Brinks Co (BCO) 2012 Q3 法說會逐字稿

Welcome to The Brink's Company third quarter 2012 earnings call. Brink's issued a press release on third quarter results this morning. They Company also filed an 8-K that includes the release and the slides that will be used in today's call. For those of you listening by phone the release and slides are available on the Company's website at brinks.com. (Operator Instructions).

Now for today's Safe Harbor statement. This call and the Q&A session contain forward-looking statements. Actual results could differ materially from projected or estimated results. Information regarding factors that cause such differences is available in today's press release and in the Company's most recent SEC filings.

Information presented and discussed on this call is representative of today only. Brink's assumes no obligation to update any forward looking statements. The call is copyrighted and may not be used without written permission from Brink's. It is now my pleasure to introduce your host evidence Ed Cunningham Director of Investor Relations and Corporate Communications. Mr. Cunningham, you may begin.

Thanks, Denise. Good morning, everyone. Joining me today are CEO , Tom Schievelbein and CFO, Joseph Dziedzic. As most of you know we report results on both a GAAP and non-GAAP basis. non-GAAP results exclude certain items such as U.S. retirement expenses , income taxes, asset acquisitions and dispositions. Non-GAAP results also adjust the tax rate to the mid point of our full year non-GAAP estimated range which is 37% to 40%.

The summary of non-GAAP to GAAP EPS is on page two of the release. More detailed reconciliations are also provided in the release and in the appendix to the slides we are using today. They slides are included in this mornings 8-K filing and are available on our website. From this point our comments will focus on non-GAAP results which we believe make it easier for investors to assess operating performance between periods.

Non-GAAP earnings were $0.50 per share versus $0.60 last year . The decline was due primarily to lower profits in Latin America which more than offset profit gains in Europe and North America. The segment margin rate was 6.2% down from 7.2% last year. Revenue fell 2%. Organic revenue growth which excludes the currency impact was 6%. Currency translation had negative impact of $76 million on revenue, $5 million on profit and $0.06 at the EPS level.

Please note that page seven of the press release provides a summary of collected results and outlook items that should help those who wish to forecast 2012 results in more detail. In addition to guidance on revenue and segment margin it includes our outlook for non segment expense, interest expense, tax rate, non controlling interest, capital expenditure , capital leases and depreciation and amortization. I will turn the call over to Tom.

Thanks, Ed. Good morning everyone. I am going to start with some brief comments about the quarter and our outlook and then I will cover some of the actions we are taken to improve both short and long-term results. Joe will provide a detailed review of the quarter and the assumptions behind our guidance.

The real story behind the third quarter earnings was profit decline in Latin America most of which was caused by two items a $4 million write off related to a government receivable in Argentina and profit decline of $4 million in Venezuela due to our inability to fully recover value-added tax receivables from the government. We expect continued volatility and profit pressure in Venezuela. The combined impact of these two items was $0.09 per share combining these two items with the $5 million currency impact reduced the year-over-year earning by $0.15 per share. As a result we have adjusted the segment margin rate guidance for 2012. We had expected to finish the year at 7%. We now expect it to be closer to 6.7%. Our initial outlook for 2013 calls for a margin rate of about 7% which including solid operating margin expansion while factoring in significant uncertainty in Venezuela, continued investment in IT based productivity and higher investment aimed at further profit growth in Mexico. We expect organic revenue growth to remain in the 5% to 8% range for both 2012 and 2013.

My first 100 days since becoming the permanent CEO were largely dedicated to meeting with employees and customers and shareholder. We are redefining what it means to be customer centric and what the benefits of doing so mean to our customers as well as to Brink's. We are also conducting a thorough review of which functions should be centralized versus centralized at the global, regional or country level. I expect these initiatives to yield positive results including lower costs, more effective decision making and higher profits.

Our challenge is to deliver better results in the near term as we transform Brink's to achieve sustainable growth over the longer term. As we look ahead to 2013 I believe we can deliver modest profit growth while investing in the necessary resources to position us for the longer term. So my primary focus is to reposition the Company for accelerated growth in 2014 and beyond. We are making solid progress if North America and Europe. We are assuming there will be no meaningful revenue growth in either region and we certainly can not assume that market conditions will improve at least in the near term. Therefore sustaining this progress and driving margins in both regions toward the 7% range over the next three years will require additional cost reductions and productivity improvements.

In Latin America we expect continue growth despite the recent profit decline. With the exception of Venezuela the outlook for the region as a whole remains positive, especially when you consider the upside impact of our goal to achieve a double digit margin rate in Mexico. Successful execution in each of these regions is critical to profit growth over the next three years. We are not assuming a significant contribution from new higher value solutions until the end of 2015 or so. By then we expect to have achieved substantial margin expansions in our core businesses that will be supplemented by an infusion of higher margin revenue from new services. These would include such things as full-service ATM support and other services that help our customers operate more efficiently.

I am now going to close with a summary of some of the actions we have taken aimed at both short and long-term results. In North America the gains we achieved thus far are the result of head count reductions and other cost cutting initiatives. The benefits of these actions have been partially offset by continued price and volume pressures. But we are on track to achieve the lower end of the margin rate guidance we provided earlier in the year. We have or are in the process of consolidating selected CIT and cash processing operations among several locations. We are closing seven branches and we expect exit certain markets by year end. During 2013 we should also begin to realize the benefits from some of our IT based investments that we are making in back office productivity and route optimization tools. Initial pilots have been promising. But we need to roll out these changes across the enterprise to get a true reflection of savings.

In Europe our portfolio review is ongoing and beginning to yield opportunities. As I said before if we determine we cannot achieve an acceptable return in a certain market we will take steps to reduce the presence there or completely exit that market. As noted in the earnings release we recorded $4 million impairment related to reshaping of our footprint in that region. Our review will continue until we are satisfied that we are achieving that acceptable return. We will provide more details when it is appropriate to do so. Instilling more discipline into our Company wide capital allocation process is another priority. Despite spending more on IT based productivity initiatives our full year capital expenditures should be more than 10% below last year.

Finally, since none of this happens without effective leadership we are also strengthening our leadership team in several key areas. The heads of North America, Europe , Latin America and Asian Pacific regions now report directly to me. A search is underway for a new president of North American operations. Amit Zukerman President of Brink's global services has assumed additional responsibilities for the Asia-Pacific region where we expect to reduce costs by consolidate that regions administrative functions with global services. At the corporate level we have recently hired a new chief human resources officer, Holly Tyson. Holly comes to us from Bristol-Myers Squibb, and is playing a key role in planning the leadership changes needed to achieve long-term growth. In addition to the North American position we have searches underway for a new Chief Information Officer and new Chief Commercial Strategy Officer. Each of these positions will be instrumental in shifting our revenue to services that generate higher margins.

In summary we have taken action on several fronts in an effort to improve near term results as we transform the Company to achieve sustainable long-term growth. We will continue to take the decisive actions necessary to improve performance. Joe is up next. Then we will open it up for questions. Joe.

Thanks, Tom. I will start with a summary of third quarter results. Revenue fell 2% in total but was up 6% on an organic bases as solid organic growth in Latin America and Europe was offset by unfavorable currency impact of 8%. Segment operating profit fell 16%. As unfavorable currency and a profit decline in Latin America more than offset improved profits in Europe and North America. Earnings fell to $0.50 per share.

I have added the year-to-date totals at the bottom of slide nine to highlight that in spite of the unfavorable currency impact of $12 million we have still grown segment operating profits $7 million. And that earnings per share has grown 10% year-over-year to $1.47. The decrease in segment profit reduced earnings per share by $0.14. There were three significant items that drove this decline. Unfavorable currency reduced earnings per share by $0.06. The write off of a government receivable in Argentina reduced earnings per share by $0.05. And our inability to fully recover value added tax receivables from the Venezuela government reduced earnings per share by another $0.04. The receivable write off in Argentina relates to a government program designed to incentives the transportation industry to hire and retain union employees. This program started in 2005 and was terminated by the government earlier this year as a government cost cutting measure. We have concluded we are unlikely to receive payment of this receivable that relates primarily to the year 2011. In Venezuela the recovery of value added tax receivables will be an ongoing cost to the business. But will only be about $0.01 per share per year. The third quarter impact of $0.04 included about four years worth of recovery cost. The total impact of these three items was $0.15 per share. The rest of the business was up slightly as the improvements in Europe and North America were partially offset by severance and timing of price increases to recover wage inflation in Latin America.

For the fourth quarter we expect segment profit growth to drive improved earnings per share with no significant change in interest cost or tax rate. North America and Europe profit should continue to improve. While Latin America profit is likely to be down compared to an extremely strong fourth quarter last year in Venezuela. As Ed mentioned we provide a full year outlook for these and other items in the earnings release. It shows both non segment and interest expense coming in flat for the year. We expect non controlling interest expense to be below year ago levels due to a profit decline in Venezuela. The tax rate should remain between 37% and 40%.

On year-to-date basis earnings per share is up $0.13 per share or 10%, in spite of three significant head winds totaling $0.24 per share. Unfavorable currency is negatively impacting earnings per share by $0.15. And the two items form third quarter in Venezuela and Argentina had a $0.09 per share impact. The rest of the business is generating $0.37 per share of growth. Driven primarily by Europe and Latin America. Currency and geo-political volatility is a fact of life for a global company operating in as many places as we do. We will continue to drive operational improvements in the business and clearly communicate the impact of these environmental factors.

Let's look at total segment results. Organic revenue growth of 6% is in line with annual guidance of 5% to 8%. Segment margin rate declined by 100 basis points to 6.2% reflecting profit growth in Europe and North America that was more than offset by currency and previously mentioned items in Argentina and Venezuela. We know expect the full year margin rate to come in around 6.7% with organic revenue growth of about 6%. We also anticipate about 5% of downward pressure on revenue from currency due to stronger U.S. dollar. Through nine months our segment margin rate stands at 6.2%. The assumptions behind our 6.7% annual rate guidance includes a fourth quarter of continued improvement in Europe and North America and solid profit growth across most of Latin America with the exception of Venezuela.

Venezuela experienced a very strong fourth quarter last year driven by retro active price increases and strong volumes which will be difficult to match in 2012. We continue to serve our customers in Venezuela in an increasingly difficult environment. Inflationary pressure have become more difficult to recover and this has impacted our margins in 2012. We will continue to make the necessary investments in Venezuela to protect our employees and serve customers but we do not expect margins to expand in the near term.

North America revenue was down 4%. The trend is expected to be flat to down slightly as it has been for the past three years. We continue to take the necessary steps to generate productivity in the business including exiting unprofitable markets and consolidating branches to fund the necessary investments to generate margin expansion in the next few years. We are very aware that we cannot cut our way to sustainable growth and profits. That is why we continue to focus on improving service levels and cost competitiveness to win new business at profitable rates and developing new service offerings. Consistent with our message all year we expect full year margins to be at the low end of the range of 4.5% to 5.5%. We have tightened the range to 4.5% to 5%.

International segment revenues increased 9% organically reflecting solid growth in Latin America and Europe which was more than offset by negative currency translation. Operating profit declined due to the Argentina government receivable write off, our inability to fully recover our value-added tax receivables from the government in Venezuela, increase severance and the timing of price increases to recover wage inflation in Latin America. Our Mexico operation continued to improve through the third quarter and we expect it to deliver sold margin expansion in 2012. Through the third quarter margins are ahead of the full year 2011 margins of 2.6%. For the full year we expect international operations to deliver organic revenue growth in the 7% to 10% range. However, we anticipate negative pressure of 5% to 7% from currency. The full year margin rate for international currently at 6.7% through nine months should end the year between 7% to 8%.

Year-to-date cash flow from operating activities excluding changes in customer obligations and discontinued operations declined $48 million. The decline versus last year was driven by $14 million in pension payments to our former CEO and Chief Administrative Officer, higher tax payments of $14 million driven by the timing of tax refunds, increase in working capital from organic growth and receivable collection timing partially offset by the recovery of value added tax payments in Venezuela. Year to day capital expenditure and capital leasings declined by $27 million versus last year as we continued efforts to reduce maintenance capital spending through efficiency projects and reallocated more of our spending to growth and productivity initiatives.

The North America decreased CapEx by $19 million as we continued to reduce U.S. spending on maintenance CapEx and (Inaudible). while focusing the spend on productivity projects. The International segment CapEx spend decreased by $8 million year-to-date primarily due to timing of the delivery of armored vehicles particular in Mexico and Brazil. Total capital expenditures for the year are expected to be about $210 million versus $239 million in 2011. This is a reduction of another 25% versus our previous guidance of $235 million. We will continue to focus on efficiently deploying capital investments to maintain the level of safety and security that Brink's is known for while reallocating capital to focus on growth and productivity efforts.

Net debt increase from $232 million at the end of 2011 to $249 million at the end of the third quarter due to an acquisition in France and the impact of lower cash flow from operating activities. We discussed on our last earnings call that our near term U.S. pension payment requirements would be reduced by recently passed legislation. The revised payment schedule will be included in the third quarter 10-Q. I will summarize the changes. In 2012 our payments declined by $9 million. We expect 2013 required payments to decline by $28 million, and 2014 payments to decline by $19 million. So the total decline is $56 million through 2014. As we have said before the near term decreases will be offset by longer term increases which generally start in 2017 for us. It is important to reiterate our plan is to fund these pension contributions utilizing cash from operations or debt.

Our initial outlook for 2013 calls for organic revenue growth to remain in the 5% to 8% range with a segment margin rate of about 7%. This rate assumes solid overall expansion that will be tempered by lower results in Venezuela. Where we are assuming no margin growth on operational basis and the potential currency devaluation. We also plan to increase spending on critical productivity projects across the Company to drive the centralization and standardization initiative that Tom talked about earlier. We will provide more details on the 2013 outlook when we report our fourth quarter results. Denise, let us open it up for questions.

Thank you, sir. (Operator Instructions). Our first question will come from Ian Zaffino of Oppenheimer. Please go ahead.

Thanks, guys. The question will be on Venezuela. With increased uncertainty there and increased risk, does it make sense to eventually chose to exit that market.

Ian , Tom Schievelbein . It is good to hear from you. We are looking at all of the issues surrounding all of our countries. I think Joe has more details to provide on Venezuela. We are not currently looking to exit Venezuela , so, Joe , do you want to talk more. We are trying to provide as much visibility and transparency as we can.

Hi, Ian. Venezuela margins have been strong in past years. We have shown you in our earnings per share walks and bridges that the earnings Venezuela are down on a year-over-year basis. It is down partially because of the value-added tax issue, but the pressure of Venezuela from wage inflation and our inability to fully recover that through price increases is causing margin contraction. We still like our business in Venezuela. We still have a strong management team down there, we have a strong market position, and we believe at some point we will be able to (Inaudible). the earnings from Venezuela. We are going to keep running the business as best we can and manage through the issues that we are dealing with. Clearly it is having an impact on our profitability on a year-over-year and we expect it to have further pressure on 2013 earnings. Based upon the recent election results we would expect the pressure to continue and we think there is a strong potential for devaluation which is what we assuming when we look forward to 2013. We are planning for the worst and hope for the best.

Okay. On Mexico, I know you have some significant margin expansion potential there. What are you specifically doing there? What is the pace of the margin ramp we should expect.

In terms of the pace of the margin ramp it was 2.6. Last year we had expansion this year and we said we would get to double digit margins by 2015. A lot of what we are doing is looking at productivity improvements making sure the operation is running as smoothly as possible. We continue to invest in Mexico and we are utilizing our global services organization to improve margins in Mexico. Joe, anything further.

At the beginning of the year we gave guidance on Mexico that said we didn't expect significant margin expansion or contraction in 2012 versus 2011 because we were working to reinvest the productivity and efficiencies we were gaining to accelerating the margin expansion. What we have found this year is that the investments we have made have mostly been CapEx. We haven't had to spend as much that hits the P&L in terms of expenses to drive the efficiencies and productivity. So we have realized margin expansion on a year-to-date.

We are ahead of where we were last year from the 2.6% margin. We are above that year-to-date and we expect to be above that when we get to year end this year. We are very much on tract to get to our 10% by 2015. The margin expansion depending upon what it costs us to make the changes we need to make, it may be a bit lumpy and it maybe more linear toward the 2015. We have to wait to see what it cost to take the actions necessary.

Thank you very much.

Our next question will come from Clint Fendley of Davenport. Please go ahead.

Good morning gentlemen. First question I know the guidance has changed here just slightly for North America. Obviously not a big difference. But were there any additional contract losses in the quarter or since that time in the region?

Clint, this is Tom, no there really aren't. The reason we tightened up the guidance is for the last two or three-quarters we have been talking about the 4.5% to 5.5%. We said we could get to the lower end of that range through actions that we would take, but to get to the higher end of that range we need some tail winds from the market. Obviously we have got no tail winds from the market. We haven't seen in general an improvement in the economic situation in the U.S. or North America in general, but the U.S. in particular. That is the reason that we have tightened up the range. We have seen the improvements that we knew we could get through our own actions.

What about as far as, I know you have talked about the investments that you have made in some of your back office and you had anticipated that may be that could help in you the second half, but it is probably more of a 2013 event. Is that still your thinking on that?

It is. As I said in my comments we have had a couple of pilots that are underway at a number of branches. They are returning promising results, until we roll it out across the enterprise it is really pretty hard to give definitive position.

Okay. And the other aspect on your guidance the CapEx that is down by about $25 million. I know you explained in your commentary that a part of that at least is due to CompuSafe. I know you have spoken in previous calls about tweaking the CompuSafe offering. Is that something you are still attempting to do or is that off the table. Maybe a general update on CompuSafe and where you stand with that.

I will give you a general comment on CompuSafe and Joe can give you any detail. The issue on CompuSafe is we were not seeing the kind of margins that we thought we should for that solutions product, so we constrained the capital and that is driving up the margin on that particular opportunity which is exactly what we had anticipated. With that, Joe, any other comments?

Sure. We have streamlined the offering and standardized some of our processes and re tiered our pricing in the U.S. to ensure the customers are getting what they are willing to pay for and we are not incurring costs for things that our customers do not see value in. We are grow CompuSafe outside of the U.S. The margins outside of the U.S. have proven to be much better than what we have experienced in the U.S. So our focus in the past year or year and a half has been to get the profitability and returns on CompuSafe in the U.S. up to levels that are acceptable. That is part of why you are seeing slower growth in the CompuSafe service offering in the last year or year and a half. We still like the product very much. We think it is a differentiator for us. We just have to make sure it delivers the returns we expect for the investments we are making.

Thank you. Very helpful. Last question here on Venezuela. You mentioned a minute ago in the prior question you are assuming the devaluation in 2013. Is that in your guidance then.

It absolutely is. For 2013 we have assumed that Venezuela's local currency margin does not improve. We have assumed effectively flat profitability from operations year-over-year. And then we put a devaluation on top that. Year-over-year we would expect Venezuela to be negative impact on earnings similar to what has happened in 2012. We are planning for the worst and hoping for the best. We like our business in Venezuela , we like our management team, we like our position we just have to manage through what is becoming an increasingly more difficult environment.

Okay. Thank you.

Our next question will come from Jamie Clement of Sidoti . Please go ahead.

Tom, Joe , Ed, good morning.

Good morning, Jamie.

Joe, could you repeat for me because I couldn't quite get it all. Your 2013 guidance with respect to Latin America. I am not sure if you got into Venezuela specifically, obviously I heard your answer to Clint's question. But with the devaluation are you implying that margins in Latin America should be roughly flat in 2013 versus 2012? I can't remember the word you used.

We didn't reference Latin America margins specifically for 2013. What is happening with our guidance is globally the business margin is expanding very nicely within our targeted range, but when we assume that Venezuela has a devaluation and the margin dollars when you translate into U.S. dollars is a negative year-over-year, that has a dilutive effect on our margin rate for 2013. We would expect Latin America to continue to grow in 2013 on a year-over-year basis, the margins dollars and rates, but Venezuela will be a drag within that.

Let me put it this way, Jamie. The 7% that we provide to you includes the drag we anticipate from Venezuela. Other than that, it would have been higher.

Okay. But the 7% is for 2013, right.

That is correct.

I think we all know that your Latin America businesses are typically all things being equal more profitable than some of the businesses in your mature countries. I don't know what exactly you all are assuming in terms of a range of potential devaluations, looking back to 2009 the last time this happened it is not hard to make some assumptions. That is a pretty big chunk if they were to devalue to the parallel rate right now, right? I am curious are you assuming full devaluation to parallel rate or are you assuming someplace in between.

We are assuming somewhere in the neighborhood of 30% to 50% devaluation. If there are such things as experts on Venezuela everyone is predicting a 30% to 50% devaluation. We are no smarter than anyone else so we assume somewhere in that range.

Okay.

Just to reiterate on Venezuela. Venezuela is about 8% of the total Company revenues. We disclosed those in the Q. The margin ratings in Venezuela have historically been very strong and much higher than the Company average. With the contraction in margins that we have seen in Venezuela this year it is still above the Company average but nowhere near as significant as it has been in prior years.

Okay. Switching gears if I may. This is a rare earnings season where we see organic revenue growth out of Europe out of any company. Considering this has been a challenging geography for you for several years now, I am curious, Tom , for your thoughts about what is going right for Brink's from a revenue perspective in that region.

Okay. It is in general obviously Europe is not the best from a macroeconomic perspective, but when you look at each of the particular countries. You have to look at each particular country. France has been up year over year. The Netherlands has done a great job of increasing their revenues. Russia has done a very good job and a lot of that is driven by our BJS operation but Russia has done good job of increasing their revenues. When you add those together with the flatness of the rest of it, that is pretty much where we see the growth that we have had in Europe.

Thank you all very much for your time.

Our next question will come from Michael Kim of Imperial Capital . Please go ahead.

Good morning. Turning back to North America, can you talk a little more about competitive pricing and the volume environment how much of that is secular driven versus competitive.

I think that most of the pricing we have seen is a follow on to the pricing we have seen over the last two or three years, and so as we look at that we see some of the large tier one banks continuing to have pressure and as a result we have seen if you call that secular or not, I am not sure. If you really look at most of our reduction so far in 2012, most of that comes from contracts that we probably lost a year or so ago and that we are starting to lose and they are starting to transfer out now as we speak. There remains some pricing pressure within North America.

Has the level of contract, dropouts similar this year as they were last year.

There is no difference. We are winning contracts as well as having some impact from where we have to transfer out.

In terms of new service offerings, can you talk a little about the progress there, especially ATM services and any quantitative data you can provide on total contract value.

What I can give you at this point is probably anecdotal. But we are in looking at two or three pilots around the world and some of those in the U.S. in terms of our new solutions in terms of ATM and other things. That is a work in progress right now. We are seeing some positive movement on that, but it would be premature to talk about particular customers.

One for Joe. Just looking longer term on CapEx. Is it your sense that this level here with a little less emphasis on maintenance and more on productivity is this the right level to be thinking about, or do you expect maybe further room on rationalizing the maintenance CapEx?

Michael, we are working through our 2013 detailed budget right now. We are going to continue to exercise prudence and judgment. We are going to invest in the regions where we have growth, and we are going to be pretty tough on reinvesting on maintenance. We are always going to invest to protect our employees that is something we will always do. We will never compromise that. I hope we can continue to grow CapEx, because we have the growth opportunities and investments that generate acceptable returns. When we get through our budgeting process after the fourth quarter earnings release, we will provide more guidance on that.

Okay. Thank you very much.

(Operator Instructions). The next question will come from Doug Greiner of Compass Point. Please go ahead.

Thanks. Just one for Joe. SG&A was up $7 million from last quarter and there is further leadership hiring coming. Will you update us with the outlook for SG&A going forward.

There is a lot of unusual items and different charges and expenses that we incur that hit SG&A. Sometimes it has some lumpiness. In general it should be growing at about the rate of the revenues and costs in the businesses.

Can you just review the head count reductions that you took. Is there more room there or are you done? That is it. Thanks.

The head count reductions in the U.S. have transpired other the last year and a half to two years. They were in the neighborhood of probably a thousand people or so. As we continue to look at solutions and closing branches obviously that could have an impact on head count reductions. There is nothing that is region wide in terms of head count reduction.

Doug, to give you specifics for third quarter on SG&A the two items in Venezuela and Argentina those charges hit SG&A this quarter. That was about $8 million of incremental costs.

Our next question will come from William Von Mueffling of Contillion.

Good morning. I have a quick question on the Argentine contract. Can you give us more color in terms of is there more business with the government, what happened is that the extent of it?

Sure. This is actually a government incentive that was offered to the entire transportation industry to hire and retain union employees. It was enacted in 2005 during a difficult economic environment in Argentina. The Argentina government decided earlier this year to terminate that benefit to the transportation industry. We have determined it is unlikely we will be able to collect that receivable from the government. It has been written off 100%. So there is no other government receivables related to this item.

Thanks.

And our next question will come from Chris Mancini of GAMCO . Please go ahead.

Good morning. Could you give us some more color on global services during the quarter. Specifically some color on what happened with diamond, gold, and jewelry flows. And related to that you mentioned I think in the commentary that Amit Zukerman was taking on additional responsibility. Are you reorganizing global services?

Well let me talk about the last one first. We are not reorganizing global services as much as we are taking advantage of the fact that most of the far east is global services. So we are consolidating the far east region with global services so that Amit takes on more responsibility and it is a opportunity for us to reduce some of the overhead expenses throughout the Company. So it is not a reorganization of global services as much as it is just a cost reduction. That is an opportunity for us.

Got it.

If you look at diamonds and jewelry markets, they are weak right now. This has got a lot to do with the economic situation throughout the world. We continue to support a lot of the diamond and jewelry shows and there was just one in Hong Kong which would indicate that there will be some continued weak demand in that particular line of business. If you look at precious metals that is on the up tick. It does vary a little bit about the particular markets you look at whether it is the far east or London. If you have been reading the papers there is some major instability in a lot of the mines in Africa, primarily South Africa but in general Africa. That could have an impact. It is unclear yet what that impact could be. Overall global services is growing. But you do see some various of their particular markets have some pluses and minuses.

Just related to that. There was a lot of press about Brink's opening a new gold vault in London. I don't know if that is open or if there are startup expenses related to that in the quarter that were meaningful.

There are no startup expenses related to that in the quarter that were meaningful. It is started up, it is open.

Okay. Just lastly , again in the commentary you mentioned the value added services becoming a meaningful margin contributor at the end of 2015, is that a reflection of the sales cycle the lead time you need to get those services in place or is there something else going on there.

It is mostly the lead time. It is a much different sales cycle than our traditional businesses of CIT or money processing. It takes a lot longer because you have to get much more involved with the overhead and finances of the bank itself and you also then have to show them the savings that you can provide. It goes from being a short term sale to a much, much longer term strategic sale. That is really the reason for the extended sales cycle.

2015 is not that far away. Thanks guys.

No, but we have people working on it hard. Like I said we have pilots that are beginning.

Great.

(Operator Instructions). I am showing no additional questions in the queue. This will conclude our question and answer sessions. Ladies and gentlemen, we thank you for attending today's Brink's Company conference call. The conference has now concluded. You may disconnect your lines.