Brinks Co (BCO) 2004 Q4 法說會逐字稿

At this time, I would like to welcome everyone to the fourth-quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (OPERATOR INSTRUCTIONS) Thank you. I will now turn the call over to Scott, Director of Investor Relations. You may begin your conference, sir.

Thank you. Good morning everyone. Welcome to our fourth-quarter 2004 earnings conference call. I'm joined today by Michael Dan, our Chief Executive Officer, and Bob Ritter, our Chief Financial Officer. As we typically do, they will start with some comments about the quarter and the year, and then we will open up the call for questions. Before that, just a couple of quick reminders about the call. Today's press release is available on our company website at BrinksCompany.com. Also available by fax, and that number is 877-275-7488. There will be a replay of our call starting this afternoon through Friday, February 25th. The replay number for North America toll-free 800-642-1687, or outside North America 706-645-9291. The conference ID for the replay 3686029. A replay of our webcast will also be available on our website.

Now the 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 SEC 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 the 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.

With that, let me turn the call over to Michael Dan.

Thanks, Scott. Let me also extend my welcome to those of you who have joined us today. This morning we reported strong results for the fourth quarter, which included a very strong year. I will comment on our fourth-quarter results in a moment, but first I want to mention some of the highlights for 2004. Across all of our businesses, we were successful in the midst of improving economies in driving top-line revenue growth and producing solid margins. Notably, we stayed the course at BAX Global, and we are pleased to see that the changes we have been making and the enhancements we have been implementing over the past several years have begun to bear fruit. BAX was profitable in all four quarters during 2004. and saw rising performance over the course of the year.

Brink's continued to pursue growth, especially overseas. We completed an attractive acquisition in Greece, and just last week we announced agreements to acquire CIT, cash processing, and guarding operations from affiliates of Group 4 Securicor. This will build and strengthen our presence in Luxembourg and Scotland. We also recently completed the acquisition of the remainder of our joint venture operation in Ireland. While growing, we haven't ignored performance. We did extremely well in a few countries, and that helped us get back to the profit margins that I expect from Brink's, Inc. We have challenges to deal with in 2005, but I wanted to see management maintain the discipline and patience and keep our margins constant.

Brink's Home Security stuck to a successful game plan, producing high growth and terrific results. Into Brink's Co., we further strengthened our balance sheet, contributed $50 million to the VEBA, $11 million to our pension plan, and reduced our net debt levels again in 2004. We start 2005 with a strong foundation and good momentum coming out of the fourth quarter.

Now, turning to the fourth-quarter results. Brink's, Inc., Brink's Home Security, and BAX Global all posted double-digit revenue increases, which resulted in favorable profit performance and increased cash flows. The Brink's Company's revenues for the quarter were up 17 percent to 1.3 billion, and operating profit came in at 60 million. Although reported operating profit is down a few million from the fourth quarter a year ago, if you exclude the 10 million pre-tax gain on the sale of our former gold operations in the fourth quarter of 2003, the current period operating performance improved 10 percent.

Current period operating profit was impacted by significantly higher corporate expenses, largely related to Sarbanes-Oxley Section 404, as well as higher benefit costs, which more than offset a decrease in costs from our former coal operations. Earnings from continuing operations improved significantly to 31 million or 55 cents per share, from the 4 million or 8 cents per share. I would like to point out that the fourth quarter of 2003 included the net impact of a $22 million deferred tax valuation allowance, partially offset by the gain from the sale of the coal operations.

Brink's, Inc. posted strong results, led again by the international side, reflecting improved economic conditions and better performance in several regions. Brink's, Inc. achieved a solid operating margin over 8 percent. Brink's Home Security turned in another excellent quarter, posting strong top-line growth, margins and cash flow, reflecting the robust subscriber growth in industry-leading customer retention. BAX Global continues to improve, posting a significant improvement over the fourth quarter of 2003, as well as a healthy sequential profit growth from the third quarter to the fourth quarter in 2004. The Americas operations accounted for most of the improvement in the quarter, as freight volumes increased substantially.

Now I will comment a little more in depth on each of our units, starting with Brink's, Inc. Brink's revenue increased 12 percent, driven as I mentioned by international operations. This top-line growth reflects both higher volumes and a significant effect from foreign currency exchange. Excluding the currency effects, Brink's revenues were up about 8 percent in the quarter. International revenue rose 19 percent for the quarter, while North American revenue was up about 2 percent, mainly from better performance in Canada. Brink's operating profit came in at 42 million, representing a margin of 8.1 percent. This is down as we suggested it might be from the third quarter, in which the margin was just over 9 percent. It is also lower in comparison to a very strong fourth quarter a year ago, in which Brink's achieved operating profit of 44.5 million and a margin also over 9 percent.

Looking at the regions in detail, in South America operating profit was up 25 percent, reflecting revenue growth of 15 percent, which was boosted by strong currencies in a few countries. The primary driver was again Venezuela, our largest operation in the region, as more favorable market conditions were sustained. In Europe, revenues were up 25 percent with roughly 40 percent of the increase coming from the currency effects, while operating profit was up 17 percent over the prior year. This strong performance reflects improved results in France, our largest operation in Europe, combined with additional contribution from our acquisitions in Greece, our growth in Global Services, and modest improvement in the UK. Currency effects account for about one-third of that increase.

Performance in Germany, which has been flat for several quarters, was again lackluster, reflecting economic conditions as well as the competitive picture. Results in Belgium were also weak. In Asia-Pacific, revenues were down slightly, but operating profits were maintained with year-ago levels. In North America, operating profit was down slightly, due to higher cost of the U.S. operations.

Assessing performance for the full year as we like to do, 2004 was a good, solid year, but not a great year for Brink's. Revenue growth was 14 percent, roughly 8 percent if you factor out currency, but was flat in North America. As you know, I have been unhappy with the margins for the last couple of years, but it is good to see Brink's get back into the more normal range of 7.5 percent that it earned in 2004. Regarding the outlook for Brink's, Inc., overall they should be able to grow revenues again. We don't expect to get the boost from the foreign exchange that we experienced this year. Also, we did very well in a few countries in 2004. Stronger competition is expected to make it a tougher year. However, given the revenue growth and the margin that we have achieved in 2004, we believe a target margin range of 7 to 8 percent is reasonable for 2005.

In North America, we should see continued growth in Cash Logistics and CompuSafe, while traditional cash in transit and ATM services should improve with better marketing conditions in Canada and the U.S. However, our preliminary review of actuarial reports tells us that U.S. pension costs will be going up about $6 million. In Europe, we are encouraged by the strong performances in France and early signs of recovery in the UK. Germany is still a problem in terms of performance, and we're doing all we can to improve results there. South American conditions were more stable in 2004, and we are optimistic that this environment will continue. Asia-Pacific should continue to show good results, and will be an area we will continue to grow. The growth in performance we expect for Brink's should continue to generate strong cash flows and positive economic value added.

Now at Brink's Home Security. We had yet another record quarter, operationally and financially. New installation volume grew 14 percent. Our customer retention, already best-in-class, further strengthened year-over-year with a disconnect rate declining to 5.9 percent from the 6.4 percent in last year's fourth quarter. Subscriber growth was 11 percent year-over-year, and we had about 921,000 valued customers as of the end of December. As a result, revenues grew 11 percent, operating profits grew 14 percent. The growth in the subscriber base and further improvement in field services enabled Brink's Home Security to achieve record operating profit of 21.4 million in the fourth quarter. Monthly recurring revenue grew to 26.1 million at the end of December, and cash flow was once again strong. Overall, a continuing strong performance from Brink's Home Security.

Stepping back and looking at the year, we achieved the kind of balance performance we had in mind when we set percentage growth targets of 10, 10, and 10. The first two, subscribers and revenue, were up 11 percent, while the third target, operating profit, grew more than 13. The full-year disconnect rate improved from 6.6 percent from 6.9. This performance is testament to effective marketing, excellent execution, and world-class customer service. The outlook for Brink's Home Security remains bright. The market potential for monitored security is still strong. As we have noted before, the U.S. market is estimated to be only 20 to 25 percent saturated, and home construction continues strong. In fact, there were 1.5 million single-family housing starts last year.

Brink's Home Security will stay focused on a successful business model that is designed to create customers for life, including our effective mass marketing and subscriber selection, continued focus on several proven customer acquisition channels, which include our strong branch network, our home technology service, and our qualified dealers, all while maintaining the best-in-class customer service. We expect Brink's Home Security to continue to post good growth in subscribers, revenues, earnings and cash flow. And we will pursue additional growth by expanding our capabilities and presence in the commercial market.

Now turning to BAX Global. BAX posted another quarter of improved performance with its fifth profitable quarter in a row. BAX had its best quarter since the fourth quarter of 1999. In the quarter, revenues were up a strong 21 percent or about 19 percent excluding currency effects, driven by growth in Asia-Pacific and the higher U.S. freight volumes. BAX posted operating profit of $26 million in the fourth quarter, up from 16 million a year ago. This positive performance reflects significant improvements in the Americas, as well as modest, better results in Europe. Looking first at the Americas, revenue increased 20 percent on strong domestic freight volume. Our domestic freight operations posted a 21 percent increase in revenue, led by the wholesale freight forwarder service, which saw volumes and revenues more than triple versus the fourth quarter of 2003. Meanwhile, our guaranteed overnight product posted a 50 percent revenue increase. We also saw revenue growth for the low teens for our BAXSaver and two-day products.

Along with the higher revenues from InterAmerica shipping, U.S. export revenues also grew 23 percent. Operating profit in the Americas was just over 10 million, a significant improvement over the 700,000 earned in the fourth quarter of 2003. At ATI, service levels were stable and we are pleased with our contribution to BAX improvements. On the international side, revenues grew 23 percent. The Asia-Pacific region was again the growth driver, with a revenue increase of nearly 30 percent due to strong increase in air exports and the robust supply chain management activity. Currency effects accounted for about 2 percentage point of this increase. Although European revenue grew 11 percent, the increase was almost entirely related to currency exchange rates.

International operating profit was up 12 percent in the quarter, due to better performance across Europe. Operating profit in Asia-Pacific was again strong in the fourth-quarter, but flat with 2003, due to gross margin pressures. Overall, a solid quarter for BAX. The outlook for BAX, they had a rewarding year in 2004, its best since 1999. The road back to profitability has been long, but BAX has achieved this goal by setting the right strategy and by being patient and disciplined in pursuing results. There is much more to do, but 2004 set a firm foundation to build upon.

BAX earned $56 million at the operating profit line in 2004, representing a margin of 2.3 percent. Although we saw the needle move substantially towards our goal of earning solid returns for BAX, we need to drive further improvement, particularly in Europe. But BAX is a more balanced business today than a few years ago. It is beginning to demonstrate the earnings and cash flow capabilities we expect to see. The Americas operations improved profitability this quarter. With a sustained economic recovery in the U.S., profits stand to strengthen again in 2005, with both freight and logistics contributing to the improvement. We believe that Europe or the UK in particular have a brighter outlook in 2005, and we're doing all we can to keep improving our results in the region. Of course, we also believe Asia-Pacific will remain a strong market for exports in our supply chain management services.

In summary, we are pleased with the results for the quarter and the full year of 2004, which gives us a positive outlook for 2005. Our businesses are executing their plans and strategies designed to grow their businesses and sustain long-term growth and value for our shareholders. Brink's will pursue growth in its traditional armored car operations while expanding value-added solutions like cash processing and valuables logistics, where growth and margin potential is higher. For 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 supply chain management businesses around the world. At the same time, we will continue to reduce the asset intensity of the business, support our goal for BAX to earn its cost of capital. BAX is strong in Asia. We will look to build on this success and favorable customer relationships we've enjoyed in this large and expanding market.

We believe the economies in the U.S., Latin America, and Europe will continue to get better, and improved market conditions should further benefit both BAX Global and Brink's, Inc. Brink's Home Security should continue to build on its excellent operational and financial success with growth for revenues, profits, and new subscribers sustained in 2005 at the rate of 10 percent or so. Overall, The Brink's Company's growth, performance, and financial position continue to improve, building long-term value for our investors.

Now for some additional comments on our results and financial position, Bob Ritter.

Thanks, Michael. As usual, I will make a few comments about the businesses and our costs and expenses to help you with forecasting. Then I will finish up with information on our financial position and cash flow considerations. Michael has already commented on the quarter, so I will spend a little time overviewing the year and looking at some factors to be considered for 2005. Let me start with Brink's, Inc. Brink's did fairly well in 2004. Operating profits were up about 50 percent versus where they were just two years ago in 2002. But having made this leap, we've only gotten back to an acceptable margin level. Looking to 2005, we are faced with some challenges. Revenues here in North America have been relatively flat for the last two years, and we see a $6 million increase in pension costs. We'd like to see profitable growth with the emphasis on profitable. As always, patience and discipline will be critical.

In the international arena, we expect the level of competition to pick up, but we have several operations which have ample room to improve margins. We will see growth and profitability, but it is likely that it will be at a much lower rate of increase than we have seen these last two years. Brink's Home Security had another great year. Michael already told you how they achieved his triple double challenge on subscriber, revenue, and earnings growth. They should continue to perform well, but I will caution you that we expect to have added costs this year to continue developing our presence in commercial markets and for the preparation and startup of a second full-time monitoring site. The addition of this site will give Brink's Home Security room to grow for several years.

BAX Global turned in a good first year in the drive to solid returns. Although the added earnings lift was welcome, the real bonus was a strong boost to the Company's cash flow. Later there will be more about how that cash flow was used. Margins at BAX were up to 2.3 percent for the year and almost 4 percent for the quarter, despite the soft performance in Europe. The economies of the U.S. and Asia are still growing, so we have a nice tailwind to start 2005. But BAX, like our other operations, has challenges and opportunities. We need to see improvement in Europe, better margins in Asia, and continued efforts to extract more from the U.S. system while growing our asset-like (ph) services. We won't tell you to expect another 50 million plus increase in operating profits, but we should see additional movement towards solid operating returns. We are also looking forward to another increase in cash flow.

Now that I have covered a few points on the businesses, let me cover other costs and expenses. First, in 2004, we had net charges of about $46 million related to our former coal operations running through operating income. I said net because as you can see in the table in today's earnings release, this included about $7 million in gains on the sale of excess assets. As we have said in the past, we can't count on a steady benefit like this going forward. We may have another 5 to $7 million of income items in 2005 or 2006, but I can't guess when that will occur. So relooking at 2004 without these gains, total expenses would have been about $53 million.

Looking into 2005, we should probably run at or near that number. As we did last year, our Form 10-K filing will provide more specifics about this. Corporate expenses ended the year with unusually high charges. The biggest single factor was the cost of documenting and then auditing our Sarbanes-Oxley Section 404 work. Based on our spending for consultants and estimates from our auditors, we're going to spend at or above the top end of the estimated range, $10 million or more, for the 2004 year. Now maybe I'm just being optimistic, but I would like to assume we will see a sizable decrease in this in 2005.

We also expect benefit costs to be lower in 2005 than we saw this year. After all, from a performance standpoint, 2004 was a pretty good year for the Company. The effective tax rate for the full year of 2004 came in at about 39 percent, and I expect 2005's effective rate to again be around 40 percent.

Finally, I would like to make a few comments about the Company's cash flow and debt position. I will start with depreciation and amortization. The full-year 2004 depreciation and amortization came out at the top end of our last forecast. $175 million in total, divided among Brink's at $81 million, Brink's Home Security at $52 million, and BAX Global at $42 million. Looking ahead to 2005, we are expecting Brink's to move from about 81 million to around 90 million. Brink's Home Security should be in the range of 55 to 60 million, and BAX should be in the same general range as this year, about $45 million or so. In total, the Company should see about 185 to $195 million of depreciation and amortization.

As for capital expenditures, spending also came in at the top end of our last forecast, $220 million for the full year, with Brink's Home Security taking the largest share at $118 million, Brink's at $75 million, and BAX at $25 million. Looking to 2005, Brink's Home Security will continue to build value through its growing subscriber base. In addition, we will spend about $25 million to purchase its current customer service center as it comes off lease in about a month, and to prepare the second site for customer service and backup computing. In total, spending for Brink's Home Security in 2005 should be in the 150 to $160 million range.

Brink's, Inc. will be investing more in IT and related process projects to spur future growth in higher-margin services, so we expect spending there to move from $76 million in 2004 to 85 to $90 million for the current year. BAX Global will also be investing in IT systems. This, along with the upgrading of some hard assets, should result in spending running from 40 million to $50 million. All in all, spending in 2005 for The Brink's Company is currently expected to grow to 280 to $290 million.

As for financings, we ended the year with outstanding debt of about $245 million. Combining this with roughly $170 million in cash, the Company's net debt was about 75 million at the end of December, about half last year-end's figure. Receivables sold in the asset securitization facility were only $25 million at December 31st, down from 77 million for December 2003. In summary, financings net of cash were just over $100 million at the end of December, down about $60 million from last September's level and down over $120 million from last year-end; this despite our making $61 million in pension and VEBA contributions during the year.

To summarize 2004 from a financial perspective, we used over $180 million to attack the Company's 3 main liability issues, the VEBA funding, the U.S. pension plan, and debt, and less than $30 million of this came from asset sales, the rest from normal operations. Looking to 2005, we expect to once again generate solid cash flow. We intend to put this to work growing our businesses and positioning them for the future through prudent capital investments and acquisitions like the ones we announced last week. We also have a lot of spare borrowing capacity, so we won't be afraid to use it to continue funding the VEBA and taking other steps to address our liabilities as appropriate. That is all I have for now. Operator, we're ready for questions.

(OPERATOR INSTRUCTIONS) Jeff Kessler of Lehman Brothers.

This is (indiscernible) for Jeff Kessler. First, congratulations on the excellent disconnect rate at Brink's Home Security. I guess my first question is just related to the SOX costs that you guys attribute to the increased corporate expense. Can you give us some more color as to how much of the expense like a number was related to the SOX, and how much to legal and other?

For the full year we spent -- and this is just on the corporate side -- in the vicinity of $10 million to third parties associated with it.

And do you have any number for the fourth quarter?

The fourth quarter would have had a slightly higher share because at the end of the third quarter, we were projecting a range of running somewhere between 7 and 10. And so, obviously, we had a much larger topoff of the number in the fourth quarter because of the amount of work that we had to do.

The other question is in the Brink's, the armored business, the weaker margins, do you see that improving significantly -- I mean improving considerably going forward? Is this like -- are the increased costs in the U.S. that was mentioned sort of a trend, or is that going to sort of reduce going --?

Brink's margins in the fourth quarter were about 8 percent, so that is where we should be, in the 7 to 8 percent range. They are usually a little higher in the fourth quarter because there's increased costs and some security costs that we bear, and we weren't there. But I expect Brink's to maintain their margin levels in spite of the increased pension costs that we outlined.

Okay, and final question is just the recent acquisitions you did from Group 4 Securicor, is that mainly strategic in terms of geography? And can you give us some more color in terms of the two acquisitions specifically?

Yes, I think that's a pretty good summation of it. It expands our presence in Luxembourg, which is important, where we had a relatively small presence. And it increases our density in Scotland and in Northern England, which I think will be accretive for us in both cases.

All right, that's about it. Thank you, guys.

Michael Novak (ph) of Frontier Capital.

I was just looking for some details on how you plan to reduce the asset intensity of your domestic BAX network. Thank you.

Well, we continue to reduce it by, first of all, the size of BAX continues to grow, and is not on the asset side of the business. So our revenues were up substantially this year at BAX, and we didn't increase the asset intensity at all. We continue to manage the airplane asset intensity of the business in a very, very smart intelligent way, because we are driving towards the goal of earning our cost of capital, and it is my judgment we will be able to do that probably in 2006 for the first time.

In terms of the planes, is there any hope that you can -- I know you have the hub for a number of years still, but that you would be able to use third-party capacity rather than leasing your own planes for the domestic network?

Riley has re-leased all the planes, whether we own them or we sign a long-term contract with another supplier. At the current time, it is about 50 percent through our own subsidiary where we lease the assets, versus the AMCI contracts we signed with a third party. We are making the same financial commitment, so it really -- it is immaterial to the equation.

But it is material if there is another downturn and you're stuck with these long-term leases that you can't fill up profitably.

No. Unfortunately, we don't have any long-term leases. We keep those leases very, very short, and you can see that detail in our 10-K.

Okay.

Michael Hoffman of Friedman, Billings, Ramsey.

Good morning. Bob, I've got to try again on the SOX in the fourth quarter. We'd been running about 10.7 million on corporate, and you come out with a 17.3. So is all of that delta SOX?

A good portion of it. We were aiming at the low end of our rate that we had projected at the end of the third quarter, where we said roughly 7 million to 10 million is the range. We were initially accruing towards the lower end of that range, and obviously we have had to top-up quite a bit in the fourth quarter to get ourselves up to the 10 million plus that we expect.

So you had been recurring quarterly for this?

Yes, we have.

So this is a catch-up. Can you give me a sense when you say you think you have a pretty big reduction, essentially, there are two big pieces. There was doing all that documentation. Did you hire somebody to do that documentation for you, or did you do it internally?

It was a combination of internal resources, which we obviously want to return back to their day-to-day regular jobs, but we also had employed another of the big 4 as a consultant to assist us in the process.

Right, so those expenses go away both quarterly as well as whatever was left in the fourth quarter?

I'm not sure they'll all go away, but they'll come down.

All right. And then the actual audit by the outside auditor of your SOX plan, how many hours do you think you ended up having to expend to do that, and how many hours do you reduce when you have to repeat that audit next year?

I'm not going to be able to speak for them in terms of reductions, because they have to do what they believe is right from a professional standpoint. But you have to remember, this is a difficult first year, I think both for industry and for the big 4 accounting firms as we all sort of work our way through to what the final goal is here. So they have -- the charge that we are going to have is probably going to double or possibly even a little bit larger than our normal audit fee.

That's just the regular annual audit, plus the -- and in addition, you have another charge which is related to auditing 404.

That is going to be roughly double to actually more than double of our normal audit fee for the year.

Right, okay. In the VEBA, you shared with what you put in so far. Is there -- have you maxed out the tax leverage in '04 of the VEBA contributions?

No. Actually, we could technically have done a little bit more during 2004, but we elected not to because it actually positions us better for some tax strategies that we want to employ in the future.

Okay.

So we actually could have put a little bit more in.

Okay, so should we expect similar level of contribution in '05?

Assuming our earnings are going the way we expect, that would be my expectation when we go to the Board in July.

Okay. Then Michael, I can't help but ask this; when we met in Dallas in the fall, you talked about EVA returns on capital, that BAX hadn't returned its cost of capital more than twice in the 18 years you owned it. You are virtually at if not at your return on capital now. So now what's the strategic reason for owning this? You've gotten to a place where a buyer would have to pay you a fair value for it. Why do you own this?

We still think it is an attractive asset whose value is not fully appreciated for our shareholders at the current time. We think the demonstrated progress we've made in the last two years and we will see in 2005 will further enhance the potential value and create options for us, as we do with all our assets that we own.

So the opening on that is that you would entertain a purchase price if it would return the right value to shareholders.

The BAX operation is not for sale. If anyone approached me in any of the business units and offered me a value that I thought was in excess of the value to our shareholders, obviously we would take that to the Board.

All right. Thanks, and congratulations. Great quarter.

Steven Fisher (ph) of UBS.

You mentioned the higher security costs at Brink's, Inc.. Can you just give a little color there; what were those higher security costs?

Just normal fourth quarter; the level of crime on all three major operating areas of the world has increased, just having to deal with I guess the times that we are in. And we have to step up correspondingly and make sure that we are protecting our employees and the assets of our customers, and we tend to do so. We really didn't have that level of increased threat one year ago that we experienced in the fourth quarter of 2004.

And what did you say the impact of that was? Could you quantify that?

It would be hard because it's spread over so many countries. But it probably cost us 200, 300 basis points.

Okay, thanks. And then just how do you assess the traction that your cash logistics business is having, sort of the cash outsourcing and the higher value-added services?

It is like any other logistics type sales, a long process, and obviously we are dealing with large financial institutions. We've had good success signed at the end of last year, and we will be spending in the next 5 to 6 months of this year implementing that one contract in the United States. But we are trying to keep the pipeline full and build our internal resources and capabilities to be able to grow that business as fast as we can.

Like how long do you think it might be before the impact of those services really outweigh the impact of cash transit weakness and pension cost and other things going on?

Well, hopefully we are there, and we can continue to improve that process over time. It is just a matter of building that vault. There is a lot of competitive pressure in Brink's markets at the current time. Those pressures put pressure on everyone. Those pressures eventually will ease as some companies I don't think will make it. And when that happens, we get a nice little boost. That's been the history of Brink's, and I assume that will happen in the future.

Okay. Just last question, home security; you mentioned a 6.6 percent disconnect rate for the year, down from 6.9 percent, and you're at 5.9 percent I guess in a seasonally better quarter. Is there any level that you talk about, any target level internally that you guys focus on getting for that business?

We used to -- we spent years watching it go the other way, and so I am so proud of the Brink's Home Security management team to be able to drive it down to this level. It is truly the best-in-class if you look at what goes on. And I would like to think we can keep it at 6 percent or below as we continue to work upon the myriad of things that we do to be able to provide the level of customer service we can. I don't think we will see those types of improvements we've witnessed the last two years or three years continue. So if we can stay at 6 percent, try to drive that down below 6 percent a little bit, I think I would be satisfied.

Great. Thanks very much.

James Clement of Sidoti & Co.

Good morning, gentlemen. Bob, I may unfortunately ask you to repeat some information that you gave, specifically about BHS, the second monitoring facility. What is your estimate that that is going to contribute in '05 from a CapEx perspective?

The two monitoring facilities, the initial one that we -- the one that we've always had that we are going to purchase, and the second one combined is about $25 million.

So you are including the purchase of the first facility in that number?

Yes.

Okay. In terms of getting the second facility up and running, I don't believe you commented on this. Correct me if I'm wrong, but in terms of training cost, that kind of stuff that is going to have to flow through the P&L, do you have any kind of sense of what that number might look like in '05?

You will continue to see the improvements at Brink's Home Security and hitting our 10, 10, and 10 in 2005, in my opinion, which includes taking into consideration all those costs.

Oh, it does. Okay, very good. Thank you very much.

Jon Langenfeld of Robert W. Baird.

Good morning. Very good progress on the back side. A couple questions there. How did the trends progress in the quarter, specifically through December and then into the first part of 2005?

Our December was better than I have heard other people comment on until the end of the month, of course, when things all tend to fall off. But our December volumes in the heavy freight segment were good. And some of the comments you've heard, I think up around the smaller package people who've reported already and talked about the volumes falling off in December, we did not see that. And so far, the volumes are as expected in our business plan starting 2005.

And the yield pressure that you commented on in your prepared remarks, has that been persistent through the quarter and into '05?

In Asia, yes. Most of those pressures are Asian-based, and it is just very, very difficult margin pressure due to competitive factors.

All right, and finally, just looking at your rate growth within the worldwide segment on BAX, you had been kind of trending at the 15, 20 percent growth range through the first three quarters of the year, and that fell to 6 or 7 percent here in the fourth quarter. Is that a mix issue, just more challenging comparisons or slower trends, or what would you attribute that to?

I would -- once again, the economy really started to pick up in the third and fourth quarter of 2003. So I think the comparison would be the right answer to that.

Okay, great. Thank you.

(OPERATOR INSTRUCTIONS) At this time, I am showing there are no further questions.

Thank you all for joining us, and we will talk to you soon. Thank you.

Again, thank you everyone for participating in today's conference. You may now disconnect.