run for one or more years, costs are incurred to prepare to serve, or to transition away, from a customer.  We also periodically incur costs to reduce operations when volumes decline, including costs to reduce the number of employees and close or consolidate branch and administrative facilities.  In addition, safety and security costs can vary depending on performance, cost of insurance coverage, and changes in crime rates (i.e., attacks and robberies).

Cash Logistics is a fully integrated solution that proactively manages the supply chain of cash from point-of-sale through bank deposit.  The process includes cashier balancing and reporting, deposit processing and consolidation, and electronic information exchange (including “same-day” credit capabilities).  Retail customers use Brink’s Cash Logistics services to count and reconcile coins and currency in a secure environment, to prepare bank deposit information, and to replenish customer coins and currency in proper denominations.

Because Cash Logistics involves a higher level of service and more complex activities, customers are charged higher prices, which result in higher margins.  The ability to offer Cash Logistics to customers differentiates Brink’s from many of its competitors.  Management is focused on continuing to grow Cash Logistics revenue.

Brink’s revenues and related operating profit are generally higher in the second half of the year, particularly in the fourth quarter, because of generally increased economic activity associated with the holiday season.

Former Operations
On October 31, 2008, we completed the tax-free spin-off of Brink’s Home Security Holdings, Inc. (“BHS”), a former monitored security business in North America.  On August 5, 2007, we sold our domestic cash handling operations in the United Kingdom.  See “Discontinued Operations” for a description of the transactions and see “Liquidity and Capital Resources” for a description of the effect of these dispositions on our cash flow and financial position. We have reported the earnings and cash flows of these operations within discontinued operations for all periods presented.

We have significant liabilities associated with our former operations, primarily related to retirement plans, which are partially funded by plan trusts.  These trusts sustained significant market losses during the second half of 2008.

Information about our liabilities related to former operations is contained in the following sections of this report:
·  
Non-segment Income (Expense) on page 32
·  
Liquidity and Capital Resources – Contractual Obligations – on page 48
·  
Application of Critical Accounting Policies – on page 52
·  
Notes 3, 17 and 21 to the consolidated financial statements, which begin on page 83

 
22

 


RESULTS OF OPERATIONS


Consolidated Review

   
GAAP
   
% Change
   
Adjusted (a)
   
% Change
 
Years Ended December 31,
 
2009
   
2008
   
2007
   
2009
   
2008
   
2009
   
2008
   
2007
   
2009
   
2008
 
(In millions, except per share amounts)
                                                           
                                                             
Revenues
  $ 3,135       3,164       2,735       (1 )     16     $ 2,897       2,990       2,616       (3 )     14  
Segment operating profit:
                                                                               
International
    157       215       153       (27 )     41       118       166       126       (29 )     32  
North America
    57       57       70       (1 )     (19 )     57       57       70       (1 )     (19 )
Total segment operating profit (b)
    213       272       223       (22 )     22       175       223       196       (22 )     14  
Non-segment operating profit (c)
    (47 )     (43 )     (62 )     7       (30 )     (38 )     (43 )     (62 )     (12 )     (30 )
Total operating profit
    167       229       161       (27 )     42       137       180       134       (24 )     34  
Income from continuing operations (d)
    196       132       78       48       68       66       107       66       (38 )     62  
Net income (d)
    200       183       137       9       34       71       158       125       (55 )     27  
                                                                                 
Diluted earnings per share:
                                                                               
Continuing operations
  $ 4.11       2.82       1.67       46       69     $ 1.39       2.29       1.40       (39 )     64  
Net income
    4.21       3.93       2.92       7       35       1.48       3.39       2.66       (56 )     27  
Amounts may not add due to rounding.

(a)  
Adjusted financial information is contained on pages 39 - 40, including reconciliation to amounts reported under generally accepted accounting principles in the United States (“GAAP”).  Adjustments relate to the exchange rate used to translate operating results in Venezuela and transaction losses on repatriated cash, an exclusion of an acquisition-related gain, and exclusion of a release of a U.S. tax valuation allowance.
(b)  
Total Segment operating profit is a non-GAAP measure.  This table reconciles the measure to operating profit, a GAAP measure.  We believe that our disclosure of total Segment operating profit allows investors a way to assess the total operating performance of Brink’s excluding Non-segment income (expenses).  We provide our outlook of total Segment operating profit and Non-segment income (expense) for 2010 on page 38.
(c)  
Non-segment includes expenses related to corporate and former operations and other amounts not allocated to segment operating profit.
(d)  
Amounts reported in this table are attributable to Brink’s and exclude earnings related to noncontrolling ownership interests in consolidated subsidiaries.


Overview
Our revenues and operating profit were down in 2009 compared to 2008.  A weak economy and the results from a highly profitable monetary conversion project in Venezuela included in 2008 made the comparison difficult.  Our income from continuing operations attributable to Brink’s and our earnings per share in 2009 were higher than 2008 primarily as a result of a release of a deferred tax valuation allowance.

Revenues and operating profit in 2008 improved from 2007 primarily due to organic growth in Latin America, including a large currency conversion project in Venezuela. Our income from continuing operations attributable to Brink’s and our earnings per share in 2008 were higher than 2007 primarily for the same reason, as well as a gain on the sale of certain assets of our former coal operations and lower retirement plans expense.

“Adjusted Results” are Non-GAAP Financial Measures
We provide an analysis of our results of operations below on both a GAAP and Adjusted basis.  The Adjusted analysis excludes certain income and expenses recorded under GAAP.  The supplemental disclosures are intended to assist readers in understanding our performance without the adjustments.  The adjustments are described in detail and are reconciled to our GAAP results on pages 39-40.  The adjustments relate to:

·  
translating our Venezuelan results at a different rate of exchange,
·  
currency exchange transaction losses on the repatriation of Venezuelan dividends,
·  
a gain recognized upon acquiring a controlling interest in an operation in India, and
·  
a release of a U.S. deferred tax asset valuation allowance.


 
23

 


Revenues

GAAP
2009 versus 2008
Revenues in 2009 were lower than 2008.

Revenues in 2009 decreased 1% primarily due to unfavorable changes in currency exchange rates ($146 million), mostly offset by the net positive effect of businesses acquired in 2009, net of dispositions ($97 million) and organic growth (see page 21 for our definition of “organic”).

Revenues increased 1% on an organic basis due mainly to higher average selling prices (including the effects of inflation in several Latin American countries), mostly offset by lower volumes in Global Services operations and the loss of guarding contracts in France.

2008 versus 2007
Revenues in 2008 were higher than 2007.
·  
Our revenues increased 16% in 2008 compared to 2007 mainly due to higher volumes, including $51 million in incremental revenues from the conversion project in Venezuela.
·  
Favorable changes in currency exchange rates increased revenues by 4% ($98 million) in 2008 over 2007.
 
Adjusted
2009 versus 2008
Revenues in 2009 were lower than 2008.

Revenues in 2009 decreased 3% primarily due to unfavorable changes in currency exchange rates ($194 million), partially offset by the net positive effect of businesses acquired and disposed in 2009 ($97 million).
 
Revenues remained flat on an organic basis compared to 2008.  Higher average selling prices (including the effects of inflation in several Latin American countries), were mostly offset by lower volumes in Global Services operations and the loss of guarding contracts in France.

2008 versus 2007
Revenues in 2008 were higher than 2007.
·  
Our revenues increased 14% in 2008 compared to 2007 mainly due to higher volumes, including $25 million in incremental revenues from the conversion project in Venezuela.
·  
Favorable changes in currency exchange rates increased our revenues by 4% ($107 million) in 2008 over 2007.

Operating Profit

GAAP
2009 versus 2008
Operating profit decreased 27% due mainly to
·  
the inclusion in 2008 results of profits from the monetary conversion project in Venezuela that was completed in 2008,
·  
a $12 million increase in restructuring and severance costs, primarily in Europe,
·  
$6 million in accounting corrections in Belgium, and
·  
higher non-segment expenses.

2008 versus 2007
Operating profit increased 42% due mainly to significant operating profit from the conversion project in 2008 and lower non-segment expenses, partially offset by lower results from our North America segment.
 
Adjusted
2009 versus 2008
Operating profit decreased 24% mainly due to
·  
the inclusion in 2008 results of profits from the monetary conversion project in Venezuela that was completed in 2008,
·  
a $12 million increase in restructuring and severance costs, primarily in Europe, and
·  
$6 million in accounting corrections in Belgium,
partially offset by lower non-segment expenses.

2008 versus 2007
Operating profit increased 34% due mainly to lower non-segment expenses and significant operating profit from the conversion project in 2008, partially offset by lower results from our North America segment.




 
24

 


Income from continuing operations and Net income, and related per share amounts
(attributable to Brink’s)

GAAP
2009 versus 2008
Income from continuing operations and net income (and related per share amounts) was higher in 2009 compared to 2008 primarily as a result of a release of a deferred tax valuation allowance, as more fully described on page 52, partially offset by lower operating profits.

2008 versus 2007
Income from continuing operations and net income (and related per share amounts) was higher in 2008 compared to 2007 primarily as a result of a higher operating profits and a lower effective income tax rate.

Adjusted
2009 versus 2008
Income from continuing operations and net income (and related per share amounts) was lower in 2009 compared to 2008 primarily as a result of lower operating profits.
 
2008 versus 2007
Income from continuing operations and net income (and related per share amounts) was higher in 2008 compared to 2007 primarily as a result of a higher operating profits and a lower effective income tax rate.
 

 
25

 


Segment Operating Results

Segment Review
2009 versus 2008
GAAP
   
Years Ended
         
Percentage
 
   
December 31,
         
Change
 
         
Organic
   
Acquisitions /
   
Currency
                   
(In millions)
 
2008
   
Change
   
Dispositions
   
Change (a)
   
2009
   
Total
   
Organic
 
                                           
Revenues:
                                         
EMEA
  $ 1,358.9       (21.8 )     3.3       (82.9 )     1,257.5       (7 )     (2 )
Latin America
    800.6       74.7       80.4       (51.0 )     904.7       13       9  
Asia Pacific
    71.8       (3.5 )     11.6       (1.2 )     78.7       10       (5 )
International
    2,231.3       49.4       95.3       (135.1 )     2,240.9       -       2  
North America
    932.2       (28.3 )     1.5       (11.3 )     894.1       (4 )     (3 )
Revenues
  $ 3,163.5       21.1       96.8       (146.4 )     3,135.0       (1 )     1  
                                                         
Operating profit:
                                                       
International
  $ 215.0       (59.5 )     8.8       (7.5 )     156.8       (27 )     (28 )
North America
    56.9       -       0.1       (0.4 )     56.6       (1 )     -  
Segment operating profit
  $ 271.9       (59.5 )     8.9       (7.9 )     213.4       (22 )     (22 )
                                                         
Segment operating margin:
                                                       
International
    9.6 %                             7.0 %                
North America
    6.1 %                             6.3 %                
Segment operating margin
    8.6 %                             6.8 %                

Adjusted (b)
   
Years Ended
         
Percentage
 
   
December 31,
         
Change
 
         
Organic
   
Acquisitions /
   
Currency
                   
(In millions)
 
2008
   
Change
   
Dispositions
   
Change (a)
   
2009
   
Total
   
Organic
 
                                           
Revenues:
                                         
EMEA
  $ 1,358.9       (21.8 )     3.3       (82.9 )     1,257.5       (7 )     (2 )
Latin America
    627.2       57.7       80.4       (98.5 )     666.8       6       9  
Asia Pacific
    71.8       (3.5 )     11.6       (1.2 )     78.7       10       (5 )
International
    2,057.9       32.4       95.3       (182.6 )     2,003.0       (3 )     2  
North America
    932.2       (28.3 )     1.5       (11.3 )     894.1       (4 )     (3 )
Revenues
  $ 2,990.1       4.1       96.8       (193.9 )     2,897.1       (3 )     -  
                                                         
Operating profit:
                                                       
International
  $ 166.2       (45.5 )     8.8       (11.2 )     118.3       (29 )     (27 )
North America
    56.9       -       0.1       (0.4 )     56.6       (1 )     -  
Segment operating profit
  $ 223.1       (45.5 )     8.9       (11.6 )     174.9       (22 )     (20 )
                                                         
Segment operating margin:
                                                       
International
    8.1 %