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On CNBC's "Mad Money", Jim Cramer said that CVS Health Corp (NYSE: CVS) is a great stock and a cheap stock, but he is concerned that it is going to have to compete with Amazon.com, Inc. (NASDAQ: AMZN). Cramer thinks that Brink's Company (NYSE:...


More than meets the eye, doesn't just apply to transformers. Although, The Brink's Company (NYSE:BCO) is best known for providing fearful homeowners with peace of mind through its home security devices and related security services, the company makes most of its revenue from providing armored car transport for cash, diamonds, and other valuables. In fact, jewelers throughout the world depend on Brinks to transport diamonds from mines in Africa and Asia to the factories where they are cut and polished and to their final destination in retail stores. Brink's fastest growing source of revenue, however, is its check digitization software. The software allows banks to create digital images of checks as they are deposited into an ATM and reduces banks' cost of clearing checks. Over 16% of the company's revenue came from licensing the software in 2007, and the company expects to roll it out to 6 to 10 of the top 25 banks by the end of 2008.

In 2008, Brink's will spinoff Brink's Home Security. The transaction is expected to be completed in the fourth quarter of 2008 and shareholders will receive a tax free distribution of stock at its completion.[1]

Brink's Inc. will also be building newer and more technologically advanced versions of their distribution centers around the world during the 2008 fiscal year. Distribution centers play a large role in transporting valuable goods across multiple countries by by serving as nodes where specific services are offered and the status of ongoing tasks are monitored. The new centers will increase the company's capacity to handle the complex logistics associated with the transport of large quantities of valuable items through multiple countries, provide customers with greater ability to monitor their items and reduce the overhead costs as certain monitoring and order intake tasks are automated. [2] In fiscal 2007, close to $141.6 million was allocated towards accomplishing this end and Brink's has already budgeted up to $195 million dollars in fiscal 2008 for this expansion.[3]

Business Financials

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Fast economic growth, lower service costs, and increased margins in the emerging economies overseas has increased the amount of revenues from overseas transactions.[4]

Globally, Brink’s Company has 492 branches operating in 37 countries and 57,000 total employees with more than 60% of their total revenue derived from overseas sales.[5]

The Brink's Company offers its services under two independent brands: Brink's Inc. and Brink's Home Security. During the 2007 fiscal year, total revenues exceeded $3 billion and total net profit amounted to $337.5 million From 2005 to 2007, Brink's Company overseas revenue grew by 38.4% due largely to rapid growth in its Latin America segment that was driven by increased demand of services, lower service costs, and increased margins. [6] During the 2007 fiscal year, overseas revenue accounted for 68% of their total revenues. [7]

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Revenue and operating profit growth in Brink's Inc. have remained consistent over the past 4 years[8]
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A large portion of both operating profit and revenue is derived from Brink's Inc.[9]

Segment Breakdown

Brink's Inc.

Brink's Inc. provides armored car transportation, ATM servicing, currency and coin processing to both commercial and governmental agencies around the world. It has approximately 10,000 vehicles and 800 facilities all dedicated to providing its clients with a wide array of services ranging from cash-in-transit (CIT) armored car service, ATM replenishment and servicing, and global services which involves the the secure transportation of valuables. [10]

Brink's Home Security

Brink's Home Security (BHS) is the second-largest provider of security systems for residential and commercial properties.[11] The primary consumers of BHS are residents of a single-family home and this cohort makes up more than 90% of BHS's customer base.[12] On February 25, 2008, as a result of a review of strategic options that began in November of 2007, Brink's announced that it will be spinning off this sector of its business into a separate publicly traded company. [13] Investors will receive a tax free distribution of stock as the deal is finalized in the fourth quarter of this year.

Key Trends and Forces

A declining US dollar in 2008 will boost Brink's revenue

During the 2007 fiscal year, more than 60% of Brink's revenue was obtained from its overseas operations with a significant amount coming from Latin America, 22%, and the Eurpean, Middle East, and Africa (EMEA) region.[14] As a result of a declining dollar during the 2007 fiscal year, revenue was higher by $142.6 million and net income was higher by $39.7 million.[15] If the dollar continues to decline in fiscal 2008, Brink's annual revenue will be driven higher.

Brink's Inc. continued expansion of its proprietary software in fiscal 2008 will increase total revenue

In the second quarter of 2007 Brink's introduced a software system dedicated to the imaging and processing of checks that, by the first quarter of 2008, was handling and clearing more than 1 million checks a month. This software is helps banks to cut transportation costs by digitizing the process of clearing checks as they are deposited at a bank. By the end of the 2008 fiscal year, Brink's expects to be able to service six to ten of the top 25 banks in the United States.[16] This service is offered in a bundled package that includes such things as real-time bank vault cash inventory software which contributed, in fiscal 2007, to 16% of Brink's revenue or $434 million dollars. [17]

The perception of violence and crime has long been positively correlated with business growth for security firms[18]

In 2006, there was close to 10 million property related crimes such as theft and burglary.[19] Whle this sounds like a large number, it actually represents a decline in crime rates. Robberies in metropolitan cities, where BHS has most of its clients, for instance, decreased at a rate of .6% in 2007. [20] However, research has shown that perceived levels of crime are consistently much higher than actual levels. In other words, fear is good for business. [21]

The contraction in the US Housing Market will play a significant role in BHS's ability to expand its new client base [22]

BHS was able to capitalize on the strong US housing market in 2005 by building formative relationships with home builders and subsequently increasing their rate of growth in new installations. While revenue and profits have grown at a steady pace, there was a decline in the customer base during the 2007 fiscal year that, if continued will have a negative effect on future revenue streams. Not only has there been an absolute decrease in the customer base but there was also a simultaneous increase in the customer disconnect rate, a ratio comparing the number of customers who cancel during the period with the total number of customers, to 7% which is a .6% increase over the previous period. [23] However, more than 50% of customers who do disconnect do so as a result of business or residential relocations, which lie outside of Brink's control. Up to 30% of the customer disconnects that occur in a given year are financially motivated. [24]

During the first quarter of 2008, the contracting housing market led to growth rates for BHS' customer base, increased customer disconnect rates and greater payment delinquency. These factors have all affected the bottom line of their operations but analysts still expect Brink's to post earnings of .79 per share in the first quarter of 2008, a .17 increase over first quarter results from 2007.[25]

Competitive Analysis

The competitive landscape within the security and protection service industry is highly fragmented with numerous regional and local players. The standard consumer in this market is the single family home owner who seeks an extra layer of protection for their home. Therefore, the rate at which firms are able to retain customers or prevent customers from disconnecting their service will directly correlate with net income.

Customer Data
Disconnect Rate
The Brink's Company 7.0%[26]
ADT Worldwide 12.3%[27]
Protection One 8.6% [28]
Monitronics International 12.2% [29]

The market for the global transportation of valuables and cash management is dominated by multinational organizations that can be differentiated by the number of facilities and vehicles that they are able to employ for their operations. This metric indicates the breadth of a firm's logistical network which will dictate its ability to provide clients with an integrated delivery of services.

Property Data
Facilities Vehicles
The Brink's Company[30] 799 9,065
Group 4 Securicor [31] 500 9,000
Securitas AB [32] 274 N/A
Prosegur [33] 600 4,700
Garda World Corporation [34] 287 2,000

Market Share Analysis

The security and protection services industry is comprised of more than 40 publicly traded companies with a combined market cap of $22.5B. Brink's is among the top five leading firms within this sector and a brief comparison is given below.

2007 Data [35]
Market Capitalization P/E
L-3 Communications Holdings (LLL) $13.7B 18.7
The Brink's Company $3.2B 22.80
Geo Group $1.4B 32.90
Checkpoint Systems $1.1B 19.22
L-1 Identity Solutions $1.0B 56.68


  1. Yahoo Finance(2/25/08): "Brink's to Spin Off Home Security Unit"
  2. Brinks Journal: January 2008 Page 9
  3. BCO 2008 10K Statement Page 57
  4. BCO 2008 10K Statement Page 7
  5. Thompson Reuters Financial Services: "BCO Stock Description"
  6. BCO 2008 10K Statement Page 8, 32
  7. BCO 2008 10K Statement Page 5
  8. BCO 2008 10K Statement Page 7
  9. BCO 2008 10K Statement Page 12
  10. BCO 2008 10K Statement Page 7
  11. Brink's Company Website
  12. See 5
  13. See 3
  14. BCO 2008 10-K Statement Page 17
  15. BCO 2008 10-K Statement Page 36 and 81
  16. Brink's Journal: January 2008 Page 5
  17. BCO 2008 10K Statement Page 10
  18. New York Times (10/8/1990): "Crime Can't be Worse, Business Can't be Better
  19. Federal Bureau of Investigation: Uniform Crime Report 2006
  20. FBI 2007 Preliminary Semi-annual Uniform Crime Report
  21. Wayne State University College of Urban, Labor, and Metropolitan Affairs(6/14/2005): Reality vs. Perceptions An Analysis of Crime in Downtown Detroit
  22. BCO 2008 10-K Statement Page 18
  23. BCO 2008 10K Statement Page 13
  24. BCO 2008 10K Statement Page 15
  25. Yahoo Finance: BCO Analyst Estimates
  26. BCO 2008 10-K Statement Page 15
  27. TYC 2008 10K Statement Page 15
  28. PONE 2006 10K Statement Page 33
  29. | Monitronics Intl. 2006 10K Statement Page 21
  30. BCO 2008 10-K Statement Page 15
  31. G4S 2007 Annual Report Page 4
  32. Mobile Services Organizational Overview
  33. Prosegur Global Operations
  34. Garda 2008 Annual Report Pages 8,10
  35. Yahoo Finance: Security & Protection Services Industry Browser
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