Edgar Filing: BRINKS CO

form_10-q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

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 1-9148

	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.)

1801 Bayberry Court, Richmond, Virginia 23226-8100

(Address of principal executive offices) (Zip Code)

(804) 289-9600

(Registrant's telephone number, including area code)

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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

(Check one): Large Accelerated Filer x Accelerated Filer o Non-Accelerated Filer 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 October 31, 2007, 48,491,344 shares of $1 par value common stock were outstanding.

Part I - Financial Information

Item 1. Financial Statements

THE BRINK’S COMPANY

and subsidiaries

Consolidated Balance Sheets

(Unaudited)

	September 30,			December 31,
(In millions)	2007			2006

ASSETS

Current assets:
Cash and cash equivalents	$	175.4			137.2
Accounts receivable, net		496.2			469.4
Prepaid expenses and other		100.8			72.4
Deferred income taxes		63.4			71.8
Total current assets		835.8			750.8

Property and equipment, net		1,070.9			981.9
Goodwill		137.5			124.0
Deferred income taxes		105.4			142.2
Other		199.7			189.1
Total assets	$	2,349.3			2,188.0

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Short-term debt	$	10.6			33.4
Current maturities of long-term debt		8.8			10.5
Accounts payable		153.4			142.8
Income taxes payable		4.7			33.9
Accrued liabilities		455.0			386.1
Total current liabilities		632.5			606.7

Long-term debt		115.9			126.3
Accrued pension costs		118.5			135.5
Postretirement benefits other than pensions		166.6			180.1
Deferred revenue		175.6			164.5
Deferred income taxes		10.4			20.8
Other		225.8			200.3
Total liabilities		1,445.3			1,434.2

Commitments and contingencies (notes 4, 5, 8 and 11)

Shareholders' equity:
Common stock		48.5			48.5
Capital in excess of par value		441.9			414.7
Retained earnings		629.3			552.0
Accumulated other comprehensive loss		(215.7	)		(261.4	)
Total shareholders' equity		904.0			753.8
Total liabilities and shareholders' equity	$	2,349.3			2,188.0

See accompanying notes to consolidated financial statements.

THE BRINK’S COMPANY

and subsidiaries

Consolidated Statements of Operations

(Unaudited)

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
(In millions, except per share amounts)	2007			2006			2007			2006

Revenues	$	817.0			709.5			2,336.2			2,048.2

Expenses:
Operating expenses		624.7			537.5			1,791.8			1,573.8
Selling, general and administrative expenses		130.0			119.5			363.0			334.1
Total expenses		754.7			657.0			2,154.8			1,907.9
Other operating income (loss), net		(1.8	)		1.9			2.6			5.0

Operating profit		60.5			54.4			184.0			145.3

Interest expense		(2.5	)		(3.7	)		(8.0	)		(10.0	)
Interest and other income, net		3.0			4.0			6.7			14.1
Income from continuing operations before income taxes and
minority interest		61.0			54.7			182.7			149.4
Provision for income taxes		27.3			24.9			74.0			64.7
Minority interest		3.7			4.1			14.5			11.2

Income from continuing operations		30.0			25.7			94.2			73.5

Income (loss) from discontinued operations, net of income taxes		(4.1	)		0.8			(11.3	)		387.1

Net income	$	25.9			26.5			82.9			460.6

Earnings per common share
Basic:
Continuing operations	$	0.64			0.55			2.02			1.44
Discontinued operations		(0.09	)		0.02			(0.24	)		7.56
Net income		0.56			0.57			1.78			8.99

Diluted:
Continuing operations	$	0.64			0.54			2.00			1.42
Discontinued operations		(0.08	)		0.02			(0.24	)		7.48
Net income		0.55			0.56			1.76			8.91

Weighted-average common shares outstanding
Basic		46.6			46.7			46.5			51.2
Diluted		47.1			47.2			47.0			51.7

Cash dividends paid per common share	$	0.1000			0.0625			0.2625			0.1500

See accompanying notes to consolidated financial statements.

THE BRINK’S COMPANY

and subsidiaries

Consolidated Statement of Shareholders’ Equity

Nine months ended September 30, 2007

(Unaudited)

					Capital						Accumulated
					in Excess						Other
			Common		of Par			Retained			Comprehensive
(In millions)	Shares (a)		Stock		Value			Earnings			Loss			Total

Balance as of December 31, 2006		48.5	$	48.5		414.7			552.0			(261.4	)		753.8
Net income		-		-		-			82.9			-			82.9
Other comprehensive income		-		-		-			-			45.7			45.7
Dividends		-		-		-			(11.9	)		-			(11.9	)
Share-based compensation - stock options		-		-		9.7			-			-			9.7
Proceeds from exercise of stock options		-		-		6.8			-			-			6.8
Excess tax benefit of stock options exercised		-		-		3.9			-			-			3.9
Other share-based compensation		-		-		6.9			-			-			6.9
Retire shares of common stock and other		-		-		(0.1	)		(0.7	)		-			(0.8	)
Adoption of Financial Accounting Standards
Board Interpretation 48 (see notes 1 and 5)		-		-		-			7.0			-			7.0
Balance as of September 30, 2007		48.5	$	48.5		441.9			629.3			(215.7	)		904.0

(a)	Includes 1.9 million shares at September 30, 2007, held by The Brink’s Company Employee Benefits Trust that have not been allocated to participants (2.3 million shares at December 31, 2006).

See accompanying notes to consolidated financial statements.

THE BRINK’S COMPANY

and subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months
	Ended September 30,
(In millions)	2007			2006

Cash flows from operating activities:
Net income	$	82.9			460.6
Adjustments to reconcile net income to net cash provided (used) by operating activities:
(Income) loss from discontinued operations, net of tax		11.3			(387.1	)
Depreciation and amortization		137.2			119.0
Impairment charges:
Subscriber disconnects		37.9			35.7
Other		2.1			-
Amortization of deferred revenue		(25.6	)		(23.6	)
Deferred income taxes		26.6			148.5
Provision for uncollectible accounts receivable		8.1			8.1
Share-based compensation		9.7			9.1
Other operating, net		16.1			17.2
Postretirement benefit funding (more) less than expense:
Pension		(7.6	)		11.2
Other than pension		(4.2	)		(249.1	)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable		(17.9	)		(53.6	)
Accounts payable, income taxes payable and accrued liabilities		36.6			(140.3	)
Deferral of subscriber acquisition cost		(18.0	)		(18.5	)
Deferral of revenue from new subscribers		35.8			33.5
Prepaid and other current assets		(13.9	)		(21.3	)
Other, net		7.3			5.2
Discontinued operations, net		(3.5	)		(4.1	)
Net cash provided (used) by operating activities		320.9			(49.5	)

Cash flows from investing activities:
Capital expenditures		(228.6	)		(203.4	)
Acquisitions		(11.3	)		(12.4	)
Marketable securities:
Purchases		(0.7	)		(1,662.6	)
Sales		1.0			1,636.9
Proceeds from disposal of BAX Global, net of $90.3 million of cash disposed		-			1,010.5
Other, net		8.3			2.5
Discontinued operations, net		0.3			(6.5	)
Net cash provided (used) by investing activities		(231.0	)		765.0

Cash flows from financing activities:
Long term debt:
Additions		108.7			82.5
Repayments		(119.1	)		(217.8	)
Short-term debt repayments, net		(24.5	)		(0.4	)
Repurchase shares of common stock of The Brink’s Company		-			(618.5	)
Dividends to:
Shareholders of The Brink’s Company		(11.9	)		(7.2	)
Minority interest holders in subsidiaries		(6.9	)		(8.8	)
Proceeds from exercise of stock options		6.8			17.8
Excess tax benefits from exercise of stock options		4.2			3.7
Other, net		(0.2	)		(2.4	)
Discontinued operations, net		(14.8	)		(3.5	)
Net cash used by financing activities		(57.7	)		(754.6	)

Effect of exchange rate changes on cash		6.0			2.8

Cash and cash equivalents:
Increase (decrease)		38.2			(36.3	)
Balance at beginning of period		137.2			96.2
Amount held by BAX Global at December 31, 2005		-			78.6
Balance at end of period	$	175.4			138.5

See accompanying notes to consolidated financial statements.

THE BRINK’S COMPANY

and subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 - Basis of presentation

The Brink’s Company (along with its subsidiaries, the “Company”) has two operating segments:

· Brink’s, Incorporated (“Brink’s”)

· Brink’s Home Security, Inc. (“BHS”)

On August 5, 2007, the Company sold Brink’s United Kingdom domestic cash handling operations. These operations have been reported as discontinued operations for all periods presented. See note 8 for a description of the transaction.

The Company’s unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting and applicable quarterly reporting regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, the unaudited consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The Company revised the 2006 presentation of minority interest from a deduction in arriving at income before income taxes to a reduction in earnings after taxes. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements. Actual results could differ materially from those estimates. The most significant estimates used by management are related to goodwill and other long-lived assets, pension and other postretirement benefit obligations, and income taxes.

During the third quarter of 2007, adjustments were made to correct amounts previously reported for the first half of 2007 and prior annual periods. These adjustments decreased third quarter net income by $4.6 million, including a decrease in operating profit of $2.2 million and an increase in the provision for income taxes for continuing operations of $2.1 million. The Company has concluded these adjustments are not material, individually or in the aggregate, to the current or any previous annual period.

Recently Adopted Accounting Standards

The Company adopted FASB Interpretation (“FIN”) 48, Accounting for Uncertainty in Income Taxes – an interpretation of SFAS 109, effective January 1, 2007. This interpretation clarifies the accounting for uncertain tax positions. It prescribes a recognition threshold and measurement principle for tax positions taken or expected to be taken on tax returns. The adoption of this interpretation increased retained earnings at January 1, 2007, by $7.0 million.

Note 2 – Segment information

The Company conducts business in two operating segments: Brink’s and BHS. These segments are identified by the Company based on how resources are allocated and operating decisions are made. Management evaluates performance and allocates resources based on operating profit or loss, excluding corporate allocations.

Brink’s offers services globally including armored car transportation, automated teller machine (“ATM”) replenishment and servicing, currency deposit processing and cash management services including cash logistics services (“Cash Logistics”), deploying and servicing safes and safe control devices, including its patented CompuSafe® service, coin sorting and wrapping, integrated check and cash processing services (“Virtual Vault Services”), arranging the secure transportation of valuables (“Global Services”), transporting, storing and destroying sensitive information (“Secure Data Solutions”) and guarding services, including airport security. Brink’s operates in approximately 50 countries.

During the third quarter of 2007, Brink’s recorded a $2.0 million impairment charge to write down long-lived assets to estimated fair value. The charge was recorded as part of other operating income (loss), net, due to expected future operating losses and negative operating cash flows associated with these assets.

BHS offers monitored security services in North America primarily for owner-occupied, single-family residences. To a lesser extent, BHS offers security services for commercial properties. BHS typically installs and owns the on-site security systems, and charges fees to monitor and service the systems.

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
(In millions)	2007			2006			2007			2006

Revenues:
Brink's	$	692.7			597.9			1,977.8			1,722.2
BHS		124.3			111.6			358.4			326.0
Revenues	$	817.0			709.5			2,336.2			2,048.2

Operating profit:
Brink's	$	53.0			51.0			146.9			129.3
BHS		25.5			23.4			84.5			71.3
Business segments		78.5			74.4			231.4			200.6
Corporate		(14.3	)		(13.9	)		(36.8	)		(36.1	)
Former operations		(3.7	)		(6.1	)		(10.6	)		(19.2	)
Operating profit	$	60.5			54.4			184.0			145.3

Note 3 - Earnings per share

Shares used to calculate earnings per share are as follows:

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
(In millions)	2007		2006		2007		2006

Weighted-average common shares outstanding:
Basic		46.6		46.7		46.5		51.2
Effect of dilutive stock options		0.5		0.5		0.5		0.5
Diluted		47.1		47.2		47.0		51.7

Antidilutive stock options excluded from denominator		0.7		0.3		0.3		0.2

Shares of the Company’s common stock held by The Brink’s Company Employee Benefits Trust (the “Employee Benefits Trust”) that have not been allocated to participants under the Company’s various benefit plans are excluded from earnings per share calculations since they are treated as treasury shares for the calculation of earnings per share. The Employee Benefits Trust held 1.9 million unallocated shares at September 30, 2007, and 2.3 million unallocated shares at September 30, 2006.

Note 4 – Employee and retiree benefits

Pension plans

The Company has various defined benefit plans for eligible employees.

The components of net periodic pension cost for the Company’s pension plans were as follows:

	U.S. Plans						Non-U.S. Plans						Total
(In millions)	2007			2006			2007			2006			2007			2006

Three months ended September 30,

Service cost	$	-			-			2.3			2.1			2.3			2.1
Interest cost on PBO		11.1			10.6			2.6			2.3			13.7			12.9
Return on assets - expected		(13.3	)		(12.7	)		(2.5	)		(2.0	)		(15.8	)		(14.7	)
Other amortization, net		3.5			4.4			0.7			1.0			4.2			5.4
Net periodic pension cost	$	1.3			2.3			3.1			3.4			4.4			5.7

Nine months ended September 30,

Service cost	$	-			-			6.6			6.7			6.6			6.7
Interest cost on PBO		33.0			31.4			7.4			6.9			40.4			38.3
Return on assets - expected		(40.0	)		(37.9	)		(7.2	)		(6.4	)		(47.2	)		(44.3	)
Other amortization, net		9.7			12.7			2.2			3.1			11.9			15.8
Net periodic pension cost	$	2.7			6.2			9.0			10.3			11.7			16.5

On September 7, 2007, the Company made a voluntary contribution to its primary U.S. pension plan of $13 million. The Company does not expect to make additional contributions to the primary U.S. pension plan during 2007.

Postretirement benefits other than pensions

Company-Sponsored Plans

The Company provides postretirement health care benefits (the “Company-sponsored plans”) for eligible active and retired employees in the U.S. and Canada of the Company’s current and former businesses, including eligible participants of the former coal operations (the “coal-related” plans).

The components of net periodic postretirement cost related to Company-sponsored plans were as follows:

	Coal-related plans						Other plans					Total
(In millions)	2007			2006			2007			2006		2007			2006

Three months ended September 30,

Service cost	$	-			-			0.1			0.1		0.1			0.1
Interest cost on APBO		7.8			7.8			0.1			0.2		7.9			8.0
Return on assets – expected		(9.7	)		(8.6	)		-			-		(9.7	)		(8.6	)
Amortization of losses		2.8			3.6			(0.1	)		-		2.7			3.6
Net periodic postretirement cost	$	0.9			2.8			0.1			0.3		1.0			3.1

Nine months ended September 30,

Service cost	$	-			-			0.2			0.3		0.2			0.3
Interest cost on APBO		23.5			24.0			0.5			0.7		24.0			24.7
Return on assets – expected		(29.0	)		(25.8	)		-			-		(29.0	)		(25.8	)
Amortization of losses		8.6			11.6			(0.2	)		-		8.4			11.6
Net periodic postretirement cost	$	3.1			9.8			0.5			1.0		3.6			10.8

Pneumoconiosis (Black Lung) Obligations

The Company is self-insured with respect to almost all of its black lung obligations. The components of net periodic postretirement benefit cost related to black lung obligations were as follows:

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
(In millions)	2007		2006		2007		2006

Interest cost on APBO	$	0.7		0.6		2.0		1.9
Amortization of losses		0.5		0.3		1.2		0.9
Net periodic postretirement cost	$	1.2		0.9		3.2		2.8

Note 5 – Income taxes

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
	2007			2006			2007			2006

Continuing operations
Provision for income taxes (in millions)	$	27.3			24.9			74.0			64.7
Effective tax rate		44.7	%		45.5	%		40.5	%		43.3	%

Discontinued operations
Provision (benefit) for income taxes (in millions)	$	-			(3.0	)		(1.6	)		210.2
Effective tax rate		-		NM			NM				35.2	%

The effective income tax rate on continuing operations in the first nine months of 2007 was higher than the 35% U.S. statutory tax rate primarily due to a $6.1 million increase in the valuation allowances for non-U.S. jurisdictions and $2.4 million of state tax expense. The Company establishes or reverses valuation allowances for non-U.S. deferred tax assets depending on all available information including historical and expected future operating performance of its subsidiaries. Changes in judgment about the future realization of deferred tax assets could result in significant adjustments to the valuation allowances.

The effective income tax rate on continuing operations in the first nine months of 2006 was higher than the 35% U.S. statutory tax rate primarily due to $6.8 million in state tax expense and a $3.3 million net increase in the valuation allowance for non-U.S. deferred tax assets.

At January 1, 2007, the Company had approximately $15 million of unrecognized tax benefits related to continuing operations, of which approximately $11 million (net of federal tax benefit) would have an effect, if recognized, on the effective tax rate. In addition, there were approximately $2.1 million of unrecognized tax benefits related to discontinued operations.

Included in the balance of unrecognized tax benefits at January 1, 2007, is $1.4 million related to tax positions for which it is reasonably possible that the total amounts could significantly change during 2007. This amount represents a possible decrease in unrecognized tax benefits related to state income tax audits, state settlement negotiations currently in progress and expiring statutes of limitation in various jurisdictions.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. At January 1, 2007, the Company had $1.3 million accrued for the potential payment of interest and $0.2 million accrued for the potential payment of penalties.

There were no significant changes to unrecognized tax benefits or accrued interest and penalties during the first nine months of 2007.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. With a few exceptions, as of January 1, 2007, the Company was no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2003.

Note 6 – Share-based compensation plans

The fair value of options granted during the 2007 and 2006 periods was calculated using the Black-Scholes option-pricing model and the following estimated weighted-average assumptions:

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
Options Granted	2007			2006			2007			2006

Number of shares underlying options, in thousands		636			600			636			610
Weighted-average exercise price per share	$	63.60			55.21			63.60			55.11

Assumptions used to estimate fair value:
Expected dividend yield:
Weighted-average		0.6	%		0.5	%		0.6	%		0.5	%
Range		0.6	%		0.5	%		0.6	%		0.5	%
Expected volatility:
Weighted-average		27	%		32	%		27	%		32	%
Range		26%-31	%		30%-36	%		26%-31	%		30%-36	%
Risk-free interest rate:
Weighted-average		4.9	%		5.0	%		4.9	%		5.0	%
Range		4.9%-5.0	%		4.7%-5.2	%		4.9%-5.0	%		4.6%-5.2	%
Expected term in years:
Weighted-average		3.8			4.3			3.8			4.3
Range		2.1 - 6.1			2.8 - 7.0			2.1 - 6.1			2.8 - 7.0

Weighted-average fair value estimates at grant date:
In millions	$	10.7			10.8			10.7			11.0
Fair value per share	$	16.84			18.08			16.84			18.04

Share-based compensation expense for continuing operations was $6.9 million during the third quarter of 2007 and $6.1 million during the third quarter of 2006. Share-based compensation expense for continuing operations was $9.7 million during the first nine months of 2007 and $9.1 million during the first nine months of 2006.

Note 7 – Capital stock

Common stock

On September 14, 2007, the Company’s board of directors authorized the purchase of up to $100 million of the Company’s outstanding common shares. The repurchase authorization does not have an expiration date and potential share repurchases will depend on a variety of factors. The Company has not purchased any shares under this program.

During full-year 2006, the Company used proceeds from the sale of BAX Global to purchase 12.2 million shares of its common stock for $630.9 million, including 10.4 million shares purchased in a $530.9 million Dutch auction self-tender offer completed on April 11, 2006.

Preferred stock

On September 25, 2007, the “Expiration Date” occurred under the Amended and Restated Rights Agreement, dated as of September 1, 2003, between the Company and American Stock Transfer & Trust Company (successor to Equiserve Trust Company, N.A.), as amended by Amendment No. 1 thereto, dated September 25, 2006, between the Company and American Stock Transfer & Trust Company (the “Rights Agreement”). As a result, the Rights Agreement and the rights issued thereunder expired by their own terms and each share of common stock, par value $1.00 per share, of the Company no longer is accompanied by a right to purchase, under certain circumstances, one one-thousandth of a share of Series A Participating Cumulative Preferred Stock of the Company. Prior to expiration, the Rights Agreement gave holders of common stock the right to purchase Series A Participating Cumulative Preferred Stock if, among other things, a third-party accumulated more than 15% of the voting rights of all outstanding common stock.

Note 8 - Discontinued operations

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
(In millions)	2007			2006			2007			2006

Brink’s United Kingdom domestic cash handling operations:
Gain on sale	$	0.7			-			0.7			-
Results from operations (a)		(3.1	)		(2.6	)		(13.9	)		(8.0	)
BAX Global:
Gain on sale		-			(0.6	)		-			587.7
Results from operations – January 2006		-			-			-			7.0
Adjustments to contingent liabilities of former operations		(1.7	)		1.0			0.3			10.6
Income (loss) from discontinued operations before income taxes		(4.1	)		(2.2	)		(12.9	)		597.3
Provision (benefit) for income taxes		-			(3.0	)		(1.6	)		210.2
Income (loss) from discontinued operations	$	(4.1	)		0.8			(11.3	)		387.1

(a)	Revenues of Brink’s United Kingdom domestic cash handling operations were $5.8 million for the third quarter of 2007, $11.1 million for the third quarter of 2006, $28.9 million for the first nine months of 2007 and $33.5 million for the first nine months of 2006.

Brink’s United Kingdom domestic cash handling operations

During the third quarter, the Company sold Brink’s United Kingdom domestic cash handling operations for $2.2 million in cash and recognized a $0.7 million gain on the sale. The Company expects to recognize up to $2.2 million of income in discontinued operations during future periods as the assumption of certain contractual obligations by the buyer is completed. These operations recorded a $7.5 million impairment charge, primarily related to writing down leasehold improvements and vehicles to estimated fair value, during the second quarter of 2007 due to the loss of customers. The fair value of the impaired assets was determined based on management’s estimate of the amount that could be received on a sale to a willing third party. These operations have been reported as discontinued operations for all periods presented.

BAX Global

On January 31, 2006, the Company sold BAX Global for approximately $1 billion in cash. As of September 30, 2006, the Company recorded a pretax gain of approximately $588 million ($376 million after tax) on the sale. Through December 31, 2006, the pretax gain on sale was adjusted to $587 million ($375 million after tax) upon settlement of closing adjustments with the purchaser. See note 11 for contingencies related to BAX Global. BAX Global’s results of operations have been reported as discontinued operations for all periods presented.

Other

The Company settled its withdrawal liabilities with two coal industry multi-employer pension plans and made final payments to the plans of $20.4 million in July 2006. A pretax benefit of $9.9 million related to this settlement was recorded within discontinued operations during the second quarter of 2006.

Note 9 - Supplemental cash flow information

	Nine Months
	Ended September 30,
(In millions)	2007		2006

Cash paid for:
Interest	$	7.2		11.1
Income taxes, net		48.4		85.9

Note 10 - Comprehensive income

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
(In millions)	2007			2006			2007		2006

Net income	$	25.9			26.5			82.9		460.6
Other comprehensive income (loss), net of divestitures, reclasses and
taxes:
Benefit plan experience loss (a)		7.1			-			15.9		-
Benefit plan prior service cost		0.3			-			1.0		-
Minimum pension liability		-			-			-		11.1
Foreign currency translation adjustments		16.2			(0.8	)		27.9		4.3
Marketable securities		(0.1	)		0.1			0.9		0.4
Other comprehensive income (loss)		23.5			(0.7	)		45.7		15.8
Comprehensive income	$	49.4			25.8			128.6		476.4

(a) Includes a $2.5 million gain related to a remeasurement of a pension plan of Brink’s subsidiary in the United Kingdom.

Note 11 – Commitments and contingencies

BAX Global litigation

BAX Global is defending a claim related to the apparent diversion by a third party of goods being transported for a customer. Although BAX Global is defending this claim vigorously and believes that its defenses have merit, it is possible that this claim ultimately may be decided in favor of the claimant. If so, the Company believes that the ultimate amount of reasonably possible unaccrued losses could range from $0 to $10 million. The Company has contractually indemnified the purchaser of BAX Global for this contingency.

Value-added taxes (“VAT”) and customs duties

During 2004, the Company determined that one of its non-U.S. Brink’s business units had not paid customs duties and VAT with respect to the importation of certain goods and services. The Company was advised that civil and criminal penalties could be asserted for the non-payment of these customs duties and VAT. Although no penalties have been asserted to date, they could be asserted at any time. The business unit has provided the appropriate government authorities with an accounting of unpaid customs duties and VAT and has made payments covering its calculated unpaid VAT. The Company believes that the range of reasonably possible losses is between $0.4 million and $3.0 million for potential penalties on unpaid VAT and has accrued $0.4 million. The Company believes that the range of possible losses for unpaid customs duties and associated penalties, none of which has been accrued, is between $0 and $35 million. The Company believes that the assertion of the penalties on unpaid customs duties would be excessive and would vigorously defend against any such assertion. The Company does not expect to be assessed interest charges in connection with any penalties that may be asserted. The Company continues to diligently pursue the timely resolution of this matter and, accordingly, the Company’s estimate of the potential losses could change materially in future periods. The assertion of potential penalties may be material to the Company’s financial position and results of operations.

Other loss contingencies

The Company also has other contingent liabilities, primarily related to former coal operations, including obligations for the expected settlement of coal-related workers’ compensation claims and reclamation obligations.

THE BRINK’S COMPANY

and subsidiaries

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The Brink’s Company (along with its subsidiaries, the “Company”) has two operating segments:

Brink’s, Incorporated (“Brink’s”)	Brink’s 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 including cash logistics services (“Cash Logistics”), deploying and servicing safes and safe control devices, including its patented CompuSafe® service, coin sorting and wrapping, integrated check and cash processing services (“Virtual Vault Services”), arranging the secure transportation of valuables (“Global Services”), transporting, storing, and destroying sensitive information (“Secure Data Solutions”) and guarding services, including airport security.

Brink’s Home Security, Inc. (“BHS”)	BHS offers monitored security services in North America primarily for owner-occupied, single-family residences. To a lesser extent, BHS offers security services for commercial and multi-family properties. BHS typically installs and owns the on-site security systems and charges fees to monitor and service the systems.

The Company sold BAX Global Inc. (“BAX Global”), a wholly owned freight transportation subsidiary, in 2006 for approximately $1 billion in cash. See “Discontinued Operations” for a description of the transaction and see “Liquidity and Capital Resources” for a description of how the Company used the proceeds.

The Company has significant obligations associated with its former coal operations and expects to have significant ongoing expenses and cash outflows related to its former coal operations. The Company has funded a significant portion of the postretirement medical benefit obligation related to its former coal operations through its Voluntary Employees’ Beneficiary Association trust (“VEBA”). The market value of the VEBA’s assets at September 30, 2007, was approximately $478 million.

RESULTS OF OPERATIONS

Overview

	Three Months					Nine Months
	Ended September 30,					Ended September 30,
(In millions)	2007			2006		2007			2006

Income (loss) from:
Continuing operations	$	30.0			25.7		94.2			73.5
Discontinued operations		(4.1	)		0.8		(11.3	)		387.1
Net income	$	25.9			26.5		82.9			460.6

The income (loss) items in the above table are reported after tax.

COMPARISON OF RESULTS FOR THE THIRD QUARTER

Continuing operations

Income from continuing operations increased by about 17% in the third quarter of 2007 versus the third quarter of the prior year primarily due to growth at Brink’s and BHS. Brink’s operating profit increased in the third quarter of 2007 from the prior-year period primarily due to operating profit growth in Latin America. BHS continued a trend of reporting higher operating profit although it recorded a net charge of $2.5 million related to legal settlement expenses in the third quarter this year.

Expenses related to former operations in the third quarter of 2007 were lower primarily due to lower expenses for postretirement medical benefits.

Discontinued operations

Losses from discontinued operations in the third quarter of 2007 primarily related to Brink’s United Kingdom domestic cash handling operations. These operations were sold in August 2007.

COMPARISON OF RESULTS FOR THE NINE-MONTH PERIOD

Continuing operations

Income from continuing operations increased in the first nine months of 2007 versus the same period of the prior-year primarily due to growth at Brink’s and BHS. Brink’s operating profit increased in the first nine months of 2007 from the prior-year period primarily due to higher operating profit in Latin America. The prior year included restructuring charges in Australia of $4.6 million. BHS continued a trend of reporting higher operating profit.

Expenses related to former operations in the first nine months of 2007 were lower primarily due to lower expenses for postretirement medical benefits. These expense reductions were offset by lower interest and other income, net. In the first nine months of 2006, the temporary investment of the proceeds from the sale of BAX Global resulted in higher interest income.

Discontinued operations

The loss from discontinued operations in the first nine months of 2007 is primarily related to operating losses of the former United Kingdom domestic cash handling operations, including $7.5 million of impairment charges on long-lived assets during the second quarter of 2007.

Income from discontinued operations in the first nine months of last year was primarily the result of an after-tax gain on the sale of BAX Global.

Consolidated Review

	Three Months									Nine Months
	Ended September 30,						%			Ended September 30,						%
(In millions)	2007			2006			change			2007			2006			change

Revenues:
Brink’s	$	692.7			597.9			16			1,977.8			1,722.2			15
BHS		124.3			111.6			11			358.4			326.0			10
Revenues	$	817.0			709.5			15			2,336.2			2,048.2			14

Operating profit:
Brink’s	$	53.0			51.0			4			146.9			129.3			14
BHS		25.5			23.4			9			84.5			71.3			19
Business segments		78.5			74.4			6			231.4			200.6			15
Corporate		(14.3	)		(13.9	)		3			(36.8	)		(36.1	)		2
Former operations		(3.7	)		(6.1	)		(39	)		(10.6	)		(19.2	)		(45	)

Operating profit		60.5			54.4			11			184.0			145.3			27

Interest expense		(2.5	)		(3.7	)		(32	)		(8.0	)		(10.0	)		(20	)
Interest and other income, net		3.0			4.0			(25	)		6.7			14.1			(52	)
Income from continuing operations before
income taxes and minority interest		61.0			54.7			12			182.7			149.4			22
Provision for income taxes		27.3			24.9			10			74.0			64.7			14
Minority interest		3.7			4.1