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 June 30, 2008

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

(Check one): Large Accelerated Filer x Accelerated Filer ¨ Non-Accelerated Filer ¨ Smaller Reporting Company ¨

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 July 31, 2008, 47,372,320 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)

	June 30,			December 31,
(In millions)	2008			2007

ASSETS

Current assets:
Cash and cash equivalents	$	246.3			196.4
Accounts receivable, net		526.0			491.9
Prepaid expenses and other		121.9			93.5
Deferred income taxes		60.0			63.9
Total current assets		954.2			845.7

Property and equipment, net		1,185.7			1,118.4
Goodwill		155.7			141.3
Deferred income taxes		86.5			90.1
Other		206.5			198.8

Total assets	$	2,588.6			2,394.3


LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Short-term borrowings	$	9.3			12.4
Current maturities of long-term debt		11.6			11.0
Accounts payable		170.8			171.9
Income taxes payable		17.5			14.9
Accrued liabilities		477.5			429.7
Total current liabilities		686.7			639.9

Long-term debt		158.5			89.2
Accrued pension costs		56.1			58.0
Postretirement benefits other than pensions		103.6			111.9
Deferred revenue		181.9			178.6
Deferred income taxes		34.8			29.8
Minority interest		79.9			68.2
Other		166.9			172.4
Total liabilities		1,468.4			1,348.0

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

Shareholders’ equity:
Common stock		47.4			48.4
Capital in excess of par value		464.0			452.6
Retained earnings		708.8			675.8
Accumulated other comprehensive loss		(100.0	)		(130.5	)

Total shareholders’ equity		1,120.2			1,046.3

Total liabilities and shareholders’ equity	$	2,588.6			2,394.3

See accompanying notes to consolidated financial statements.

THE BRINK’S COMPANY

and subsidiaries

Consolidated Statements of Operations

(Unaudited)

	Three Months						Six Months
	Ended June 30,						Ended June 30,
(In millions, except per share amounts)	2008			2007			2008			2007

Revenues	$	931.7			778.7			1,852.3			1,519.2

Cost and Expenses:
Cost of revenues		712.0			602.4			1,393.7			1,167.1
Selling, general and administrative expenses		145.5			120.6			286.1			233.0
Total expenses		857.5			723.0			1,679.8			1,400.1
Other operating income (expense), net		0.4			3.5			(0.6	)		4.4

Operating profit		74.6			59.2			171.9			123.5

Interest expense		(3.3	)		(3.0	)		(5.8	)		(5.5	)
Interest and other income, net		3.0			2.1			5.1			3.7
Income from continuing operations before income taxes and
minority interest		74.3			58.3			171.2			121.7
Provision for income taxes		18.3			21.4			52.3			46.7
Minority interest		7.5			3.8			22.4			10.8

Income from continuing operations		48.5			33.1			96.5			64.2

Income (loss) from discontinued operations, net of income taxes		0.2			(4.8	)		2.3			(7.2	)

Net income	$	48.7			28.3			98.8			57.0


Earnings per common share
Basic:
Continuing operations	$	1.05			0.71			2.09			1.38
Discontinued operations		0.01			(0.10	)		0.05			(0.16	)
Net income		1.06			0.61			2.14			1.23

Diluted:
Continuing operations	$	1.04			0.70			2.07			1.37
Discontinued operations		0.01			(0.10	)		0.05			(0.15	)
Net income		1.05			0.60			2.12			1.21

Weighted-average common shares outstanding
Basic		46.0			46.5			46.2			46.4
Diluted		46.5			47.1			46.7			47.0

Cash dividends paid per common share	$	0.10			0.10			0.20			0.1625

See accompanying notes to consolidated financial statements.

THE BRINK’S COMPANY

and subsidiaries

Consolidated Statement of Shareholders’ Equity

Six months ended June 30, 2008

(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, 2007		48.4		$	48.4			452.6			675.8			(130.5	)		1,046.3

Net income		-			-			-			98.8			-			98.8
Other comprehensive income		-			-			-			-			30.5			30.5
Shares repurchased and retired		(1.0	)		(1.0	)		(10.4	)		(56.6	)		-			(68.0	)
Dividends		-			-			-			(9.1	)		-			(9.1	)
Share-based compensation:
Stock options:
Compensation expense		-			-			2.4			-			-			2.4
Consideration received
from exercise of stock options		-			-			7.3			-			-			7.3
Excess tax benefit of stock compensation		-			-			9.1			-			-			9.1
Other share-based benefit programs		-			-			3.0			(0.1	)		-			2.9

Balance as of June 30, 2008		47.4		$	47.4			464.0			708.8			(100.0	)		1,120.2

(a)	Includes 1.4 million shares at June 30, 2008, held by The Brink’s Company Employee Benefits Trust that have not been allocated to participants (1.7 million shares at December 31, 2007).

See accompanying notes to consolidated financial statements.

THE BRINK’S COMPANY

and subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	Six Months
	Ended June 30,
(In millions)	2008			2007

Cash flows from operating activities:
Net income	$	98.8			57.0
Adjustments to reconcile net income to net cash provided (used) by operating activities:
(Income) loss from discontinued operations, net of tax		(2.3	)		7.2
Depreciation and amortization		103.5			88.6
Impairment charges for subscriber disconnects		24.7			24.3
Amortization of deferred revenue		(20.0	)		(16.7	)
Deferred income taxes		9.9			20.4
Provision for uncollectible accounts receivable		6.5			5.3
Compensation expense for stock options		2.4			2.8
Other operating, net		23.5			13.8
Postretirement expense (credits), net of funding:
Pension		(6.7	)		3.4
Other than pension		(3.8	)		(4.3	)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable		(21.6	)		(1.5	)
Accounts payable, income taxes payable and accrued liabilities		17.8			12.4
Deferral of subscriber acquisition cost		(12.1	)		(12.1	)
Deferral of revenue from new subscribers		23.6			24.2
Prepaid and other current assets		(24.2	)		(32.4	)
Other, net		(3.7	)		6.3
Discontinued operations, net		-			(1.4	)
Net cash provided by operating activities		216.3			197.3

Cash flows from investing activities:
Capital expenditures		(160.5	)		(145.3	)
Acquisitions		(5.4	)		(10.8	)
Cash proceeds from disposal		2.5			2.7
Other, net		2.2			2.0
Discontinued operations, net		-			(0.1	)
Net cash used by investing activities		(161.2	)		(151.5	)

Cash flows from financing activities:
Revolving credit facilities borrowings, net		70.4			4.2
Long term debt:
Additions		-			1.1
Repayments		(6.1	)		(6.6	)
Short-term repayments, net		(4.1	)		(24.9	)
Repurchase shares of common stock of The Brink’s Company		(66.5	)		(0.3	)
Dividends to:
Shareholders of The Brink’s Company		(9.1	)		(7.4	)
Minority interest holders in subsidiaries		(8.8	)		(6.4	)
Proceeds from exercise of stock options		4.9			5.9
Excess tax benefits associated with stock compensation		8.7			4.0
Discontinued operations, net		-			(11.3	)
Net cash used by financing activities		(10.6	)		(41.7	)

Effect of exchange rate changes on cash		5.4			2.6

Cash and cash equivalents:
Increase		49.9			6.7
Balance at beginning of period		196.4			137.2
Balance at end of period	$	246.3			143.9

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 February 25, 2008, the board of directors approved a plan to separate the Company into two independent publicly traded companies through a spin-off of 100% of Brink’s Home Security Holdings, Inc. (“BHSH”), a newly formed subsidiary of the Company that will hold the shares of BHS prior to the spin-off. BHSH filed an initial Form 10 with the Securities and Exchange Commission (the “SEC”) on May 30, 2008, and filed a first amendment to the Form 10 on July 18, 2008. The Form 10 provides information about the spin-off, including historical and pro forma financial information. The Brink's Company will continue to operate Brink's, its secure transportation and cash management unit. The spin-off of BHS is expected to take the form of a tax-free stock distribution to The Brink's Company shareholders and be completed in the fourth quarter of 2008. After the distribution, the Company will report expenses related to the spin-off and BHS’ results of operations, including previously reported results, within discontinued operations.

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 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. 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, 2007.

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, legal contingencies and income taxes.

Accounting Corrections

During the second quarter of 2008, the Company determined that the amount of certain revenue and expenses recognized between December 1, 2001 and March 31, 2008, related to security systems disconnect at BHS had been understated. The correction of these understatements increased BHS revenues by $2.0 million, BHS operating profit by $2.5 million and consolidated income from continuing operations by $1.6 million in the second quarter of 2008. The Company also identified and corrected other items which increased income from continuing operations in the period by $1.8 million. The effect of these corrections was not material to any prior quarter or annual period.

Recently Adopted Accounting Standards

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) 157, Fair Value Measurements. In February 2008, the FASB issued FASB Staff Position 157-2, Partial Deferral of the Effective Date of SFAS 157, which delayed the effective date of SFAS 157 for all nonrecurring fair value measurements of nonfinancial assets and nonfinancial liabilities. The Company adopted SFAS 157, effective January 1, 2008 for financial assets and financial liabilities. SFAS 157 defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosure of fair value measurements. SFAS 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and states that a fair value measurement should be determined based on assumptions that market participants would use in pricing the asset or liability. The implementation of SFAS 157, as it relates to the Company’s financial assets and financial liabilities, did not have a material effect on the Company’s results of operations or financial position. The Company is currently evaluating the potential impact, if any, on its nonfinancial assets and liabilities.

The Company adopted SFAS 159, The Fair Value Option for Financial Assets and Liabilities – Including an amendment of FASB Statement No. 115, effective January 1, 2008. SFAS 159 permits entities to choose to measure certain financial assets and liabilities at fair value (the “fair-value option”). Unrealized gains and losses, arising subsequent to the election of the fair-value option, are reported in earnings. The Company did not elect the fair-value option for existing assets or liabilities upon adoption. Therefore, the implementation of SFAS 159 did not have an effect on the Company’s results of operations or financial position.

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 primary services include:

Cash-in-transit (“CIT”) armored car transportation

Automated teller machine (“ATM”) replenishment and servicing

Global Services - arranging secure long-distance transportation of valuables

Cash Logistics – money processing, supply chain management of cash; from point-of-sale through transport, vaulting and bank deposit

Guarding services, including airport security

Secure Data Solutions - transporting, storing and destroying sensitive information

Brink’s operates in approximately 50 countries.

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

	Three Months						Six Months
	Ended June 30,						Ended June 30,
(In millions)	2008			2007			2008			2007

Revenues:
Brink’s	$	797.8			659.3			1,590.6			1,285.1
BHS		133.9			119.4			261.7			234.1
Revenues	$	931.7			778.7			1,852.3			1,519.2

Operating profit:
Brink’s	$	52.6			42.9			134.6			93.9
BHS		35.5			30.8			67.5			59.0
Business segments		88.1			73.7			202.1			152.9
Corporate		(13.3	)		(10.9	)		(29.4	)		(22.5	)
Former operations		(0.2	)		(3.6	)		(0.8	)		(6.9	)
Operating profit	$	74.6			59.2			171.9			123.5

Note 3 – Earnings per share

Shares used to calculate earnings per share were as follows:

	Three Months				Six Months
	Ended June 30,				Ended June 30,
(In millions)	2008		2007		2008		2007

Weighted-average common shares outstanding:
Basic		46.0		46.5		46.2		46.4
Effect of dilutive stock options		0.5		0.6		0.5		0.6
Diluted		46.5		47.1		46.7		47.0

Antidilutive stock options excluded from denominator		0.1		0.1		0.2		0.1

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 1.4 million unallocated shares at June 30, 2008, and 1.9 million unallocated shares at June 30, 2007.

In July 2008, the Company decided to terminate the Employee Benefits Trust. The termination is expected to be finalized during the third quarter of 2008. Prior to termination, the shares currently held by the Employee Benefits Trust will be distributed to the Company, whereupon the shares will be retired.

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 (credit) for the Company’s pension plans were as follows:

	U.S. Plans						Non-U.S. Plans						Total
(In millions)	2008			2007			2008			2007			2008			2007

Three months ended June 30,

Service cost	$	-			-			2.6			2.3			2.6			2.3
Interest cost on projected benefit obligation		11.5			11.1			3.4			2.4			14.9			13.5
Return on assets – expected		(14.7	)		(13.3	)		(3.0	)		(2.4	)		(17.7	)		(15.7	)
Amortization of losses		0.4			3.5			1.0			0.7			1.4			4.2
Net periodic pension cost (credit)	$	(2.8	)		1.3			4.0			3.0			1.2			4.3

Six months ended June 30,

Service cost	$	-			-			5.0			4.3			5.0			4.3
Interest cost on projected benefit obligation		22.9			21.9			6.6			4.8			29.5			26.7
Return on assets – expected		(29.5	)		(26.7	)		(6.1	)		(4.7	)		(35.6	)		(31.4	)
Amortization of losses		0.7			6.2			1.9			1.5			2.6			7.7
Net periodic pension cost (credit)	$	(5.9	)		1.4			7.4			5.9			1.5			7.3

Postretirement benefits other than pensions

Company-Sponsored Plans

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

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

	Coal-related plans						Other plans						Total
(In millions)	2008			2007			2008			2007			2008			2007

Three months ended June 30,

Service cost	$	-			-			-			0.1			-			0.1
Interest cost on accumulated postretirement
benefit obligations		7.8			7.8			0.1			0.1			7.9			7.9
Return on assets – expected		(9.7	)		(9.7	)		-			-			(9.7	)		(9.7	)
Amortization of losses (gains)		2.0			2.8			(0.1	)		(0.1	)		1.9			2.7
Net periodic postretirement cost	$	0.1			0.9			-			0.1			0.1			1.0

Six months ended June 30,

Service cost	$	-			-			0.1			0.2			0.1			0.2
Interest cost on accumulated postretirement
benefit obligations		15.7			15.7			0.3			0.3			16.0			16.0
Return on assets – expected		(19.3	)		(19.3	)		-			-			(19.3	)		(19.3	)
Amortization of losses (gains)		4.0			5.8			(0.2	)		(0.1	)		3.8			5.7
Curtailment gain		-			-			(2.0	)		-			(2.0	)		-
Net periodic postretirement cost (credit)	$	0.4			2.2			(1.8	)		0.4			(1.4	)		2.6

In January 2008, Brink’s announced the freezing of the Canadian postretirement benefit plan. Some employees will not meet the eligibility requirement to receive benefits. As a result, the Company recorded a $2.0 million curtailment gain in the first quarter of 2008.

The market value of the Voluntary Employees’ Beneficiary Association trust’s assets at June 30, 2008, was approximately $405 million.

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				Six Months
	Ended June 30,				Ended June 30,
(In millions)	2008		2007		2008		2007

Interest cost on accumulated postretirement
benefit obligations	$	0.6		0.7		1.3		1.3
Amortization of losses		0.1		0.4		0.3		0.7
Net periodic postretirement cost	$	0.7		1.1		1.6		2.0

Note 5 – Income taxes

	Three Months						Six Months
	Ended June 30,						Ended June 30,
	2008			2007			2008			2007

Continuing operations
Provision for income taxes (in millions)	$	18.3			21.4			52.3			46.7
Effective tax rate		24.6	%		36.7	%		30.5	%		38.4	%

Discontinued operations
Provision (benefit) for income taxes (in millions)	$	0.1			(1.9	)		0.9			(1.6	)
Effective tax rate		33.3	%		28.3	%		28.1	%		18.2	%

The effective income tax rate on continuing operations in the first six months of 2008 was lower than the 35% U.S. statutory tax rate due to a $16.9 million decrease in the non-U.S. tax provision, primarily due to the geographical mix of earnings in the foreign jurisdictions and an $8.8 million valuation allowance release for non-U.S. jurisdictions. The decrease was partially offset by a $6.5 million tax charge resulting from the decision to spin off BHS and $2.6 million of state tax expense.

The effective income tax rate on continuing operations in the first six months of 2007 was higher than the 35% U.S. statutory tax rate primarily due to a $7.0 million increase in the valuation allowances for non-U.S. jurisdictions and $1.2 million of state tax expense. This was partially offset by a $2.2 million benefit related to the Company's foreign tax credit position and a $2.9 million benefit related to the geographical mix of earnings in non-U.S. jurisdictions.

Note 6 – Share-based compensation plans

On April 7, 2008, the Company granted 25,918 restricted stock units under the 2005 Equity Incentive Plan. The total grant date fair value of these units was $1.7 million. As of June 30, 2008, there was $1.5 million of total unrecognized compensation cost related to these units which is expected to be recognized over a weighted average period of 1.8 years. The units will be settled exclusively in the Company’s common shares.

On July 10, 2008, the Company granted 530,950 options under the 2005 Equity Incentive Plan. The options have an exercise price of $64.15 per share.

On July 11, 2008, the Company granted 13,057 deferred stock units under the Non-Employee Directors’ Equity Plan. The units will be settled exclusively in the Company’s common shares.

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. Under the program, the Company used $40.6 million to purchase 654,800 shares of common stock between December 5, 2007, and March 31, 2008, at an average price of $61.98 per share. The Company used an additional $15.7 million to purchase 229,000 shares of common stock in the second quarter of 2008, at an average price of $68.48 per share. As of June 30, 2008, the Company had $43.7 million under the program available to purchase shares. The repurchase authorization does not have an expiration date.

Note 8 – Discontinued operations

	Three Months					Six Months
	Ended June 30,					Ended June 30,
(In millions)	2008		2007			2008		2007

Results of Brink’s United Kingdom domestic cash handling operations (a)	$	-		(8.3	)		-		(10.8	)
Adjustments to contingent liabilities of former operations		0.3		1.6			3.2		2.0
Income (loss) from discontinued operations before income taxes		0.3		(6.7	)		3.2		(8.8	)
Provision (benefit) for income taxes		0.1		(1.9	)		0.9		(1.6	)
Income (loss) from discontinued operations	$	0.2		(4.8	)		2.3		(7.2	)

(a)

Brink’s United Kingdom domestic cash handling operations were sold in August 2007. Revenues of the operations were $12.1 million for the second quarter of 2007 and $23.1 million for the first six months of 2007. Results of Brink’s United Kingdom domestic cash handling operations included a $7.5 million asset impairment charge in the second quarter of 2007.

Note 9 – Supplemental cash flow information

	Six Months
	Ended June 30,
(In millions)	2008		2007

Cash paid for:
Interest	$	5.7		5.5
Income taxes, net		41.1		36.4

Note 10 – Comprehensive income

	Three Months					Six Months
	Ended June 30,					Ended June 30,
(In millions)	2008			2007		2008			2007

Net income	$	48.7			28.3		98.8			57.0
Other comprehensive income (loss), net of reclasses and taxes:
Benefit plan experience loss		2.0			4.4		3.9			8.8
Benefit plan prior service cost		0.4			0.5		0.7			0.7
Foreign currency translation adjustments		1.0			8.1		26.8			11.7
Marketable securities		(0.2	)		1.0		(0.9	)		1.0
Other comprehensive income		3.2			14.0		30.5			22.2
Comprehensive income	$	51.9			42.3		129.3			79.2

Note 11 – Commitments and contingent matters

Operating leases

The Company has made residual value guarantees of approximately $72.3 million at June 30, 2008, related to operating leases, principally for trucks and other vehicles.

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 $14 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 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

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

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.

On February 25, 2008, the board of directors approved a plan to separate the Company into two independent publicly traded companies through a spin-off of 100% of Brink’s Home Security Holdings, Inc. (“BHSH”), a newly formed subsidiary of the Company that will hold the shares of BHS prior to the spin-off. The Brink's Company will continue to operate Brink's, its secure transportation and cash management unit. BHSH filed an initial Form 10 with the Securities and Exchange Commission (the “SEC”) on May 30, 2008, and filed a first amendment to the Form 10 on July 18, 2008. The Form 10 provides information about the spin-off, including historical and pro forma financial information. The spin-off of BHS is expected to take the form of a tax-free stock distribution to The Brink's Company shareholders and be completed in the fourth quarter of 2008. After the distribution, the Company will report expenses related to the spin-off and BHS’ results of operations, including previously reported results, within discontinued operations.

The Company has significant liabilities associated with its former coal operations and expects to have ongoing expenses and cash outflows related to its former coal operations.

RESULTS OF OPERATIONS

Overview

	Three Months					Six Months
	Ended June 30,					Ended June 30,
(In millions)	2008		2007			2008		2007

Income (loss) from:
Continuing operations	$	48.5		33.1			96.5		64.2
Discontinued operations		0.2		(4.8	)		2.3		(7.2	)
Net income	$	48.7		28.3			98.8		57.0

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

Income from continuing operations increased by 47% in the second quarter of 2008 versus the second quarter of the prior year primarily due to improved performance at Brink’s and BHS and a lower effective tax rate. Higher corporate expenses were offset by lower expenses related to former operations. Brink’s operating profit increased in the second quarter of 2008 from the prior-year period primarily due to higher operating profit in Latin America and Europe, Middle East, and Africa (“EMEA”), partially offset by lower operating profit in North America. BHS continued a trend of reporting higher operating profit.

Income from continuing operations increased by 50% in the first half of 2008 versus the same period of the prior year primarily due to improved performance at Brink’s and BHS and a lower effective tax rate. Higher corporate expenses were offset by lower expenses related to former operations. Brink’s operating profit increased in the first half of 2008 from the prior-year period primarily due to higher operating profit in Latin America and EMEA, partially offset by lower operating profit in North America. BHS continued a trend of reporting higher operating profit.

Consolidated Review

	Three Months									Six Months
	Ended June 30,						%			Ended June 30,						%
(In millions)	2008			2007			change			2008			2007			change

Revenues:
Brink’s	$	797.8			659.3			21			1,590.6			1,285.1			24
BHS		133.9			119.4			12			261.7			234.1			12
Revenues	$	931.7			778.7			20			1,852.3			1,519.2			22

Operating profit:
Brink’s	$	52.6			42.9			23			134.6			93.9			43
BHS		35.5			30.8			15			67.5			59.0			14
Business segments		88.1			73.7			20			202.1			152.9			32
Corporate		(13.3	)		(10.9	)		22			(29.4	)		(22.5	)		31
Former operations		(0.2	)		(3.6	)		(94	)		(0.8	)		(6.9	)		(88	)

Operating profit		74.6			59.2			26			171.9			123.5			39

Interest expense		(3.3	)		(3.0	)		10			(5.8	)		(5.5	)		5
Interest and other income, net		3.0			2.1			43			5.1			3.7			38
Income from continuing operations before
income taxes and minority interest		74.3			58.3			27			171.2			121.7			41
Provision for income taxes		18.3			21.4			(14	)		52.3			46.7			12
Minority interest		7.5			3.8			97			22.4			10.8			107

Income from continuing operations		48.5			33.1			47			96.5			64.2			50

Income (loss) from discontinued operations,
net of income taxes		0.2			(4.8	)	NM				2.3			(7.2	)	NM
Net income	$	48.7			28.3			72			98.8			57.0			73

COMPARISON OF RESULTS FOR THE SECOND QUARTER

Revenues - Consolidated

The Company’s consolidated revenue during the second quarter of 2008 increased from the prior-year period as a result of growth at both operating segments. Brink’s revenues in the second quarter of 2008 increased over the prior-year period due to Organic Revenue Growth (defined below) and favorable changes in foreign currency exchange rates. Organic Revenue Growth includes revenues associated with the conversion project, as discussed below. The conversion project is expected to provide an insignificant amount of revenues for the remainder of the year. BHS’ revenues increased year over year primarily as a result of growth in the subscriber base and higher average monitoring rates.

Operating Profit - Consolidated

The Company’s consolidated operating profit in the second quarter of 2008 increased from the prior-year period as a result of growth from both operating segments. Brink’s operating profit included significant growth in Latin America including operating profit from the conversion project. Operating profit in EMEA was higher than the prior-year quarter as a result of favorable changes in currency exchange rates and broad improvement in operating performance throughout the region. North American operating profit was lower than the prior-year quarter due primarily to higher labor, fuel and legal settlement expenses. BHS’ operating profit for the current quarter improved over the prior-year period due to higher profit from recurring services, partially offset by increased investment in new subscribers.

Corporate expense in the second quarter of 2008 included approximately $3 million of professional and legal costs related to the planned spin-off of BHS. For the full year, the Company expects to incur $17 million to $20 million of professional, legal and advisory fees related to the strategic reviews conducted by the Company, proxy matters and the proposed spin-off of BHS.

Expenses related to former operations were lower in the second quarter of 2008 compared to the same period last year primarily due to lower pension and other postretirement expenses.

COMPARISON OF RESULTS FOR THE SIX-MONTH PERIOD

Revenues - Consolidated

The Company’s consolidated revenue during the first half of 2008 increased from the prior-year period as a result of growth at both operating segments. Brink’s revenues in the first half of 2008 increased over the prior-year period due to Organic Revenue Growth (defined below) and favorable changes in foreign currency exchange rates. Organic Revenue Growth includes revenues associated with the conversion project. BHS’ revenues increased year over year primarily as a result of growth in the subscriber base and higher average monitoring rates.

Operating Profit - Consolidated

The Company’s consolidated operating profit in the first half of 2008 increased from the prior year period as a result of growth from both operating segments. Brink’s operating profit included significant growth in Latin America including significant operating profit from the conversion project. Operating profit in EMEA was higher than the prior-year period as a result of favorable changes in currency exchange rates and broad improvement in operating performance throughout the region. North American operating profit was lower than the prior-year period due primarily to higher labor, fuel and legal settlement expenses. BHS’ operating profit for the current period improved due to higher profit from recurring services, partially offset by increased investment in new subscribers.

Corporate expense in the first half of 2008 included approximately $9 million of professional, legal and advisory fees incurred related to the strategic reviews conducted by the Company, proxy matters and the initial steps to implement the planned spin-off of BHS.

Expenses related to former operations were lower in the first half of 2008 compared to the same period last year primarily due to lower pension and other postretirement expenses.

Brink’s, Incorporated

	Three Months							Six Months
	Ended June 30,				%			Ended June 30,				%
(In millions)	2008		2007		change			2008		2007		change

Revenues:
International	$	563.1		440.2		28			1,125.6		854.8		32
North America (a)		234.7		219.1		7			465.0		430.3		8
	$	797.8		659.3		21			1,590.6		1,285.1		24

Operating profit:
International	$	41.7		28.2		48			110.3		60.9		81
North America (a)		10.9		14.7		(26	)		24.3		33.0		(26	)
	$	52.6		42.9		23			134.6		93.9		43

Cash flow information:
Depreciation and amortization (b)	$	31.2		26.0		20			60.9		50.7		20
Capital expenditures (c)		38.8		31.1		25			70.3		57.3		23

(a) U.S. and Canada.

(b) Depreciation and amortization for the full-year of 2008 is expected to be between $125 million and $130 million.

Revenues – Brink’s

Revenues at Brink’s were higher in the second quarter and first half of 2008 compared to the prior-year periods as a result of a combination of the effects of Organic Revenue Growth (defined below) and favorable changes in currency exchange rates. Organic Revenue Growth includes revenues from the conversion project.

Revenues from Cash Logistics were $133.9 million in the second quarter of 2008 and $104.4 million in the second quarter of 2007 ($279.5 million in the first half of 2008 and $203.1 million in the first half of 2007) and are included in the revenues shown in the table above. The increase in these revenues was due primarily to Organic Revenue Growth, including the impact of the conversion project.

Operating Profit – Brink’s

Operating profit in the second quarter and first half of 2008 was higher than in the prior-year periods primarily as a result of strong performance in Latin America, including conversion project activities. Operating profit in EMEA was higher than the prior-year periods as a result of favorable changes in currency exchange rates and improved operating results in a number of countries. North American operating profit was lower than in the prior-year periods due largely to higher spending on labor, fuel, and legal settlement expenses, partially offset by the benefit of reductions in postretirement benefit obligations in Canada.

Brink’s expects to generate operating profit margins of approximately 9% in 2008.

Supplemental Revenue Analysis

The following table provides supplemental information related to Organic Revenue Growth which is not required by U.S. generally accepted accounting principles (“GAAP”). The Company defines Organic Revenue Growth as the change in revenue from the prior-year period due to factors such as changes in prices for products and services (including the effect of fuel surcharges), changes in business volumes and changes in product mix. Estimates of changes due to fluctuations in foreign currency exchange rates and the effects of new acquisitions are excluded from Organic Revenue Growth.

The supplemental Organic Revenue Growth information presented is non-GAAP financial information that management uses to evaluate results of existing operations without the effects of acquisitions, dispositions and currency exchange rates. The Company believes that this information may help investors evaluate the performance of the Company’s operations. The limitation of this measure is that the effects of acquisitions, dispositions and changes in values of foreign currencies cannot be completely separated from changes in prices (including price increases due to inflation) and volume of the base business. This supplemental non-GAAP information does not affect net income or any other reported amounts. This supplemental non-GAAP information should be viewed in conjunction with the Company’s consolidated statements of operations.

Revenue growth rates for operations outside the U.S. include the effect of changes in currency exchange rates. On occasion in this report, the change in revenue versus the prior year has been disclosed using constant currency exchange rates in order to provide information about growth rates without the impact of fluctuating foreign currency exchange rates. Growth at constant-currency exchange rates equates to growth as measured in local currency. This measurement of growth using constant-currency exchange rates is higher than growth computed using actual currency exchange rates when the U.S. dollar is strengthening and lower when the U.S. dollar is weakening.

	Three Months		% change		Six Months		% change
(In millions)	Ended June 30,		from prior period		Ended June 30,		from prior period

2006 Revenues	$	575.9				1,124.3
Effects on revenue of:
Organic Revenue Growth		48.5		8		96.2		8
Acquisitions and dispositions, net		6.5		1		12.8		1
Changes in currency exchange rates (a)		28.4		5		51.8		5

2007 Revenues		659.3		14		1,285.1		14
Effects on revenue of:
Organic Revenue Growth		66.4		10		162.3		13
Acquisitions and dispositions, net		6.4		1		14.1		1
Changes in currency exchange rates (a)		65.7		10		129.1		10