Brinks Co (BCO) 2005 Q2 法說會逐字稿

Good morning. My name is Wendy and I will be your conference facilitator. At this time, I would like to welcome everyone to The Brink's Company Second Quarter Earnings release 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. Mr. Dudley, you may begin your conference.

Thank you. Good morning, everybody. Welcome to our second quarter conference call. With me today are Michael Dan, our Chief Executive Officer, and Bob Ritter, our Chief Financial Officer. They will each have some initial comments and then we'll open up our call for some questions.

Before that, a couple of quick details about our call today. First, our press release that we issued this morning is available on our website at brinkscompany.com and it is also available by fax by calling 877-275-7488. We will have a replay of today's call and that will be available sometime this afternoon through Friday, August 19. The replay number in North America will be 800-642-1687, or for those dialing from outside of North America, 706-645-9291. The conference ID for the replay is 7887757 and a replay of today's webcast will also be available on our website at brinkscompany.com.

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 most recent Form 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 expressed written permission of The Brink's Company.

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

Thanks, Scott. Let me also extend my welcome to those of you who have joined us today. Operationally, we posted good second quarter results with a 16% increase in revenues. Operating profits and income from continuing operations would have been up solidly without the $10 million restructuring and severance charge at Brink's Incorporated, which were mostly related to our European operations, as we discussed in the last call.

Brinks Incorporated, Brink's Home Security, and BAX Global, all posted double-digit revenue increases and improved cash flow. Brink's Home Security continued its strong profit performance and BAX's second quarter operating profit increased both sequentially and year-over-year. However, operating performance for Brink's Incorporated declined, due mainly to those restructuring and severance costs associated with downsizing of operations in The Netherlands and Belgium.

Earnings from continued operations for The Brink's Company in the second quarter were 12 million or $0.21 per share, down from 12.6 million or $0.23 per share one year ago. Earnings from discontinued operations were $0.06 per share and reflected mainly a decrease in withdrawal liability for multi-employer pension plans. In the second quarter of 2004 earnings from discontinued operations were $0.11 per share. Net income per share was $0.27 down from $0.34 one year ago.

I'll comment on each of the business units starting with Brink's Incorporated. Brink's revenue increased 15% driven by international operations. This topline growth reflects mainly higher volumes and the 3% benefit from foreign currency exchange. International revenues rose 21% for the quarter. Our North American revenue was up 6%. Brink's operating profit came in at 15.1 million down from 25.3 million in last year's second quarter, due largely to the restructuring and severance cost I mentioned at the outset.

Now, looking at our International operations. South American operating profit tripled on revenue growth of 17% reflecting higher volumes. The benefit of the continued favorable market conditions in Venezuela, our largest operation in the region, was partially offset by weaker performance in Brazil. The balance of countries performed very well.

In Europe the revenues were up 24% or roughly 19% excluding the currency effects. This strong revenue increase reflects primarily continued strong volumes in France, Global Services and the effects of the acquisitions in Luxemburg, the UK and Ireland. However, Europe reported a small operating loss due to significant restructuring costs in the Netherlands and Belgium to address the loss of a major customer that we reported last quarter and overall to position the region for better profitability going forward. However, much of the benefits of these costs will not be seen until the first part of next year. We also incurred some integration costs associated with the recent acquisitions.

In Asia Pacific revenues and operating profit matched the strong levels of the year ago. In North America operating profit was down more than 25% to slight revenue growth in the US and Canada, which included a small benefit of foreign exchange on the Canadian revenues. Profit was impacted by higher costs recorded in the quarter to reflect higher pension costs, safety and security expenses. On a positive note we are starting to see the competitive picture improve with customers returning to Brink's due to service issues with competitors.

Regarding the outlook for Brink's Incorporated, overall Brink's should be able to grow revenues and improve operating margins in the seasonally second half of the year. Given the year-to-date margin and the restructuring and severance costs we now expect the margin for the full year 2005 to be slightly below the 7 to 8% range that we had previously expected. However, we shall return to the strong profitability in 2006.

In North America our value added Cash Logistics and CompuSafe services should maintain their solid growth, while traditional cash in transit and ATM services, which make up the bulk of our business will improve with better market conditions in Canada and competitive pressures easing in the US, especially in 2006.

Operating profit throughout the remainder of 2005 will continue to be impacted by higher employee benefit expense including the increase in pension cost of about $6 million in the US for the full year. Internationally, we plan to continue to grow and enhance our European operations. We expect to do this through effective integration of our acquisitions in Eastern Europe, Luxemburg and UK, as well as through the restructuring of our operations in Belgium and the Netherlands. We are working to finalize the agreements with the unions and their workers. We expect to incur about 2 to $3 million of additional cost for restructuring in the third or fourth quarters.

In South America conditions remain favorable at the current time. While there is always a risk, we don't see anything in the near term that would change that. Asia Pacific should continue to grow and produce solid margins over the course of the year, driven by strength in Global Services.

Now turning to Brick's Home Security. They continue their string of record quarters operationally and financially. New installation volume grew 19%. Our customer retention already very strong, further improved year-over-year with the disconnect rate declining to 6.8% compared to 7.2% in last year's second quarter.

Subscriber growth was 11% year-over-year and we ended the second quarter with about 973,000 subscribers. We expect to reach the 1 million subscriber level before our next earnings release.

We continued to achieve good growth from each of our subscriber acquisition channels. In the second quarter our branches accounted for 70% of the new subscribers. Our dedicated dealer network contributed 16%, and our home technologies division, which provides pre-wiring for new home builders accounted for 7. Thanks to strong subscriber additions revenues grew 13% and operating profit by about 18% to a record 23.3 million in the second quarter. Monthly recurring revenue also grew 13% to 27.7 million at the end of June, and cash flow was once again strong. Overall, another great performance from Brink's Home Security.

The outlook for Brink's remains bright. Home Security is the leader in the growing residential security market, and is actively gearing up to enter the main commercial market with a strong brand, highly effective marketing, and excellent service performance. Brink's Home Security is poised to continue to post good growth in subscribers, revenues, earnings, and cash flow.

Now moving to BAX Global. BAX posted another quarter of improved year-over-year performance and its seventh profitable quarter in a row, despite continued high fuel prices. In the quarter revenues were up 17%, with 2% points coming from currency effects. The improved topline performance reflects growth in Asia-Pacific and higher US freight volumes as well as higher fuel surcharges. BAX posted operating profit of 16.8 million in the second quarter, up from 12.4 million a year ago. This positive performance reflects strong results in Asia-Pacific, better results in Europe, partially offset by decline in the Americas.

BAX's supply chain management activity posted growth in revenues and profits. As you know, we are focused on increasing the size of this part of our business where profit potential is higher.

Now looking first at the Americas, revenue increased 12% on a 4% growth domestic freight in US export volume. Our domestic freight operations posted a 4% increase in revenue, led by the wholesale freight forwarder service, which saw volumes in revenues nearly double compared to the second quarter of 2004. As was the case in the first quarter, the performance of our expedited service was mixed. With revenues for our guaranteed overnight product increased 12%, our standard overnight service declined 15%. Customers continue to shift towards lower-priced deferred products, as evidenced by a 9% increase in our BAXSaver product. This is reflected in our fuel surcharges in a very slow May. The Americas posted operating profit of 3.7 million down from 6.1 million in the second quarter a year ago, reflecting a shift in product mix.

On the international side, revenues grew 23%. The Asia-Pacific region was the growth driver, with a revenue increase of 30% due to a strong increase in air exports and the robust supply chain management activity. European revenue grew 10%, with 4% points coming from the currency exchange rates. Growth in Europe reflects both a slight improvement in market conditions, successful sales and marketing efforts that produce customer wins. International operating profit grew to 19 million from about 11 million in the quarter, mainly due to strong performance in Asia-Pacific and a better performance across Europe.

The outlook for BAX, we believe that Asia-Pacific will remain a strong market for exports and our supply chain management services, a market in which BAX is very well positioned. We also believe that Europe and the UK in particular, can improve further during the second half of the year. We are headed into the busy part of the shipping season, which as you know, normally produces the lion's share of BAX's profits. For the first half of 2005, operating profits for BAX had grown to 60% over last year. The negative impact of high fuel prices on the volume mix is likely to continue to be a concern in the US. However, based on the improving trends in the first and second quarters, we believe BAX is in a strong position to achieve solid year-over-year growth in the second half of the year.

In summary, Brink's Incorporated will pursue growth in its traditional armored car operations while expanding its value-added solutions, like cash processing and valuables logistics where growth and margin potential is highest. For BAX Global, the focus will be on improving the utilization of our integrated domestic freight, domestic network, building on our strong presence and success in Asia, and increasing the relative size and scope of our supply chain management business around the globe.

We believe the economies in the US and Europe will continue to grow. We expect Brink's Home Security to continue to build on its excellent operational and financial success with growth for revenues, profits, and new subscribers, sustained in 2005 at our 10% rate. Overall, The Brink's Company's growth, performance, and financial position continue to improve.

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

Thanks Michael. As usual, I will make a few comments about the businesses and our costs and expenses to help our forecasting. Then I will finish up with information on our financial position and cash flow considerations.

First, in regard to results from continuing operations for the quarter, we have certain costs that negatively impacted the operating profit at Brink's Inc. As mentioned, in comparison to the second quarter last year, Brink's recorded about $10 million more restructuring and severance costs largely related to adjusting the scope of our operations in Belgium and the Netherlands. Because of all of the final actions underlining these costs will play out over the next two to three quarters, we expect to see only 1 to $2 million of benefit over the rest of this year, but 6 to $7 million of annual benefits going forward.

In addition, our tax rate for the second quarter came in higher than normally expected at 57%. We recorded some additional non-cash valuation allowances on tax benefits related to our Brink's Inc. operations in Latin America. Including the valuation allowances recorded to date and our expectations for the second half, we expect the full-year effective tax rate to be roughly 41 or 42%.

Also as Michael mentioned, second quarter results included income from discontinued operations in both 2005 and 2004 related to reductions in the estimated withdrawal liabilities for coal-related multi-employer pension plans. In June, the last remaining workers covered by UMWA contract finished working for us. This should result in withdrawal from the multi-employer plans. In addition, we received updated information on the under funded status of the plans as of June 30, 2004, and this was lower than our previous estimates. This positive difference was reflected as an adjustment to contingent liabilities within discontinued operations. We expect our ultimate liability will be between 30 and $31 million, and we expect to make the payment late this year or early next year.

Looking at the third quarter, we expect good performance at Brink's Home Security and seasonal increases in volumes at Brink's, Inc. and BAX Global. As history shows, margins at Brink's and BAX are usually much stronger in the third and fourth quarters of the year as compared to the first two quarters. We expect Brink's will have a good second half, but don't forget Brink's will likely have another 2 to $3 million of restructuring cost in the second half of this year.

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 second quarter depreciation and amortization hit $47 million in total, divided among Brink's at 23 million, Brink's Home Security at $14 million, and BAX Global at 10 million. Looking ahead for the full year of 2005, we're still expecting Brink's to be around $90 million, Brink's Home Security should be in the 55 to $60 million range, and BAX should come in at 40 to $45 million or so. In total, the Company should see about 185 to $195 million of depreciation and amortization in 2005.

As for capital expenditures, second quarter spending came in at $72 million. You will note in today's press release that CapEx for BAX increased in the second quarter of this year to $60 million from the very low $4 million in the prior-year period. BAX Global purchased two DC-8 aircrafts during the quarter for about $5 million. Frankly, the way the DC-8 market is today, in some cases, it makes much more sense for us to purchase planes than it does to lease them. And in total, spending for Brink's Home Security in 2005 should be in the 160 to $165 million range. At Brink's, we expect spending to hit 85 to 90 million for the current year, and BAX Global should run from 45 million to 50 million. All in all, spending in 2005 for The Brink's Company is currently expected to run about 290 to $300 million.

As for financing, we ended the quarter with outstanding debt of about $295 million. Combining this with roughly $160 million in cash, the Company's net debt was about 135 million at the end of June, up about 60 million from year-end 2004. Receivables sold in the asset securitization facility were up to $61 million at June 30 from $25 million at last year-end.

In summary, financings net of cash were about $195 million at the end of June, up from the $100 million range at year-end, but down about $10 million from March's level. The increase in net financings since year-end reflects the Company's investment to support growth, including acquisitions by Brinks Inc during the first half of the year, and the purchase by Brink's Home Security of its headquarters building in Dallas. In addition, construction on a second monitoring site has begun in Knoxville, Tennessee. Even with the investments made to date, we expect to once again generate solid cash flow in 2005, and we will continue to put this to work growing our businesses and positioning them for the future. Wendy, that's all I have for now. We are ready for questions.

[OPERATOR INSTRUCTIONS]. James Clement, Sidoti & Company.

Good morning gentlemen. With regard, I guess, this is a sort of two-part question about the Brink's Inc division. First part is, could you give us a little bit more color, perhaps a little bit of a better sense of how meaningful the more value-added services that you guys have in that division, whether Cash Logistics or CompuSafe, that kind of thing, just how much those kinds of things are contributing to revenue? And then also, I believe you said you thought you might fall a little bit short of the 7% to 8% profit margin range that you talked about for '05, but with the restructuring that you are taking, is that level fair game for 2006?

Jim, the answer to those questions is yes. As far as the color goes, it's very hard to tell you exactly how much revenue comes from value added services. As you will recall, we basically have an asset base and we use the same different lines of business we call them. For instance, Cash Logistics, our trucks have to pick up the cash and bring it to us, if our competitors don't. CompuSafe uses our own vehicles, and transportation in the ATM line of business, which is also value added, also uses our transportation section. If I was to take a stab at it, I would say it's about 50% value added versus 50% of pure transportation. And of course, those businesses are all intertwined and continue to grow at a pretty steady rate across the globe.

As far as the margins go, 7% to 8% is where this business should be performing. We are going to fall short of that this year, restructuring cost are probably little bit more than 50% of that shortfall, and I would say that some security cost, pension cost, are making up the balance.

Michael Hoffman, Friedman Billings Ramsey & Co.

If I could follow up on that margin question, Mike, is it reasonable to assume that in the second half that one of the two quarters, if I understand the data you have given, you have got another $2 to $3 million of severance cost, it appears that probably is in the third quarter, so I'm going to have a below $7 to $8 in the third quarter by definition. But, with the fourth quarter be back to 7 and 8, and in that's such case, what are you doing in the US, to adjust your cost structure to offset the increase for the pension and the safety and security?

First of all, I'll take the last part of your question, which is in US. In a competitive situation, the US has been pretty difficult last two or three years, which we've talked previously, Michael, on these calls. I would tell you that the worm is starting to turn and that the pressures on the competition and their service levels are starting to be unacceptable to the marketplace. And so, for the first time, we are starting to see signs of some of the more service sensitive customers interested in returning to Brinks.

At the same time, the growth of our Cash Logistics business is starting to accelerate a little bit with some quick contracts in the pipeline that we’re in the process of taking over, and I think those would all contribute to the improvement in helping cover some of those costs that we have in the US side of the business. And of course, the balance of it is the restructuring cost in Europe that we've covered previously in the call.

And if I laid this down in a way that makes sense, would you agree that third quarter you won't see 7, 8, but 4Q you could?

It all depends, I think, when some of those restructuring costs hit. I just don't know the rules today, on when we can take these charges. Three, four years ago, we were taking the whole charge and then had it played out through the year, and you can't do that any more under the stricter accounting rules. So, I would like to have them behind us, but we will book them as soon as we can book them. We know how much they are going to be, $2 to $3 million, I just can't predict the timing.

Okay, the second part of that to follow up is, when you feel comfortable that improving pricing, because it is really easing on competitive issues and higher margin services, the Cash Logistics is accelerating, that growth of that is accelerating in the second half will clearly offset this cost increase from pensions, etc.?

I think if we don't see that fully in the second half here, we are definitely going to have it for next year.

Okay. Just to clarify, Bob, on the tax issue, your 41% to 42% includes the 57% in the second quarter?

Yes, it does. So, that implies a lower rate for the balance of the year.

What are your thoughts about the nature of that lower rate?

I expect this to go back to a more normal rate, basically going up to the 41% to 42% is taking the higher level of allowances that we've had to provide during the first half and basically, spreading that out over the full-year's earnings estimate.

Okay, all right. And then, the question that's got to be asked, because there is a Wall Street Journal article back in June and there is the Deal.com (ph), so are you a seller of BAX, is there a book on the street, and is this business for sale, and do you have any interested parties?

Well, as you know, Michael, we don't make comments on rumors and things that are -- and the market reports that go on. If we have anything to say on any strategic area, we will do it at the appropriate time. But, we don't comment on rumors, never have and never will.

Jeffrey Kessler, Lehman Brothers.

Well, as you know, depending on which one gets asked first, Friedman Billings or us, we ask the same questions. So, most of my question have been asked by Mr. Hoffman. Nevertheless, I will continue on that line of thinking with US Brink's.

Michael, I hear you -- this was your baby for like ten years, and you are talking about improving pricing, the competition beginning to have its -- falling on its own petard, so to speak, because they have been under-pricing by so much and you can only do that for so long until service begins to hurt you and hurt your client base, and more higher value added services. What else are you doing to offset the increase in these higher workers comp costs and things like that? Other companies, whether they are facilities management companies or whoever who manage large amounts of people, have to deal with these increases in costs all the time. You managing a lot of people in a CIT business, have to be able to offset that within the CIT business itself, forgetting about what you can do in the, let's say, in CompuSafe or in just pricing. So, what type of cost structure changes can you make within the CIT business to at least improve the margin there?

Jeff, we are in the safety and security business and it's the essence of who we are and what we are, and we have very robust programs.

And by the way, forgive me for saying CIT, because I understand where you coming from with regard to -- that there is more than just transporting cash from the Fed to a bank?

Right. But, Jeff, at the end of the day, we are in the safety and security business. We rigorously manage all these costs all the time. This last quarter, some of those safety costs were higher than expected. Some of those had to do with lawsuits or court cases that might go against us, which made that a little bit higher. But, overall, we keep our security and our safety costs pretty flat.

We do see some of the security costs rising. But, this is part of managing this business. If you lower your barriers too much to try to save money, your risk goes up, and eventually those security costs will bite you one way or the other. And we've always taken the position here that safety and security of our people come first. We try to stay ahead of that. I will tell you that the scene, the criminal scene, the attacks on the industry are up in the United States and Europe and in Latin America. And we are responding to that to make sure that we have the best long-term sustainable solution to that with the many years of experience that we have, and we are going to stay that course. And obviously, if it’s happening in the industry it’s happening to our competitors and fortunately, it's happened to our competitors more than ourselves.

That's what I was going to ask. The attacks on the industry overall are up?

Yes.

Doesn't your greater number of people per truck, greater cost structure per truck, and better -- obviously higher worker's comp costs give you some advantage with regard to the value-add that you can provide to your customers if you are truly marketing yourself as a security company?

I think, over time, that's always been very, very beneficial for us and we continually steer that course.

Secondly, can you give some broad-based idea of how many CompuSafe installations are out there?

Probably, somewhere between 4,600 and 4,800.

All right. So, that continues to rise albeit slowly, but it continues to rise, because the last number we got was like 45 or 46, something like that.

And Jeff, we are doing a pilot program now. We have got a pilot program up in Canada that's now starting to take off and get some traction. And then, we have now started a pilot program at a request of one of our US customers in Europe, and we are looking at six countries where there are pilot programs as we introduce that service there.

Can you identify where in Canada or where in Europe?

It will be in France, Germany, and the UK, and Holland will be where we start in Europe. And in Canada, it's across the board. It's with a national retail commercial account.

Okay. During the quarter, you purchased two planes for BAX. Can you differentiate versus -- is there a lease cost in getting -- and can I just get some overall strategy, thoughts out of you on why you bought two more planes or leased two more planes or whatever?

Jeff, we are not expanding our fleet. What we are doing is we are trying to stay as flexible as we can with our fixed cost asset base. And when we you lease an airplane that, if somebody gives it you, you basically have to give it back to them in the same condition that you received it or with a fresh, what they call, C check where the plane's been gone through basically nose to tail. Many times, the cost of that C check is exceeds the market value of the aircraft.

Sometimes, let's give you an example, if the price of an aircraft is $2 million, it might cost $3 million to return the plane. And I know that the owner of the airplane is probably going to park it in the desert, if I find a better aircraft. Now, what I have done is I've bought the airplane for $2 million and if I choose at the end of the cycle of that aircraft not to utilize it again, I will put it into the desert and it won't cost me a nickel, which is a better financial move for the Company and maintains increased flexibility.

All right. Is there any change other than -- I mean, I didn't see in the press release, I may have missed it, is there any change in the level of VEBA funding or what you intend to do in terms of funding the VEBA over the course of the remainder of the year?

No. You didn't miss anything there, Jeff. There was nothing to announce. We have not changed the level of funding to date. We are still evaluating how that fits into our total tax situation and the Company's cash flow considerations for the year. But, sometime between now and obviously year-end, we will make a final decision on that.

Okay. And can you make some comment finally on what you are either operating cash flow or free cash flow -- I know, you don't make projections, so I will say that in front, but could you make some comment about your cash flow, either from an operating point of view or free cash flow point of view for the year?

Jeff, obviously, if I get too detailed on that, we will be giving you a detailed projection. So, I won't.

Maybe can you give of a vague projection on it, so it's not detailed?

Here comes a vague projection. We reduced our borrowings by about $10 million during the second quarter. We would expect with the performance -- by higher performance we are going to see in Brinks and BAX over the balance of this year that we are going to see substantial improvement in our borrowing position by year-end.

Okay. And I am getting a question from Scott. Any quantification how much both -- can you give us any idea -- okay, final question, and I will let everybody else -- of how much below the 7 to 8 area percent in Brink’s are you folks talking about for this year? Below is a very, very vague and general number. Are we talking about 6% or are talking about 6.8% or are we talking about 5%, because certainly, Mike, I can get on your case for when you normalize this thing and add back the $10 million, you are still getting to only 4.7 or so percent for the quarter, which is unacceptable for this type of business when you should be running at 250 basis points higher. Can you get this up to 6 point something percent over the next quarter or so?

I believe by the end of the year it will be forming very close, for the year to the 7% range.

By the end of the year you will have the operating profit up to close to 7% for the whole year.

That's correct.

Steven Fisher, UBS Securities LLC.

Can you just comment on the integration of the acquisition? It sounds like you made some progress in the quarter. Do you think there's still a chance that they could be accretive by the fourth quarter and would that be contributing to getting close to that 7%?

That's accurate.

And, secondly on BAX, it seemed like around the economy, June was the best month of the quarter, can you give us a sense of how much of that 4% improvement in shipping volumes came in June?

Yes, May was very poor, surprisingly poor. In June, as you mentioned, they rebounded nicely, and I guess the good news is July is on our projection, internal projections. So, I think the economy is doing just fine, and of course we have to see where August goes and September is always a strong month as you know.

Okay, and then the corporate expense at BAX was a little bit higher than it has been for the past few quarters on a dollar basis, and a percent of sales. Can you just tell us where you are spending more there, related to these plan leases or --?

The business is growing quite rapidly, especially in the Asia Pacific theater and supply change management also. So, we have had some good customer wins and we are preparing to take on some additional work in Asia and in Europe, and we are gearing up to do that.

On the valuation allowance, can you just tell us what's driving it to record of that? You know, I would think you would be required to book it when you don't expect to have sufficient future profitability to use an NOL, and it sounds like things have been pretty solid in Latin America, except for maybe Brazil as you mentioned. Can you just tell us what's behind there and do you expect any other places to kind of put you in that situation where you might have to record a valuation allowance, going forward?

Steve, the big issue there is, we have to look on a country-by-country basis and in some cases we actually have to look if we are operating in one or more subsidiaries within a country, we actually have to look down to the subsidiary level to be able to make that kind of a determination as to whether or not we think we will have sufficient future earnings. But it's basically -- been picking out a couple of more problematic countries and subsidiaries in Europe and Latin America over the last couple of quarters, that have required us to take this valuation allowances.

As to whether or not we are going to have any more in the future, that's always difficult to give you a perfect prediction on. But, as it looks right now, there is nothing significant on the radar screen that I can see.

The overall profitability outlook is still positive for those regions, I guess?

Yes, it is.

And then just lastly, going back to Brink's inc., can you break out the higher pension cost from the security and safety costs? I was getting the sense that last quarter that the pension cost was mostly behind us, can you just give us a little detail there?

Firstly, the pension cost is -- that's something that we spread across the year quarter-by-quarter. And, you’re going to see roughly a $6 million increase this year over the last year. So, it's going to break out quarter-by-quarter roughly that way.

Yvonne Varano, Jefferies & Co.

In Brink's, Inc., can you just give me an idea of what the revenue impact was from the acquisitions in the quarter?

Yes, Yvonne, during the quarter our revenue from acquisitions went up about $23.5 million, I think it's actually $23.4 million, and for the year-to-date the increase this year over the last year because of acquisitions is $42.7 million.

And then on the currency in the North American area as well as Canada, that's 6% increase year-over-year for revenue, how much of that was currency?

A very small amount, probably a couple of million dollars.

And then -- it seemed that -- when you talked about the increase in the cost for the security and safety, some of that sounded like it might be one-time in the quarter. Or is that added expense on an ongoing basis?

Usually, we raise our defenses, our safety securities are ongoing and we go to the marketplace and recoup the cost. There is usually a time lag in doing that, but that's the standard way we operate our business.

And then lastly, you talked about, I guess gaining share back from some competitors, can you give any more color on who you might be taking business from?

We don't disclose that. All I can tell you is there has been a lot of pressure especially on the ATM side of the business, frankly because the financial institutions have trouble making money in that line of businesses. And so, low cost offers have been very attractive, but as you know, the number one thing the banks have to do is deliver great service to the customers, nothing is more aggravating than an ATM machine that is not properly functioning, and so that customer sensitivity issue, level of service issue has resurfaced and we’re starting to see, as I said, the worm turn and more customers starting to migrate back to our service offering.

James Clement.

Hello again. A question for you guys about BAX. I think [Banta] Corporation has talked about a budding strategic partnership with -.

Jamie?

Jamie, you cut out.

I’m sorry, Mr. Clement’s line has dropped from the Conference. [OPERATOR INSTRUCTIONS]. Mr. Dudley?

Well, that's all the questions we have. We will be around later today for any follow up. Thanks again for joining us.