form_8-k.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
___________________________
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of Report (Date of Earliest Event Reported): October 31,
2007
THE
BRINK’S COMPANY
(Exact
name of registrant as specified in its charter)
|
Virginia
|
1-9148
|
54-1317776
|
|
(State
or other jurisdiction of incorporation)
|
(Commission
File Number)
|
(IRS
Employer Identification No.)
|
1801
Bayberry Court
P.
O. Box 18100
Richmond,
VA 23226-8100
(Address
and zip code of
principal
executive offices)
Registrant’s
telephone number, including area code: (804)
289-9600
Not
Applicable
(Former
name or former address, if changed since last report)
Check
the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation
of
the registrant under any of the following provisions (see General
Instruction A.2.):
[
] Written communications pursuant to
Rule 425 under the Securities Act (17 CFR 230.425)
[
] Soliciting materials pursuant to
Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[
] Pre-commencement communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
[
] Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
7.01. Regulation
FD Disclosure.
During
the third quarter earnings
conference call of The Brink’s Company (the “Company”), held on October 31,
2007, Michael T. Dan, President, Chief Executive Officer and Chairman of the
Board of the Company, made the following comments about the Company’s
determination earlier this year to continue to pursue its previously stated
strategy:
“I’d
like to make a few comments about our company’s strategy. During, and
since, our last conference call on August 2, some of you have asked us to give
you more insight into the process that we have followed and some of the factors
which underlie the company’s determination this summer to continue to pursue our
previously stated strategy of:
|
·
|
Growing
our existing strong security
businesses
|
|
·
|
Focusing
on accelerating the growth of high-potential opportunities within
those
businesses
|
|
·
|
Exploiting
the cash flow, brand-building and other benefits of operating the
two
premier businesses under the same flagship brand name
and
|
|
·
|
Exploring
the expansion of the Brink’s brand into suitable security-related
businesses.
|
My
comments today relate to the process and thinking that led up to our
announcement in early August. Having said that, let me remind you of
our ongoing commitment to conduct a dynamic review of strategy on a continuous
basis. Both with and without external assistance, management and the
Board conduct routine, and frankly, non routine reviews of where we’ve been and
where we’re going. We remain vigilant to changes in opportunities and
markets. And, as we’ve told you before, if the Board decides that
changing strategic direction is the right thing to do, we would announce that
as
soon as it is appropriate.
Now,
let me give you some insight into the process that we followed that resulted
in
the July reaffirmation of our strategy.
First,
I’ll tell you a little bit about our world class advisors.
We
first explored values with Morgan Stanley when the sale process for BAX Global
was initiated in late 2004. Since the conclusion of that successful
process, we have retained them continuously. The people at Morgan
Stanley have provided valuable insight and advice to the Board on numerous
occasions. To this mix, we added Greenhill & Company this last
year to provide their solid, experienced perspectives on capital markets and
corporate strategy, totally independent of Morgan Stanley to ensure a broad
second view of the best approaches to enhancing long-term shareholder
value.
Our
advisors made an initial presentation to the Board on the company and the
alternative strategic directions less than a month after the completion of
our
half billion dollar dutch auction share purchase in April [sic]
2006. Our advisors have met frequently with the Board since then, and
I mean frequently.
Among
other things, we have covered valuation issues, the pros and cons of strategic
alternatives, insights into the markets and evaluations of alternatives whether
suggested by investors, management and the Board or other parties.
We
have provided the Board with in depth information about our business,
competitors, performance and prospects, balance sheet and tax issues amongst
many other things.
The
Board reviewed the information provided to it, considered correspondence from
investors and questioned the management and advisors.
After
following this rigorous process, we found ourselves in July with a general
consensus (although not without one public dissenter) that continuing to follow
our previously stated strategy was the best path at that time to increase
shareholder value, or, to put it in other words, that the risks to values
inherent in a spin-off outweighed any argued benefit.
Now,
I’d like to spend time reviewing a few of the factors we considered in our
review.
First
and foremost, we firmly believe that shareholder value is created by sustainable
operating performance and growth prospects. In evaluating a spin-off,
we considered that there could be a risk that it would leave the separated
units
with reduced resources and prospects to drive growth in earnings and cash
flow.
There
are those who argue that separating the businesses will allow management to
better focus on their business and receive compensation incentives which are
more tightly tied to their unit’s performance. In our case, Brink’s
and Brink’s Home Security have been run on a decentralized basis for over a
decade. Management is highly focused on their operations and, with
the exception of stock options, all of the compensation depends on the
performance of their units and their units alone.
But
one of the better indicators of management capability is what others think
and
say about it. When people, including competitors, talk about Brink’s
and Brink’s Home Security, one of the first things mentioned is the already high
quality of management each of these businesses has.
As
we have said on numerous occasions, we believe that the Brink’s brand has a huge
implication for performance. Brink’s is known the world over to
financial institutions, bankers and retailers while Brink’s Home Security has
built a strong position with
consumers
here in the U.S. and Canada over the past 25 years. But the key word
in Brink’s Home Security is the name Brink’s, not Home and not
Security.
Rarely,
if ever, do companies split a brand with the iconic status of
Brink’s. The reasons are concerns over the control and treatment and
use of the brand in the future, concern over reputation and risk, concern over
future expansion projects – as an example, we are already alarm monitoring on a
local basis in several European companies using the Brink’s name.
In
addition, there would be royalty issues over the use of the brand if the company
and the brand were split. This would create a substantial financial
burden on Brink’s Home Security.
For
these reasons, we view the Brink’s brand as do other companies with strong
brands and had to consider whether value creation would be impacted by a split
of the brand. Further, we believe that Brink’s Home Security’s
performance could be affected without the Brink’s name. Sales
opportunities may be reduced while being more costly and the cost of
installation, servicing and monitoring may not get the same boost from volume
and the fixed cost sharing that we experience today.
Next,
we questioned the complete comparability of the comparables used by some in
the
investment community who are proponents of a spin-off. Although we
agree that there are some similarities, the three major European companies
to
which we are usually compared: Group 4 Securicor, Prosegur and
Securitas are predominantly guarding companies with approximately 70%, 60%
and
80%, respectively, of their revenues coming from guarding. Many of
you know that guarding businesses typically have lower margins than well-run
cash logistics businesses but, on the other hand, they have much lower capital
needs. Accordingly, much more of their earnings are converted into
current free cash flow than in our case where we continue to invest in the
good
growth, high return, alarm business and expansion of Brink’s into new products
and services and geographies. We suspect that at least a portion of
the valuation premiums, that the so-called comparables enjoy stems from their
current free cash flow generation, about 50% or more for some. In
contrast, we’re building value over the long run.
We
also saw concerns about capital costs and valuations if the companies were
to be
split.
Post-spin,
each company would be smaller, less diversified and subject to greater
volatility of performance. The rating agencies may likely view these
as negative factors in comparison to how we are currently
positioned. One has already publicly commented on
it.
It
is likely that Brink’s could retain an investment grade rating despite retaining
the legacy pension and retirement medical benefit obligations. The
credit rating would be important to both capital availability and to fund growth
and to the purchasing decisions of many of the sophisticated customers who
prefer working with vendors with investment grade credit ratings.
On
the other hand, based on its relatively small size and cash usage, the alarm
monitoring business would require a sizeable injection of capital from BCO
or
would likely face a decline in credit rating to below investment
grade. This could hurt future performance prospects in two
ways. First, and the most obvious, in the nervous credit markets as
we are currently experiencing, large amounts of capital would be unavailable
to
fund growth opportunities. Second, as it pushes into the commercial
business, its credit rating as a vendor may become a more decisive factor in
the
“buy” decision.
Finally,
credit ratings, at Brink’s Home Security in particular, trading liquidity, and
performance volatility at Brink’s could negatively impact equity market
valuations in a spin-off.
To
summarize, today, I’ve tried to give you a better understanding of the process
and some of the considerations which supported our comments about strategy
on
our last phone call.
Having
said that, we do see substantial value in The Brink’s Company, we’re excited
about our growth prospects, and we’re committed to an ongoing, rigorous process
of considering and setting strategy and executing upon the selected strategy
to
increase shareholder value.
As
I said before, and as demonstrated by our actions over the past ten years,
management and the Board are committed to the continuous consideration of our
alternatives and the company’s strategic direction may change in the
future. If a change occurs, you can be certain that it will have come
about through the use of a rigorous process followed by well informed people
with objective, open minds.”
In
accordance with General Instruction B.2 of Form 8-K, the information in this
Current Report on Form 8-K shall not be deemed “filed” for the purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liability of that section, nor shall it be deemed incorporated
by
reference in any filing under the Securities Act of 1933, as amended, except
as
shall be expressly set forth by specific references in such a
filing.
SIGNATURE
Pursuant
to the requirements 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.
| |
THE
BRINK'S COMPANY |
|
| |
(Registrant) |
|
| |
|
|
| |
|
|
|
|
Date:
October 31, 2007
|
By:
|
/s/ Austin
F. Reed |
|
| |
|
Austin
F. Reed |
|
| |
|
Vice
President, General Counsel and Secretary |
|
| |
|
|
|