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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-9148
THE BRINK'S COMPANY
(Exact name of registrant as specified in its charter)
Virginia 54-1317776
(State or other jurisdiction of (IRS 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 exchange on
Title of each class which registered
------------------- ----------------
The Brink's Company Common Stock, Par Value $1 New York Stock Exchange
Rights to Purchase Series A Participating New York Stock Exchange
Cumulative Preferred Stock
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark 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. [ ]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2).
Yes [X] No [ ]
As of March 5, 2004, there were issued and outstanding 54,251,610
shares of common stock. The aggregate market value of shares of common stock
held by nonaffiliates, as of June 30, 2003, was $764,203,741.
Documents incorporated by reference: Part I, Part II and Part IV
incorporate information by reference from the Annual Report of the Company for
the year ended December 31, 2003. Part III incorporates information by reference
from portions of the Registrant's definitive 2004 Proxy Statement to be filed
pursuant to Regulation 14A.
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
- --------------------------------------------------------------------------------
The Brink's Company
The Brink's Company, a Virginia corporation incorporated in 1930, has three
primary operating segments within its "Business and Security Services"
businesses: Brink's, Incorporated ("Brink's"); Brink's Home Security, Inc.
("BHS"); and BAX Global Inc. ("BAX Global").
In May 2003, the shareholders approved a proposal to change the Company's name
to "The Brink's Company." The Company's shares now trade on the New York Stock
Exchange under the symbol "BCO." The Company's shares previously traded on the
New York Stock Exchange under the symbol "PZB."
Financial information related to the Company's operating segments is included in
Note 2 to the consolidated financial statements in the Company's 2003 Annual
Report, which note is herein incorporated by reference.
The Company has approximately 48,600 employees in its Business and Security
Services operations, including approximately 36,000 at Brink's, 2,600 at BHS and
9,900 at BAX Global.
A significant portion of the Company's business is conducted outside the United
States. Because the financial results of the Company are reported in U.S.
dollars, they are affected by changes in the value of the various foreign
currencies in relation to the U.S. dollar. The Company, from time to time, uses
foreign currency forward contracts to hedge certain transactional risks
associated with foreign currencies. The Company is also subject to other risks
customarily associated with doing business in foreign countries, including labor
and economic conditions, political instability, controls on repatriation of
earnings and capital, nationalization, expropriation and other forms of
restrictive action by local governments. The future effects of such risks on the
Company cannot be predicted.
Available Information and Corporate Governance Documents
The Brink's Company's internet address is www.brinkscompany.com. The Company
makes available, free of charge, through its website, its Annual Report on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act as soon as reasonably practicable after the Company electronically
files such information with or furnishes it to the Securities and Exchange
Commission. In addition, the Corporate Governance Policies, Business Code of
Ethics and the charters of the Audit and Ethics, Compensation and Benefits and
Corporate Governance and Nominating Committees are available on the Company's
web site and are available in print, without charge, to any shareholder upon
request by contacting the Corporate Secretary at 1801 Bayberry Court, P. O. Box
18100, Richmond, Virginia 23226-8100.
BUSINESS AND SECURITY SERVICES
Brink's, Incorporated ("Brink's")
General
The major services offered by Brink's include armored car transportation,
automated teller machine ("ATM") servicing, currency and deposit processing
(including "Cash Logistics" services), coin sorting and wrapping, arranging the
secure air transportation of valuables ("Global Services") and the deploying and
servicing of safes and safe control devices, including its patented CompuSafe(R)
service.
Brink's has operations throughout the world with 42% of its 2003 revenues from
its operations in North America. Brink's in North America serves customers
through 155 branches in the U.S. and 44 branches in Canada.
Brink's operations outside North America are located in 48 countries, with
concentrations in Europe (39% of Brink's 2003 revenues) and South America (15%
of Brink's 2003 revenues.) In addition, Brink's has growing operations in the
Asia-Pacific region of the world that accounted for 4% of its 2003 revenues.
Brink's largest operations outside North America, in terms of 2003 revenues,
were located in France, Venezuela, the Netherlands, Brazil, Germany, the United
Kingdom and Colombia. These operations accounted for 80% of 2003 revenues
outside of North America.
Brink's ownership interest in subsidiaries and affiliated companies ranges from
20% to 100%. In some instances local laws limit the extent of Brink's ownership
interest.
Brink's customers include banks; industrial, retail and other commercial
businesses; investment banking and brokerage firms; and government agencies,
such as a country's central bank. Brink's provides individualized services under
separate contracts designed to meet the distinct transportation, security and
logistics requirements of its customers. These contracts are usually for an
initial term of, at least, one year but continue in effect thereafter until
canceled by either party.
Brink's armored car transportation services generally include secure
transportation of:
o Cash between businesses and banks.
o Cash, securities and other negotiable items and valuables between commercial
banks, central banks (such as the U.S. Federal Reserve Banks and their
branches and correspondents) and brokerage firms.
o New currency, coins and precious metals for a number of central banks
throughout the world.
o Canceled checks between banks or between a clearing house and its member
banks in certain geographic areas.
1
The trend by banks, retail businesses and others to outsource vaulting and cash
room operations continued in 2003. Brink's provides coin and currency processing
("Cash Logistics") services primarily to banks and retail customers. Cash
Logistics is a fully integrated solution that proactively manages the entire
cycle of cash from point-of-sale through deposit at the bank. The process
includes transportation, cashier balancing and reporting, deposit processing and
consolidation, and electronic information exchange. Retail customers use Brink's
Cash Logistics services to count and reconcile coins and currency in Brink's
secure environment, to prepare bank deposit information and to replenish retail
locations' coins and currency in proper denominations.
Through its proprietary cash processing and information systems, Brink's offers
customers the ability to integrate a full range of vault, ATM, transportation,
storage, processing, inventory management and reporting services. Brink's
believes that its cash processing and information systems differentiate its Cash
Logistics services from its competitors.
For transporting money and other valuables over long distances, Brink's Global
Services offers a combined armored car and secure air transportation service
between many cities around the world. Brink's uses regularly scheduled or
chartered aircraft in connection with its air courier services. Included in
Global Services is a specialized diamond and jewelry secure transportation
operation, with offices in the major diamond and jewelry centers of the world.
Brink's CompuSafe(R) services provide retail customers with a proprietary
integrated system for safeguarding and managing cash. Brink's markets its
CompuSafe(R) services to a variety of cash-intensive retail customers, such as
convenience stores, gas stations and restaurants. The service includes
installing a specialized safe in the retail establishment that holds safeguarded
canisters. The customer's employees deposit currency into the canister. The
canister can only be removed by Brink's armored car personnel.
Competition
Brink's is the oldest and largest armored car service company in the U.S. as
well as a market leader in many of the countries in which it operates.
Worldwide, Brink's competes with a number of large multinational companies and
with many smaller companies.
Primary factors in attracting and retaining customers are security, the quality
of services provided and the price for services. Brink's believes its
competitive advantages include:
o Recognizable name
o Reputation for a high level of service and security
o Proprietary cash processing and information systems
o High-quality insurance coverage
o Ability to serve multiple markets for the same customer in many of the
countries in which Brink's has operations
Brink's believes its cost structure is generally competitive, although Brink's
believes certain competitors may have lower costs as a result of lower wage and
benefit levels for employees or as a result of different security and service
standards.
Brink's growth in revenues from financial institutions and retail businesses is
partially dependent on the growth in the economy. Recent slow economic growth
has resulted in an increasing focus on the cost of all services including
armored car services by customers and potential customers. Because Brink's
management believes that the high level of service and security provided
differentiates Brink's from its competitors, Brink's resists competing on price
alone.
The availability of quality and reliable insurance coverage is an important
factor in the ability of Brink's to obtain and retain customers and to manage
the risks of its business. Brink's purchases insurance coverage for losses in
excess of what it considers prudent deductibles and/or retentions. For losses
below deductible or retention levels, Brink's is self-insured. Brink's insurance
policies cover losses from most causes, with the exception of war, nuclear risk
and certain other exclusions typical for such policies. Brink's generally does
not offer its customers protection from losses arising from excluded clauses.
Insurance is provided by different groups of underwriters at negotiated rates
and terms. Insurance is available to Brink's in major markets although the
premiums charged are subject to fluctuations depending on market conditions. The
loss experience of Brink's and, to a limited extent, other armored carriers
affects premium rates charged to Brink's.
Service Mark, Patents and Copyrights
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 Brink's
business. Brink's owns patents with respect to certain coin sorting and counting
machines, which expire in 2007 and 2008, respectively. Brink's has patents
associated with its integrated CompuSafe(R) service, that expire in 2015 through
2018. The patents for the CompuSafe(R) device and sorting and counting machines
provide important advantages to Brink's. However, Brink's operations are not
dependent on the existence of the aforementioned patents.
The Company has entered into certain agreements to license the Brink's and the
Brink's Home Security name. Examples include licenses to distributors of
security products (padlocks, home safes, door and window hardware, etc.) offered
for sale to consumers through major retail chains.
Government Regulation
The operations of Brink's 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. and intraprovince operations
in Canada are subject to regulation by state and by Canadian and provincial
regulatory authorities, respectively. Brink's International operations are
regulated to varying degrees by the countries in which they operate.
2
Employee Relations
At December 31, 2003, Brink's and its subsidiaries had approximately 36,000
employees, including 10,600 employees in North America, (of whom 1,800 were
classified as part-time employees) and 25,400 employees outside North America.
At December 31, 2003, Brink's was a party to 13 collective bargaining agreements
in North America with various local unions covering approximately 1,300
employees, almost all of whom are employees in Canada and members of unions
affiliated with the International Brotherhood of Teamsters. Two agreements will
expire in 2004 and both are expected to be renegotiated. The remaining
agreements will expire after 2004. Outside of North America, the branch
workforce are members of labor or employee organizations in the majority of the
countries of operation. Brink's believes that its employee relations are
satisfactory.
Properties
Brink's has property and equipment in locations throughout the world. Branch
facilities generally have office space, a vault to securely store valuables, and
a garage to house armored vehicles and to serve as vehicle terminals. Many
times, branches have additional space to repair and maintain vehicles.
Brink's owns or leases armored vehicles, panel trucks and other vehicles that
are primarily service vehicles. Brink's armored vehicles are of bullet-resistant
construction and are specially designed and equipped to afford security for crew
and cargo.
The following table discloses leased and owned facilities and vehicles for
Brink's most significant operations as of December 31, 2003.
Branch Facilities Vehicles
- -----------------------------------------------------------------------------------------------------------
Country Leased Owned Total Leased Owned Total
- -----------------------------------------------------------------------------------------------------------
U.S 133 22 155 1,668 580 2,248
Canada 35 9 44 313 139 452
Europe 162 20 182 1,324 1,096 2,420
South America 112 24 136 125 2,213 2,338
Asia Pacific 63 20 83 5 127 132
- -----------------------------------------------------------------------------------------------------------
Total 505 95 600 3,435 4,155 7,590
===========================================================================================================
Of the leased branches in North America, 120 facilities are held under long-term
leases. The remaining 48 branches are held under short-term leases or
month-to-month tenancies.
Approximately 4,300 Brink's-owned CompuSafe(R) devices are located on customers'
premises in North America.
Brink's Home Security ("BHS")
General
BHS believes that it is the second largest provider of monitored security
services to single family residences and commercial properties in North America.
BHS is primarily engaged in the business of marketing, selling, installing,
monitoring and servicing electronic security systems in owner-occupied,
single-family residences. At December 31, 2003, BHS had more than 833,000
systems under monitoring contracts, including approximately 122,000 new
subscribers added during the year. BHS provides services to subscribers located
in most metropolitan areas in 44 states, the District of Columbia and several
markets in two western provinces in Canada.
BHS' typical security system installation consists of sensors and other devices
which are installed at a customer's home or commercial location. The equipment
can be configured to signal intrusion, fire, medical and other alerts. When an
alarm is triggered, a signal is sent by telephone line to BHS' central
monitoring station in Irving, Texas. The monitoring station holds an
Underwriters' Laboratories, Inc. ("UL") listing. UL specifications for service
centers include building integrity, back-up computer and power systems, staffing
and standard operating procedures. In the event of an emergency, such as fire,
tornado, major interruption in telephone or computer service, or any other event
affecting the Irving facility, monitoring operations can be transferred to a
backup facility located in Carrollton, Texas.
BHS markets its alarm systems primarily through television and direct mail
advertising, yellow page and internet advertising, alliances with other service
companies, inbound telemarketing and field sales employees. BHS employees
install and service most of the systems; however, dealers and subcontractors are
utilized on occasion in some service areas. BHS does not manufacture the
equipment used in its security systems. Equipment is purchased from a limited
number of suppliers and no interruptions in supply are expected. Equipment
inventories are maintained at each branch office.
3
BHS has an authorized dealer program to expand its geographic coverage and
leverage its national advertising. The dealer program accounted for 12% of new
installations during 2003 and, as of December 31, 2003, 4% of BHS' total
subscriber base. Approximately 81 dealers were authorized to participate in the
program as of December 31, 2003. BHS requires that its dealers install the same
type of equipment as is installed by its own branches, and adhere to the same
installation quality standards.
In addition to initiating subscriber relationships through its branch and dealer
networks, BHS obtains new residential subscribers through its Brink's Home
Technologies ("BHT") division. BHT markets residential security systems, as well
as a variety of low-voltage security, home networking, communications and
entertainment options, directly to major home builders. New system activations
from BHT accounted for 9% of new subscribers added during 2003.
BHS also provides monitored security to residents of apartment and condominium
complexes; however, these customers currently represent less than 2% of
subscribers.
Although its core business is focused on the monitoring of residential security
systems, BHS installs and monitors commercial security systems. Commercial
customers represented approximately 4% of subscribers at year end.
Government Regulation
BHS and its employees are subject to various federal, state and local consumer
protection, licensing and other laws and regulations. Most states in which BHS
operates have licensing laws directed specifically toward the alarm industry.
BHS' business relies upon the use of wireline telephone service to communicate
signals. Wireline telephone companies are currently regulated by both the
Federal and state governments. BHS' wholly owned Canadian subsidiary is subject
to the laws of Canada, British Columbia and Alberta.
The alarm service industry experiences a high incidence of false alarms. BHS
believes its false alarm rate compares favorably to other companies' rates. The
high incidence of false alarms in the industry has caused some local governments
to impose assessments, fines and penalties on either subscribers or the alarm
companies. A few municipalities have adopted ordinances under which both permit
and alarm dispatch fees are charged directly to the alarm companies. BHS' alarm
service contracts generally allow BHS to pass these charges on to customers.
Police departments in two major western U.S. cities are not required to respond
to calls from alarm companies unless an emergency has been visually verified. If
more police departments in the future refuse to respond to calls from alarm
companies without visual verification, this could have an adverse effect on
future results of operations for BHS.
On October 1, 2003, the Federal Communications Commission/ Federal Trade
Commission "Do Not Call" list went into effect. Federal law prohibits telephone
solicitations to phone numbers on the Do Not Call list. BHS has implemented
policies, procedures and training to help ensure compliance with this law. This
law constrains BHS' ability to contact prospects referred to it by customers or
other businesses with whom BHS has marketing alliance agreements. However, as
there are other ways to initiate a sale, the overall impact that the "Do Not
Call" list will have on BHS' ability to attract new subscribers, or the costs to
attract new subscribers, cannot be determined at present.
Competition
BHS competes in most major metropolitan markets in the U.S. and several markets
in western Canada through BHS owned branch operations or its authorized dealer
program. The monitored security alarm market has a large number of competitors,
including thousands of local and regional companies. BHS believes it is now the
second largest provider of monitored security services to single-family
residences and commercial properties in North America.
Competition is based on a variety of factors including, but not limited to,
company reputation and service quality, product quality and price. There is
substantial competitive pressure on installation fees. Several significant
competitors offer installation prices which match or are less than BHS' prices;
however, many of the small local competitors in BHS' markets continue to charge
significantly more for installation. Competitive pressure on monitoring rates,
while less intense than on installation fees, is still substantial. BHS believes
that the monitoring rates it offers are generally comparable to the rates
offered by other major security companies.
BHS believes its customer retention rate is the highest among the major home
security service companies. BHS believes this favorable retention rate is due to
its focus on selecting new customers with strong credit backgrounds and the high
quality of customer service it provides.
Employees
BHS has approximately 2,600 employees, none of whom is covered by a collective
bargaining agreement. BHS believes that its employee relations are satisfactory.
Properties
BHS has approximately 60 leased offices and warehouse facilities located
throughout the U.S. and two leased offices in Canada. The lease for the central
monitoring station in Irving, Texas expires in 2005, but includes several
renewal options. This facility also serves as BHS' headquarters and houses most
administrative, technical and marketing services personnel. Additional
administrative personnel are located in a portion of an adjacent building in
office space that is leased for a term ending in 2009. The lease for the backup
monitoring center in Carrollton, Texas, expires in 2005. BHS leases
approximately 1,200 vehicles which are used in the process of installing and
servicing its security systems.
4
BHS retains ownership of most of the more than 833,000 systems currently being
monitored. When a customer cancels monitoring services, BHS typically disables
the system. In a limited number of cases, BHS removes the equipment. When a
residential customer cancels monitoring services because of an impending
household move, the retention of the BHS system in the residence facilitates the
marketing of monitoring services to the subsequent homeowner.
BAX Global
General
BAX Global provides heavy freight transportation and supply chain management
services on a global basis. BAX Global specializes in the heavy freight market
for business to business shipping.
BAX Global's transportation services are provided within North America using a
dedicated fleet of 18 planes with a national sorting hub in Toledo, Ohio. BAX
Global's North American operation also has a ground network that provides
transportation on a regional basis.
Outside North America, BAX Global provides transportation services using
available space on commercial carriers and, on occasion, using chartered
aircraft. BAX Global's primary markets outside North America are shipping
Intra-Asia, from Asia to North America and Europe, Intra-Europe and between
North America and Europe.
BAX Global continues to expand its ocean shipping business primarily by
marketing its ocean products to its current air freight and supply chain
management customer base.
Air Transport International, LLC ("ATI"), a wholly owned subsidiary of BAX
Global, provides transportation services in North America to BAX Global and also
provides worldwide charter transportation services to other customers.
BAX Global provides certain transportation customers with supply chain
management services and operates more than 40 logistics warehouse and
distribution facilities in key world markets. BAX Global specializes in
developing supply chain management programs for companies entering new global
markets or consolidating regional activity.
BAX Global's Products
Expedited Freight Services Region offered
- -------------------------- --------------
o Overnight delivery Worldwide
o Second-day delivery Worldwide
o Wholesale freight forwarding Americas
o Air export delivery Worldwide
Nonexpedited Freight Services Region offered
- ----------------------------- --------------
o BAXSaver Suite of deferred
delivery products (various deferred
delivery terms) Americas
o Ocean delivery Worldwide
o Customs brokerage services Worldwide
o Supply chain management services Worldwide
o Aircraft charter services Worldwide
Transportation
BAX Global offers its North American (U.S., Canada and Mexico) transportation
customers a variety of products and pricing options, such as guaranteed and
standard overnight and second-day delivery as well as deferred delivery
(delivery generally within one to three business days).
A variety of value-added ancillary services, such as shipment tracking,
inventory control and management reports are also offered. BAX Global began
offering a time-definite, guaranteed product to freight forwarders, freight
brokers and international airlines in 2003. BAX Global primarily markets to
small to mid-sized forwarders and provides a higher service level compared to
common carriage. In 2004, BAX expects to continue to expand its sales and
marketing efforts to this market.
Outside North America, BAX Global offers a variety of services including
standard and expedited freight services, ocean forwarding and door-to-door
delivery.
BAX Global also frequently acts as customs broker, facilitating the clearance of
goods through customs at international points of entry. BAX Global has the
ability to link its international network with the North American transportation
infrastructure and customs brokerage capabilities to provide seamless
door-to-door delivery and distribution from global markets to virtually any city
in North America.
BAX Global sells its services primarily through its direct sales force. BAX
Global uses various marketing methods, including print media advertising and
direct marketing campaigns.
BAX Global generally picks up or receives freight shipments from its customers,
consolidates the freight of various customers into shipments for common
destinations and arranges for the transportation of the consolidated freight.
BAX Global uses either commercial carriers or, in the case of most of its North
American shipments, its own transportation fleet and regional and national hub
sorting facilities. BAX Global distributes the shipments at the package's
destination. While shipments move long distances on either common carrier or BAX
Global's fleet, the local pickup and delivery of freight are accomplished
principally by independent contractors using trucks dedicated to the BAX Global
network. BAX Global's independent contractors are required to display BAX
Global's logo and colors.
BAX Global has the ability to provide freight service to all North American
business communities as well as to virtually all countries throughout its
network of 500 company-operated stations and agent locations in 124 countries.
BAX Global's network is composed primarily of controlled subsidiaries and, to a
lesser extent, agents and sales representatives in certain non-U.S. locations,
typically under short-term contracts.
5
BAX Global's freight business is tied to the cycles of international trade, with
higher volumes of shipments from August through December than during the other
months of the year. The lowest volume of shipments generally occurs in January
and February.
Including U.S. export and import revenue, BAX Global's international shipments
and logistics services accounted for approximately 77% of its revenues in 2003.
Intra-U.S. shipments accounted for approximately 23% of total revenues in 2003.
BAX Global's network has a worldwide communications and information system which
provides global tracking and tracing of shipments and logistics data for
management information reports, enabling customers to improve efficiency and
control costs. BAX Global's customers are increasingly turning to its online
services offering information management available via its web site,
www.baxglobal.com.
Supply Chain Management
BAX Global's supply chain management business specializes in developing
solutions that include the design, implementation and management of inventory,
distribution and information processes to improve a customer's efficiency and
productivity.
BAX Global operates value-added logistics warehouse and distribution facilities
in key world markets. Companies in the healthcare, retail, automotive, aerospace
and high technology industries have been targeted as businesses with significant
supply chain management needs.
Worldwide revenues from the supply chain management business represented 10% of
BAX Global's total revenues in 2003.
North American Aircraft Operations
BAX Global has a fleet of leased and contracted aircraft providing regularly
scheduled next-day service throughout North America. BAX Global's wholly owned
subsidiary, ATI, is a U.S.-based freight and passenger airline that operates a
certificated fleet of DC-8 aircraft. BAX Global also operates Boeing 727s under
contracts that provide the aircraft, crew, maintenance and insurance ("ACMI").
In addition to the aircraft assigned to BAX Global's North American
transportation network, ATI also provides domestic and international service for
the U.S. Government Air Mobility Command and other charter customers.
The following is a summary of BAX Global's fleet as of December 31, 2003.
BAX Global's
Transportation Charter
Network Customers Grounded Total
- -----------------------------------------------------------------------------
DC-8:
Cargo:
Leased 10 2 - 12
Owned - - 3 3
Combi-Configured (a):
Leased - 3 - 3
Owned - 2 1 3
727-Cargo-ACMI 11 - - 11
- -----------------------------------------------------------------------------
Total Planes 21 7 4 32
=============================================================================
(a) Aircraft configured to accommodate both passengers and cargo.
Of the 21 planes in BAX Global's transportation network, 18 are assigned to
regularly scheduled routes. Generally, three planes are held for use as backups
or are in maintenance.
BAX Global's nightly scheduled lift capacity for planes in operation at December
31, 2003 was approximately 1.0 million pounds, based on an average freight
density of 7.5 pounds per cubic foot. BAX Global's nightly lift capacity varies
depending upon the number and type of planes operated by BAX Global at any
particular time. Including trucking capacity available to BAX Global, the
aggregate daily cargo capacity at December 31, 2003, was approximately 1.9
million pounds.
For aircraft held under long-term lease, BAX Global is generally responsible for
all the normal costs of operating and maintaining the aircraft. In addition, BAX
Global is generally responsible for all or a portion of any special maintenance
or modifications which may be required by Federal Aviation Administration
("FAA") regulations or orders (see "Government Regulation" below). BAX Global's
ultimate liability for mandated special maintenance or modifications is
generally subject to dollar limits, specific exclusions and sharing arrangements
with the lessors. Over the last three years, BAX Global spent a total of
approximately $70 million on routine heavy maintenance of its aircraft fleet.
BAX Global is generally responsible for fuel costs and other incidental costs
such as landing fees for aircraft operated under ACMI contracts.
See notes 15 and 23 to the consolidated financial statements in the Company's
2003 Annual Report for information regarding future minimum lease payments and
other purchase commitments related to the Company's aircraft. BAX Global's 15
leased aircraft have various expiration dates extending through 2005, and its 11
planes under ACMI contracts have various expiration dates through 2004. Based on
the current state of the aircraft leasing market, BAX Global believes that it
should be able to renew these leases or enter into new leases on terms
reasonably comparable to those currently in effect.
6
The average airframe age of the fleet operated by ATI is in excess of 30 years;
however, the condition of a particular aircraft and its fair market value is
dependent on its maintenance history. Factors other than age, such as cycles
(essentially the number of flights) can have a significant impact on an
aircraft's serviceability. Generally, cargo aircraft tend to have fewer cycles
than passenger aircraft over comparable time periods because they are used for
fewer flights per day and longer flight segments.
Fuel costs are a significant element of the total costs of operating BAX
Global's aircraft fleet. Fuel prices are subject to worldwide and local market
conditions. In order to protect against price increases in jet fuel, from time
to time BAX Global enters into hedging agreements, including swap contracts,
options and collars. BAX Global charges a fuel surcharge in the U.S. to its
customers when fuel costs are higher than the normal historical range.
Customers
BAX Global's customers include thousands of large and small industrial and
commercial businesses. Worldwide, BAX Global's top 10 customers accounted for
less than 13% of total BAX Global revenue in 2003. The Company targets customers
in the automotive, aerospace, healthcare, high technology, retail and other
industries where rapid delivery of high-value products is required.
Competition
The transportation and supply chain management industries have been and are
expected to remain highly competitive. The principal competitive factors in the
transportation industry are price, the ability to provide consistently fast and
reliable delivery of shipments and the ability to provide premium services such
as shipment tracking. The principal competitive factors in the supply chain
industry are price, access to a reliable transportation network, warehousing and
distribution capabilities, and sophisticated information systems.
There is aggressive price competition in the heavy-freight market, particularly
for the business of high volume shippers. BAX Global competes with various types
of transportation companies, including other integrated transportation companies
that operate their own fleets, as well as with freight forwarders, premium
less-than-truckload (or "LTL") carriers, express delivery services, and
passenger airlines.
Domestically, BAX Global also competes with package delivery services provided
by ground transportation companies, including trucking firms and surface freight
forwarders that offer specialized time-specific services within limited
geographical areas.
BAX Global believes its hub-and-spoke network of aircraft and trucks that serves
the North American market allows it to move freight more reliably than if it
solely used third-party services. The hub, which is located in Toledo, Ohio,
consists of various facilities, including a technologically advanced material
handling system, which is capable of sorting approximately one million pounds of
freight per hour. BAX Global's hub-and-spoke system feeds much of its North
American import and export business and BAX Global believes it provides a
competitive advantage by offering superior, reliable service to its customers,
shipping to, from or within North America.
As an international freight forwarder, BAX Global competes with government-owned
or subsidized passenger airlines and postal services. In ocean shipping, BAX
Global negotiates global contracts as a freight forwarder and a Non Vessel
Operating ("NVO") Common Carrier, which allows it to compete against other
freight forwarding/NVO companies.
In supply chain management services, BAX Global competes with many third-party
logistics providers.
Employee Relations
BAX Global and its subsidiaries have approximately 9,900 employees worldwide, of
whom about 1,200 are classified as part-time.
As of December 31, 2003, approximately 200 flight crewmembers (captains, first
officers and flight engineers), were represented for purposes of collective
bargaining by the International Brotherhood of Teamsters. This contract expires
in 2004 and is expected to be renegotiated. Another 114 employees in the U.S.
(principally customer service, clerical and/or dock workers) were represented by
labor unions that in most cases are also affiliated with the International
Brotherhood of Teamsters. BAX Global did not experience any significant strike
or work stoppage in 2003 and believes that its employee relations are
satisfactory.
Government Regulation
The air transportation industry, including BAX Global, is subject to regulation
by the FAA under the Federal Aviation Act of 1958, as amended, and the
Transportation Security Administration ("TSA") under the Aviation and
Transportation Security Act of 2001. The FAA is an agency of the Department of
Transportation ("DOT") and TSA is an agency of the Department of Homeland
Security.
BAX Global is subject to various other requirements and regulations in
connection with its operations, including certain safety and security
regulations of the DOT and other federal and state agencies. BAX Global's
international operations are regulated by varying degrees by the countries in
which they operate.
Properties
BAX Global has approximately 260 company-operated stations (100 domestic and 160
international) and has agency agreements with approximately 240 stations (50
domestic and 190 international). BAX Global's stations are usually located at or
near airports or other transportation corridors. BAX Global operates domestic
stations, which generally include office space and warehousing facilities
located in 39 states, the District of Columbia and Puerto Rico. BAX Global
operates international facilities in 35 countries. Nearly all company-operated
stations are leased.
7
BAX Global operates its main freight-sorting operation and related facilities
(the "Hub") at Toledo Express Airport in Ohio. The lease of the Hub with the
Toledo-Lucas County Port Authority expires in 2013. The lease provides BAX
Global with rights of renewal for three five-year periods. Other facilities in
the U.S. are held under leases having terms of one to ten years.
BAX Global provides certain transportation customers with supply chain
management services and operates more than 40 leased logistics warehouse and
distribution facilities in key world markets.
BAX Global has under lease through 2012 a 116,000 square foot corporate office
facility located in Irvine, California.
See "Aircraft Operations" above for information about contracted, leased and
owned aircraft.
FORMER OPERATIONS
During 2003, the Company sold, or agreed to sell, its remaining natural resource
business.
The Company sold its natural gas and timber operations in 2003, and sold its
gold operations in 2004. The Company has retained certain coal-related
liabilities and related expenses. Retained liabilities are significant and
include obligations related to postretirement benefits for Company-sponsored
medical plans, black lung benefits, reclamation and other costs related to
closed mines, Health Benefit Act obligations, workers' compensation claims and
costs of withdrawal from multi-employer pension plans. The Company expects to
have significant ongoing expenses and cash outflow relating to its former coal
operations, including ongoing costs related to the administration of the
retained liabilities. See notes 4, 5, 6 and 23 to the consolidated financial
statements, which notes are herein incorporated by reference.
At December 31, 2003, the Company had approximately 100 employees related to its
former natural resource operations. These employees perform various duties
including reclaiming and maintaining residual assets and managing other retained
liabilities related to the former coal operations.
Environmental Matters
The Company is responsible for the reclamation of former coal mining operations
that have not otherwise been assumed by purchasers of the coal operations. The
Surface Mining Control and Reclamation Act of 1977 and the regulations
promulgated thereunder ("SMCRA") by the Federal Office of Surface Mining
Reclamation and Enforcement ("OSM") establish reclamation standards for all
aspects of surface mining as well as many aspects of deep mining. OSM and its
state counterparts monitor compliance with SMCRA. At December 31, 2003, the
Company's estimated liability for reclamation was $7.9 million.
The Company is also subject to other federal environmental laws, including the
Resource Conservation and Recovery Act; the Occupational Safety and Health Act;
the Toxic Substances Control Act; the Comprehensive Environmental Resource,
Compensation and Liability Act; the Clean Water Act; the Clean Air Act and the
Safe Drinking Water Act, as well as state laws of similar scope. The Company
believes it is in compliance with all applicable environmental laws.
The Company has agreed to pay a portion of the remediation costs arising from
hydrocarbon contamination at a formerly owned petroleum terminal facility
("Tankport") in Jersey City, New Jersey, which was sold in 1983. The Company is
in the process of completing remediation of the site under an approved plan. The
Company estimates its portion of the remaining clean-up and operational and
maintenance costs, to be $2.5 million at December 31, 2003.
Health and Safety Laws
Health and safety standards in the U.S. coal industry, including reclamation and
maintenance activities on the Company's residual coal assets, are legislated by
the Federal Coal Mine Health and Safety Act of 1969 and the Federal Mine Safety
and Health Act of 1977. The Company believes it is in compliance with all
applicable health and safety laws.
Forward-Looking Information
Certain of the matters discussed herein, including statements regarding foreign
exchange rates and other risks associated with foreign operations, significant
ongoing expenses and cash outflows related to former coal operations in the
future (including costs related to the administration of retained liabilities),
the uninterrupted supply of equipment to BHS, the impact of the refusal of
police departments to respond to calls from alarm companies without visual
verification and the national "Do Not Call" list on BHS, the expected seasonal
impact on the volumes shipped by BAX Global, the ability of BAX Global to renew
certain aircraft leases or enter into new leases on reasonably comparable terms,
the highly competitive nature of the transportation and supply chain management
industries, the renegotiation of union contracts, liability for reclamation
related to the former coal operations, and estimates of clean-up, operational
and maintenance costs relating to the Tankport matter, involve forward-looking
information which is subject to known and unknown risks, uncertainties, and
contingencies which could cause actual results, performance or achievements, to
differ materially from those which are anticipated.
Such risks, uncertainties and contingencies, many of which are beyond the
control of the Company, include, but are not limited to, fluctuations in
interest and exchange rates, economic, business and social conditions in the
U.S. and abroad, effectiveness of hedging activities and the ability of
counterparties to perform, actual retirement experience of the former coal
operation's employees, black lung claims incidence, the number of dependents
covered under benefit obligations, coal industry turnover rates, actual medical
and legal costs relating to the benefits, changes in inflation rates (including
the continued volatility of medical inflation), the performance of BHS'
equipment suppliers, the incidence of false alarms, the willingness of BHS'
8
customers to pay for private response personnel or other alternatives to police
responses to alarms, the effectiveness of BHS' other marketing strategies,
market for airplanes, concessions requested by Brink's, BAX Global or the
applicable union, changes in the scope or method of remediation or monitoring
required under the coal-related permits or related to the Tankport property, the
demand for the Company's products and services, the ability of the Company and
its operations to obtain appropriate insurance coverage at reasonable prices,
pricing and other competitive industry factors, fuel prices, new government
regulations and legislative initiatives, issuance of permits, judicial
decisions, and variations in costs or expenses.
9
ITEM 3. LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
Not applicable.
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
- --------------------------------------------------------------------------------
Not applicable.
10
Executive Officers of the Registrant
The following is a list as of March 5, 2004, of the names and ages of the
executive and other officers of The Brink's Company and the names and ages of
certain officers of its subsidiaries, indicating the principal positions and
offices held by each. There is no family relationship between any of the
officers named.
Name Age Positions and Offices Held Held Since
- --------------------------------------------------------------------------------------------------------------------
Executive Officers:
Michael T. Dan 53 President, Chief Executive Officer and Chairman of the Board 1998
James B. Hartough 56 Vice President-Corporate Finance and Treasurer 1988
Frank T. Lennon 62 Vice President-Human Resources and Administration 1985
Austin F. Reed 52 Vice President, General Counsel and Secretary 1994
Robert T. Ritter 52 Vice President and Chief Financial Officer 1998
Other Officers:
Matthew A.P. Schumacher 45 Controller 2001
Arthur E. Wheatley 61 Vice President and Director-Risk Management 1988
Subsidiary Officers:
Robert B. Allen 50 President of Brink's Home Security, Inc. 2001
Joseph L. Carnes 46 President of BAX Global Inc. 2000
Richard Gold 53 President of Brink's, Incorporated 2004
====================================================================================================================
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 on February 6, 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 and as President and Chief
Executive Officer of Brink's Holding Company, a position he has held since
December 31, 1995. He served as President of Brink's, Incorporated from December
2002 until January 2004. He also serves as Chairman of the Board of BAX Global
Inc., a position he has held since February 1998. 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. Ritter joined The Brink's Company as Vice President and Chief Financial
Officer in August 1998. From June 1996 to July 1998, he served as Chief
Financial Officer of WLR Foods, Inc. He was a private investor and financial
consultant from April 1995 to May 1996 and was Treasurer at American Cyanamid
Company from March 1991 to January 1994 and Controller from February 1994 to
March 1995.
Messrs. Hartough, Lennon, Reed and Wheatley have served in their present
positions for more than the past five years.
Mr. Schumacher joined the Company as Controller on July 13, 2001. Prior to
joining the Company, he was employed by NL Industries, Inc. as the Assistant
Controller from 1997 through July 2001.
Mr. Allen joined Brink's Home Security, Inc. in August 1999 as Executive Vice
President and Chief Operating Officer. He was promoted to President of Brink's
Home Security, Inc. in March 2001. From January 1997 to August 1999, he held
various positions at Aegis Communications Group (formerly ATC Communications)
including Executive Vice President of Sales and Marketing and Chief Operating
Officer. From 1980 through 1996, he held various domestic and international
positions at Frito-Lay including Vice President of Field Marketing and Country
Manager in Greece and Turkey.
Mr. Carnes was elected President of BAX Global Inc. in May 2000. He joined BAX
Global Inc. as President - U.S. and Canada in September 1999. Prior to joining
BAX Global Inc., he served as Executive Vice President, North America for Fritz
Companies Inc. where he was employed from 1987 to 1999.
Mr. Gold joined Brink's, Incorporated as President on January 1, 2004. Prior to
joining the Company, he was employed by Cummins, Inc. for twenty-three years. In
his last position, he served as Vice President, General Manager of a Cummins
business unit.
11
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
- --------------------------------------------------------------------------------
The Company's common stock trades on the New York Stock Exchange under the
symbol "BCO."
Reference is made to page 113 of the Company's 2003 Annual Report which is
herein incorporated by reference, for other information required by this item.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
Reference is made to pages 114 and 115 of the Company's 2003 Annual Report which
is herein incorporated by reference, for information required by this item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
- --------------------------------------------------------------------------------
Reference is made to pages 18 through 64 of the Company's 2003 Annual Report
which is herein incorporated by reference, for information required by this
item.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------------------
The information regarding quantitative and qualitative disclosures about market
risk is included in this report under Item 7.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
Reference is made to pages 65 through 113 of the Company's 2003 Annual Report
which is herein incorporated by reference, for information required by this
item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- --------------------------------------------------------------------------------
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
- --------------------------------------------------------------------------------
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, the
Company carried out an evaluation, with the participation of the Company's
management, including the Company's Chief Executive Officer and Vice President
and Chief Financial Officer, of the effectiveness of the Company's disclosure
controls and procedures (as defined under Rule 13a-15(e) under the Securities
Exchange Act of 1934) as of the end of the period covered by this report. Based
upon that evaluation, the Company's Chief Executive Officer and Vice President
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company required to be included in the Company's periodic SEC
filings.
There has been no change in the Company's internal control over financial
reporting during the quarter ended December 31, 2003, that has materially
affected, or is reasonably likely to materially affect, the Company's internal
controls over financial reporting.
12
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- --------------------------------------------------------------------------------
The information required by this Item regarding directors is herein incorporated
by reference to the Company's definitive proxy statement to be filed pursuant to
Regulation 14A within 120 days after December 31, 2003. The information
regarding executive officers is included in this report following Item 4, under
the caption "Executive Officers of the Registrant."
The Company has adopted a Business Code of Ethics that applies to all of the
directors, officers and employees (including the Chief Executive Officer, Chief
Financial Officer and Controller) and has posted the Code on the Company's web
site. The Company intends to satisfy the disclosure requirement under Item 10 of
Form 8-K relating to amendments to or waivers from any provision of the Business
Code of Ethics applicable to the Chief Executive Officer, Chief Financial
Officer or Controller by posting this information on the web site. The internet
address is www.brinkscompany.com.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The information required by Item 11 is incorporated by reference to the
Company's definitive proxy statement to be filed pursuant to Regulation 14A
within 120 days after December 31, 2003.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------
The information required by Item 12 is incorporated by reference to the
Company's definitive proxy statement to be filed pursuant to Regulation 14A
within 120 days after December 31, 2003.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
The information required by Item 13 is incorporated by reference to the
Company's definitive proxy statement to be filed pursuant to Regulation 14A
within 120 days after December 31, 2003.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
- --------------------------------------------------------------------------------
The information required by Item 14 is incorporated by reference to the
Company's definitive proxy statement to be filed pursuant to Regulation 14A
within 120 days after December 31, 2003.
13
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
(a) 1. All financial statements - see index to financial statements and
schedules.
2. Financial statement schedules - see index to financial statements
and schedules.
3. Exhibits - see exhibit index.
(b) Reports on Form 8-K
(i) Report on Form 8-K furnished on February 4, 2004, providing the
Registrant's earnings press release for the fourth quarter of
2003 pursuant to Item 12 of Form 8-K;
(ii) Report on Form 8-K filed on December 31, 2003, reporting the
closing on the sale of the timber business;
(iii) Report on Form 8-K filed on November 14, 2003, reporting the
consummation of the sale of West Virginia coal properties;
(iv) Report on Form 8-K furnished on October 30, 2003, providing the
Registrant's earnings press release for the third quarter of 2003
pursuant to Item 12 of Form 8-K;
(v) Report on Form 8-K filed on October 16, 2003, reporting the sale
of shares of MPI Mines Ltd. stock; and
(vi) Report on Form 8-K filed on October 8, 2003, reporting the
execution of definitive agreements for the sale of West Virginia
coal properties.
Undertaking
For the purposes of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned
Registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into Registrant's Registration Statements on Form S-8 Nos. 2-64258,
33-2039, 33-21393, 33-23333, 33-69040, 33-53565, 333-02219, 333-78631,
333-78633, 333-70758, 333-70772, 333-70766 and 333-70762. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
14
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 15, 2004.
The Brink's Company
---------------------------
(Registrant)
By /s/ M. T. Dan
----------------------------
(M. T. Dan,
Chairman, President and
Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated, on March 15, 2004.
Signatures Title
- ----------------- --------
R. G. Ackerman* Director
B. C. Alewine* Director
J. R. Barker* Director
M. C. Breslawsky* Director
J. L. Broadhead* Director
/s/ M. T. Dan
- ---------------------------------- Chairman, President and
(M. T. Dan) Chief Executive Officer
(principal executive officer)
G. Grinstein* Director
R. M. Gross* Director
/s/ R. T. Ritter
- ---------------------------------- Vice President
(R. T. Ritter) and Chief Financial Officer
(principal financial officer and
principal accounting officer)
C. S. Sloane* Director
R. L. Turner* Director
*By /s/ M. T. Dan
-----------------------------
(M. T. Dan, Attorney-in-Fact)
15
Index to Financial Statements and Schedules
Financial Statements:
The consolidated financial statements of The Brink's Company, listed in the
index below which are included in the Company's 2003 Annual Report for the year
ended December 31, 2003, are herein incorporated by reference. With the
exception of the pages listed in the index below and the information
incorporated by reference included in Parts I, II and IV, the 2003 Annual Report
of the Shareholders is not deemed filed as part of this report.
THE BRINK'S COMPANY ANNUAL REPORT
Page Numbers
in 2003
Annual
Report
------------
Management's Discussion and Analysis of
Results of Operations and Financial Condition............18-64
Independent Auditors' Report ...............................66
Consolidated Balance Sheets.................................67
Consolidated Statements of Operations.......................68
Consolidated Statements of Comprehensive Income (Loss)......69
Consolidated Statements of Shareholders' Equity.............70
Consolidated Statements of Cash Flows.......................71
Notes to Consolidated Financial Statements..................72-113
Selected Financial Data.....................................114-115
Financial Statement Schedules:
Page numbers
In Form 10-K
------------
Independent Auditors' Report
on Financial Statement Schedule..........................16
Schedule II - Valuation and qualifying accounts.............17
16
INDEPENDENT AUDITORS' REPORT
ON FINANCIAL STATEMENT SCHEDULE
The Board of Directors
The Brink's Company
Under date of February 4, 2004, we reported on the consolidated balance sheets
of The Brink's Company and subsidiaries (the "Company") as of December 31, 2003
and 2002, and the related consolidated statements of operations, comprehensive
income (loss), shareholders' equity and cash flows for each of the years in the
three-year period ended December 31, 2003, as contained in the 2003 annual
report on Form 10-K. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related financial
statement schedule as included herein. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material aspects, the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, effective
January 1, 2002, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets."
/s/ KPMG LLP
Richmond, Virginia
February 4, 2004
17
The Brink's Company
Schedule II - Valuation and Qualifying Accounts
For the Years Ending December 31, 2003, 2002 and 2001
(in millions)
Balance at Charged to Currency Balance at
Beginning of Costs and Translation End of
Period Expenses (a) Deductions (b) Adjustment Period
- ----------------------------------------------------------------------------------------------------------------------------------
Allowance for Doubtful Accounts
- -------------------------------
Year Ended December 31, 2001 $ 39.8 12.3 (8.9) (1.4) 41.8
Year Ended December 31, 2002 41.8 4.6 (11.8) 0.9 35.5
Year Ended December 31, 2003 35.5 (1.1) (7.5) 0.7 27.6
Valuation Allowance for Deferred Tax Assets
- -------------------------------------------
Year Ended December 31, 2001 $ 9.0 1.3 - - 10.3
Year Ended December 31, 2002 10.3 1.5 - (2.0) 9.8
Year Ended December 31, 2003 9.8 27.9 - 0.8 38.5
(a) Includes amounts charged to loss from discontinued operations.
(b) Amounts written off, less recoveries
18
Exhibit Index
Each Exhibit listed previously filed document is hereby incorporated by
reference to such document.
Exhibit
Number Description
2(i) Membership Interest Acquisition Agreement Among Air Transport
International LLC and BAX Global Inc., dated February 3, 1998.
Exhibit 2 to the Registrant's Current Report on Form 8-K filed
May 14, 1998.
2(ii) Share Purchase Agreement, dated as of January 27, 1998, between
Brink's Security International, Inc., acting as Purchaser, and
Generale de Transport et D'Industrie, acting as Seller. Exhibit
10(v) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1998 (the "1998 Form 10-K").
2(iii) Shareholders' Agreement, dated as of January 10, 1997, between
Brink's Security International, Inc., and Valores Tamanaco,
C.A. Exhibit 10(w) to the 1998 Form 10-K.
3(a) (i) The Registrant's Articles of Correction to its Articles
of Incorporation. Exhibit 3(i) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.
(ii) Articles of Amendment to the Registrant's Articles of
Incorporation, dated as of May 2, 2003. Exhibit 3(i) to
the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2003.
3(b) The Registrant's Bylaws, as amended through February 6, 2004.
4(a) (i) Amended and Restated Rights Agreement dated as of
September 1, 2003 between the Registrant and Equiserve
Trust Company, N.A., as Rights Agent, together with Form
of Right Certificate. Exhibit 1 to the Registrant's
Amendment No. 4 to Form 8-A/A (filed on October 9,
2003).
10(a)* The Key Employees' Incentive Plan, as amended. Exhibit 10(a)
to the 1998 Form 10-K.
10(b)* The Key Employees' Deferred Compensation Program, as amended
and restated as of January 14, 2000. Exhibit 10(b) to the 1999
Form 10-K.
10(c)* (i) The Registrant's Pension Equalization Plan as amended.
Exhibit 10(e)(I) to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1997 (the
"1997 Form 10-K").
(ii) Amended and Restated Trust Agreement, dated December 1,
1997, between the Registrant and Chase Manhattan Bank,
as Trustee (the "Trust Agreement"). Exhibit 10(e)(ii) to
the 1997 Form 10-K.
(iii) Amendment No. 1 to Trust Agreement, dated as of
August 18, 1999. Exhibit 10(c)(iii) to the 1999
Form 10-K.
(iv) Amendment No. 2 to Trust Agreement, dated as of July 26,
2001. Exhibit 10(c)(iv) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 2002
(the "2002 Form 10-K").
(v) Amendment No. 3 to Trust Agreement, dated as of
September 18, 2002. Exhibit 10(c)(v) to the 2002 Form
10-K.
(vi) Trust Agreement under the Pension Equalization Plan,
Retirement Plan for Non-Employee Directors and Certain
Contractual Arrangements of The Brink's Company made as
of September 16, 1994, by and between the Registrant and
Chase Manhattan Bank (National Association), as Trustee.
Exhibit 10(i) to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1994
(filed November 14, 1994 - File No. 1-9148) (the "Third
Quarter 1994 Form 10-Q").
19
(vii) Form of letter agreement dated as of September 16, 1994,
between the Registrant and one of its officers. Exhibit
10(e) to the Third Quarter 1994 Form 10-Q.
(viii) Form of letter agreement dated as of September 16,
1994, between the Registrant and Participants pursuant
to the Pension Equalization Plan. Exhibit 10(f) to the
Third Quarter 1994 Form 10-Q.
(ix) Amendment No. 4 to Trust Agreement, dated as of
September 22, 2003. Exhibit 10.1 to the Registrant's
Form 10-Q for the quarter ended September 30, 2003 (the
"Third Quarter 2003 Form 10-Q").
10(d)* The Registrant's Executive Salary Continuation Plan. Exhibit
10(e) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1991 (filed March 26, 1991 - File No.
1-9148) (the "1991 Form 10-K").
10(e)* The Registrant's Non-Employee Directors' Stock Option Plan, as
amended and restated as of January 14, 2000. Exhibit 10(e) to
the 1999 Form 10-K.
10(f)* The Registrant's 1988 Stock Option Plan, as amended and
restated as of January 14, 2000. Exhibit 10(f) to the 1999
Form 10-K.
10(g)* (i) The Brink's Company Management Performance Improvement
Plan. Exhibit 10(g) to the 1999 Form 10-K.
(ii) Amendment, dated as of March 12, 2004, to The Brink's
Company Management Performance Improvement Plan.
10(h)* Form of change in control agreement replacing all prior change
in control agreements and amendments and modifications thereto,
between the Registrant (or a subsidiary) and various officers
of the Registrant. Exhibit 10(l)(ii) to the 1997 Form 10-K.
10(i)* Form of Indemnification Agreement entered into by the
Registrant with its directors and officers. Exhibit 10(l) to
the 1991 Form 10-K.
10(j)* (i) Registrant's Retirement Plan for Non-Employee Directors,
as amended. Exhibit 10(g) to the Third Quarter 1994
Form 10-Q.
(ii) Form of letter agreement dated as of September 16, 1994,
between the Registrant and its Non-Employee Directors
pursuant to Retirement Plan for Non-Employee Directors.
Exhibit 10(h) to the Third Quarter 1994 Form 10-Q.
10(k)* (i) Form of severance agreement between the Registrant (or
a subsidiary) and various of the Registrant's officers.
Exhibit 10(o)(ii) to the 1997 Form 10-K.
10(l)* Registrant's Directors' Stock Accumulation Plan, as amended and
restated as of January 14, 2000. Exhibit 10(l) to the 1999
Form 10-K.
10(m)* Registrant's Amended and Restated Plan for Deferral of
Directors' Fees. Exhibit 10(o) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1989
(filed March 24, 1990 - File No. 1-9148).
10(n) (i) Lease dated as of April 1, 1989, between Toledo-Lucas
County Port Authority (the "Authority"), as Lessor, and
Burlington, as Lessee. Exhibit 10(i) to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1989 (filed August 11, 1989 - File No. 1-9148)
(the "Second Quarter 1989 Form 10-Q").
(ii) Lease Guaranty Agreement dated as of April 1, 1989,
between Burlington (formerly Burlington Air Express
Management Inc.), as Guarantor, and the Authority.
Exhibit 10(ii) to the Second Quarter 1989 Form 10-Q.
(iii) Trust Indenture dated as of April 1, 1989 between the
Authority and Society Bank & Trust (formerly, Trustcorp.
Bank, Ohio) (the "Trustee"), as Trustee. Exhibit 10(iii)
to the Second Quarter 1989 Form 10-Q.
(iv) Assignment of Basic Rent and Rights Under a Lease and
Lease Guaranty dated as of April 1, 1989 from the
Authority to the Trustee. Exhibit 10(iv) to the Second
Quarter 1989 Form 10-Q.
20
(v) Open-End First Leasehold Mortgage and Security Agreement
dated as of April 1, 1989 from the Authority to the
Trustee. Exhibit 10(v) to the Second Quarter 1989 Form
10-Q.
(vi) First Supplement to Lease dated as of January 1, 1990,
between the Authority and Burlington, as Lessee. Exhibit
10 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1990 (filed May 15, 1990 -
File No. 1-9148).
(vii) Revised and Amended Second Supplement to Lease dated as
of September 1, 1990, between the Authority and
Burlington. Exhibit 10(i) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1990 (filed November 13, 1990 - File No. 1-9148) (the
"Third Quarter 1990 Form 10-Q").
(viii) Amendment Agreement dated as of September 1, 1990, among
City of Toledo, Ohio, the Authority, Burlington and the
Trustee. Exhibit 10(ii) to the Third Quarter 1990 Form
10-Q.
(ix) Assumption and Non-Merger Agreement dated as of
September 1, 1990, among Burlington, the Authority and
the Trustee. Exhibit 10(iii) to the Third Quarter 1990
Form 10-Q.
(x) First Supplemental Indenture between Toledo-Lucas County
Port Authority, and Society National Bank, as Trustee,
dated as of March 1, 1994. Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994 (filed May 12, 1994 -
File No. 1-9148) (the "First Quarter 1994 Form 10-Q").
(xi) Third Supplement to Lease between Toledo-Lucas County
Port Authority, as Lessor, and Burlington Air Express
Inc., as Lessee, dated as of March 1, 1994. Exhibit 10.2
to the First Quarter 1994 Form 10-Q.
(xii) Fourth Supplement to Lease between Toledo-Lucas County
Port Authority, as Lessor, and Burlington Air Express
Inc., as Lessee, dated as of June 1, 1991. Exhibit 10.3
to the First Quarter 1994 Form 10-Q.
(xiii) Fifth Supplement to Lease between Toledo-Lucas County
Port Authority, as Lessor, and Burlington Air Express
Inc., as Lessee, dated as of December 1, 1996. Exhibit
10(r)(xiii) to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1996.
10(o) Credit Agreement, dated as of September 6, 2002, among The
Brink's Company, as Borrower, Certain of Its Subsidiaries,
as Guarantors, Various Lenders, Fleet National Bank, as
Co-Arranger and Documentation Agent, Wachovia Bank, National
Association, and the Bank of Nova Scotia, as Co-Arrangers
and Syndication Agents, JPMorgan Chase Bank, as
Administrative Agent, and J.P. Morgan Securities Inc., as
Sole Advisor, Lead Arranger and Bookrunner. Exhibit 10 to
the Registrant's Third Quarter 2002 Form 10-Q.
10(p) (i) Credit Agreement, dated as of November 12, 2002, among
BAX Global Inc., Brink's, Incorporated, and certain of
their subsidiaries, as Borrowers, the Registrant as
Guarantor and Bayerische Hypo-Und Vereinsbank AG.
Exhibit 10(p)(i) to the 2002 Form 10-K.
(ii) Guaranty, dated as of November 12, 2002, between the
Registrant, as Guarantor, and Bayerische Hypo-Und
Vereinsbank AG. Exhibit 10(p)(ii) to the 2002 Form 10-K.
10(q) (i) Credit Agreement, dated as of December 20, 2002, among
BAX Global Inc., Brink's, Incorporated and the
Registrant, as Borrowers and Guarantors, and ABN AMRO
Bank, N.V. Exhibit 10(q)(i) to the 2002 Form 10-K.
21
(ii) Guaranty between BAX Global, as Guarantor, and ABN AMRO
Bank, N.V. Exhibit 10(q)(ii) to the 2002 Form 10-K.
(iii) Guaranty between Brink's, Incorporated, as Guarantor,
and ABN AMRO Bank, N.V. Exhibit 10(q)(iii) to the 2002
Form 10-K.
(iv) Guaranty between the Registrant, as Guarantor, and ABN
AMRO Bank, N.V. Exhibit 10(q)(iv) to the 2002 Form 10-K.
10(r)* (i) Employment Agreement dated as of May 4, 1998, between
the Registrant and M. T. Dan. Exhibit 10(a) to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998 (the "Third Quarter
1998 Form 10-Q").
(ii) Amendment No. 1 to Employment Agreement between the
Registrant and Michael T. Dan. Exhibit 10 to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002.
10(s)* Executive Agreement dated as of May 4, 1998, between the
Registrant and M. T. Dan. Exhibit 10(b) to the Third Quarter
1998 Form 10-Q.
10(t)* Executive Agreement dated as of August 7, 1998, between the
Registrant and R. T. Ritter. Exhibit 10(c) to the Third Quarter
1998 Form 10-Q.
10(u)* Severance Agreement dated as of August 7, 1998, between the
Registrant and R. T. Ritter. Exhibit 10(d) to the Third Quarter
1998 Form 10-Q.
10(v) Trust Agreement for The Brink's Company Employee Welfare
Benefit Trust. Exhibit 10(t) to the 1999 Form 10-K.
10(w) (i) Note Purchase Agreement dated as of January 18, 2001,
between the Registrant and the Purchasers listed on
Schedule A thereto. Exhibit 10(u)(i) to the 2000 Form
10-K.
(ii) Form of Series A Promissory Note. Exhibit 10(u)(ii) to
the 2000 Form 10-K.
(iii) Form of Series B Promissory Note. Exhibit 10(u)(iii) to
the 2000 Form 10-K.
10(x) (i) Receivables Purchase Agreement dated as of December 15,
2000, among BAX Funding Corporation, BAX Global Inc.,
Liberty Street Funding Corp. and the Bank of Nova
Scotia. Exhibit 10(v)(i) to the 2000 Form 10-K.
(ii) Purchase and Sale Agreement dated as of December 15,
2000, among the Originators named therein, BAX Funding
Corporation and BAX Global Inc. Exhibit 10(v)(ii) to the
2000 Form 10-K.
10(y) (i) Note Purchase Agreement dated as of April 11, 2002
between the Registrant and the Purchasers set forth on
the signature page. Exhibit 10(a)(i) to the
Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002 (the "First Quarter 2002
Form 10-Q).
(ii) Form of Promissory Note. Exhibit 10(a)(ii) to the First
Quarter 2002 Form 10-Q.
10(z) (i) $43,160,000 Bond Purchase Agreement, dated September 17,
2003, among the Peninsula Ports Authority of Virginia,
Dominion Terminal Associates, Pittston Coal Terminal
Corporation and the Registrant. Exhibit 10.2(i) to the
Third Quarter 2003 Form 10-Q.
(ii) Loan Agreement between the Peninsula Ports Authority of
Virginia and Dominion Terminal Associates, dated
September 1, 2003. Exhibit 10.2(ii) to the Third Quarter
2003 Form 10-Q.
(iii) Indenture and Trust between the Peninsula Ports
Authority of Virginia and Wachovia Bank, National
Association ("Wachovia"), as trustee, dated September 1,
2003. Exhibit 10.2(iii) to the Third Quarter 2003
Form 10-Q.
22
(iv) Parent Company Guaranty Agreement, dated September 1,
2003, made by the Registrant for the benefit of
Wachovia. Exhibit 10.2(iv) to the Third Quarter 2003
Form 10-Q.
(v) Continuing Disclosure Undertaking between the Registrant
and Wachovia, dated September 24, 2003. Exhibit 10.2(v)
to the Third Quarter 2003 Form 10-Q.
(vi) Coal Terminal Revenue Refunding Bond (Dominion Terminal
Associates Project - Brink's Issue) Series 2003. Exhibit
10.2(vi) to the Third Quarter 2003 Form 10-Q.
13 Parts of the 2003 Annual Report of the Registrant.
21 Subsidiaries of the Registrant.
23 Consent of independent auditors.
24 Powers of attorney.
31 Rule 13a-14(a)/15d-14(a) Certifications.
32 Section 1350 Certifications.
99(a)* Amendment to Registrant's Pension-Retirement Plan relating to
preservation of assets of the Pension-Retirement Plan upon a
change in control. Exhibit 99 to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1992 (filed March
20, 1993 - File No. 1-9148).
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*Management contract or compensatory plan or arrangement.
23