Delivers GAAP earnings per share of $0.39 and non-GAAP earnings per
share of $0.47 Monthly recurring revenue ("MRR") rose 9.1 percent
from a year ago to $44.2 million Ending subscribers increased 4.4
percent compared to a year ago Trailing twelve-month disconnect
rate was 8.2 percent IRVING, Texas, Feb. 24 /PRNewswire-FirstCall/
-- Brink's Home Security Holdings, Inc. (NYSE:CFL), a premier
provider of monitored security services in North America, now
operating under the brand Broadview Security, today reported
financial results for the fourth quarter and fiscal year ended
December 31, 2009. (Logo:
http://www.newscom.com/cgi-bin/prnh/20090708/DA43773LOGO) "We are
pleased with our quarterly and annual results. Monthly recurring
revenue growth was once again above 9 percent and we were able to
deliver organic growth in revenue and customer count despite a
challenging housing market and continued high rates of
unemployment," said president and chief executive, Bob Allen. He
continued, "I'm proud of our employees and their performance in
difficult market conditions. I believe we will continue to perform
well as a standalone company until our acquisition with Tyco
International is complete, and we merge into the ADT organization."
Recent Events On January 18, 2010, Brink's Home Security Holdings,
Inc. and Tyco International Ltd. ("Tyco") announced a definitive
agreement for Tyco to acquire the Company in a cash and stock
transaction. The Company's board of directors unanimously approved
the transaction, which is subject to customary closing conditions,
including clearance under the Hart-Scott-Rodino Antitrust Act and
approval by the Company's shareholders at a special shareholder
meeting, the date of which has not yet been set. Fourth Quarter
Results Revenue for the fourth quarter of 2009 was $145.4 million,
representing an increase of 7.5 percent from $135.2 million
recorded in the same period last year. The increase in revenue was
primarily due to continued growth in the subscriber base, up 4.4
percent from a year ago, and a 4.5 percent increase in average
monthly recurring revenue per ending subscriber, partially offset
by lower pre-wire and trim-out revenues from new home builder
customers. Operating profit was $27.5 million, compared to $24.7
million in the fourth quarter of 2008. The fourth quarter 2009
operating profit margin was 18.9 percent compared to 18.3 percent
in the comparable quarter in 2008. The increase in margin was
largely due to the reduction in royalty rate charged to the Company
by its former parent and higher profits from recurring services on
the larger subscriber base, partially offset by the brand
introduction costs and an increase in impairment charges related to
customer disconnects. Additionally, the Company incurred
approximately $1.1 million of costs related to the proposed merger
transaction. Brand introduction costs reduced operating profit in
the fourth quarter of 2009 by $6.7 million. Excluding the brand
introduction costs, operating profit would have been $34.2 million,
or a 23.5 percent operating margin. Similarly, had the royalty rate
been approximately 1.25 percent of revenues in 2008, operating
profit in the fourth quarter of 2008 would have been $27.3 million
with a 20.2 percent operating margin. Net income for the fourth
quarter of 2009 was $17.8 million and diluted GAAP earnings per
share were $0.39, compared to net income of $14.8 million and pro
forma earnings per share of $0.32 in the same period last year.
(The terminology 'pro forma earnings per share' is used in
conjunction with the financial results for the three and twelve
months ended December 31, 2008. The Company was not public during
the entirety of the period and the fully diluted number of shares
outstanding was, therefore, calculated on a 'pro forma' basis.)
Brand introduction costs reduced net income by $3.9 million, or
$0.08 per share, in the fourth quarter of 2009. Full Year 2009
Results Revenue for the full year of 2009 was $565.1 million,
representing an increase of 6.2 percent from $532.3 million
recorded last year. The increase in revenue was primarily due to
the 5.3 percent average growth in the subscriber base and higher
average monitoring rates. Operating profit for the year was $101.4
million, an increase of 7.9 percent from $94.0 million in 2008,
driven primarily by lower royalty expense and higher profits from
recurring services on the larger subscriber base, the benefits of
which were largely offset by brand introduction costs. Full year
2009 operating profit margin was 17.9 percent, up from 17.7 percent
in 2008. Net income for the full year 2009 was $62.7 million and
diluted earnings per share were $1.36, representing an increase of
9.8 percent from net income of $57.1 million and an increase of 8.8
percent from diluted earnings per share of $1.25 last year.
Non-GAAP Information Non-GAAP Financial Results In the table below,
non-GAAP financial results for the three and twelve months ended
December 31, 2009 have been adjusted to exclude the brand
introduction expenses incurred in the respective periods. The three
months and twelve months ended December 31, 2008 non-GAAP financial
results were adjusted to reflect the current royalty rate of 1.25
percent. A complete reconciliation of these non-GAAP figures can be
found in the attached schedules. Three Months Ended Twelve Months
Ended December 31, December 31, ------------------
------------------- (In millions, except 2009 2008 2009 2008 per
share data) ---- ---- ---- ---- (b) (a) (b),(c) (a),(c) Non-GAAP
Operating Profit $34.2 $27.3 $122.0 $119.0 Non-GAAP Net Income
$21.7 $16.3 $75.5 $72.4 Non-GAAP Earnings per share - diluted $0.47
$0.36 $1.64 $1.58 a) Historically, the Company paid its former
parent a royalty of 7 percent on revenues in the United States and
3 percent on revenues in Canada. On November 1, 2008, the royalty
rate changed to approximately 1.25 percent of revenues and will
continue to be calculated on that basis until the earlier of
October 31, 2011 or when the Company ceases the active use of the
Brink's brand name and terminates its brand license agreement. The
non-GAAP financial results above have been adjusted to calculate
the results as if the royalty rate had been approximately 1.25
percent of revenue for all periods presented. The adjustment to
operating profit for the three and twelve months ended December 31,
2008 was $2.6 million and $25.0 million, respectively. The
adjustment to net income is $1.5 million, or $0.04 per share
earnings on a diluted basis, and $15.3 million, or $0.33 per share
earnings on a diluted basis, respectively. b) Brand introduction
expenses for the three and twelve months ended December 31, 2009
were $6.7 million and $20.6 million, respectively. The expenses
reduced diluted earnings per share for the three and twelve months
ended December 31, 2009, by $0.08 and $0.28, respectively. The
non-GAAP figures above have been adjusted to exclude the effect of
these expenses. c) For the twelve months ended December 31, 2009,
the Company incurred certain net non-cash litigation charges of
$3.2 million, reducing diluted earnings per share for the period by
$0.04. In 2008, a previously disclosed non-cash accounting
correction increased operating profit by $3.6 million, net income
by $2.2 million and pro forma earnings per share by $0.05 for the
twelve months ended December 31, 2008. The non-GAAP figures above
have not been adjusted to exclude the effect of these items.
Operating Metrics Monthly recurring revenue ("MRR") increased 9.1
percent at quarter-end over the prior year period to $44.2 million,
driven by a 4.4 percent increase in ending subscribers and a 4.5
percent increase in average monthly recurring revenue per
subscriber. Adjusted EBITDA from recurring services for the fourth
quarter of 2009 increased 12.7 percent to $88.6 million compared to
$78.6 million in the year-ago quarter. Adjusted cash invested in
new subscribers for the fourth quarter was $62.3 million compared
to $60.9 million in the year-ago quarter. Please see the attached
schedules for a more detailed explanation of these non-GAAP
measures and a reconciliation of these non-GAAP measures to their
closest GAAP counterparts. Other Information The Company ended the
fourth quarter of 2009 with net subscriber additions of
approximately 10,900 compared to approximately 16,300 in the same
quarter last year. Approximately 39,000 new customer systems were
installed during the fourth quarter of 2009 compared to
approximately 41,600 installations in the same period one year ago.
The lower volume of installations continues to reflect the weakness
in the economy and the housing market. The annualized disconnect
rate for the fourth quarter of 2009 was 8.3 percent, up from 7.8
percent in the prior year. The increase is due to comparatively
more customers requesting termination of service for reasons other
than household relocation. Customers continue to cite household
financial pressure as a major reason for terminating service. A
decrease in disconnects due to customer relocations was offset by
an increase in financial write offs of customer accounts. The
trailing twelve month disconnect rate at the end of the fourth
quarter was 8.2 percent, up from 7.5 percent in the prior year. The
effective income tax rate for the fourth quarter of 2009 was 35.2
percent, compared to 39.9 percent in the prior year period. The
effective tax rate for the full year was 38.1 percent, compared to
38.9 percent in the prior year. Capital expenditures totaled $45.9
million in the fourth quarter of 2009 compared to $42.5 million in
the comparable quarter of the prior year. As of December 31, 2009,
cash and investments totaled $118.2 million compared to $108.5
million and $63.6 million at September 30, 2009 and December 31,
2008, respectively. Accounts receivable (net of allowance), were
$36.5 million at December 31, 2009 compared to $36.3 million at
September 30, 2009. The Company has no long-term debt and has not
borrowed on its credit facility. Cumulative spending associated
with the introduction of the Company's new brand, Broadview
Security, was $20.6 million in 2009, including $6.7 million spent
in the fourth quarter. The Company had previously provided an
estimated total incremental spend associated with the new brand
introduction and an estimate for the portion to be spent in the
full year 2010. In light of the proposed acquisition by Tyco, the
Company will not be updating these figures or providing guidance
for the full year 2010. Forward Looking Statements This press
release contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (which Sections were adopted as part of the Private
Securities Litigation Reform Act of 1995). Statements preceded by,
followed by or that otherwise include the words "believe,"
"anticipate," "estimate," "expect," "intend," "plan," "project,"
"prospects," "outlook," and similar words or expressions, or future
or conditional verbs such as "will," "should," "would," "may," and
"could" are generally forward-looking in nature and not historical
facts. These forward looking statements involve known and unknown
risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different
from any anticipated results, performance or achievements. We
disclaim any intention to, and undertake no obligation to, revise
any forward-looking statements, whether as a result of new
information, a future event, or otherwise. These risks,
uncertainties and contingencies, many of which are beyond our
control, include, but are not limited to risks related to the
completion of the merger, risks inherent in our spin-off from our
former parent corporation, including increased costs and reduced
profitability associated with operating as an independent company,
the demand for our products and services, the ability to identify
and execute further cost and operational improvements and
efficiencies in our core business, the actions of competitors, our
ability to successfully build and market our new brand, our ability
to identify strategic opportunities and integrate them
successfully, our ability to maintain subscriber growth, the number
of household moves, the level of home sales or new home
construction, potential instability in housing credit markets, our
estimated reconnection experience, our ability to cost-effectively
develop or incorporate new systems or technology in a timely
manner, our ability to balance the cost of acquiring customers with
the profit from serving existing customers, our ability to keep
disconnect rates relatively low, the availability and cost of
capital, and general business conditions. For additional risks and
uncertainties that could impact our forward-looking statements,
please see the Company's Annual Report on Form 10-K for the year
ended December 31, 2008, and subsequent quarterly reports on Form
10-Q including but not limited to the discussion under "Risk
Factors" therein, filed with the SEC, which you may view at
http://www.sec.gov/. For additional risks and uncertainties, please
also see the Company's Annual Report on Form 10-K for the year
ended December 31, 2009, which will be filed with the SEC on or
before March 1, 2010. IMPORTANT ADDITIONAL INFORMATION TO BE FILED
WITH THE SEC This communication does not constitute an offer to
sell or the solicitation of an offer to buy any securities or a
solicitation of any vote or approval. The proposed merger
transaction involving Tyco and Brink's Home Security Holdings will
be submitted to the shareholders of Brink's Home Security Holdings
for their consideration. In connection with the proposed merger,
Tyco has filed with the SEC a registration statement on Form S-4
that includes a preliminary proxy statement of Brink's Home
Security Holdings that also constitutes a prospectus of Tyco. The
definitive proxy statement/prospectus will be mailed to
shareholders of Brink's Home Security Holdings. INVESTORS AND
SECURITY HOLDERS OF BRINK'S HOME SECURITY HOLDINGS ARE URGED TO
READ THESE DOCUMENTS AND THE DEFINITIVE PROXY STATEMENT/PROSPECTUS
AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY
WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security
holders may obtain free copies of the registration statement and
the proxy statement/prospectus and other documents filed with the
SEC (when available) by Tyco and Brink's Home Security Holdings
through the web site maintained by the SEC at http://www.sec.gov/.
Free copies of the registration statement and the proxy
statement/prospectus and other documents filed with the SEC (when
available) can also be obtained, with respect to Tyco, by directing
a request to Investor Relations Department, Tyco International
Management Company, 9 Roszel Road, Princeton, New Jersey 08540, or
at Tyco's Investor Relations website at http://investors.tyco.com/,
under the heading "Investor Relations" and then under the heading
"SEC Filings" or, with respect to Brink's Home Security Holdings,
by directing a request to Investor Relations, Brink's Home Security
Holdings, Inc., at 8880 Esters Boulevard, Irving, Texas 75063 or at
Brink's Home Security Holdings' Investor Relations website at
http://www.investors.brinkshomesecurity.com/. PARTICIPANTS IN THE
SOLICITATION Tyco, Brink's Home Security Holdings and their
respective directors and executive officers and other persons may
be deemed to be participants in the solicitation of proxies in
respect of the proposed transaction. Information regarding Tyco's
directors and executive officers is available in its Annual Report
on Form 10-K for the year ended September 25, 2009, filed with the
SEC on November 17, 2009, and its proxy statement for its 2009
annual meeting of shareholders, filed with the SEC on or about
January 15, 2009. Information regarding Brink's Home Security
Holdings' directors and executive officers is set forth in Brink's
Home Security Holdings' proxy statement for its 2009 annual
meeting, filed with the SEC on April 7, 2009. Other information
regarding the participants in the proxy solicitation and a
description of their direct and indirect interests, by security
holdings or otherwise, is included in the preliminary proxy
statement/prospectus and will be included in the definitive proxy
statement/prospectus and other relevant materials to be filed with
the SEC when they become available. About Brink's Home Security
Holdings, Inc. Brink's Home Security Holdings, Inc. (NYSE:CFL),
operating as Broadview Security, headquartered in Irving, Texas, is
one of the premier providers of security system monitoring services
for residential and commercial properties in North America. The
Company operates throughout the United States and Western Canada
and services approximately 1.4 million customers. For more
information, please visit http://www.broadviewsecurity.com/ or
http://www.brinkshomesecurityholdings.com/. BRINK'S HOME SECURITY
HOLDINGS, INC. and subsidiaries Condensed Consolidated Statements
of Income (Unaudited) (In millions, Three Months Twelve Months
except per share Ended Ended amounts) December 31, December 31,
------------ ------------ 2009 2008 2009 2008 ---- ---- ---- ----
Revenues $145.4 $135.2 $565.1 $532.3 Expenses: Cost of revenues (a)
69.5 67.9 274.3 287.0 Selling, general and administrative expenses
48.7 41.2 190.9 150.9 ---- ---- ----- ----- Total expenses 118.2
109.1 465.2 437.9 Other operating income, net 0.3 (1.4) 1.5 (0.4)
--- ---- --- ---- Operating profit 27.5 24.7 101.4 94.0 Interest
expense, net - - 0.1 0.6 --- --- --- --- Income before income taxes
27.5 24.7 101.3 93.4 Provision for income taxes 9.7 9.9 38.6 36.3
--- --- ---- ---- Net income $17.8 $14.8 $62.7 $57.1 ===== =====
===== ===== Earnings per common share (b) Basic $0.39 $0.32 $1.37
$1.25 Diluted $0.39 $0.32 $1.36 $1.25 Weighted average common
shares outstanding (b) Basic 45.9 45.8 45.9 45.8 Diluted 46.2 45.8
46.0 45.8 a) Cost of Revenues includes royalty expense charged to
the Company by its former parent company for use of the Brink's
brand name. The rate utilized for fiscal 2008 for the months
January through October was a rate of 7 percent of revenues in the
United States and 3 percent of revenues outside the United States.
However, for the months of November and December 2008, the rate
utilized was approximately 1.25 percent of revenues for both within
and outside of the United States. Similarly, the rate used for the
full year 2009 was approximately 1.25 percent of revenues and will
continue to be approximately 1.25 percent until the earlier of
October 31, 2011 or when the Company ceases the active use of the
Brink's brand name. b) For the period ended December 31, 2009,
basic earnings per share ("EPS") is computed by dividing net income
by the weighted average number of common shares outstanding for the
period ended December 31, 2009. Diluted EPS is calculated in a
similar manner, but includes the dilutive effect of stock options
and restricted stock units outstanding as of December 31, 2009.
Basic and diluted earnings per share for the period ended December
31, 2008 were computed on a pro forma basis using the average
number of shares of the Company's common stock outstanding from
October 31, 2008 to December 31, 2008. The number of diluted shares
used in the calculation is based on the number of shares of the
Company's common stock outstanding plus the estimated potential
dilution that could have occurred if options and restricted stock
units granted under the Company's equity-based compensation
arrangements were exercised or converted into the Company's common
stock. BRINK'S HOME SECURITY HOLDINGS, INC. and subsidiaries
Supplemental Financial Information (Unaudited) Three Months Ended
Twelve Months Ended December 31, December 31, ------------------
------------------- 2009 2008 2009 2008 ($in Millions, except ----
---- ---- ---- subscriber and disconnect data)
-------------------------- Profit from recurring services $ 58.0
49.9 223.9 195.3 Investment in new subscribers $(30.5) (25.2)
(122.5) (101.3) ------ ----- ------ ------ Operating profit $ 27.5
24.7 101.4 94.0 ===== ==== ===== ==== Monthly recurring revenues
(a) $ 44.2 40.5 Adjusted EBITDA from recurring services (a),(b) $
88.6 78.6 341.5 318.3 Adjusted cash invested in new
subscribers(a),(c) $(62.3) (60.9) (257.3) (248.5) Depreciation and
amortization $ 23.4 21.4 91.2 85.3 Net cash provided by operating
activities $ 55.1 69.5 240.1 224.0 ------------------------------
----- ---- ----- ----- Capital expenditures - security systems $
42.4 40.5 173.4 168.4 Capital expenditures - non- security system $
3.5 2.0 13.7 9.4 ---------------------------- --- --- ---- ---
Number of subscribers (in thousands): Beginning of period 1,348.1
1,285.3 1,301.6 1,223.9 Installations 39.0 41.6 166.5 173.1
Disconnects (28.1) (25.3) (109.1) (95.4) ----- ----- ------ -----
End of period 1,359.0 1,301.6 1,359.0 1,301.6 Average number of
subscribers 1,353.7 1,292.9 1,334.5 1,267.5 ======= ======= =======
======= Disconnect rates: Expressed as an annualized percentage:
8.3 7.8 8.2 7.5 Annualized percentage excluding multi-family
disconnects:(d) 8.0 7.2 8.0 7.1 a) See "Non-GAAP Reconciliations"
below. b) Adjusted EBITDA from recurring services as presented is
adjusted for the change in the royalty rate (see Non-GAAP
reconciliation in attached schedules). For the three months and
twelve months ended December 31, 2009, adjusted EBITDA from
recurring services includes the effect of non-cash litigation
charges (in the Non-GAAP reconciliation section, see footnote (b)
in the table reconciling adjusted EBITDA from recurring services to
operating profit). c) Adjusted to exclude incremental costs related
to the brand introduction. d) Multi-family disconnects do not have
a material impact on the income statement. Reconciliation of
Non-GAAP Financial Measures to Comparable U.S. GAAP Measures
(Unaudited) Pursuant to the requirements of Regulation G, the
Company has provided a reconciliation of each non-GAAP financial
measure used in this earnings release to the most directly
comparable GAAP financial measure. Certain of these measures differ
from GAAP in that they exclude certain amounts of royalty expense
incurred by the Company on a historical basis. Historically, the
Company paid its former parent company a royalty of 7 percent on
revenues in the United States and 3 percent on revenues in Canada.
On November 1, 2008, the royalty rate changed to approximately 1.25
percent of revenues and will continue to be calculated on that
basis until the earlier of October 31, 2011 or when the Company
ceases the active use of the "Brink's" brand name. In deriving the
non-GAAP financial measures, the historical royalty rate was
calculated using a rate of approximately 1.25 percent and adjusting
for the related tax effect. Additionally, for the fourth quarter
and year-to-date 2009, the Company derived non-GAAP measures by
adjusting for brand introduction costs incurred (and the related
tax effect, where appropriate) in association with the development
of the Company's new brand identity. The Company uses three other
non-GAAP financial measures: Monthly Recurring Revenue ("MRR"),
adjusted EBITDA from recurring services, and adjusted cash invested
in new subscribers. MRR differs from GAAP in that certain revenue
components, which are included in GAAP revenue, are excluded from
the calculation of MRR. These components include certain revenues
that are received by the Company, but that are not derived from
monthly contractual billing arrangements, the amortization of
deferred revenue related to active subscriber accounts, and
recognition of deferred revenue related to subscriber accounts that
disconnect. Adjusted EBITDA from recurring services differs from
GAAP in that adjustments are made to normalize royalties, to add
back non-cash expenses, and to make reductions for other non-cash
income items. Adjusted cash invested in new subscribers is a
Non-GAAP measure that is used to convey the total cash invested to
acquire new subscribers and make additional investments, as
necessary, in existing subscribers, without regard to the
accounting treatment of the various cash components. It is
comprised of primarily capitalized security system costs, marketing
and selling expenses, and deferred subscriber acquisition costs
(current year payments) less deferred revenue from new subscribers
(current year receipts). This measure is adjusted to exclude brand
introduction costs. The Company's basis for these adjustments is
described below. Management uses these non-GAAP measures for
internal reporting and forecasting purposes, for publicly providing
its business outlook, and for evaluating the Company's performance.
The Company has provided these non-GAAP financial measures in
addition to GAAP financial results because it believes that these
non-GAAP financial measures provide useful information to certain
investors and financial analysts for comparison across accounting
periods when evaluating the Company's historical and prospective
financial performance and, therefore, is useful to investors and
financial analysts in helping them to better understand the
Company's operating results and underlying operational trends. The
Company has historically provided this or similar information and
understands that some investors and financial analysts find this
information helpful in analyzing the Company's margins, net income
and comparing the Company's financial performance to that of its
peer companies and competitors. These non-GAAP financial measures
are not prepared in accordance with accounting principles generally
accepted in the United States ("GAAP") and may differ from the
non-GAAP information used by other companies. There are significant
limitations associated with the use of non-GAAP financial measures.
The additional non-GAAP financial information presented here should
be considered in conjunction with, and not as a substitute for or
superior to, the financial information presented in accordance with
GAAP (such as operating profit, net income and earnings per share)
and should not be considered measures of the Company's liquidity.
BRINK'S HOME SECURITY HOLDINGS, INC. and subsidiaries Non-GAAP
Reconciliation (Unaudited) Twelve Months Ended December 31,
------------ (In millions) 2009 2008 ---- ---- Monthly recurring
revenues ("MRR")(a) $44.2 $40.5 Amounts excluded from MRR:
Amortization of deferred revenue(b) 3.3 3.6 Other revenues(c) 1.2
1.4 --- --- Revenues on a GAAP basis: December 48.7 45.5 January -
November 516.4 486.8 ----- ----- Reported GAAP full year 2009
Revenue $565.1 $532.3 ====== ====== a) MRR is calculated based on
the number of subscribers at period end multiplied by the average
fee per subscriber received in the last month of the period for
contracted monitoring and maintenance services. b) Includes
amortization of deferred revenue related to active subscriber
accounts and recognition of deferred revenue related to subscriber
accounts that disconnect. c) Revenues that are not pursuant to
monthly contractual billings, including revenues from such sources
as ad-hoc field service calls, product sales and installation fees
not subject to deferral, terminated contract penalty billings for
breached contracts, pass-through revenue (alarm permit fees, false
alarm fines, etc.) and partial month revenues recognized from
customers who disconnected during the last month of the period and
are, therefore, not included in MRR. This amount is reduced for
adjustments recorded against revenue (primarily customer goodwill
credits and other billing adjustments), and for the amount included
in MRR for new customers added during the last month of the period
for those portions of the month for which revenues were not
recognized for such customers. MRR is a non-GAAP financial measure
used in this press release. The Company uses MRR to evaluate
performance. The Company believes the presentation of MRR is useful
to investors because the measure is widely used in the industry to
assess the amount of recurring revenues from contracted monitoring
and maintenance services that a monitored security alarm business
produces. This supplemental non-GAAP information should be reviewed
in conjunction with the Company's consolidated statements of
operations. BRINK'S HOME SECURITY HOLDINGS, INC. and subsidiaries
Adjusted EBITDA from Recurring Services and Adjusted Cash Invested
in New Subscribers Adjusted EBITDA from recurring services and
adjusted cash invested in new subscribers are measures used to
monitor our operating performance. Adjusted EBITDA from recurring
services is a non-GAAP measure that we use to convey profits
generated from the subscriber base adjusted for certain non-cash
items including asset impairment charges, depreciation of fixed
assets, amortization of deferred charges, and amortization of
deferred revenue. We believe EBITDA from Recurring Services is
useful to provide investors with information about operating
profits, adjusted for significant non-cash items, generated from
the existing customer base, which can be used to support our
investment in new subscribers. Adjusted cash invested in new
subscribers is a non-GAAP measure that we believe is useful to
investors to provide information about the total cash invested to
acquire new subscribers or move existing subscribers without regard
to the accounting treatment of the various cash components.
Adjusted cash invested in new subscribers is primarily comprised of
capitalized security system costs, marketing and selling expenses,
and deferred subscriber acquisition costs (current year payments)
less deferred revenue from new subscribers (current year receipts).
This supplemental non-GAAP information should be reviewed in
conjunction with our historical consolidated statements of income
and cash flow. The table below reconciles adjusted EBITDA from
recurring services and adjusted cash invested in new subscribers
for the three and twelve months ended December 31, 2009 and 2008,
to net income, their closest GAAP counterpart. Three Months Twelve
Months Ended Ended December 31, December 31, -------------
------------- (In millions) 2009 2008 2009 2008 ---- ---- ---- ----
Adjusted EBITDA from recurring services $88.6 $78.6 $341.5 $318.3
Adjustment to royalty rate(a) - (2.2) - (21.7) Depreciation and
amortization (23.4) (21.4) (91.2) (85.3) Impairment charges from
subscriber disconnects (17.2) (15.1) (65.9) (56.5) Amortization of
deferred revenue 10.0 10.0 39.5 40.5 ---- ---- ---- ---- Profit
from recurring services 58.0 49.9 223.9 195.3 ---- ---- ----- -----
Adjusted cash invested in new subscribers (62.3) (60.9) (257.3)
(248.5) Deferred revenue from new subscribers (current year
receipts) (9.3) (10.0) (39.8) (44.3) Deferred subscriber
acquisition costs (current year payments) 5.4 5.2 21.8 23.1
Security system capital expenditures(b) 42.4 40.5 173.4 168.4 Brand
Introduction(c) (6.7) - (20.6) - ---- ---- ----- ---- Investment in
new subscribers (30.5) (25.2) (122.5) (101.3) ----- ----- ------
------ Interest Expense - - (0.1) (0.6) Provision for Income Taxes
(9.7) (9.9) (38.6) (36.3) ---- ---- ----- ----- Net Income $17.8
$14.8 $62.7 $57.1 ===== ===== ===== ===== a) Our results of
operations include a royalty expense that was charged to us by our
former parent company for use of certain trademarks. The rate
utilized for fiscal 2008 for the months January through October was
a rate of 7 percent of revenues in the United States and 3 percent
of revenues outside the United States with a rate of approximately
1.25 percent of revenues used for the months of November and
December 2008. For the three and twelve months ended December 31,
2009, the rate used was approximately 1.25 percent of revenues for
both within and outside the United States. For comparison purposes,
the current royalty rate of 1.25 percent was used for the three and
twelve months ended December 31, 2008. During 2008, a portion of
royalty expense was allocated to investment in new subscribers (and
is therefore excluded from this adjustment). b) Amount excludes
non-security system capital expenditures of $3.5 million and $13.7
million for the three and twelve months ended December 31, 2009 and
$2.0 million and $9.4 million for the prior year comparable
periods. c) Brand introduction expenses are excluded from adjusted
cash invested in new subscribers. BRINK'S HOME SECURITY HOLDINGS,
INC. and subsidiaries Non-GAAP Financial Measures Reconciliation
(Unaudited) The following tables show the non-GAAP financial
measures used in this press release reconciled to the most directly
comparable GAAP financial measures. Three Months Twelve Months
Ended Ended December 31, December 31, (In millions, except per
share ------------ ------------- amounts) 2009 2008 2009 2008 ----
---- ---- ---- GAAP operating profit $27.5 24.7 101.4 94.0 Add:
Adjustment to royalty rate (a) - 2.6 - 25.0 Add: Brand Introduction
6.7 - 20.6 - --- --- ---- --- Non-GAAP operating profit (b) $34.2
27.3 122.0 119.0 ===== ==== ===== ===== GAAP net income $17.8 14.8
62.7 57.1 Add: Adjustment to royalty rate (a) - 2.6 - 25.0 Add:
Brand Introduction 6.7 - 20.6 - Less: Tax effects of adjustments
(2.8) (1.1) (7.8) (9.7) ---- ---- ---- ---- Non-GAAP net income (b)
$21.7 16.3 75.5 72.4 ===== ==== ==== ==== GAAP earnings per share -
diluted $0.39 0.32 1.36 1.25 Add: Adjustment to royalty rate (a) -
0.06 - 0.54 Add: Brand Introduction 0.14 - 0.45 - Less: Tax effects
of adjustments (0.06) (0.02) (0.17) (0.21) ----- ----- ----- -----
Non-GAAP earnings per share - diluted (b) $0.47 0.36 1.64 1.58
===== ==== ==== ==== a) The Company's results of operations include
a royalty expense that was charged to the Company by its former
parent company for use of the Brink's brand name. The rate utilized
for fiscal year 2008 for the months January through October was a 7
percent rate in the United States and 3 percent outside of the
United States. However, for the months of November and December
2008, the rate used was approximately 1.25 percent of revenue for
both within and outside the United States. b) Non-GAAP figures for
the twelve months ended December 31, 2009 as presented in the table
above include the effect of previously reported non-cash litigation
charges. The net charge for the twelve months ended December 31,
2009 was $3.2 million, or $0.04 per share earnings on a diluted
basis. In 2008, a previously disclosed non-cash accounting
correction increased operating profit by $3.6 million, net income
by $2.2 million and pro forma earnings per share by $0.05 for the
twelve months ended December 31, 2008. The non-GAAP figures above
have not been adjusted to exclude the effect of these items.
http://www.newscom.com/cgi-bin/prnh/20090708/DA43773LOGO
http://photoarchive.ap.org/ DATASOURCE: Brink's Home Security
Holdings, Inc. CONTACT: Investor Relations of Brink's Home Security
Holdings, Inc., +1-972-871-3130 Web Site:
http://www.brinkshomesecurityholdings.com/
http://www.broadviewsecurity.com/
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