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Brink's hits milestone

Brink's hits milestone After reaching 750,000 accounts, the home security company aims for millionth customer mark

IRVING, Texas - Brink's Home Security announced in early November it had hit 750,000 customers, reaching a major milestone in the company's growth and inching closer to its closest competitor despite never having made a major acquisition. The company, which has 90 percent of its account base in the residential market, saw its installed base increase by more than 77,000 installations in the first three quarters of 2002, an increase of about 15.8 percent over last year, said Bob Allen, president of Brink's Home Security. That number slowed for a time about two years ago, when the company saw its customer disconnect rate rise, Allen said. To compensate, the company slowed its pace, twice raised its minimum credit scores, once in late 1999 and again in 2001, and increased its advertised installation prices in most of the country. "We were letting customers in the door who weren't going to be lifelong customers," Allen said. "Now we are making sure we look at the lifetime value of a customer to make sure that we are getting the economic value add for our shareholders…and we're back into stronger double-digit increases in installs and we're going to keep that going." That determination to tighten credit requirements was aided by the company's sophisticated database that keeps detailed records of customer accounts, from the first point of contact with the customer, every service issue, and the customer alarm and billing history. An analysis of the data determined that a customer's propensity to disconnect had a high correlation to credit scoring, among other factors, Allen said. To manage its 750,000 accounts, the company has just fewer than 2,500 employees throughout the United States and western Canada in 50 company-owned branches - a number which company officials said they hope to grow through a variety of channels. Those include an increase in the new construction market, where Brink's has relationships with some of the nation's top builders for everything from low voltage work to home theater systems, as well as security installations. The new construction market makes up less than 10 percent of the company's business. "That has helped us grow our markets as well, and we need to be in the markets where the major production builders are," Allen said. The company's home technology business is currently concentrated in the Sunbelt. A secondary growth vehicle for the company is its dealer program, which also makes up less than 10 percent of the company's business. The company's 70 dealers are located "where our company locations are not,"Allen said. Also, only two to three Brink's dealers are in the same market, mostly secondary and tertiary markets where company locations aren't feasible. Like many other companies that offer a dealer program, Allen said the company has been inundated with calls from dealers looking for a new source of funding for their accounts. Brink's program is "not a major growth platform for the company," Allen said. Limiting the number of dealers, and by extension acquisitions, has helped to keep Brink's internal operations orderly and profitable, said Jack Mallon, managing director of Mallon Capital. "They have had no acquisitions so no heavy debt, and amortization (of debt) plays less of a factor going forward," Mallon said. "They also have very standardized operations, so they realize all that cost savings and are able to offer standard equipment, not a hodgepodge of products." According to Allen, Brink's did make one acquisition of a Nebraska company more than a decade ago, and has been looking at several other companies over the years. "We didn't grow as rapidly as we might have over the last five years by not being in the acquisition market, but we are not paying the price of those aggressive acquisitions today," Allen said. "We look at target acquisition companies, but the price has to be right." Brink's is also looking to use its national presence to boost its commercial operations; the company has been adding staff and additional resources to that sector, where Allen said Brink's has a competitive advantage due to the very small number of national competitors. As well as reaching the millionth customer mark, which is expected to happen in late 2005 or early 2006, Brink's intends to move into all 50 states and increase its Canadian presence, Allen said. Industry Analyst Joe Freeman said the decline of the ADT authorized dealer program (see related story on page 1) makes it an opportune time for Brink's to increase its presence. "This gives Brink's a better opening because they are dealing with a slower competitor than they are used to dealing with," Freeman said.

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