Brinks Co (BCO) 2004 Q3 法說會逐字稿

Good morning. At this time, I would like to welcome everyone to the Brink’s Company Third Quarter Earnings Conference Call. (OPERATOR INSTRUCTIONS). Thank you. Mr. Dudley, you may begin your conference.

Thank you. Good morning everyone. Welcome to our third quarter 2004 conference call. I am joined today by Michael Dan, our CEO, and Bob Ritter, our CFO. As we normally do, they will each have some comments. And then we’ll open up the call for your questions. Before that, a couple of quick details related to the call. (CALLER INSTRUCTIONS).

And now for our Safe Harbor statement. This call, including the question-and-answer session, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from projected results. Additional information regarding factors that could cause actual results to differ materially from the projected results is readily available in today’s press release, and in our filings with the Securities and Exchange Commission, including our recent forms 10-K, 10-Q and 8-K. The information discussed on this call is representative as of today only. And the Brink’s Company assumes no obligation to update any forward-looking statements made.

This call is a copyrighted work of the Brink’s Company, and may not be rebroadcast, sold or otherwise distributed without the express written permission of the Brink’s Company. And with that, let me turn the call over to Michael Dan. Michael?

Thanks Scott. Let me also extend my welcome to those of you that have joined us today. This morning we reported solid results for the third quarter, driven by improved revenue performance and good operating results from each of our three businesses. For the quarter, Brink’s Company’s revenues were up 20%, and operating profit grew to $58.7m, up from $22.4m a year ago.

As a result of this, earnings from continuing operations improved significantly, to $37.7m or $0.68 per share, from $11.5m or $0.22 per share in the prior period. Brink’s, Inc., Brink’s Home Security and BAX all posted double-digit revenue increases, which resulted in much improved operating profit and cash flow.

In addition to better operating results from each of our businesses, the Brink’s Company’s operating profits also benefitted from a decrease in cost for the formal co-operations, somewhat offset by higher corporate expenses. Brink’s, Inc. posted improved results, led again by the international side, which benefitted mainly from improving economic conditions, the Olympics, and strong performances in a few countries.

Brink’s Home Security turned in another excellent quarter, with solid subscriber growth and customer retention contributed to strong margins and cash flow. PAX Global had another positive quarter, posting a solid profit this year versus loss a year ago. The Americas operations accounted for much of this improvement in the quarter, as we saw the benefit of leverage from higher freight volumes on Bax’s integrated air and ground network in the United States.

Now I will comment on each of the businesses, starting with Brink’s, Inc. Brink’s revenue increased 15%, or 12% excluding currency effects, driven by international operations. International revenues rose 25% for the quarter, while North American revenue was up about 3%, driven by Canada. Brink’s operating profit grew a very strong 34% year-over-year, to $44.7m, with all of the improvement coming from the international operations. Safety and security performance was solid in the quarter.

Looking at the major regions in more detail, South American operating profit was up more than 50%, reflecting revenue growth of 15%, or 21% excluding negative currency effects. Venezuela was a primary driver, as market (additions) (ph) showed some stability. In Europe, revenues were up 30%, about one-third of the increase due to currency effects, while operating profit was up over 50% from prior year.

The strong performance reflects significant improvement in France, our largest operation in Europe, which was helped by competitor difficulties, and a surge in cash needs by consumers. Europe also benefitted from a strong performance in the operation we acquired in Greece, which was helped by one-time incremental business associated with the Olympics. However, performance in the U.K. and Germany still need to be improved. Overall, a solid management performance in Europe.

In Asia-Pacific, revenue and operating profits both improved nicely, driven by our global services operation. In North America, operating profit was down slightly year over year. Better results from cash logistics, claim processing and global services were offset by lower profits in our U.S. armored operations.

The prior year operating profit included about $1m net benefit from a gain on the sale of our old building in Chicago, partially offset by costs for the closure of our former Darien, Connecticut headquarters.

Our CompuSafe service added installations and increased profits from the third quarter. We now have more than 4,500 units installed, up from about 4,200 at the end of the third quarter of 2003. And we’ll continue to work to keep growing this service.

Now before discussing the outlook, I want to briefly mention the tax issue we discussed last quarter. I want to call your attention to the update in today’s press release, which contains the most recent information developed from our continuing investigation. We have reduced the previous charge, and reflected that adjustment in the third quarter. Notably, we have also revised downward the range of reasonably possible additional losses for customs penalties.

Regarding the outlook for Brink’s, in North America we should see continued growth in cash logistics in CompuSafe on traditional cash in transit and ATM services should achieve some modest growth, with better conditions in Canada, and the improving U.S. economy. In Europe, we are encouraged by the better performance in France, our largest operation, which as you know is a region in which we focused management attention last year. We are seeing the fruits of those efforts. We still have work to do in the U.K. and Germany. But we need some assistance from the economies there. But we believe we can achieve better results. And we are focused on that objective.

South American conditions have been more stable this year. We are cautiously optimistic that these conditions will be maintained. But, as you know, we can’t and don’t count on that. We are facing competitive pressures in certain markets, like Brazil. But we’ll hold steadfast to our pricing and profit discipline.

Asia-Pacific should continue to grow, driven by global services. Brink’s should continue its strong cash generation. Overall, we expect solid performance in the fourth quarter, although sequential profit growth will be a real challenge, given the especially strong third quarter we just posted. Our target, as always, will be in the 7-8% margin range. There is even a small chance that we will be down from the 9.1% margin we just posted for the third quarter.

Now at Brink’s Home Security, they had yet another record quarter operationally and financially. New installation volume grew 17%. Our customer retention, already best in class, further strengthened year over year, with the disconnect rate declining 7.1% from 7.4% in last year’s third quarter. The third quarter rate is normally higher than the full year rate, as disconnects increase during the summer, due to customer moves. So, to achieve our rate of about 7.1% during a traditionally higher disconnect period is a notable management accomplishment.

Subscriber growth was 10% year-over-year. And we ended the quarter with almost 900,000 subscribers. As a result of this, revenues grew 11%. Operating profits grew 12%. Growth of subscriber base, and improved field service operations, enabled Brink’s Home Security to achieve record operating profit of $20.2m in the third quarter. Monthly recurring revenue grew 11% to $25.2m at the end of September. Cash flow was once again strong.

Overall, a continuing strong performance from Brink’s Home Security. The outlook remains bright. The market potential for monitor security is very strong. In the U.S., the residential alarm market is estimated to be only 20-25% saturated. The number of single family homes constructed has been running more than one million units annually for the last seven to eight years. This year, the single family housing starts are trending towards 1.4 million units.

Brink’s Home Security will focus on the successful business model that is designed to create customers for life, including effective mass marketing to single family homeowners, and subscriber acquisition through a variety of proven channels, which include our strong branch network, our home technology service, and a growing network of well qualified Brink’s trained dealers, careful subscriber selection, and of course attention to delivering the highest quality service at every step of the process, by operating efficiently and cost effectively.

I expect Brink’s Home Security to continue to post good growth in subscribers, revenues, earnings, and cash flow. We continue exploring additional growth by expanding our capabilities and presence in the commercial market.

Moving to BAX Global, BAX posted another quarter of improved performance in its fourth profitable quarter in a row. In fact, BAX had one of its best quarters since we completed a restructuring of the Company several years ago. And over the last four quarters, BAX has earned over $45m at the operating profit line.

Revenues were up a strong 25%, or about 22% excluding currency effects, driven by growth in Asia Pacific, and higher U.S. freight volumes. A small part of the revenue increase was driven by fuel surcharges as crude oil prices have risen substantially over the last several months. BAX posted a worldwide operating profit of $14.6m in the quarter, compared to a loss of $5.3m a year ago. This positive performance primarily reflects significant improvement in the Americas. The performance in Asia Pacific was solid. And there was modest improvement in Europe.

Looking first at the Americas, revenue increased 25% on strong domestic freight volume across all product lines. Operating profit in the Americas was $8.1m, a significant improvement over a loss of $11.3m in the third quarter last year. This performance is after giving effect to a $4.7m charge to write-off uneconomic IT investments.

Our domestic freight operations posted a 25% increase in revenue, led by the wholesale freight forwarder service we launched last summer, and by strong growth in our guaranteed overnight product. We also saw revenue growth in the low teens for our standard overnight, the BAX saver products, while other deferred products were up about 5%.

Along with the higher revenues from inter-America shipping, the Americas region also posted a strong 22% growth in U.S. export revenues. ATI increased its revenues and profit contribution, reflecting higher charter activity, including some for the U.S. government. On the international side, revenues grew 24%. The Asia Pacific region was again the growth driver, with a revenue increase of 32%, due to a strong increase in air exports, and increased support chain management activity. Currency effects accounted for about two percentage points of the increase.

Although Europe revenue grew 10%, the increase was almost entirely related to currency exchange rates. International operating profit was up 20% in the quarter, driven by Hong Kong, China and Singapore. Operating profit in Europe was slightly better. Overall, a solid quarter for BAX, especially in the Americas.

As far as the outlook, obviously BAX is having a much better year in 2004, with the year to date operating profit of $30m, compared to a loss of $13m the first nine months of 2003. The Americas operation was profitable again this quarter. And we believe that with a sustained economic recovery in the U.S., positive performance should continue, and hopefully grow. In fact, BAX is on track in 2004 to have its best year since 1999.

We are especially focused on growth in Asia Pacific, which we expect to continue, driven by strong market exports and supply chain management services. We believe that Europe and the U.K. in particular have better prospects in the year ahead. We’ll be doing all we can to improve our results in that part of the world.

In summary, we are pleased with results for the quarter and year-to-date. Solid performance gives us an optimistic view looking at the fourth quarter, and heading into the next year. Our businesses are making many of the right actions to improve, to grow, and to get the most out of rebounding economies.

Brink’s will pursue growth in its traditional armored car operations. And we’ll be emphasizing value-added solutions, like cash logistics and CompuSafe, where growth and margin potential is higher. With BAX Global, the focus will be on further improving the utilization of our integrated domestic freight transportation network, while increasing the relative size and scope of our growing supply chain management businesses around the world. We are especially strong in Asia. And we will work to build on the success we have enjoyed in this large and rapidly expanding market.

We believe the economies in the U.S. and Europe will continue to get better. And improved market conditions should further benefit Brink’s and BAX Global. Brink’s Home Security should continue to build on its excellent operational and financial success, as growth rates for revenues, profits, and new subscribers become more balanced toward the rate of 10%.

Overall, the Brink’s Company’s performance, growth, and financial position continue to improve, helping build value for our investors. Now for some additional comments on our results and our financial positions, here’s Bob Ritter.

Thanks Michael. I’ll start my comments on operating performance with Brink’s, Inc. As Michael noted, we had a really good third quarter, with some exceptional performance in a few subsidiaries. Overall, margins hit 9.1% for the quarter, with international operations running just under 10%.

Now it’s tough to match a standard that high on a quarter-in/quarter-out basis, let alone improve upon it. As a result, we don’t see a step up to a higher level in the fourth quarter as the highest probability. But please don’t misinterpret what we’ve said this morning. We expect the fourth quarter will be very good. But we will need a lot of things to go right just to match this quarter’s performance.

It’s difficult to say enough about the performance of Brink’s Home Security. It just turned in another record quarter with solid growth in subscribers, revenues, profits, and cash flow. We expect more of the same in the fourth quarter, with the added benefit of moving into an historically slower season for disconnects. The fourth quarter should be another good quarter of value-building.

BAX Global’s performance also was solid for the third quarter. Operating profits improved by almost $20m over the results of a year ago. And this was after recording an impairment charge of about $5m. There’s nice leverage coming out of the U.S. system. And Asia is growing well. Hopefully the economy here and in the rest of the world keeps moving ahead, so BAX Global can add a strong fifth quarter to its string of positive ones.

Corporate expense was up again in the last quarter, with costs relating to Section 404 of Sarbanes-Oxley being the primary factor. Our costs of former co-related operations were again significantly below last year’s level for the quarter. There’s nothing new here to report that we haven’t covered in earlier quarters. The one exception is the credit for gains on the sale of property. We still expect to record about $6m of additional gains. However, since the completion of all the steps needed to realize these gains requires the actions of others, the timing could be in the fourth quarter, or even next year.

I’ll wrap up on operating performance with a quick comment on taxes. We were able to resolve a few open issues with tax authority this quarter, and have also reevaluated our expectations for the full year’s effective tax rate, as we do every quarter. As a result, the effective tax rate for the third quarter is well below the norm. It ran at 27.1 % on continuing operations. For modeling purposes, we currently expect the effective tax rate for the full year to be roughly 39%.

Finally, I would like to make a few comments about the Company’s cash flow and debt position. I’ll start with depreciation and amortization. We expect the full year 2004's depreciation and amortization to be close to what we last estimated. We currently expect it to be in the range of $165-175m in total, divided among Brink’s at $75-80m, Brink’s Home Security at $50-55m, and BAX Global in the $40-45m range.

As for capital expenditures, spending came in at a little over $150m for the first nine months. And for the full year, CapEx on continuing operations still looks as though it will be close to the range we noted during the last call. Our current estimate is $205m to $220m. We expect Brink’s Home Security will take the largest share at $115 to $120m, as we continue to build the subscriber base and value of the business.

Brink’s investment should run in the $70 to $75m range. And BAX should run at roughly $20m to $25m for the year. As for financing, we ended September with outstanding debt of about $240m. Combining this with roughly $150m in cash, the Company’s net debt was about $90m at the end of September, about the same as the end of last quarter. And this compares with a net debt figure of just above $145m in December last year.

Receivables sold in the asset securitization facility were $70m at September 30, down from the $77m we had last year at the end of December. In summary, financing, net of cash, were right at $160m at the end of September, down over $60m from last year-end’s level. This net financing figure was only up about $20m from the June 30 figure, despite our making $61m in pension and VEBA contributions during the quarter.

To wrap it up, so far all three of our businesses have had a really solid nine months, from both an earnings and cash flow standpoint. We recently entered into a new five year revolving credit facility, which expanded our borrowing capacity. We’ll continue to use this combination of financial strength, earnings and cash flow to finance growth and address our liability situation.

That’s all I have for now. Theresa, we are ready for questions.

(CALLER INSTRUCTIONS). Jeff Kessler.

Thank you. And I normally don’t congratulate people on good quarters. Obviously this was a good quarter. The first question is with regard to what you knew at the Investor Day, which was not too long ago, and your fairly poker-faced presentation, which was obviously right down the line in terms of FD, and what you’re reporting today. Was there any improvement or change in the numbers as you went through them between the time you made your presentation then and the time today? You guys were obviously optimistic. But basically, basic industry descriptive back then. Today is a very optimistic presentation.

Jeff, there has been no change in our normal disclosures as we go forward, quarter to quarter, and trying to describe our business conditions, the challenges that we face and the impacts of different economies, or different social or political situations that effect our business around the world. And we try to convey those as clearly and as concisely as possible.

Okay. The second question is you’ve had two competitors. One in the armored car business over in Europe, one in the freight business here in the United States, both of whom were, let’s call them weak sisters, acquired. Now you did reference both of them as perhaps helping you. Is there any way for you to gauge how long the integration process will take on the part of your competition, to give you a window to continue to benefit from the, we’ll call it weak performance of your competition, in both those areas?

Well it’s difficult. I think to be more specific in Europe, of course, our major competitor entered liquidation. And they were purchased by a seasoned, strong operator, who really doesn’t have any integration challenges to speak of in France, because they were not a large player there in the CIT side of the business. So I don’t think -- that will probably help us in the long run, because it’s a better disciplined competition.

In the United States, the acquisition of course has yet to take place. It’s been announced. It’s expected to close some time in the fourth quarter. I would expect it would probably be six months to a year before any effects of the new management philosophy or the disciplines that will be exercised by the buyer will be felt by ourselves or in the marketplace.

Now when you say disciplined, are you referring to the Company’s operating discipline, or pricing discipline as well? Because the two can mean very different things.

I think it’s all included. As you know, it’s been a very difficult market environment for an extended time, specifically in the United States. And I don’t think the -- I think the pricing will probably firm up over time. But Jeff, we’ve been operating in this environment for four or five years.

And we changed our strategy a few years ago, went to more neutral products, and expanded the revenue stream going through our fixed asset base. We’ve been pursuing that strategy the last couple years, with a major change just recently, (a year ago) (ph). And I think those strategic changes have benefitted us. So we’re going forward. This was happening in spite of the recently announced acquisition. So we’re going to steer our course of what we think is the best interest of the assets we have employed in that business.

Thanks. Can I get – ? You folks basically begged the question a little bit on what we’ll call the VAT issue, even though it’s more of, I guess, in other words, tax issue at this point in time, back at the Investor Day. Can you give us any more clarity on anything with regard to this, compared to what we heard three weeks, three/four weeks ago?

I think, Jeff, we’ve updated the best information that we have today in the press release, in the last page there. We’ve made a slight adjustment to the reserves that were taken in the previous quarters. I can assure you we’re working feverishly to find a resolution to put this issue behind us. We’re very hopeful we’ll be able to have some more information hopefully by year-end.

It’s somewhat of a little cloud that we want to dispel as quickly as possible. But our disclosures have been very, very clear on what we think those risks are at the current time. And, as you know, I think it’s always important not to have any cloud hanging over any of our activities. And we know that. So hopefully we’ll have more information, hopefully by the end of the year, so we can get this behind us.

Well, (Tuclava) (ph) gave a lot of people a $26 - $27 enter price into your stock at least. One final question. That is your comments on Brink’s Armored North America. Cash in transit, what are the gating factors that you are currently through? Because it sounds like what you are really trying to do here is get all your growth out of cash logistics, out of CompuSafe, out of the so-called ancillary services, and that you are basically assuming virtually no growth in the CIT portion of the business.

Jeff, I think a better way to characterize it there’s been pretty severe price competition in the CIT side of the business in the United States for about the last 18-24 months. And as those pressures mount in that business, because of reaction, tends to continue to drop price. As you know, we have a pretty strong pricing discipline. And we’ve walked away for some businesses, and taken some pretty strong stands with customers, as we historically have done. And we will continue to do that.

The fact of the matter is that the other services, the ATM services, the CompuSafe services, cash logistic services, are a much more sophisticated product to tie our customers in, give them more value added services, and are less effective by those competitive pressures. At some point, those competitive pressures, and the effects of those pricing decisions made by competition, as always, will cause severe pain. And we’ll be in a position at that particular time to hopefully increase our volumes, and therefore our revenue streams in the CIT line of business. And we will wait it out.

Okay. Thank you. And keep up the good work.

[Jerome Lan].

Unlike Jeff, I do congratulate people on quarters like this. So congratulations. Terrific performance. Can I ask you – ? You mentioned, there is some noise from the Olympics in the quarter. And I wonder if you can give us any more detail on what impact quantified you believe that had. And I am also particularly curious if it was, you believe, purely isolated to increase volume or traffic in Greece. Or was there also some residual effect on other European nations participating in the commercial services for it, or simply traffic, people going to the Olympics.

Good question. First of all, we don’t break out individual country results as a rule. But Greece had a very, very strong third quarter as a result of guarding activity specifically that was utilized during the Olympics. It was limited to Greece. It really wasn’t reflected anywhere else. There was a material incremental effect for the quarter, which we wanted to point out to investors, so they knew it, which helped drive the very, very strong results we had out of Europe. And, of course, it won’t reoccur.

Okay. And on Brink’s, Inc. CapEx, can you give us a breakdown of what that money is being spent on?

[Jerome], this is Bob Ritter. That is typically spent as a combination of some replacement capital for the branches that we have, a well as the trucks that we operate. But, in addition, we have a continuing investment in information technology, to make sure that we have the industry leading information technology services, to be able to support our customers.

Okay. So I appreciate that. I guess what I am also wondering, though, is if only on a theoretical basis, is the mathematical – ? Is the financials behind CompuSafe similar in any way to the model of BHS, where you’re making capital investment in customers by installing CompuSafe system.

It’s very, very similar, except it’s more capital intensive than the typical investment in the home security. And there’s a little different risk profile, because they tend to be, rather than individual homeowners, they tend to be companies. And you have more units with one customer.

Right. But so as that continues to grow, we should see, obviously, an effect then on Brink’s, Inc. CapEx.

Right. But once again, the returns on that business, on the capital employed, are very, very good, as they are in the home security business. And we would be pleased to have the financial worth to finance that accelerating growth.

Understood. Thanks very much.

(CALLER INSTRUCTIONS). [Mike Haleron].

Good morning. I have two questions for you regarding BAX Global. First, we noticed that the international margins have contracted slightly year over year. Is there any particular reason why there was a slight contraction?

Well, once again, we were pretty flat in Europe Mike. And we are feeling some of the lift pressures and margin squeeze coming out of Asia on the capacity side. And I also would tell you there’s some greater competitive pressures coming there, as everyone flocks to Asia, tries to grow with the market over there. And I don’t think it’s out of line with what we’ve seen with other people that have reported to date this quarter. And our business continues to grow. But I do believe that margin contraction will continue in the immediate future.

Okay. Do you consider the margin contraction to be a product of the growth itself?

Right now it’s just tight market. I really believe it’s tight market. You still have the port slowdown going on a little bit. You’ve got the surcharges flowing through, because we’re a non-asset based carrier in that portion of the business. All those factors working. And of course there’s still shifts of business going on, as you know, from some of the Asian tigers, to the main one in China.

And I guess the second question then relates to the surcharges. With some of the other companies that have reported today, they have noted that there is going to be some significant challenges continuing to pass those fuel charges in the near-term. Is this a concern of yours? I know you consider this to be a significant near-term challenge.

It’s always an issue. But we have been very, very successful throughout this year, and in the past, by building in the, basically automatic pass-through of those expenses. It’s not always the case with some of our large multi-national customers. On occasion there’s a delay in getting those increases through. But our customers basically recognize that those are costs outside of our control, and overall I think are very, very cooperative in allowing us to get the increased surcharges recovered.

Fantastic. I appreciate your help. That was very helpful.

Thank you.

[Ed Bray].

Good morning and congratulations. A number of little questions. You’re coming up on 900,000 subs in the BHS division. And I am curious at what point you all will anticipate a new monitoring center, and how much might that cost?

We are under discussions now to build a second monitoring center for a variety of reasons. We have yet to finalize a location for that. We probably will shortly after the first year. And the capital costs for something like that are usually in the $15m range, plus or minus $3m or $4m. We should have some more clarity on that probably at year-end, or in the first quarter of next year. And in the scope of things, it’s not a lot of capital for the size and the performance of that business.

In fact Ed, this is Bob Ritter. We have a disclosure in the 10-Q, which we started last quarter, as we started looking more and more intently at this thing. In the Q, which should be filed relatively soon, we actually put a number in for additional CapEx in Brink’s Home Security next year of about $20m, which should help you on that.

Okay. The next question was just can you give us any more sort of transparency on the size of the remaining pension deficit? I know you’ve contributed a fair bit of money this year. Maybe if you can the size of the plan assets relative to the plan obligations as they currently stand?

Okay. You can see where it was at the end of last year. We’ve put in $11m so far this year. And we have our fingers crossed, obviously, about both interest rate movements, so we know what the discount rate is, and also what happens with the financial markets over the next month or two. So it will be difficult to answer that one, and to try to project where we’re going to be at the end of December.

Okay.

We’re hoping it’s going to be another improved number for us.

Okay. And just a couple more quick ones. The tax position – do you have anything you can offer us as far as the current NOL position or tax credit position?

It’s fairly sizeable. They’re coming forward from last year, between the NOLs that we generated last year upon the filing of our tax return, and our, the tax credit carry forwards we have, and also, obviously the VEBA contributions we can make. We can again tell you it will be quite a while before we’re paying taxes in the United States.

Okay. I’ll wait for the Q on that.

Yeah, that one we’ll actually update it in more detail for you in the K, as we will evaluate everything we have by the end of the year.

Okay. Then the last question on the VEBA, I don’t know whether it was formally stated or sort of informally that the goal once the assets get up to sort of the $350m range, that that might be adequate enough to fund the projected obligations in total. Is that still somewhat of an accurate figure? Or has that number changed materially?

Well, that’s a number, obviously, we have to keep an eye on at all times. But our current projections on it, when we get somewhere between $300m and $400m, we think we’re going to be pretty comfortable with that level. And then that will be the point in time where we’ll start evaluating whether or not we want to take excess cash flow out of the VEBA, and start using it to help defray some of our cash costs.

Okay. Thank you all very much.

[Brian Butler].

Hello. Congratulations on a good quarter. A question on the BAX. You had the $4.7m charge on the IT equipment. Was that a non-cash charge?

Well, the cash was spent in prior quarters. So it’s not -- the cash effect didn’t hit us this quarter.

Okay. And so if you removed that, your margins in BAX then were around 3.1% operating profits?

Yes they were.

Is that kind of the right level to look at going forward?

We still are very intent on moving it to where we think it can get to, which is being able to earn our cost of capital. And that’s going to be somewhere north of 4%. So that’s – we are not happy yet with 3.1. We want to keep moving the needle forward.

Okay. And then as you see the progress in BAX, and the good results, this definitely makes it a much more sellable asset. Have you guys re-looked at the potential of possibly looking for a buyer for BAX?

At the current time, our focus of fixing BAX to create the same value for, the maximum value for our shareholders. And, as with any asset we own, (indiscernible), it’s not our intent to sell them unless somebody offers us more value than we see for our own shareholders.

Do you have a time frame on when that fix will finally be complete for BAX?

(Indiscernible) cost of capital.

Okay. And then just a question on Brink’s Home Security. On the commercial, moving into commercial markets, can you just give me an update on progress there, and what hurdles might need to be overcome in order to see that really grow?

We’ve always been in the business, on the side. We’re really putting a focus on it now, and hiring dedicated people, dedicated staff, to pursue that business, as we see it as another good line to build, or run through our model, that has been so successful on the residential side. And we expect it to be an accelerating part of our business over time.

And there’s still a learning curve, obviously, that we’re going through. And our strategy is to cautiously, as we have done building home security, go forward within a very narrow model exercise, to make sure that the returns on capital are at or exceed those that our business historically has done.

Okay. And then one last question, just on accounting kind of thing. What was the ending and dilutive share counts.

The ending share count from the quarter is probably just under 55 million shares outstanding. But to get to the dilutive ones, remember you have to add back the value of options that are in there. And the dilutive count for the quarter was 55.5 million shares. And year-to-date it is 55 million shares.

All right. Thank you very much.

Jeff Kessler.

One follow-up on your cash flow and funding of the VEBA. I don’t believe you went over this at the Investor Day. But do you have some type of target based on the cash flow, and the -- both, obviously CapEx, G&A, and EBITDA, that you are going to generate in 2005 for some level of funding for the VEBA next year? Do you have some range that you can throw at us?

Okay. We are always interested in trying to get that funded as rapidly as possible, because we know how important that is to our investors. And you can see over the last two years, we’ve pout in $82m last year. We put in $50m this year. We would hope to keep something in that range. But that’s something that we have to reevaluate every year, as we look at our current tax position and other cash needs. And typically that’s the type of thing that we evaluate late in the second quarter, and then review with our Board before making any substantial decisions on that.

Okay, thank you.

[Steven Fisher].

Hi. Good morning. Just a clarification. I think you said that your (back saver) (ph) in standard overnight revenues were up in the mid-teens in the quarter. Is that the mid-teens for each of them? And, if so, was that all economic improvement on the standard overnight side? Or does peak season have any impact?

We had improvement across all lines of business in the inter-America products. Every single line of business was up. And I don’t have the exact percentages of each of the lines. But every single one of them is up, reflecting the improved economy, and the multiple revenue lines that we now have built into our system.

That standard overnight, that growth there would be fairly significantly different from previous quarters, where it’s been flat or down, right?

Yes. Yes. I think once again reflecting the economy.

Okay. Thank you.

And you do have a follow up from [Jerome Lan].

Hi. Just one follow-up on my question about guarding in Europe, in the Olympics. A couple years ago you guys suffered a lot from leftover staffing in Brink’s, Inc. in Europe from the Euro conversion. And I am just wondering do you have the potential for any kind of similar problems when you have a large event for this new guarding business?

Right now, obviously, with the Olympics, can you staff down quickly once that’s gone away? And there will be similar events I assume you will want to capitalize on, whether it’s a WTO meeting, or, I don’t know, World Cup, whatever it might be.

It’s a very different situation, because of the immensity and the threat that was felt through the Olympics. The business community, the government, and the unions in Greece got together and actually signed an agreement about 18 months prior to the Olympics as to how all the mechanism of all that was going to work. And that agreement was followed, and we ramped up, and we have ramped down appropriately.

Right. But do you anticipate that sort of union and business cooperation for future large events?

I don’t think any one would be similar to bringing the Olympics Games to Greece was under the threat of terrorism that was at the time. I don’t see the scale ever being the same. I think it was a unique, one-time event. But we obviously, on the labor side, have to be very, very cautious as we ramp up and ramp down, and make sure that we’re properly costing for that in our business model.

So will you be seeking other sort of one-time event driven business? Or is it all going to be permanent installation type stuff?

As we look to become more and more familiar with the guarding business, which right now we’re limiting just to the European theater, we’re interested in those types of things. But we’re not going to expose ourselves unnecessarily to “special event” type of activities.

Great. Okay. Thanks very much. I appreciate it.

At this time, there are no further questions. Gentlemen, are there any closing remarks?

No. That’s it. We want to thank you all for joining us. And we’ll talk to you soon. Thank you.