BCO OpCo Initiation

8/8/2019 BCO OpCo Initiation

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Ian A. Zaffino, [email protected]

Brian J. [email protected]

See "Important Disclosures and Certifications" section at the end of this report for important disclosures,including potential conflicts of interest.See "Price Target Calculation" and "Key Risks to Price Target" sections at the end of this report, whereapplicable.

Stock Price Performance

Q1 Q1 Q2 Q30

15

30

45

60

75

2009

1 Year Price History for BCO

Created by BlueMatrix

Company Description

Founded in 1859, Brink's is the oldest and

largest global provider of secure

transportation, cash logistics and other

security-related services to banks, retailers,

government agencies, mints, jewelers and

other commercial operators.

January 15, 2009 SPECIAL SITUATIONS/SPECIAL SITUATIONS

Stock Rating:

OUTPERFORM12-18 mo. Price Target $32.00

BCO - NYSE $24.44

3-5 Yr. EPS Gr. Rate 12%

52-Wk Range $41.14-$18.19

Shares Outstanding 45.8M

Float 45.0M

Market Capitalization $1,118.6M

Avg. Daily Trading Volume 890,268

Dividend/Div Yield NA/NM

Fiscal Year Ends Dec

Book Value $14.06

2008E ROE 10.0%LT Debt $145.0M

Preferred NA

Common Equity $654M

Convertible Available No

EPS Diluted Q1 Q2 Q3 Q4 Year Mult.

2007A 0.29 0.30 0.32 0.76 1.67 14.6x

2008E 0.70A 0.66A 0.63A 0.54 2.54 9.6x

2009E 0.45 0.36 0.51 0.53 1.86 13.1x

2010E -- -- -- -- 2.26 10.8x

Brink's Company

Initiate Coverage with an Outperform RatingSUMMARY

We initiate coverage of Brink's Company (BCO) with an Outperform rating and a12- to 18-month PT of $32. With the completion of a major asset divestitureprogram, Brink's now is a pure-play secure logistics company. It boasts anindustry-leading 17% share of the $14B global market. The company is net debtfree, and in our view, is well positioned to take advantage of a recent decline inacquisition prices. BCO trades at a highly attractive 3.5x 2009E EBITDA, which webelieve more than "prices in" FX headwinds, higher pension expense, the roll-off ofa one-time contract and political/economic risks in certain emerging markets.

KEY POINTS

s Brink's is the world's largest secure logistics company with 17% market shareand even more impressive position in its largest markets. It is the dominantplayer in Venezuela, enjoys a quasi-duopoly with Loomis in France, and boasts35% of the U.S. market. This leadership has enabled BCO to transcendcompetitive pressures and enjoy strong pricing.

s Brink's has successfully parlayed its core cash-in-transit business to capture"high value services," which yield higher margins and longer contracts. As oftenas possible, the company attempts to capture highly profitable businessopportunities, including money processing, virtual vaulting and intelligent safes.

s Since 1970, Brink's has logged positive revenue growth in all but 4 years (1973,1983-1985). Even in recessionary years, it's averaged growth of ~10%. Goingforward, management continues to believe long-term revenues can grow in the

high single digits, helped by the emerging economies and the increased use ofcash in the post-credit crunch world.

s Michael Dan has been CEO for ~10 years. During his tenure he helpedtransform BCO from a natural resource heavy conglomerate into alaser-focused secure logistics provider. BCO has divested numerous assets,including coal, BAX and Brink's Home Security. The results of these effortsappear in BCO's improving ROICe.g., 11% in 2007, vs. 4% in 2000.

s Initiate coverage with Outperform and $32 price target. Our price targetrepresents 4.7x EV/2009E EBITDA, vs. the group at 6x. We believe thisvaluation is appropriate, as it takes into account FX headwinds, higher pensionexpense, the roll-off of a large contract in Venezuela and political/economicrisks in certain emerging markets.

EQUITY RESEARCH

INITIATION OF COVERAGE

Oppenheimer & Co Inc. 300 Madison Avenue 4th Floor New York, NY 10017 Tel: 800-221-5588 Fax: 212-667-8229


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Investment Thesis

Founded in 1859 and based in Richmond, Virginia, Brinks is the worlds premier security

company. It recently completed an asset divestiture program, including the sale of its coal

holdings, the divestiture of BAX Global and the spin-off of Brinks Home Security, and is now a

pure-play secure logistics company. The companys offerings include Cash-in-Transit (e.g.

armored trucks and ATM servicing), High Value Services (e.g. cash logistics, money processing

and the transport of valuables) and other security services (e.g. airport, embassy and public

venue protection). BCO operates in more than 50 countries and employs over 50,000 employees

across ~800 facilities worldwide. The company is net debt free and trades at a highly attractive

3.5x 2009E EBITDA, which we believe more than prices in headwinds related to FX, higher

pension expense, the roll-off of a one-time contract and operations in certain emerging markets.

The following are the investment highlights:

Premier Security Company. With roughly $3 billion of annual revenues, Brinks is the largest

secure logistics company in the world. It operates 786 branches in more than 50 countries and

boasts a 17% share of the global market, vs. Group 4 Securicor plc (U.K.), at 14%, Loomis

(Sweden), at 13%, Prosegur at 6% and a host of smaller players, including Compania de

Seguridad (Spain) and Garda World Security (Canada). In certain regions, BCOs leadership

position is even more impressiveit is the dominant player in Venezuela, enjoys a quasi-duopoly

in France with Loomis, and leads the U.S. with a 35% share, vs. Loomis 30%. This leadershipposition has enabled BCO to transcend competitive pressures and enjoy strong pricing,

particularly since one of its main competitors is on the ropes. We look for Brinks to extend its

presence, particularly in the BRIC (Brazil, Russia, India, China) nations, where it could deploy an

estimated $50 million to $100 million on bolt-on and/or larger acquisitions.

Favorable Industry Trends. The number of notes in circulation has historically increased in the

low-double digits in North America and at an even faster rate elsewhere, including Western

Europe (e.g., 8.3% since the introduction of the Euro) and the numerous developing economies.

Latin America is one region that has witnessed a large increase in notes, as economic conditions

improve and wealth spreads throughout these mostly cash-based societies. The credit crisis has

also increased the use of cash, as credit and credit cards are less of an option to many

consumers and businesses. A second trend, which also has helped the company, is the push

toward outsourcing cash logistics. This trend is expected to continue and the market opportunitycould approach $2.3-$2.8 billion by 2010, representing a 10%-15% CAGR since 2006.

Full Complement of Services. Brinks has successfully parlayed its core cash-in-transit

business into more attractive opportunities, which it self-dubs, high value services. BCO

frequently looks to extend its relationships beyond just ATM services, armored car transportation

and point-to-point pick-up of cash/valuables. As often as possible it attempts to capture highly

profitable business opportunities, such as money processing, virtual vaulting and intelligent safes

(e.g., CompuSafe). These high value services now account for nearly one-third of revenues and

not only carry significantly higher margins, but also come with long-term contracts averaging 5

years (in vaulting and back office), vs. only 1-2 years for stand-alone CIT work.

Strong and Steady Revenue Growth. Since 1970, Brinks has logged positive revenue growth

in all but 4 years (1973, 1983-1985). Even in recessionary years, the entire company hasaveraged growth of ~10%. Going forward, management continues to believe it can grow long-

term revenues in the high single-digits per year and improve operating margins by 50 basis

points annually. We believe this strong growth can be attributed to the companys regional

diversification, its increased product offering, the growing number of notes in circulation,

managements willingness to shed poorly performing operations (such as the U.K.) and

investments in faster growing regions (such as the emerging markets).

Valuation. BCO currently trades at an attractive 3.5x and 13.1x our 2009 EBITDA and EPS

estimates, respectively. These multiples compare to the comparable group at 6.2x and 9.4x

2009E consensus EBITDA and EPS. We believe EBITDA is the more appropriate metric as BCO

is under-levered and its balance sheet is net debt free. We believe BCOs current valuation

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already reflects upcoming headwinds, including lower FX benefits, the roll-off of the Venezuela

contract, and higher pension expense. Our $32 price target represents 4.6x 2009E EV/EBITDA

and assumes the company can close the multiple gap with its peers. In terms of free cash flow,

we estimate $73 million, or $1.57 per share, in 2009, slightly below projected EPS of $1.86, as

the company continues to invest in its business. We believe Brinks could use its cash flow to buy

smaller players in the BRIC nations and, longer-term, resume its share repurchase program.

Risks

Under-funded Pension. Although Brinks froze its pension plan more than three years ago and

sold its coal business, as of December 2007 it had a gross pension liability of roughly $1.3

billion$963 million from the frozen pension and $570 million in legacy post-retirement medical

liabilities related to the coal business (which it has established a VEBA). As of September 2008,

BCO had assets to reduce the net liability to $160 million ($60 million in pension and $100 million

in retiree medical). However, interest rates have declined meaningfully and the lower discount

rate could increase the companys under-funded position. We estimate in 2009 and 2010, the

company will record a non-cash pension expense of ~$40 million and will make a cash payment

of $75-$125 million in 2010 based on the September under-funded levels.

Roll-off of Venezuela Contract. Brinks completed a significant project in Venezuela, where it

performed cash handling services to assist in the conversion to the bolivar fuerte from the

bolivar. We estimate the contract added more than $50 million to 2008 revenues and roughly $30million to operating profit. This activity was a large driver of growth in 2008, and will not repeat in

2009. While investors are aware of this situation, it nevertheless presents an optical challenge to

the companys financial results.

Foreign Currency Translation. Because almost 70% of revenues come from outside North

America (e.g., U.S. and Canada), fluctuations in currency, particularly the Euro, have a

meaningful impact on reported revenues. Foreign currency translation added $168 million to

revenues in the first nine months of 2008. However, operating profit tends to be naturally hedged

from currency fluctuations, as BCOs costs are often in the same currency as its revenues. As a

result, the $168 million FX benefit in the first nine months of 2008 impacted pre-tax profit by only

$9.6 million. Further, the recent strength in the dollar could reduce the 2008 impact modestly.

Fuel. With roughly 9,100 vehicles globally, BCO is a large consumer of fuel, on an absolutebasis. However, on a percentage of revenues basis, it is only in the low-single digits, as is

insurancethe other big expense. To cushion the impact of fuel, the company attempts to

structure its contracts to either pass-through the cost or add a surcharge to the base rate

charged. As a result, the company is able to limit its exposure to fuel price fluctuations to one

month.

Emerging market Instability. Brinks is one of the largest players in Latin America, where it

derives roughly 25% of its revenues and ~8% from Venezuela alone. This region tends to be

highly profitable for BCO, as the business opportunity is large and competition tends to be

fragmented. However, there is greater risk in Latin America in terms of safety and security,

geopolitical issues and the threats of currency devaluation., Nevertheless, BCO has strong

pricing power there and, in fact, is already raising rates in certain countries to at least offset the

impact of inflation., Further, the companys assets in Venezuela are only worth $90 million. It has

done business in the region for more than 40 years, where it operates in conjunction with a local

player under the local brand name.

Risk to Consensus Estimates. Although the company has been clear with the investment

community about the headwinds it will face in 2009, we believe Street estimates contain several

outliers that make 2009 consensus too high. In fact, 2009 consensus EPS of $2.14 is well

above our $1.86 estimate. To remedy this, we believe the company could provide guidance

either before, or in conjunction with, its fourth-quarter earnings report slated for early February.

Although we think the stock is attractively priced and management has clearly intimated the

headwinds, any earnings revision could negatively impact the share price.

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Business Description

Founded in 1859, Brinks is the oldest and largest provider of secure transportation, cash

logistics and other security-related services to banks, retailers, government agencies, mints,

jewelers and other commercial operators. It has recently completed an asset divestiture program,

shedding its weight freight transportation (BAX Global), natural resources, and home security

(recently spun off as CFL in October 2008) businesses and is now a stand-alone secure logistics

company. It boasts the premier global brand and garners the leading market share of 17%.

Figure 1: Global Market Share Breakdown

17%

14%

13%6%

50%

Brink's G4S

Securitas/Loomis Prosegur

Others

Source: Company documents

BCOs services are broken down into three segments. Its core business is Cash-In-Transit (55%

of revenue), which provides the foundation and infrastructure for its High Value Services offering

(32% of revenues). The company also provides Other Security Services (13% of revenue), such

as airport and embassy protection, but this is considered non-core.

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Figure 2: Segment Breakdown by Revenue

55%32%

13%

Cash-in-Transit & ATM Services

High Value Services

Security Services

Source: Company documents

CIT and ATM Services (55% of 2008E revenue)

Brinks core businesses are CIT (Cash-in-Transit) and ATM services, which represent ~55% of

total 2008E revenue. BCOs CIT business is based on meticulous security practices and high risk

management proficiency. This high level of customer service coupled with a premier brand gives

BCO the ability to capture premium pricing relative to its competitors. Contracts are typically 1-2

years and can be as long as 5 years. BCO is able to pass-through fuel and/or add surcharges,

but could experience a 1+ month lag, which could hurt the company in periods of rapid gasoline

price volatility.

Cash in transit includes armored car point-to-point pick up and delivery of cash, coins, checks

and other valuables. BCOs ATM operations service ~72,000 ATMs globally. The company

provides cash replenishment, cash monitoring and forecasting capabilities, deposit pick-up and

processing services. Pricing is based upon geography and per stop.

Value Added Services (32% of 2008E revenue)

BCOs core operations provide an extensive global network to lay the foundation for cross-selling

High Value Services (~32% of total revenue). These value added services enjoy high margins

and long, sticky contracts.

Global Services Brinks is a leader in secure long-distance transportation and logistics for

diamonds, jewelry, precious metals, securities, currency, high-tech devices, electronics and

pharmaceuticals. It already has an extensive global network in place, and it can leverage its

armored trucks and secure air and sea transportation to provide international shipping services.

Cash Logistics Brinks helps its customers manage their supply chain of cash, from point of

sale through transport, vaulting and bank deposit.

Money Processing: This service includes counting, sorting and wrapping currency as

well as cashier balancing, checking for counterfeit currency, account consolidation and

electronic reporting. Brinks advanced technology offerings include online cash tracking,

cash inventory management, check imaging for real-time deposit processing, and other

web-based tools.

CompuSafe: This patented service offers customers a system for preventing theft and

efficiently managing cash. This tool is for cash-intensive businesses such as

restaurants, retail stores, gas stations, entertainment venues, etc. A specialized safe

box (with system features such as currency-recognition technology, multi-language

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touch screens and electronic interface between point-of-sale and back office systems) is

installed in the customers facility. The contents can only be removed by Brinks

personnel and taken to a safe location, verified and transferred for deposit.

Virtual Vault: This solution enables commercial deposit processing virtually anywhere

and combines cash logistics, Web-based information tools and secure armored

transportation to help banks expand into new markets with minimal investments (without

expanding brick-and-mortar branch networks).

Other Security Services (13% of 2008E revenue)BCO protects airports, embassies, public venues and stores with electronic surveillance, access

control and trained patrolling personnel. These services are offered mainly in select European

markets (France, Germany, Luxembourg and Greece) and mostly relates to long-term contracts

to protect airports. This segment tends to have lower margins and is not truly a core of the

companys future direction.

Geographic Breakdown

BCO generates ~70% of revenues outside North America. France and Venezuela are its two

largest international markets, representing 22% and 11% of total revenues, respectively.

Because of lower competition and better pricing, we estimate international operations represent

approximately 82% of operating income.

Figure 3: 2008E Revenue Breakdown by Region

29%

22%21%

11%

15%2%

Nor th Amer ica France

Rest of EMEA Venezuela

Rest of Latin America Asia Pacific

Source: Company documents and Oppenheimer & Co. Inc.estimates.

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Figure 4: Historical and Estimated Revenue by Region

Revenues by Region 2006 2007 2008E 2009E 2010ENorth America 830.0 886.3 941.4 958.5 1,006.4

Growth 6.7% 6.8% 6.2% 1.8% 5.0%

International:

EMEA:

France 546.5 628.8 716.8 698.9 747.8

Growth 7.6% 15.1% 14.0% -2.5% 7.0%

Other 456.6 562.7 667.1 650.4 689.4Growth 2.9% 23.2% 18.6% -2.5% 6.0%

Total EMEA 1,003.1 1,191.5 1,383.9 1,349.3 1,437.3

5.4% 18.8% 16.1% -2.5% 6.5%

Latin America:

Venezuela 171.7 224.9 341.8 341.8 375.9

Growth 33.1% 31.0% 52.0% 0.0% 10.0%

Other 282.5 369.3 465.3 557.9 613.7Growth 24.9% 30.7% 26.0% 19.9% 10.0%

Total Latin America 454.2 594.2 807.2 899.6 989.6Growth 27.9% 30.8% 35.8% 11.5% 10.0%

Asia Pacific 67.0 62.6 75.0 82.2 90.8Growth -6.4% -6.6% 19.7% 9.7% 10.4%

Total International 1,524.3 1,848.3 2,266.0 2,331.2 2,517.7

Growth 10.6% 21.3% 22.6% 2.9% 8.0%

Total Revenue 2,354.3 2,734.6 3,207.4 3,289.7 3,524.1

Growth 9.2% 16.2% 17.3% 2.6% 7.1%

Source: Company documents and Oppenheimer & Co. Inc. estimates.

North America. This segment represents 29% of total revenue and operates 182 and 55

branches in the U.S. and Canada, respectively. It owns or leases 2,333 vehicles (26% of total

vehicles). BCO has ~35% market share in the U.S., vs. Loomis at 30%, leverage-challenged

Garda (Canadian) at 20% each, and several smaller players. We expect North American

revenues to grow ~1.8%/5% YoY in 2009E/2010E.

EMEA (Europe, Middle East and Africa). Brinks operates 249 branches in 21 countries across

Europe, Middle East and Africa. This segment represents 44% of total 2008E revenues, and over

half of the revenues are derived from France. In France, the company enjoys a quasi-duopoly

with Loomis, sharing almost 80% of the market. Other significant operations include the

Netherlands and Germany. We expect France and the rest of EMEA to exhibit a 2.5% decline inrevenue growth in 2009, as a stronger dollar could offset organic growth. However, on a constant

currency basis growth should be 6+%. We look for a return to growth of 6.5% YoY in 2010.

Latin America. BCO operates 211 branches in 7 countries, which contribute 25% to company-

wide revenues. Over one-third of revenues from this region are derived from Venezuela, with

other significant operations located in Brazil and Columbia. We expect Venezuelan revenues to

be flat in 2009, as $50 million of revenues related to the one-time Venezuela Currency

Conversion Project will not likely repeat. However, we expect the rest of Latin America to grow

20% in 2009 (7% organically and 13% from the recent Brazil acquisition). We expect 2010

revenue growth for Venezuela and the rest of Latin America to be 10% YoY.

Asia Pacific. BCO operates 32 branches in 9 countries, which contribute 3% to total revenues.

After a couple years of negative growth, due to the loss of a major Australian customer, this

region should exhibit high double-digit growth in 2008. We expect 10%/10% YoY revenue growth

in 2009E/2010E.

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Figure 5: North America and International Historic and Estimated Revenue

$250

$500

$750

$1,000

$1,250

$1,500

$1,750

$2,000$2,250

$2,500

$2,750

2004 2005 2006 2007 2008E 2009E 2010E

North America International


Figure 6: North America and International Historic and Estimated Operating Margin

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2004 2005 2006 2007 2008E 2009E 2010E

International North America


As BCO expands internationally, International margins have increased substantially. In 2008

operating margins were 10.1% - nearly double those of North America. These results were

partially helped by very high margins related to the one-time Venezuelan Conversion project.

Specifically, Venezuela changed its national currency from the bolivar to the bolivar fuerte on

January 1, 2008, and Brinks performed additional cash handling services to assist in the

conversion. This project brought $50 million of incremental revenues at a high margin. Excluding

this project, we estimate 2008 operating margins of 8.6%.

Foreign Exchange Rates

BCO reports its results in U.S. dollars, but derives 70% of revenues outside North America.

Naturally, revenues are highly affected by changes in exchange rates, particularly between the

dollar and the Euro. As the dollar weakens against the Euro, reported revenues increase. This

dynamic has resulted in FX revenue gains of 1%, 1.3% and 6% in 2005, 2006 and 2007,

respectively, and 8.5% in the first nine months of 2008.

The companys operating profit, however, is naturally hedged against FX fluctuations, as costs

tend to be in the local currency. Therefore, in the first nine months of 2008, FX only impacted

operating profit by $9.6 million, despite a $168 million revenue impact. With the recent strength in

the USD, it is likely FX could negatively affect revenues in 2009; however, its impact on the

bottom line could be meaningfully less.

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Return on Capital

Figure 7: Return on Capital

3.9%4.5%

5.2%5.7% 5.5%

4.9%

8.7%

10.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2000 2001 2002 2003 2004 2005 2006 2007

ROIC

Source: Company documents and Oppenheimer & Co. Inc.

As shown in Figure 7, management has significantly increased BCOs return on capital since the

beginning of the decade. This achievement can be attributed to the divestiture of non-core assets

and the expansion into more profitable businesses. As a pure-play, we estimate ROIC could

approach the mid teens.

Management

Michael Dan Chief Executive Officer, Chairman of the Board. Prior to his election as President

and Chief Executive Officer of the Company in February 1998, he served as President and Chief

Executive Officer of Brinks, Inc. beginning in 1993. He is a director of Principal Financial Group,

Inc. and Principal Life Insurance Company. Mr. Dan has been a director of the Company since

1998.

Michael Cazer Chief Financial Officer. Following the retirement of Rob Ritter, Mr. Cazer joined

the company in May 2008 as CFO. He has 20 years of financial experience in numerous

leadership positions at General Electric, most recently as CFO of GE Security. Prior to this role

he was CFO of GE Consumer and Industrial Europe and CFO of GE Fanuc. He holds a B.S. in

business and economics, magna cum laude, from Lehigh University.

Frank Lennon Chief Administrative Officer. Mr. Lennon was appointed Vice President and

Chief Administrative Officer in 2005. Prior to this position, he was the Vice President, Human

Resources and Administration from 1990 through 2005.

Estimates, Outlook and Balance Sheet.Pensions, retirement and other costs. BCO retains certain liabilities related to its former coal

operations, including postretirement medical and black lung benefits. These liabilities and

expenses are funded through cash contributions to a Voluntary Employees Beneficiary

Association trust (VEBA). Most of the covered individuals are near, or above, the normal

retirement age, so these obligations should begin to decrease over time. BCOs most recent

cash contribution to the VEBA was $225 million and occurred when the company divested BAX

Global in January 2006 for $1 billion cash.

At the end of 2008, we estimate BCOs pension plan and VEBA will be under-funded by ~$80

million and $140 million, respectively, vs. Octobers under-funded position of ~$60 million and

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$100 million, respectively. We believe liabilities could be re-valued higher, as interest rates and

thus the effective discount rate assumption, have declined recently. The company will also be

required to make a ~$75-$125 million pension cash contribution in 2010 (none in 2009) to comply

with minimum funding requirements. The company could, however, make voluntary contributions

to these plans in 2009 and has ample cash, liquidity and capacity to do so. We anticipate a non-

cash pension expense of ~$40 million related to lower expected return on asset plans and

increased loss amortization in 2009 and 2010.

Balance Sheet. The balance sheet is in excellent condition, in our opinion, with ample liquidity

and pro forma cash of $204 million (prior to its recent $50 million Sebival acquisition). Debt stood

at $162 million, and consisted of $66 million outstanding on its $400 million revolving bank credit

facility, $18 million outstanding on its $50 million multi-currency revolver, a $43.2 million

guarantee on the principal amount of bonds issued by Ports Authority of Virginia related to a

deep water coal terminal called Dominion Terminal Associates and other debt of $35 million.

BCO also has a newly established unsecured $135 million letter of credit facility, which is yet

untapped.

BCO is net debt free and with almost ~$500 million of debt capacity, is in our opinion, in a

position to make acquisitions and take advantage of lower multiples. We anticipate bolt-on

acquisitions in the $50 to $100 million range, similar to its recently announced $50 million

acquisition of Brazil-based Sebival. Longer-term, the company could resume its share

repurchase, and complete repurchase in the amount of $44 million remaining on its $100 millionauthorization.

2009. We anticipate revenue growth of 2.6%, comprised of 6% organic growth and 2%

acquisition growth (Brazilian acquisition adds $60 million), offset by a 4% decline related to FX

and the completion of the $50 million Venezuela Conversion Project. We expect operating profit

to decline 13% YoY, as BCO takes a $40 million non-cash pension charge and loses the benefits

of FX and the high-margin Conversion project. Operating margins could decline to 5.7%, vs.

6.6% expected in 2008. Our EPS of $1.86 represents a 27% YoY decline from our 2008 estimate

of $2.54. This reflects negative growth in operating profit, coupled with a 700 basis point increase

in the tax rate to 33%. We anticipate free cash flow of $73 million ($1.57 per share).

2010. We estimate revenue growth could accelerate to 7% YoY. We assume 7% organic growth

and no acquisitions or FX impact. We expect International/North America revenue to grow8%/5%. BCO could take a non-cash pension charge in 2010 of $40 million, as it might in 2009.

Our operating income estimate assumes 17% YoY growth and a 50 basis point operating margin

improvement to 6.3%. Our EPS estimate of $2.26 represents 24% YoY growth. Our free cash

flow estimate is $96 million or $2.06 per share.

Valuation. BCO currently trades at an attractive 3.5x and 13.1x our 2009 EBITDA and EPS

estimates, respectively. These multiples compare to the comparable group at 6.2x and 9.4x

2009E consensus EBITDA and EPS. We believe EBITDA is the more appropriate metric as BCO

is under-levered and its balance sheet is net debt free. We believe BCOs current valuation

already reflects upcoming headwinds, including lower FX benefits, the roll-off of the Venezuela

contract, and higher pension expense. Our $32 price target represents 4.6x 2009E EV/EBITDA

and assumes the company can close the multiple gap with its peers. In terms of free cash flow,

we estimate $73 million, or $1.57 per share, in 2009, slightly below projected EPS of $1.86, asthe company continues to invest in its business. We believe Brinks could use its cash flow to buy

smaller players in the BRIC nations and, longer-term, resume its share repurchase program.

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Figure 8: Comparable Valuations

Stock Market Enterprise

Ticker Price Capitalization Value 2009E 2010E 2009E 2010E

Securitas SECUB.SS SEK 64.25 SEK 22,353.6 SEK 34,081.6 7.0x 6.8x 9.5x 9.2x

Loomis LOOMB.SS SEK 60.25 SEK 4,192.4 SEK 7,719.4 4.7x 4.3x 8.7x 7.4x

G4S GFS.LN 1.90 2,675.8 4,086.2 7.0x 6.5x 10.0x 9.5x

Prosegur PSG.SM 24.10 1,487.0 1,632.0 6.0x 5.6x 11.0x 10.0x

Garda World Security GW.CT CAD 1.26 CAD 39.7 CAD 693.7 6.1x 5.5x 8.0x NA

Average 6.2x 5.8x 9.4x 9.0x

Brink's Company BCO $24.35 $1,122.5 $1,131.3 3.5x 3.1x 13.1x 10.8x

EV/EBITDA P/E

Source: Company documents, First Call and Oppenheimer & Co. Inc. estimates. Priced on 1/15/09

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Figure 9: Income Statement

BCO - Income Statement

($ in M, except per share data)

Fiscal Year End December 31

2006PF 2007PF 1Q08 2Q08 3Q08 4Q08E 2008E 2009E 2010E

International 1,524.3 1,848.3 562.5 563.1 575.8 564.6 2,266.0 2,331.2 2,517.7Growth 35.7% 27.9% 22.9% 7.6% 22.6% 2.9% 8.0%

North America 830.0 886.3 230.3 234.7 237.6 238.8 941.4 958.5 1,006.4Growth 9.0% 7.1% 6.0% 3.0% 6.2% 1.8% 5.0%

Revenue 2,354.3 2,734.6 792.8 797.8 813.4 803.4 3,207.4 3,289.7 3,524.1Growth 11.4% 16.2% 26.7% 21.0% 17.4% 6.2% 17.3% 2.6% 7.1%

COGS 1,797.4 2,084.9 587.2 613.7 616.1 604.2 2,421.2 2,522.8 2,683.9

Gross Profit 556.9 649.7 205.6 184.1 197.3 199.2 786.2 766.8 840.2Gross Margin 23.7% 23.8% 25.9% 23.1% 24.3% 24.8% 24.5% 23.3% 23.8%

Depreciation 96.0 110.0 29.7 31.2 31.5 32.0 124.4 131.4 138.0

SG&A 356.4 379.8 108.7 110.5 111.6 112.5 443.3 445.0 479.3% of Sales 15.1% 13.9% 13.7% 13.9% 13.7% 14.0% 13.8% 13.5% 13.6%

Other Operating Income (Loss), net 6.2 1.1 (0.7) 0.4 (4.4) (1.0) (5.7) 0.0 0.0

Operating Profit 110.7 161.0 66.5 42.8 49.8 53.8 212.9 190.5 222.9

Operating Margin 4.7% 5.9% 8.4% 5.4% 6.1% 6.7% 6.6% 5.8% 6.3%

Interest Expense (12.0) (10.8) (2.5) (3.3) (3.0) (3.0) (11.8) (12.0) (10.5)

Interest and Other Income, Net 16.9 10.5 2.1 3.0 4.5 2.0 11.6 8.0 5.0

Pretax Income 115.6 160.7 66.1 42.5 51.3 52.8 212.7 186.5 217.4

Income Taxes 44.2 59.5 18.3 4.3 14.3 17.4 54.3 61.5 71.7Tax rate 38.2% 37.0% 27.7% 10.1% 27.9% 33.0% 25.5% 33.0% 33.0%

Minority Interest 18.3 22.8 14.9 7.5 7.5 10.0 39.9 38.0 40.0

Income from Continuing Operations 53.1 78.4 32.9 30.7 29.5 25.4 118.5 86.9 105.7

Weighted Average Shares Outstanding (Basic) 50.0 46.5 46.5 46.0 46.1 46.1 46.2 46.2 46.2

Weighted Average Shares Outstanding (Diluted) 50.5 47.1 46.9 46.5 46.6 46.6 46.7 46.7 46.7

EPS, Diluted $1.05 $1.67 $0.70 $0.66 $0.63 $0.54 $2.54 $1.86 $2.26

EBITDA 206.7 271.0 96.2 74.0 81.3 85.8 337.3 321.9 360.9EBITDA Margin 8.8% 9.9% 12.1% 9 .3% 10.0% 10.7% 10.5% 9.8% 10.2%


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Figure 10: Balance Sheet

BCO - Balance Sheet



3Q08 PF

ASSETSCurrent assets:

Cash and cash equivalents 203.5

Accounts receivable, net 475.5

Prepaid expenses and other 95.8

Deferred income taxes 91.1

Total current assets 865.9

Property and equipment, net 532.5

Goodwill 140.4

Deferred income taxes 130.6

Other 122.9

Total assets 1,792.3

LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:

Short-term borrowings 6.2

Current maturities of long-term debt 11.6

Accounts payable 130.8

Income taxes payable 8.0

Accrued liabilities 403.7

Total current liabilities 560.3

Long-term debt 144.5

Accrued pension costs 52.3

Postretirement benefits other than pensions 101.7

Deferred revenue -Deferred income taxes 51.1

Minority interest 84.6

Other 144.0

Total liabilities 1,138.5

Total shareholders equity 653.8

Total liabilities and shareholders equity 1,792.3

Source: Company documents and Oppenheimer & Co. Inc.estimates.

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Figure 11: Free Cash Flow

BCO - Free Cash Flow



2005 2006 2007 2008E 2009E 2010E

EBITDA 128.0 206.7 271.0 337.3 321.9 360.9

Interest (8.1) 4.9 (0.3) (0.2) (4.0) (5.5)

Taxes (18.4) (44.2) (59.5) (54.3) (61.5) (71.7)

Working Capital NA NA NA (10) (10) (10)

Other 0.8 35.6 62.9 - - -

Capital Expenditures (107.3) (113.5) (141.6) (170.0) (173.0) (177.0)

Free Cash Flow (5.0) 89.5 132.5 102.8 73.3 96.7

Free Cash Flow Per Share -$0.09 $1.77 $2.82 $2.20 $1.57 $2.07


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Price Target Calculation

Our $32 price target represents 4.6x 2009E EV/EBITDA and assumes the company can close the multiple gap with its

peers which trade at about 6x.

Key Risks to Price Target

Under-funded Pension. Although Brink's froze its pension plan more than three years ago and sold its coal business, as of December2007 it had a gross pension liability of roughly $1.3 billion $963 million from the frozen pension and $570 million in legacypostretirement medical liabilities related to the coal business (which it has established a VEBA). As of September 2008, BCO had assetsto reduce the net liability to $160 million ($60 million in pension and $100 million in retiree medical). However, interest rates havedeclined meaningfully and the lower discount rate could increase the company's under-funded position. We estimate in 2009 and 2010,the company will record a non-cash pension expense ~$40 million and will make a cash payment of $75-$125 million in 2010 based onthe September under-funded levels.

Roll-off of Venezuela Contract. Brink's completed a significant project in Venezuela, where it performed cash handling services toassist in the conversion to the bolivar fuerte from the bolivar. We estimate the contract added more than $50 million to 2008 revenuesand roughly $30 million to operating profit. This activity was a large driver of growth in 2008, and will not repeat in 2009. While investorsare aware of this situation, it nevertheless presents an optical challenge to the company's financial results.

Foreign Currency Translation . Because almost 70% of revenues come from outside North America (e.g., U.S. and Canada),fluctuations in currency, particularly the Euro, have a meaningful impact on reported revenues. Foreign currency translation added $168million to revenues in the first 9 months of 2008. However, operating profit tends to be naturally hedged from currency fluctuations, asBCO's costs are often in the same currency its revenues are. As a result, the $168 million FX benefit in the first 9 months only impactedpretax profit by only $9.6 million. Further, the recent strength in the dollar could reduce the 2008 impact modestly.

Fuel. With roughly 9,100 vehicles globally, BCO is a large consumer of fuel, on an absolute basis. However, on a percentage ofrevenues basis, it is only in the "low-single digits", as is insurance, the other big expense. To cushion the impact of fuel, the companyattempts to structure its contracts to either pass-through the cost or add a surcharge to the base rate charged. As a result, the companyis able to limit its exposure to fuel price fluctuations to one month.

Emerging market Instability. Brink's is one of the largest players in Latin America, where it derives roughly 25% of its revenues and~8% in Venezuela. This region tends to be highly profitable for BCO, as the business opportunity is large and competition tends to befragmented. However, there is greater risk in Latin America in terms of safety and security, geopolitical issues and the threats ofcurrency devaluation. However, the company has asset worth only $90 million in Venezuela and has operated in the region for morethan 40 year and is well equipped to do business there.

Risk to Consensus Estimates. Although the company has been clear with the investment community about the headwinds it will facein 2009, we believe "Street estimates" contain several "outliers" that make 2009 consensus too high. In fact, 2009 consensus EPS of$2.14 is well above our $1.86 estimate. To remedy this, we believe the company could provide guidance either before, or in conjunctionwith, its fourth-quarter earnings report slated for early February. Although we think the stock is attractively priced and management has

clearly intimated the headwinds, any earnings revision could negatively impact the share price.

Important Disclosures and Certifications

Analyst Certification - The author certifies that this research report accurately states his/her personal views about thesubject securities, which are reflected in the ratings as well as in the substance of this report.The author certifies that nopart of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or viewscontained in this research report.

Potential Conflicts of Interest:

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Equity research analysts employed by Oppenheimer & Co. Inc. are compensated from revenues generated by the firmincluding the Oppenheimer & Co. Inc. Investment Banking Department. Research analysts do not receive compensationbased upon revenues from specific investment banking transactions. Oppenheimer & Co. Inc. generally prohibits anyresearch analyst and any member of his or her household from executing trades in the securities of a company that suchresearch analyst covers. Additionally, Oppenheimer & Co. Inc. generally prohibits any research analyst from serving as anofficer, director or advisory board member of a company that such analyst covers. In addition to 1% ownership positions in

covered companies that are required to be specifically disclosed in this report, Oppenheimer & Co. Inc. may have a longposition of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or inoptions, futures or other derivative instruments based thereon. Recipients of this report are advised that any or all of theforegoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts ofinterest.

0

15

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45

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75

2007 2008 2009

Rating and Price Target History for: Brink's Company (BCO) as of 01-14-2009

Created by BlueMatrix

All price targets displayed in the chart above are for a 12- to- 18-month period. Prior to March 30, 2004, Oppenheimer &Co. Inc. used 6-, 12-, 12- to 18-, and 12- to 24-month price targets and ranges. For more information about target pricehistories, please write to Oppenheimer & Co. Inc., 300 Madison Avenue, New York, NY 10017, Attention: Equity ResearchDepartment, Business Manager.

Oppenheimer & Co. Inc. Rating System as of January 14th, 2008:

Outperform(O) - Stock expected to outperform the S&P 500 within the next 12-18 months.

Perform (P) - Stock expected to perform in line with the S&P 500 within the next 12-18 months.

Underperform (U) - Stock expected to underperform the S&P 500 within the next 12-18 months.

Not Rated (NR) - Oppenheimer & Co. Inc. does not maintain coverage of the stock or is restricted from doing so due to a potentialconflict of interest.

Oppenheimer & Co. Inc. Rating System prior to January 14th, 2008:

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Buy - anticipates appreciation of 10% or more within the next 12 months, and/or a total return of 10% including dividend payments,and/or the ability of the shares to perform better than the leading stock market averages or stocks within its particular industry sector.

Neutral - anticipates that the shares will trade at or near their current price and generally in line with the leading market averages due toa perceived absence of strong dynamics that would cause volatility either to the upside or downside, and/or will perform less well thanhigher rated companies within its peer group. Our readers should be aware that when a rating change occurs to Neutral from Buy,

aggressive trading accounts might decide to liquidate their positions to employ the funds elsewhere.

Sell - anticipates that the shares will depreciate 10% or more in price within the next 12 months, due to fundamental weaknessperceived in the company or for valuation reasons, or are expected to perform significantly worse than equities within the peer group.

Distribution of Ratings/IB Services Firmwide

IB Serv/Past 12 Mos.

Rating Count Percent Count Percent

OUTPERFORM [O] 350 47.20 123 35.14

PERFORM [P] 360 48.50 122 33.89

UNDERPERFORM [U] 32 4.30 8 25.00

Although the investment recommendations within the three-tiered, relative stock rating system utilized by Oppenheimer & Co. Inc. do notcorrelate to buy, hold and sell recommendations, for the purposes of complying with FINRA rules, Oppenheimer & Co. Inc. has assignedbuy ratings to securities rated Outperform, hold ratings to securities rated Perform, and sell ratings to securities rated Underperform.

Additional Information Available

Please log on to http://www.opco.com or write to Oppenheimer & Co. Inc., 300 Madison Avenue, New York, NY 10017,

Attention: Equity Research Department, Business Manager.

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Brink's Company

BCO OpCo Initiation

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