Brinks Co (BCO) 2008 Q1 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to The Brinks Company First Quarter Results 2008. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (OPERATOR INSTRUCTIONS).

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Mr. Ed Cunningham, Director of Investor Relations and Corporate Communications for the Brinks Company. Thank you Mr. Cunningham, you may begin.

Thank you, [Doug], and good morning. This is Ed Cunningham, and I want to thank everyone for joining today's call. It will proceed as follows; CEO Michael Dan will review and comment on financial results and outlook, and Bob Ritter, our CFO will make some follow-up comments before we open it up for questions.

As most of you know, Bob is retiring and this will be his last conference call with us. Mike Cazer, who will replace Bob as CFO, is also sitting in on today's call.

An earnings release was issued this morning and is available on our website at brinkscompany.com. If you wish to have it faxed to you, call 877-275-7488.

And now for our Safe Harbor statement; this call, and 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 or estimated results. Information regarding factors that could cause such differences is available in today's press release and in our SEC filings, which include our most recent Form 10-Q and 10-K documents.

Information discussed on this call is representative as of today only. The Brinks Company assumes no obligation to update any forward-looking statements made during the call. And this call is copyrighted, and cannot be used by a third-party without written permission from the Company.

I'll now turn it over to Michael Dan.

Thanks, Ed. Good morning and thank you for joining today's call. This morning, we reported first quarter earnings of $1.02 per share versus $0.66 per share last year with both operating units delivering strong profit growth over last year's first quarter.

As always, we face challenges in both businesses, but we also see many opportunities and we remain on track to meet or exceed the annual revenue American goals we provided during our last call in January.

At Brinks, Inc., which we refer to as Brinks, we expect annual percentage revenue growth to be in the high single digit range, with an operating margin of approximately 9% for the full year. At Brinks Home Security, we are on track to achieve our full-year goal with 10% or better growth in revenue, and operating profit, while growing the subscriber base in the high single digit percentage range, even in this tough market.

As most of you know, we have announced our intent to pursue a tax-free spinoff of Brinks Home Security into a separately publicly-traded Company. The process to achieve the spinoff is underway and should be completed in the fourth quarter of this year. Our initial filing of the SEC Form 10 is expected to occur during the second quarter. Form 10 will provide many preliminary details regarding the spinoff. During this call, we will not further comment on the proposed spinoff. This includes the Q&A session at the end of the call.

Let's get back to our first quarter results. Earnings came in at $48 million, or $1.02 per share, up from the $31.1 million, or $0.66 last year. Total revenue rose 24% to $921 million. Operating profit was $97.3 million, up 51% over last year. These results include about $35 million of revenue relating to one-time turn-seat conversion projects in Venezuela. A push into this quarter's profit improvement was attributable also to this project. However, activity relating to the conversion has already fallen off sharply in the second quarter, and should be completed during the third quarter.

Also results include corporate expenses of about $6 million for legal, advisory professional fees related to the strategic review, proxy matters, and the proposed spinoff. We expect to incur another $10 million to $15 million in spinoff-related expenses as the year progresses.

I'll now cover our 2 operating units, starting with Brinks, Inc. The revenues rose 27% to $793 million. Operating profit came in at about $82 million, an increase of more than 16% year-over-year. For the second quarter, we expect inflationary pressures, including significant wage increases in the waning down the currency conversion efforts to reduce international margins. As a result, the operating profit margin for the second quarter is expected to be approximately 7%, the more typical range for our second quarter.

In North America, revenue rose about 9% to $230 million. Operating profit declined 27% to $13.4 million. Obviously, we are disappointed in this performance, which included lower activity levels of global services, ground operations, and cash logistics, as well as higher costs related to labor, transportation, and selling activities.

All of these factors combined to reduce the equity margin in North America to 5.8%, down from the 8.7% last year. The first quarter of 2007, however, was a very tough time. Obviously, costs have gone up a bit faster than revenues in North America. Costs are focused on the IT and the SG&A, which is appropriate with our solution selling focus with the right investment at the right time. However, we remain confident that our growth will resume as the banking and retail customers now have even greater incentive to reduce costs by accelerating the outsourcing efforts. Our pipeline looks positive.

Revenue from the international operations grew about 36% to $563 million, while operating profit more than doubled to 69. Once again, the improvement was primarily due to very solid results in Latin America. Revenue in this region rose more than 60% to $211 million, which includes the $35 million related to turn-seat conversion operations. The strong profit growth came from increases in volume and solid improvement from our mobile operations in Venezuela, Brazil, Colombia, Chile, and Argentina.

In the EMEA region, the revenue was up about 23% to $332 million, while profits declined slightly. We are continuing to make good progress in several European countries, but we're disappointed by our profit decline due to tough competition and lower volumes in France, which accounts for about half of our annual revenue in this region.

Revenue profits are relatively small. Asia-Pacific operations were up versus last year due to improved results in global services.

In summary, it was a solid quarter for Brinks, due mainly to results from our Latin American operations. As the year progresses, we hope to see improved results in both North America and Europe.

Now let's turn to Brinks Home Security, which turned in another solid performance under difficult market conditions. First quarter revenue at BHS increased more than 11% to $128 million. The revenue growth was a result of continued growth in our customer base, which grew more than 8% and now includes approximately 1.25 million subscribers. Average monitoring rates increased about 3%.

Operating profit rose 14% to $32 million, yielding a profit margin of 25%, up slightly from last year in spite of higher marketing expenditures.

The annualized disconnect rate was 6.1%, which was flat against previous year's rate. We expect the full year disconnect rate in 2008 to range between 6.5% and 7%.

Monthly [retrain] revenue rose a healthy 12% to $38.3 million, so future cash flow continues to grow.

Installation growth for the quarter was down 3% due to the ongoing weakness in the housing market. Sustaining longer term subscriber growth at or near double-digits ultimately depends on the reversal of the downward trend in installation growth.

A recovery in the housing markets would certainly help, but like most people, we are assuming that the current weakness in housing will persist through at least the rest of this year. Even so, we expect full year growth in the subscriber base to be in the high single digit percentage range. And our outlook for full year revenue in profit growth of 10% or better remains unchanged. Management is focused on dealing with this tough environment, and cost controls and marketing spend were excellent during the quarter.

Now, before I turn it over to Bob Ritter, I would to publicly thank Bob for his ten years as my partner in meeting the transition for a very complex multi-faceted business to where we find our Company today. He was instrumental in the journey, and I thank him both professionally and personally for everything we have accomplished for all of our stakeholders. His commitment to hand over the reins to Mike Cazer in an orderly fashion to ensure a smooth transition is also appreciated. Thank you Bob; now over to you.

Thank you Michael, and welcome to all of you who are listening in on this call. As Michael said, the results for the first quarter were solid, a good start to the year.

At Brinks Incorporated, revenues increased by 27% to $793 million. Currency kicked in 10%, and the currency conversion also helped, but organic growth looks to be running track to our annual target.

Margins in Q1 were pretty high at 10.3%, driven by the strong volume in Latin America. Please keep in mind that we expect higher labor and other costs in Q2 and a sharp slowing in currency conversion volume, which should end up in normalized margins. We are estimating an operating profit of about 7% for the quarter, still up from the 6.5% we earned on continuing operations in Brinks last year.

Brinks Home Security demonstrated again the importance of maintaining control in a tough market like they are currently facing. Growth in subscribers continued to be tough, but revenue and operating profits were both up strongly. We expect more of the same in coming quarters.

As you look at the second quarter, remember that we had 200, that 2,200 technical disconnects in last year's second quarter; that puts the disconnect rate up to an abnormally high 8%. We expect a much better number this year.

Corporate expenses came in high as were predicted last time, as a result of professional and consulting fees. I can assure you that they will stay high as we prepare for the spin.

Costs of former operations were way down year-over-year. They should stay low over the balance of this year. On taxes, the distribution of earnings around the world is helping to bring down our tax rate. We're now looking at a 34% to 36% effective rate for the full year of 2008.

Now, for my normal comments on cash flow items; in Brinks, we spent a little over $30 million on CapEx in the first quarter. Since we're usually a little on the light side early in the year, I expect that the $155 million to $165 million range we've given you previously is still the best estimate.

From a depreciation side, Brinks had $30 million in Q1. The run rate normally goes up as the year progresses, so we will stick with our range of $125 million to $140 million from our last call.

BHS spending and depreciation for the first quarter of $45 million and $21 million respectively are also tracking well towards our earlier forecast. We're looking at full-year numbers for CapEx in the range of $185 million to $195 million for the year, and depreciation in the range of $85 million and $95 million.

Now to wrap up on capital structure; if you look at page 11 in today's release, you can see that debt is up a little over $65 million since year-end. About $45 million of that spend is from share repurchases; having said that, we are still very liquid with substantial borrowing capacity. Michael and the Board have plenty of financial flexibility to work through the spinoff and address growth and shareholder return issues, a good position to be in.

I'd like to thank Michael and the rest of the employees of the Brinks Company for all of their help and assistance in the last 10 years. I'll miss you all, and I'm actually looking forward to the end of today so I can start to figure out what I want to do next.

That's all I have for now, and quite possibly for some time to come. Doug, we are ready for questions.

Thank you Mr. Ritter. (OPERATOR INSTRUCTIONS).

Jamie Clement, Sidoti and Company.

Michael, Bob, Ed good morning; Michael, let me just ask you a question about Brink, Inc. and second quarter guidance with respect to the rest of the year. Obviously, you have some cost pressures, but still, I mean you're talking about a second quarter that's going to be better second quarter at Brink, Inc. than the last four years' second quarters. So do you, even with the cost pressures, do you still feel comfortable that you'll be able to get the kind of second half margin rate of approaching 9% that you'll need to approach a full-year margin of 9%?

No, I think the, my comments included I think the second quarter would be in the, the Brinks Inc. would be in the 7% range trying to help reset because of the incredible first quarter we had, which is probably a normal rate for our second quarter. As you know, we pick up substantially in the third and fourth quarters of the years.

So I expect to be back on track with margins. There's still some upside opportunity in those numbers depending on the Latin American performance, but I'm comfortable with the 7% figure that I gave. As you know, we don't really give guidance, but it was such an incredible first quarter, we thought it would be appropriate to help reset the analysts back into the 7% range.

Yes, and Michael I think I may have misstated my question, you may have misinterpreted, but what I was just sort of trying to get to was that 7% for a second quarter to me is actually a good margin for a second quarter, so I wanted to make sure that I was not going to get overly concerned about your, the language in the press release and your prepared remarks with respect to rising costs and a problem in the second half of the year, and I think you addressed that.

Jamie, I listened to both you and Michael and I think you're in agreement.

No, that's good to hear because when I saw comments about rising costs, 7% I mean, as I said, that's the best margin you will have seen over the last 5 years, so that's pretty good.

Moving on to Brinks Home Security, I mean this was a very good quarter, obviously housing market conditions still tough; can you talk about the last 6 quarters, the last 5 quarters, whatever the right timeframe, and talk a little bit about -- I think you mentioned on the last call about how you felt you were managing your resources better in that business. Can you talk a little bit about that?

Yes, as you recall, we were talking in the second half of last year in particular, the slowing housing markets, we started to expand our spinoff marketing to keep the funnel full of sales opportunities for our sales force and keep our installation rate up, which I think was the appropriate thing for the Management Group there to do. And we didn't, we weren't satisfied with the efficiency ratio of it. With the effects of the housing slowdown, we're overcoming those effects. We're still not sure; it's kind of hard to figure out.

But we recognized that, and the Management Group down there decided to really hone in on the marketing efficiency and the marketing spend, and not to "try to jump start" something in front of the housing slowdown that we had. And those efforts, which we talked about the last conference call has come through, and as you know, in that business model, we don't grow as fast, the margins increase because we're not investing in new customers where we always lose money as we expand.

Okay thanks very much for your time.

Brian Butler FBR.

Good morning guys; first question, just kind of in your prepared remarks you guys -- or in the press release -- you had noted that there was lower volume in the high margin US global service operation. Could you elaborate on that; I mean is that competition is becoming more competitive, or you're just not seeing as much outsourcing as you kind of had hoped?

That's not a problem. I would tell you that global services is basically moving diamonds and jewelry around the United States, and then international shipments of currency and precious metals. The combination of less precious metal movements because there's a very, very high cost to precious metals, and less jewelry and diamond demand, particularly in the US market. By the way, that has not affected global services outside the US.

And I think if you look at some of the big retailers results have been published to date that they're having the same effect. Their retail sales are down, and their international sales are up, and so we're sort of following that trend. And how long that will continue, I don't know, but as far as the business line goes, on an overall global basis, global services had good growth for the quarter.

Okay, now about on the cash logistic side in the US; is that still growing as you had expected?

That's always lumpy because we sign large accounts and it comes in at different rates. So we didn't have much to crow about in the first quarter as far as new accounts. And there is a slowdown in the retail sales market, and part of our revenue there is about how much cash we count and how many deposits we handle, and it was dampened somewhat in the first quarter by those effects.

Okay, and then just quickly on the Brinks Home Security, can you just go into some detail on how the marketing expenses there are shaping up, and if you're getting kind of expected value out of that, or is that going to increase or decrease as you kind of go forward here?

Well, we increase every year because we grow the base every year. But our attempt to accelerate in the third and fourth quarter last year just wasn't successful, so we backed down a little bit in the first quarter. So we got our normal uptick in a slowing market with operating margins that we're enjoying the first quarter.

All right, and one last one for Bob, and I'm sure this will be the last time you'll get to talk about this too, too much anyway. What's the balance on the VEBA?

My recollection is it's around $418 million, maybe plus or minus a couple million there. It will be in the Q.

The Q is going to be out soon?

The Q will be out this afternoon because since I'm retiring after today, so this is the last day I can sign the CERT.

All right, well thank you very much, and I hope you enjoy your retirement.

Thank you very much Brian.

Clint Fendley, Davenport.

Good morning gentlemen; congratulations on a very nice quarter. I wondered if you could comment on some of the actual drivers for the inflationary pressures that you're seeing with regard to the wage increases in Latin America.

Most of it is inflation-driven, especially in Venezuela, also in Argentina, to a lesser degree in Brazil.

Okay.

Typically, the wage agreements kick in at one point in time during the year, and most of them come up in the second quarter.

Okay, so it's the rehab period.

Right.

And have the old costs played any role here? I mean could you talk about maybe your ability for capacities, increases on to your customers?

Fuel costs, we always have a delay, and so the real strong spike that we've experienced first quarter has affected results in the organization. And we're usually able to get back about 70% of those increases over time. Some of the larger contracts are more difficult, but at these fuel levels, we made a decision that we're going to get stronger with the major accounts and -- remember, it's mostly diesel, and diesel in particular is much, much higher than gasoline prices today.

Okay thank you; that's helpful. And then Bob on the $10 million to $15 million in remaining corporate expenses, I mean how should we expect that to be spread between the remaining quarters here?

I would say that we're probably going to come down somewhat from the run rate we had in the first quarter in the second quarter, because we're still just gearing up, but much of it will be back-end loaded, and also some of it will be tied to the quarter that we actually complete this in, which again, we're expecting to probably be in the fourth quarter this year.

I would expect to see it come down some the second quarter, be somewhat flat in the third quarter, and then spike a little bit. But I'll also remind you that as soon as it does spike, that it will also drop down into discontinued operations.

Got it, okay thanks guys.

Steven Fischer, UBS.

Hi, good morning; I wonder if you could just comment on what the trends were in security and safety costs during the quarter. I didn't hear any mention of that in the prepared remarks.

It's basically flat on a year-over-year basis. And as you know, before we reserve for the year for most of those exposures, and as the year goes on depending on what our security experience is, we begin the reversal process and I will tell you that the security losses on a global basis are up a little bit, which are not surprising with the economic strains that we're feeling. I would expect our security losses to be slightly higher this year because of the economic strains, but at the same time, we are investing in raising our security barriers because that is a more wise investment of our funds to control those costs over the long term.

Okay, and then I know there's a number of moving parts, but as you look at the margins in North America, do you think, is it fair to say that the first quarter is kind of the low point and then should improve as the year goes on?

Yes, better asked is what are the two major concerns that I have about going forward, and where my personal focus and where Management's focus would be. It's going to be in the US and in France, our two largest operations.

The US is front loaded with IT expenses and SG&A expenses, which is right on our strategy of what we want to do, and unfortunately, some of the benefit of those expenses has yet to occur, although I think the pipeline is looking very attractive. Actually, I just returned from our Annual Meeting with our entire Management Group in the United States, and the amount of enthusiasm and excitement that they have about where we are is really, really positive, and I think that as the year goes on, we'll see improvements across the board there. The only concern would be to the security environment deteriorate dramatically in the United States.

Okay great, and then in France, I mean it sounds like you have a combination of competition and market weakness. I mean is there anything you can do there to mitigate that situation, and how long might that take?

France had a terrific last couple of years. The competition was in somewhat disarray; the competition is stronger and better. There are some irrational pricing decisions starting to take place there, but we have a very, very strong management group there, and we continue to diversify that business into other security related activities, which will help control that effect.

But more importantly, other countries in Europe are improving with the management focus that's been over there the last couple of years. Germany is better; the Netherlands is better; the UK is better; even in the Middle East, Dubai, as you know, is a fast-growing economy. We're doing very, very well there.

So we have a good balance of business throughout Europe, and even if France maintain some pressure on it, I think the improvements elsewhere in Europe will help us continue our growth patterns.

Okay great, thanks a lot, and Bob all the best to you.

Thanks Steven.

Wayne Archambo, BlackRock.

Thank you, Mr. Dan could you at this point determine which of the 2 entities you'll be joining when the Company separates?

The Board of Directors will make all those decisions in the May, July, September timeframe. When those decisions are made, they'll be included in the Form 10, the preliminary one we hope to file during the second quarter. As each of these decisions are made, we'll be filing additional public filings detailing that.

So we should know that by July at the latest?

I would think that would be a reasonable timeframe.

Okay, thank you.

(OPERATOR INSTRUCTIONS) Michael Kim, Imperial Capital.

Good morning gentlemen; how are you? Just quickly on the Brinks Home Security business, the attrition rates were pretty impressive this quarter, and it sounds like relative to last year, the second quarter will be a nice improvement. Could you talk a little bit about the opportunity to actually see right down in maybe closer to the low end of the 6% range; is it some low-hanging fruits or some efforts that you're working towards to bring that attrition rate down, especially considering it sounds like the subscriber addition may be more moderate this year given the housing issues?

Well, a couple of things to remind you; I believe it was the second quarter of last year that we had some adjustments in our disconnect rate, and we had some multi-family disconnects, which inflated our numbers a little bit. And I also want to remind you that the first quarter is generally one of our better quarters in disconnect rates because people tend to move, where in the second and third quarter, that tends to accelerate. Although I'm not so sure that's going to happen with the housing slowdown and the mortgage mess that we're dealing with in this country.

But I can assure you that management focus at Brinks Home Security has customers for life. Every program we have is to keep that rate as low as possible. It's our biggest, probably our biggest single cost when we have a disconnect, and we're focused on it all the time. Keeping it in the lower 6% range keeps the Chairman very, very happy, but it is a very, very difficult thing to control. But I can assure that we put more effort into that single metric than any other metric in that Company.

And then on the other side, do you see an opportunity to actually find value-added services to break up the overall rates?

On Brinks, Inc.?

Yes, no I'm sorry, for Brinks Home Security, just the months fees that you normally derive per customer.

We tend to have the average monitor rate collected from our customers tends to trickle up a few percentage points, and that has to do with how long a customer stays, when is the last time we did their entries, and we always, I think publicly report what our average increase was; it was 3% in the first quarter of this year.

As long as we continue to execute, and I think we might have an effect there, as our commercial business becomes a more meaningful part of our business, we tend to charge higher monitor rates for that. But that's still just a small part of the business that I don't think will be a material factor for another year or two.

And Michael, one of the other factors that you see in the increase in the average rates is the amount of service business that we, the monthly service fees that people pay, they're seeing the value of paying the extra $4 or $5 a month to be able to not worry about service calls and so forth. That's coming in, and we're also starting to see more and more people having wireless services attached to their subscriber accounts, which also obviously brings up the number.

Do you have a sense of what your fees could look like exiting the year? Is it maybe another 3%, 4%, 5% higher, or maybe better than that?

If you look at the last couple of years, our trend has been probably on average, the monthly recurring revenue has been going up maybe 3%, 3.5% per year, over and above the subscriber growth.

Would you expect to at least achieve that this year, or maybe better?

We're there in the first quarter.

Okay, well great, perfect; well thanks very much, and nice progress so far.

Jamie Clement.

Hi Michael, just curious about an update on the acquisition environment, obviously, prolonged credit market weakness. To the extent that there might be some deals out there, do you think that sellers valuation expectations have started to come down at all?

Absolutely; our deal pipeline is full. We had very small acquisition we completed in the first quarter, which we didn't, the announcement was about $5 million, a tuck-in acquisition in the United States. But our acquisition pipeline is full, and the insurance markets, by the way, in our industry are difficult -- not for us, but for our competitors I think helping that prospect along. And so I'm excited about our acquisition growth opportunity in the next 18 to 24 months.

Okay, thank you very much for your time.

David Hancock, Morgan Stanley.

Yes, good morning; just a couple of quick questions please. Firstly, can you comment on customer reaction as you try to pass on cost increases; how amenable are they to you getting price increases through?

And secondly, just on France, can you talk about the balance in terms of profitability pressure between pricing pressure and cost increases? I thought the market in France had become more consolidated, so I'm slightly surprised that the competition is getting a bit more aggressive. Can you just talk about the dynamic there please, and what you can do to improve performance in that market? Thank you.

Yes, there are a lot of questions there, but it basically focused on the French market I believe. At the end of the day, there are 2 major competitors in France, which both have -- we're one of them -- which both have in the range of 40% market share. And then there's a bunch of smaller operators around. The major competitor has taken a course recently, it appears, to be more aggressive and try to gain market share.

We also are experiencing lower volumes in our cash logistics business there, which is very, very large, which is putting pressure on margins. It's always been our philosophy to hold our line on pricing. I don't think we're going to get much price relief in the French market during 2008, but I think there's things we can do on the efficiency side. And that will be offset by the security risk in France, which has risen quite dramatically. The number of security attacks on our industry has gone up dramatically year-over-year in France reflecting, I think, some of the economic strains in that country.

So we have to balance all these things out. I don't think France will have as good a year as had the last 2 years, and probably end up being down a little bit, but management is hard at work to balance that off with further diversification of our business lines.

Perfect, thank you; just a follow-up on the customer reaction to your attempting to pass through cost increases with price increases. Can you say something about how that is in the US, and maybe have you ever disclosed what your fuel cost as a percent to your total revenue please?

We don't disclose that.

Price increases in the United States are reasonable, reasonable; we're getting the I would say inflationary cost increases. A little concerned about fuel price increases to make sure we don't have as large a lag because of the rapid increase. That's probably my biggest concern.

And the major contracts tend to be 2 and 3-year contracts, and there's not too many major contracts that are up for renegotiation, so if they were negotiated 2 years ago or 3 years ago, they've probably had a CPI index in them, and the automatically kick in.

Perfect, thank you very much.

Yvonne Varano, Jefferies.

Thank you. In Brinks North America, you had some pretty strong top-line growth there, and I was just wondering if you could give us a little more color on where it's coming from and maybe an update on some of the products in the cash logistics side there.

Okay, we're getting pretty good strong revenue growth in the Southeastern part of the United States, and the Southwestern part of the United States; relatively flat elsewhere. And I would also say the Northeastern part of the United States, the competitive environment is changing a little bit, and we're able to grow there.

But as you take on business, it takes a quarter or two tot get the performance to fall to the bottom line as we assimilate the new business. But our pipeline is good, and actually our revenue growth in the US business was higher this quarter than it's been probably for the last 5 or 6 quarters, other than seasonally adjusted.

I'll also tell you that our Canadian Company had a good banking season. When the banks come up for the renegotiation of their contracts, which typically are 3-year contracts, we have gained share in Canada, which is helping our numbers.

Okay, and then is some of that growth coming from the ability to increase the outsourcing services that you offer?

Yes, there's no question, and we expect more of that to come.

Any metrics on how big that is now?

If we -- I think our, worldwide we've reported publicly our cash logistics business is $500 million to $600 million I think we've disclosed publicly before. In the US, it grows lumpy. If we sign a new bank and we take it on, it can be a 15% to 20% growth rate, so we have things in the pipeline that we're working on, and you have to pop them, and when the pop, you'll see them in our revenue figures.

And did we get some of those in Q1?

No, the first quarter, on the cash logistics side, it was very, very flat revenue-wise.

Okay, thanks very much.

Beth Lilly, Gabelli.

Good morning; I wanted to talk about your security business, and you know Michael, you've talked in the past about making acquisitions on the commercial side and growing out that piece of the business. And as valuations are coming down, would you say you're looking at more commercial properties as opposed to residential properties?

Absolutely; the residential properties, we can still create customers much cheaper than the acquisition market is on the residential side. Most of our focus has been on the commercial side and will continue to be there.

And remind us again as you look to grow that side of the business, it's a lower margin business, correct?

Actually, the way we're growing the commercial business, which is small to medium sized, which is really what we've tackled so far at Brinks Home Security, those margins aren't so bad because we get more cash up front than we do on the residential side, and (inaudible) rates can be a little bit higher. So at the current point in time, I think it's just as attractive as our residential business.

Do you have an objective in mind in terms of 3 to 5 years from now on the security side of the business, do you want it to be x% commercial and then x% residential, or I mean how do you think about that business in terms of --?

Well, ex any acquisitions, all right, the commercial side in 5 years, in my judgment, could be as high as 20% of that business.

Okay, so that's just organic growth.

Organic growth with small and medium sized companies.

Okay, okay thanks.

Beth, that really fits our business model, right; that was monitoring and installing, much different than the high-end residential or the mid or large scale industrial type products.

Okay terrific; and then again, just so I can get clear, your margins won't go down then.

Our margins, the faster we grow the home security business, the more pressures on our margins because we lose money; it slows down, it goes up, as I know you are well aware of.

So if the market picks up on the home technology side, which is our new home builders, and which I don't expect it to pick up this year, if that market comes back, even though we've shrunk in that area, we've gained share, we've gained market share. I mean, people have disappeared. So if the new home sales inventory finally shakes itself out, whether it's 2009, 2010, I think the acceleration of that business will be a very, very positive factor for BHS.

Okay terrific, okay; all right, and then Bob just best of luck to you. You've been a delight to deal with over the years, and enjoy your retirement.

Thanks Beth; I've always appreciated talking to you for a number of years. I guess it probably goes back 8 or 9.

Yes it does, thanks so much.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time.