BRINKS CO
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2017
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OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ____________ to ____________
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Commission file number 001-09148
THE BRINK’S COMPANY
(Exact name of registrant as specified in its charter)
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Virginia
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54-1317776
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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P.O. Box 18100,
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1801 Bayberry Court
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Richmond, Virginia
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23226-8100
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code
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(804) 289-9600
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Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange on
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Title of each class
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which registered
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The Brink’s Company Common Stock, Par Value $1
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
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No
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
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No
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
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No
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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes
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No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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Emerging Growth Company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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No
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As of
February 26, 2018
, there were issued and outstanding
50,575,403
shares of common stock. The aggregate market value of shares of common stock held by non-affiliates as of June 30,
2017
, was
$3,357,715,184
.
Documents incorporated by reference: Part III incorporates information by reference from portions of the Registrant’s definitive
2018
Proxy Statement to be filed pursuant to Regulation 14A.
THE BRINK’S COMPANY
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31,
2017
TABLE OF CONTENTS
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Item 16.
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Form 10-K Summary
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Overview
The Brink’s Company is the global leader in secure logistics, cash management
(a)
and security solutions including cash-in-transit, ATM replenishment and maintenance, cash management services, including vault outsourcing, money processing, and intelligent safe services, international transportation of valuables, and payment services. Our customers include financial institutions, retailers, government agencies (including central banks), mints, jewelers and other commercial operations around the world. Our global network serves customers in more than
100
countries. We have ownership interests in companies in
41
countries and agency relationships with companies in additional countries. We employ approximately
62,300
people and our operations include approximately
1,100
facilities and
12,600
vehicles.
Brink’s was founded in 1859 and The Brink’s Company was first incorporated in 1930 under the laws of the State of Delaware (at that time, the Company was named The Pittston Company). It succeeded to the business of a Virginia corporation in 1986 and was renamed The Brink’s Company in 2003. Our headquarters are located in Richmond, Virginia. The Brink’s Company, along with its subsidiaries, is referred to as “we,” “our,”, “us,” “Brink’s,” or “the Company” throughout this Form 10-K.
Brink’s operations are located throughout the world with 77% of our revenues earned outside the U.S. during
2017
. Revenues earned in the U.S., Brazil, France, Mexico, Argentina, Venezuela and Canada represent 75% of consolidated revenues. The following table presents a summary of revenues by segment in
2015
,
2016
and
2017
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(In millions)
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2017
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% total
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% change
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2016
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% total
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% change
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2015
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% total
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Revenues by segment:
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North America
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$
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1,254.2
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37
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4
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$
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1,210.3
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40
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(1
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$
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1,224.0
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40
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South America
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924.6
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28
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29
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718.7
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24
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—
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719.3
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23
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Rest of World
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1,014.1
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30
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4
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979.4
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32
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(5
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1,033.6
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34
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Total reportable segments
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3,192.9
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95
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10
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2,908.4
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96
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(2
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2,976.9
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97
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Other items not allocated to segments
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154.1
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5
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37
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112.2
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4
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33
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84.5
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3
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Total Revenues
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$
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3,347.0
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100
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11
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$
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3,020.6
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100
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(1
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$
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3,061.4
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100
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Amounts may not add due to rounding.
Geographic financial information related to revenues and long-lived assets is included in the consolidated financial statements on page 76.
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(a)
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Based on publicly available company data for cash services businesses.
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1
Vision, Mission and Strategy
Our Vision
We provide a motivated, high performance team environment that drives customer focus and industry success. We are the global leader in cash management and security services.
Our Strategy
Our strategy is to:
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Accelerate profitable growth ("APG")
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Close the gap with operational excellence ("CTG")
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Introduce differentiated services ("IDS")
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Accelerate profitable growth through:
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growing High-Value Services
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growing account share with existing customers
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increasing focus on smaller financial institutions
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penetrating large, unvended retail market
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exploring core and adjacent acquisitions
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We have opportunities to grow revenue in higher-margin lines of business such as money processing outsourcing, CompuSafe
®
services and recyclers, and Brink’s Global Services. Our plan calls for growing revenue with both large and small financial institutions, and increasing penetration of the large and underserved retail market. We also have the financial flexibility to pursue accretive acquisitions in both core and adjacent markets.
Close the gap with operational excellence by:
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leading our industry in safety and security
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exceeding customer expectations
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increasing operational productivity
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achieving industry-leading margins
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We have already begun an aggressive drive to improve internal productivity, optimize cost and achieve industry-leading margins.
Introduce differentiated services through:
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leveraging uniform, best-in-class global technology base for logistics and operating systems
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offering end-to-end cash supply chain managed services
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launching a customer portal and value-added, fee-based services
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The third component of our strategy is to introduce differentiated services to our customers by strengthening and leveraging our IT capabilities. Our IT strategy and systems will also drive improved service levels and operational efficiencies.
2
Services
We design customized services to meet the cash and valuables supply chain needs of our customers. We enter into contracts with our customers to establish pricing and other terms. Cash-in-Transit and ATM contracts usually cover an initial term of at least one year and in many cases one to three years, and generally remain in effect thereafter until canceled by either party. Contracts for Cash Management Services are typically longer. Following are descriptions of our service offerings:
Core Services
(51% of total revenues in
2017
)
Cash-in-transit and ATM Services are core services we provide to customers throughout the world. We charge customers per service performed or based on the value of goods transported. Revenues are affected by the level of economic activity in various markets as well as the volume of business for specific customers. Core Services generated approximately $1.7 billion of revenues in
2017
($1.6 billion in 2016 and 2015).
Cash-in-Transit Services
– Serving customers since 1859, our success in Cash-in-Transit is driven by a combination of rigorous security practices, high-quality customer service, risk management and logistics expertise. Cash-in-Transit Services generally include the secure transportation of:
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cash between businesses and financial institutions, such as banks and credit unions
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cash, securities and other valuables between commercial banks, central banks and investment banking and brokerage firms
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new currency, coins, bullion and precious metals for central banks and other customers
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ATM Services
– We manage
98,200
ATMs worldwide. We provide customers who own and operate ATMs a variety of service options. Basic ATM management services include cash replenishment and first and second line maintenance. We also provide comprehensive services for ATM management including cash replenishment, replenishment forecasting, cash optimization, ATM remote monitoring, service call dispatching, transaction processing, installation services, and first and second line maintenance.
High-Value Services
(42% of total revenues in
2017
)
Our Core Services, combined with our brand and global infrastructure, provide a broad platform from which we offer additional high-value services, which generated approximately $1.4 billion of revenues in
2017
($1.2 billion in 2016 and 2015).
Global Services
- Brink’s Global Services ("BGS") is the leading global provider of secure transport of highly-valued commodities including diamonds, jewelry, precious metals, securities, currency, high-tech devices, electronics and pharmaceuticals. Our specialized diamond and jewelry operations have offices in the world’s major diamond and jewelry centers. Serving customers in more than
100
countries, BGS provides secure transportation services including pick-up, packaging, customs clearance, secure vault storage and inventory management. BGS uses a combination of armored vehicles and secure air and sea transportation.
Cash Management Services
- We offer a variety of cash management services, depending on customers’ unique needs. These include:
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money processing (e.g., counting, sorting, wrapping, checking condition of bills, etc.) and other cash management services
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services related to deploying and servicing “intelligent” safes and safe control devices, including our patented CompuSafe
®
service
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check imaging services
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Other cash management services include cashier balancing, counterfeit detection, account consolidation and electronic reporting. Retail and bank customers use Brink’s to count and reconcile coins and currency, prepare bank deposit information and replenish coins and currency in specific denominations.
Brink's offers a fully integrated approach to managing customers' supply chain of cash. These services include logistical support from point-of-sale through transport, vaulting, bank deposit and related credit reporting. We also offer a variety of technology applications including online cash tracking, cash inventory management, check imaging for real-time deposit processing, and a variety of other web-based tools that enable banks and other customers to reduce costs while improving service to their customers. We believe the quality and scope of our money processing and information systems differentiate our Cash Management Services from competitive offerings.
Brink’s CompuSafe
®
Service
. Brink’s CompuSafe
®
service provides an integrated, closed-loop system for preventing theft and managing cash. We market CompuSafe
®
services to a variety of cash-intensive customers including convenience stores, gas stations, restaurants, retail chains and entertainment venues. In a majority of instances, once the specialized safe is installed, the customer’s employees deposit currency into the safe’s cassettes, which can only be removed by Brink’s personnel. Upon removal, the cassettes are securely transported to a vault for processing where contents are verified and transferred for deposit. Our CompuSafe
®
service features currency-recognition and counterfeit-detection technology, multi-language touch screens and an electronic interface between the point-of-sale, back-office systems and external banks. Our electronic reporting interface with external banks enables customers to receive same-day credit on their cash balances, even if the cash remains on the customer’s premises. Recently, some customers have requested specialized safes permitting customer employees to remove money in a secure manner that was previously deposited in the safe cassettes to meet a current need. We have also implemented this capability.
3
Vaulting Services
. Vaulting services combine Cash-in-Transit Services, Cash Management Services, vaulting and electronic reporting technologies to help banks expand into new markets while minimizing investment in vaults and branch facilities. In addition to providing secure storage, we process deposits, provide check imaging and reconciliation services, perform currency inventory management, process ATM replenishment orders and electronically transmit banking transactions.
Payment Services
– We provide convenient payment services, including bill payment processing, mobile phone top-up, and Brink’s Money™ prepaid cards.
Bill payment processing services include bill payment acceptance and processing services on behalf of utility companies and other billers. Consumers can pay bills, top-up prepaid mobile phones and manage accounts at retail agent locations that we operate on behalf of utility companies, banks and a small number of leased payment locations. This service is offered at over 32,000 locations in Brazil, Colombia, Panama and Mexico.
We offer Brink’s Money™ general purpose reloadable prepaid cards and payroll cards to consumers and employers in the U.S. Our general purpose reloadable cards are sold to consumers through our direct-to-consumer marketing efforts while our payroll cards are sold to employers who use them to pay employees electronically. Brink’s Money™ cards can be used at stores, restaurants, online retailers, and at ATMs worldwide. This product is targeted to the millions of unbanked and under-banked Americans looking for alternative financial products.
Commercial Security Systems
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We provide commercial security system services in designated markets in Europe. Our security system design and installation services include alarms, motion detectors, closed-circuit televisions, digital video recorders, and access control systems, including card and biometric readers, electronic locks, and turnstiles. We may also provide monitoring services after systems have been installed.
Other Security Services
(7% of total revenues in
2017
)
Guarding
– We protect airports, offices, warehouses, stores, and public venues with or without electronic surveillance, access control, fire prevention and trained patrolling personnel. Other security services generated approximately $0.2 billion of revenues in
2017
($0.2 billion in 2016 and 2015).
We offer security and guarding services in France, Luxembourg, Greece and Brazil. A portion of this business involves long-term contracts related primarily to security services at airports and embassies. Generally, guarding contracts are for a one-year period, and the majority of contracts are extended.
Industry and Competition
Brink’s competes with large multinational, regional and smaller companies throughout the world. Our largest multinational competitors are G4S plc (U.K.); Loomis AB (Sweden); Prosegur, Compania de Seguridad, S.A. (Spain); and Garda World Security Corporation (Canada).
We believe the primary factors in attracting and retaining customers are security expertise, service quality, and price. Our competitive advantages include:
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brand name recognition
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reputation for a high level of service and security
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risk management and logistics expertise
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global network and customer base
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proven operational excellence, and
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high-quality insurance coverage and financial strength
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Although we face competitive pricing pressure in many markets, we resist competing on price alone. We believe our high levels of service, security expertise and value-added solutions differentiate us from competitors.
Insurance Coverage
The availability of high-quality and reliable insurance coverage is an important factor in our ability to attract and retain customers and manage the risks inherent in our business. We purchase insurance coverage for losses in excess of what we consider to be prudent levels of self-insurance. Our insurance policies cover losses from most causes, with the exception of war, nuclear risk and certain other exclusions typical in such policies.
Insurance for security is provided by different groups of underwriters at negotiated rates and terms. Premiums fluctuate depending on market conditions. The security loss experience of Brink’s and, to a limited extent, other armored carriers affects our premium rates.
4
Service Mark and Patents
BRINKS is a registered service mark in the U.S. and certain foreign countries. The BRINKS mark, name and related marks are of material significance to our business. We own patents for safes and related services, iDeposit and Daily Credit processes, including our integrated CompuSafe
®
service, which expire between
2018
and
2032
. These patents provide us with important advantages; however, we are not dependent on the existence of these patents.
We have licensed the Brink’s name to a limited number of companies, including a company that provides residential smart home and home security services and a distributor of security products (padlocks, door hardware, etc.) to customers through major retail chains.
Government Regulation
Our U.S. operations are subject to regulation by the U.S. Department of Transportation with respect to safety of operations, equipment and financial responsibility. Intrastate operations in the U.S. are subject to state regulation. Operations outside of the United States are regulated to varying degrees by the countries in which we operate.
Employee Relations
At
December 31, 2017
, our company had approximately
62,300
full-time and contract employees, including approximately
7,000
employees in the United States (of whom approximately
300
were classified as part-time employees) and approximately
55,300
employees outside the United States. At
December 31, 2017
, Brink’s was a party to eleven collective bargaining agreements in the United States and Canada with various local unions covering approximately
1,400
employees. The agreements have various expiration dates from
2018
to
2021
. Outside of the United States and Canada, approximately
61%
of employees are represented by trade union organizations. We believe our employee relations are satisfactory.
Business Divestitures
Below is a summary of the significant businesses we exited in the last three years. These divestitures did not meet the criteria for classification as discontinued operations. Operating results for these businesses are included in continuing operations for the current and prior periods. We continue to operate our Global Services business in each of these countries.
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We sold our 70% ownership interest in a Russian cash management business in November 2015 and recognized a $5.9 million loss on the disposition. A significant part of the loss ($5.0 million) represented the reclassification of foreign currency translation adjustments from accumulated other comprehensive income (loss) into earnings.
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We sold an Irish guarding operation in November 2015.
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In September 2016, we shut down the remaining operations in the Republic of Ireland and Northern Ireland. During 2016, we incurred approximately $16 million in losses as we exited these operations. These losses included $5 million in severance costs and $2 million in property impairment charges. During 2017, additional losses incurred related to the Ireland operations were not significant.
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We sold a German guarding operation in October 2016.
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5
Business Acquisitions
In 2017, we acquired six business operations in five countries for an aggregate purchase price of approximately $365 million. See Note 6 to the consolidated financial statements for more detailed information on the acquired assets and liabilities from these acquisitions. Below is a brief description of each of the six business acquisitions:
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In March 2017, we acquired 100% of the capital stock of American Armored Transport, Inc. ("AATI"). AATI provides secured trucking transportation of high-value cargo within the continental United States.
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We acquired 100% of the capital stock of Muitofacil Holding Ltda., a Brazil-based holding company, and its subsidiary, Muitofacil Arrecadacao e Recebimento Ltda. (together "Pag Facil") in April 2017. Pag Facil offers bank correspondent services, bill payment processing and mobile phone top-up services in Brazil.
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In June 2017, we acquired 100% of the capital stock of Global Security S.A. (“LGS”). LGS is a Chilean security company specializing
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in CIT and ATM services.
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We acquired 100% of the shares of Maco Transportadora de Caudales S.A. ("Maco Transportadora") in July 2017. Maco Transportadora is a CIT and Money Processing business based in Argentina.
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In August 2017, we acquired 100% of the capital stock of Maco Litoral, S.A., an Argentina-based company which provides CIT and ATM services.
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We acquired 100% of the shares of Temis S.A.S. and its wholly-owned subsidiaries, Les Goelands S.A.S. and Temis Conseil et Formation S.A.R.L (together "Temis") in October 2017. Temis provides CIT and Money Processing services in France.
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In January 2018, we announced an agreement to purchase Rodoban Transportes Aereos e Terrestres Ltda., Rodoban Servicos e Sistemas de Seguranca Ltda., and Rodoban Seguranca e Transporte de Valores Ltda. (together "Rodoban"). Rodoban provides CIT, Money Processing and ATM services primarily in southeastern Brazil.
Reorganization and Restructuring
In the fourth quarter of 2016, management implemented restructuring actions across our global business operations and our corporate functions. As a result of these actions, we recognized
$18.1 million
in related 2016 costs. We recognized an additional
$17.3 million
in 2017 under this restructuring for additional costs related to severance, a benefit program termination, asset-related adjustments, and lease terminations. Severance actions are expected to reduce our global workforce by
800
to
900
positions and result in annualized cost savings of
$20 million
when this restructuring is finalized. We expect to incur additional costs between
$10
and
$12 million
in the aggregate in future periods, primarily severance costs.
Management initiated a global restructuring of our business in the third quarter of 2015 (“2015 Reorganization and Restructuring”), which included the recognition in 2015 of
$11.6 million
in costs related to employee severance, contract terminations and lease terminations. We recognized an additional
$6.5 million
in charges in 2016 related to this restructuring. The 2015 Reorganization and Restructuring reduced the global workforce by approximately
1,100
positions and resulted in approximately
$20 million
in 2016 cost savings. The actions under this program were substantially completed by the end of 2016, with cumulative pretax charges of approximately
$18 million
.
In the fourth quarter of 2014, we announced a reorganization and restructuring of Brink’s global organization (“2014 Reorganization and Restructuring”) to provide for a more streamlined and centralized organization. As part of this program, we reduced our total workforce by approximately
1,700
positions. Severance costs of
$21.8 million
associated with these actions were recognized in 2014, with an additional
$1.9 million
in restructuring charges recognized in 2015. The restructuring saved annual direct costs of approximately
$50 million
in 2015 compared to 2014, excluding severance, lease termination and accelerated depreciation. The actions under this program were substantially completed by the end of 2015.
Executive Leadership and Board of Directors Restructuring
In January 2016, Brink’s entered into an agreement (the "Starboard Agreement") with Starboard Value LP and its affiliates ("Starboard"). As a result, our former Chief Executive Officer ("CEO"), Thomas C. Schievelbein, stepped down in May 2016, and two of the Company’s directors (including the Company’s independent lead director at that time) retired from the Board. Pursuant to the Starboard Agreement, among other things, the Board appointed three new independent directors and delegated to the Board’s Corporate Governance and Nominating Committee the responsibility to oversee the Board's process to search for a new CEO. In June 2016, the Board appointed Douglas A. Pertz as the Company’s president and CEO and as a member of the Board. In July 2016, Ronald J. Domanico replaced Joseph W. Dziedzic as Chief Financial Officer. In the fourth quarter of 2015, we recognized
$1.8 million
in costs related to the Executive Leadership and Board of Directors restructuring. We recognized an additional
$4.3 million
in charges, primarily severance costs, in 2016.
Other Restructurings
Management routinely implements restructuring actions in targeted sections of our business. As a result of these actions, we recognized related severance costs of
$4.6 million
in
2017
. The majority of these restructuring actions were completed in 2017. The completed restructuring actions reduced our workforce by approximately
300
positions, which will result in
$4 million
in annualized cost savings. For the remaining restructuring actions, we expect to incur additional costs less than
$1 million
in future periods. These estimates will be updated as management targets additional sections of our business.
6
Available Information and Corporate Governance Documents
The following items are available free of charge on our website (
www.brinks.com
) as soon as reasonably possible after filing or furnishing them with the Securities and Exchange Commission (the “SEC”):
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Annual reports on Form 10-K
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Quarterly reports on Form 10-Q
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Current reports on Form 8-K, and amendments to those reports
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The following documents are also available free of charge on our website:
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Corporate Governance Policies
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Code of Ethics
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The charters of the following committees of our Board of Directors (the “Board”): Audit and Ethics, Compensation and Benefits, Corporate Governance and Nominating, and Finance and Strategy
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Printed versions of these items will be mailed free of charge to shareholders upon request. Such requests can be made by contacting the Corporate Secretary at 1801 Bayberry Court, P. O. Box 18100, Richmond, Virginia 23226-8100.
7
We operate in highly competitive industries.
We compete in industries that are subject to significant competition and pricing pressures in most markets. In addition, our business model requires significant fixed costs associated with offering many of our services including costs to operate a fleet of armored vehicles and a network of secure branches. Because we believe we have competitive advantages such as brand name recognition and a reputation for a high level of service and security, we resist competing on price alone. However, continued pricing pressure from competitors or failure to achieve pricing based on the competitive advantages identified above could result in lost volume of business and have an adverse effect on our business, financial condition, results of operations and cash flows. In addition, given the highly competitive nature of our industries, it is important to develop new solutions and product and service offerings to help retain and expand our customer base. Failure to develop, sell and execute new solutions and offerings in a timely and efficient manner could also negatively affect our ability to retain our existing customer base or pricing structure and have an adverse effect on our business, financial condition, results of operations and cash flows.
Decreased use of cash could have a negative impact on our business.
The proliferation of payment options other than cash, including credit cards, debit cards, stored-value cards, mobile payments and on-line purchase activity, could result in a reduced need for cash in the marketplace and a decline in the need for physical bank branches and retail stores. To mitigate this risk, we are developing new lines of business and investing in adjacent security-related markets, but there is a risk that these initiatives may not offset the risks associated with our traditional cash-based business and that our business, financial condition, results of operations and cash flows could be negatively impacted.
Our strategy may not be successful.
Our strategy has three pillars: accelerate profitable growth, close the gap with competitors and introduce differentiated services. We may not be successful in growing revenue in high-margin lines of business, increasing our market share with existing customers or winning new business with smaller financial institutions and the retail market. Although we have already begun a drive to improve productivity and optimize costs, we may not be able to achieve industry-leading margins. We also may not be successful in strengthening and leveraging our IT capabilities to improve service levels and drive efficiencies. If we are unable to achieve our strategic objectives and anticipated operating profit improvements, our results of operations and cash flows may be adversely affected.
We have significant operations outside the United States.
We currently serve customers in more than
100
countries, including
41
countries where we operate subsidiaries. Seventy-seven percent (77%) of our revenues in
2017
came from operations outside the U.S. We expect revenues outside the U.S. to continue to represent a significant portion of total revenues. Business operations outside the U.S. are subject to political, economic and other risks inherent in operating in foreign countries, such as:
|
•
|
the difficulty of enforcing agreements, collecting receivables and protecting assets through foreign legal systems;
|
|
•
|
trade protection measures and import or export licensing requirements;
|
|
•
|
difficulty in staffing and managing widespread operations;
|
|
•
|
required compliance with a variety of foreign laws and regulations;
|
|
•
|
enforcement of our global compliance program in foreign countries with a variety of laws, cultures and customs;
|
|
•
|
varying permitting and licensing requirements in different jurisdictions;
|
|
•
|
foreign ownership laws;
|
|
•
|
changes in the general political and economic conditions in the countries where we operate, particularly in emerging markets;
|
|
•
|
threat of nationalization and expropriation;
|
|
•
|
higher costs and risks of doing business in a number of foreign jurisdictions;
|
|
•
|
laws or other requirements and restrictions associated with organized labor;
|
|
•
|
limitations on the repatriation of earnings;
|
|
•
|
fluctuations in equity, revenues and profits due to changes in foreign currency exchange rates, including measures taken by governments to devalue official currency exchange rates;
|
|
•
|
inflation levels exceeding that of the U.S; and
|
|
•
|
inability to collect for services provided to government entities.
|
We are exposed to certain risks when we operate in countries that have high levels of inflation, including the risk that:
|
•
|
the rate of price increases for services will not keep pace with the cost of inflation;
|
|
•
|
adverse economic conditions may discourage business growth which could affect demand for our services;
|
|
•
|
the devaluation of the currency may exceed the rate of inflation and reported U.S. dollar revenues and profits may decline; and
|
|
•
|
these countries may be deemed “highly inflationary” for U.S. generally accepted accounting principles (“GAAP”) purposes.
|
We manage these risks by monitoring current and anticipated political and economic developments, monitoring adherence to our global compliance program and adjusting operations as appropriate. Changes in the political or economic environments of the countries in which we operate could have a material adverse effect on our business, financial condition, results of operations and cash flows.
8
Our business success depends on retaining our leadership team and attracting and retaining qualified personnel.
Our future success depends, in part, on the continuing services and contributions of our leadership team to execute on our strategic plan and to identify and pursue new opportunities. Our future success also depends, in part, on our continued ability to attract and retain highly skilled and qualified personnel. Any turnover in senior management or inability to attract and retain qualified personnel could have a negative effect on our results of operations. Turnover in key leadership positions within the Company may adversely affect our ability to manage the company efficiently and effectively, could be disruptive and distracting to management and may lead to additional departures of current personnel, any of which could have a material adverse effect on our business and results of operations.
We may be unable to achieve, or may be delayed in achieving, our initiatives to drive efficiency and control costs.
We have launched a number of initiatives, including the reorganization and restructuring actions described on page 6, to improve efficiencies and reduce operating costs. Although we have achieved annual cost savings associated with these initiatives, we may be unable to sustain the cost savings that we have achieved. In addition, if we are unable to achieve, or have any unexpected delays in achieving additional cost savings, our results of operations and cash flow may be adversely affected. Even if we meet our goals as a result of these initiatives, we may not receive the expected financial benefits of these initiatives.
We may not be successful in pursuing strategic investments or acquisitions or realize the expected benefits of those transactions because of integration difficulties and other challenges.
While we may identify opportunities for acquisitions and investments to support our growth strategy, as well as divestiture opportunities, our due diligence examinations and positions that we may take with respect to appropriate valuations for acquisitions and divestitures and other transaction terms and conditions may hinder our ability to successfully complete business transactions to achieve our strategic goals. Our ability to realize the anticipated benefits from acquisitions will depend, in part, on successfully integrating each business with our company as well as improving operating performance and profitability through our management efforts and capital investments. The risks to a successful integration and improvement of operating performance and profitability include, among others, failure to implement our business plan, unanticipated issues in integrating operations with ours, unanticipated changes in laws and regulations, labor unrest resulting from union operations, regulatory, environmental and permitting issues, the effect on our internal controls and compliance with the regulatory requirements under the Sarbanes-Oxley Act of 2002, and difficulties in fully identifying and evaluating potential liabilities, risks and operating issues. The occurrence of any of these events may adversely affect our expected benefits of any acquisitions and may have a material adverse effect on our financial condition, results of operations or cash flows.
We have significant deferred tax assets in the United States that may not be realized.
Deferred tax assets are future tax deductions that result primarily from the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial statement and income tax purposes. At
December 31, 2017
, we had
$173 million
of U.S. deferred tax assets, net of valuation allowances, primarily related to our retirement plan obligations. These future tax deductions may not be realized if tax rules change in the future, if forecasted U.S. operational results are not realized or if any other U.S. projected future taxable income is insufficient. Consequently, not realizing our U.S. deferred tax assets may significantly and materially affect our financial condition, results of operations and cash flows.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“Tax Reform Act”) was enacted into law. The Tax Reform Act reduced the federal tax rate for corporations from 35% to 21%, beginning January 1, 2018 and the Company recorded a provisional one-time non-cash charge in 2017 for the new rate and other legislative changes. We expect the recently enacted U.S. tax reform to have an unfavorable impact related to the broadening of the Company’s U.S. tax base that will more than offset the favorable impact of the new 21% rate. We will continue to analyze the full impact of enacted legislation as additional guidance is provided which could result in a change to our estimated non-cash charge and future results of operations.
It is possible that we will incur restructuring charges in the future.
It is possible that we will take restructuring actions in one or more of our markets in the future to reduce expenses. These actions could result in significant restructuring charges at these subsidiaries, including recognizing impairment charges to write down assets, and recording accruals for employee severance and the termination of operating leases. These charges, if required, could significantly and materially affect results of operations and cash flows.
We have significant retirement obligations.
Poor investment performance of retirement plan holdings and / or lower interest rates used to discount the obligations could unfavorably affect our liquidity and results of operations.
We have substantial pension and retiree medical obligations, a portion of which have been funded. The amount of these obligations is significantly affected by factors that are not in our control, including interest rates used to determine the present value of future payment streams, investment returns, medical inflation rates, participation rates and changes in laws and regulations. The funded status of the primary U.S. pension plan was approximately 88% as of
December 31, 2017
. Based on actuarial assumptions at the end of
2017
, we do not expect to make any future contributions. A change in assumptions could result in funding obligations that could adversely affect our liquidity and our ability to use our resources to make acquisitions and to otherwise grow our business.
9
We have $745 million of actuarial losses recorded in accumulated other comprehensive income (loss) at the end of
2017
. These losses relate to changes in actuarial assumptions that have increased the net liability for benefit plans. These losses have not been recognized in earnings. These losses will be recognized in earnings in future periods to the extent they are not offset by future actuarial gains. Our projections of future cash requirements and expenses for these plans could be adversely affected if our retirement plans have additional actuarial losses.
Our earnings and cash flow could be materially affected by increased losses of customer valuables.
We purchase insurance coverage for losses of customer valuables for amounts in excess of what we consider prudent deductibles and/or retentions. Insurance is provided by different groups of underwriters at negotiated rates and terms. Coverage is available to us in major insurance markets, although premiums charged are subject to fluctuations depending on market conditions. Our loss experience and that of other companies in our industry affects premium rates. We are not insured for losses below our coverage limits and recognize expense up to these limits for actual losses. Our insurance policies cover losses from most causes, with the exception of war, nuclear risk and various other exclusions typical for such policies. The availability of high-quality and reliable insurance coverage is an important factor in obtaining and retaining customers and managing the risks of our business. If our losses increase, or if we are unable to obtain adequate insurance coverage at reasonable rates, our financial condition, results of operations and cash flows could be materially and adversely affected.
Currency restrictions in Venezuela limit our ability to use earnings and cash flows outside of Venezuela and may negatively affect ongoing operations in Venezuela.
Because most of our past requests to convert bolivars to dollars have not been approved and certain past processes to obtain dollars are no longer available, we do not expect to be able to repatriate cash from Venezuela for the foreseeable future. Therefore, we do not expect to be able to use cash held in Venezuela for any purpose outside of that country, including reducing our U.S. debt, funding growth or business acquisitions or returning cash to shareholders.
We believe that currency exchange restrictions in Venezuela may disrupt the operation of our business in Venezuela because we may be unable to pay for goods and services that are required to be paid in dollars. This could reduce our ability to provide services to our customers in Venezuela, or could increase the cost of delivering the services, which would negatively affect our earnings and cash flows, and could result in a loss of control, deconsolidation, shutdown or loss of the business in Venezuela.
We have risks associated with confidential information.
In the normal course of business, we collect, process and retain sensitive and confidential information, including information about individuals. Despite the security measures we have in place, our facilities and systems, and those of third-party service providers and business partners, could be vulnerable to security breaches (including cybersecurity breaches), acts of vandalism, computer viruses, misplaced or lost data, programming or human errors or other similar events. Any security breach involving the misappropriation, loss or other unauthorized disclosure of confidential information, whether by us or by third-party service providers, could damage our reputation, expose us to the risks of litigation and liability, disrupt our business or otherwise have a material adverse effect on our business, financial condition, results of operations and cash flows.
Negative publicity to our name or brand could lead to a loss of revenues or profitability.
We are in the security business and our success and longevity are based to a large extent on our reputation for trust and integrity. Our reputation or brand, particularly the trust placed in us by our customers, could be negatively impacted in the event of perceived or actual breaches in our ability to conduct our business ethically, securely and responsibly. In addition, we have licensing arrangements that permit certain entities to use Brink’s name and/or other intellectual property in connection with their businesses. If any of these entities experienced an actual or perceived breach in its ability to conduct its business ethically, securely or responsibly, it could have a negative effect on our name and/or brand. Any damage to our brand could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Failures of our IT system could have a material adverse effect on our business.
We are heavily dependent on our information technology ("IT") infrastructure. Significant problems with our infrastructure, such as telephone or IT system failure, cybersecurity breaches, or failure to develop new technology platforms to support new initiatives and product and service offerings, could halt or delay our ability to service our customers, hinder our ability to conduct and expand our business and require significant remediation costs. In addition, we continue to evaluate and implement upgrades to our IT systems. We are aware of inherent risks associated with replacing these systems, including accurately capturing data and system disruptions, and believe we are taking appropriate action to mitigate these risks through testing, training, and staging implementation. However, there can be no assurances that we will successfully launch these systems as planned or that they will occur without disruptions to our operations. Any of these events could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We operate in regulated industries.
Our U.S. operations are subject to regulation by the U.S. Department of Transportation with respect to safety of operations and equipment and financial responsibility. Intrastate operations in the U.S. are subject to regulation by state regulatory authorities and interprovincial
10
operations in Canada are subject to regulation by Canadian and provincial regulatory authorities. Our other international operations are regulated to varying degrees by the countries in which we operate. Many countries have permit requirements for security services and prohibit foreign companies from providing different types of security services.
Changes in laws or regulations could require a change in the way we operate, which could increase costs or otherwise disrupt operations. In addition, failure to comply with any applicable laws or regulations could result in substantial fines or revocation of our operating permits and licenses. If laws and regulations were to change or we failed to comply, our business, financial condition, results of operations and cash flows could be materially and adversely affected.
Our inability to access capital or significant increases in our cost of capital could adversely affect our business
.
Our ability to obtain adequate and cost-effective financing depends on our credit quality as well as the liquidity of financial markets. A negative change in our ratings outlook or any downgrade in our credit ratings by the rating agencies could adversely affect our cost and/or access to sources of liquidity and capital. Additionally, such a downgrade could increase the costs of borrowing under available credit lines. Disruptions in the capital and credit markets could adversely affect our ability to access short-term and long-term capital. Our access to funds under current credit facilities is dependent on the ability of the participating banks to meet their funding commitments. Those banks may not be able to meet their funding commitments if they experience shortages of capital and liquidity. Longer disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation, reduced alternatives, or failures of significant financial institutions could adversely affect our access to capital needed for our business.
We are subject to covenants for our credit facilities and our unsecured notes.
Our senior secured credit facility, the senior notes, the unsecured multi-currency bank credit facility and our letter of credit facilities contain various financial and other covenants. The financial covenants include a limit on the ratio of net debt to earnings before interest, taxes, depreciation and amortization and a limit on the ratio of earnings before interest, taxes, depreciation and amortization to interest expense. Other covenants, among other things, limit our ability to provide liens, restrict fundamental changes, limit transactions with affiliates and unrestricted subsidiaries, restrict changes to our fiscal year and to organization documents, limit asset dispositions, limit the use of proceeds from asset sales, limit sale and leaseback transactions, limit investments, limit the ability to incur debt, restrict certain payments to shareholders, limit negative pledges and limit the ability to change the nature of our business. Although we believe none of these covenants are presently restrictive to operations, the ability to meet financial and other covenants can be affected by changes in our results of operations or financial condition. We cannot provide assurance that we will meet these covenants. A breach of these covenants could result in a default under existing credit facilities. Upon the occurrence of an event of default under any of our credit facilities, the lenders could cause amounts outstanding to be immediately payable and terminate all commitments to extend further credit. The occurrence of these events would have a significant effect on our liquidity and cash flows.
Our effective income tax rate could change.
We operate subsidiaries in
41
countries, all of which have different income tax laws and associated income tax rates. Our effective income tax rate can be significantly affected by changes in the mix of pretax earnings by country and the related income tax rates in those countries. In addition, our effective income tax rate is significantly affected by the ability to realize deferred tax assets, including those associated with net operating losses. Changes in income tax laws, income apportionment, or estimates of the ability to realize deferred tax assets, could significantly affect our effective income tax rate, financial position and results of operations. We are subject to the regular examination of our income tax returns by various tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these examinations will not have a material adverse effect on our business.
We have certain environmental and other exposures related to our former coal operations.
We may incur future environmental and other liabilities in connection with our former coal operations, which could materially and adversely affect our financial condition, results of operations and cash flows.
We may be exposed to certain regulatory and financial risks related to climate change.
Growing concerns about climate change may result in the imposition of additional environmental regulations to which we are subject. Some form of federal regulation may be forthcoming with respect to greenhouse gas emissions (including carbon dioxide) and/or "cap and trade" legislation. The outcome of this legislation may result in new regulation, additional charges to fund energy efficiency activities or other regulatory actions. Compliance with these actions could result in the creation of additional costs to us, including, among other things, increased fuel prices or additional taxes or emission allowances. We may not be able to recover the cost of compliance with new or more stringent environmental laws and regulations from our customers, which could adversely affect our business. Furthermore, the potential effects of climate change and related regulation on our customers are highly uncertain and may adversely affect our operations.
The Company could be negatively affected as a result of the actions of activist or hostile stockholders.
Shareholder
activism
, which could take many forms and arise in a variety of situations, has been increasing among publicly traded companies.
Shareholder
activism
, including potential proxy contests, requires significant time and attention by management and the Board of Directors,
11
potentially hindering the Company’s ability to execute its strategic plan and negatively affecting the trading value of our common stock. Additionally,
shareholder
activism
could give rise to perceived uncertainties as to the Company’s future direction, adversely affect its relationships with key executives, customers and other business partners, or make it more difficult to attract and retain qualified personnel. Also, the Company has been, and may in the future be, required to incur significant legal fees and other expenses related to activist shareholder matters. Any of these impacts could materially and adversely affect the Company and operating results.
We have identified material weaknesses in our
internal
control
over financial reporting which could, if not remediated, adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner, investor confidence in our company, and the value of our common stock.
Pursuant to the Sarbanes-Oxley Act of 2002, we are required to document and test our
internal
control
procedures and to provide a report by management on
internal control
over financial reporting, including management’s assessment of the effectiveness of such control. The Company had material weaknesses in its internal control over financial reporting identified during 2017 and can give no assurances that materials weaknesses will not arise in the future. Although we are working to remedy the material weaknesses identified in 2017, there can be no assurance as to when the remediation plan will be fully developed or implemented. Deficiencies, including any material weakness, in our
internal
control
over financial reporting that have not been remediated or that may occur in the future could result in misstatements of our results of operations, restatements of our financial statements, a decline in our stock price, or otherwise materially adversely affect our business, reputation, results of operations, financial condition, or liquidity.
12
Forward-Looking Statements
This document contains both historical and forward-looking information. Words such as “anticipates,” “assumes,” “estimates,” “expects,” “projects,” “predicts,” “intends,” “plans,” “potential,” “believes,” “may,” “should” and similar expressions may identify forward-looking information. Forward-looking information in this document includes, but is not limited to, statements regarding future performance of The Brink’s Company and its global operations, including: anticipated savings from reorganization and restructuring activities; the impact of U.S. tax reform and future tax liability ; the repatriation of cash from operations outside the U.S.; restrictions on foreign currency conversion, the anticipated financial effect of pending litigation; the ability to meet liquidity needs; expenses and payouts for the U.S. retirement plans and the non-U.S. pension and benefit plans and the expected long-term rate of return and funded status of the primary U.S. pension plan; compensation cost related to certain equity awards; expected liability for and future contributions to the UMWA plans, liability for black lung obligations; the projected impact of future excise tax on the UMWA plans; use of proceeds from financing activity; our ability to obtain U.S. dollars to operate our business in Venezuela and ; expected future payments under contractual obligations, and the impact of recent accounting pronouncements. Forward-looking information in this document is subject to known and unknown risks, uncertainties, and contingencies, which are difficult to quantify and which could cause actual results, performance or achievements to differ materially from those that are anticipated.
These risks, uncertainties and contingencies, many of which are beyond our control, include, but are not limited to:
|
•
|
our ability to improve profitability and execute further cost and operational improvement and efficiencies in our core businesses;
|
|
•
|
our ability to improve service levels and quality in our core businesses;
|
|
•
|
market volatility and commodity price fluctuations;
|
|
•
|
seasonality, pricing and other competitive industry factors;
|
|
•
|
investment in information technology and its impact on revenue and profit growth;
|
|
•
|
our ability to maintain an effective IT infrastructure and safeguard confidential information;
|
|
•
|
our ability to effectively develop and implement solutions for our customers;
|
|
•
|
risks associated with operating in foreign countries, including changing political, labor and economic conditions, regulatory issues, currency restrictions and devaluations, restrictions on and cost of repatriating earnings and capital, impact on the Company’s financial results as a result of jurisdictions determined to be highly inflationary, and restrictive government actions, including nationalization;
|
|
•
|
labor issues, including negotiations with organized labor and work stoppages;
|
|
•
|
the strength of the U.S. dollar relative to foreign currencies and foreign currency exchange rates;
|
|
•
|
our ability to identify, evaluate and complete acquisitions and other strategic transactions, and to successfully integrate acquired companies;
|
|
•
|
costs related to dispositions and market exits;
|
|
•
|
our ability to obtain appropriate insurance coverage, positions taken by insurers relative to claims and the financial condition of insurers;
|
|
•
|
safety and security performance and loss experience;
|
|
•
|
employee, environmental and other liabilities in connection with former coal operations, including black lung claims;
|
|
•
|
the impact of the Patient Protection and Affordable Care Act on legacy liabilities and ongoing operations;
|
|
•
|
funding requirements, accounting treatment, and investment performance of our pension plans, the VEBA and other employee benefits;
|
|
•
|
changes to estimated liabilities and assets in actuarial assumptions;
|
|
•
|
the nature of hedging relationships and counterparty risk;
|
|
•
|
access to the capital and credit markets;
|
|
•
|
our ability to realize deferred tax assets;
|
|
•
|
the outcome of pending and future claims, litigation, and administrative proceedings;
|
|
•
|
public perception of our business, reputation and brand;
|
|
•
|
changes in estimates and assumptions underlying critical accounting policies;
|
|
•
|
the promulgation and adoption of new accounting standards, new government regulations and interpretation of existing standards and regulations.
|
The information included in this document is representative only as of the date of this document, and The Brink’s Company undertakes no obligation to update any information contained in this document.
13
Not applicable.
14
We have property and equipment in locations throughout the world. Branch facilities generally have office space to support operations, a vault to securely process and store valuables and a garage to house armored vehicles and serve as a vehicle terminal. Many branches have additional space to repair and maintain vehicles.
We own or lease armored vehicles, panel trucks and other vehicles that are primarily service vehicles. Our armored vehicles are of bullet-resistant construction and are specially designed and equipped to provide security for the crew and cargo.
The following table discloses leased and owned facilities and vehicles for Brink’s most significant operations as of
December 31, 2017
.
|
Facilities
|
Vehicles
|
||||||||||||||||
|
|
Leased
|
Owned
|
Total
|
Leased
|
Owned
|
Total
|
|||||||||||
|
North America
|
236
|
|
98
|
|
334
|
|
2,921
|
|
2,107
|
|
5,028
|
|
|||||
|
South America
|
225
|
|
32
|
|
257
|
|
523
|
|
2,304
|
|
2,827
|
|
|||||
|
Rest of World
|
396
|
|
37
|
|
433
|
|
1,646
|
|
2,058
|
|
3,704
|
|
|||||
|
Corporate Items
|
5
|
|
—
|
|
5
|
|
—
|
|
—
|
|
—
|
|
|||||
|
Venezuela
|
36
|
|
28
|
|
64
|
|
—
|
|
995
|
|
995
|
|
|||||
|
Total
|
898
|
|
195
|
|
1,093
|
|
5,090
|
|
7,464
|
|
12,554
|
|
|||||
For a discussion of legal proceedings, see Note 22 to the consolidated financial statements, “Other Commitments and Contingencies,” in Part II, Item 8 of this 10-K.
Not applicable.
15
Executive Officers of the Registrant
The following is a list as of
March 1, 2018
, of the names and ages of the executive officers of The Company indicating the principal positions and offices held by each. There are no family relationships among any of the officers named.
|
Name
|
Age
|
Positions and Offices Held
|
Held Since
|
|||
|
Douglas A. Pertz
|
63
|
|
Director, President and Chief Executive Officer
|
2016
|
||
|
Ronald J. Domanico
|
59
|
|
Executive Vice President, Chief Financial Officer
|
2016
|
||
|
Michael F. Beech
|
56
|
|
Executive Vice President
|
2014
|
||
|
McAlister C. Marshall, II
|
48
|
|
Senior Vice President, General Counsel and Chief Administrative Officer
|
2008
|
||
|
Rohan Pal
|
52
|
|
Senior Vice President, Chief Information Officer and Chief Digital Officer
|
2016
|
||
|
Amit Zukerman
|
46
|
|
Executive Vice President
|
2014
|
||
Executive and other officers of the Company are elected annually and serve at the pleasure of the Board.
Mr. Pertz was appointed President and Chief Executive Officer of the Company in June 2016. Before joining the Company, Mr. Pertz served as president and CEO of Recall Holdings Limited, a global provider of digital and physical information management and security services, from 2013 until 2016. Prior to joining Recall, Mr. Pertz served as a partner with Bolder Capital, LLC (a private equity firm) from 2011 to 2013.
Mr. Domanico was appointed Executive Vice President and Chief Financial Officer of the Company in July 2016. Mr. Domanico also served as Treasurer from January through April 2017. Before joining Brink’s, Mr. Domanico served as senior vice president, strategic initiatives and capital markets at Recall Holdings Limited, a global provider of digital and physical information management and security services. From 2010 to 2014, he was senior vice president and CFO for HD Supply, one of the largest industrial distributors in North America. From 2002 to 2009 Mr. Domanico served as Senior Vice President, Chief Financial Officer and a member of the Board of Directors of Caraustar Industries. Caraustar and certain of its direct and indirect subsidiaries filed voluntary petitions on May 31, 2009 in the United States Bankruptcy Court for the Northern District of Georgia seeking relief under the provisions of chapter 11 of title 11 of the United States Bankruptcy Code. Caraustar’s plan of reorganization was confirmed by the Bankruptcy Court in early August 2009, and the company successfully emerged on August 20, 2009.
Mr. Beech was appointed Executive Vice President of the Company in December 2014. He has oversight responsibility for the Company's Brazil and Mexico operations as well as global safety and security. From December 2014 to July 2016, Mr. Beech had oversight responsibility for the Company's operations in the countries that composed the Company's former Largest 5 Markets segments. He served as President, Europe, Middle East and Africa for the Company’s operating subsidiary, Brink’s, Incorporated, from 2011 to December 2014, as President, Asia Pacific from 2011 to 2012 and as Vice President, Global Security from 2009 to 2011.
Mr. Marshall was appointed Vice President and General Counsel of the Company in September 2008 and was appointed Senior Vice President in July 2016 and Chief Administrative Officer in January 2017. He also previously held the office of Secretary from June 2012 to November 2013.
Rohan Pal was appointed Senior Vice President, Chief Information Officer and Chief Digital Officer of the Company in July 2016. Before joining Brink’s, Mr. Pal served as senior vice president and chief information officer/chief digital officer at Recall Holdings Limited, a global provider of digital and physical information management and security services from June 2013 to June 2016. From 2008 to 2013, he served as vice president and chief information officer for Tyco Fire Protection Products.
Mr. Zukerman was appointed as the Company’s Executive Vice President in December 2014. He has oversight responsibility for the Company's operations in the 38 countries that comprise the Company's South America and Rest of World segments and its Brink's Global Services Business. He served as President, Brink’s Global Services and Asia Pacific for the Company’s operating subsidiary, Brink’s, Incorporated, from 2012 to December 2014 and as President, Brink’s Global Services from 2008 to 2012.
16
|
|
Our common stock trades on the New York Stock Exchange under the symbol “BCO.” As of
February 22, 2018
, there were
1,367
shareholders of record of common stock.
In May 2017, our board of directors authorized a
$200 million
share repurchase program which will expire on December 31, 2019. We are not obligated to repurchase any specific dollar amount or number of shares and, at December 31, 2017,
$200 million
remains available under this program. The timing and volume of share repurchases may be executed at the discretion of management on an opportunistic basis, or pursuant to trading plans or other arrangements. Share repurchases under the program may be made in the open market, in privately negotiated transactions, or otherwise.
The dividends declared and the high and low prices of our common stock for each full quarterly period within the last two years are as follows:
|
2016 Quarters
|
2017 Quarters
|
||||||||||||||||||||||||
|
|
1
st
|
2
nd
|
3
rd
|
4
th
|
1
st
|
2
nd
|
3
rd
|
4
th
|
|||||||||||||||||
|
Dividends declared per common share
|
$
|
0.1000
|
|
0.1000
|
|
0.1000
|
|
0.1000
|
|
$
|
0.1000
|
|
0.1500
|
|
0.1500
|
|
0.1500
|
|
|||||||
|
Stock prices:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
High
|
$
|
34.13
|
|
35.35
|
|
37.92
|
|
45.10
|
|
$
|
54.98
|
|
67.85
|
|
84.40
|
|
87.30
|
|
|||||||
|
Low
|
25.87
|
|
26.86
|
|
26.96
|
|
36.24
|
|
40.95
|
|
52.70
|
|
66.10
|
|
74.15
|
|
|||||||||
See Note 18 to the consolidated financial statements for a description of limitations of our ability to pay dividends in the future.
17
The following graph compares the cumulative 5-year total return provided to shareholders of The Brink’s Company’s common stock compared to the cumulative total returns of the S&P SmallCap 600 Index and the S&P 600 Commercial & Professional Services Index. The graph tracks the performance of a $100 investment in our common stock and in each index from December 31, 2012, through December 31, 2017. The performance of The Brink’s Company’s common stock assumes that the shareholder reinvested all dividends received during the period.
*$100 invested on 12/31/12 in stock or index, including reinvestment of dividends
Fiscal Year ending December 31.
Source: Zacks Investment Research, Inc.
Comparison of Five-Year Cumulative Total Return
(a)
|
Years Ended December 31,
|
||||||||||||||||||
|
2012
|
2013
|
2014
|
2015
|
2016
|
2017
|
|||||||||||||
|
The Brink's Company
|
$
|
100.00
|
|
121.32
|
|
88.07
|
|
105.59
|
|
152.80
|
|
294.09
|
|
|||||
|
S&P SmallCap 600 Index
|
100.00
|
|
141.31
|
|
149.45
|
|
146.50
|
|
185.40
|
|
209.94
|
|
||||||
|
S&P 600 Commercial & Professional Services Index
|
100.00
|
|
147.74
|
|
146.37
|
|
148.26
|
|
183.77
|
|
205.57
|
|
||||||
|
(a)
|
For the line designated as “The Brink’s Company” the graph depicts the cumulative return on $100 invested in The Brink’s Company’s common stock at December 31, 2012. The cumulative return for each index is measured on an annual basis for the periods from December 31, 2012, through December 31, 2017, with the value of each index set to $100 on December 31, 2012. Total return assumes reinvestment of dividends. We chose the S&P SmallCap 600 Index and the S&P 600 Commercial & Professional Services Index as appropriate comparisons. We believe that these indices broadly measure the performance of small-cap companies in the United States market and for a smaller subset of small-cap companies in the commercial services industry, respectively.
|
18
Five Years in Review
|
GAAP Basis
|
|||||||||||||||
|
(In millions, except for per share amounts)
|
2017
(a)
|
2016
|
2015
|
2014
|
2013
|
||||||||||
|
|
|
|
|
|
|||||||||||
|
Revenues
|
$
|
3,347.0
|
|
3,020.6
|
|
3,061.4
|
|
3,562.3
|
|
3,778.6
|
|
||||
|
Operating profit
|
273.9
|
|
184.5
|
|
96.4
|
|
59.4
|
|
232.1
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Income (loss) attributable to Brink’s
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Continuing operations
|
$
|
16.9
|
|
36.2
|
|
(9.1
|
)
|
(54.8
|
)
|
66.0
|
|
||||
|
Discontinued operations
|
(0.2
|
)
|
(1.7
|
)
|
(2.8
|
)
|
(29.1
|
)
|
(9.2
|
)
|
|||||
|
Net income (loss)
attributable to Brink’s
|
$
|
16.7
|
|
34.5
|
|
(11.9
|
)
|
(83.9
|
)
|
56.8
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Financial Position
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Property and equipment, net
|
$
|
640.9
|
|
531.0
|
|
549.0
|
|
669.5
|
|
758.7
|
|
||||
|
Total assets
|
3,059.6
|
|
1,994.8
|
|
1,946.7
|
|
2,192.0
|
|
2,497.4
|
|
|||||
|
Long-term debt, less current maturities
|
1,139.6
|
|
247.6
|
|
358.1
|
|
373.1
|
|
329.9
|
|
|||||
|
Brink’s shareholders’ equity
|
317.4
|
|
337.1
|
|
317.9
|
|
434.0
|
|
693.9
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Supplemental Information
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Depreciation and amortization
|
$
|
146.6
|
|
131.6
|
|
139.9
|
|
161.9
|
|
165.8
|
|
||||
|
Capital expenditures
|
174.5
|
|
112.2
|
|
101.1
|
|
136.1
|
|
172.9
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Earnings (loss) per share attributable to Brink’s common shareholders
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Continuing operations
|
$
|
0.33
|
|
0.72
|
|
(0.19
|
)
|
(1.12
|
)
|
1.36
|
|
||||
|
Discontinued operations
|
(0.01
|
)
|
(0.03
|
)
|
(0.06
|
)
|
(0.59
|
)
|
(0.19
|
)
|
|||||
|
Net income (loss)
|
0.33
|
|
0.69
|
|
(0.24
|
)
|
(1.71
|
)
|
1.17
|
|
|||||
|
|
|
|
|
|
|||||||||||
|
Diluted:
|
|
|
|
|
|||||||||||
|
Continuing operations
|
$
|
0.33
|
|
0.72
|
|
(0.19
|
)
|
(1.12
|
)
|
1.35
|
|
||||
|
Discontinued operations
|
(0.01
|
)
|
(0.03
|
)
|
(0.06
|
)
|
(0.59
|
)
|
(0.19
|
)
|
|||||
|
Net income (loss)
|
0.32
|
|
0.68
|
|
(0.24
|
)
|
(1.71
|
)
|
1.16
|
|
|||||
|
Cash dividends
|
$
|
0.55
|
|
0.40
|
|
0.40
|
|
0.40
|
|
0.40
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Weighted-average Shares
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Basic
|
50.7
|
|
50.0
|
|
49.3
|
|
49.0
|
|
48.7
|
|
|||||
|
Diluted
|
51.8
|
|
50.6
|
|
49.3
|
|
49.0
|
|
49.0
|
|
|||||
|
Non-GAAP Basis*
|
|||||||||||||||
|
(In millions, except for per share amounts)
|
2017
|
2016
|
2015
|
2014
|
2013
|
||||||||||
|
Non-GAAP revenues
|
$
|
3,192.9
|
|
2,908.4
|
|
2,976.9
|
|
3,350.5
|
|
3,331.5
|
|
||||
|
Non-GAAP operating profit
|
281.4
|
|
215.8
|
|
167.5
|
|
134.5
|
|
163.0
|
|
|||||
|
Amounts attributable to Brink’s
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Non-GAAP income from continuing operations
|
$
|
157.2
|
|
115.6
|
|
87.1
|
|
53.3
|
|
65.6
|
|
||||
|
Non-GAAP diluted EPS – continuing operations
|
$
|
3.03
|
|
2.28
|
|
1.75
|
|
1.09
|
|
1.34
|
|
||||
|
(a)
|
In 2017, we acquired six business operations in five countries for an aggregate purchase price of approximately $365 million. We also entered into a new $1.5 billion senior secured credit facility and issued $600 million in senior unsecured notes in 2017. See Note 6 and Note 14 to the consolidated financial statements for more detailed information on the business acquisitions and debt.
|
*Reconciliations to GAAP results begin on page 35.
19
THE BRINK’S COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AS OF DECEMBER 31,
2017
AND 2016
AND FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2017
TABLE OF CONTENTS
|
|
Page
|
|
|
|
|
|
|
|
||
|
|
Analysis of Results: 2017 versus 2016
|
|
|
|
Analysis of Results: 2016 versus 2015
|
|
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
|
|
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
|
|
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
20
OPERATIONS
The Brink’s Company offers transportation and logistics management services for cash and valuables throughout the world. These services include:
|
•
|
Cash-in-Transit (“CIT”) Services – armored vehicle transportation of valuables
|
|
•
|
ATM Services – replenishing and maintaining customers’ automated teller machines; providing network infrastructure services
|
|
•
|
Global Services – secure international transportation of valuables
|
|
•
|
Cash Management Services
|
|
◦
|
Currency and coin counting and sorting; deposit preparation and reconciliations; other cash management services
|
|
◦
|
Safe and safe control device installation and servicing (including our patented CompuSafe
®
service)
|
|
◦
|
Vaulting services
|
|
◦
|
Check imaging services
|
|
•
|
Payment Services – bill payment and processing services on behalf of utility companies and other billers at any of our Brink’s or Brink’s – operated payment locations in Brazil, Colombia, Panama and Mexico and Brink’s Money™ general purpose reloadable prepaid cards and payroll cards in the U.S.
|
|
•
|
Commercial Security Systems Services – design and installation of security systems in designated markets in Europe
|
|
•
|
Guarding Services – protection of airports, offices, and certain other locations in Europe and Brazil with or without electronic surveillance, access control, fire prevention and highly trained patrolling personnel
|
During the first quarter of 2017, we implemented changes to our organizational and management structure that resulted in changes to our operating segments for financial reporting purposes. Through the fiscal year ended December 31, 2016, our business was reported in nine operating segments: U.S., France, Mexico, Brazil, Canada, Latin America, EMEA, Asia and Payment Services. Changes in our management reporting structure during the first quarter of 2017 required us to conduct an assessment in accordance with ASC Topic 280,
Segment Reporting
, to determine our operating segments.
As a result of this assessment, we now have the following operating segments:
|
•
|
North America
|
|
•
|
South America
|
|
•
|
Rest of World.
|
Prior period information has been revised to reflect our current segment structure.
We believe that Brink’s has significant competitive advantages including:
|
•
|
track record of refining our business portfolio to deliver shareholder value
|
|
•
|
medium-term growth drivers from high-value services
|
|
•
|
global footprint in a world with increasing security needs
|
|
•
|
brand name recognition
|
|
•
|
reputation for a high level of service and security
|
|
•
|
risk management and logistics expertise
|
|
•
|
value-based solutions expertise
|
|
•
|
operational excellence
|
|
•
|
high-quality insurance coverage and financial strength
|
We focus our time and resources on service quality, protecting and strengthening our brand, and addressing our risks. Our marketing and sales efforts are enhanced by the “Brink’s” brand, so we seek to protect and build its value. Because our services focus on handling, transporting, protecting and managing valuables, we strive to understand and manage risk.
In order to earn an adequate return on capital, we focus on the effective and efficient use of resources in addition to our pricing discipline. We attempt to maximize the amount of business that flows through our branches, vehicles and systems in order to obtain the lowest costs possible without compromising safety, security or service.
Operating results may vary from period to period. Because revenues are generated from charges per service performed or based on the value of goods transported, they can be affected by both the level of economic activity and the volume of business for specific customers. We also periodically incur costs to change the scale of our operations when volumes increase or decrease. Incremental costs incurred usually relate to increasing or decreasing the number of employees and increasing or decreasing branches or administrative facilities. In addition, security costs can vary depending on performance, the cost of insurance coverage, and changes in crime rates (i.e., attacks and robberies).
Brink’s revenues and related operating profit are generally higher in the second half of the year, particularly in the fourth quarter, due to generally increased economic activity associated with the holiday season.
21
RESULTS OF OPERATIONS
Analysis of Results:
2017
versus
2016
Consolidated Results
GAAP and Non-GAAP Financial Measures
We provide an analysis of our operations below on both a generally accepted accounting principles (“GAAP”) and non-GAAP basis. The purpose of the non-GAAP information is to report our operating profit, income from continuing operations and earnings per share without certain income and expense items that do not reflect the regular earnings of our operations. The non-GAAP financial measures are intended to provide investors with a supplemental comparison of our operating results and trends for the periods presented. Our management believes these measures are also useful to investors as such measures allow investors to evaluate our performance using the same metrics that our management uses to evaluate past performance and prospects for future performance. We do not consider these items to be reflective of our core operating performance due to the variability of such items from period-to-period in terms of size, nature and significance. The non-GAAP adjustments used to reconcile our GAAP results are described in detail on pages 28-30 and are reconciled to comparable GAAP measures on pages 35-37.
Definition of Organic Growth
Organic growth represents the change in revenues or operating profit between the current and prior period excluding the effect of: acquisitions and dispositions and changes in currency exchange rates. See definitions on page 24.
|
Years Ended December 31,
|
2017
|
2016
|
% Change
|
||||||
|
(In millions, except for per share amounts)
|
|
|
|
||||||
|
GAAP
|
|
|
|
||||||
|
Revenues
|
$
|
3,347.0
|
|
3,020.6
|
|
11
|
|
||
|
Cost of revenues
|
2,608.2
|
|
2,391.7
|
|
9
|
|
|||
|
Selling, general and administrative expenses
|
468.2
|
|
424.3
|
|
10
|
|
|||
|
Operating profit
|
273.9
|
|
184.5
|
|
48
|
|
|||
|
Income from continuing operations
(a)
|
16.9
|
|
36.2
|
|
(53
|
)
|
|||
|
Diluted EPS from continuing operations
(a)
|
$
|
0.33
|
|
0.72
|
|
(54
|
)
|
||
|
Non-GAAP
(b)
|
|
|
|
|
|
|
|||
|
Non-GAAP revenues
|
$
|
3,192.9
|
|
2,908.4
|
|
10
|
|
||
|
Non-GAAP operating profit
|
281.4
|
|
215.8
|
|
30
|
|
|||
|
Non-GAAP income from continuing operations
(a)
|
157.2
|
|
115.6
|
|
36
|
|
|||
|
Non-GAAP diluted EPS from continuing operations
(a)
|
$
|
3.03
|
|
2.28
|
|
33
|
|
||
|
(a)
|
Amounts reported in this table are attributable to the shareholders of Brink’s and exclude earnings related to noncontrolling interests.
|
|
(b)
|
Non-GAAP results are reconciled to the applicable GAAP results on pages 35–37.
|
GAAP Basis
Analysis of Consolidated Results:
2017
versus
2016
Consolidated Revenues
Revenues increased $326.4 million as organic growth in Venezuela ($445.5 million), South America ($134.7 million), North America ($33.2 million), and Rest of World ($18.1 million), and the favorable impact of acquisitions and dispositions ($67.6 million) was partially offset by unfavorable changes in currency exchange rates ($372.7 million). A significant portion of the reduction in revenues from currency exchange rates relates to the devaluation of the Venezuela bolivar ($400.8 million). Revenues increased 21% on an organic basis due mainly to higher average selling prices in Venezuela and Argentina (including the effects of inflation) and organic revenue growth in Brazil and Mexico driven by volume growth and price increases. See above for our definition of “organic.”
Consolidated Costs and
Expenses
Cost of revenues increased 9% to $2,608.2 million due the impact of acquisitions and inflation-based increases on labor and other operational costs, partially offset by productivity improvements. Selling, general and administrative costs increased 10% to $468.2 million due primarily to the impact of acquisitions and higher compensation costs driven by incentive-based compensation, partially offset by changes in currency exchange rates.
Consolidated Operating Profit
Operating profit increased $89.4 million due mainly to:
|
•
|
organic increases in Venezuela ($115.8 million), South America ($52.6 million) and North America ($31.3 million), and
|
|
•
|
the favorable impact of acquisitions and dispositions ($21.0 million),
|
|
•
|
lower organic impact of costs from reorganization and restructuring actions and acquisition and disposition activities ($18.8 million) included in "Other items not allocated to segments",
|
partially offset by:
|
•
|
unfavorable changes in currency exchange rates ($122.2 million), including the effects of Venezuela devaluations, and
|
|
•
|
higher corporate expenses ($27.6 million on an organic basis) due to higher incentive-based compensation and security losses
|
22
Consolidated Income from Continuing Operations Attributable to Brink’s and Related Per Share Amounts
Income from continuing operations attributable to Brink’s shareholders in 2017 decreased $19.3 million to $16.9 million primarily due to higher income tax expense ($79.2 million) driven by U.S. tax reform, higher interest expense ($11.8 million), and higher interest and other income (expense) ($21.1 million). These items were partially offset by the operating profit increase mentioned above. Earnings per share from continuing operations was $0.33, down from $0.72 in 2016.
Non-GAAP Basis
Analysis of Consolidated Results:
2017
versus
2016
Non-GAAP Consolidated Revenues
Non-GAAP revenues increased $284.5 million primarily due to organic growth in South America ($134.7 million), North America ($33.2 million), and Rest of World ($18.1 million), as well as the favorable impact of acquisitions and dispositions ($70.4 million) and currency exchange rates ($28.1 million). The favorable currency impact was driven by the Brazilian real and the euro, which was partially offset by the unfavorable impact of the Argentine peso. Non-GAAP revenues increased 6% on an organic basis due mainly to higher average selling prices in Argentina (including the effects of inflation) and organic revenue growth in Brazil and Mexico driven by volume growth and price increases. See page 22 for our definition of “organic.”
Non-GAAP Consolidated Operating Profit
Non-GAAP operating profit increased $65.6 million due mainly to:
|
•
|
organic increases in South America ($52.6 million) and North America ($31.3 million), and
|
|
•
|
the favorable impact of acquisitions and dispositions ($19.9 million),
|
partially offset by:
|
•
|
higher corporate expenses ($27.6 million on an organic basis) due to higher incentive-based compensation and security losses, and
|
|
•
|
unfavorable changes in currency exchange rates ($10.3 million).
|
Non-GAAP Consolidated Income from Continuing Operations Attributable to Brink’s and Related Per Share Amounts
Non-GAAP income from continuing operations attributable to Brink’s shareholders in 2017 increased $41.6 million to $157.2 million primarily due to the non-GAAP operating profit increase mentioned above, partially offset by the corresponding higher non-GAAP income tax expense ($14.6 million) and higher interest expense ($10.7 million). Non-GAAP earnings per share from continuing operations was $3.03, up from $2.28 in 2016.
23
Revenues and Operating Profit by Segment:
2017
versus
2016
|
|
Organic
|
Acquisitions /
|
|
% Change
|
|||||||||||||||||
|
(In millions)
|
2016
|
Change
|
Dispositions
(a)
|
Currency
(b)
|
2017
|
Total
|
Organic
|
||||||||||||||
|
Revenues:
|
|
|
|
|
|
|
|
||||||||||||||
|
North America
|
$
|
1,210.3
|
|
33.2
|
|
10.7
|
|
—
|
|
1,254.2
|
|
4
|
|
3
|
|
||||||
|
South America
|
718.7
|
|
134.7
|
|
63.7
|
|
7.5
|
|
924.6
|
|
29
|
|
19
|
|
|||||||
|
Rest of World
|
979.4
|
|
18.1
|
|
(4.0
|
)
|
20.6
|
|
1,014.1
|
|
4
|
|
2
|
|
|||||||
|
Revenues - non-GAAP
|
2,908.4
|
|
186.0
|
|
70.4
|
|
28.1
|
|
3,192.9
|
|
10
|
|
6
|
|
|||||||
|
Other items not allocated to segments
(d)
|
112.2
|
|
445.5
|
|
(2.8
|
)
|
(400.8
|
)
|
154.1
|
|
37
|
|
fav
|
|
|||||||
|
Revenues - GAAP
|
$
|
3,020.6
|
|
631.5
|
|
67.6
|
|
(372.7
|
)
|
3,347.0
|
|
11
|
|
21
|
|
||||||
|
Operating profit:
|
|||||||||||||||||||||
|
North America
|
$
|
40.1
|
|
31.3
|
|
1.9
|
|
0.7
|
|
74.0
|
|
85
|
|
78
|
|
||||||
|
South America
|
122.6
|
|
52.6
|
|
16.0
|
|
(8.4
|
)
|
182.8
|
|
49
|
|
43
|
|
|||||||
|
Rest of World
|
111.3
|
|
(0.3
|
)
|
2.0
|
|
2.2
|
|
115.2
|
|
4
|
|
—
|
|
|||||||
|
Segment operating profit
|
274.0
|
|
83.6
|
|
19.9
|
|
(5.5
|
)
|
372.0
|
|
36
|
|
31
|
|
|||||||
|
Corporate expenses
(c)
|
(58.2
|
)
|
(27.6
|
)
|
—
|
|
(4.8
|
)
|
(90.6
|
)
|
56
|
|
47
|
|
|||||||
|
Operating profit - non-GAAP
|
215.8
|
|
56.0
|
|
19.9
|
|
(10.3
|
)
|
281.4
|
|
30
|
|
26
|
|
|||||||
|
Other items not allocated to segments
(d)
|
(31.3
|
)
|
134.6
|
|
1.1
|
|
(111.9
|
)
|
(7.5
|
)
|
(76
|
)
|
fav
|
|
|||||||
|
Operating profit (loss) - GAAP
|
$
|
184.5
|
|
190.6
|
|
21.0
|
|
(122.2
|
)
|
273.9
|
|
48
|
|
fav
|
|
||||||
Amounts may not add due to rounding.
|
(a)
|
Non-GAAP amounts include the impact of prior year comparable period results for acquired and disposed businesses. GAAP results also include the impact of acquisition-related intangible amortization, restructuring and other charges, and disposition related gains/losses.
|
|
(b)
|
The amounts in the “Currency” column consist of the effects of Venezuela devaluations and the sum of monthly currency changes. Monthly currency changes represent the accumulation throughout the year of the impact on current period results of changes in foreign currency rates from the prior year period.
|
|
(c)
|
Corporate expenses are not allocated to segment results. Corporate expenses include salaries and other costs to manage the global business and to perform activities required by public companies.
|
|
(d)
|
See pages 28–30 for more information.
|
Analysis of Segment Results:
2017
versus
2016
North America
Revenues increased 4% ($43.9 million) driven by organic growth of 3% ($33.2 million) and the favorable impact of acquisitions ($10.7 million). Organic revenue growth was primarily driven by price and volume growth in Mexico. Operating profit increased $33.9 million primarily due to organic growth in the U.S. and Mexico. Organic profit growth in the U.S. was driven by lower vehicle costs, labor and other productivity improvements, and lower security losses. Organic profit growth in Mexico was driven by productivity improvements.
South America
Revenues increased 29% ($205.9 million) primarily due to 19% organic growth ($134.7 million), the favorable impact of acquisitions ($63.7 million) and currency exchange rates ($7.5 million) mostly from the Brazilian real, partially offset by a decline in the Argentine peso. The organic growth was driven by inflation-based price increases in Argentina and increased volume growth and price increases in Brazil. Operating profit increased 49% ($60.2 million) driven by organic growth in Argentina and Brazil and the favorable impact of acquisitions ($16.0 million), partially offset by unfavorable currency ($8.4 million) driven by the Argentine peso.
Rest of World
Revenues increased 4% ($34.7 million) due to the favorable impact of currency exchange rates ($20.6 million), primarily from the euro, and 2% organic growth ($18.1 million). The organic revenue growth was driven by Greece and Asia, partially offset by a decrease in France due to pricing pressure. Operating profit increased 4% ($3.9 million) due to the favorable impact of currency ($2.2 million) and acquisitions and dispositions ($2.0 million). Organic growth was down slightly ($0.3 million) due to a decrease in France related to pricing pressure which was partially offset by growth in Asia.
24
Analysis of Results:
2016
versus
2015
Consolidated Results
|
Years Ended December 31,
|
2016
|
2015
|
% Change
|
||||||
|
(In millions, except for per share amounts)
|
|
|
|
||||||
|
GAAP
|
|
|
|
||||||
|
Revenues
|
$
|
3,020.6
|
|
3,061.4
|
|
(1
|
)
|
||
|
Cost of revenues
|
2,391.7
|
|
2,443.7
|
|
(2
|
)
|
|||
|
Selling, general and administrative expenses
|
424.3
|
|
451.9
|
|
(6
|
)
|
|||
|
Operating profit
|
184.5
|
|
96.4
|
|
91
|
|
|||
|
Income (loss) from continuing operations
(a)
|
36.2
|
|
(9.1
|
)
|
fav
|
|
|||
|
Diluted EPS from continuing operations
(a)
|
$
|
0.72
|
|
(0.19
|
)
|
fav
|
|
||
|
Non-GAAP
(b)
|
|
|
|
|
|
|
|||
|
Non-GAAP revenues
|
$
|
2,908.4
|
|
2,976.9
|
|
(2
|
)
|
||
|
Non-GAAP operating profit
|
215.8
|
|
167.5
|
|
29
|
|
|||
|
Non-GAAP income from continuing operations
(a)
|
115.6
|
|
87.1
|
|
33
|
|
|||
|
Non-GAAP diluted EPS from continuing operations
(a)
|
$
|
2.28
|
|
1.75
|
|
30
|
|
||
|
(a)
|
Amounts reported in this table are attributable to the shareholders of Brink’s and exclude earnings related to noncontrolling interests.
|
|
(b)
|
Non-GAAP results are reconciled to the applicable GAAP results on pages 35–37.
|
GAAP Basis
Analysis of Consolidated Results:
2016
versus
2015
Consolidated Revenues
Revenues decreased $40.8 million or 1% due to unfavorable changes in currency exchange rates ($399.6 million), the impact of dispositions ($34.3 million), and an organic decrease in Rest of World ($3.4 million), partially offset by organic growth in Venezuela ($226.4 million), South America ($124.7 million), and North America ($45.4 million). A significant portion of the reduction in revenues from currency exchange rates relates to a devaluation of the Venezuelan bolivar after February 2016. The U.S. dollar also strengthened against the Mexican peso and most currencies in South America. Revenues increased 13% on an organic basis due mainly to higher average selling prices in Venezuela and South America (including the effects of inflation). See page 22 for our definition of “organic.”
Consolidated Costs and
Expenses
Cost of revenues decreased 2% to $2,391.7 million as changes in currency rates more than offset higher labor costs from inflation-based increases. Selling, general and administrative costs decreased 6% to $424.3 million due primarily to changes in currency exchange rates.
Consolidated Operating Profit
Operating profit increased $88.1 million due mainly to:
|
•
|
a $35.3 million charge in 2015 related to impairment of fixed assets in Venezuela, which did not reoccur in 2016,
|
|
•
|
organic increases in Venezuela ($84.8 million), South America ($49.3 million), and Rest of World ($5.5 million), and
|
|
•
|
lower corporate expenses ($13.4 million on an organic basis),
|
partially offset by:
|
•
|
unfavorable changes in currency exchange rates ($76.1 million), including the effects of Venezuela devaluations,
|
|
•
|
higher reorganization and restructuring costs in 2016 ($15.0 million),
|
|
•
|
negative impact of exiting operations in Ireland ($10.0 million), and
|
|
•
|
organic decreases in North America ($1.1 million).
|
Consolidated Income from Continuing Operations Attributable to Brink’s and Related Per Share Amounts
Income from continuing operations attributable to Brink’s shareholders in 2016 increased $45.3 million from the prior year primarily due to the operating profit increase mentioned above, partially offset by higher income attributable to noncontrolling interests ($26.6 million) and higher income tax expense ($12.0 million). Earnings per share from continuing operations was $0.72, up from negative $0.19 in 2015.
25
Non-GAAP Basis
Analysis of Consolidated Results:
2016
versus
2015
Non-GAAP Consolidated Revenues
Non-GAAP revenues decreased $68.5 million or 2% due to unfavorable changes in currency exchange rates ($198.1 million), the impact of dispositions ($37.1 million), and an organic decrease in Rest of World ($3.4 million), partially offset by organic growth in South America ($124.7 million), and North America ($45.4 million). The reduction in Non-GAAP revenues from currency exchange rates relates to a strengthening of the U.S. dollar against the Mexican peso, and most currencies in South America. Non-GAAP revenues increased 6% on an organic basis due mainly to higher average selling prices in South America (including the effects of inflation). See page 22 for our definition of “organic.”
Non-GAAP Consolidated Operating Profit
Non-GAAP operating profit increased $48.3 million due mainly to:
|
•
|
organic increases in South America ($49.3 million) and Rest of World ($5.5 million), and
|
|
•
|
lower corporate expenses ($13.4 million on an organic basis),
|
partially offset by:
|
•
|
unfavorable changes in currency exchange rates ($23.0 million), and
|
|
•
|
organic decreases in North America ($1.1 million).
|
Non-GAAP Consolidated Income from Continuing Operations Attributable to Brink’s and Related Per Share Amounts
Non-GAAP income from continuing operations attributable to Brink’s shareholders in 2016 increased $28.5 million to $115.6 million primarily due to the non-GAAP operating profit increase mentioned above, partially offset by corresponding higher non-GAAP income tax expense ($16.6 million). Non-GAAP earnings per share from continuing operations was $2.28, up from $1.75 in 2015.
26
Revenues and Operating Profit by Segment:
2016
versus
2015
|
|
Organic
|
Acquisitions /
|
|
% Change
|
|||||||||||||||||
|
(In millions)
|
2015
|
Change
|
Dispositions
(a)
|
Currency
(b)
|
2016
|
Total
|
Organic
|
||||||||||||||
|
Revenues:
|
|
|
|
|
|
|
|
||||||||||||||
|
North America
|
$
|
1,224.0
|
|
45.4
|
|
—
|
|
(59.1
|
)
|
1,210.3
|
|
(1
|
)
|
4
|
|
||||||
|
South America
|
719.3
|
|
124.7
|
|
—
|
|
(125.3
|
)
|
718.7
|
|
—
|
|
17
|
|
|||||||
|
Rest of World
|
1,033.6
|
|
(3.4
|
)
|
(37.1
|
)
|
(13.7
|
)
|
979.4
|
|
(5
|
)
|
—
|
|
|||||||
|
Revenues - non-GAAP
|
2,976.9
|
|
166.7
|
|
(37.1
|
)
|
(198.1
|
)
|
2,908.4
|
|
(2
|
)
|
6
|
|
|||||||
|
Other items not allocated to segments
(d)
|
84.5
|
|
226.4
|
|
2.8
|
|
(201.5
|
)
|
112.2
|
|
33
|
|
fav
|
|
|||||||
|
Revenues - GAAP
|
$
|
3,061.4
|
|
393.1
|
|
(34.3
|
)
|
(399.6
|
)
|
3,020.6
|
|
(1
|
)
|
13
|
|
||||||
|
Operating profit:
|
|||||||||||||||||||||
|
North America
|
$
|
45.6
|
|
(1.1
|
)
|
—
|
|
(4.4
|
)
|
40.1
|
|
(12
|
)
|
(2
|
)
|
||||||
|
South America
|
104.6
|
|
49.3
|
|
—
|
|
(31.3
|
)
|
122.6
|
|
17
|
|
47
|
|
|||||||
|
Rest of World
|
102.5
|
|
5.5
|
|
4.2
|
|
(0.9
|
)
|
111.3
|
|
9
|
|
5
|
|
|||||||
|
Segment operating profit
|
252.7
|
|
53.7
|
|
4.2
|
|
(36.6
|
)
|
274.0
|
|
8
|
|
21
|
|
|||||||
|
Corporate expenses
(c)
|
(85.2
|
)
|
13.4
|
|
—
|
|
13.6
|
|
(58.2
|
)
|
(32
|
)
|
(16
|
)
|
|||||||
|
Operating profit - non-GAAP
|
167.5
|
|
67.1
|
|
4.2
|
|
(23.0
|
)
|
215.8
|
|
29
|
|
40
|
|
|||||||
|
Other items not allocated to segments
(d)
|
(71.1
|
)
|
100.3
|
|
(7.4
|
)
|
(53.1
|
)
|
(31.3
|
)
|
(56
|
)
|
fav
|
|
|||||||
|
Operating profit (loss) - GAAP
|
$
|
96.4
|
|
167.4
|
|
(3.2
|
)
|
(76.1
|
)
|
184.5
|
|
91
|
|
fav
|
|
||||||
Amounts may not add due to rounding.
See page 24 for footnotes.
Analysis of Segment Results:
2016
versus
2015
North America
Revenues decreased 1% ($13.7 million) due to the unfavorable impact of currency exchange rates ($59.1 million) primarily from the Mexican peso, partially offset by organic growth of 4% ($45.4 million). Organic growth was driven by volume increases in the U.S. and price and volume increases in Mexico, with U.S. volume growth driven by the increased sales of cash recyclers to a large retailer. Operating profit decreased $5.5 million due to unfavorable currency ($4.4 million) primarily from the Mexican peso and organic decreases in the U.S. and Canada. The U.S. organic decline was due to higher fleet and insurance costs and the Canada decline was due to inflationary cost increases and lower organic revenue growth. These declines were partially offset by organic growth in the U.S. Payments business driven by revenue growth and lower marketing expenditures related to increasing cardholders.
South America
Revenues decreased $0.6 million as the unfavorable impact of currency exchange rates ($125.3 million) was mostly offset by 17% organic growth ($124.7 million) driven by inflation-based revenue increases in Argentina and price increases in Brazil. Operating profit increased 17% ($18.0 million) primarily due to organic growth in Argentina, Chile, and Brazil, partially offset by unfavorable currency ($31.3 million). The organic growth in Brazil was driven by a favorable tax ruling and productivity improvements.
Rest of World
Revenues decreased 5% ($54.2 million) due to the impact of dispositions ($37.1 million), unfavorable currency ($13.7 million), and organic decreases ($3.4 million). Organic revenue decreases were driven by lower BGS volumes, and lower revenue in France due to volume and pricing pressure and the loss of an airport guarding contract, partially offset by organic growth in Asia driven by Hong Kong and Singapore. Operating profit increased 9% ($8.8 million) due to organic growth ($5.5 million) and the favorable impact of dispositions ($4.2 million). The organic growth was driven by higher organic results in France due to growth in cash management services and a benefit recognized related to social charges, as well as organic growth in Asia due to revenue growth.
27
Income and Expense Not Allocated to Segments
Corporate Expenses
Corporate expenses include former non-segment and regional management costs, currency transaction gains and losses, and costs related to global initiatives.
|
Years Ended December 31,
|
% change
|
|||||||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
2017
|
2016
|
|||||||||
|
General, administrative and other expenses
|
$
|
(84.3
|
)
|
(59.8
|
)
|
(81.0
|
)
|
41
|
(26
|
)
|
||||
|
Foreign currency transaction gains (losses)
|
(1.1
|
)
|
3.8
|
|
(8.8
|
)
|
unfav
|
fav
|
|
|||||
|
Reconciliation of segment policies to GAAP
|
(5.2
|
)
|
(2.2
|
)
|
4.6
|
|
unfav
|
unfav
|
|
|||||
|
Corporate items
|
$
|
(90.6
|
)
|
(58.2
|
)
|
(85.2
|
)
|
56
|
(32
|
)
|
||||
Corporate expenses in
2017
were $32.4 million higher than the prior year primarily due to higher incentive compensation expense and security losses recognized in corporate expenses. Corporate expenses include costs to manage the global business and to perform activities required of public companies, as well as currency transaction gains and losses.
Corporate expenses in
2016
were $27.0 million lower than the prior year due to lower compensation-related expenses, along with the recognition of foreign currency transaction gains in 2016 compared to foreign currency transaction losses in 2015.
Other Items Not Allocated to Segments
|
Years Ended December 31,
|
% change
|
||||||||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
2017
|
2016
|
||||||||||
|
Revenues:
|
|||||||||||||||
|
Venezuela operations
|
$
|
154.1
|
|
109.4
|
|
84.5
|
|
41
|
|
29
|
|
||||
|
Acquisitions and dispositions
|
—
|
|
2.8
|
|
—
|
|
(100
|
)
|
fav
|
|
|||||
|
Revenues
|
$
|
154.1
|
|
112.2
|
|
84.5
|
|
37
|
|
33
|
|
||||
|
Operating profit:
|
|||||||||||||||
|
Venezuela operations
|
$
|
20.4
|
|
18.5
|
|
(45.6
|
)
|
10
|
|
fav
|
|
||||
|
Reorganization and Restructuring
|
(22.6
|
)
|
(30.3
|
)
|
(15.3
|
)
|
(25
|
)
|
98
|
|
|||||
|
Acquisitions and dispositions
|
(5.3
|
)
|
(19.5
|
)
|
(10.2
|
)
|
(73
|
)
|
91
|
|
|||||
|
Operating profit
|
$
|
(7.5
|
)
|
(31.3
|
)
|
(71.1
|
)
|
(76
|
)
|
(56
|
)
|
||||
2017
versus
2016
The impact of other items not allocated to segments on operating profit was a smaller loss (
$7.5 million
in
2017
versus
$31.3 million
in the prior year). The change was primarily due to lower charges from acquisitions and dispositions in 2017 as the prior year included losses from Ireland operations exited in 2016 as well as a loss on the sale of corporate assets. In addition, the current year includes a gain on the sale of real estate in Mexico. These favorable items were partially offset by higher amortization expense for acquisition-related intangible assets, severance costs related to recent business acquisitions in Argentina and Brazil and transaction costs related to 2017 business acquisitions. Charges from reorganization and restructuring activities were lower in the current year and profit from Venezuela operations was higher in 2017.
2016
versus
2015
The impact of other items not allocated to segments on operating profit was a smaller loss ($31.3 million in 2016 versus $71.1 million in the prior year period). The reduction was primarily due to the $35.3 million of Venezuela impairment charges recognized in the prior year period as well as lower losses related to currency devaluation in Venezuela in the current year period. The Venezuela-related items were partially offset by charges related to the shutdown of operations in Ireland, a loss on the sale of corporate assets and higher reorganization and restructuring costs in 2016.
28
Venezuela operations
We have excluded from our segment results all of our Venezuela operating results, including remeasurement losses on net monetary assets related to currency devaluations (
$9.1 million
in 2017,
$4.8 million
in 2016 and
$18.1 million
in 2015) and charges related to the impairment of property and equipment ($35.3 million in 2015), due to the Venezuelan government's restrictions that have prevented us from repatriating funds. In light of these unique circumstances, our operations in Venezuela are largely independent of the rest of our global operations. As a result, the Chief Executive Officer, the Company's Chief Operating Decision maker ("CODM"), assesses segment performance and makes resource decisions by segment excluding Venezuela operating results. Additionally, management believes excluding Venezuela from segment results makes it possible to more effectively evaluate the company’s performance between periods.
Factors considered by management in excluding Venezuela results include:
|
•
|
Continued inability to repatriate cash to redeploy to other operations or dividend to shareholders
|
|
•
|
Highly inflationary environment
|
|
•
|
Fixed exchange rate policy
|
|
•
|
Continued currency devaluations and
|
|
•
|
Difficulty raising prices and controlling costs
|
Reorganization and Restructuring
2016 Restructuring
In the fourth quarter of 2016, management implemented restructuring actions across our global business operations and our corporate functions. As a result of these actions, we recognized
$18.1 million
in related 2016 costs. We recognized an additional
$17.3 million
in 2017 under this restructuring for additional costs related to severance, asset-related adjustments, a benefit program termination and lease terminations. Severance actions are expected to reduce our global workforce by
800
to
900
positions and result in approximately
$20 million
in annualized cost savings when this restructuring is finalized. We expect to incur additional costs between
$10
and
$12 million
in future periods, primarily severance costs.
Executive Leadership and Board of Directors
In 2015, we recognized
$1.8 million
in charges related to Executive Leadership and Board of Directors restructuring actions, which were announced in January 2016. We recognized
$4.3 million
in charges in 2016 related to the Executive Leadership and Board of Directors restructuring actions.
2015 Restructuring
Brink's initiated a global restructuring of its business in the third quarter of 2015. We recognized
$11.6 million
in 2015 costs related to employee severance, contract terminations, and property impairment. We recognized an additional
$6.5 million
in 2016 related to this restructuring for additional severance costs, contract terminations and lease terminations. The 2015 Reorganization and Restructuring reduced the global workforce by approximately
1,100
positions and resulted in approximately
$20 million
in 2016 savings. The actions under this program were substantially completed by the end of 2016, with cumulative pretax charges of approximately
$18 million
.
2014 Restructuring
Brink’s reorganized and restructured its business in December 2014, eliminating the management roles and structures in its former Latin America and EMEA regions and implementing a plan to reduce the cost structure of various country operations by eliminating approximately
1,700
positions across its global workforce. Severance costs of
$21.8 million
associated with these actions were recognized in 2014. An additional
$1.9 million
in costs were recognized in 2015 related to the 2014 restructuring. The restructuring saved annual direct costs of approximately
$50 million
in 2015 compared to 2014, excluding charges for severance, lease termination and accelerated depreciation.
Other Restructurings
Management routinely implements restructuring actions in targeted sections of our business. As a result of these actions, we recognized related severance costs of
$4.6 million
in
2017
. The majority of these restructuring actions were completed in 2017. The completed restructuring actions reduced our workforce by approximately
300
positions, which will result in
$4 million
in annualized cost savings. For the remaining restructuring actions, we expect to incur additional costs less than
$1 million
in future periods. These estimates will be updated as management targets additional sections of our business.
Due to the unique circumstances around these charges, they have not been allocated to segment results and are excluded from non-GAAP results. Charges related to the employees, assets, leases and contracts impacted by these restructuring actions were excluded from the segments and corporate expenses as shown in the table below.
|
Years Ended December 31,
|
% change
|
|||||||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
2017
|
2016
|
|||||||||
|
Reportable Segments:
|
||||||||||||||
|
North America
|
$
|
(5.3
|
)
|
(6.0
|
)
|
(1.7
|
)
|
(12
|
)
|
unfav
|
||||
|
South America
|
(4.6
|
)
|
(4.6
|
)
|
(1.2
|
)
|
—
|
|
unfav
|
|||||
|
Rest of World
|
(10.1
|
)
|
(13.2
|
)
|
(6.7
|
)
|
(23
|
)
|
97
|
|||||
|
Total reportable segments
|
(20.0
|
)
|
(23.8
|
)
|
(9.6
|
)
|
(16
|
)
|
unfav
|
|||||
|
Corporate items
|
(2.6
|
)
|
(6.5
|
)
|
(5.7
|
)
|
(60
|
)
|
14
|
|||||
|
Total
|
$
|
(22.6
|
)
|
(30.3
|
)
|
(15.3
|
)
|
(25
|
)
|
98
|
||||
29
Acquisitions and dispositions
Part of our strategy is the pursuit of accretive business acquisitions. We completed six acquisitions in 2017 for a combined purchase price of approximately $365 million. In January 2018, we announced an agreement to acquire another business in Brazil for approximately $145 million. Certain acquisition and disposition items that are not considered part of the ongoing activities of the business and are special in nature are consistently excluded from non-GAAP results. These items are described below:
2017 Acquisitions and Dispositions
|
•
|
Amortization expense for acquisition-related intangible assets was $8.4 million in 2017.
|
|
•
|
Fourth quarter 2017 net gain related to the sale of real estate in Mexico ($7.8 million, net of statutory employee benefit).
|
|
•
|
Severance costs of $4.0 million related to our recent acquisitions in Argentina and Brazil.
|
|
•
|
Transaction costs of $2.6 million related to acquisitions of new businesses in 2017.
|
|
•
|
Currency transaction gains of $1.8 million related to acquisition activity.
|
2016 Acquisitions and Dispositions
|
•
|
Due to management's decision in the first quarter of 2016 to exit the Republic of Ireland, the prospective impacts of shutting down this operation were included in items not allocated to segments and were excluded from the operating segments effective March 1, 2016. This activity is also excluded from the consolidated non-GAAP results. Beginning May 1, 2016, due to management's decision to also exit Northern Ireland, the results of shutting down these operations were treated similarly to the Republic of Ireland. 2015 revenues from both Ireland operations were approximately
$20 million
. Charges included in our full-year 2016 GAAP results include
$4.9 million
in severance costs,
$1.8 million
in property impairment charges, lease restructuring charges of
$0.5 million
and an additional
$7.0 million
in operating and other exit costs. These costs have been excluded from our segment and our consolidated non-GAAP results. International shipments to and from Ireland will continue to be provided through BGS.
|
|
•
|
Amortization expense for acquisition-related intangible assets was $3.6 million in 2016.
|
|
•
|
Brink's recognized a $2.0 million loss related to the sale of corporate assets in the second quarter of 2016.
|
2015 Acquisitions and Dispositions
|
•
|
These items related primarily to Brink's sale of its 70% interest in a cash management business in Russia in the fourth quarter of 2015 from which we recognized a $5.9 million loss on the sale.
|
|
•
|
Amortization expense for acquisition-related intangible assets of $4.2 million in 2015.
|
30
Other Operating Income and Expense
Amounts below represent consolidated other operating income and expense.
|
Years Ended December 31,
|
% change
|
||||||||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
2017
|
2016
|
||||||||||
|
Foreign currency items:
|
|
|
|
|
|
||||||||||
|
Transaction gains (losses)
|
$
|
(9.2
|
)
|
1.4
|
|
(26.8
|
)
|
unfav
|
|
fav
|
|
||||
|
Foreign currency derivative instrument gains (losses)
|
0.8
|
|
(2.4
|
)
|
2.9
|
|
fav
|
|
unfav
|
|
|||||
|
Gains (losses) on sale of property
|
9.2
|
|
(1.3
|
)
|
0.9
|
|
fav
|
|
unfav
|
|
|||||
|
Argentina conversion losses
|
—
|
|
(0.1
|
)
|
(7.1
|
)
|
(100
|
)
|
(99
|
)
|
|||||
|
Impairment losses
|
(3.4
|
)
|
(20.6
|
)
|
(37.2
|
)
|
(83
|
)
|
(45
|
)
|
|||||
|
Share in earnings (losses) of equity affiliates
|
0.4
|
|
(1.5
|
)
|
0.5
|
|
fav
|
|
unfav
|
|
|||||
|
Royalty income
|
1.9
|
|
2.6
|
|
2.1
|
|
(27
|
)
|
24
|
|
|||||
|
Gains (losses) on business acquisitions and dispositions
|
0.6
|
|
0.1
|
|
(6.3
|
)
|
fav
|
|
fav
|
|
|||||
|
Other
|
3.0
|
|
1.7
|
|
1.6
|
|
76
|
|
6
|
|
|||||
|
Other operating income (expense)
|
$
|
3.3
|
|
(20.1
|
)
|
(69.4
|
)
|
fav
|
|
(71
|
)
|
||||
2017
versus
2016
We reported other operating income of $3.3 million in 2017 versus other operating expense of $20.1 million in the prior year. The change was primarily due to lower property impairment losses as the prior year included impairment charges resulting from the 2016 restructuring actions. In addition, we recognized an $8.4 million gain in 2017 related to the sale of real estate in Mexico. These positive factors were partially offset by higher foreign currency transaction losses in 2017, primarily from remeasurement losses associated with Venezuela currency devaluation ($9.1 million in 2017 versus $4.8 million in 2016) .
2016
versus
2015
Other operating expense decreased in 2016 primarily due to lower losses from foreign currency items, property impairments, Argentina currency conversions and business dispositions. The reduction in foreign currency transaction losses mainly resulted from lower remeasurement losses associated with Venezuelan currency devaluation ($4.8 million in 2016 versus $18.1 million in 2015). Impairment charges declined in 2016 as the 2015 Venezuela property impairment of $35.3 million exceeded current year impairment losses, primarily from 2016 restructuring actions. After the December 2015 devaluation of the Argentine peso, we did not incur significant losses from converting Argentina pesos to U.S. dollars ($0.1 million in 2016 versus $7.1 million in 2015). In 2015, we recognized a $5.9 million loss on the sale of a Russian cash management business.
31
Nonoperating Income and Expense
Interest Expense
|
Years Ended December 31,
|
% change
|
||||||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
2017
|
2016
|
||||||||
|
Interest expense
|
$
|
32.2
|
|
20.4
|
|
18.9
|
|
58
|
8
|
||||
Interest expense was higher in
2017
due to higher borrowing levels used to finance 2017 and future business acquisitions.
Interest expense was higher in
2016
due to interest recognized on a non-recourse financing liability in Mexico (see Note 19) and the impact of higher weighted-average interest rates in 2016 versus the prior year.
Interest and Other Income (Expense)
|
Years Ended December 31,
|
% change
|
|||||||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
2017
|
2016
|
|||||||||
|
Interest income
|
$
|
4.1
|
|
2.6
|
|
3.3
|
|
58
|
(21
|
)
|
||||
|
Gain on available-for-sale securities
|
1.5
|
|
0.5
|
|
1.1
|
|
fav
|
(55
|
)
|
|||||
|
Foreign currency transaction losses
|
(7.6
|
)
|
—
|
|
—
|
|
unfav
|
—
|
|
|||||
|
Derivative instruments
|
1.1
|
|
(0.6
|
)
|
(0.5
|
)
|
fav
|
20
|
|
|||||
|
Retirement benefit cost other than service cost
|
(47.8
|
)
|
(40.3
|
)
|
(39.8
|
)
|
19
|
1
|
|
|||||
|
Prepayment penalties
(a)
|
(8.3
|
)
|
—
|
|
—
|
|
unfav
|
—
|
|
|||||
|
Interest on Brazil tax claim
(b)
|
(1.6
|
)
|
—
|
|
—
|
|
unfav
|
—
|
|
|||||
|
Other
|
(1.6
|
)
|
(1.3
|
)
|
(0.5
|
)
|
23
|
unfav
|
|
|||||
|
Interest and other income (expense)
|
$
|
(60.2
|
)
|
(39.1
|
)
|
(36.4
|
)
|
54
|
7
|
|
||||
|
(a)
|
Penalties upon prepayment of Private Placement notes in September 2017 and a term loan in October 2017.
|
|
(b)
|
Related to an unfavorable court ruling in 2017 on a non-income tax claim in Brazil. The court ruled that Brink's must pay interest accruing from the initial claim filing in 1994 to the current date. The principal amount of the claim was approximately $1 million and was recognized in selling, general and administrative expenses in 2017.
|
Interest and other income (expense) was a higher expense in
2017
compared to
2016
primarily due to prepayment penalties, currency transaction losses related to 2017 business acquisitions, higher retirement benefit costs and interest on a Brazil tax claim.
Interest and other income (expense) was a higher expense in
2016
compared to
2015
primarily due to lower interest income and a decrease in gains on available-for-sale securities.
32
Income Taxes
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“Tax Reform Act”) was enacted into law. The Tax Reform Act includes a reduction in the federal tax rate for corporations from
35%
to
21%
as of January 1, 2018, a one-time transition tax on the cumulative undistributed earnings of foreign subsidiaries as of December 31, 2017, a repeal of the corporate alternative minimum tax, and more extensive limitations on deductibility of performance-based compensation for named executive officers. Other provisions effective as of January 1, 2018, which could materially impact the Company in the near-term, include the creation of a new U.S. minimum tax on foreign earnings called the Global Intangible Low-Taxed Income (“GILTI”) and limitations on the deductibility of interest expense.
Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Reform Act, the Company has recorded provisional amounts as of December 31, 2017, in accordance with Staff Accounting Bulletin No. 118 (“SAB 118”). We recorded a provisional one-time non-cash charge of
$92 million
in the fourth quarter of 2017 to remeasure the deferred tax assets for the new rate and for other legislative changes. We do not expect a U.S. federal current tax liability for the transition tax due to our high-tax foreign income, but we have recorded a provisional
$31.1 million
foreign tax credit offset with a full valuation allowance related to the transition tax. We did not record a current state tax liability related to the transition tax in accordance with the interpretation of existing state laws and the provisional estimates. The Company has not yet adopted an accounting policy related to the provision of deferred taxes related to GILTI. We did not change our assertion on the determination of which subsidiaries that we consider to be permanently invested and for which we do not expect to repatriate to the U.S. as a result of the Tax Reform Act. We will continue to collect and analyze data, including the undistributed earnings of foreign subsidiaries and related taxes, interpret the Tax Reform Act and apply the additional guidance and legislative changes to be issued by the U.S. federal and state authorities and may be required to make adjustments to these provisional amounts. The accounting for the Tax Reform Act will be completed by the end of 2018 in accordance with SAB 118.
Summary Rate Reconciliation – GAAP
|
(In percentages)
|
2017
|
2016
|
2015
|
|||||
|
U.S. federal tax rate
|
35.0
|
%
|
35.0
|
%
|
35.0
|
%
|
||
|
Increases (reductions) in taxes due to:
|
||||||||
|
Venezuela devaluation
|
—
|
|
2.9
|
|
61.3
|
|
||
|
Tax on accelerated U.S. income
(a)
|
(0.2
|
)
|
—
|
|
57.3
|
|
||
|
Adjustments to valuation allowances
|
3.4
|
|
18.2
|
|
18.9
|
|
||
|
Foreign income taxes
|
1.8
|
|
4.2
|
|
(18.2
|
)
|
||
|
Tax reform
|
47.4
|
|
—
|
|
—
|
|
||
|
French business tax
|
2.0
|
|
3.0
|
|
8.9
|
|
||
|
Taxes on undistributed earnings of foreign affiliates
|
0.9
|
|
0.7
|
|
(1.2
|
)
|
||
|
State income taxes, net
|
(1.3
|
)
|
(1.0
|
)
|
(4.1
|
)
|
||
|
Share-based compensation
|
(3.5
|
)
|
(1.4
|
)
|
—
|
|
||
|
Other
|
1.4
|
|
1.2
|
|
3.9
|
|
||
|
Income tax rate on continuing operations
|
86.9
|
%
|
62.8
|
%
|
161.8
|
%
|
||
|
(a)
|
In the fourth quarter of 2015, we recognized a
$23.5 million
increase to current tax expense related to a transaction that accelerated U.S. taxable income. In 2017, we recognized a $0.4 million decrease to non-U.S. tax expense related to the 2015 transaction.
|
Summary Rate Reconciliation – Non-GAAP
(a)
|
(In percentages)
|
2017
|
2016
|
2015
|
|||||
|
U.S. federal tax rate
|
35.0
|
%
|
35.0
|
%
|
35.0
|
%
|
||
|
Increases (reductions) in taxes due to:
|
|
|
|
|
|
|
||
|
Adjustments to valuation allowances
|
1.2
|
|
1.2
|
|
1.9
|
|
||
|
French business tax
|
1.5
|
|
2.0
|
|
2.5
|
|
||
|
Other
|
(3.5
|
)
|
(1.4
|
)
|
(2.6
|
)
|
||
|
Income tax rate on Non-GAAP continuing operations
|
34.2
|
%
|
36.8
|
%
|
36.8
|
%
|
||
|
(a)
|
See pages 35–37 for a reconciliation of non-GAAP results to GAAP.
|
33
Overview
Our effective tax rate has varied in the past three years from the statutory U.S. federal rate due to various factors, including
|
•
|
changes in judgment about the need for valuation allowances
|
|
•
|
changes in the geographical mix of earnings
|
|
•
|
nontaxable acquisition gains and losses
|
|
•
|
changes in laws in the U.S., France, Mexico, and Argentina
|
|
•
|
U.S. tax on accelerated taxable income
|
|
•
|
changes in the foreign currency rate used to measure Venezuela’s tax results
|
|
•
|
timing of benefit recognition for uncertain tax positions
|
|
•
|
state income taxes
|
|
•
|
tax benefit for distributions of share-based payments
|
We establish or reverse valuation allowances for deferred tax assets depending on all available information including historical and expected future operating performance of our subsidiaries. Changes in judgment about the future realization of deferred tax assets can result in significant adjustments to the valuation allowances. Based on our historical and future expected taxable earnings, we believe it is more-likely-than-not that we will realize the benefit of the deferred tax assets, net of valuation allowances.
Continuing Operations
2017
Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in 2017 was greater than the 35% U.S. statutory tax rate primarily due to the one-time non-cash tax charge for the remeasurement of the deferred tax assets as a result of U.S. tax reform. The other items that cause the rate to be higher than the U.S. statutory rate include book losses for which no tax benefit can be recorded, nondeductible expenses in Mexico, taxes on cross border payments and the characterization of a French business tax as an income tax, partially offset by the geographical mix of earnings, significant tax benefits related to the distribution of share-based payments and a French income tax credit.
2016
Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in 2016 was greater than the 35% U.S. statutory tax rate primarily due to the significant losses related to operations in the Republic of Ireland, for which no tax benefit can be recorded, a change in judgment resulting in a valuation allowance against certain U.S. tax attributes with a limited statutory carryforward period that are no longer more-likely-than-not to be realized, and the non-deductible expenses resulting from the currency devaluation in Venezuela. The other items that cause the rate to be higher than the U.S. statutory rate include book losses for which no tax benefit can be recorded, non-deductible expenses in Mexico, taxes on undistributed earnings and the characterization of a French business tax as an income tax, partially offset by the geographical mix of earnings and a French income tax credit.
2015
Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in 2015 was higher than the 35% U.S. statutory tax rate primarily due to a significant Venezuela currency remeasurement loss and impairment loss, which were largely non-deductible, and U.S. tax on accelerated taxable income. Excluding these items, the effective income tax rate was higher than the 35% U.S. statutory tax rate due to $3.7 million of tax expense due to the characterization of a French business tax as an income tax.
Noncontrolling Interests
|
Years Ended December 31,
|
% change
|
|||||||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
2017
|
2016
|
|||||||||
|
Net income (loss) attributable to noncontrolling interests
|
$
|
6.9
|
|
10.3
|
|
(16.3
|
)
|
(33
|
)
|
fav
|
||||
The decrease in net income attributable to noncontrolling interests to
$6.9 million
in 2017 was primarily due to higher currency remeasurement charges from the devaluation of Venezuelan currency.
The change from a $16.3 million net loss attributable to noncontrolling interests in 2015 to $10.3 million net income attributable to noncontrolling interests in 2016 was primarily due to improved results in our Venezuelan subsidiaries and lower currency remeasurement charges from the devaluation of Venezuelan currency. The net loss attributable to noncontrolling interests in 2015 was primarily due to a
$35.3 million
impairment charge related to Venezuelan property and equipment and $18.1 million in currency remeasurement charges from the devaluation of Venezuelan currency.
See Note 1 to the consolidated financial statements for more information about the currency remeasurement charges of our Venezuelan subsidiaries and the Venezuela impairment charge that occurred in 2015.
34
Non-GAAP Results Reconciled to GAAP
Non-GAAP results described in this filing are financial measures that are not required by or presented in accordance with GAAP. The purpose of the Non-GAAP results is to report financial information from the primary operations of our business by excluding the effects of certain income and expenses that do not reflect the ordinary earnings of our operations. The specific items excluded have not been allocated to segments, are described in detail on pages 28–30, and are reconciled to comparable GAAP measures below.
The full-year Non-GAAP tax rate in each year excludes certain pretax and income tax amounts. Amounts reported for prior periods have been updated in this report to present information consistently for all periods presented.
The Non-GAAP financial measures are intended to provide investors with a supplemental comparison of our operating results and trends for the periods presented. Our management believes these measures are also useful to investors as such measures allow investors to evaluate our performance using the same metrics that our management uses to evaluate past performance and prospects for future performance. We do not consider these items to be reflective of our core operating performance due to the variability of such items from period-to-period in terms of size, nature and significance. Additionally, non-GAAP results are utilized as performance measures in certain management incentive compensation plans.
Non-GAAP results should not be considered as an alternative to revenue, income or earnings per share amounts determined in accordance with GAAP and should be read in conjunction with their GAAP counterparts.
|
2017
|
2016
|
||||||||||||||||||
|
|
Pre-tax
|
Tax
|
Effective tax rate
|
Pre-tax
|
Tax
|
Effective tax rate
|
|||||||||||||
|
Effective Income Tax Rate
(a)
|
|||||||||||||||||||
|
GAAP
|
$
|
181.5
|
|
157.7
|
|
86.9
|
%
|
$
|
125.0
|
|
78.5
|
|
62.8
|
%
|
|||||
|
Retirement plans
(e)
|
34.9
|
|
12.6
|
|
31.5
|
|
11.3
|
|
|||||||||||
|
Venezuela operations
(b)
|
(13.5
|
)
|
(12.7
|
)
|
(15.9
|
)
|
(14.1
|
)
|
|||||||||||
|
Reorganization and Restructuring
(b)
|
22.6
|
|
7.6
|
|
30.3
|
|
7.4
|
|
|||||||||||
|
Acquisitions and dispositions
(b)
|
12.7
|
|
4.5
|
|
20.0
|
|
1.8
|
|
|||||||||||
|
Prepayment penalties
(f)
|
8.3
|
|
0.2
|
|
—
|
|
—
|
|
|||||||||||
|
Deferred tax valuation allowance
(c)
|
—
|
|
—
|
|
—
|
|
(14.7
|
)
|
|||||||||||
|
Interest on Brazil tax claim
(g)
|
1.6
|
|
0.5
|
|
—
|
|
—
|
|
|||||||||||
|
Tax reform
(h)
|
—
|
|
(86.0
|
)
|
—
|
|
—
|
|
|||||||||||
|
Tax on accelerated income
(d)
|
—
|
|
0.4
|
|
—
|
|
—
|
|
|||||||||||
|
Non-GAAP
|
$
|
248.1
|
|
84.8
|
|
34.2
|
%
|
$
|
190.9
|
|
70.2
|
|
36.8
|
%
|
|||||
|
|
2015
|
||||||||||||||||||
|
|
Pre-tax
|
Tax
|
Effective tax rate
|
||||||||||||||||
|
Effective Income Tax Rate
(a)
|
|
|
|
||||||||||||||||
|
GAAP
|
$
|
41.1
|
|
66.5
|
|
161.8
|
%
|
||||||||||||
|
Retirement plans
(e)
|
31.2
|
|
10.8
|
|
|||||||||||||||
|
Venezuela operations
(b)
|
47.8
|
|
(5.5
|
)
|
|
|
|||||||||||||
|
Reorganization and Restructuring
(b)
|
15.3
|
|
3.9
|
|
|||||||||||||||
|
Acquisitions and dispositions
(b)
|
10.2
|
|
1.4
|
|
|||||||||||||||
|
Tax on accelerated income
(d)
|
—
|
|
(23.5
|
)
|
|||||||||||||||
|
Non-GAAP
|
$
|
145.6
|
|
53.6
|
|
36.8
|
%
|
||||||||||||
Amounts may not add due to rounding.
|
(a)
|
From continuing operations.
|
|
(b)
|
See “Other Items Not Allocated To Segments” on pages 28–30 for details. We do not consider these items to be reflective of our core operating performance due to the variability of such items from period-to-period in terms of size, nature and significance.
|
|
(c)
|
There was a change in judgment resulting in a valuation allowance against certain tax attributes with a limited statutory carryforward period that are no longer more-likely-than-not to be realized due to lower than expected U.S. operating results, certain non-GAAP pre-tax items, and the timing of tax deductions related to executive leadership transition.
|
|
(d)
|
The non-GAAP tax rate excludes the 2017 foreign tax benefit that resulted from the transaction that accelerated U.S. tax in 2015.
|
|
(e)
|
Our U.S. retirement plans are frozen and costs related to these plans are excluded from non-GAAP results. Certain non-U.S. operations also have retirement plans. Settlement charges related to these non-U.S. plans are also excluded from non-GAAP results.
|
|
(f)
|
Penalties upon prepayment of Private Placement notes in September 2017 and a term loan in October 2017.
|
|
(g)
|
Related to an unfavorable court ruling in the third quarter of 2017 on a non-income tax claim in Brazil. The court ruled that Brink's must pay interest accruing from the initial claim filing in 1994 to the current date. The principal amount of the claim was approximately $1 million and was recognized in selling, general and administrative expenses in the third quarter of 2017.
|
|
(h)
|
Represents the estimated impact of tax legislation enacted into law in the fourth quarter of 2017. This primarily relates to the U.S. Tax Reform expense from the remeasurement of our net deferred tax assets.
|
35
Non-GAAP reconciled to GAAP
|
Years Ended December 31,
|
|||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
||||||
|
Revenues:
|
|
|
|
||||||
|
GAAP
|
$
|
3,347.0
|
|
3,020.6
|
|
3,061.4
|
|
||
|
Venezuela operations
(b)
|
(154.1
|
)
|
(109.4
|
)
|
(84.5
|
)
|
|||
|
Acquisitions and dispositions
(b)
|
—
|
|
(2.8
|
)
|
—
|
|
|||
|
Non-GAAP
|
$
|
3,192.9
|
|
2,908.4
|
|
2,976.9
|
|
||
|
Operating profit:
|
|
|
|
|
|
|
|||
|
GAAP
|
$
|
273.9
|
|
184.5
|
|
96.4
|
|
||
|
Venezuela operations
(b)
|
(20.4
|
)
|
(18.5
|
)
|
45.6
|
|
|||
|
Reorganization and Restructuring
(b)
|
22.6
|
|
30.3
|
|
15.3
|
|
|||
|
Acquisitions and dispositions
(b)
|
5.3
|
|
19.5
|
|
10.2
|
|
|||
|
Non-GAAP
|
$
|
281.4
|
|
215.8
|
|
167.5
|
|
||
|
Interest expense:
|
|||||||||
|
GAAP
|
$
|
(32.2
|
)
|
(20.4
|
)
|
(18.9
|
)
|
||
|
Venezuela operations
(b)
|
0.1
|
|
0.1
|
|
—
|
|
|||
|
Acquisitions and dispositions
(b)
|
1.1
|
|
—
|
|
—
|
|
|||
|
Non-GAAP
|
$
|
(31.0
|
)
|
(20.3
|
)
|
(18.9
|
)
|
||
|
Interest and other income (expense):
|
|||||||||
|
GAAP
|
$
|
(60.2
|
)
|
(39.1
|
)
|
(36.4
|
)
|
||
|
Retirement plans
(e)
|
34.9
|
|
31.5
|
|
31.2
|
|
|||
|
Venezuela operations
(b)
|
6.8
|
|
2.5
|
|
2.2
|
|
|||
|
Acquisitions and dispositions
(b)
|
6.3
|
|
0.5
|
|
—
|
|
|||
|
Prepayment penalties
(f)
|
8.3
|
|
—
|
|
—
|
|
|||
|
Interest on Brazil tax claim
(g)
|
1.6
|
|
—
|
|
—
|
|
|||
|
Non-GAAP
|
$
|
(2.3
|
)
|
(4.6
|
)
|
(3.0
|
)
|
||
|
Provision for income taxes:
|
|
|
|
|
|
|
|||
|
GAAP
|
$
|
157.7
|
|
78.5
|
|
66.5
|
|
||
|
Retirement plans
(e)
|
12.6
|
|
11.3
|
|
10.8
|
|
|||
|
Venezuela operations
(b)
|
(12.7
|
)
|
(14.1
|
)
|
(5.5
|
)
|
|||
|
Reorganization and Restructuring
(b)
|
7.6
|
|
7.4
|
|
3.9
|
|
|||
|
Acquisitions and dispositions
(b)
|
4.5
|
|
1.8
|
|
1.4
|
|
|||
|
Prepayment penalties
(f)
|
0.2
|
|
—
|
|
—
|
|
|||
|
Deferred tax valuation allowance
(c)
|
—
|
|
(14.7
|
)
|
—
|
|
|||
|
Interest on Brazil tax claim
(g)
|
0.5
|
|
—
|
|
—
|
|
|||
|
Tax reform
(h)
|
(86.0
|
)
|
—
|
|
—
|
|
|||
|
Tax on accelerated income
(d)
|
0.4
|
|
—
|
|
(23.5
|
)
|
|||
|
Non-GAAP
|
$
|
84.8
|
|
70.2
|
|
53.6
|
|
||
|
Net income (loss) attributable to noncontrolling interests:
|
|
|
|
|
|
|
|||
|
GAAP
|
$
|
6.9
|
|
10.3
|
|
(16.3
|
)
|
||
|
Venezuela operations
(b)
|
(1.6
|
)
|
(4.4
|
)
|
21.2
|
|
|||
|
Reorganization and Restructuring
(b)
|
0.8
|
|
(0.8
|
)
|
—
|
|
|||
|
Non-GAAP
|
$
|
6.1
|
|
5.1
|
|
4.9
|
|
||
|
Non-GAAP margin
|
8.8
|
%
|
7.4
|
%
|
5.6
|
%
|
|||
Amounts may not add due to rounding.
See page 35 for footnote explanations.
36
|
Years Ended December 31,
|
|||||||||
|
(In millions, except for per share amounts)
|
2017
|
2016
|
2015
|
||||||
|
Income (loss) from continuing operations attributable to Brink's:
|
|
|
|
|
|
|
|||
|
GAAP
|
$
|
16.9
|
|
36.2
|
|
(9.1
|
)
|
||
|
Retirement plans
(e)
|
22.3
|
|
20.2
|
|
20.4
|
|
|||
|
Venezuela operations
(b)
|
0.8
|
|
2.6
|
|
32.1
|
|
|||
|
Reorganization and Restructuring
(b)
|
14.2
|
|
23.7
|
|
11.4
|
|
|||
|
Acquisitions and dispositions
(b)
|
8.2
|
|
18.2
|
|
8.8
|
|
|||
|
Prepayment penalties
(f)
|
8.1
|
|
—
|
|
—
|
|
|||
|
Deferred tax valuation allowance
(c)
|
—
|
|
14.7
|
|
—
|
|
|||
|
Interest on Brazil tax claim
(g)
|
1.1
|
|
—
|
|
—
|
|
|||
|
Tax reform
(h)
|
86.0
|
|
—
|
|
—
|
|
|||
|
Tax on accelerated income
(d)
|
(0.4
|
)
|
—
|
|
23.5
|
|
|||
|
Non-GAAP
|
$
|
157.2
|
|
115.6
|
|
87.1
|
|
||
|
Diluted EPS
|
|
|
|
|
|
|
|||
|
GAAP
|
$
|
0.33
|
|
0.72
|
|
(0.19
|
)
|
||
|
Retirement plans
(e)
|
0.43
|
|
0.39
|
|
0.41
|
|
|||
|
Venezuela operations
(b)
|
0.02
|
|
0.05
|
|
0.64
|
|
|||
|
Reorganization and Restructuring
(b)
|
0.27
|
|
0.47
|
|
0.23
|
|
|||
|
Acquisitions and dispositions
(b)
|
0.16
|
|
0.37
|
|
0.18
|
|
|||
|
Prepayment penalties
(f)
|
0.16
|
|
—
|
|
—
|
|
|||
|
Deferred tax valuation allowance
(c)
|
—
|
|
0.29
|
|
—
|
|
|||
|
Interest on Brazil tax claim
(g)
|
0.02
|
|
—
|
|
—
|
|
|||
|
Tax reform
(h)
|
1.66
|
|
—
|
|
—
|
|
|||
|
Tax on accelerated income
(d)
|
(0.01
|
)
|
—
|
|
0.47
|
|
|||
|
Non-GAAP
|
$
|
3.03
|
|
2.28
|
|
1.75
|
|
||
Amounts may not add due to rounding.
See page 35 for footnote explanations.
37
Foreign Operations
We currently serve customers in more than
100
countries, including
41
countries where we operate subsidiaries.
We are subject to risks customarily associated with doing business in foreign countries, including labor and economic conditions, political instability, controls on repatriation of earnings and capital, nationalization, expropriation and other forms of restrictive action by local governments. Changes in the political or economic environments in the countries in which we operate could have a material adverse effect on our business, financial condition and results of operations. The future effects, if any, of these risks are unknown.
Our international operations conduct a majority of their business in local currencies. Because our financial results are reported in U.S. dollars, they are affected by changes in the value of various local currencies in relation to the U.S. dollar. Recent strengthening of the U.S. dollar has reduced our reported dollar revenues and operating profit, which may continue in 2018. Our operations in Venezuela are subject to local laws and regulatory interpretations that determine the exchange rate at which repatriating dividends may be converted. See Application of Critical Accounting Policies—Foreign Currency Translation on pages 56–57 for a description of our accounting methods and assumptions used to include our Venezuelan operations in our consolidated financial statements, and a description of the accounting for subsidiaries operating in highly inflationary economies.
Changes in exchange rates may also affect transactions which are denominated in currencies other than the functional currency. From time to time, we use foreign currency forward and swap contracts to hedge transactional risks associated with foreign currencies, as discussed in Item 7A on page 59. At
December 31, 2017
, the notional value of our shorter term outstanding foreign currency forward and swap contracts was
$145.5 million
with average contract maturities of approximately one month. These shorter term foreign currency forward and swap contracts primarily offset exposures in the euro, British pound and the Mexican peso. Additionally, these shorter term contracts are not designated as hedges for accounting purposes, and accordingly, changes in their fair value are recorded immediately in earnings. We recognized gains of
$0.8 million
on these contracts in
2017
. At
December 31, 2017
, the fair value of these outstanding foreign currency forward and swap contracts was not significant.
We also have a longer term cross currency swap contract to hedge exposure in Brazilian real which is designated as a cash flow hedge for accounting purposes. At
December 31, 2017
, the notional value of this longer term contract was
$1.6 million
with a weighted-average maturity of
0.1 years
. We recognized net losses of
$0.2 million
on this contract, of which losses of
$0.1 million
were included in other operating income (expense) to offset transaction gains of $0.1 million and expenses of $0.1 million were included in interest and other income (expense) in
2017
. At
December 31, 2017
the fair value of the longer term cross currency swap contract was
$0.6 million
, which is included in prepaid expenses and other on the consolidated balance sheet.
See Note 1 to the consolidated financial statements for a description of government currency processes and restrictions in Venezuela and Argentina, their effect on our operations, and how we account for currency remeasurement for our Venezuelan subsidiaries.
38
LIQUIDITY AND CAPITAL RESOURCES
Overview
Over the last three years, we used cash generated from our operations and borrowings to
|
•
|
invest in the infrastructure of our business (new facilities, cash sorting and other equipment for our Cash Management Services operations, armored trucks, CompuSafe
®
units, and information technology) ($388 million),
|
|
•
|
acquire new business operations ($317 million), and
|
|
•
|
pay dividends to Brink’s shareholders ($67 million).
|
Cash flows from operating activities increased by
$84.6 million
in
2017
as compared to the prior year primarily due to higher operating profit. Cash used for investing activities increased by
$286.0 million
in
2017
due to business acquisitions and higher capital expenditures. Cash also decreased $12.2 million in
2017
as a result of the strengthening of the U.S. dollar, primarily against currencies in Latin America including the Venezuelan bolivar and the Argentine peso. We financed our liquidity needs in
2017
with debt and cash flows from operations.
Cash flows from operating activities decreased by
$28.4 million
in
2016
as compared to the prior year primarily due to higher amounts paid for income taxes. Cash used for investing activities increased by
$5.2 million
in
2016
as higher capital expenditures and lower net cash inflows from marketable securities in 2016 were partially offset by a reduction in cash outflows related to business divestitures. Cash also decreased $12.1 million in
2016
as a result of the strengthening of the U.S. dollar, primarily against currencies in Latin America including the Venezuelan bolivar and the Argentine peso. We financed our liquidity needs in
2016
with cash flows from operations supplemented by short-term borrowings.
Operating Activities
|
Years Ended December 31,
|
$ change
|
|||||||||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
2017
|
2016
|
|||||||||||
|
Cash flows from operating activities
|
||||||||||||||||
|
Operating activities - GAAP
|
$
|
252.1
|
|
167.5
|
|
195.9
|
|
$
|
84.6
|
|
(28.4
|
)
|
||||
|
Venezuela operations
|
(17.3
|
)
|
(16.4
|
)
|
(2.3
|
)
|
(0.9
|
)
|
(14.1
|
)
|
||||||
|
(Increase) decrease in certain customer obligations
(a)
|
(6.1
|
)
|
13.2
|
|
(12.5
|
)
|
(19.3
|
)
|
25.7
|
|
||||||
|
Discontinued operations
|
—
|
|
—
|
|
2.0
|
|
—
|
|
(2.0
|
)
|
||||||
|
Operating activities - non-GAAP
|
$
|
228.7
|
|
164.3
|
|
183.1
|
|
$
|
64.4
|
|
(18.8
|
)
|
||||
|
(a)
|
To adjust for the change in the balance of customer obligations related to cash received and processed in certain of our secure Cash Management Services operations. The title to this cash transfers to us for a short period of time. The cash is generally credited to customers’ accounts the following day and we do not consider it as available for general corporate purposes in the management of our liquidity and capital resources.
|
Non-GAAP cash flows from operating activities is a supplemental financial measure that is not required by, or presented in accordance with GAAP. The purpose of this non-GAAP measure is to report financial information excluding cash flows from Venezuela operations, the impact of cash received and processed in certain of our Cash Management Services operations and without cash flows from discontinued operations. We believe this measure is helpful in assessing cash flows from operations, enables period-to-period comparability and is useful in predicting future operating cash flows. This non-GAAP measure should not be considered as an alternative to cash flows from operating activities determined in accordance with GAAP and should be read in conjunction with our consolidated statements of cash flows.
39
2017
versus
2016
GAAP
Operating cash flows increased by
$84.6 million
in
2017
compared to
2016
. The increase was primarily due to higher operating profit and changes in customer obligations of certain of our secure Cash Management Services operations (cash held for customers increased by $6.1 million in 2017 compared to a decrease of $13.2 million in 2016), partially offset by changes in working capital and increases in cash paid for income taxes in the current year.
Non-GAAP
Non-GAAP cash flows from operating activities increased by
$64.4 million
in
2017
as compared to
2016
. The increase was primarily due to higher operating profit, partially offset by changes in working capital and increases in cash paid for income taxes in the current year.
2016
versus
2015
GAAP
Operating cash flows decreased by
$28.4 million
in
2016
compared to
2015
. The decrease was primarily due to changes in customer obligations of certain of our secure Cash Management Services operations (cash held for customers decreased by $13.2 million in 2016 compared to an increase of $12.5 million in 2015), increases in cash paid for income taxes in the current year, and increases in cash used for working capital, partially offset by an increase in operating profit and an increase in operating cash provided by Venezuela operations of $14.1 million.
Non-GAAP
Non-GAAP cash flows from operating activities decreased by
$18.8 million
in
2016
as compared to
2015
. The decrease was primarily due to increases in cash paid for income taxes in the current year and increases in cash used for working capital, partially offset by an increase in operating profit.
Investing Activities
|
Years Ended December 31,
|
$ change
|
|||||||||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
2017
|
2016
|
|||||||||||
|
Cash flows from investing activities
|
||||||||||||||||
|
Capital expenditures
|
$
|
(174.5
|
)
|
(112.2
|
)
|
(101.1
|
)
|
$
|
(62.3
|
)
|
(11.1
|
)
|
||||
|
Acquisitions, net of cash acquired
|
(225.1
|
)
|
(0.7
|
)
|
—
|
|
(224.4
|
)
|
(0.7
|
)
|
||||||
|
Dispositions, net of cash disposed
|
1.4
|
|
(0.6
|
)
|
(14.6
|
)
|
2.0
|
|
14.0
|
|
||||||
|
Marketable securities:
|
||||||||||||||||
|
Purchases
|
(38.0
|
)
|
(9.2
|
)
|
(27.3
|
)
|
(28.8
|
)
|
18.1
|
|
||||||
|
Sales
|
38.3
|
|
9.1
|
|
33.9
|
|
29.2
|
|
(24.8
|
)
|
||||||
|
Proceeds from sale of property, equipment and investments
|
1.9
|
|
4.7
|
|
1.9
|
|
(2.8
|
)
|
2.8
|
|
||||||
|
Other
|
1.1
|
|
—
|
|
3.5
|
|
1.1
|
|
(3.5
|
)
|
||||||
|
Investing activities
|
$
|
(394.9
|
)
|
(108.9
|
)
|
(103.7
|
)
|
$
|
(286.0
|
)
|
(5.2
|
)
|
||||
Cash used by investing activities increased by
$286.0 million
in
2017
versus
2016
. The increase was primarily due to business acquisitions in Argentina, France, Brazil, Chile and the U.S. The aggregate purchase price paid, net of cash acquired and excluding payments of acquisition-related obligations reported as financing activities, was $225.1 million in 2017. Capital expenditures also increased $62.3 million.
Cash used by investing activities increased by
$5.2 million
in
2016
versus
2015
. The increase was due to higher capital expenditures of $11.1 million and lower net cash inflows from purchases and sales of marketable securities. These amounts were partially offset by a reduction in cash outflows related to business divestitures.
40
Capital expenditures and depreciation and amortization were as follows:
|
Years Ended December 31,
|
$ change
|
|||||||||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
2017
|
2016
|
|||||||||||
|
Property and Equipment Acquired during the year
|
||||||||||||||||
|
Capital expenditures
(a)
:
|
||||||||||||||||
|
North America
|
$
|
86.3
|
|
42.0
|
|
37.1
|
|
$
|
44.3
|
|
4.9
|
|
||||
|
South America
|
39.2
|
|
24.0
|
|
21.4
|
|
15.2
|
|
2.6
|
|
||||||
|
Rest of World
|
35.9
|
|
32.2
|
|
31.3
|
|
3.7
|
|
0.9
|
|
||||||
|
Corporate items
|
8.9
|
|
9.0
|
|
7.0
|
|
(0.1
|
)
|
2.0
|
|
||||||
|
Capital expenditures - non-GAAP
|
170.3
|
|
107.2
|
|
96.8
|
|
63.1
|
|
10.4
|
|
||||||
|
Venezuela
|
4.2
|
|
5.0
|
|
4.3
|
|
(0.8
|
)
|
0.7
|
|
||||||
|
Capital expenditures - GAAP
|
$
|
174.5
|
|
112.2
|
|
101.1
|
|
$
|
62.3
|
|
11.1
|
|
||||
|
Capital leases
(b):
|
||||||||||||||||
|
North America
|
$
|
47.3
|
|
23.2
|
|
16.3
|
|
$
|
24.1
|
|
6.9
|
|
||||
|
South America
|
4.4
|
|
6.2
|
|
2.6
|
|
(1.8
|
)
|
3.6
|
|
||||||
|
Capital leases - GAAP and non-GAAP
|
$
|
51.7
|
|
29.4
|
|
18.9
|
|
$
|
22.3
|
|
10.5
|
|
||||
|
Total:
|
||||||||||||||||
|
North America
|
$
|
133.6
|
|
65.2
|
|
53.4
|
|
$
|
68.4
|
|
11.8
|
|
||||
|
South America
|
43.6
|
|
30.2
|
|
24.0
|
|
13.4
|
|
6.2
|
|
||||||
|
Rest of World
|
35.9
|
|
32.2
|
|
31.3
|
|
3.7
|
|
0.9
|
|
||||||
|
Corporate items
|
8.9
|
|
9.0
|
|
7.0
|
|
(0.1
|
)
|
2.0
|
|
||||||
|
Total property and equipment acquired excluding Venezuela
|
222.0
|
|
136.6
|
|
115.7
|
|
85.4
|
|
20.9
|
|
||||||
|
Venezuela
|
4.2
|
|
5.0
|
|
4.3
|
|
(0.8
|
)
|
0.7
|
|
||||||
|
Total property and equipment acquired
|
$
|
226.2
|
|
141.6
|
|
120.0
|
|
$
|
84.6
|
|
21.6
|
|
||||
|
Depreciation and amortization
(a)
|
||||||||||||||||
|
North America
|
$
|
68.4
|
|
66.8
|
|
70.1
|
|
$
|
1.6
|
|
(3.3
|
)
|
||||
|
South America
|
23.5
|
|
19.0
|
|
19.5
|
|
4.5
|
|
(0.5
|
)
|
||||||
|
Rest of World
|
30.4
|
|
29.8
|
|
30.9
|
|
0.6
|
|
(1.1
|
)
|
||||||
|
Corporate items
|
12.0
|
|
10.9
|
|
11.3
|
|
1.1
|
|
(0.4
|
)
|
||||||
|
Depreciation and amortization - non-GAAP
|
134.3
|
|
126.5
|
|
131.8
|
|
7.8
|
|
(5.3
|
)
|
||||||
|
Venezuela
|
1.7
|
|
0.7
|
|
3.9
|
|
1.0
|
|
(3.2
|
)
|
||||||
|
Reorganization and Restructuring
|
2.2
|
|
0.8
|
|
—
|
|
1.4
|
|
0.8
|
|
||||||
|
Amortization of intangible assets
|
8.4
|
|
3.6
|
|
4.2
|
|
4.8
|
|
(0.6
|
)
|
||||||
|
Depreciation and amortization - GAAP
|
$
|
146.6
|
|
131.6
|
|
139.9
|
|
$
|
15.0
|
|
(8.3
|
)
|
||||
|
(a)
|
Capital expenditures as well as depreciation and amortization related to Venezuela have been excluded from South America and accelerated depreciation related to 2016 Restructuring activities has been excluded from non-GAAP amounts. Amortization of acquisition-related intangible assets has also been excluded from non-GAAP amounts.
|
|
(b)
|
Represents the amount of property and equipment acquired using capital leases. Because the assets are acquired without using cash, the acquisitions are not reflected in the consolidated cash flow statement. Amounts are provided here to assist in the comparison of assets acquired in the current year versus prior years.
|
Non-GAAP capital expenditures and non-GAAP depreciation and amortization are supplemental financial measures that are not required by, or presented in accordance with GAAP. The purpose of these non-GAAP measures is to report financial information excluding capital expenditures and depreciation and amortization from our Venezuela operations, accelerated depreciation from restructuring activities and amortization of acquisition-related intangible assets. We believe these measures are helpful in assessing capital expenditures and depreciation and amortization, enable period-to-period comparability and are useful in predicting future investing cash flows. These non-GAAP measures should not be considered as alternatives to capital expenditures and depreciation and amortization determined in accordance with GAAP and should be read in conjunction with our consolidated statements of cash flows.
Our reinvestment ratio, which we define as the annual amount of property and equipment acquired during the year divided by the annual amount of depreciation, was 1.7 in
2017
, 1.1 in
2016
, and 0.9 in
2015
.
Capital expenditures in
2017
for our operating units were primarily for machinery and equipment, armored vehicles, and information technology. Capital expenditures in
2017
were
$62.3 million
higher compared to
2016
. Total property and equipment acquired in
2017
was
$84.6 million
higher than the prior year.
Capital expenditures in
2016
for our operating units were primarily for machinery and equipment, armored vehicles, and information technology. Capital expenditures in
2016
were
$11.1 million
higher compared to
2015
. Total property and equipment acquired in
2016
was
$21.6 million
higher than the prior year.
41
Corporate capital expenditures in the last three years were primarily for implementing a new finance shared service center and investing in information technology.
Financing Activities
|
Years Ended December 31,
|
$ change
|
|||||||||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
2017
|
2016
|
|||||||||||
|
Cash flows from financing activities
|
||||||||||||||||
|
Borrowings and repayments:
|
||||||||||||||||
|
Short-term borrowings
|
$
|
(125.2
|
)
|
115.0
|
|
(22.7
|
)
|
$
|
(240.2
|
)
|
137.7
|
|
||||
|
Long-term revolving credit facilities, net
|
(58.1
|
)
|
(112.2
|
)
|
(64.4
|
)
|
54.1
|
|
(47.8
|
)
|
||||||
|
Other long-term debt, net
|
922.5
|
|
(34.2
|
)
|
44.1
|
|
956.7
|
|
(78.3
|
)
|
||||||
|
Borrowings (repayments)
|
739.2
|
|
(31.4
|
)
|
(43.0
|
)
|
770.6
|
|
11.6
|
|
||||||
|
Debt financing costs
|
(16.3
|
)
|
—
|
|
(2.0
|
)
|
(16.3
|
)
|
2.0
|
|
||||||
|
Payment of acquisition-related obligation
|
(90.9
|
)
|
—
|
|
—
|
|
(90.9
|
)
|
—
|
|
||||||
|
Nonrecourse financing of real estate transaction
|
—
|
|
—
|
|
14.5
|
|
—
|
|
(14.5
|
)
|
||||||
|
Prepayment penalties
|
(8.3
|
)
|
—
|
|
—
|
|
(8.3
|
)
|
—
|
|
||||||
|
Common stock issued
|
—
|
|
3.0
|
|
—
|
|
(3.0
|
)
|
3.0
|
|
||||||
|
Dividends to:
|
||||||||||||||||
|
Shareholders of Brink’s
|
(27.7
|
)
|
(19.8
|
)
|
(19.5
|
)
|
(7.9
|
)
|
(0.3
|
)
|
||||||
|
Noncontrolling interests in subsidiaries
|
(4.6
|
)
|
(4.6
|
)
|
(5.3
|
)
|
—
|
|
0.7
|
|
||||||
|
Proceeds from exercise of stock options
|
2.7
|
|
12.2
|
|
3.8
|
|
(9.5
|
)
|
8.4
|
|
||||||
|
Other
|
(8.3
|
)
|
(4.3
|
)
|
(1.0
|
)
|
(4.0
|
)
|
(3.3
|
)
|
||||||
|
Financing activities
|
$
|
585.8
|
|
(44.9
|
)
|
(52.5
|
)
|
$
|
630.7
|
|
7.6
|
|
||||
2017
versus
2016
Cash provided by financing activities increased by
$630.7 million
in
2017
compared to
2016
due to increased borrowing under our new senior secured credit facility and our senior unsecured notes, which were issued in October 2017. The increased borrowings were used to fund acquisition activity in Argentina, France, Brazil, Chile and the U.S. during the year. The increase in borrowings was partially offset by repayments of short-term borrowings.
2016
versus
2015
Cash used by financing activities decreased by
$7.6 million
in
2016
compared to
2015
due to higher short-term borrowings and increased proceeds from stock option exercises. These financing cash inflow increases were partially offset by higher net repayments of our revolving credit facilities and other long-term debt as well as cash receipts in 2015 from a Mexico real estate transaction which did not reoccur in 2016.
Common stock issued
We received $3.0 million in 2016 when our CEO and CFO purchased a combined 100,440 shares of our common stock.
Dividends
We paid dividends to Brink’s shareholders of
$0.15
per share in each of the last three quarters. In each of the nine previous quarters, we paid dividends of $0.10 per share to Brink's shareholders. Future dividends are dependent on our earnings, financial condition, shareholders’ equity levels, our cash flow and business requirements, as determined by the Board of Directors.
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Changes in currency exchange rates reduced the amount of cash and cash equivalents by
$12.2 million
during
2017
, compared to a reduction of
$12.1 million
in
2016
and
$34.0 million
in
2015
. The decrease in 2017 was due to the strengthening of the U.S. dollar, primarily against the Venezuelan bolivar and Argentine peso. The decrease in 2016 was caused by strengthening of the U.S. dollar, primarily against currencies in Latin America including the Venezuelan bolivar and the Argentine peso. The decrease in 2015 was caused by the strengthening of the U.S. dollar, primarily against most currencies in Latin America including the Venezuelan bolivar, Argentine peso and Brazilian real. See Note 1 to the consolidated financial statements for more information.
42
Capitalization
We use a combination of debt, leases and equity to capitalize our operations.
As of
December 31, 2017
, debt as a percentage of capitalization (defined as total debt and equity) was
79%
compared to
56%
at
December 31, 2016
. The ratio increased in
2017
because our debt increased and our equity decreased versus the prior year. Our debt in
2017
increased primarily from the borrowings under the senior secured credit facility and senior unsecured notes. These debt proceeds were used in part to repay the Revolving Facility, the Term Loan, certain other indebtedness and certain fees and expenses from closing the transactions. Our equity decreased in
2017
primarily due to other comprehensive losses.
Summary of Debt, Equity and Other Liquidity Information
|
Amount available under credit facilities
|
Outstanding balance
|
|||||||||||||
|
December 31,
|
December 31,
|
|||||||||||||
|
(In millions)
|
2017
|
2017
|
2016
|
$ change
(a)
|
||||||||||
|
Debt:
|
||||||||||||||
|
Short-term borrowings
|
||||||||||||||
|
Uncommitted credit facilities
|
$
|
—
|
|
$
|
—
|
|
108.3
|
|
(108.3
|
)
|
||||
|
Restricted cash borrowings
(b)
|
—
|
|
27.0
|
|
22.3
|
|
4.7
|
|
||||||
|
Other
|
—
|
|
18.2
|
|
32.2
|
|
(14.0
|
)
|
||||||
|
Total Short-term borrowings
|
$
|
—
|
|
$
|
45.2
|
|
162.8
|
|
(117.6
|
)
|
||||
|
Long-term debt
|
||||||||||||||
|
Revolving Facility
|
$
|
—
|
|
$
|
—
|
|
55.8
|
|
$
|
(55.8
|
)
|
|||
|
Private Placement Notes
|
—
|
|
—
|
|
85.6
|
|
(85.6
|
)
|
||||||
|
Term Loan
|
—
|
|
—
|
|
65.6
|
|
(65.6
|
)
|
||||||
|
Multi-currency revolving facilities
|
—
|
|
—
|
|
3.6
|
|
(3.6
|
)
|
||||||
|
Senior Secured - Revolving Facility
|
1,000.0
|
|
—
|
|
—
|
|
—
|
|
||||||
|
Senior Secured - Term Loan A
|
—
|
|
491.4
|
|
—
|
|
491.4
|
|
||||||
|
Senior Unsecured Notes
|
—
|
|
591.2
|
|
—
|
|
591.2
|
|
||||||
|
Letter of Credit Facilities
|
37.6
|
|
—
|
|
—
|
|
—
|
|
||||||
|
Other
|
—
|
|
12.0
|
|
2.8
|
|
9.2
|
|
||||||
|
Capital leases
|
—
|
|
96.9
|
|
67.0
|
|
29.9
|
|
||||||
|
Total Long-term debt
|
$
|
1,037.6
|
|
$
|
1,191.5
|
|
280.4
|
|
$
|
911.1
|
|
|||
|
Total Debt
|
$
|
1,037.6
|
|
$
|
1,236.7
|
|
443.2
|
|
$
|
793.5
|
|
|||
|
Total equity
|
$
|
338.2
|
|
354.8
|
|
$
|
(16.6
|
)
|
||||||
|
(a)
|
In addition to cash borrowings and repayments, the change in the debt balance also includes changes in currency exchange rates.
|
|
(b)
|
These
2017
and
2016
amounts are for short-term borrowings related to cash borrowed under lending arrangements used in the process of managing customer cash supply chains, which is currently classified as restricted cash and not available for general corporate purposes. See Note 19 for more details.
|
43
Reconciliation of Net Debt to U.S. GAAP Measures
|
December 31,
|
|
|||||||||
|
(In millions)
|
2017
|
2016
|
$ change
|
|||||||
|
Debt:
|
||||||||||
|
Short-term borrowings
|
$
|
45.2
|
|
162.8
|
|
$
|
(117.6
|
)
|
||
|
Long-term debt
|
1,191.5
|
|
280.4
|
|
911.1
|
|
||||
|
Total Debt
|
1,236.7
|
|
443.2
|
|
793.5
|
|
||||
|
Restricted cash borrowings
(a)
|
(27.0
|
)
|
(22.3
|
)
|
(4.7
|
)
|
||||
|
Total Debt without restricted cash borrowings
|
1,209.7
|
|
420.9
|
|
788.8
|
|
||||
|
Less:
|
||||||||||
|
Cash and cash equivalents
|
614.3
|
|
183.5
|
|
430.8
|
|
||||
|
Amounts held by Cash Management Services operations
(b)
|
(16.1
|
)
|
(9.8
|
)
|
(6.3
|
)
|
||||
|
Cash and cash equivalents available for general corporate purposes
|
598.2
|
|
173.7
|
|
424.5
|
|
||||
|
Net Debt
|
$
|
611.5
|
|
247.2
|
|
$
|
364.3
|
|
||
|
(a)
|
Restricted cash borrowings are related to cash borrowed under lending arrangements used in the process of managing customer cash supply chains, which is currently classified as restricted cash and not available for general corporate purposes.
|
|
(b)
|
Title to cash received and processed in certain of our secure Cash Management Services operations transfers to us for a short period of time. The cash is generally credited to customers’ accounts the following day and we do not consider it as available for general corporate purposes in the management of our liquidity and capital resources and in our computation of Net Debt.
|
Net Debt is a supplemental non-GAAP financial measure that is not required by, or presented in accordance with GAAP. We use Net Debt as a measure of our financial leverage. We believe that investors also may find Net Debt to be helpful in evaluating our financial leverage. Net Debt should not be considered as an alternative to Debt determined in accordance with GAAP and should be reviewed in conjunction with our consolidated balance sheets. Set forth above is a reconciliation of Net Debt, a non-GAAP financial measure, to Debt, which is the most directly comparable financial measure calculated and reported in accordance with GAAP, as of
December 31, 2017
, and
December 31, 2016
. Net Debt excluding cash and debt in Venezuelan operations was
$615 million
at
December 31, 2017
, and
$255 million
at
December 31, 2016
.
Net Debt at the end of
2017
increased by
$364 million
when compared to Net Debt at the end of
2016
primarily due to the funding of business acquisitions.
Liquidity Needs
Our operating liquidity needs are typically financed by cash from operations, short-term borrowings and the Revolving Credit Facility (our debt facilities are described below). We have certain limitations and considerations related to the cash and borrowing capacity that are reported in our consolidated financial statements. Based on our current cash on hand, amounts available under our credit facilities and current projections of cash flows from operations, we believe that we will be able to meet our liquidity needs for more than the next twelve months.
Limitations on dividends from foreign subsidiaries
. A significant portion of our operations are outside the U.S. which may make it difficult to repatriate additional cash for use in the U.S. See Item 1A.,
Risk Factors
, for more information on the risks associated with having businesses outside the U.S.
Venezuela
We have
$3.4 million
of cash and cash equivalents denominated in Venezuelan bolivars (as remeasured at the published DICOM rate of
3,345
bolivars to the U.S. dollar) at
December 31, 2017
. We believe that the DICOM process to convert bolivars (as described in Note 1 to the consolidated financial statements) is the only method for which we could receive U.S. dollars that we need to operate our business and to repatriate earnings. The Venezuelan government has restricted conversions of bolivars into U.S. dollars in the past and may do so in the future. We did not repatriate any U.S. dollars from Venezuela in
2017
or
2016
.
In Note 3, we are required to present projected benefit payments of our Venezuela benefit plan for the next 10 years. Because the economy in Venezuela has had significant inflation in the last several years, we applied highly inflationary assumptions when calculating the projected benefit payments. Due to the uncertainties associated with the significant inflation in Venezuela, there can be no assurances that these assumptions provide an accurate reflection of future payments. We assumed an inflation rate of
900%
in 2018 with a gradual decline to
4%
in 2033, as we expect the economy of Venezuela over time to return to inflation rates more typical for the region. When these undiscounted bolivar-denominated projected benefit payments are translated into U.S. dollars at the December 31, 2017 DICOM exchange rate, the calculation results in projected benefit payments of
$38.7 trillion
over the next 10 years. If we applied the same inflation rate assumption to the December 31, 2017 DICOM exchange rate over the next 10 years, the projected benefit payments would be less than our December 31, 2017 liability of
$4.3 million
. In 2017, we made payments in bolivars related to this benefit plan which translated to approximately $1.4 million. In future years, we expect to continue to make these payments in bolivars with cash generated from our Venezuelan operations.
44
Argentina.
At
December 31, 2017
, we had cash denominated in Argentine pesos of $33.2 million. The government in Argentina had previously imposed limits on the exchange of Argentine pesos into U.S. dollars. As a result, we elected in the past and may continue in the future to repatriate cash from Argentina using different markets to convert Argentine pesos into U.S. dollars if U.S. dollars are not readily available. Prior to the December 2015 devaluation of the Argentine peso, we converted Argentine pesos into U.S. dollars at rates less favorable than the rates at which we translated the financial statements of our subsidiary in Argentina. However, after the December 2015 devaluation of the Argentine peso, the market rates used to convert Argentine pesos into U.S. dollars have been similar to the rates at which we translate the financial statements of our subsidiary in Argentina.
Cash and Cash Equivalents
At December 31, 2017, we had $614.3 million in cash and cash equivalents, compared to $183.5 million at December 31, 2016. The $430.8 million increase in cash and cash equivalents is primarily attributable to the proceeds received from our new senior secured credit facility and our senior unsecured notes, net of repayments of short-term borrowings and other long-term debt. We plan to use the incremental cash and cash equivalents for working capital needs, capital expenditures, acquisitions and other general corporate purposes. At December 31, 2017, the incremental cash and cash equivalents were invested in money market accounts.
Debt
Short-Term Borrowings
Uncommitted Credit Facilities
In October 2016, we entered into a
$100 million
uncommitted credit facility. Borrowings under this facility had a maximum maturity of not more than
thirty
days. Interest on this facility was generally based on LIBOR plus a margin of
1.00%
. In September 2017, we paid off the outstanding balance and the facility was terminated.
In February 2016, we entered into a
$24 million
uncommitted credit facility with an initial expiration date in
February 2017
. The facility was amended in
February 2017
, which extended the expiration date to February 2018. Interest on this facility was based on LIBOR plus a margin of
1.00%
. In October 2017, we paid off the outstanding balance and the facility was terminated.
Unsecured Term Loan Facility
In
August 2017
, we entered into a
364
-day senior unsecured delayed draw term loan facility in an aggregate principal amount of up to
$100 million
. Interest on this facility was based on LIBOR plus a margin which ranges from
1.000%
to
1.875%
depending on either our credit rating or leverage ratio as defined within this facility. In October 2017, we paid off the outstanding balance of
$85 million
and the facility was terminated.
Long-Term Debt
Senior Secured Credit Facility
In
October 2017
, we entered into a new senior secured credit facility (the “Senior Secured Credit Facility”) with Wells Fargo Bank, National Association, as administrative agent, consisting of a
$1 billion
Revolving Credit Facility and a
$500 million
Term Loan Facility. Loans under the Revolving Credit Facility mature five years after the closing date (
October 17, 2022
) and loans under the Term Loan Facility amortize five percent annually and mature five years after the closing date. Interest rates for the Senior Secured Credit Facility are based on LIBOR plus a margin or an alternate base rate plus a margin. The Revolving Credit Facility allows us to borrow money or issue letters of credit (or otherwise satisfy credit needs) on a revolving basis over the term of the facility. As of
December 31, 2017
,
$1 billion
was available under the Revolving Credit Facility. The obligations under the Senior Secured Credit Facility are secured by a first-priority lien on all or substantially all of the assets of the Company and certain of its domestic subsidiaries, including a first-priority lien on equity interests of certain of the Company’s direct and indirect subsidiaries. The Company and certain of its domestic subsidiaries also guarantee the obligations under the Senior Secured Credit Facility.
The margin on both LIBOR and alternate base rate borrowings under the Senior Secured Credit Facility is based on the Company’s consolidated net leverage ratio. The margin on LIBOR borrowings, which can range from
1.25%
to
2.50%
, was
1.75%
at
December 31, 2017
. The margin on alternate base rate borrowings, which can range from
0.25%
to
1.50%
, was
0.75%
as of
December 31, 2017
. We also pay an annual commitment fee on the unused portion the Revolving Credit Facility based on the Company’s consolidated net leverage ratio. The commitment fee, which can range from
0.15%
to
0.40%
, was
0.25%
as of
December 31, 2017
.
Senior Unsecured Notes
In
October 2017
, we issued at par ten-year senior unsecured notes (the "Senior Notes") in the aggregate principal amount of
$600 million
. The Senior Notes will mature on
October 15, 2027
, bearing an annual interest rate of
4.625%
. The Senior Notes are general unsecured obligations guaranteed by certain of the Company’s existing and future U.S. subsidiaries, which are also guarantors under the Senior Secured Credit Facility.
The Senior Notes have not been and will not be registered under the Securities Act of 1933 (the “Securities Act”) or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The notes were offered in the United States only to persons reasonably believed to be qualified institutional buyers in reliance on the exception from registration set forth in Rule 144A under the Securities Act and outside the United States to non-U.S. persons pursuant to Regulation S under the Securities Act.
45
The aggregate proceeds from the Senior Secured Credit Facility and the Senior Notes were used in part to repay the prior Revolving Facility (described below), the prior term loan, certain other indebtedness and certain fees and expenses related to the closing of the transactions. Remaining net proceeds are expected to be used for working capital needs, capital expenditures, acquisitions and other general corporate purposes.
Revolving Facility
We had a
$525 million
unsecured multi-currency revolving bank credit facility (the “Revolving Facility”) that was scheduled to mature in
March 2020
. The Revolving Facility’s interest rate was based on LIBOR plus a margin or an alternate base rate plus a margin. The Revolving Facility allowed us to borrow loans or issue letters of credit (or otherwise satisfy credit needs) on a revolving basis over the term of the facility. In October 2017, we paid off the outstanding balance and the facility was terminated.
Private Placement Notes
In September 2017, we paid off our private placement notes for
$86 million
, which included
$7 million
in prepayment penalties.
Term Loan
We entered into a
$75 million
unsecured term loan in
March 2015
. Interest on this loan was based on LIBOR plus a margin of
1.75%
. In October 2017, we paid off the term loan for
$64 million
, which included $2 million in prepayment penalties.
Other Facilities
Various foreign subsidiaries maintain other lines of credit and overdraft facilities with a number of banks.
Letter of Credit Facilities
We have one
$10 million
unsecured multi-currency revolving bank credit facility, which can be used solely for the issuance of letters of credit and bank guarantees. As of
December 31, 2017
, we had undrawn letters of credit and guarantees of
$5 million
issued under this facility. This
$10 million
facility expires in
March 2019
.
We have a
$40 million
uncommitted letter of credit facility that expires in
May 2018
. As of
December 31, 2017
,
$11 million
was utilized.
We have
two
unsecured letter of credit facilities totaling
$94 million
, of which approximately
$38 million
was available at
December 31, 2017
. At
December 31, 2017
, we had undrawn letters of credit and guarantees of
$56 million
issued under these letter of credit facilities. A
$40 million
facility expires in
December 2018
and a
$54 million
facility expires in
December 2019
. The Senior Secured Credit Facility is also available for issuance of letters of credit and bank guarantees.
The Senior Secured Credit facility, Senior Notes, the unsecured multi-currency revolving bank credit facility, and the letter of credit facilities contain various financial and other covenants. The financial covenants, among other things, limit our ability to provide liens, restrict fundamental changes, limit transactions with affiliates and unrestricted subsidiaries, restrict changes to our fiscal year and to organizational documents, limit asset dispositions, limit the use of proceeds from asset sales, limit sale and leaseback transactions, limit investments, limit the ability to incur debt, restrict certain payments to shareholders, limit negative pledges, limit the ability to change the nature of our business, provide for a maximum consolidated net leverage ratio and provide for minimum coverage of interest costs. If we were not to comply with the terms of our various financing agreements, the repayment terms could be accelerated and the commitments could be withdrawn. An acceleration of the repayment terms under one agreement could trigger the acceleration of the repayment terms under the other financing agreements. We were in compliance with all financial covenants at
December 31, 2017
.
Equity
Common Stock
At
December 31, 2017
, we had
100 million
shares of common stock authorized and
50.5 million
shares issued and outstanding.
Preferred Stock
At
December 31, 2017
, we had the authority to issue up to
2 million
shares of preferred stock, par value
$10
per share.
Share Repurchase Program
In May 2017, our board of directors authorized a
$200 million
share repurchase program which will expire on December 31, 2019. We are not obligated to repurchase any specific dollar amount or number of shares and, at December 31, 2017,
$200 million
remains available under this program. The timing and volume of share repurchases may be executed at the discretion of management on an opportunistic basis, or pursuant to trading plans or other arrangements. Share repurchases under the program may be made in the open market, in privately negotiated transactions, or otherwise.
Off Balance Sheet Arrangements
We have operating leases that are described in the notes to the consolidated financial statements. We use operating leases to lower our cost of financings. We believe that operating leases are an important component of our capital structure.
46
Contractual Obligations
The following table reflects our contractual obligations as of
December 31, 2017
.
|
Estimated Payments Due by Period
|
|||||||||||||||||||||
|
(In millions)
|
2018
|
2019
|
2020
|
2021
|
2022
|
Later Years
|
Total
|
||||||||||||||
|
Contractual obligations:
|
|||||||||||||||||||||
|
Long-term debt obligations
|
$
|
29.3
|
|
27.7
|
|
26.5
|
|
25.2
|
|
393.9
|
|
603.1
|
|
1,105.7
|
|
||||||
|
Interest payments on long-term debt
(a)
|
41.5
|
|
43.0
|
|
42.2
|
|
41.3
|
|
37.4
|
|
132.9
|
|
338.3
|
|
|||||||
|
Capital lease obligations
|
22.6
|
|
18.4
|
|
16.7
|
|
15.0
|
|
12.8
|
|
11.4
|
|
96.9
|
|
|||||||
|
Operating lease obligations
|
91.8
|
|
84.8
|
|
69.8
|
|
44.8
|
|
36.7
|
|
93.5
|
|
421.4
|
|
|||||||
|
Acquisition-related payments
(b)
|
18.4
|
|
18.8
|
|
—
|
|
—
|
|
—
|
|
—
|
|
37.2
|
|
|||||||
|
Purchase obligations
|
19.3
|
|
2.6
|
|
2.0
|
|
2.0
|
|
2.0
|
|
1.3
|
|
29.2
|
|
|||||||
|
Other long-term liabilities reflected on the
|
|||||||||||||||||||||
|
Company’s balance sheet under GAAP:
|
|||||||||||||||||||||
|
Primary U.S. pension plan
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|||||||
|
Other retirement obligations:
|
|||||||||||||||||||||
|
UMWA plans
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
501.9
|
|
501.9
|
|
|||||||
|
Black lung and other plans
|
8.0
|
|
8.2
|
|
7.3
|
|
6.7
|
|
6.3
|
|
73.8
|
|
110.3
|
|
|||||||
|
Workers compensation and other claims
|
16.8
|
|
13.3
|
|
8.6
|
|
5.7
|
|
4.6
|
|
25.5
|
|
74.5
|
|
|||||||
|
Uncertain tax positions
|
1.4
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1.4
|
|
|||||||
|
Other
|
1.8
|
|
0.8
|
|
0.8
|
|
0.8
|
|
0.8
|
|
7.1
|
|
12.1
|
|
|||||||
|
Total
|
$
|
250.9
|
|
217.6
|
|
173.9
|
|
141.5
|
|
494.5
|
|
1,450.5
|
|
2,728.9
|
|
||||||
|
(a)
|
Estimated future interest payments on our long term debt are based on the outstanding borrowings as of December 31, 2017, the respective maturity dates of the debt agreements and the interest rates in effect at December 31, 2017.
|
|
(b)
|
Remaining undiscounted amounts due under the contract, assuming no reduction for any potential seller's indemnified losses.
|
U.S. primary pension plan.
Pension benefits provided to eligible U.S. employees were frozen on December 31, 2005, and benefits are not provided to employees hired after 2005 or to those covered by a collective bargaining agreement. We did not make cash contributions to the primary U.S. pension plan in
2017
. There are approximately
14,200
beneficiaries in the plans.
Based on current assumptions, we do not expect to make additional contributions.
UMWA plans.
Retirement benefits related to former coal operations include medical benefits provided by the Pittston Coal Group Companies Employee Benefit Plan for UMWA Represented Employees. There are approximately
3,300
beneficiaries in the UMWA plans. The company does not expect to make additional contributions to these plans until
2027
, based on actuarial assumptions.
Black Lung plans.
Under the Federal Black Lung Benefits Act of 1972, Brink’s is responsible for paying lifetime black lung benefits to miners and their dependents for claims filed and approved after June 30, 1973. There are approximately
760
black lung beneficiaries.
Non-U.S. defined-benefit pension plans.
We have various defined-benefit pension plans covering eligible current and former employees of some of our international operations. See Note 3 for information about these non-U.S. plans' benefit obligation and estimated future benefit payments over the next 10 years.
Assumptions for U.S. Retirement Obligations
We have made various assumptions to estimate the amount of payments to be made in the future. The most significant assumptions include:
|
•
|
Changing discount rates and other assumptions in effect at measurement dates (normally December 31)
|
|
•
|
Investment returns of plan assets
|
|
•
|
Addition of new participants (historically immaterial due to freezing of pension benefits and exit from coal business)
|
|
•
|
Mortality rates
|
|
•
|
Change in laws
|
The Contractual Obligations table above represents payments projected to be paid with our corporate funds and does not represent payments projected to be made to beneficiaries with retirement plan assets.
47
Funded Status of U.S. Retirement Plans
|
Actual
|
Projected
|
||||||||||||
|
(In millions)
|
2017
|
2018
|
2019
|
2020
|
2021
|
2022
|
|||||||
|
Primary U.S. pension plan
|
|
|
|
|
|
|
|||||||
|
Beginning funded status
|
$
|
(107.8
|
)
|
(102.3
|
)
|
(79.3
|
)
|
(55.4
|
)
|
(30.5
|
)
|
(4.5
|
)
|
|
Net periodic pension credit
(a)
|
18.5
|
|
22.0
|
|
22.9
|
|
23.5
|
|
25.4
|
|
27.2
|
|
|
|
Payment from Brink’s
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
Benefit plan actuarial gain (loss)
|
(13.0
|
)
|
1.0
|
|
1.0
|
|
1.4
|
|
0.6
|
|
—
|
|
|
|
Ending funded status
|
$
|
(102.3
|
)
|
(79.3
|
)
|
(55.4
|
)
|
(30.5
|
)
|
(4.5
|
)
|
22.7
|
|
|
UMWA plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning funded status
|
$
|
(226.6
|
)
|
(294.3
|
)
|
(295.5
|
)
|
(297.6
|
)
|
(300.6
|
)
|
(304.6
|
)
|
|
Net periodic postretirement cost
(a)
|
(1.9
|
)
|
(1.2
|
)
|
(2.1
|
)
|
(3.0
|
)
|
(4.0
|
)
|
(5.2
|
)
|
|
|
Benefit plan actuarial gain (loss)
|
(66.3
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
Other
|
0.5
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
Ending funded status
|
$
|
(294.3
|
)
|
(295.5
|
)
|
(297.6
|
)
|
(300.6
|
)
|
(304.6
|
)
|
(309.8
|
)
|
|
Black lung plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning funded status
|
$
|
(57.2
|
)
|
(67.0
|
)
|
(62.1
|
)
|
(57.5
|
)
|
(53.2
|
)
|
(49.2
|
)
|
|
Net periodic postretirement cost
(a)
|
(2.4
|
)
|
(2.2
|
)
|
(2.0
|
)
|
(1.9
|
)
|
(1.8
|
)
|
(1.6
|
)
|
|
|
Payment from Brink’s
|
7.3
|
|
7.1
|
|
6.6
|
|
6.2
|
|
5.8
|
|
5.4
|
|
|
|
Benefit plan actuarial gain (loss)
|
(14.7
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
Ending funded status
|
$
|
(67.0
|
)
|
(62.1
|
)
|
(57.5
|
)
|
(53.2
|
)
|
(49.2
|
)
|
(45.4
|
)
|
|
(a)
|
Excludes amounts reclassified from accumulated other comprehensive income (loss).
|
Summary of Total Expenses Related to All U.S. Retirement Liabilities
This table summarizes actual and projected expense (income) related to U.S. retirement liabilities. These expenses are not allocated to segment results.
|
Actual
|
Projected
|
||||||||||||
|
(In millions)
|
2017
|
2018
|
2019
|
2020
|
2021
|
2022
|
|||||||
|
Primary U.S. pension plan
|
$
|
7.7
|
|
6.3
|
|
2.6
|
|
(0.3
|
)
|
(5.9
|
)
|
(10.9
|
)
|
|
UMWA plans
|
16.8
|
|
18.6
|
|
18.3
|
|
18.3
|
|
18.4
|
|
18.6
|
|
|
|
Black lung plans
|
8.4
|
|
8.4
|
|
6.2
|
|
5.8
|
|
5.4
|
|
4.9
|
|
|
|
Total
|
$
|
32.9
|
|
33.3
|
|
27.1
|
|
23.8
|
|
17.9
|
|
12.6
|
|
Summary of Total Payments from U.S. Plans to Participants
This table summarizes actual and estimated payments from the plans to participants.
|
Actual
|
Projected
|
||||||||||||
|
(In millions)
|
2017
|
2018
|
2019
|
2020
|
2021
|
2022
|
|||||||
|
Payments from U.S. Plans to participants
|
|||||||||||||
|
Primary U.S. pension plan
|
$
|
49.1
|
|
50.3
|
|
50.6
|
|
50.8
|
|
50.9
|
|
50.8
|
|
|
UMWA plans
|
33.5
|
|
34.2
|
|
34.0
|
|
34.4
|
|
34.3
|
|
33.6
|
|
|
|
Black lung plans
|
7.3
|
|
7.1
|
|
6.6
|
|
6.2
|
|
5.8
|
|
5.4
|
|
|
|
Total
|
$
|
89.9
|
|
91.6
|
|
91.2
|
|
91.4
|
|
91.0
|
|
89.8
|
|
48
Summary of Projected Payments from Brink’s to U.S. Plans
This table summarizes estimated payments from Brink’s to U.S. retirement plans.
|
Projected Payments to Plans from Brink's
|
||||||||||||
|
(In millions)
|
Primary U.S. Pension Plan
|
UMWA Plans
|
Black Lung Plans
|
Total
|
||||||||
|
Projected payments
|
||||||||||||
|
2018
|
$
|
—
|
|
—
|
|
7.1
|
|
7.1
|
|
|||
|
2019
|
—
|
|
—
|
|
6.6
|
|
6.6
|
|
||||
|
2020
|
—
|
|
—
|
|
6.2
|
|
6.2
|
|
||||
|
2021
|
—
|
|
—
|
|
5.8
|
|
5.8
|
|
||||
|
2022
|
—
|
|
—
|
|
5.4
|
|
5.4
|
|
||||
|
2023
|
—
|
|
—
|
|
5.0
|
|
5.0
|
|
||||
|
2024
|
—
|
|
—
|
|
4.6
|
|
4.6
|
|
||||
|
2025
|
—
|
|
—
|
|
4.2
|
|
4.2
|
|
||||
|
2026
|
—
|
|
—
|
|
3.9
|
|
3.9
|
|
||||
|
2027
|
—
|
|
18.9
|
|
3.7
|
|
22.6
|
|
||||
|
2028
|
—
|
|
28.9
|
|
3.4
|
|
32.3
|
|
||||
|
2029
|
—
|
|
28.1
|
|
3.2
|
|
31.3
|
|
||||
|
2030
|
—
|
|
27.3
|
|
3.0
|
|
30.3
|
|
||||
|
2031
|
—
|
|
26.4
|
|
2.8
|
|
29.2
|
|
||||
|
2032 and thereafter
|
—
|
|
372.3
|
|
27.8
|
|
400.1
|
|
||||
|
Total projected payments
|
$
|
—
|
|
501.9
|
|
92.7
|
|
594.6
|
|
|||
The amounts in the tables above are based on a variety of estimates, including actuarial assumptions as of
December 31, 2017
. The estimated amounts will change in the future to reflect payments made, investment returns, actuarial revaluations, and other changes in estimates. Actual amounts could differ materially from the estimated amounts.
Contingent Matters
During the fourth quarter of 2015, we became aware of an investigation initiated by COFECE (the Mexican antitrust agency) related to potential anti-competitive practices among competitors in the cash logistics industry in Mexico (the industry in which Brink’s Mexican subsidiary, SERPAPROSA, is active). The investigation was completed during the fourth quarter of 2017 and we no longer believe that an administrative claim or proceeding arising from this investigation could result in a material loss to the Company.
In addition, we are involved in various other lawsuits and claims in the ordinary course of business. We are not able to estimate the loss or range of losses for some of these matters. We have recorded accruals for losses that are considered probable and reasonably estimable. Except as otherwise noted, we do not believe that it is reasonably possible the ultimate disposition of any of the lawsuits currently pending against the Company could have a material adverse effect on our liquidity, financial position or results of operations.
49
APPLICATION OF CRITICAL ACCOUNTING POLICIES
The application of accounting principles requires the use of assumptions, estimates and judgments. We make assumptions, estimates and judgments based on, among other things, knowledge of operations, markets, historical trends and likely future changes, similarly situated businesses and, when appropriate, the opinions of advisors with relevant knowledge and experience. Reported results could have been materially different had we used a different set of assumptions, estimates and judgments.
Deferred Tax Asset Valuation Allowance
Deferred tax assets result primarily from net operating losses, tax credit carryforwards, and the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial statement and income tax purposes, as determined under enacted tax laws and rates. The new U.S. tax reform law had a significant impact on the deferred tax asset.
Accounting Policy
We establish valuation allowances, in accordance with the Financial Accounting Standards Board ("FASB") ASC Topic 740,
Income Taxes
, when we estimate it is not more likely than not that a deferred tax asset will be realized. We decide to record valuation allowances primarily based on an assessment of positive and negative evidence including historical earnings and future taxable income that incorporates prudent, feasible tax-planning strategies. We assess deferred tax assets on an individual jurisdiction basis. Changes in tax statutes, the timing of deductibility of expenses or expectations for future performance could result in material adjustments to our valuation allowances, which would increase or decrease tax expense. Our valuation allowances are as follows.
Valuation Allowances
|
December 31,
|
||||||
|
(In millions)
|
2017
|
2016
|
||||
|
U.S.
|
$
|
80.0
|
|
38.1
|
|
|
|
Non-U.S.
|
18.9
|
|
24.7
|
|
||
|
Total
|
$
|
98.9
|
|
62.8
|
|
|
Application of Accounting Policy
U.S. Deferred Tax Assets
We had
$201 million
of net deferred tax assets at
December 31, 2017
, of which
$173 million
related to U.S. jurisdictions. The Tax Reform Act reduced the federal tax rate for corporations from 35% to 21%, beginning January 1, 2018. As a result, we remeasured our deferred tax assets considering the new rate and recognized a provisional $88 million reduction to net deferred tax assets through income from continuing operations in the fourth quarter of 2017. We recorded an estimated $31 million foreign tax credit carryforward related to the transition tax included in the Tax Reform Act, which was offset by a full valuation allowance. Excluding the effects of the Tax Reform Act, we also concluded that we were not more-likely-than-not to realize assets related to certain attributes with a limited statutory carryforward and recorded a $7 million valuation allowance through income from continuing operations.
In 2016, we changed our judgment about the need for valuation allowances for certain U.S. tax attributes with a limited statutory carryforward period that were no longer more-likely-than-not to be realized due to lower than expected U.S. operating results, certain pre-tax items, and other timing of tax deductions related to executive leadership transition. As a result, we recognized a $14.7 million valuation allowance in 2016 through income from continuing operations.
We used various estimates and assumptions to evaluate the need for the valuation allowance in the U.S. These included
|
•
|
projected revenues and operating income for our U.S. entities,
|
|
•
|
projected royalties and management fees paid to U.S. entities from subsidiaries outside the U.S.,
|
|
•
|
estimated required contributions to our U.S. retirement plans,
|
|
•
|
the estimated impact of U.S. tax reform, and
|
|
•
|
interest rates on projected U.S. borrowings.
|
Our projections assumed continued growth of our revenues and operating profit both in the U.S. and outside the U.S. Had we used different assumptions, we might have made different conclusions about the need for valuation allowances. For example, using different assumptions we might have concluded that we require a full valuation allowance offsetting our U.S. deferred tax assets.
Non-U.S. Deferred Tax Assets
In 2017, we changed our judgment about the need for valuation allowances for deferred tax assets in certain non-U.S. jurisdictions as a result of changes in operating results and the outlook about the future operating performance in those jurisdictions. As a result, we recognized a tax benefit of $1.8 million in 2017 through income from continuing operations.
50
Goodwill, Other Intangible Assets and Property and Equipment Valuations
Accounting Policy
At
December 31, 2017
, we had property and equipment of
$640.9 million
, goodwill of
$453.7 million
and other intangible assets of
$105.7 million
, net of accumulated depreciation and amortization. We review these assets for possible impairment using the guidance in FASB ASC Topic 350,
Intangibles - Goodwill and Other
, for goodwill and other intangible assets and FASB ASC Topic 360,
Property, Plant and Equipment
, for property and equipment. Our review for impairment requires the use of significant judgments about the future performance of our operating subsidiaries. Due to the many variables inherent in the estimates of the fair value of these assets, differences in assumptions could have a material effect on the impairment analyses.
Application of Accounting Policy
Goodwill
We review goodwill for impairment annually and whenever events or circumstances make it more likely than not that impairment may have occurred. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit.
Under U.S. GAAP, the annual impairment test may be either a quantitative test or a qualitative assessment. The qualitative assessment can be performed in order to determine whether facts and circumstances support a determination that reporting unit fair values are greater than their carrying values.
For
2017
, we elected to forego the optional qualitative assessment and we performed a quantitative goodwill impairment test instead. We estimated the fair value of each reporting unit using projections of cash flows and compared to its carrying value. We completed the annual goodwill impairment test as of October 1,
2017
and concluded that the fair value of each reporting unit substantially exceeded its carrying value by a range of 22% to 278%.
Finite-lived Intangible Assets and Property and Equipment
We review finite-lived intangible assets and property and equipment for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. For purposes of assessing impairment, assets are grouped at the lowest levels for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. To determine whether impairment has occurred, we compare estimates of the future undiscounted net cash flows of groups of assets to their carrying value.
Estimates of Future Cash Flows
We made significant assumptions when preparing financial projections of cash flow used in our impairment analyses, including assumptions of future results of operations, capital requirements, income taxes, long-term growth rates for determining terminal value, and discount rates. Our projections assumed continued growth of our revenues and operating profit both in the U.S. and outside the U.S. Our conclusions regarding asset impairment may have been different if we had used different assumptions.
51
Retirement and Postemployment Benefit Obligations
We provide benefits through defined benefit pension plans and retiree medical benefit plans and under statutory requirements.
Accounting Policy
We account for pension and other retirement benefit obligations under FASB Accounting Standards Update (“ASU”) Topic 715,
Compensation – Retirement Benefits.
We account for postemployment benefit obligations, including workers’ compensation obligations, under FASB ASC Topic 712,
Compensation – Nonretirement Postemployment Benefits
.
To account for these benefits, we make assumptions of expected return on assets, discount rates, inflation, demographic factors and changes in the laws and regulations covering the benefit obligations. Because of the inherent volatility of these items and because the obligations are significant, changes in the assumptions could have a material effect on our liabilities and expenses related to these benefits.
Our most significant retirement plans include our primary U.S. pension plan and the retiree medical plans of our former coal business that were collectively bargained with the United Mine Workers of America (the “UMWA”). The critical accounting estimates that determine the carrying values of liabilities and the resulting annual expense are discussed below.
Application of Accounting Policy
Discount Rate Assumptions
For plans accounted under FASB ASC Topic 715, we discount estimated future payments using discount rates based on market conditions at the end of the year. In general, our liability changes in an inverse relationship to interest rates. That is, the lower the discount rate, the higher the associated plan obligation.
U.S. Plans
For our largest retirement plans, including the primary U.S. pension and UMWA plans and black lung obligations, we derive the discount rates used to measure the present value of benefit obligations using the cash flow matching method. Under this method, we compare the plan’s projected payment obligations by year with the corresponding yields on a Mercer yield curve. Each year’s projected cash flows are then discounted back to their present value at the measurement date and an overall discount rate is determined. The overall discount rate is then rounded to the nearest tenth of a percentage point.
We used Mercer’s Above-Mean Curve to determine the discount rates for retirement cost and the year-end benefit obligation. To derive the Above-Mean Curve, Mercer uses only those bonds with a yield higher than the mean yield of the same portfolio of high quality bonds. The Above-Mean Curve reflects the way an active investment manager would select high-quality bonds to match the cash flows of the plan.
Non-U.S. Plans
We use the same cash flow matching method to derive the discount rates for our major non-U.S. retirement plans. Where the cash flow matching method is not possible, rates of local high-quality long-term government bonds are used to estimate the discount rate.
The discount rates for the primary U.S. pension plan, UMWA retiree medical plans and black lung obligations were:
|
Primary U.S. Plan
|
UMWA Plans
|
Black Lung
|
||||||||||||||||||||||||
|
|
2017
|
2016
|
2015
|
2017
|
2016
|
2015
|
2017
|
2016
|
2015
|
|||||||||||||||||
|
Discount rate:
|
||||||||||||||||||||||||||
|
Retirement cost
|
4.3
|
%
|
4.5
|
%
|
4.1
|
%
|
4.1
|
%
|
4.4
|
%
|
4.0
|
%
|
3.9
|
%
|
4.2
|
%
|
3.7
|
%
|
||||||||
|
Benefit obligation at year end
|
3.7
|
%
|
4.3
|
%
|
4.5
|
%
|
3.6
|
%
|
4.1
|
%
|
4.4
|
%
|
3.5
|
%
|
3.9
|
%
|
4.2
|
%
|
||||||||
Sensitivity Analysis
The discount rate we select at year end materially affects the valuations of plan obligations at year end and the calculations of net periodic expenses for the following year. The tables below compare hypothetical plan obligation valuations for our largest plans as of
December 31, 2017
, actual expenses for
2017
and projected expenses for
2018
assuming we had used discount rates that were one percentage point lower or higher.
Plan Obligations at
December 31, 2017
|
(In millions)
|
Hypothetical
1% lower
|
Actual
|
Hypothetical
1% higher
|
||
|
Primary U.S. pension plan
|
$
|
996.2
|
|
879.5
|
784.3
|
|
UMWA plans
|
575.0
|
|
513.5
|
462.6
|
|
Actual
2017
and Projected
2018
Expense (Income)
52
|
(In millions, except for percentages)
|
Hypothetical sensitivity analysis
for discount rate assumption
|
Hypothetical sensitivity analysis
for discount rate assumption
|
||||||||||||
|
Actual
|
1% lower
|
1% higher
|
Projected
|
1% lower
|
1% higher
|
|||||||||
|
Years Ending December 31,
|
2017
|
2017
|
2017
|
2018
|
2018
|
2018
|
||||||||
|
Primary U.S. pension plan
|
||||||||||||||
|
Discount rate assumption
|
4.3
|
%
|
3.3
|
%
|
5.3
|
%
|
3.7
|
%
|
2.7
|
%
|
4.7
|
%
|
||
|
Retirement cost
|
$
|
7.7
|
|
16.1
|
|
0.4
|
|
$
|
6.3
|
|
13.8
|
|
(0.2
|
)
|
|
UMWA plans
|
||||||||||||||
|
Discount rate assumption
|
4.1
|
%
|
3.1
|
%
|
5.1
|
%
|
3.6
|
%
|
2.6
|
%
|
4.6
|
%
|
||
|
Retirement cost
|
$
|
16.8
|
|
17.9
|
|
15.7
|
|
$
|
18.6
|
|
19.9
|
|
17.3
|
|
Expected-Return-on-Assets
Assumption
Our expected-return-on-assets assumption, which materially affects our net periodic benefit cost, reflects the long-term average rate of return we expect the plan assets to earn. We select the expected-return-on-assets assumption using advice from our investment advisor considering each plan’s asset allocation targets and expected overall investment manager performance and a review of the most recent long-term historical average compounded rates of return, as applicable. We selected 7.25% as the expected-return-on-assets assumption for our primary U.S. plan and 8.25% for our UMWA retiree medical plans for actual
2017
and
2018
expense.
The twenty to thirty year compound annual return of our primary U.S. pension plan has averaged from 7.0% to 9.2%.
Sensitivity Analysis
Effect of using different expected-rate-of-return assumptions.
Our
2017
and projected
2018
expense would have been different if we had used different expected-rate-of-return assumptions. For every hypothetical change of one percentage point in the assumed long-term rate of return on plan assets (and holding other assumptions constant), our actual
2017
and projected
2018
expense would be as follows:
|
(In millions, except for percentages)
|
|
Hypothetical sensitivity analysis
for expected-return-on asset
assumption
|
|
Hypothetical sensitivity analysis
for expected-return-on asset
assumption
|
||||||||||
|
Actual
|
1% lower
|
1% higher
|
Projected
|
1% lower
|
1% higher
|
|||||||||
|
Years Ending December 31,
|
2017
|
2017
|
2017
|
2018
|
2018
|
2018
|
||||||||
|
Expected-return-on-asset assumption
|
||||||||||||||
|
Primary U.S. pension plan
|
7.25
|
%
|
6.25
|
%
|
8.25
|
%
|
7.25
|
%
|
6.25
|
%
|
8.25
|
%
|
||
|
UMWA plans
|
8.25
|
%
|
7.25
|
%
|
9.25
|
%
|
8.25
|
%
|
7.25
|
%
|
9.25
|
%
|
||
|
Primary U.S. pension plan
|
$
|
7.7
|
|
15.1
|
|
0.5
|
|
$
|
6.3
|
|
13.7
|
|
(1.1
|
)
|
|
UMWA plans
|
16.8
|
|
18.8
|
|
14.8
|
|
18.6
|
|
20.6
|
|
16.6
|
|
||
53
Effect of improving or deteriorating actual future market returns.
Our funded status at December 31,
2018
, and our
2019
expense will be different from currently projected amounts if our projected
2018
returns are better or worse than the returns we have assumed for each plan.
|
(In millions, except for percentages)
|
Hypothetical sensitivity analysis of 2018 asset return
better or worse than expected
|
||||||
|
Years Ending December 31,
|
Projected
|
Better return
|
Worse return
|
||||
|
Return on investments in 2018
|
|||||||
|
Primary U.S. pension plan
|
7.25
|
%
|
14.50
|
%
|
—
|
%
|
|
|
UMWA plans
|
8.25
|
%
|
16.50
|
%
|
—
|
%
|
|
|
Projected Funded Status at December 31, 2018
|
|||||||
|
Primary U.S. pension plan
|
$
|
(79
|
)
|
(25
|
)
|
(134
|
)
|
|
UMWA plans
|
(295
|
)
|
(280
|
)
|
(312
|
)
|
|
|
2019 Expense
(a)
|
|||||||
|
Primary U.S. pension plan
|
$
|
3
|
|
—
|
|
5
|
|
|
UMWA plans
|
18
|
|
16
|
|
21
|
|
|
|
(a)
|
Actual future returns on investments will not affect our earnings until
2019
since the earnings in
2018
will be based on the "expected return on assets" assumption.
|
Effect of using fair market value of assets to determine expense.
For our defined-benefit pension plans, we calculate expected investment returns by applying the expected long-term rate of return to the market-related value of plan assets. In addition, our plan asset actuarial gains and losses that are subject to amortization are based on the market-related value.
The market-related value of the plan assets is different from the actual or fair market value of the assets. The actual or fair market value is, at a point in time, the value of the assets that is available to make payments to pensioners and to cover any transaction costs. The market-related value recognizes changes in fair value from the expected value on a straight-line basis over five years. This recognition method spreads the effects of year-over-year volatility in the financial markets over several years.
Our expenses related to our primary U.S. pension plan would have been different if our accounting policy were to use the fair market value of plan assets instead of the market-related value to recognize investment gains and losses.
|
(In millions)
|
Based on market-related value of assets
|
Hypothetical
(a)
|
|||||||||||||||||
|
Actual
|
Projected
|
Projected
|
|
|
|
||||||||||||||
|
Years Ending December 31,
|
2017
|
2018
|
2019
|
2017
|
2018
|
2019
|
|||||||||||||
|
Primary U.S. pension plan expense
|
$
|
7.7
|
|
6.3
|
|
2.6
|
|
$
|
13.7
|
|
3.1
|
|
(0.5
|
)
|
|||||
|
(a)
|
Assumes that our accounting policy was to use the fair market value of assets instead of the market-related value of assets to determine our expense related to our primary U.S. pension plan.
|
For our UMWA plans, we calculate expected investment returns by applying the expected long-term rate of return to the fair market value of the assets at the beginning of the year. This method is likely to cause the expected return on assets, which is recorded in earnings, to fluctuate more than had we used the accounting methodology of our defined-benefit pension plans.
Medical Inflation Assumption
We estimate the trend in healthcare cost inflation to predict future cash flows related to our retiree medical plans. Our assumption is based on recent plan experience and industry trends.
For the UMWA plans, our largest retiree medical plans, we have assumed a medical inflation rate of 6.5% for
2018
, and we project this rate to decline to 5% in
2024
and hold at 5% thereafter. Our overall medical inflation rate assumption, including the assumption that medical inflation rates will gradually decline over the next seven years and hold at 5%, is based on macroeconomic assumptions of gross domestic growth rates, the excess of national health expenditures over other goods and services, and population growth. Our assumption of a medical inflation rate of 6.5% for
2018
is based on our recent actual experience. The average annual medical inflation rate of the Company over the last five to eleven years ranged from 5.8% to 6.3%.
If we had assumed that medical inflation rates were one percentage point higher in each future year, the plan obligation for these plans at
December 31, 2017
, would have been approximately $76.0 million higher and the expense for
2017
would have been $2.0 million higher. If we had assumed that the medical inflation rates were one percentage point lower, the plan obligation at
December 31, 2017
, would have been approximately $64.2 million lower and the related
2017
expenses would have been $1.7 million lower.
54
If we had projected medical inflation rates to decline from 6.6% to 4.5% by 2028, instead of our projected decline from 6.5% to 5% by
2024
, the plan obligation for the UMWA retiree medical benefit plan would have been $4.6 million lower for
2017
and our expense would be $0.5 million lower for
2018
.
Excise Tax on Administrators by Patient Protection and Affordable Care Act
A 40% excise tax is expected to be imposed on high-cost health plans (“Cadillac plans”). The new Tax Reform Act delayed the effective date of the excise tax on Cadillac plans to 2022. The tax will apply to plan costs that exceed a certain threshold level for individuals and for families, which will be indexed to inflation. Even though the tax is not assessed directly to an employer but rather to the benefits plan administrator, the cost is expected to be passed through to plan sponsors as higher premiums or higher claims administration fees, increasing the plan sponsor’s obligations. Our plan obligations at
December 31, 2017
, include
$34.5 million
related to this tax. We are currently unable to reduce the benefit levels of our UMWA medical plans to avoid this excise tax because these benefit levels are required by the Coal Industry Retiree Health Benefit Act of 1992.
Workers’ Compensation
Besides the effects of changes in medical costs, worker’s compensation costs are affected by the severity and types of injuries, changes in state and federal regulations and their application and the quality of programs which assist an employee’s return to work. Our liability for future payments for workers’ compensation claims is evaluated annually with the assistance of an actuary.
Numbers of Participants
Mortality tables.
We use the Mercer modified RP-2014 base table and the Mercer modified MP-2016 projection scale, with a Blue Collar adjustment factor for the majority of our U.S. retirement plans and a White Collar adjustment factor for our nonqualified U.S. pension plan.
Lump sum offer to participants in 2014.
In August 2014, we offered approximately 9,000 terminated participants that had not yet retired the option of receiving the value of their pension benefit in a lump-sum payment, or as a reduced annuity that would begin earlier. The lump-sum elections were accepted by approximately 4,300 terminated participants resulting in payments by the plan of about $150 million. This action helped reduce the premiums paid to the Pension Benefit Guaranty Corporation (“PBGC”) as a portion of the premiums is based on the number of participants in the plan. We recognized a settlement loss in the fourth quarter of 2014 related to the lump-sum payment of $56 million.
Number of participants
. The number of participants by major plan in the past five years is as follows:
|
Number of participants
|
|||||||||
|
Plan
|
2017
|
2016
|
2015
|
2014
|
2013
|
||||
|
UMWA plans
|
3,300
|
3,600
|
3,700
|
3,900
|
4,100
|
||||
|
Black Lung
|
760
|
750
|
700
|
700
|
710
|
||||
|
U.S. pension
|
14,200
|
14,800
|
15,000
|
15,200
|
19,800
|
||||
Because we are no longer operating in the coal industry, we anticipate that the number of participants in the UMWA retirement medical plan will decline over time due to mortality. Because the U.S. pension plan has been frozen, the number of its participants will also decline over time.
Venezuela
-
Projected Benefit Payments of Our Venezuela Benefit Plan Impacted by Currency Devaluation
Our non-U.S. net pension liability includes projected benefit obligations related to Venezuela of
$4.3 million
,
$5.6 million
, and
$4.1 million
at December 31,
2017
,
2016
and
2015
, respectively. The net periodic pension cost related to these benefit obligations was
$7.5 million
,
$2.9 million
, and
$2.5 million
in
2017
,
2016
and
2015
, respectively.
As discussed in Note 1, the economy in Venezuela has had significant inflation in the last several years and we consolidate our Venezuelan results using highly inflationary accounting rules. In determining the projected benefit obligation and net periodic pension cost, we project our bolivar-denominated expected cash outflows using expected salary increases and discount the expected cash outflows to present value. The discount rate and salary scale are adjusted for expected inflation.
The assumption for inflation in Venezuela was made considering the current economic situation in Venezuela and an analysis of regional economic performances during hyperinflationary cycles. Over the long term, we expect the economy of Venezuela will return to inflation rates more typical for the region. Based on these considerations, we assumed an inflation rate of
900%
in 2018 with a gradual decline to
4%
in 2033. For
2017
, this inflation adjustment has been excluded from the non-U.S. assumptions table in Note 3.
As the projected salary increases and discount rate are both adjusted for inflation, there is not a significant impact to our current year projected benefit obligation as a result of increasing expected inflation. Our real net discount rate for Venezuela was
4%
and was determined using government bonds within the region. There are no salary increases expected other than inflationary increases.
The inflation adjustment for Venezuela results in significant expected bolivar-denominated cash outflows in the next
10
years as these amounts are increased for inflationary growth but are not discounted back to present value. As we expect to make these benefit payments in bolivars with cash generated from our Venezuelan operations, these amounts have been excluded from the estimated future non-U.S. projected benefit payments table in Note 3.
55
When these undiscounted bolivar-denominated cash outflows are translated into U.S. dollars at the
December 31, 2017
DICOM exchange rate of approximately
3,345
bolivars to the dollar, for purposes of U.S. GAAP reporting, the results are projected cash outflows of
$38.7 trillion
. In addition to being undiscounted, these U.S. dollar translated projected cash outflows also do not reflect future inflation-driven devaluation of the Venezuelan currency. The devaluation of the Venezuelan bolivar has been significant over the last three years. The exchange rate was
674
bolivars to the dollar at December 31, 2016, which is a
70%
decline from the December 31, 2015 rate of
199
bolivars to the dollar. Further, the
December 31, 2017
DICOM exchange rate of approximately
3,345
bolivars to the dollar reflects an additional
80%
decline from the end of 2016.
Foreign Currency Translation
The majority of our subsidiaries outside the U.S. conduct business in their local currencies. Our financial results are reported in U.S. dollars, which include the results of these subsidiaries.
Accounting Policy
Our accounting policy for foreign currency translation is different depending on whether the economy in which our foreign subsidiary operates has been designated as highly inflationary. Economies with a three-year cumulative inflation rate of more than 100% are considered highly inflationary. Subsequent reductions in cumulative inflation rates below 100% do not change the method of translation unless the reduction is deemed to be other than temporary.
Non-Highly Inflationary Economies
Assets and liabilities of foreign subsidiaries in non-highly inflationary economies are translated into U.S. dollars using rates of exchange at the balance sheet date. Translation adjustments are recorded in other comprehensive income (loss). Revenues and expenses are translated at rates of exchange in effect during the year. Transaction gains and losses are recorded in net income (loss).
Highly Inflationary Economies
Foreign subsidiaries that operate in highly inflationary countries must use the reporting currency (the U.S. dollar) as the functional currency. Local-currency monetary assets and liabilities are remeasured into dollars each balance sheet date, with remeasurement adjustments and other transaction gains and losses recognized in earnings. Nonmonetary assets and liabilities do not fluctuate with changes in local currency exchange rates to the dollar.
Application of Accounting Policy
Venezuela
The economy in Venezuela has had significant inflation in the last several years. We consolidate our Venezuelan results using our accounting policy for subsidiaries operating in highly inflationary economies.
We control our Venezuela business for purposes of consolidation of financial statements. Specifically, while the Venezuela government has imposed restrictions that prevent the repatriation of funds, management continues to provide guidance and strategic oversight, including budgeting and forecasting for the Venezuela business. In addition, in this highly inflationary economy, the Venezuela business has negotiated price increases with certain customers to help offset cost inflation. We will continue to monitor the situation in Venezuela and the impact that the economic and political environment in that country has on our ability to control our Venezuela operations.
Since 2003, the Venezuelan government has controlled the exchange of local currency into other currencies, including the U.S. dollar, and has required that currency exchanges be made at official rates established by the government instead of allowing open markets to determine currency rates. Different official rates exist for different industries and purposes and the government does not approve all requests to convert bolivars to other currencies.
As a result of the restrictions on currency exchange, we have in the past been unable to obtain sufficient U.S. dollars to purchase certain imported supplies and fixed assets. Consequently, our Venezuela operations have occasionally purchased more expensive, bolivar-denominated supplies and fixed assets. There is a risk that official currency exchange mechanisms will be discontinued or will not be accessible when needed in the future, which may prevent us from repatriating dividends or obtaining dollars to operate our Venezuelan operations.
Due to the Venezuelan government's restrictions that have prevented us from repatriating funds, results from our Venezuelan operations are included in items not allocated to segments and are excluded from the operating segments.
Remeasurement rates during 2015
. In 2014, the Venezuelan government initiated an exchange mechanism known as SICAD II. Through February 11, 2015, we used rates from an exchange mechanism known as SICAD II to remeasure our bolivar-denominated monetary assets and liabilities into U.S. dollars and to translate our revenue and expenses. Effective February 12, 2015, the SICAD II exchange mechanism was disbanded and we began to use the rate under the new exchange mechanism, known as SIMADI, to remeasure bolivar-denominated monetary assets and liabilities and to translate our revenue and expenses. The SIMADI rate ranged from
170
to
200
bolivars to the dollar since it was first published through the end of 2015. At December 31, 2015, it was
199
bolivars to the dollar. We recognized an
$18.1 million
net remeasurement loss in 2015. The after-tax effect of this loss attributable to noncontrolling interests was
$5.6 million
. We received minimal U.S. dollars using the SIMADI process.
56
Remeasurement rates during 2016
.
In the first quarter of 2016, the Venezuelan government announced that it would replace the SIMADI exchange mechanism with the DICOM exchange mechanism and would allow the DICOM exchange mechanism rate to float freely. At March 31, 2016, the DICOM rate was approximately
273
bolivars to the dollar. From March 31, 2016 through the end of 2016, the rate declined
59%
to close at approximately
674
bolivars to the dollar at December 31, 2016. We recognized a
$4.8 million
pretax remeasurement loss in 2016. However, the after-tax effect in the current period attributable to noncontrolling interest was income of
$2.7 million
.
Remeasurement rates during 2017
.
Since the end of 2016, the DICOM rate has declined
80%
to close at approximately
3,345
bolivars to the dollar at December 31, 2017. We have received only minimal U.S. dollars through this exchange mechanism. In 2017, we recognized a
$9.1 million
pretax remeasurement loss. The after-tax effect of this loss attributable to noncontrolling interest was
$1.0 million
.
Items related to our Venezuelan operations are as follows:
|
•
|
Our investment in our Venezuelan operations on an equity-method basis was
$23.1 million
at
December 31, 2017
, and
$19.2 million
at
December 31, 2016
.
|
|
•
|
Our Venezuelan operations had net payables to other Brink's affiliates of
$2.7 million
at
December 31, 2017
and
$6.1 million
at
December 31, 2016
.
|
|
•
|
Our Venezuelan operations had net nonmonetary assets of
$23.0 million
at
December 31, 2017
, and
$17.6 million
at
December 31, 2016
.
|
|
•
|
Our bolivar-denominated net monetary net liabilities were
$2.3 million
(including
$3.4 million
of cash and cash equivalents) at
December 31, 2017
, and
$1.4 million
net monetary assets (including
$6.8 million
of cash and cash equivalents) at
December 31, 2016
.
|
|
•
|
Accumulated other comprehensive losses attributable to Brink’s shareholders related to our operations in Venezuela were approximately
$114.9 million
at
December 31, 2017
and
$114.7 million
at
December 31, 2016
.
|
Argentina
We operate in Argentina through wholly owned subsidiaries and a smaller controlled subsidiary ("Brink's Argentina"). Revenues from Brink's Argentina represented approximately
7%
of our consolidated revenues for the year ended
December 31, 2017
and
5%
of our consolidated revenues for the years ended
December 31, 2016
and 2015. The operating environment in Argentina continues to present business challenges, including continuing devaluation of the Argentine peso and high inflation.
During 2015, the exchange rate ranged from
8.5
to
9.8
local pesos to the U.S. dollar until December 17, 2015 when the currency was devalued. For years ended
December 31, 2017
and
December 31, 2016
, the value of the Argentine peso declined by approximately 15% and 19% respectively. At
December 31, 2017
, the exchange rate was
18.6
Argentine pesos to the U.S. dollar.
The government in Argentina had previously imposed limits on the exchange of Argentine pesos into U.S. dollars. As a result, we elected in the past and may continue in the future to repatriate cash from Argentina using different markets to convert Argentine pesos into U.S. dollars if U.S. dollars are not readily available. Conversions prior to the December 17, 2015 devaluation had settled at rates approximately
30%
to
40%
less favorable than the rates at which we translated the financial statements of our subsidiary in Argentina. After the December 2015 devaluation of the Argentine peso, the market rates used to convert Argentine pesos into U.S. dollars have been similar to the rates at which we translate the financial statements of our subsidiary in Argentina. See Note 19
for more information.
We recognized losses from converting Argentine pesos into U.S. dollars of
$0.1 million
in
2016
and
$7.1 million
in
2015
. These conversion losses are classified in the consolidated statements of operations as other operating income (expense). At
December 31, 2017
, we had cash denominated in Argentine pesos of
$33.2 million
.
Although Argentina is not currently designated as a highly inflationary economy for accounting purposes, sustained volatility in inflation rates as well as continued deterioration in the exchange rate could have an adverse impact on Brink's Argentina's revenues, net earnings and net monetary asset position. We continue to closely monitor the situation in Argentina to determine whether we should consolidate Brink's Argentina results using our accounting policy for subsidiaries operating in highly inflationary economies.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
, which will require the recognition of assets and liabilities by lessees for certain leases classified as operating leases under current accounting guidance and also requires expanded disclosures regarding leasing activities. ASU 2016-02 will be effective January 1, 2019 and we are required to use the modified retrospective method to adopt the new standard. We are assessing the potential impact of the standard on financial reporting.
In March 2016, the FASB issued ASU 2016-09,
Improvements to Employee Share-Based Payment Accounting
, which simplifies how certain features related to share-based payments are accounted for and presented in the financial statements. We elected to early adopt this ASU in the fourth quarter of 2016 and, per the requirements of the pronouncement, we applied the amendments to the beginning of 2016. Under ASU 2016-09, accounting changes adopted using the modified retrospective method must be calculated as of the beginning of 2016 and reported as a cumulative-effect adjustment. As a result, we recognized a $0.2 million cumulative-effect adjustment to January 1, 2016 retained earnings for previously unrecognized excess tax benefits. We have elected to continue our previous accounting policy of estimating forfeitures and, therefore, we did not recognize any cumulative-effect adjustment related to forfeitures. ASU 2016-09 requires that
57
accounting changes adopted using the prospective method should be reported in the applicable interim periods of 2016. We did not have any material changes to previously reported interim financial information in 2016 as it relates to the recognition of excess tax benefits in the statement of operations or the classification of excess tax benefits in the statement of cash flows. In 2017, the accounting under this ASU resulted in the recognition of
$6.7 million
in excess tax benefits.
In June 2016, the FASB issued ASU 2016-13,
Measurement of Credit Losses on Financial Instruments
, which significantly changes the way entities recognize impairment of many financial assets by requiring immediate recognition of estimated credit losses expected to occur over their remaining life. ASU 2016-13 is effective January 1, 2020, with early adoption permitted January 1, 2019. We are assessing the potential impact of this new standard on financial reporting.
In November 2016, the FASB issued ASU 2016-18,
Statement of Cash Flows: Restricted Cash
, which requires entities to include restricted cash and restricted cash equivalent balances with cash and cash equivalent balances in the statement of cash flows. We will adopt ASU 2016-18 in the first quarter of 2018 using the retrospective transition method. The adoption of this ASU effective January 1, 2018 will result in a change to previously reported amounts in the consolidated statements of cash flows. Net cash provided by operating activities will increase $44.3 million, net cash provided by financing activities will increase $1.5 million and the negative effect of exchange rate changes on cash will decrease $11.3 million as compared to previously reported 2017 amounts. For 2016, net cash provided by operating activities will increase $22.8 million, net cash used by financing activities will decrease $19.9 million and the negative effect of exchange rate changes on cash will increase $3.6 million.
In May 2014, the FASB issued ASU 2014-09,
Revenue From Contracts with Customers
, a new standard related to revenue recognition, which requires an entity to recognize an amount of revenue to which it expects to be entitled for the transfer of promised goods and services to customers. The new standard will replace most of the existing revenue recognition standards in U.S. GAAP. In August 2015, the FASB issued ASU 2015-14, which defers the effective date of this new standard to January 1, 2018. Subsequently, the FASB has continued to refine the standard and has issued several amendments. The significant effects of the new standard for us will be associated with variable consideration and capitalization of costs to obtain contracts, such as sales commissions. Currently, we recognize the impact of pricing changes in the period they become fixed and determinable and we expense sales commissions and other costs to obtain contracts as they are incurred. We do not expect a material impact on our future consolidated statements of operations or consolidated balance sheets. However, the new guidance will result in expanded disclosures regarding our various performance obligations, revenue disaggregation and contractual rights. We intend to use the modified retrospective method to adopt the new standard. We expect to recognize a cumulative-effect adjustment to January 1, 2018 retained earnings of approximately $2 million, primarily from the capitalization of costs to obtain contracts.
In January 2017, the FASB issued ASU 2017-04,
Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment
, which requires an entity to no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. The guidance is effective January 1, 2020 with early adoption permitted. We are currently evaluating the impact of this guidance, including transition elections and required disclosures, on our financial statements and the timing of adoption.
In March 2017, the FASB issued ASU 2017-07,
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
, which requires an entity to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. We elected to early adopt this ASU in the first quarter of 2017 using the retrospective transition method for the periods presented. As a result, the consolidated statements of operations have been updated to reflect this guidance.
The adoption of this ASU resulted in a change in certain previously reported amounts in the consolidated statements of operations. Cost of revenues decreased $33.1 million, selling, general and administrative expenses decreased $7.2 million and operating profit as well as interest and other income (expense) increased $40.3 million compared to previously reported 2016 amounts. In 2015, cost of revenues decreased $27.9 million, selling, general and administrative expenses decreased $11.9 million and operating profit as well as interest and other income (expense) increased $39.8 million compared to previously reported amounts. The early adoption of this ASU had no impact on the previously reported income from continuing operations or net income for the prior year periods.
In August 2017, the FASB issued ASU 2017-12,
Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities
, which amends and simplifies the application of hedge accounting guidance to better portray the economic results of risk management activities in the financial statements. The guidance expands the ability to hedge nonfinancial and financial risk components, reduces complexity in fair value hedges of interest rate risk, eliminates the requirement to separately measure and report hedge ineffectiveness, and eases certain hedge effectiveness assessment requirements. The guidance is effective January 1, 2019 with early adoption permitted. We are currently evaluating the impact of this guidance, including transition elections and required disclosures, on our financial statements and the timing of adoption.
58
We currently serve customers in more than
100
countries, including
41
countries where we operate subsidiaries. These operations expose us to a variety of market risks, including the effects of changes in interest rates, foreign currency exchange rates and commodity prices. These financial and commodity exposures are monitored and managed by us as an integral part of our overall risk management program.
We may periodically use various derivative and non-derivative financial instruments, as discussed below, to hedge our interest rate, foreign currency and commodity prices exposures when appropriate. The risk that counterparties to these instruments may be unable to perform is minimized by limiting the counterparties used to major financial institutions with investment grade credit ratings. We do not expect to incur a loss from the failure of any counterparty to perform under the agreements. We do not use derivative financial instruments for purposes other than hedging underlying financial or commercial exposures.
The sensitivity analyses discussed below for the market risk exposures were based on the facts and circumstances in effect at
December 31, 2017
. Actual results will be determined by a number of factors that are not under management’s control and could vary materially from those disclosed.
Interest Rate Risk
We use both fixed and floating rate debt and leases to finance our operations. Floating rate obligations, including the term loan facility under our senior secured credit facility, expose us to fluctuations in cash flows due to changes in the general level of interest rates. Fixed rate obligations, including our senior unsecured notes, are subject to fluctuations in fair values as a result of changes in interest rates.
Our floating rate debt typically is based on an underlying floating rate component as well as a fixed rate margin component. Based on the contractual interest rates on our floating rate debt at
December 31, 2017
, a hypothetical 10% increase in rates would increase cash outflows by approximately $1.0 million over a twelve-month period. In other words, the weighted-average interest rate on our floating rate instruments (including any fixed rate margin component) was 3.5% per annum at
December 31, 2017
. If the underlying floating rate component were to increase by 10%, our average rate on this debt would increase by 0.2 percentage points to 3.7%. The effect on the fair values on our unsecured senior notes for a hypothetical 10% decrease in the yield curve from year-end
2017
levels would result in a $23.0 million increase in the fair value of our unsecured senior notes.
Foreign Currency Risk
We have exposure to the effects of foreign currency exchange rate fluctuations on the results of all of our foreign operations. Our foreign operations generally use local currencies to conduct business, but their results are reported in U.S. dollars.
We are also exposed periodically to the foreign currency rate fluctuations that affect transactions not denominated in the functional currency of our domestic and foreign operations. To mitigate these exposures, we enter into foreign currency forward and swap contracts from time to time. At
December 31, 2017
, the notional value of our shorter term outstanding foreign currency forward and swap contracts was
$145.5 million
with average contract maturities of approximately one month. These shorter term contracts primarily offset exposures in the euro, the British pound and the Mexican peso. Additionally, these shorter term contracts are not designated as hedges for accounting purposes, and accordingly, changes in their fair value are recorded immediately in earnings. We also have a longer term cross currency swap contract to hedge exposure in the Brazilian real which is designated as a cash flow hedge for accounting purposes. At
December 31, 2017
, the notional value of this longer term contract, which matures in January 2018, was
$1.6 million
with a weighted-average maturity of
0.1 years
. We do not use derivative financial instruments to hedge investments in foreign subsidiaries since such investments are long-term in nature.
The effects of a hypothetical simultaneous 10% appreciation in the U.S. dollar from the
2017
levels against all other currencies of countries in which we have continuing operations are as follows:
|
(In millions)
|
Hypothetical Effects
Increase/ (decrease)
|
||
|
Effect on Earnings:
|
|
||
|
Translation of 2017 earnings into U.S. dollars
|
$
|
(21.3
|
)
|
|
Transaction gains (losses)
(a)
|
(3.6
|
)
|
|
|
Effect on Other Comprehensive Income (Loss):
|
|
|
|
|
Translation of net assets of foreign subsidiaries
|
(101.4
|
)
|
|
(a) Net of outstanding foreign currency swap and forward contracts.
The hypothetical foreign currency effects above detail the consolidated effect attributable to Brink’s of a simultaneous change in the value of a large number of foreign currencies relative to the U. S. dollar. The foreign currency exposure effect related to a change in an individual currency could be significantly different.
59
THE BRINK’S COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31,
2017
AND 2016
AND FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD ENDED DECEMBER 31, 2017
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Note 6 – Acquisitions
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60
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of The Brink’s Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of The Brink’s Company and subsidiaries (the "Company") as of December 31, 2017, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows, for the year ended December 31, 2017, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cash flows for the year ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2017 based on criteria established in
Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
March 1, 2018
, expressed an adverse opinion on the Company's internal control over financial reporting because of material weaknesses.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Richmond, Virginia
March 1, 2018
We have served as the Company’s auditor since 2017.
61
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
The Brink’s Company:
We have audited the accompanying consolidated balance sheet of The Brink’s Company and subsidiaries as of December 31, 2016, and the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the years in the two-year period ended December 31, 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Brink’s Company and subsidiaries as of December 31, 2016, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP
Richmond, Virginia
February 23, 2017, except for Notes 2 and 3,
as to which the date is September 29, 2017
62
THE BRINK’S COMPANY
and subsidiaries
|
December 31,
|
||||||
|
(In millions, except for per share amounts)
|
2017
|
2016
|
||||
|
ASSETS
|
||||||
|
Current assets:
|
||||||
|
Cash and cash equivalents
|
$
|
614.3
|
|
183.5
|
|
|
|
Restricted cash
|
112.6
|
|
55.5
|
|
||
|
Accounts receivable (net of allowance: 2017 - $11.2; 2016 - $8.3)
|
642.3
|
|
501.1
|
|
||
|
Prepaid expenses and other
|
119.0
|
|
103.6
|
|
||
|
Total current assets
|
1,488.2
|
|
843.7
|
|
||
|
Property and equipment, net
|
640.9
|
|
531.0
|
|
||
|
Goodwill
|
453.7
|
|
186.2
|
|
||
|
Other intangibles
|
105.7
|
|
19.1
|
|
||
|
Deferred income taxes
|
226.2
|
|
327.9
|
|
||
|
Other
|
144.9
|
|
86.9
|
|
||
|
Total assets
|
$
|
3,059.6
|
|
1,994.8
|
|
|
|
LIABILITIES AND EQUITY
|
||||||
|
Current liabilities:
|
||||||
|
Short-term borrowings
|
$
|
45.2
|
|
162.8
|
|
|
|
Current maturities of long-term debt
|
51.9
|
|
32.8
|
|
||
|
Accounts payable
|
174.6
|
|
139.3
|
|
||
|
Accrued liabilities
|
488.5
|
|
385.7
|
|
||
|
Restricted cash held for customers
|
74.7
|
|
33.2
|
|
||
|
Total current liabilities
|
834.9
|
|
753.8
|
|
||
|
Long-term debt
|
1,139.6
|
|
247.6
|
|
||
|
Accrued pension costs
|
208.8
|
|
208.8
|
|
||
|
Retirement benefits other than pensions
|
362.8
|
|
286.1
|
|
||
|
Deferred income taxes
|
25.1
|
|
7.6
|
|
||
|
Other
|
150.2
|
|
136.1
|
|
||
|
Total liabilities
|
2,721.4
|
|
1,640.0
|
|
||
|
Commitments and contingent liabilities (notes 3, 4, 14, 16, 22 and 23)
|
|
|
|
|
||
|
Equity:
|
||||||
|
The Brink’s Company (“Brink’s”) shareholders:
|
||||||
|
Common stock, par value $1 per share:
|
||||||
|
Shares authorized: 100.0
|
||||||
|
Shares issued and outstanding: 2017 - 50.5; 2016 - 50.0
|
50.5
|
|
50.0
|
|
||
|
Capital in excess of par value
|
628.6
|
|
618.1
|
|
||
|
Retained earnings
|
564.9
|
|
576.0
|
|
||
|
Accumulated other comprehensive income (loss):
|
||||||
|
Benefit plan adjustments
|
(601.0
|
)
|
(559.6
|
)
|
||
|
Foreign currency translation
|
(327.4
|
)
|
(349.1
|
)
|
||
|
Unrealized gains on available-for-sale securities
|
1.1
|
|
1.0
|
|
||
|
Gains on cash flow hedges
|
0.7
|
|
0.7
|
|
||
|
Accumulated other comprehensive loss
|
(926.6
|
)
|
(907.0
|
)
|
||
|
Brink’s shareholders
|
317.4
|
|
337.1
|
|
||
|
Noncontrolling interests
|
20.8
|
|
17.7
|
|
||
|
Total equity
|
338.2
|
|
354.8
|
|
||
|
Total liabilities and equity
|
$
|
3,059.6
|
|
1,994.8
|
|
|
See accompanying notes to consolidated financial statements.
63
THE BRINK’S COMPANY
and subsidiaries
|
Years Ended December 31,
|
|||||||||
|
(In millions, except for per share amounts)
|
2017
|
2016
|
2015
|
||||||
|
Revenues
|
$
|
3,347.0
|
|
3,020.6
|
|
3,061.4
|
|
||
|
Costs and expenses:
|
|||||||||
|
Cost of revenues
|
2,608.2
|
|
2,391.7
|
|
2,443.7
|
|
|||
|
Selling, general and administrative expenses
|
468.2
|
|
424.3
|
|
451.9
|
|
|||
|
Total costs and expenses
|
3,076.4
|
|
2,816.0
|
|
2,895.6
|
|
|||
|
Other operating income (expense)
|
3.3
|
|
(20.1
|
)
|
(69.4
|
)
|
|||
|
Operating profit
|
273.9
|
|
184.5
|
|
96.4
|
|
|||
|
Interest expense
|
(32.2
|
)
|
(20.4
|
)
|
(18.9
|
)
|
|||
|
Interest and other expense
|
(60.2
|
)
|
(39.1
|
)
|
(36.4
|
)
|
|||
|
Income from continuing operations before tax
|
181.5
|
|
125.0
|
|
41.1
|
|
|||
|
Provision for income taxes
|
157.7
|
|
78.5
|
|
66.5
|
|
|||
|
Income (loss) from continuing operations
|
23.8
|
|
46.5
|
|
(25.4
|
)
|
|||
|
Loss from discontinued operations, net of tax
|
(0.2
|
)
|
(1.7
|
)
|
(2.8
|
)
|
|||
|
Net income (loss)
|
23.6
|
|
44.8
|
|
(28.2
|
)
|
|||
|
Less net income (loss) attributable to noncontrolling interests
|
6.9
|
|
10.3
|
|
(16.3
|
)
|
|||
|
Net income (loss) attributable to Brink’s
|
$
|
16.7
|
|
34.5
|
|
(11.9
|
)
|
||
|
Amounts attributable to Brink’s:
|
|||||||||
|
Continuing operations
|
$
|
16.9
|
|
36.2
|
|
(9.1
|
)
|
||
|
Discontinued operations
|
(0.2
|
)
|
(1.7
|
)
|
(2.8
|
)
|
|||
|
Net income (loss) attributable to Brink’s
|
$
|
16.7
|
|
34.5
|
|
(11.9
|
)
|
||
|
Earnings (loss) per share attributable to Brink’s common shareholders
(a)
:
|
|||||||||
|
Basic:
|
|||||||||
|
Continuing operations
|
$
|
0.33
|
|
0.72
|
|
(0.19
|
)
|
||
|
Discontinued operations
|
(0.01
|
)
|
(0.03
|
)
|
(0.06
|
)
|
|||
|
Net income (loss)
|
0.33
|
|
0.69
|
|
(0.24
|
)
|
|||
|
Diluted:
|
|||||||||
|
Continuing operations
|
$
|
0.33
|
|
0.72
|
|
(0.19
|
)
|
||
|
Discontinued operations
|
(0.01
|
)
|
(0.03
|
)
|
(0.06
|
)
|
|||
|
Net income (loss)
|
0.32
|
|
0.68
|
|
(0.24
|
)
|
|||
|
Weighted-average shares
|
|||||||||
|
Basic
|
50.7
|
|
50.0
|
|
49.3
|
|
|||
|
Diluted
|
51.8
|
|
50.6
|
|
49.3
|
|
|||
(a) Amounts may not add due to rounding.
See accompanying notes to consolidated financial statements.
64
THE BRINK’S COMPANY
and subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
|
Years Ended December 31,
|
|||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
||||||
|
Net income (loss)
|
$
|
23.6
|
|
44.8
|
|
(28.2
|
)
|
||
|
Benefit plan adjustments:
|
|||||||||
|
Benefit plan actuarial gains (losses)
|
(43.6
|
)
|
12.6
|
|
4.4
|
|
|||
|
Benefit plan prior service costs
|
(0.9
|
)
|
(1.6
|
)
|
(3.6
|
)
|
|||
|
Deferred profit sharing
|
—
|
|
(0.3
|
)
|
—
|
|
|||
|
Total benefit plan adjustments
|
(44.5
|
)
|
10.7
|
|
0.8
|
|
|||
|
Foreign currency translation adjustments
|
23.6
|
|
(26.3
|
)
|
(104.1
|
)
|
|||
|
Unrealized net gains (losses) on available-for-sale securities
|
0.2
|
|
(0.1
|
)
|
(0.5
|
)
|
|||
|
Gains (loss) on cash flow hedges
|
0.1
|
|
0.8
|
|
(0.3
|
)
|
|||
|
Other comprehensive loss before tax
|
(20.6
|
)
|
(14.9
|
)
|
(104.1
|
)
|
|||
|
Provision (benefit) for income taxes
|
(1.8
|
)
|
0.9
|
|
(0.7
|
)
|
|||
|
Other comprehensive loss
|
(18.8
|
)
|
(15.8
|
)
|
(103.4
|
)
|
|||
|
Comprehensive income (loss)
|
4.8
|
|
29.0
|
|
(131.6
|
)
|
|||
|
Less comprehensive income (loss) attributable to noncontrolling interests
|
7.7
|
|
9.6
|
|
(20.1
|
)
|
|||
|
Comprehensive income (loss) attributable to Brink’s
|
$
|
(2.9
|
)
|
19.4
|
|
(111.5
|
)
|
||
See accompanying notes to consolidated financial statements.
65
THE BRINK’S COMPANY
and subsidiaries
Consolidated Statements of Equity
Years Ended
December 31, 2017
,
2016
and
2015
|
(In millions)
|
Shares
|
Common
Stock
|
Capital in Excess of Par Value
|
Retained
Earnings
|
Accumulated Other Comprehensive Loss
|
Attributable to
Noncontrolling
Interests
|
Total
|
||||||||
|
Balance as of December 31, 2014
|
48.6
|
|
$
|
48.6
|
|
584.5
|
|
592.9
|
|
(792.0
|
)
|
39.8
|
|
473.8
|
|
|
Net loss
|
—
|
|
—
|
|
—
|
|
(11.9
|
)
|
—
|
|
(16.3
|
)
|
(28.2
|
)
|
|
|
Other comprehensive loss
|
—
|
|
—
|
|
—
|
|
—
|
|
(99.6
|
)
|
(3.8
|
)
|
(103.4
|
)
|
|
|
Dividends to:
|
|||||||||||||||
|
Brink’s common shareholders ($0.40 per share)
|
—
|
|
—
|
|
—
|
|
(19.5
|
)
|
—
|
|
—
|
|
(19.5
|
)
|
|
|
Noncontrolling interests
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(5.3
|
)
|
(5.3
|
)
|
|
|
Share-based compensation:
|
|||||||||||||||
|
Stock options and awards:
|
|||||||||||||||
|
Compensation expense
|
—
|
|
—
|
|
14.1
|
|
—
|
|
—
|
|
—
|
|
14.1
|
|
|
|
Consideration from exercise of stock options
|
0.2
|
|
0.2
|
|
3.6
|
|
—
|
|
—
|
|
—
|
|
3.8
|
|
|
|
Reduction in excess tax benefit of stock compensation
|
—
|
|
—
|
|
(1.8
|
)
|
—
|
|
—
|
|
—
|
|
(1.8
|
)
|
|
|
Other share-based benefit transactions
|
0.1
|
|
0.1
|
|
0.6
|
|
(0.2
|
)
|
—
|
|
—
|
|
0.5
|
|
|
|
Business dispositions
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1.9
|
)
|
(1.9
|
)
|
|
|
Acquisitions of noncontrolling interests
|
—
|
|
—
|
|
(1.4
|
)
|
—
|
|
(0.3
|
)
|
0.2
|
|
(1.5
|
)
|
|
|
Balance as of December 31, 2015
|
48.9
|
|
48.9
|
|
599.6
|
|
561.3
|
|
(891.9
|
)
|
12.7
|
|
330.6
|
|
|
|
Cumulative effect of change in accounting principle
(a)
|
—
|
|
—
|
|
—
|
|
0.2
|
|
—
|
|
—
|
|
0.2
|
|
|
|
Net income
|
—
|
|
—
|
|
—
|
|
34.5
|
|
—
|
|
10.3
|
|
44.8
|
|
|
|
Other comprehensive loss
|
—
|
|
—
|
|
—
|
|
—
|
|
(15.1
|
)
|
(0.7
|
)
|
(15.8
|
)
|
|
|
Common stock issued
|
0.1
|
|
0.1
|
|
2.9
|
|
—
|
|
—
|
|
—
|
|
3.0
|
|
|
|
Dividends to:
|
|||||||||||||||
|
Brink’s common shareholders ($0.40 per share)
|
—
|
|
—
|
|
—
|
|
(19.8
|
)
|
—
|
|
—
|
|
(19.8
|
)
|
|
|
Noncontrolling interests
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(4.6
|
)
|
(4.6
|
)
|
|
|
Share-based compensation:
|
|||||||||||||||
|
Stock options and awards:
|
|||||||||||||||
|
Compensation expense
|
—
|
|
—
|
|
9.5
|
|
—
|
|
—
|
|
—
|
|
9.5
|
|
|
|
Consideration from exercise of stock options
|
0.5
|
|
0.5
|
|
11.7
|
|
—
|
|
—
|
|
—
|
|
12.2
|
|
|
|
Other share-based benefit transactions
|
0.5
|
|
0.5
|
|
(5.6
|
)
|
(0.2
|
)
|
—
|
|
—
|
|
(5.3
|
)
|
|
|
Balance as of December 31, 2016
|
50.0
|
|
50.0
|
|
618.1
|
|
576.0
|
|
(907.0
|
)
|
17.7
|
|
354.8
|
|
|
|
Net income
|
—
|
|
—
|
|
—
|
|
16.7
|
|
—
|
|
6.9
|
|
23.6
|
|
|
|
Other comprehensive income (loss)
|
—
|
|
—
|
|
—
|
|
—
|
|
(19.6
|
)
|
0.8
|
|
(18.8
|
)
|
|
|
Dividends to:
|
|||||||||||||||
|
Brink’s common shareholders ($0.55 per share)
|
—
|
|
—
|
|
—
|
|
(27.7
|
)
|
—
|
|
—
|
|
(27.7
|
)
|
|
|
Noncontrolling interests
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(4.6
|
)
|
(4.6
|
)
|
|
|
Share-based compensation:
|
|||||||||||||||
|
Stock options and awards:
|
|||||||||||||||
|
Compensation expense
|
—
|
|
—
|
|
17.7
|
|
—
|
|
—
|
|
—
|
|
17.7
|
|
|
|
Consideration from exercise of stock options
|
0.1
|
|
0.1
|
|
2.6
|
|
—
|
|
—
|
|
—
|
|
2.7
|
|
|
|
Other share-based benefit transactions
|
0.4
|
|
0.4
|
|
(9.8
|
)
|
(0.1
|
)
|
—
|
|
—
|
|
(9.5
|
)
|
|
|
Balance as of December 31, 2017
|
50.5
|
|
$
|
50.5
|
|
628.6
|
|
564.9
|
|
(926.6
|
)
|
20.8
|
|
338.2
|
|
|
(a)
|
We elected to early adopt the provisions of ASU 2016-09,
Improvements to Employee Share-Based Payment Accounting
, in the fourth quarter of 2016 resulting in a cumulative effect adjustment to Retained Earnings for previously unrecognized excess tax benefits. See Note 1 for further discussion of the impacts of this standard.
|
See accompanying notes to consolidated financial statements.
66
THE BRINK’S COMPANY
and subsidiaries
|
Years Ended December 31,
|
|||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
||||||
|
Cash flows from operating activities:
|
|||||||||
|
Net income (loss)
|
$
|
23.6
|
|
44.8
|
|
(28.2
|
)
|
||
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|||||||||
|
Loss from discontinued operations, net of tax
|
0.2
|
|
1.7
|
|
2.8
|
|
|||
|
Depreciation and amortization
|
146.6
|
|
131.6
|
|
139.9
|
|
|||
|
Share-based compensation expense
|
17.7
|
|
9.5
|
|
14.1
|
|
|||
|
Deferred income taxes
|
94.2
|
|
(2.9
|
)
|
7.1
|
|
|||
|
Gains and losses:
|
|||||||||
|
Prepayment penalties
|
8.3
|
|
—
|
|
—
|
|
|||
|
Property and other assets
|
(9.2
|
)
|
1.3
|
|
(0.9
|
)
|
|||
|
Other gains and losses
|
(2.8
|
)
|
(0.6
|
)
|
5.2
|
|
|||
|
Venezuela impairment
|
—
|
|
—
|
|
35.3
|
|
|||
|
Other impairment losses
|
3.4
|
|
20.6
|
|
1.9
|
|
|||
|
Retirement benefit funding (more) less than expense:
|
|||||||||
|
Pension
|
15.9
|
|
13.6
|
|
10.8
|
|
|||
|
Other than pension
|
17.9
|
|
13.7
|
|
9.2
|
|
|||
|
Remeasurement losses due to Venezuela currency devaluations
|
9.1
|
|
4.8
|
|
18.1
|
|
|||
|
Other operating
|
6.0
|
|
3.7
|
|
2.6
|
|
|||
|
Changes in operating assets and liabilities, net of effects of acquisitions:
|
|||||||||
|
Accounts receivable and income taxes receivable
|
(164.9
|
)
|
(53.2
|
)
|
(44.8
|
)
|
|||
|
Accounts payable, income taxes payable and accrued liabilities
|
100.9
|
|
13.9
|
|
20.1
|
|
|||
|
Customer obligations
|
6.1
|
|
(13.2
|
)
|
12.5
|
|
|||
|
Prepaid and other current assets
|
(11.4
|
)
|
(10.0
|
)
|
(3.4
|
)
|
|||
|
Other
|
(9.5
|
)
|
(11.8
|
)
|
(4.4
|
)
|
|||
|
Discontinued operations
|
—
|
|
—
|
|
(2.0
|
)
|
|||
|
Net cash provided by operating activities
|
252.1
|
|
167.5
|
|
195.9
|
|
|||
|
Cash flows from investing activities:
|
|||||||||
|
Capital expenditures
|
(174.5
|
)
|
(112.2
|
)
|
(101.1
|
)
|
|||
|
Acquisitions, net of cash acquired
|
(225.1
|
)
|
(0.7
|
)
|
—
|
|
|||
|
Dispositions, net of cash disposed
|
1.4
|
|
(0.6
|
)
|
(14.6
|
)
|
|||
|
Marketable securities:
|
|||||||||
|
Purchases
|
(38.0
|
)
|
(9.2
|
)
|
(27.3
|
)
|
|||
|
Sales
|
38.3
|
|
9.1
|
|
33.9
|
|
|||
|
Cash proceeds from sale of property, equipment and investments
|
1.9
|
|
4.7
|
|
1.9
|
|
|||
|
Other
|
1.1
|
|
—
|
|
3.5
|
|
|||
|
Net cash used by investing activities
|
(394.9
|
)
|
(108.9
|
)
|
(103.7
|
)
|
|||
|
Cash flows from financing activities:
|
|||||||||
|
Borrowings (repayments) of debt:
|
|||||||||
|
Short-term borrowings
|
(125.2
|
)
|
115.0
|
|
(22.7
|
)
|
|||
|
Long-term revolving credit facilities:
|
|||||||||
|
Borrowings
|
941.8
|
|
494.0
|
|
569.5
|
|
|||
|
Repayments
|
(999.9
|
)
|
(606.2
|
)
|
(633.9
|
)
|
|||
|
Other long-term debt:
|
|||||||||
|
Borrowings
|
1,109.9
|
|
4.8
|
|
86.1
|
|
|||
|
Repayments
|
(187.4
|
)
|
(39.0
|
)
|
(42.0
|
)
|
|||
|
Debt financing costs
|
(16.3
|
)
|
—
|
|
(2.0
|
)
|
|||
|
Payment of acquisition-related obligation
|
(90.9
|
)
|
—
|
|
—
|
|
|||
|
Nonrecourse financing of real estate transaction
|
—
|
|
—
|
|
14.5
|
|
|||
|
Prepayment penalties
|
(8.3
|
)
|
—
|
|
—
|
|
|||
|
Common stock issued
|
—
|
|
3.0
|
|
—
|
|
|||
|
Dividends to:
|
|||||||||
|
Shareholders of Brink’s
|
(27.7
|
)
|
(19.8
|
)
|
(19.5
|
)
|
|||
|
Noncontrolling interests in subsidiaries
|
(4.6
|
)
|
(4.6
|
)
|
(5.3
|
)
|
|||
|
Proceeds from exercise of stock options
|
2.7
|
|
12.2
|
|
3.8
|
|
|||
|
Minimum tax withholdings associated with share-based compensation
|
(10.2
|
)
|
(6.6
|
)
|
(2.0
|
)
|
|||
|
Other
|
1.9
|
|
2.3
|
|
1.0
|
|
|||
|
Net cash provided (used) by financing activities
|
585.8
|
|
(44.9
|
)
|
(52.5
|
)
|
|||
|
Effect of exchange rate changes on cash and cash equivalents
|
(12.2
|
)
|
(12.1
|
)
|
(34.0
|
)
|
|||
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|||
|
Increase
|
430.8
|
|
1.6
|
|
5.7
|
|
|||
|
Balance at beginning of period
|
183.5
|
|
181.9
|
|
176.2
|
|
|||
|
Balance at end of period
|
$
|
614.3
|
|
183.5
|
|
181.9
|
|
||
See accompanying notes to consolidated financial statements.
67
THE BRINK’S COMPANY
and subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The Brink’s Company (along with its subsidiaries, “we,” “our,” “Brink’s” or the “Company”), based in Richmond, Virginia, is a leading provider of secure transportation, cash management services and other security-related services to banks and financial institutions, retailers, government agencies, mints, jewelers and other commercial operations around the world. Brink’s is the oldest and largest secure transportation and cash management services company in the U.S., and a market leader in many other countries.
Principles of Consolidation
The consolidated financial statements include our controlled subsidiaries. Control is determined based on ownership rights or, when applicable, based on whether we are considered to be the primary beneficiary of a variable interest entity. See "Venezuela" section below for further information. For controlled subsidiaries that are not wholly-owned, the noncontrolling interests are included in net income and in total equity.
Investments in businesses that we do not control, but for which we have the ability to exercise significant influence over operating and financial policies, are accounted for under the equity method and our proportionate share of income or loss is recorded in other operating income (expense). Investments in businesses for which we do not have the ability to exercise significant influence over operating and financial policies are accounted for under the cost method or, if applicable, as available-for-sale securities. All intercompany accounts and transactions have been eliminated in consolidation.
Revenue Recognition
Revenue is recognized when services related to armored vehicle transportation, ATM services, Cash Management Services, payment services, guarding and the secure international transportation of valuables are performed. Customer contracts have prices that are fixed and determinable and we assess the customer’s ability to meet the contractual terms, including payment terms, before entering into contracts. Taxes collected from customers and remitted to governmental authorities are not included in revenues in the consolidated statements of operations.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, demand deposits and investments with original maturities of three months or less. Cash and cash equivalents include amounts held by certain of our secure Cash Management Services operations for customers for which, under local regulations, the title transfers to us for a short period of time. The cash is generally credited to customers’ accounts the following day and we do not consider it as available for general corporate purposes in the management of our liquidity and capital resources. We record a liability for the amounts owed to customers (see Note 12).
Trade Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses on our existing accounts receivable. We determine the allowance based on historical write-off experience. We review our allowance for doubtful accounts quarterly. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is calculated principally on the straight-line method based on the estimated useful lives of individual assets or classes of assets.
Leased property and equipment meeting capital lease criteria are capitalized at the lower of the present value of the related lease payments or the fair value of the leased asset at the inception of the lease. Amortization is calculated on the straight-line method based on the lease term.
Leasehold improvements are recorded at cost. Amortization is calculated principally on the straight-line method over the lesser of the estimated useful life of the leasehold improvement or the lease term. Renewal periods are included in the lease term when the renewal is determined to be reasonably assured.
68
Part of the costs related to the development or purchase of internal-use software is capitalized and amortized over the estimated useful life of the software. Costs that are capitalized include external direct costs of materials and services to develop or obtain the software, and internal costs, including compensation and employee benefits for employees directly associated with a software development project.
|
Estimated Useful Lives
|
Years
|
|
Buildings
|
16 to 25
|
|
Building leasehold improvements
|
3 to 10
|
|
Vehicles
|
3 to 10
|
|
Capitalized software
|
3 to 5
|
|
Other machinery and equipment
|
3 to 10
|
Expenditures for routine maintenance and repairs on property and equipment are charged to expense. Major renewals, betterments and modifications are capitalized and depreciated over the lesser of the remaining life of the asset or, if applicable, the lease term.
Goodwill and Other Intangible Assets
Goodwill is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible net assets of businesses acquired. Intangible assets arising from business acquisitions include customer lists, customer relationships, covenants not to compete, trademarks and other identifiable intangibles. At
December 31, 2017
, finite-lived intangible assets have remaining useful lives ranging from
1
to
10 years
and are amortized based on the pattern in which the economic benefits are used or on a straight-line basis.
Impairment of Goodwill and Long-Lived Assets
Goodwill is not amortized but is tested at least annually for impairment at the reporting unit level, which is one level below an operating segment. Goodwill is assigned to one or more reporting units at the date of acquisition. Effective February 2017, we implemented changes to our organization and management structure.
After the February 2017 reorganization, we have
eight
reporting units:
|
•
|
U.S.
|
|
•
|
Mexico
|
|
•
|
Canada
|
|
•
|
France
|
|
•
|
Brazil
|
|
•
|
Global Markets - South America
|
|
•
|
Global Markets - EMEA
|
|
•
|
Global Markets - Asia
|
We performed goodwill impairment tests on the reporting units that had goodwill as of October 1, 2017. We performed a quantitative analysis to determine whether reporting unit fair values exceeded their carrying amounts. We based our estimates of fair value on projected future cash flows and completed these impairment tests, as well as the tests in the previous two years, with no impairment charges required.
Indefinite-lived intangibles are also tested for impairment at least annually by comparing their carrying values to their estimated fair values. We have had no significant impairments of indefinite-lived intangibles in the last three years.
Long-lived assets other than goodwill and other indefinite-lived intangibles are reviewed for impairment when events or changes in circumstances indicate the carrying value of an asset may not be recoverable.
For long-lived assets other than goodwill that are to be held and used in operations, an impairment is indicated when the estimated total undiscounted cash flow associated with the asset or group of assets is less than carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value.
Retirement Benefit Plans
We account for retirement benefit obligations under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 715,
Compensation – Retirement Benefits
. For U.S. and certain non-U.S. retirement plans, we derive the discount rates used to measure the present value of benefit obligations using the cash flow matching method. Under this method, we compare the plan’s projected payment obligations by year with the corresponding yields on a Mercer yield curve. Each year’s projected cash flows are then discounted back to their present value at the measurement date and an overall discount rate is determined. The overall discount rate is then rounded to the nearest tenth of a percentage point. In non-U.S. locations where the cash flow matching method is not possible, rates of local high-quality long-term government bonds are used to select the discount rate.
We used Mercer’s Above-Mean Curve to determine the discount rates for the year-end benefit obligations and retirement cost of our U.S. retirement plans.
We select the expected long-term rate of return assumption for our U.S. pension plan and retiree medical plans using advice from our investment advisor. The selected rate considers plan asset allocation targets, expected overall investment manager performance and long-term historical average compounded rates of return.
69
Benefit plan actuarial gains and losses are recognized in other comprehensive income (loss). Accumulated net benefit plan actuarial gains and losses that exceed
10%
of the greater of a plan’s benefit obligation or plan assets at the beginning of the year are amortized into earnings from other comprehensive income (loss) on a straight-line basis. The amortization period for pension plans is the average remaining service period of employees expected to receive benefits under the plans. The amortization period for other retirement plans is primarily the average remaining life expectancy of inactive participants.
Income Taxes
Deferred tax assets and liabilities are recorded to recognize the expected future tax benefits or costs of events that have been, or will be, reported in different years for financial statement purposes than tax purposes. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which these items are expected to reverse. We recognize tax benefits related to uncertain tax positions if we believe it is more likely than not the benefit will be realized. We review our deferred tax assets to determine if it is more-likely-than-not that they will be realized. If we determine it is not more-likely-than-not that a deferred tax asset will be realized, we record a valuation allowance to reverse the previously recognized tax benefit.
Foreign Currency Translation
Our consolidated financial statements are reported in U.S. dollars. Our foreign subsidiaries maintain their records primarily in the currency of the country in which they operate.
The method of translating local currency financial information into U.S. dollars depends on whether the economy in which our foreign subsidiary operates has been designated as highly inflationary or not. Economies with a three-year cumulative inflation rate of more than
100%
are considered highly inflationary.
Assets and liabilities of foreign subsidiaries in non-highly inflationary economies are translated into U.S. dollars using rates of exchange at the balance sheet date. Translation adjustments are recorded in other comprehensive income (loss). Revenues and expenses are translated at rates of exchange in effect during the year. Transaction gains and losses are recorded in net income (loss).
Foreign subsidiaries that operate in highly inflationary countries use the U.S. dollar as their functional currency. Local currency monetary assets and liabilities are remeasured into U.S. dollars using rates of exchange as of each balance sheet date, with remeasurement adjustments and other transaction gains and losses recognized in earnings. Nonmonetary assets and liabilities do not fluctuate with changes in local currency exchange rates to the dollar.
Venezuela
The economy in Venezuela has had significant inflation in the last several years. We consolidate our Venezuelan results using our accounting policy for subsidiaries operating in highly inflationary economies.
We control our Venezuela business for purposes of consolidation of financial statements. Specifically, while the Venezuela government has imposed restrictions that prevent the repatriation of funds, management continues to provide guidance and strategic oversight, including budgeting and forecasting for the Venezuela business. In addition, in this highly inflationary economy, the Venezuela business has negotiated price increases with certain customers to help offset cost inflation. We will continue to monitor the situation in Venezuela and the impact that the economic and political environment in that country has on our ability to control our Venezuela operations.
Since 2003,
the Venezuelan government has controlled the exchange of local currency into other currencies, including the U.S. dollar, and has required that currency exchanges be made at official rates established by the government instead of allowing open markets to determine currency rates. Different official rates exist for different industries and purposes and the government does not approve all requests to convert bolivars to other currencies.
As a result of the restrictions on currency exchange, we have in the past been unable to obtain sufficient U.S. dollars to purchase certain imported supplies and fixed assets to fully operate our business in Venezuela. Consequently, our Venezuelan operations have occasionally purchased more expensive, bolivar-denominated supplies and fixed assets. There is a risk that official currency exchange mechanisms will be discontinued or will not be accessible when needed in the future, which may prevent us from repatriating dividends or obtaining dollars to operate our Venezuelan operations.
Due to the Venezuelan government's restrictions that have prevented us from repatriating funds, results from our Venezuelan operations are included in items not allocated to segments and are excluded from the operating segments.
Remeasurement rates during 2015.
In 2014
,
the Venezuelan government initiated an exchange mechanism known as SICAD II. Through February 11, 2015, we used the SICAD II rates to remeasure our bolivar-denominated monetary assets and liabilities into U.S. dollars and to translate our revenue and expenses. Effective February 12, 2015, the SICAD II exchange mechanism was disbanded and we began to use the rate under the new exchange mechanism, known as SIMADI, to remeasure bolivar-denominated monetary assets and liabilities and to translate our revenue and expenses. The SIMADI rate ranged from
170
to
200
bolivars to the dollar and, at December 31, 2015, it was
199
bolivars to the dollar. We recognized an
$18.1 million
net remeasurement loss in 2015. The after-tax effect of this loss attributable to noncontrolling interests was
$5.6 million
. We received only minimal U.S. dollars using the SIMADI process.
70
Remeasurement rates during 2016
. In the first quarter of 2016, the Venezuelan government announced that it would replace the SIMADI exchange mechanism with the DICOM exchange mechanism and would allow the DICOM exchange mechanism rate to float freely. At March 31, 2016, the DICOM rate was approximately
273
bolivars to the dollar. From March 31, 2016 through the end of 2016, the rate declined
59%
to close at approximately
674
bolivars to the dollar at December 31, 2016. We received only minimal U.S. dollars through this exchange mechanism. We recognized a
$4.8 million
pretax remeasurement loss in 2016. However, the after-tax effect in the current period attributable to noncontrolling interest was income of
$2.7 million
.
Remeasurement rates during 2017.
Since the end of 2016, the rate has declined
80%
to close at
3,345
bolivars to the dollar at December 31, 2017. We received only minimal U.S. dollars through this exchange mechanism. In 2017, we recognized a
$9.1 million
pretax remeasurement loss. The after-tax effect of this loss attributable to noncontrolling interest was
$1.0 million
.
Items related to our Venezuelan operations are as follows:
|
•
|
Our investment in our Venezuelan operations on an equity-method basis was
$23.1 million
at
December 31, 2017
, and
$19.2 million
at
December 31, 2016
.
|
|
•
|
Our Venezuelan operations had net payables to other Brink's affiliates of
$2.7 million
at
December 31, 2017
and
$6.1 million
at
December 31, 2016
.
|
|
•
|
Our Venezuelan operations had net nonmonetary assets of
$23.0 million
at
December 31, 2017
, and
$17.6 million
at
December 31, 2016
.
|
|
•
|
Our bolivar-denominated net monetary liabilities were
$2.3 million
(including
$3.4 million
of cash and cash equivalents) at
December 31, 2017
, and
$1.4 million
net monetary assets (including
$6.8 million
of cash and cash equivalents) at
December 31, 2016
.
|
|
•
|
Accumulated other comprehensive losses attributable to Brink’s shareholders related to our operations in Venezuela were approximately
$114.9 million
at
December 31, 2017
and
$114.7 million
at
December 31, 2016
.
|
Impairment of Long-lived Assets in Venezuela
During the second quarter of 2015, Brink's elected to evaluate and pursue strategic options for the Venezuelan business, which required us to perform an impairment review of the carrying values of our Venezuelan long-lived assets in accordance with FASB ASC Topic 360,
Property, Plant and Equipment
. Our asset impairment analysis included management's best estimate of associated cash flows relating to the long-lived assets and included fair value assumptions that reflect conditions that exist in a volatile economic environment. Future events or actions relative to our Venezuelan business may result in further adjustments. As a result of our impairment analysis, we recognized a
$35.3 million
impairment charge in 2015.
As of December 31, 2017, we were not evaluating or pursuing strategic options for our Venezuelan business. The current carrying value of the long-lived assets of our Venezuelan operations is
$14.6 million
at
December 31, 2017
. We have not reclassified any of the
$114.9 million
of accumulated other comprehensive losses attributable to Brink’s shareholders related to our operations in Venezuela into earnings.
Argentina
We operate in Argentina through wholly owned subsidiaries and a smaller controlled subsidiary ("Brink's Argentina"). Revenues from Brink's Argentina represented approximately
7%
of our consolidated revenues from the year ended
December 31, 2017
and
5%
of our consolidated revenues for the years ended
December 31, 2016
and
2015
. The operating environment in Argentina continues to present business challenges, including continuing devaluation of the Argentine peso and high inflation.
During 2015, the exchange rate ranged from
8.5
to
9.8
local pesos to the U.S. dollar until December 17, 2015 when the currency was devalued. For years ended
December 31, 2017
and
December 31, 2016
, the value of the Argentine peso declined by approximately
15%
and
19%
respectively. At
December 31, 2017
, the exchange rate was
18.6
Argentine pesos to the U.S. dollar.
The government in Argentina had previously imposed limits on the exchange of Argentine pesos into U.S. dollars. As a result, we elected in the past and may continue in the future to repatriate cash from Argentina using different markets to convert Argentine pesos into U.S. dollars if U.S. dollars are not readily available. Conversions prior to the December 17, 2015 devaluation had settled at rates approximately
30%
to
40%
less favorable than the rates at which we translated the financial statements of our subsidiary in Argentina. After the December 2015 devaluation of the Argentine peso, the market rates used to convert Argentine pesos into U.S. dollars have been similar to the rates at which we translate the financial statements of our subsidiary in Argentina. See Note 19 for more information.
We recognized losses from converting Argentine pesos into U.S. dollars of
$0.1 million
in
2016
and
$7.1 million
in
2015
. These conversion losses are classified in the consolidated statements of operations as other operating income (expense). At
December 31, 2017
, we had cash denominated in Argentine pesos of
$33.2 million
.
Although Argentina is not currently designated as a highly inflationary economy for accounting purposes, sustained volatility in inflation rates as well as continued deterioration in the exchange rate could have an adverse impact on Brink's Argentina's revenues, net earnings and net monetary asset position. We continue to closely monitor the situation in Argentina.
71
Ireland
Due to management's decision in the first quarter of 2016 to exit the Republic of Ireland, the prospective impacts of shutting down this operation are included in items not allocated to segments and are excluded from the operating segments effective March 1, 2016. Beginning May 1, 2016, due to management's decision to also exit Northern Ireland, the results of shutting down these operations are treated similarly to the Republic of Ireland. Revenues from both Ireland operations shut down in 2016 were approximately
$20 million
in 2015. International shipments to and from Ireland will continue to be provided through BGS.
Restricted Cash
In France, we offer services to certain of our customers where we manage some or all of their cash supply chains. In connection with this offering, we take temporary title to certain customers' cash, which is included as restricted cash in our financial statements due to customer agreement or regulation (see Note 19).
Concentration of Credit Risks
We routinely assess the financial strength of significant customers and this assessment, combined with the large number and geographic diversity of our customers, limits our concentration of risk with respect to accounts receivable. Financial instruments which potentially subject us to concentrations of credit risks are principally cash and cash equivalents and accounts receivables. Cash and cash equivalents are held by major financial institutions.
Use of Estimates
In accordance with U.S. generally accepted accounting principles (“GAAP”), we have made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements. Actual results could differ materially from those estimates. The most significant estimates are related to goodwill, intangibles and other long-lived assets, pension and other retirement benefit assets and obligations, legal contingencies, deferred tax assets, purchase price allocations and foreign currency translation.
Fair-value estimates.
We have various financial instruments included in our financial statements. Financial instruments are carried in our financial statements at either cost or fair value. We estimate fair value of assets using the following hierarchy using the highest level possible:
Level 1: Quoted prices for identical assets or liabilities in active markets.
Level 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are directly or indirectly observable, or inputs that are derived principally from, or corroborated by, observable market data by correlation or other means.
Level 3: Unobservable inputs that reflect estimates and assumptions.
New Accounting Standards
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
, which will require the recognition of assets and liabilities by lessees for certain leases classified as operating leases under current accounting guidance and also requires expanded disclosures regarding leasing activities. ASU 2016-02 will be effective January 1, 2019 and we are required to use the modified retrospective method to adopt the new standard. We are assessing the potential impact of the standard on financial reporting.
In March 2016, the FASB issued ASU 2016-09,
Improvements to Employee Share-Based Payment Accounting
, which simplifies how certain features related to share-based payments are accounted for and presented in the financial statements. We elected to early adopt this ASU in the fourth quarter of 2016 and, per the requirements of the pronouncement, we applied the amendments to the beginning of 2016. Under ASU 2016-09, accounting changes adopted using the modified retrospective method must be calculated as of the beginning of 2016 and reported as a cumulative-effect adjustment. As a result, we recognized a
$0.2 million
cumulative-effect adjustment to January 1, 2016 retained earnings for previously unrecognized excess tax benefits. We have elected to continue our previous accounting policy of estimating forfeitures and, therefore, we did not recognize any cumulative-effect adjustment related to forfeitures. ASU 2016-09 requires that accounting changes adopted using the prospective method should be reported in the applicable interim periods of 2016. We did not have any material changes to previously reported interim financial information in 2016 as it relates to the recognition of excess tax benefits in the statement of operations or the classification of excess tax benefits in the statement of cash flows. In 2017, the accounting under this ASU resulted in the recognition of
$6.7 million
in excess tax benefits.
In June 2016, the FASB issued ASU 2016-13,
Measurement of Credit Losses on Financial Instruments
, which significantly changes the way entities recognize impairment of many financial assets by requiring immediate recognition of estimated credit losses expected to occur over their remaining life. ASU 2016-13 is effective January 1, 2020, with early adoption permitted January 1, 2019. We are assessing the potential impact of this new standard on financial reporting.
In November 2016, the FASB issued ASU 2016-18,
Statement of Cash Flows: Restricted Cash
, which requires entities to include restricted cash and restricted cash equivalent balances with cash and cash equivalent balances in the statement of cash flows. As such, inclusion of restricted cash impacts operating activities, financing activities and effect of exchange rate changes on cash. We will adopt ASU 2016-18 in the first quarter of 2018 using the retrospective transition method. The adoption of this ASU effective January 1, 2018 will result in a change to previously reported amounts in the consolidated statements of cash flows. Net cash provided by operating activities will increase
$44.3 million
, net cash provided by financing activities will increase
$1.5 million
and the negative effect of exchange rate changes on cash will decrease
$11.3 million
as compared to previously reported 2017 amounts. For 2016, net cash provided by operating activities will increase
72
$22.8 million
, net cash used by financing activities will decrease by
$19.9 million
and the negative effect of exchange rate changes on cash will increase by
$3.6 million
.
In May 2014, the FASB issued ASU 2014-09,
Revenue From Contracts with Customers
, a new standard related to revenue recognition, which requires an entity to recognize an amount of revenue to which it expects to be entitled for the transfer of promised goods and services to customers. The new standard will replace most of the existing revenue recognition standards in U.S. GAAP. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of this new standard to January 1, 2018. Subsequently, the FASB continued to refine the standard and issued several amendments. The significant effects of the new standard for us will be associated with variable consideration and capitalization of costs to obtain contracts, such as sales commissions. Currently, we recognize the impact of pricing changes in the period they become fixed and determinable and we expense sales commissions and other costs to obtain contracts as they are incurred. We do not expect a material impact on our future consolidated statements of operations or consolidated balance sheets. However, the new guidance will result in expanded disclosures regarding our various performance obligations, revenue disaggregation and contractual rights. We intend to use the modified retrospective method to adopt the new standard. We expect to recognize a cumulative-effect adjustment to January 1, 2018 retained earnings of less than
$2 million
, primarily from the capitalization of costs to obtain contracts.
In January 2017, the FASB issued ASU 2017-04,
Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment
, which requires an entity to no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. The guidance is effective January 1, 2020 with early adoption permitted. We are currently evaluating the impact of this guidance, including transition elections and required disclosures, on our financial statements and the timing of adoption.
In March 2017, the FASB issued ASU 2017-07,
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
, which requires an entity to report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. We elected to early adopt this ASU in the first quarter of 2017 using the retrospective transition method for the periods presented. As a result, the consolidated statements of operations have been updated to reflect this guidance.
The adoption of this ASU resulted in a change in certain previously reported amounts in the consolidated statements of operations. Cost of revenues decreased
$33.1 million
, selling, general and administrative expenses decreased
$7.2 million
and operating profit as well as interest and other income (expense) increased
$40.3 million
compared to previously reported 2016 amounts. In 2015, cost of revenues decreased
$27.9 million
, selling, general and administrative expenses decreased
$11.9 million
and operating profit as well as interest and other income (expense) increased
$39.8 million
compared to previously reported amounts. The early adoption of this ASU had no impact on the previously reported income from continuing operations or net income for the prior year periods.
In August 2017, the FASB issued ASU 2017-12,
Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities
, which amends and simplifies the application of hedge accounting guidance to better portray the economic results of risk management activities in the financial statements. The guidance expands the ability to hedge nonfinancial and financial risk components, reduces complexity in fair value hedges of interest rate risk, eliminates the requirement to separately measure and report hedge ineffectiveness, and eases certain hedge effectiveness assessment requirements. The guidance is effective January 1, 2019 with early adoption permitted. We are currently evaluating the impact of this guidance, including transition elections and required disclosures, on our financial statements and the timing of adoption.
73
The Brink’s Company offers transportation and logistics management services for cash and valuables throughout the world.
Core services include
:
|
•
|
CIT Services – armored vehicle transportation of valuables
|
|
•
|
ATM Services – replenishing and maintaining customers’ automated teller machines; providing network infrastructure services
|
High-value services include
:
|
•
|
Global Services – secure international transportation of valuables
|
|
•
|
Cash Management Services
|
|
◦
|
Currency and coin counting and sorting; deposit preparation and reconciliations; other cash management services
|
|
◦
|
Safe and safe control device installation and servicing (including our patented CompuSafe
®
service)
|
|
◦
|
Vaulting services
|
|
◦
|
Check imaging services for banking customers
|
|
•
|
Payment Services – bill payment and processing services on behalf of utility companies and other billers at any of our Brink’s or Brink’s-operated payment locations in Brazil, Colombia, Panama and Mexico and Brink’s Money™ general purpose reloadable prepaid cards and payroll cards in the U.S.
|
Other security services include
:
|
•
|
Commercial Security Systems Services – design and installation of security systems in designated markets in Europe.
|
|
•
|
Guarding Services – protection of airports, offices, and certain other locations in Europe and Brazil with or without electronic surveillance, access control, fire prevention and highly trained patrolling personnel
|
We identify our operating segments based on how our
chief operating decision maker (“CODM”) allocates resources, assesses performance and makes decisions. Our CODM is our President and Chief Executive Officer. Our CODM evaluates performance and allocates resources to each operating segment based on a profit or loss measure which, at the reportable segment level, excludes the following:
|
•
|
Corporate expenses - former non-segment and regional management costs, currency transaction gains and losses, adjustments to
|
reconcile segment accounting policies to U.S. GAAP, and costs related to global initiatives
|
•
|
Other items not allocated to segments - certain significant items such as reorganization and restructuring actions that are evaluated
|
on an individual basis by management and are not considered part of the ongoing activities of the business. Results from Venezuela
operations are also excluded from our segment results due to the Venezuelan government's restrictions that have prevented us from
repatriating funds. We also exclude certain costs, gains and losses related to acquisitions and dispositions of assets and of businesses.
We currently serve customers in more than
100
countries, including
41
countries where we operate subsidiaries.
During the first quarter of 2017, we implemented changes to our organizational and management structure that resulted in changes to our operating segments for financial reporting purposes. Through the fiscal year ended December 31, 2016, our business was reported in
nine
operating segments: U.S., France, Mexico, Brazil, Canada, Latin America, EMEA, Asia and Payment Services. Changes in our management reporting structure during the first quarter of 2017 required us to conduct an assessment in accordance with ASC Topic 280,
Segment Reporting
, to determine our operating segments.
As a result of this assessment, we now have the following operating segments:
|
•
|
North America
|
|
•
|
South America
|
|
•
|
Rest of World.
|
Previously disclosed information for all periods presented has been revised to reflect our current segment structure.
74
|
Revenues
|
Operating Profit
|
||||||||||||||||||
|
Years Ended December 31,
|
Years Ended December 31,
|
||||||||||||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
2017
|
2016
|
2015
|
|||||||||||||
|
Reportable Segments:
|
|||||||||||||||||||
|
North America
|
$
|
1,254.2
|
|
1,210.3
|
|
1,224.0
|
|
$
|
74.0
|
|
40.1
|
|
45.6
|
|
|||||
|
South America
|
924.6
|
|
718.7
|
|
719.3
|
|
182.8
|
|
122.6
|
|
104.6
|
|
|||||||
|
Rest of World
|
1,014.1
|
|
979.4
|
|
1,033.6
|
|
115.2
|
|
111.3
|
|
102.5
|
|
|||||||
|
Total reportable segments
|
3,192.9
|
|
2,908.4
|
|
2,976.9
|
|
372.0
|
|
274.0
|
|
252.7
|
|
|||||||
|
Reconciling Items:
|
|||||||||||||||||||
|
Corporate items:
|
|||||||||||||||||||
|
General, administrative and other expenses
|
—
|
|
—
|
|
—
|
|
(84.3
|
)
|
(59.8
|
)
|
(81.0
|
)
|
|||||||
|
Foreign currency transaction losses
|
—
|
|
—
|
|
—
|
|
(1.1
|
)
|
3.8
|
|
(8.8
|
)
|
|||||||
|
Reconciliation of segment policies to GAAP
|
—
|
|
—
|
|
—
|
|
(5.2
|
)
|
(2.2
|
)
|
4.6
|
|
|||||||
|
Other items not allocated to segments:
|
|||||||||||||||||||
|
Venezuela operations
|
154.1
|
|
109.4
|
|
84.5
|
|
20.4
|
|
18.5
|
|
(45.6
|
)
|
|||||||
|
Reorganization and Restructuring
|
—
|
|
—
|
|
—
|
|
(22.6
|
)
|
(30.3
|
)
|
(15.3
|
)
|
|||||||
|
Acquisitions and dispositions
|
—
|
|
2.8
|
|
—
|
|
(5.3
|
)
|
(19.5
|
)
|
(10.2
|
)
|
|||||||
|
Total
|
$
|
3,347.0
|
|
3,020.6
|
|
3,061.4
|
|
$
|
273.9
|
|
184.5
|
|
96.4
|
|
|||||
|
Years Ended December 31,
|
|||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
||||||
|
Capital Expenditures by Reportable Segment
|
|||||||||
|
North America
|
$
|
86.3
|
|
42.0
|
|
37.1
|
|
||
|
South America
|
39.2
|
|
24.0
|
|
21.4
|
|
|||
|
Rest of World
|
35.9
|
|
32.2
|
|
31.3
|
|
|||
|
Total reportable segments
|
161.4
|
|
98.2
|
|
89.8
|
|
|||
|
Corporate items
|
8.9
|
|
9.0
|
|
7.0
|
|
|||
|
Venezuela
|
4.2
|
|
5.0
|
|
4.3
|
|
|||
|
Total
|
$
|
174.5
|
|
112.2
|
|
101.1
|
|
||
|
Depreciation and Amortization by Reportable Segment
|
|||||||||
|
Depreciation and amortization of property and equipment:
|
|||||||||
|
North America
|
$
|
68.4
|
|
66.8
|
|
70.1
|
|
||
|
South America
|
23.5
|
|
19.0
|
|
19.5
|
|
|||
|
Rest of World
|
30.4
|
|
29.8
|
|
30.9
|
|
|||
|
Total reportable segments
|
122.3
|
|
115.6
|
|
120.5
|
|
|||
|
Corporate items
|
12.0
|
|
10.9
|
|
11.3
|
|
|||
|
Venezuela
|
1.7
|
|
0.7
|
|
3.9
|
|
|||
|
Reorganization and Restructuring
|
2.2
|
|
0.8
|
|
—
|
|
|||
|
Depreciation and amortization of property and equipment
|
138.2
|
|
128.0
|
|
135.7
|
|
|||
|
Amortization of intangible assets
(a)
|
8.4
|
|
3.6
|
|
4.2
|
|
|||
|
Total
|
$
|
146.6
|
|
131.6
|
|
139.9
|
|
||
|
(a)
|
Amortization of acquisition-related intangible assets has been excluded from reportable segment amounts.
|
|
December 31,
|
|||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
||||||
|
Assets held by Reportable Segment
|
|
|
|
||||||
|
North America
|
$
|
733.5
|
|
629.4
|
|
638.4
|
|
||
|
South America
|
740.5
|
|
371.4
|
|
315.0
|
|
|||
|
Rest of World
|
883.3
|
|
621.8
|
|
614.0
|
|
|||
|
Total reportable segments
|
2,357.3
|
|
1,622.6
|
|
1,567.4
|
|
|||
|
Corporate items
|
643.6
|
|
321.3
|
|
332.4
|
|
|||
|
Venezuela
|
58.7
|
|
50.9
|
|
46.9
|
|
|||
|
Total
|
$
|
3,059.6
|
|
1,994.8
|
|
1,946.7
|
|
||
75
|
Long-Lived Assets by Geographic Area
(a)
|
|||||||||
|
Non-U.S.:
|
|||||||||
|
Mexico
|
$
|
99.6
|
|
78.1
|
|
93.2
|
|
||
|
France
|
84.1
|
|
67.5
|
|
68.1
|
|
|||
|
Brazil
|
57.2
|
|
45.3
|
|
34.0
|
|
|||
|
Canada
|
46.7
|
|
42.4
|
|
38.9
|
|
|||
|
Other
|
146.5
|
|
127.2
|
|
122.7
|
|
|||
|
Subtotal
|
434.1
|
|
360.5
|
|
356.9
|
|
|||
|
U.S.
|
206.8
|
|
170.5
|
|
192.1
|
|
|||
|
Total
|
$
|
640.9
|
|
531.0
|
|
549.0
|
|
||
|
(a)
|
Long-lived assets include only property and equipment.
|
|
Years Ended December 31,
|
|||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
||||||
|
Revenues by Geographic Area
(a)
|
|||||||||
|
Outside the U.S.:
|
|||||||||
|
Brazil
|
$
|
434.6
|
|
344.9
|
|
336.4
|
|
||
|
France
|
429.4
|
|
424.5
|
|
431.5
|
|
|||
|
Mexico
|
327.2
|
|
296.3
|
|
333.7
|
|
|||
|
Argentina
|
250.3
|
|
156.4
|
|
158.4
|
|
|||
|
Venezuela
|
154.1
|
|
109.4
|
|
84.5
|
|
|||
|
Canada
|
151.2
|
|
150.2
|
|
153.7
|
|
|||
|
Other
|
824.4
|
|
775.1
|
|
826.7
|
|
|||
|
Subtotal
|
2,571.2
|
|
2,256.8
|
|
2,324.9
|
|
|||
|
U.S.
|
775.8
|
|
763.8
|
|
736.5
|
|
|||
|
Total
|
$
|
3,347.0
|
|
3,020.6
|
|
3,061.4
|
|
||
|
(a)
|
Revenues are recorded in the country where service is initiated or performed. No single customer represents more than 10% of total revenue.
|
|
Years Ended December 31,
|
|||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
||||||
|
Revenues by Service Type:
|
|||||||||
|
Core services
|
$
|
1,719.5
|
|
1,597.6
|
|
1,615.7
|
|
||
|
High-value services
|
1,409.8
|
|
1,209.3
|
|
1,208.8
|
|
|||
|
Other security services
|
217.7
|
|
213.7
|
|
236.9
|
|
|||
|
Total
|
$
|
3,347.0
|
|
3,020.6
|
|
3,061.4
|
|
||
76
|
December 31,
|
|||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
||||||
|
Net assets outside the U.S.
|
|
|
|
||||||
|
France
|
$
|
219.4
|
|
102.1
|
|
87.1
|
|
||
|
Other Rest of World countries
|
273.1
|
|
205.0
|
|
221.2
|
|
|||
|
Mexico
|
133.7
|
|
86.1
|
|
86.1
|
|
|||
|
Argentina
|
234.0
|
|
28.6
|
|
28.3
|
|
|||
|
Brazil
|
151.3
|
|
106.3
|
|
87.9
|
|
|||
|
Other South American countries
|
116.2
|
|
98.4
|
|
86.9
|
|
|||
|
Canada
|
63.3
|
|
57.6
|
|
50.3
|
|
|||
|
Total
|
$
|
1,191.0
|
|
684.1
|
|
647.8
|
|
||
|
(In millions)
|
2017
|
2016
|
2015
|
||||||
|
Information about Unconsolidated Equity Affiliates held by Rest of World:
|
|||||||||
|
Carrying value of investments and advances at December 31
|
$
|
4.0
|
|
3.5
|
|
4.9
|
|
||
|
Undistributed earnings at December 31
|
2.6
|
|
2.5
|
|
2.2
|
|
|||
|
Share of equity earnings (loss)
|
0.4
|
|
(1.5
|
)
|
0.5
|
|
|||
In 2016, Brink's recorded an impairment charge of
$1.8 million
related to an equity investment in a BGS business in Belgium.
77
Defined-benefit Pension Plans
Summary
We have various defined-benefit pension plans covering eligible current and former employees. Benefits under most plans are based on salary and years of service. There are limits to the amount of benefits which can be paid to participants from a U.S. qualified pension plan. We maintain a nonqualified U.S. plan to pay benefits for those eligible current and former employees in the U.S. whose benefits exceed the regulatory limits. Pension benefits provided to eligible U.S. employees were frozen on December 31, 2005.
Components of Net Periodic Pension Cost
|
(In millions)
|
U.S. Plans
|
Non-U.S. Plans
|
Total
|
||||||||||||||||||||||||||
|
Years Ended December 31,
|
2017
|
2016
|
2015
|
2017
|
2016
|
2015
|
2017
|
2016
|
2015
|
||||||||||||||||||||
|
Service cost
|
$
|
—
|
|
—
|
|
—
|
|
$
|
11.3
|
|
10.5
|
|
10.4
|
|
$
|
11.3
|
|
10.5
|
|
10.4
|
|
||||||||
|
Interest cost on projected benefit obligation
|
35.1
|
|
37.1
|
|
36.0
|
|
15.2
|
|
11.5
|
|
11.2
|
|
50.3
|
|
48.6
|
|
47.2
|
|
|||||||||||
|
Return on assets – expected
|
(53.3
|
)
|
(54.6
|
)
|
(54.6
|
)
|
(9.9
|
)
|
(9.5
|
)
|
(9.5
|
)
|
(63.2
|
)
|
(64.1
|
)
|
(64.1
|
)
|
|||||||||||
|
Amortization of losses
|
26.6
|
|
24.9
|
|
31.2
|
|
5.3
|
|
5.1
|
|
5.0
|
|
31.9
|
|
30.0
|
|
36.2
|
|
|||||||||||
|
Amortization of prior service cost
|
—
|
|
—
|
|
—
|
|
1.1
|
|
1.0
|
|
0.9
|
|
1.1
|
|
1.0
|
|
0.9
|
|
|||||||||||
|
Settlement loss
|
—
|
|
—
|
|
—
|
|
2.0
|
|
3.1
|
|
5.7
|
|
2.0
|
|
3.1
|
|
5.7
|
|
|||||||||||
|
Net periodic pension cost
|
$
|
8.4
|
|
7.4
|
|
12.6
|
|
$
|
25.0
|
|
21.7
|
|
23.7
|
|
$
|
33.4
|
|
29.1
|
|
36.3
|
|
||||||||
|
Included in:
|
|||||||||||||||||||||||||||||
|
Continuing operations
|
$
|
8.4
|
|
7.4
|
|
12.6
|
|
$
|
25.0
|
|
21.7
|
|
22.6
|
|
$
|
33.4
|
|
29.1
|
|
35.2
|
|
||||||||
|
Discontinued operations
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1.1
|
|
—
|
|
—
|
|
1.1
|
|
|||||||||||
|
Net periodic pension cost
|
$
|
8.4
|
|
7.4
|
|
12.6
|
|
$
|
25.0
|
|
21.7
|
|
23.7
|
|
$
|
33.4
|
|
29.1
|
|
36.3
|
|
||||||||
The components of net periodic pension cost other than the service cost component are included in interest and other income (expense) in the consolidated statements of operations.
78
Obligations and Funded Status
Changes in the projected benefit obligation (“PBO”) and plan assets for our pension plans are as follows:
|
(In millions)
|
U.S. Plans
|
Non-U.S. Plans
|
Total
|
|||||||||||||||
|
Years Ended December 31,
|
2017
|
2016
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
|
Benefit obligation at beginning of year
|
$
|
845.9
|
|
844.8
|
|
267.3
|
|
262.8
|
|
1,113.2
|
|
1,107.6
|
|
|||||
|
Service cost
|
—
|
|
—
|
|
11.3
|
|
10.5
|
|
11.3
|
|
10.5
|
|
||||||
|
Interest cost
|
35.1
|
|
37.1
|
|
15.2
|
|
11.5
|
|
50.3
|
|
48.6
|
|
||||||
|
Participant contributions
|
—
|
|
—
|
|
0.4
|
|
0.2
|
|
0.4
|
|
0.2
|
|
||||||
|
Plan amendments
|
—
|
|
—
|
|
—
|
|
(0.2
|
)
|
—
|
|
(0.2
|
)
|
||||||
|
Plan combinations
|
—
|
|
—
|
|
0.6
|
|
0.4
|
|
0.6
|
|
0.4
|
|
||||||
|
Acquisition
|
—
|
|
—
|
|
2.5
|
|
—
|
|
2.5
|
|
—
|
|
||||||
|
Settlements
|
—
|
|
—
|
|
(1.0
|
)
|
(9.3
|
)
|
(1.0
|
)
|
(9.3
|
)
|
||||||
|
Benefits paid
|
(49.1
|
)
|
(47.8
|
)
|
(16.6
|
)
|
(12.7
|
)
|
(65.7
|
)
|
(60.5
|
)
|
||||||
|
Actuarial (gains) losses
|
58.4
|
|
11.8
|
|
7.4
|
|
17.7
|
|
65.8
|
|
29.5
|
|
||||||
|
Foreign currency exchange effects
|
—
|
|
—
|
|
14.4
|
|
(13.6
|
)
|
14.4
|
|
(13.6
|
)
|
||||||
|
Benefit obligation at end of year
|
$
|
890.3
|
|
845.9
|
|
301.5
|
|
267.3
|
|
1,191.8
|
|
1,113.2
|
|
|||||
|
Fair value of plan assets at beginning of year
|
$
|
728.5
|
|
721.4
|
|
173.4
|
|
164.8
|
|
901.9
|
|
886.2
|
|
|||||
|
Return on assets – actual
|
97.1
|
|
54.3
|
|
16.1
|
|
18.2
|
|
113.2
|
|
72.5
|
|
||||||
|
Participant contributions
|
—
|
|
—
|
|
0.4
|
|
0.2
|
|
0.4
|
|
0.2
|
|
||||||
|
Plan combinations
|
—
|
|
—
|
|
0.6
|
|
0.4
|
|
0.6
|
|
0.4
|
|
||||||
|
Employer contributions
|
0.7
|
|
0.6
|
|
16.8
|
|
14.9
|
|
17.5
|
|
15.5
|
|
||||||
|
Settlements
|
—
|
|
—
|
|
(1.0
|
)
|
(9.3
|
)
|
(1.0
|
)
|
(9.3
|
)
|
||||||
|
Benefits paid
|
(49.1
|
)
|
(47.8
|
)
|
(16.6
|
)
|
(12.7
|
)
|
(65.7
|
)
|
(60.5
|
)
|
||||||
|
Foreign currency exchange effects
|
—
|
|
—
|
|
13.2
|
|
(3.1
|
)
|
13.2
|
|
(3.1
|
)
|
||||||
|
Fair value of plan assets at end of year
|
$
|
777.2
|
|
728.5
|
|
202.9
|
|
173.4
|
|
980.1
|
|
901.9
|
|
|||||
|
Funded status
|
$
|
(113.1
|
)
|
(117.4
|
)
|
(98.6
|
)
|
(93.9
|
)
|
(211.7
|
)
|
(211.3
|
)
|
|||||
|
Included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Current liability, included in accrued liabilities
|
$
|
0.7
|
|
0.9
|
|
2.2
|
|
1.6
|
|
2.9
|
|
2.5
|
|
|||||
|
Noncurrent liability
|
112.4
|
|
116.5
|
|
96.4
|
|
92.3
|
|
208.8
|
|
208.8
|
|
||||||
|
Net pension liability
|
$
|
113.1
|
|
117.4
|
|
98.6
|
|
93.9
|
|
211.7
|
|
211.3
|
|
|||||
79
Other Changes in Plan Assets and Benefit Recognized in Other Comprehensive Income (Loss)
|
(In millions)
|
U.S. Plans
|
Non-U.S. Plans
|
Total
|
|||||||||||||||
|
Years Ended December 31,
|
2017
|
2016
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
|
Benefit plan net actuarial losses recognized in accumulated other comprehensive income (loss):
|
||||||||||||||||||
|
Beginning of year
|
$
|
(320.9
|
)
|
(333.7
|
)
|
(82.9
|
)
|
(95.0
|
)
|
(403.8
|
)
|
(428.7
|
)
|
|||||
|
Net actuarial gains (losses) arising during the year
|
(14.6
|
)
|
(12.1
|
)
|
(1.2
|
)
|
(9.0
|
)
|
(15.8
|
)
|
(21.1
|
)
|
||||||
|
Reclassification adjustment for amortization of prior actuarial losses included in net income (loss)
|
26.6
|
|
24.9
|
|
7.3
|
|
8.2
|
|
33.9
|
|
33.1
|
|
||||||
|
Foreign currency exchange effects
|
—
|
|
—
|
|
(6.1
|
)
|
12.9
|
|
(6.1
|
)
|
12.9
|
|
||||||
|
End of year
|
$
|
(308.9
|
)
|
(320.9
|
)
|
(82.9
|
)
|
(82.9
|
)
|
(391.8
|
)
|
(403.8
|
)
|
|||||
|
Benefit plan prior service cost recognized in accumulated other comprehensive income (loss):
|
||||||||||||||||||
|
Beginning of year
|
$
|
—
|
|
—
|
|
(9.2
|
)
|
(10.8
|
)
|
(9.2
|
)
|
(10.8
|
)
|
|||||
|
Prior service credit (cost) from plan amendments during the year
|
—
|
|
—
|
|
—
|
|
0.2
|
|
—
|
|
0.2
|
|
||||||
|
Reclassification adjustment for amortization of prior service cost included in net income (loss)
|
—
|
|
—
|
|
1.1
|
|
1.0
|
|
1.1
|
|
1.0
|
|
||||||
|
Foreign currency exchange effects
|
—
|
|
—
|
|
(0.2
|
)
|
0.4
|
|
(0.2
|
)
|
0.4
|
|
||||||
|
End of year
|
$
|
—
|
|
—
|
|
(8.3
|
)
|
(9.2
|
)
|
(8.3
|
)
|
(9.2
|
)
|
|||||
Approximately
$33.0 million
of actuarial loss and
$0.1 million
of prior service cost are expected to be amortized from accumulated other comprehensive income (loss) into net periodic pension cost during
2018
.
The net actuarial losses in 2017 were primarily due to the lower discount rates at the end of the year compared to the prior year, largely offset by actual return on assets being higher than expected. The net actuarial losses in 2016 were primarily due to the lower discount rates at the end of the year compared to the prior year, partially offset by actual return on assets being higher than expected.
Information Comparing Plan Assets to Plan Obligations
Information comparing plan assets to plan obligations as of
December 31, 2017
and
2016
are aggregated below. The accumulated benefit obligation (“ABO”) differs from the PBO in that the ABO is based on the benefit earned through the date noted. The PBO includes assumptions about future compensation levels for plans that have not been frozen. The total ABO for our U.S. pension plans was
$890.3 million
in
2017
and
$845.9 million
in
2016
. The total ABO for our Non-U.S. pension plans was
$264.8 million
in
2017
and
$232.3 million
in
2016
.
|
(In millions)
|
U.S. Plans
|
Non-U.S. Plans
|
Total
|
|||||||||||||||
|
December 31,
|
2017
|
2016
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
|
Information for pension plans with an ABO in excess of plan assets:
|
||||||||||||||||||
|
Fair value of plan assets
|
$
|
777.2
|
|
728.5
|
|
47.6
|
|
41.3
|
|
824.8
|
|
769.8
|
|
|||||
|
Accumulated benefit obligation
|
890.3
|
|
845.9
|
|
120.2
|
|
107.3
|
|
1,010.5
|
|
953.2
|
|
||||||
|
Projected benefit obligation
|
890.3
|
|
845.9
|
|
139.8
|
|
127.9
|
|
1,030.1
|
|
973.8
|
|
||||||
80
Assumptions
The weighted-average assumptions used to determine the net pension cost and benefit obligations for our pension plans were as follows:
|
U.S. Plans
|
Non-U.S. Plans
(b)
|
||||||||||||||||
|
2017
|
2016
|
2015
|
2017
|
2016
|
2015
|
||||||||||||
|
Discount rate:
|
|||||||||||||||||
|
Pension cost
|
4.3
|
%
|
4.5
|
%
|
4.1
|
%
|
3.7
|
%
|
5.1
|
%
|
5.1
|
%
|
|||||
|
Benefit obligation at year end
|
3.7
|
%
|
4.3
|
%
|
4.5
|
%
|
3.5
|
%
|
3.7
|
%
|
5.1
|
%
|
|||||
|
Expected return on assets – pension cost
|
7.25
|
%
|
7.50
|
%
|
7.50
|
%
|
5.50
|
%
|
5.65
|
%
|
5.58
|
%
|
|||||
|
Average rate of increase in salaries
(a):
|
|||||||||||||||||
|
Pension cost
|
N/A
|
|
N/A
|
|
N/A
|
|
2.7
|
%
|
3.8
|
%
|
3.9
|
%
|
|||||
|
Benefit obligation at year end
|
N/A
|
|
N/A
|
|
N/A
|
|
2.6
|
%
|
2.7
|
%
|
3.8
|
%
|
|||||
|
(a)
|
Salary scale assumptions are determined through historical experience and vary by age and industry. The U.S. plan benefits are frozen and will not increase due to future salary increases.
|
|
(b)
|
The discount and salary increase rates of our Venezuela benefit plan are not adjusted for inflation. See the separate section below for more details.
|
Mortality Tables for our U.S. Retirement Benefits
We use the Mercer modified RP-2014 base table and the Mercer modified MP-2016 projection scale, with a Blue Collar adjustment factor for the majority of our U.S. retirement plans and a White Collar adjustment factor for our nonqualified U.S. pension plan.
Estimated Future Cash Flows
Estimated Future Contributions from the Company into Plan Assets
Our policy is to fund at least the minimum actuarially determined amounts required by applicable regulations. We do not expect to make contributions to our primary U.S. pension plan in
2018
. We expect to contribute
$14.2 million
to our non-U.S. pension plans and
$0.7 million
to our nonqualified U.S. pension plan in
2018
.
Estimated Future Benefit Payments from Plan Assets to Beneficiaries
Projected benefit payments of the plans in the next 10 years using assumptions in effect at
December 31, 2017
, are as follows:
|
(In millions)
|
U.S. Plans
|
Non-U.S. Plans
(a)
|
Total
|
||||||
|
2018
|
$
|
51.1
|
|
11.5
|
|
62.6
|
|
||
|
2019
|
52.0
|
|
11.3
|
|
63.3
|
|
|||
|
2020
|
51.6
|
|
11.7
|
|
63.3
|
|
|||
|
2021
|
51.5
|
|
13.0
|
|
64.5
|
|
|||
|
2022
|
51.5
|
|
13.3
|
|
64.8
|
|
|||
|
2023 through 2027
|
256.7
|
|
86.8
|
|
343.5
|
|
|||
|
(a)
|
Excludes projected benefit payments related to our Venezuela benefit plan, which are presented separately in the section below.
|
81
Venezuela
Our non-U.S. net pension liability includes projected benefit obligations related to Venezuela of
$4.3 million
,
$5.6 million
, and
$4.1 million
at December 31,
2017
,
2016
and
2015
, respectively. The net periodic pension cost related to these benefit obligations was
$7.5 million
,
$2.9 million
, and
$2.5 million
in
2017
,
2016
and
2015
, respectively.
As discussed in Note 1, the economy in Venezuela has had significant inflation in the last several years and we consolidate our Venezuelan results using highly inflationary accounting rules. In determining the projected benefit obligation and net periodic pension cost, we project our bolivar-denominated expected cash outflows using expected salary increases and discount the expected cash outflows to present value. The discount rate and salary scale are adjusted for expected inflation.
The assumption for inflation in Venezuela was made considering the current economic situation in Venezuela and an analysis of regional economic performances during hyperinflationary cycles. Over the long term, we expect the economy of Venezuela will return to inflation rates more typical for the region. Based on these considerations, we assumed an inflation rate of
900%
in 2018 with a gradual decline to
4%
in 2033. For
2017
, this inflation adjustment has been excluded from the non-U.S. assumptions table above.
As the projected salary increases and discount rate are both adjusted for inflation, there is not a significant impact to our current year projected benefit obligation as a result of increasing expected inflation. Our real net discount rate for Venezuela was
4%
and was determined using government bonds within the region. There are no salary increases expected other than inflationary increases.
The inflation adjustment for Venezuela results in significant expected bolivar-denominated cash outflows in the next
10
years as these amounts are increased for inflationary growth but are not discounted back to present value. As we expect to make these benefit payments in bolivars with cash generated from our Venezuelan operations, these amounts have been excluded from the estimated future non-U.S. projected benefit payments table above.
When these undiscounted bolivar-denominated cash outflows are translated into U.S. dollars at the
December 31, 2017
DICOM exchange rate of approximately
3,345
bolivars to the dollar, for purposes of U.S. GAAP reporting, the results are projected cash outflows of
$38.7 trillion
as presented in the table below. In addition to being undiscounted, these U.S. dollar translated projected cash outflows also do not reflect future inflation-driven devaluation of the Venezuelan currency. The devaluation of the Venezuelan bolivar has been significant over the last three years. The exchange rate was
674
bolivars to the dollar at December 31, 2016, which is a
70%
decline from the December 31, 2015 rate of
199
bolivars to the dollar. Further, the
December 31, 2017
DICOM exchange rate of approximately
3,345
bolivars to the dollar reflects an additional
80%
decline from the end of 2016.
Venezuela Estimated Future Benefit Payments to Beneficiaries - Undiscounted and not Reflecting Future Currency Devaluation
Projected benefit payments of our Venezuela benefit plan in the next 10 years using assumptions in effect at
December 31, 2017
, are as follows:
|
(In millions)
|
Venezuela
|
|
|
2018
|
0.8
|
|
|
2019
|
4.7
|
|
|
2020
|
40.5
|
|
|
2021
|
354.6
|
|
|
2022
|
3,243.4
|
|
|
2023 through 2027
|
38,740,810.4
|
|
82
Retirement Benefits Other than Pensions
Summary
We provide retirement healthcare benefits for eligible current and former U.S., Canadian, and Brazilian employees. Retirement benefits related to our former U.S. coal operation include medical benefits provided by the Pittston Coal Group Companies Employee Benefit Plan for UMWA Represented Employees (the “UMWA plans”) as well as costs related to black lung obligations.
Components of Net Periodic Postretirement Cost
The components of net periodic postretirement cost related to retirement benefits other than pensions were as follows:
|
(In millions)
|
UMWA Plans
|
Black Lung and Other Plans
|
Total
|
||||||||||||||||||||||||||
|
Years Ended December 31,
|
2017
|
2016
|
2015
|
2017
|
2016
|
2015
|
2017
|
2016
|
2015
|
||||||||||||||||||||
|
Service cost
|
$
|
—
|
|
—
|
|
—
|
|
$
|
0.1
|
|
—
|
|
0.2
|
|
$
|
0.1
|
|
—
|
|
0.2
|
|
||||||||
|
Interest cost on APBO
|
18.4
|
|
18.9
|
|
17.1
|
|
3.2
|
|
2.7
|
|
2.8
|
|
21.6
|
|
21.6
|
|
19.9
|
|
|||||||||||
|
Return on assets – expected
|
(16.5
|
)
|
(17.5
|
)
|
(20.6
|
)
|
—
|
|
—
|
|
—
|
|
(16.5
|
)
|
(17.5
|
)
|
(20.6
|
)
|
|||||||||||
|
Amortization of losses
|
19.5
|
|
18.0
|
|
15.5
|
|
4.1
|
|
2.5
|
|
3.1
|
|
23.6
|
|
20.5
|
|
18.6
|
|
|||||||||||
|
Amortization of prior service cost (credit)
|
(4.6
|
)
|
(4.6
|
)
|
(4.6
|
)
|
1.7
|
|
1.7
|
|
1.8
|
|
(2.9
|
)
|
(2.9
|
)
|
(2.8
|
)
|
|||||||||||
|
Curtailment (gain)
|
—
|
|
—
|
|
—
|
|
(0.1
|
)
|
—
|
|
(0.1
|
)
|
(0.1
|
)
|
—
|
|
(0.1
|
)
|
|||||||||||
|
Net periodic postretirement cost
|
$
|
16.8
|
|
14.8
|
|
7.4
|
|
$
|
9.0
|
|
6.9
|
|
7.8
|
|
$
|
25.8
|
|
21.7
|
|
15.2
|
|
||||||||
The components of net periodic postretirement cost other than the service cost component are included in interest and other income (expense) in the consolidated statements of operations.
Obligations and Funded Status
Changes in the accumulated postretirement benefit obligation (“APBO’) and plan assets related to retirement healthcare benefits are as follows:
|
(In millions)
|
UMWA Plans
|
Black Lung and Other Plans
|
Total
|
|||||||||||||||
|
Years Ended December 31,
|
2017
|
2016
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
|
APBO at beginning of year
|
$
|
444.2
|
|
433.1
|
|
66.1
|
|
59.8
|
|
510.3
|
|
492.9
|
|
|||||
|
Service cost
|
—
|
|
—
|
|
0.1
|
|
—
|
|
0.1
|
|
—
|
|
||||||
|
Interest cost
|
18.4
|
|
18.9
|
|
3.2
|
|
2.7
|
|
21.6
|
|
21.6
|
|
||||||
|
Plan amendments
|
—
|
|
—
|
|
(1.1
|
)
|
—
|
|
(1.1
|
)
|
—
|
|
||||||
|
Curtailment
|
—
|
|
—
|
|
(2.4
|
)
|
—
|
|
(2.4
|
)
|
—
|
|
||||||
|
Benefits paid
|
(33.5
|
)
|
(31.7
|
)
|
(7.4
|
)
|
(8.3
|
)
|
(40.9
|
)
|
(40.0
|
)
|
||||||
|
Actuarial (gains) losses, net
|
84.4
|
|
23.9
|
|
17.3
|
|
11.2
|
|
101.7
|
|
35.1
|
|
||||||
|
Foreign currency exchange effects
|
—
|
|
—
|
|
—
|
|
0.7
|
|
—
|
|
0.7
|
|
||||||
|
APBO at end of year
|
$
|
513.5
|
|
444.2
|
|
75.8
|
|
66.1
|
|
589.3
|
|
510.3
|
|
|||||
|
Fair value of plan assets at beginning of year
|
$
|
217.6
|
|
227.4
|
|
—
|
|
—
|
|
217.6
|
|
227.4
|
|
|||||
|
Return on assets – actual
|
34.6
|
|
22.2
|
|
—
|
|
—
|
|
34.6
|
|
22.2
|
|
||||||
|
Employer contributions
|
0.5
|
|
(0.3
|
)
|
7.4
|
|
8.3
|
|
7.9
|
|
8.0
|
|
||||||
|
Benefits paid
|
(33.5
|
)
|
(31.7
|
)
|
(7.4
|
)
|
(8.3
|
)
|
(40.9
|
)
|
(40.0
|
)
|
||||||
|
Fair value of plan assets at end of year
|
$
|
219.2
|
|
217.6
|
|
—
|
|
—
|
|
219.2
|
|
217.6
|
|
|||||
|
Funded status
|
$
|
(294.3
|
)
|
(226.6
|
)
|
(75.8
|
)
|
(66.1
|
)
|
(370.1
|
)
|
(292.7
|
)
|
|||||
|
Included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Current, included in accrued liabilities
|
$
|
—
|
|
—
|
|
7.3
|
|
6.6
|
|
7.3
|
|
6.6
|
|
|||||
|
Noncurrent
|
294.3
|
|
226.6
|
|
68.5
|
|
59.5
|
|
362.8
|
|
286.1
|
|
||||||
|
Retirement benefits other than pension liability
|
$
|
294.3
|
|
226.6
|
|
75.8
|
|
66.1
|
|
370.1
|
|
292.7
|
|
|||||
83
Other Changes in Plan Assets and Benefit Recognized in Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) of our retirement benefit plans other than pensions are as follows:
|
(In millions)
|
UMWA Plans
|
Black Lung and Other Plans
|
Total
|
|||||||||||||||
|
Years Ended December 31,
|
2017
|
2016
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
|
Benefit plan net actuarial gain (loss) recognized in accumulated other comprehensive income (loss):
|
||||||||||||||||||
|
Beginning of year
|
$
|
(263.0
|
)
|
(261.8
|
)
|
(32.2
|
)
|
(25.8
|
)
|
(295.2
|
)
|
(287.6
|
)
|
|||||
|
Net actuarial gains (losses) arising during the year
|
(66.3
|
)
|
(19.2
|
)
|
(14.9
|
)
|
(11.2
|
)
|
(81.2
|
)
|
(30.4
|
)
|
||||||
|
Reclassification adjustment for amortization of prior actuarial losses included in net income (loss)
|
19.5
|
|
18.0
|
|
4.1
|
|
2.5
|
|
23.6
|
|
20.5
|
|
||||||
|
Foreign currency exchange effects
|
—
|
|
—
|
|
—
|
|
2.3
|
|
—
|
|
2.3
|
|
||||||
|
End of year
|
$
|
(309.8
|
)
|
(263.0
|
)
|
(43.0
|
)
|
(32.2
|
)
|
(352.8
|
)
|
(295.2
|
)
|
|||||
|
Benefit plan prior service (cost) credit recognized in accumulated other comprehensive income (loss):
|
||||||||||||||||||
|
Beginning of year
|
$
|
41.9
|
|
46.5
|
|
(2.1
|
)
|
(3.5
|
)
|
39.8
|
|
43.0
|
|
|||||
|
Prior service credit from plan amendments during the year
|
—
|
|
—
|
|
1.1
|
|
—
|
|
1.1
|
|
—
|
|
||||||
|
Reclassification adjustment for amortization or curtailment of prior service cost included in net income (loss)
|
(4.6
|
)
|
(4.6
|
)
|
1.6
|
|
1.7
|
|
(3.0
|
)
|
(2.9
|
)
|
||||||
|
Foreign currency exchange effects
|
—
|
|
—
|
|
0.1
|
|
(0.3
|
)
|
0.1
|
|
(0.3
|
)
|
||||||
|
End of year
|
$
|
37.3
|
|
41.9
|
|
0.7
|
|
(2.1
|
)
|
38.0
|
|
39.8
|
|
|||||
We estimate that
$26.7 million
of actuarial loss and
$3.5 million
of prior service credit will be amortized from accumulated other comprehensive income (loss) into net periodic postretirement cost during
2018
.
We recognized net actuarial losses in 2017 associated with the UMWA obligations primarily due to a lower discount rate, partially offset by return on assets being higher than expected. We recognized net actuarial losses in 2017 associated with the black lung and other plans primarily related to a lower discount rate.
We recognized net actuarial losses in 2016 associated with the UMWA obligations primarily due to a lower discount rate, partially offset by return on assets being higher than expected. We recognized net actuarial losses in 2016 associated with the black lung and other plans primarily related to a lower discount rate.
Assumptions
See
Mortality Tables for our U.S. Retirement Benefits
on page 81 for a description of the mortality assumptions.
The APBO for each of the plans was determined using the unit credit method and assumed rates as follows:
|
2017
|
2016
|
2015
|
||||||
|
Weighted-average discount rate:
|
||||||||
|
Postretirement cost:
|
||||||||
|
UMWA plans
|
4.1
|
%
|
4.4
|
%
|
4.0
|
%
|
||
|
Black lung
|
3.9
|
%
|
4.2
|
%
|
3.7
|
%
|
||
|
Weighted-average
|
4.2
|
%
|
4.4
|
%
|
4.1
|
%
|
||
|
Benefit obligation at year end:
|
||||||||
|
UMWA plans
|
3.6
|
%
|
4.1
|
%
|
4.4
|
%
|
||
|
Black lung
|
3.5
|
%
|
3.9
|
%
|
4.2
|
%
|
||
|
Weighted-average
|
3.7
|
%
|
4.2
|
%
|
4.4
|
%
|
||
|
Expected return on assets
|
8.25
|
%
|
8.25
|
%
|
8.25
|
%
|
||
84
Healthcare Cost Trend Rates
For UMWA plans, the assumed healthcare cost trend rate used to compute the
2017
APBO is
6.5%
for
2018
, declining to
5.0%
in
2024
and thereafter (in
2016
:
7.0%
for
2017
declining to
5.0%
in
2023
and thereafter). For the black lung obligation, the assumed healthcare cost trend rate used to compute the
2017
APBO was
5.0%
. Other plans in the U.S. provide for fixed-dollar value coverage for eligible participants and, accordingly, are not adjusted for inflation.
For the Canadian plan, the assumed healthcare cost trend rate used to compute the
2017
APBO is
6.5%
for
2018
, declining to
5.0%
in
2024
. For the Brazilian plan, the assumed healthcare cost trend rate used to compute the
2017
APBO is
3.3%
.
The table below shows the estimated effects of a one percentage-point change in the assumed healthcare cost trend rates for each future year.
|
Effect of Change in Assumed Healthcare Trend Rates
|
||||||
|
(In millions)
|
Increase 1%
|
Decrease 1%
|
||||
|
Higher (lower):
|
||||||
|
Service and interest cost in 2018
|
$
|
2.3
|
|
(1.9
|
)
|
|
|
APBO at December 31, 2018
|
79.4
|
|
(67.0
|
)
|
||
We provide healthcare benefits to our UMWA retirees who are eligible for the
Medicare Prescription Drug, Improvement and Modernization Act of 2003
(the “Medicare Act”) subsidy reimbursement under an employer group waiver plan (“EGWP”). Under this arrangement, a government approved health insurance provider receives the Medicare Act subsidy reimbursement on our behalf and passes these savings to us. Additionally, by providing healthcare benefits under an EGWP, we are able to benefit from the mandatory
50%
discount that pharmaceutical companies must provide for Medicare Act-eligible prescription drugs.
Excise Tax on Administrators by Patient Protection and Affordable Care Act of 2010
A
40%
excise tax on third-party benefit plan administrators by the
Patient Protection and Affordable Care
Act
will be imposed on high-cost health plans (“Cadillac plans”). The new Tax Reform Act delayed the effective date of the excise tax on Cadillac plans to 2022. We are currently unable to reduce the benefit levels of our UMWA medical plans to avoid this excise tax because these benefit levels are required by the Coal Industry Retiree Health Benefit Act of 1992. We have assumed that the cost of the excise tax paid by administrators will be passed through to us in the form of higher premiums or higher claims administration fees, increasing our obligations. Our plan obligations at
December 31, 2017
, include
$34.5 million
related to this tax (
$19.4 million
at
December 31, 2016
).
Cash Flows
Estimated Contributions from the Company to Plan Assets
Based on the funded status and assumptions at
December 31, 2017
, we expect the Company to contribute
$7.3 million
in cash to the plans to pay
2018
beneficiary payments for black lung and other plans. We do not expect to contribute cash to our UMWA plans in
2018
since we believe these plans have sufficient amounts held in trust to pay for beneficiary payments until
2027
based on actuarial assumptions. Our UMWA plans are not covered by ERISA or other funding laws or regulations that require these plans to meet funding ratios.
Estimated Future Benefit Payments from Plan Assets to Beneficiaries
Projected benefit payments of the plans in the next
10
years using assumptions in effect at
December 31, 2017
, are as follows:
|
(In millions)
|
UMWA Plans
|
Black Lung and Other Plans
|
Total
|
||||||
|
2018
|
$
|
34.2
|
|
7.3
|
|
41.5
|
|
||
|
2019
|
34.0
|
|
6.9
|
|
40.9
|
|
|||
|
2020
|
34.4
|
|
6.4
|
|
40.8
|
|
|||
|
2021
|
34.3
|
|
6.0
|
|
40.3
|
|
|||
|
2022
|
33.6
|
|
5.6
|
|
39.2
|
|
|||
|
2023 through 2027
|
156.3
|
|
22.9
|
|
179.2
|
|
|||
85
Retirement Plan Assets
U.S. Plans
|
|
December 31, 2017
|
December 31, 2016
|
||||||||||||||
|
(In millions, except for percentages)
|
Fair Value Level
|
Total Fair Value
|
% Actual Allocation
|
% Target Allocation
|
Total Fair Value
|
% Actual Allocation
|
% Target Allocation
|
|||||||||
|
U.S. Pension Plans
|
||||||||||||||||
|
Cash, cash equivalents and receivables
|
$
|
4.6
|
|
1
|
—
|
4.0
|
|
—
|
—
|
|||||||
|
Equity securities:
|
||||||||||||||||
|
U.S. large-cap
(a)
|
1
|
88.1
|
|
11
|
12
|
94.1
|
|
13
|
14
|
|||||||
|
U.S. small/mid-cap
(a)
|
1
|
36.4
|
|
5
|
5
|
40.6
|
|
6
|
6
|
|||||||
|
International
(a)
|
1
|
111.5
|
|
14
|
15
|
80.1
|
|
11
|
12
|
|||||||
|
Emerging markets
(b)
|
1
|
15.0
|
|
2
|
2
|
9.9
|
|
1
|
2
|
|||||||
|
Dynamic asset allocation
(c)
|
1
|
29.8
|
|
4
|
4
|
26.6
|
|
4
|
4
|
|||||||
|
Fixed-income securities:
|
||||||||||||||||
|
Long duration - mutual fund
(d)
|
1
|
304.2
|
|
49
|
48
|
282.6
|
|
48
|
48
|
|||||||
|
Long duration - Treasury strips
(d)
|
2
|
74.5
|
|
65.3
|
|
|||||||||||
|
High yield
(e)
|
1
|
14.8
|
|
2
|
2
|
10.5
|
|
1
|
2
|
|||||||
|
Emerging markets
(f)
|
1
|
15.2
|
|
2
|
2
|
9.7
|
|
1
|
2
|
|||||||
|
Other types of investments:
|
||||||||||||||||
|
Core property
(g) (l)
|
|
41.0
|
|
5
|
5
|
56.9
|
|
8
|
5
|
|||||||
|
Structured credit
(h) (l)
|
|
42.1
|
|
5
|
5
|
48.2
|
|
7
|
5
|
|||||||
|
Total
|
$
|
777.2
|
|
100
|
100
|
728.5
|
|
100
|
100
|
|||||||
|
UMWA Plans
|
||||||||||||||||
|
Equity securities:
|
||||||||||||||||
|
U.S. large-cap
(a)
|
1
|
$
|
40.3
|
|
18
|
19
|
45.5
|
|
21
|
22
|
||||||
|
U.S. small/mid-cap
(a)
|
1
|
16.8
|
|
8
|
8
|
19.9
|
|
9
|
10
|
|||||||
|
International
(a)
|
1
|
50.6
|
|
23
|
24
|
40.1
|
|
19
|
19
|
|||||||
|
Emerging markets
(b)
|
1
|
8.6
|
|
4
|
4
|
8.2
|
|
4
|
4
|
|||||||
|
Dynamic asset allocation
(c)
|
1
|
15.2
|
|
7
|
7
|
14.9
|
|
7
|
7
|
|||||||
|
Fixed-income securities:
|
||||||||||||||||
|
High yield
(e)
|
1
|
4.3
|
|
2
|
2
|
4.4
|
|
2
|
2
|
|||||||
|
Emerging markets
(f)
|
1
|
8.7
|
|
4
|
4
|
8.1
|
|
4
|
4
|
|||||||
|
Multi asset real return
(i)
|
1
|
10.8
|
|
5
|
5
|
10.6
|
|
5
|
5
|
|||||||
|
Other types of investments:
|
||||||||||||||||
|
Core property
(g) (l)
|
|
23.1
|
|
11
|
10
|
24.9
|
|
11
|
10
|
|||||||
|
Structured credit
(h) (l)
|
|
12.4
|
|
6
|
5
|
16.1
|
|
7
|
5
|
|||||||
|
Global private equity
(j) (l)
|
11.8
|
|
5
|
7
|
8.6
|
|
4
|
7
|
||||||||
|
Energy debt
(k) (l)
|
16.6
|
|
7
|
5
|
16.3
|
|
7
|
5
|
||||||||
|
Total
|
$
|
219.2
|
|
100
|
100
|
217.6
|
|
100
|
100
|
|||||||
|
(a)
|
These categories include passively managed U.S. large-cap mutual funds and actively managed U.S. small/mid-cap and international mutual funds that track various indices such as the S&P 500 Index, the Russell 2500 Index and the MSCI All Country World Ex-U.S. Index.
|
|
(b)
|
This category represents an actively managed mutual fund that invests primarily in equity securities of emerging market issuers. Emerging market countries are those countries that are characterized as developing or emerging by any of the World Bank, the United Nations, the International Finance Corporation, or the European Bank for Reconstruction and Development or included in an emerging markets index by a recognized index provider.
|
|
(c)
|
This category represents an actively managed mutual fund that seeks to generate total return over time by selecting investments from among a broad range of asset classes. The fund’s allocations among asset classes may be adjusted over short periods and can vary from multiple to a single asset class.
|
|
(d)
|
This category represents actively managed mutual funds that seek to duplicate the risk and return characteristics of a long-term fixed-income security portfolio with approximate duration of
25 years
and longer by using a long duration bond portfolio. This category also includes Treasury future contracts and
zero
-coupon securities created by the U.S. Treasury.
|
|
(e)
|
This category represents an actively managed mutual fund that invests primarily in fixed-income securities rated below investment grade, including corporate bonds and debentures, convertible and preferred securities and zero-coupon obligations. The fund’s average weighted maturity may vary and will generally not exceed
ten
years.
|
|
(f)
|
This category represents an actively managed mutual fund that invests primarily in U.S. dollar-denominated debt securities of government, government-related and corporate issuers in emerging market countries, as well as entities organized to restructure the outstanding debt of such issuers.
|
|
(g)
|
This category represents an actively managed real estate fund of funds that seeks both current income and long-term capital appreciation through investing in underlying funds that acquire, manage, and dispose of commercial real estate properties. These properties are high-quality, low-leveraged, income-generating office, industrial, retail, and multi-family properties, generally fully-leased to creditworthy companies and governmental entities.
|
|
(h)
|
This category invests primarily in a diversified portfolio comprised primarily of collateralized loan obligations and other structured credit investments backed primarily by bank loans.
|
|
(i)
|
This category represents an actively managed mutual fund that invests primarily in fixed income and equity securities and commodity linked instruments. The category seeks total returns that exceed the rate of inflation over a full market cycle regardless of market conditions.
|
|
(j)
|
This category will offer exposure to a diversified pool of global private assets fund investments. Further, the category will seek to shorten the duration of the typical private assets fund of funds through a dedicated focus on secondary strategies (i.e. funds whose investment strategy is to purchase interests in other private market investments/funds as a way to provide the original investors liquidity prior to the end of those investments’/funds’ contracted end date), income-producing investment strategies (e.g. debt, real estate, and to a lesser extent, real assets), and underlying funds whose stated life is
five
to
seven
years, as opposed to the more typical
10
-year life of private assets funds.
|
|
(k)
|
This category invests in credit securities of commodity oriented companies affected by the dislocation in the commodity markets with the investment objective of producing an equity like return with less downside risk than equity or commodity investments.
|
|
(l)
|
In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.
|
86
Assets of our U.S. plans are invested with an objective of maximizing the total return, taking into consideration the liabilities of the plan, and minimizing the risks that could create the need for excessive contributions. Plan assets are invested primarily using actively managed accounts with asset allocation targets listed in the tables above. Our policy does not permit the purchase of Brink’s common stock if immediately after any such purchase the aggregate fair market value of the plan assets invested in Brink’s common stock exceeds
10%
of the aggregate fair market value of the assets of the plan, except as permitted by an exemption under ERISA. The plans rebalance their assets on a quarterly basis if actual allocations of assets are outside predetermined ranges. Among other factors, the performance of asset groups and investment managers will affect the long-term rate of return.
The UMWA plans acquired the structured credit investment in 2014. The investment is subject to a
two
-year lockup provision, which expired in 2016. The UMWA plans also acquired the energy debt investment in 2015, which is subject to a
three
-year lockup provision, which will expire in 2018.
The global private equity investment cannot be redeemed due to the nature of the underlying investments. As the global private equity investment matures and becomes fully invested, liquidating distributions will be provided back to investors. We expect to receive liquidating distributions over the stated life of the underlying investments. We have
$11 million
in unfunded commitments related to the global private equity investment.
Most of the investments of our U.S. retirement plans can be redeemed daily. The structured credit investments can be redeemed quarterly with
65
days’ notice. The core property fund investment can be redeemed quarterly with
95
days’ notice. The energy debt investment can be redeemed semi-annually with
95
days' notice.
We believe all plans have sufficient liquidity to meet the needs of the plans' beneficiaries in all market scenarios.
Non-U.S. Plans
|
December 31, 2017
|
December 31, 2016
|
|||||||||||||
|
(In millions, except for percentages)
|
Total Fair Value
|
% Actual Allocation
|
% Target Allocation
|
Total Fair Value
|
% Actual Allocation
|
% Target Allocation
|
||||||||
|
Non-U.S. Pension Plans
|
||||||||||||||
|
Cash and cash equivalents
|
$
|
0.3
|
|
—
|
—
|
0.9
|
|
—
|
—
|
|||||
|
Equity securities:
|
||||||||||||||
|
U.S. equity funds
(a)
|
28.3
|
|
25.5
|
|
||||||||||
|
Canadian equity funds
(a)
|
39.0
|
|
33.9
|
|
||||||||||
|
European equity funds
(a)
|
4.8
|
|
4.5
|
|
||||||||||
|
Emerging markets
(a)
|
5.6
|
|
4.6
|
|
||||||||||
|
Other non-U.S. equity funds
(a)
|
24.8
|
|
22.7
|
|
||||||||||
|
Total equity securities
|
102.5
|
|
51
|
52
|
91.2
|
|
53
|
53
|
||||||
|
Fixed-income securities:
|
||||||||||||||
|
European fixed-income funds
(b)
|
18.4
|
|
14.1
|
|
||||||||||
|
High-yield
(c)
|
1.3
|
|
1.2
|
|
||||||||||
|
Emerging markets
(d)
|
1.6
|
|
1.4
|
|
||||||||||
|
Long-duration
(e)
|
77.1
|
|
63.1
|
|
||||||||||
|
Total fixed-income securities
|
98.4
|
|
49
|
47
|
79.8
|
|
46
|
46
|
||||||
|
Other types of investments:
|
||||||||||||||
|
Other
|
1.7
|
|
1.5
|
|
||||||||||
|
Total other types of investments
|
1.7
|
|
—
|
1
|
1.5
|
|
1
|
1
|
||||||
|
Total
|
$
|
202.9
|
|
100
|
100
|
173.4
|
|
100
|
100
|
|||||
|
(a)
|
These categories are comprised of equity index actively and passively managed funds that track various indices such as S&P 500 Composite Total Return Index, Russell 1000 and 2000 Indices, MSCI Europe Ex-UK Index, S&P/TSX Total Return Index, MSCI EAFE Index and others. Some of these funds use a dynamic asset allocation investment strategy seeking to generate total return over time by selecting investments from among a broad range of asset classes, investing primarily through the use of derivatives.
|
|
(b)
|
This category is primarily designed to generate income and exhibit volatility similar to that of the Sterling denominated bond market. This category primarily invests in investment grade or better securities.
|
|
(c)
|
This category consists of global high-yield bonds. This category invests in lower rated and unrated fixed income, floating rate and other debt securities issued by European and American companies.
|
|
(d)
|
This category consists of a diversified portfolio of debt securities issued by governments, financial institutions, companies or other entities domiciled in emerging market countries.
|
|
(e)
|
This category is designed to achieve a return consistent with holding longer term debt instruments. This category invests in interest rate and inflation derivatives, government-issued bonds, real-return bonds, and futures contracts.
|
Asset allocation strategies for our non-U.S. plans are designed to accumulate a diversified portfolio among markets and asset classes in order to reduce market risk and increase the likelihood that pension assets are available to pay benefits as they are due. Assets of non-U.S. pension plans are invested primarily using actively managed accounts. The weighted-average asset allocation targets are listed in the table above, and reflect limitations on types of investments held and allocations among assets classes, as required by local regulation or market practice of the country where the assets are invested. Most of the investments of our non-U.S. retirement plans can be redeemed at least monthly, except for a portion of “Other” in the above table, which can be redeemed quarterly.
87
Non-U.S. Plans - Fair Value Measurements
|
(In millions)
|
December 31, 2017
|
December 31, 2016
|
||||
|
Quoted prices in active markets for identical assets (Level 1)
|
$
|
182.6
|
|
156.0
|
|
|
|
Net asset value per share practical expedient
(a)
|
20.3
|
|
17.4
|
|
||
|
Total fair value
|
$
|
202.9
|
|
173.4
|
|
|
|
(a)
|
In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.
|
Savings Plans
We sponsor various defined contribution plans to help eligible employees provide for retirement. We record expense for amounts that we contribute on behalf of employees, usually in the form of matching contributions. Prior to April 1, 2017, we matched the first
1.5%
of employees’ eligible contributions to our U.S. 401(k) plan. In April 2017, we increased the matching contribution to the first
2%
of employees' eligible contributions. Our matching contribution expense is as follows:
|
(In millions)
|
|||||||||
|
Years Ended December 31,
|
2017
|
2016
|
2015
|
||||||
|
U.S. 401(K)
|
$
|
4.4
|
|
3.4
|
|
3.6
|
|
||
|
Other plans
|
4.6
|
|
4.5
|
|
0.3
|
|
|||
|
Total
|
$
|
9.0
|
|
7.9
|
|
3.9
|
|
||
88
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“Tax Reform Act”) was enacted into law. The Tax Reform Act includes a reduction in the federal tax rate for corporations from
35%
to
21%
as of January 1, 2018, a one-time transition tax on the cumulative undistributed earnings of foreign subsidiaries as of December 31, 2017, a repeal of the corporate alternative minimum tax, and more extensive limitations on deductibility of performance-based compensation for named executive officers. Other provisions effective as of January 1, 2018, which could materially impact the Company in the near-term, include the creation of a new U.S. minimum tax on foreign earnings called the Global Intangible Low-Taxed Income (“GILTI”) and limitations on the deductibility of interest expense.
Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Reform Act, the Company has recorded provisional amounts as of December 31, 2017, in accordance with Staff Accounting Bulletin No. 118 (“SAB 118”). We recorded a provisional one-time non-cash charge of
$92 million
in the fourth quarter of 2017 to remeasure the deferred tax assets for the new rate and for other legislative changes. We do not expect a U.S. federal current tax liability for the transition tax due to our high-tax foreign income, but we have recorded a provisional
$31.1 million
foreign tax credit offset with a full valuation allowance related to the transition tax. We did not record a current state tax liability related to the transition tax in accordance with the interpretation of existing state laws and the provisional estimates. The Company has not yet adopted an accounting policy related to the provision of deferred taxes related to GILTI. We did not change our assertion on the determination of which subsidiaries that we consider to be permanently invested and for which we do not expect to repatriate to the U.S. as a result of the Tax Reform Act. We will continue to collect and analyze data, including the undistributed earnings of foreign subsidiaries and related taxes, interpret the Tax Reform Act and apply the additional guidance and legislative changes to be issued by the U.S. federal and state authorities and may be required to make adjustments to these provisional amounts. The accounting for the Tax Reform Act will be completed by the end of 2018 in accordance with SAB 118.
|
Years Ended December 31,
|
|||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
||||||
|
Income (loss) from continuing operations before income taxes
|
|||||||||
|
U.S.
|
$
|
(41.6
|
)
|
(28.3
|
)
|
(23.2
|
)
|
||
|
Foreign
|
223.1
|
|
153.3
|
|
64.3
|
|
|||
|
Income from continuing operations before income taxes
|
$
|
181.5
|
|
125.0
|
|
41.1
|
|
||
|
Provision (benefit) for income taxes from continuing operations
|
|||||||||
|
Current tax expense (benefit)
|
|||||||||
|
U.S. federal
|
$
|
(33.7
|
)
|
(3.3
|
)
|
(1.0
|
)
|
||
|
State
|
0.4
|
|
0.5
|
|
(0.2
|
)
|
|||
|
Foreign
|
96.8
|
|
84.2
|
|
60.6
|
|
|||
|
Current tax expense
|
63.5
|
|
81.4
|
|
59.4
|
|
|||
|
Deferred tax expense (benefit)
|
|||||||||
|
U.S. federal
|
106.2
|
|
0.6
|
|
7.7
|
|
|||
|
State
|
(4.9
|
)
|
(0.1
|
)
|
—
|
|
|||
|
Foreign
|
(7.1
|
)
|
(3.4
|
)
|
(0.6
|
)
|
|||
|
Deferred tax expense (benefit)
|
94.2
|
|
(2.9
|
)
|
7.1
|
|
|||
|
Provision for income taxes of continuing operations
|
$
|
157.7
|
|
78.5
|
|
66.5
|
|
||
|
Years Ended December 31,
|
|||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
||||||
|
Comprehensive provision (benefit) for income taxes allocable to
|
|||||||||
|
Continuing operations
|
$
|
157.7
|
|
78.5
|
|
66.5
|
|
||
|
Discontinued operations
|
(0.1
|
)
|
(1.1
|
)
|
(1.0
|
)
|
|||
|
Other comprehensive income (loss)
|
(1.8
|
)
|
0.9
|
|
(0.7
|
)
|
|||
|
Equity
|
—
|
|
(0.2
|
)
|
1.8
|
|
|||
|
Comprehensive provision for income taxes
|
$
|
155.8
|
|
78.1
|
|
66.6
|
|
||
89
Rate Reconciliation
The following table reconciles the difference between the actual tax rate on continuing operations and the statutory U.S. federal income tax rate of
35%
.
|
Years Ended December 31,
|
||||||||
|
(In percentages)
|
2017
|
2016
|
2015
|
|||||
|
U.S. federal tax rate
|
35.0
|
%
|
35.0
|
%
|
35.0
|
%
|
||
|
Increases (reductions) in taxes due to:
|
||||||||
|
Venezuela devaluation
|
—
|
|
2.9
|
|
61.3
|
|
||
|
Tax on accelerated U.S. income
(a)
|
(0.2
|
)
|
—
|
|
57.3
|
|
||
|
Adjustments to valuation allowances
|
3.4
|
|
18.2
|
|
18.9
|
|
||
|
Foreign income taxes
|
1.8
|
|
4.2
|
|
(18.2
|
)
|
||
|
Tax reform
|
47.4
|
|
—
|
|
—
|
|
||
|
French business tax
|
2.0
|
|
3.0
|
|
8.9
|
|
||
|
Taxes on undistributed earnings of foreign affiliates
|
0.9
|
|
0.7
|
|
(1.2
|
)
|
||
|
State income taxes, net
|
(1.3
|
)
|
(1.0
|
)
|
(4.1
|
)
|
||
|
Share-based compensation
|
(3.5
|
)
|
(1.4
|
)
|
—
|
|
||
|
Other
|
1.4
|
|
1.2
|
|
3.9
|
|
||
|
Actual income tax rate on continuing operations
|
86.9
|
%
|
62.8
|
%
|
161.8
|
%
|
||
|
(a)
|
In the fourth quarter of 2015, we recognized a
$23.5 million
increase to current tax expense related to a transaction that accelerated U.S. taxable income. In 2017, we recognized a benefit of
$0.4 million
related to that transaction.
|
Components of Deferred Tax Assets and Liabilities
|
December 31,
|
||||||
|
(In millions)
|
2017
|
2016
|
||||
|
Deferred tax assets
|
||||||
|
Pension liabilities
|
$
|
56.2
|
|
74.5
|
|
|
|
Retirement benefits other than pensions
|
71.3
|
|
87.2
|
|
||
|
Workers’ compensation and other claims
|
29.1
|
|
41.7
|
|
||
|
Property and equipment, net
|
5.2
|
|
6.6
|
|
||
|
Other assets and liabilities
|
88.6
|
|
107.3
|
|
||
|
Net operating loss carryforwards
|
41.1
|
|
42.4
|
|
||
|
Alternative minimum and other tax credits
(a)
|
68.2
|
|
62.0
|
|
||
|
Subtotal
|
359.7
|
|
421.7
|
|
||
|
Valuation allowances
|
(98.9
|
)
|
(62.8
|
)
|
||
|
Total deferred tax assets
|
260.8
|
|
358.9
|
|
||
|
Deferred tax liabilities
|
||||||
|
Property and equipment, net
|
3.7
|
|
—
|
|
||
|
Retirement benefits other than pensions
|
2.0
|
|
2.1
|
|
||
|
Other assets and miscellaneous
|
54.0
|
|
36.5
|
|
||
|
Deferred tax liabilities
|
59.7
|
|
38.6
|
|
||
|
Net deferred tax asset
|
$
|
201.1
|
|
320.3
|
|
|
|
Included in:
|
||||||
|
Noncurrent assets
|
226.2
|
|
327.9
|
|
||
|
Noncurrent liabilities
|
(25.1
|
)
|
(7.6
|
)
|
||
|
Net deferred tax asset
|
$
|
201.1
|
|
320.3
|
|
|
|
(a)
|
U.S. foreign tax credits of
$64.2 million
have a
10
year carryforward period and the remaining credits of
$4.0 million
have various carryforward periods. The foreign tax credits include an estimated
$31.1 million
related to the Tax Reform Act. The U.S. foreign tax credits and other U.S. tax credits have a full valuation allowance.
|
90
Valuation Allowances
Valuation allowances relate to deferred tax assets for certain federal credit carryforwards, certain state and non-U.S. jurisdictions. Based on our analysis of positive and negative evidence including historical and expected future taxable earnings, and a consideration of available tax-planning strategies, we believe it is more-likely-than-not that we will realize the benefit of the existing deferred tax assets, net of valuation allowances, at
December 31, 2017
.
|
Years Ended December 31,
|
|||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
||||||
|
Valuation allowances:
|
|||||||||
|
Beginning of year
|
$
|
62.8
|
|
45.7
|
|
40.1
|
|
||
|
Expiring tax credits
|
(0.4
|
)
|
(0.4
|
)
|
(0.3
|
)
|
|||
|
Acquisitions and dispositions
|
(3.4
|
)
|
(0.3
|
)
|
—
|
|
|||
|
Changes in judgment about deferred tax assets
(a)
|
(1.8
|
)
|
2.6
|
|
1.5
|
|
|||
|
Other changes in deferred tax assets, charged to:
|
|||||||||
|
Income from continuing operations
|
43.9
|
|
20.5
|
|
8.4
|
|
|||
|
Other comprehensive income (loss)
|
0.2
|
|
0.7
|
|
0.3
|
|
|||
|
Retained earnings
(b)
|
—
|
|
2.5
|
|
—
|
|
|||
|
Foreign currency exchange effects
|
(2.4
|
)
|
(8.5
|
)
|
(4.3
|
)
|
|||
|
End of year
|
$
|
98.9
|
|
62.8
|
|
45.7
|
|
||
|
(a)
|
Changes in judgment about valuation allowances are based on a recognition threshold of “more-likely-than-not” of realizing beginning-of-year balances of deferred tax assets. Amounts are recognized in income from continuing operations.
|
|
(b)
|
In 2016, we recognized
$2.5 million
in retained earnings as a result of the early adoption of ASU 2016-09.
|
Net Operating Losses
The gross amount of the net operating loss carryforwards as of
December 31, 2017
, was
$372.2 million
. The tax benefit of net operating loss carryforwards, before valuation allowances, as of
December 31, 2017
, was
$41.1 million
, and expires as follows:
|
(In millions)
|
Federal
|
State
|
Foreign
|
Total
|
||||||||
|
Years of expiration
|
||||||||||||
|
2018-2022
|
$
|
—
|
|
0.1
|
|
6.1
|
|
6.2
|
|
|||
|
2023-2027
|
—
|
|
0.6
|
|
4.3
|
|
4.9
|
|
||||
|
2028 and thereafter
|
—
|
|
15.8
|
|
1.1
|
|
16.9
|
|
||||
|
Unlimited
|
—
|
|
—
|
|
13.1
|
|
13.1
|
|
||||
|
|
$
|
—
|
|
16.5
|
|
24.6
|
|
41.1
|
|
|||
Uncertain Tax Positions
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|
Years Ended December 31,
|
|||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
||||||
|
Uncertain tax positions:
|
|||||||||
|
Beginning of year
|
$
|
6.4
|
|
6.9
|
|
7.2
|
|
||
|
Increases related to prior-year tax positions
|
0.1
|
|
0.6
|
|
—
|
|
|||
|
Decreases related to prior-year tax positions
|
(0.5
|
)
|
(0.4
|
)
|
(0.3
|
)
|
|||
|
Increases related to current-year tax positions
|
1.4
|
|
1.2
|
|
1.1
|
|
|||
|
Increases related to acquisitions
|
4.2
|
|
—
|
|
—
|
|
|||
|
Settlements
|
(0.1
|
)
|
(0.8
|
)
|
—
|
|
|||
|
Effect of the expiration of statutes of limitation
|
(0.8
|
)
|
(0.8
|
)
|
(0.7
|
)
|
|||
|
Foreign currency exchange effects
|
(0.3
|
)
|
(0.3
|
)
|
(0.4
|
)
|
|||
|
End of year
|
$
|
10.4
|
|
6.4
|
|
6.9
|
|
||
Included in the balance of unrecognized tax benefits at
December 31, 2017
, are potential benefits of approximately
$9.7 million
that, if recognized, will reduce the effective tax rate on income from continuing operations.
We recognize accrued interest and penalties related to unrecognized tax benefits in provision (benefit) for income taxes. We reverse interest and penalties accruals when a statute of limitation lapses or when we otherwise conclude the amounts should not be accrued. Net increase (reversal) included in provision (benefit) for income taxes amounted to
($0.3) million
in
2017
,
$0.1 million
in
2016
, and
($0.1) million
in
2015
. We had accrued interest and penalties of
$0.8 million
at
December 31, 2017
, and
$0.9 million
at
December 31, 2016
.
We file income tax returns in the U.S. federal and various state and foreign jurisdictions. With a few exceptions, as of
December 31, 2017
, we were no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before
2014
.
91
Additionally, due to statute of limitations expirations and audit settlements, it is reasonably possible that approximately
$1.4 million
of currently remaining unrecognized tax positions may be recognized by the end of 2018.
The following table presents our property and equipment that is classified as held and used:
|
December 31,
|
||||||
|
(In millions)
|
2017
|
2016
|
||||
|
Land
|
$
|
56.7
|
|
51.4
|
|
|
|
Buildings
|
220.5
|
|
196.4
|
|
||
|
Leasehold improvements
|
205.5
|
|
187.5
|
|
||
|
Vehicles
|
490.9
|
|
394.5
|
|
||
|
Capitalized software
(a)
|
199.3
|
|
179.1
|
|
||
|
Other machinery and equipment
|
634.0
|
|
549.6
|
|
||
|
1,806.9
|
|
1,558.5
|
|
|||
|
Accumulated depreciation and amortization
|
(1,166.0
|
)
|
(1,027.5
|
)
|
||
|
Property and equipment, net
|
$
|
640.9
|
|
531.0
|
|
|
|
(a)
|
Amortization of capitalized software costs included in continuing operations was
$20.5 million
in
2017
,
$19.6 million
in
2016
and
$20.7 million
in
2015
.
|
92
We acquired operations in various countries in 2017. We accounted for these acquisitions as business combinations using the acquisition method. Under the acquisition method of accounting, assets acquired and liabilities assumed from these operations are recorded at fair value on the date of acquisition. The consolidated statements of operations include the results of operations for each acquired entity from the date of acquisition.
Maco Transportadora de Caudales S.A. (“Maco Transportadora”)
Argentine Cash in Transit (“CIT”) and Money Processing business
On
July 18, 2017
, we acquired
100%
of the shares of Maco Transportadora for approximately
$205 million
. The total purchase price will be paid in cash and approximately
$173 million
of the purchase consideration was paid to the sellers through December 31, 2017. The remaining amounts will be paid in scheduled installments over the next
two years
with the final amount based partially on the retention of customer revenue versus a target revenue amount. This contingent consideration arrangement requires us to pay a potential undiscounted amount between
$0
to
$30 million
based on retaining the revenue levels of existing customers at the acquisition date. If there is a shortfall in revenues, a multiple of
2.5
is applied to the revenue shortfall and the contingent consideration to be paid to the former owners is reduced. We used a probability-weighted approach to estimate the fair value of the contingent consideration. The fair value of the contingent consideration reflected in the table below is the present value of the full
$30 million
potentially payable as of December 31, 2017 as we believe it is unlikely that the contingent consideration payments will be reduced for a revenue shortfall.
The Maco Transportadora business will be integrated into our existing Brink’s Argentina operations. Maco Transportadora has approximately
1,450
employees,
4
branches and over
150
armored vehicles across its operations.
We have provisionally estimated fair values for the assets purchased, liabilities assumed and purchase consideration as of the date of the acquisition in the following table. The determination of estimated fair value required management to make significant estimates and assumptions. The amounts reported are considered provisional as we are completing the valuations that are required to allocate the purchase price. As a result, the allocation of the provisional purchase price may change in the future. There have been no significant changes to our fair value estimates of the net assets acquired for Maco Transportadora.
|
(In millions)
|
Estimated Fair Value at Acquisition Date
|
||
|
Fair value of purchase consideration
|
|||
|
Cash paid through December 31, 2017
|
$
|
173.3
|
|
|
Fair value of future payments to sellers
|
2.5
|
|
|
|
Contingent consideration
|
28.7
|
|
|
|
Fair value of purchase consideration
|
$
|
204.5
|
|
|
Fair value of net assets acquired
|
|||
|
|
|||
|
Cash
|
$
|
10.3
|
|
|
Accounts receivable
|
16.6
|
|
|
|
Other current assets
|
0.6
|
|
|
|
Property and equipment, net
|
2.4
|
|
|
|
Intangible assets
(a)
|
60.2
|
|
|
|
Goodwill
(b)
|
147.6
|
|
|
|
Other noncurrent assets
|
0.1
|
|
|
|
Current liabilities
|
(11.8
|
)
|
|
|
Noncurrent liabilities
|
(21.5
|
)
|
|
|
Fair value of net assets acquired
|
$
|
204.5
|
|
|
(a)
|
Intangible assets are comprised of customer relationships, trade name and non-competition agreements. Final allocation will be determined once the valuation is complete.
|
|
(b)
|
Consists of intangible assets that do not qualify for separate recognition, combined with synergies expected from integrating Maco Transportadora’s operations into our existing Brink’s Argentina operations. All of the goodwill has been assigned to the South America reporting unit and is not expected to be deductible for tax purposes.
|
93
Other acquisitions in 2017
On
March 14, 2017
, we acquired
100%
of the capital stock of American Armored Transport, Inc. ("AATI"). AATI provides secured trucking transportation of high-value cargo throughout the continental United States and is expected to complement our existing tractor trailer division in the United States.
On
April 19, 2017
, we acquired
100%
of the capital stock of Muitofacil Holding Ltda., a Brazil-based holding company, and its subsidiary, Muitofacil Arrecadacao e Recebimento Ltda. (together "Pag Facil"). Pag Facil offers bank correspondent services, bill payment processing and mobile phone top-up services in Brazil and is expected to supplement our existing Brazilian payment services businesses.
On
June 29, 2017
, we acquired
100%
of the capital stock of Global Security S.A. (“LGS”). LGS is a Chilean security company specializing in CIT and ATM services and will be integrated into our existing Brink’s Chile operations.
On
August 14, 2017
, we acquired
100%
of the capital stock of Maco Litoral, S.A., (“Maco Litoral”) an Argentina-based company which provides CIT and ATM services.
On
October 31, 2017
, we acquired
100%
of the shares of Temis S.A.S. and its wholly-owned subsidiaries, Les Goelands S.A.S. and Temis Conseil et Formation S.A.R.L (together "Temis"). The Temis business provides CIT and Money Processing services in France and will be integrated into our existing Brink's France operations.
The aggregate purchase price of these
five
business acquisitions (AATI, Pag Facil, LGS, Maco Litoral and Temis) was approximately
$160 million
. These
five
acquired operations employ approximately
1,700
people in the aggregate.
For these
five
business acquisitions (AATI, Pag Facil, LGS, Maco Litoral and Temis), we have provisionally estimated fair values for the assets purchased and liabilities assumed as of the date of the acquisitions. These estimated amounts are aggregated in the following table. The determination of estimated fair value required management to make significant estimates and assumptions. The amounts reported are considered provisional as we are completing the valuations that are required to allocate the purchase price, as a result, the allocation of the purchase price and the amount of goodwill and intangibles may change in the future. Our fair value estimates of acquisition date goodwill increased approximately
$14 million
, acquisition date intangible assets decreased approximately
$11 million
, and acquisition date noncurrent liabilities increased approximately
$6 million
as compared to our initial estimates in the period of acquisition. There have been no other significant changes to our fair value estimates of the net assets acquired for these acquisitions.
|
(In millions)
|
Estimated Fair Value at Acquisition Date
|
||
|
Fair value of purchase consideration
|
|||
|
Cash paid through December 31, 2017
|
$
|
160.4
|
|
|
Indemnification asset
|
(4.0
|
)
|
|
|
Fair value of future payments to sellers
|
3.9
|
|
|
|
Fair value of purchase consideration
|
$
|
160.3
|
|
|
Fair value of net assets acquired
|
|||
|
|
|||
|
Cash
|
$
|
7.4
|
|
|
Accounts receivable
|
20.1
|
|
|
|
Property and equipment, net
|
13.2
|
|
|
|
Intangible assets
(a)
|
39.6
|
|
|
|
Goodwill
(b)
|
118.9
|
|
|
|
Other current and noncurrent assets
|
5.0
|
|
|
|
Current liabilities
|
(24.2
|
)
|
|
|
Noncurrent liabilities
|
(19.7
|
)
|
|
|
Fair value of net assets acquired
|
$
|
160.3
|
|
|
(a)
|
Intangible assets are comprised of customer relationships, trade names and non-competition agreements. Final allocation will be determined once all valuations have been completed.
|
|
(b)
|
Consists of intangible assets that do not qualify for separate recognition, combined with synergies expected from integrating these acquired operations into our existing operations. The goodwill from these acquisitions has been assigned to the following reporting units: AATI (U.S.), Pag Facil (Brazil), LGS and Maco Litoral (South America), and Temis (France). We do not expect goodwill related to AATI, LGS, Maco Litoral or Temis to be deductible for tax purposes. If certain conditions are met in the future, goodwill related to Pag Facil will be deductible for tax purposes.
|
94
Pro Forma disclosures (unaudited)
The pro forma consolidated results of Brink’s presented below reflect a hypothetical ownership on January 1, 2016 of the businesses we acquired during 2017.
|
(In millions)
|
Revenue
|
Net income attributable to Brink's
|
||||
|
Actual results included in Brink's consolidated 2017 results for businesses acquired in 2017 from the date of acquisition
|
||||||
|
Twelve months ended December 31, 2017
|
||||||
|
Maco Transportadora
|
$
|
49.3
|
|
7.8
|
|
|
|
Other acquisitions
(a)
|
50.8
|
|
2.2
|
|
||
|
Total
|
$
|
100.1
|
|
10.0
|
|
|
|
Pro forma results of Brink's for the twelve months ended December 31,
|
||||||
|
2017
|
||||||
|
Brink's as reported
|
$
|
3,347.0
|
|
16.7
|
|
|
|
Maco Transportadora
(b)
|
56.9
|
|
6.2
|
|
||
|
Other acquisitions
(b)
|
65.7
|
|
2.6
|
|
||
|
Total
|
$
|
3,469.6
|
|
25.5
|
|
|
|
2016
|
||||||
|
Brink's as reported
|
$
|
3,020.6
|
|
34.5
|
|
|
|
Maco Transportadora
(b)
|
79.5
|
|
6.2
|
|
||
|
Other acquisitions
(b)
|
98.0
|
|
5.2
|
|
||
|
Total
|
$
|
3,198.1
|
|
45.9
|
|
|
|
(a)
|
Includes the actual results of AATI, Pag Facil, LGS, Maco Litoral and Temis.
|
|
(b)
|
Represents amounts prior to acquisition by Brink's.
|
Acquisition costs
We have incurred
$2.6 million
in transaction costs related to business acquisitions in 2017. These costs are classified in the consolidated statement of operations as selling, general and administrative expenses.
95
Goodwill
Effective February 2017, we implemented changes to our organization and management structure that resulted in changes to our operating segments for financial reporting purposes. We now have
three
operating segments. The changes in the carrying amount of goodwill by operating segment for the years ended
December 31, 2017
and
2016
are as follows:
|
December 31, 2017
|
||||||||||||
|
(In millions)
|
Beginning Balance
|
Acquisitions/
Dispositions
|
Currency
|
Ending Balance
|
||||||||
|
Goodwill:
|
|
|
|
|
||||||||
|
North America
|
$
|
23.9
|
|
7.8
|
|
0.3
|
|
32.0
|
|
|||
|
South America
|
27.1
|
|
203.7
|
|
(15.9
|
)
|
214.9
|
|
||||
|
Rest of World
|
135.2
|
|
55.0
|
|
16.6
|
|
206.8
|
|
||||
|
Total Goodwill
|
$
|
186.2
|
|
266.5
|
|
1.0
|
|
453.7
|
|
|||
|
December 31, 2016
|
||||||||||||
|
(In millions)
|
Beginning Balance
|
Acquisitions/
Dispositions
|
Currency
|
Ending Balance
|
||||||||
|
Goodwill:
|
|
|
|
|
||||||||
|
North America
|
$
|
22.3
|
|
—
|
|
1.6
|
|
23.9
|
|
|||
|
South America
|
23.0
|
|
—
|
|
4.1
|
|
27.1
|
|
||||
|
Rest of World
|
140.0
|
|
(0.2
|
)
|
(4.6
|
)
|
135.2
|
|
||||
|
Total Goodwill
|
$
|
185.3
|
|
(0.2
|
)
|
1.1
|
|
186.2
|
|
|||
Intangible Assets
The following table summarizes our other intangible assets by category:
|
December 31, 2017
|
December 31, 2016
|
|||||||||||||||||||||
|
(In millions)
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
Weighted-average amortization period
|
|||||||||||||||
|
Customer relationships
|
137.5
|
|
(51.9
|
)
|
85.6
|
|
50.2
|
|
(43.5
|
)
|
6.7
|
|
8.9
|
|
||||||||
|
Indefinite-lived trade names
|
7.9
|
|
—
|
|
7.9
|
|
7.5
|
|
—
|
|
7.5
|
|
—
|
|
||||||||
|
Finite-lived trade names
|
8.4
|
|
(2.3
|
)
|
6.1
|
|
1.3
|
|
(1.2
|
)
|
0.1
|
|
3.8
|
|
||||||||
|
Other contract-related assets
|
6.6
|
|
(3.0
|
)
|
3.6
|
|
6.7
|
|
(2.4
|
)
|
4.3
|
|
6.6
|
|
||||||||
|
Other
|
6.5
|
|
(4.0
|
)
|
2.5
|
|
3.7
|
|
(3.2
|
)
|
0.5
|
|
2.1
|
|
||||||||
|
Total
|
$
|
166.9
|
|
(61.2
|
)
|
105.7
|
|
$
|
69.4
|
|
(50.3
|
)
|
19.1
|
|
||||||||
In 2016, we recognized a
$6.5 million
impairment charge related to a customer relationship intangible asset in our Brink's India operations, which is included in other operating expense. Total amortization expense for our finite-lived intangible assets was
$8.4 million
in
2017
. Our estimated aggregate amortization expense for finite-lived intangibles recorded at
December 31, 2017
, for the next
five years
is as follows:
|
(In millions)
|
2018
|
2019
|
2020
|
2021
|
2022
|
||||||||||
|
Amortization expense
|
$
|
14.7
|
|
13.3
|
|
11.5
|
|
11.1
|
|
9.7
|
|
||||
96
|
December 31,
|
||||||
|
(In millions)
|
2017
|
2016
|
||||
|
Prepaid expenses
|
$
|
72.5
|
|
60.3
|
|
|
|
Mobile airtime inventory
|
4.8
|
|
10.9
|
|
||
|
Income tax receivable
|
21.1
|
|
16.5
|
|
||
|
Other
|
20.6
|
|
15.9
|
|
||
|
Prepaid expenses and other
|
$
|
119.0
|
|
103.6
|
|
|
|
December 31,
|
||||||
|
(In millions)
|
2017
|
2016
|
||||
|
Deposits
|
$
|
11.4
|
|
12.4
|
|
|
|
Deferred profit sharing asset
|
11.3
|
|
11.3
|
|
||
|
Income tax receivable
|
75.4
|
|
31.9
|
|
||
|
Derivative instruments
|
0.8
|
|
1.6
|
|
||
|
Equity method investment in unconsolidated entities
|
4.0
|
|
3.5
|
|
||
|
Marketable securities
|
4.1
|
|
4.1
|
|
||
|
Other
|
37.9
|
|
22.1
|
|
||
|
Other assets
|
$
|
144.9
|
|
86.9
|
|
|
97
The following tables provide the components of other comprehensive income (loss), including the amounts reclassified from accumulated other comprehensive income (loss) into earnings:
|
Amounts Arising During the Current Period
|
Amounts Reclassified to Net Income (Loss)
|
||||||||||||||
|
(In millions)
|
Pretax
|
Income Tax
|
Pretax
|
Income Tax
|
Total Other Comprehensive Income (Loss)
|
||||||||||
|
2017
|
|
|
|
|
|
||||||||||
|
Amounts attributable to Brink's:
|
|
|
|
|
|
||||||||||
|
Benefit plan adjustments
|
$
|
(99.3
|
)
|
21.2
|
|
54.9
|
|
(18.2
|
)
|
(41.4
|
)
|
||||
|
Foreign currency translation adjustments
|
22.7
|
|
(1.0
|
)
|
—
|
|
—
|
|
21.7
|
|
|||||
|
Unrealized gains (losses) on available-for-sale securities
|
1.7
|
|
(0.6
|
)
|
(1.5
|
)
|
0.5
|
|
0.1
|
|
|||||
|
Gains (losses) on cash flow hedges
|
(0.1
|
)
|
(0.1
|
)
|
0.2
|
|
—
|
|
—
|
|
|||||
|
|
(75.0
|
)
|
19.5
|
|
53.6
|
|
(17.7
|
)
|
(19.6
|
)
|
|||||
|
Amounts attributable to noncontrolling interests:
|
|||||||||||||||
|
Benefit plan adjustments
|
(0.8
|
)
|
—
|
|
0.7
|
|
—
|
|
(0.1
|
)
|
|||||
|
Foreign currency translation adjustments
|
0.9
|
|
—
|
|
—
|
|
—
|
|
0.9
|
|
|||||
|
|
0.1
|
|
—
|
|
0.7
|
|
—
|
|
0.8
|
|
|||||
|
Total
|
|||||||||||||||
|
Benefit plan adjustments
(a)
|
(100.1
|
)
|
21.2
|
|
55.6
|
|
(18.2
|
)
|
(41.5
|
)
|
|||||
|
Foreign currency translation adjustments
(b)
|
23.6
|
|
(1.0
|
)
|
—
|
|
—
|
|
22.6
|
|
|||||
|
Unrealized gains (losses) on available-for-sale securities
(c)
|
1.7
|
|
(0.6
|
)
|
(1.5
|
)
|
0.5
|
|
0.1
|
|
|||||
|
Gains (losses) on cash flow hedges
(d)
|
(0.1
|
)
|
(0.1
|
)
|
0.2
|
|
—
|
|
—
|
|
|||||
|
|
$
|
(74.9
|
)
|
19.5
|
|
54.3
|
|
(17.7
|
)
|
(18.8
|
)
|
||||
|
2016
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Amounts attributable to Brink's:
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Benefit plan adjustments
|
$
|
(39.5
|
)
|
16.7
|
|
51.3
|
|
(17.6
|
)
|
10.9
|
|
||||
|
Foreign currency translation adjustments
|
(26.6
|
)
|
0.2
|
|
(0.1
|
)
|
—
|
|
(26.5
|
)
|
|||||
|
Unrealized gains (losses) on available-for-sale securities
|
0.4
|
|
(0.2
|
)
|
(0.5
|
)
|
0.2
|
|
(0.1
|
)
|
|||||
|
Gains (losses) on cash flow hedges
|
(1.2
|
)
|
—
|
|
2.0
|
|
(0.2
|
)
|
0.6
|
|
|||||
|
|
(66.9
|
)
|
16.7
|
|
52.7
|
|
(17.6
|
)
|
(15.1
|
)
|
|||||
|
Amounts attributable to noncontrolling interests:
|
|||||||||||||||
|
Benefit plan adjustments
|
(1.5
|
)
|
—
|
|
0.4
|
|
—
|
|
(1.1
|
)
|
|||||
|
Foreign currency translation adjustments
|
0.4
|
|
—
|
|
—
|
|
—
|
|
0.4
|
|
|||||
|
|
(1.1
|
)
|
—
|
|
0.4
|
|
—
|
|
(0.7
|
)
|
|||||
|
Total
|
|||||||||||||||
|
Benefit plan adjustments
(a)
|
(41.0
|
)
|
16.7
|
|
51.7
|
|
(17.6
|
)
|
9.8
|
|
|||||
|
Foreign currency translation adjustments
(b)
|
(26.2
|
)
|
0.2
|
|
(0.1
|
)
|
—
|
|
(26.1
|
)
|
|||||
|
Unrealized gains (losses) on available-for-sale securities
(c)
|
0.4
|
|
(0.2
|
)
|
(0.5
|
)
|
0.2
|
|
(0.1
|
)
|
|||||
|
Gains (losses) on cash flow hedges
(d)
|
(1.2
|
)
|
—
|
|
2.0
|
|
(0.2
|
)
|
0.6
|
|
|||||
|
|
$
|
(68.0
|
)
|
16.7
|
|
53.1
|
|
(17.6
|
)
|
(15.8
|
)
|
||||
98
|
Amounts Arising During the Current Period
|
Amounts Reclassified to Net Income (Loss)
|
||||||||||||||
|
(In millions)
|
Pretax
|
Income Tax
|
Pretax
|
Income Tax
|
Total Other Comprehensive Income (Loss)
|
||||||||||
|
2015
|
|
|
|
|
|
||||||||||
|
Amounts attributable to Brink's:
|
|
|
|
|
|
||||||||||
|
Benefit plan adjustments
|
$
|
(57.1
|
)
|
20.4
|
|
58.1
|
|
(20.2
|
)
|
1.2
|
|
||||
|
Foreign currency translation adjustments
|
(106.2
|
)
|
0.3
|
|
5.7
|
|
—
|
|
(100.2
|
)
|
|||||
|
Unrealized gains (losses) on available-for-sale securities
|
0.6
|
|
(0.2
|
)
|
(1.1
|
)
|
0.4
|
|
(0.3
|
)
|
|||||
|
Gains (losses) on cash flow hedges
|
3.3
|
|
—
|
|
(3.6
|
)
|
—
|
|
(0.3
|
)
|
|||||
|
|
(159.4
|
)
|
20.5
|
|
59.1
|
|
(19.8
|
)
|
(99.6
|
)
|
|||||
|
Amounts attributable to noncontrolling interests:
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Benefit plan adjustments
|
(0.7
|
)
|
—
|
|
0.5
|
|
—
|
|
(0.2
|
)
|
|||||
|
Foreign currency translation adjustments
|
(3.6
|
)
|
—
|
|
—
|
|
—
|
|
(3.6
|
)
|
|||||
|
|
(4.3
|
)
|
—
|
|
0.5
|
|
—
|
|
(3.8
|
)
|
|||||
|
Total
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Benefit plan adjustments
(a)
|
(57.8
|
)
|
20.4
|
|
58.6
|
|
(20.2
|
)
|
1.0
|
|
|||||
|
Foreign currency translation adjustments
(b)
|
(109.8
|
)
|
0.3
|
|
5.7
|
|
—
|
|
(103.8
|
)
|
|||||
|
Unrealized gains (losses) on available-for-sale securities
(c)
|
0.6
|
|
(0.2
|
)
|
(1.1
|
)
|
0.4
|
|
(0.3
|
)
|
|||||
|
Gains (losses) on cash flow hedges
(d)
|
3.3
|
|
—
|
|
(3.6
|
)
|
—
|
|
(0.3
|
)
|
|||||
|
|
$
|
(163.7
|
)
|
20.5
|
|
59.6
|
|
(19.8
|
)
|
(103.4
|
)
|
||||
|
(a)
|
The amortization of prior actuarial losses and prior service cost is part of total net periodic retirement benefit cost when reclassified to net income (loss). Net periodic retirement benefit cost also includes service cost, interest cost, expected returns on assets, and settlement costs. Due to the adoption of ASU 2017-07 (see Note 1), total service cost is allocated between cost of revenues and selling, general and administrative expenses on a plan-by-plan basis and the remaining net periodic retirement benefit cost items are allocated to interest and other income (expense):
|
|
December 31,
|
|||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
||||||
|
Total net periodic retirement benefit cost included in:
|
|
|
|
||||||
|
Cost of revenues
|
$
|
9.0
|
|
8.9
|
|
8.2
|
|
||
|
Selling, general and administrative expenses
|
2.4
|
|
1.6
|
|
2.4
|
|
|||
|
Interest and other income (expense)
|
47.8
|
|
40.3
|
|
39.8
|
|
|||
|
(b)
|
Reclassification of foreign currency translation amounts in 2015 relate primarily to the sale of our Russian cash management operations. These amounts are included in other operating income (expense).
|
|
(c)
|
Gains and losses on sales of available-for-sale securities are reclassified from accumulated other comprehensive loss to the consolidated statements of operations when the gains or losses are realized. Pretax amounts are classified in the consolidated statements of operations as interest and other income (expense).
|
|
(d)
|
Pretax gains and losses on cash flow hedges are classified in the consolidated statements of operations as
|
|
•
|
other operating income (expense) (
$0.1 million
losses in
2017
,
$1.3 million
losses in
2016
and
$4.1 million
gains in
2015
)
|
|
•
|
interest and other income (expense) (
$0.1 million
losses in
2017
,
$0.3 million
losses in
2016
and
$0.5 million
losses in
2015
.)
|
99
The changes in accumulated other comprehensive loss attributable to Brink’s are as follows:
|
(In millions)
|
Benefit Plan Adjustments
|
Foreign Currency Translation Adjustments
|
Unrealized Gains (Losses) on Available-for-Sale Securities
|
Gains (Losses) on Cash Flow Hedges
|
Total
|
||||||||||
|
Balance as of December 31, 2014
|
$
|
(571.7
|
)
|
(222.1
|
)
|
1.4
|
|
0.4
|
|
(792.0
|
)
|
||||
|
Other comprehensive income (loss) before reclassifications
|
(36.7
|
)
|
(105.9
|
)
|
0.4
|
|
3.3
|
|
(138.9
|
)
|
|||||
|
Amounts reclassified from accumulated other comprehensive loss
|
37.9
|
|
5.7
|
|
(0.7
|
)
|
(3.6
|
)
|
39.3
|
|
|||||
|
Other comprehensive income (loss) attributable to Brink's
|
1.2
|
|
(100.2
|
)
|
(0.3
|
)
|
(0.3
|
)
|
(99.6
|
)
|
|||||
|
Acquisitions of noncontrolling interests
|
—
|
|
(0.3
|
)
|
—
|
|
—
|
|
(0.3
|
)
|
|||||
|
Balance as of December 31, 2015
|
(570.5
|
)
|
(322.6
|
)
|
1.1
|
|
0.1
|
|
(891.9
|
)
|
|||||
|
Other comprehensive income (loss) before reclassifications
|
(22.8
|
)
|
(26.4
|
)
|
0.2
|
|
(1.2
|
)
|
(50.2
|
)
|
|||||
|
Amounts reclassified from accumulated other comprehensive loss
|
33.7
|
|
(0.1
|
)
|
(0.3
|
)
|
1.8
|
|
35.1
|
|
|||||
|
Other comprehensive income (loss) attributable to Brink's
|
10.9
|
|
(26.5
|
)
|
(0.1
|
)
|
0.6
|
|
(15.1
|
)
|
|||||
|
Balance as of December 31, 2016
|
(559.6
|
)
|
(349.1
|
)
|
1.0
|
|
0.7
|
|
(907.0
|
)
|
|||||
|
Other comprehensive income (loss) before reclassifications
|
(78.1
|
)
|
21.7
|
|
1.1
|
|
(0.2
|
)
|
(55.5
|
)
|
|||||
|
Amounts reclassified from accumulated other comprehensive loss
|
36.7
|
|
—
|
|
(1.0
|
)
|
0.2
|
|
35.9
|
|
|||||
|
Other comprehensive income (loss) attributable to Brink's
|
(41.4
|
)
|
21.7
|
|
0.1
|
|
—
|
|
(19.6
|
)
|
|||||
|
Balance as of December 31, 2017
|
$
|
(601.0
|
)
|
(327.4
|
)
|
1.1
|
|
0.7
|
|
(926.6
|
)
|
||||
100
Investments in Trading Securities and Available-for-sale Securities
We have investments in mutual funds designated as trading securities and as available-for-sale securities that are carried at fair value in the financial statements. For these investments, fair value was estimated based on quoted prices categorized as a Level 1 valuation.
Fixed-Rate Debt
The fair values and carrying values of our significant fixed-rate debt, excluding any unamortized issuance costs, was as follows:
|
December 31,
|
||||||
|
(In millions)
|
2017
|
2016
|
||||
|
Unsecured notes issued in a private placement
(a)
|
|
|
||||
|
Carrying value
|
$
|
—
|
|
85.7
|
|
|
|
Fair value
|
—
|
|
88.2
|
|
||
|
Senior unsecured notes
|
||||||
|
Carrying value
|
600.0
|
|
—
|
|
||
|
Fair value
|
590.6
|
|
—
|
|
||
|
(a)
|
Prepaid in September 2017.
|
The fair value estimates of our unsecured notes issued in a private-placement and our senior unsecured notes were based on the present value of future cash flows, discounted at rates for similar instruments at the respective measurement dates, which we have categorized as a Level 3 valuation.
Forward and Swap Contracts
We have outstanding foreign currency forward and swap contracts to hedge transactional risks associated with foreign currencies. At
December 31, 2017
, the notional value of our shorter term outstanding foreign currency forward and swap contracts was
$145.5 million
, with average maturities of approximately
one
month. These shorter term foreign currency forward and swap contracts primarily offset exposures in the euro, the British pound and the Mexican peso and are not designated as hedges for accounting purposes. At
December 31, 2017
, the fair value of these shorter term foreign currency contracts was not significant.
In 2013, we entered into a longer term cross-currency swap to hedge against the change in value of a long-term intercompany loan denominated in Brazilian real. This longer term swap contract, which matures in January 2018, is designated as a cash flow hedge for accounting purposes. At
December 31, 2017
, the notional value of this contract was
$1.6 million
with a weighted-average maturity of
0.1 years
. At
December 31, 2017
, the fair value of this swap contract was an asset of
$0.6 million
, which is included in prepaid expenses and other on the consolidated balance sheet.
In the first quarter of 2016, we entered into
two
interest rate swaps to hedge cash flow risk associated with changes in variable interest rates and are designated as cash flow hedges for accounting purposes. At
December 31, 2017
, the notional value of this contract was
$40 million
with a weighted-average maturity of
1.7 years
. At
December 31, 2017
, the fair value of these interest rate swaps was a net asset of
$1.0 million
, of which
$0.2 million
was included in prepaid expenses and other and
$0.8 million
was included in other assets on the consolidated balance sheet.
The fair values of these forward and swap contracts are determined using Level 2 valuation techniques and are based on the present value of net future cash payments and receipts.
Contingent Consideration
The estimated fair value of our liabilities for contingent consideration represents the fair value of the potential amounts payable for our acquisition of Maco Transportadora. These contingent amounts will be paid in scheduled installments over the next
two years
with the final amounts based partially on the retention of customer revenue versus a target revenue amount. The contingent consideration arrangement requires us to pay potential undiscounted amounts between
$0
to
$30.3 million
based on retaining the revenue levels of existing customers at the acquisition dates. If there is a shortfall in revenues, a multiple of
2.5
is applied to the revenue shortfall and the contingent consideration to be paid to the former owners is reduced.
We used a probability-weighted approach to estimate the fair value of these contingent consideration payments. The fair value of the contingent consideration is the present value of the full
$30.3 million
potentially payable as of December 31, 2017 as we believe it is unlikely that the contingent consideration payments will be reduced for a revenue shortfall.
At December 31, 2017, we had recognized contingent consideration liabilities of
$29.1 million
of which
$14.8 million
was included in accrued liabilities and
$14.3 million
in other. The fair value of these liabilities was estimated using a discounted cash flow technique with significant inputs that are not observable in the market and thus represent a Level 3 valuation. The significant inputs in the Level 3 valuation not supported by market activity included our probability assessments of expected future cash flows related to our acquisition of this entity during the period from acquisition to the estimated settlement date of the remaining payments. Subsequent to the respective acquisition dates
101
to each measurement date, changes in these liabilities due to the passage of time and the corresponding impact of discounting as well as the impact of changes in exchange rates between the Argentine peso and the U.S. dollar, were and will be recognized in earnings.
The contingent consideration payments may differ from the amounts that are ultimately paid, with any changes in the liabilities recorded in interest and other expense in our consolidated statements of operations until the liabilities are settled.
Other Financial Instruments
Other financial instruments include cash and cash equivalents, accounts receivable, floating rate debt, accounts payable and accrued liabilities. The financial statement carrying amounts of these items approximate the fair value.
There were no transfers in or out of any of the levels of the valuation hierarchy in
2017
.
|
December 31,
|
||||||
|
(In millions)
|
2017
|
2016
|
||||
|
Payroll and other employee liabilities
|
$
|
157.6
|
|
123.2
|
|
|
|
Taxes, except income taxes
|
95.7
|
|
80.8
|
|
||
|
Income taxes payable
|
26.0
|
|
23.2
|
|
||
|
Acquisition-related obligations
|
18.0
|
|
—
|
|
||
|
Workers’ compensation and other claims
|
16.8
|
|
19.2
|
|
||
|
Cash held by Cash Management Services operations
(a)
|
16.1
|
|
9.8
|
|
||
|
Cash supply chain deposit liability
|
10.9
|
|
—
|
|
||
|
Retirement benefits (see Note 3)
|
10.2
|
|
9.1
|
|
||
|
Other
|
137.2
|
|
120.4
|
|
||
|
Accrued liabilities
|
$
|
488.5
|
|
385.7
|
|
|
|
(a)
|
Title to cash received and processed in certain of our secure Cash Management Services operations transfers to us for a short period of time. The cash is generally credited to customers’ accounts the following day and we record a liability while the cash is in our possession.
|
|
December 31,
|
||||||
|
(In millions)
|
2017
|
2016
|
||||
|
Workers’ compensation and other claims
|
$
|
57.7
|
|
56.5
|
|
|
|
Non-recourse financing liability
(a)
|
—
|
|
12.6
|
|
||
|
Post-employment benefits
|
10.9
|
|
11.5
|
|
||
|
Asset retirement and remediation obligations
|
12.6
|
|
14.3
|
|
||
|
Acquisition-related obligations
|
17.8
|
|
—
|
|
||
|
Noncurrent tax liabilities
|
9.1
|
|
5.3
|
|
||
|
Other
|
42.1
|
|
35.9
|
|
||
|
Other liabilities
|
$
|
150.2
|
|
136.1
|
|
|
|
(a)
|
Brink's Mexico entered into a transaction in 2015 to sell its headquarters building in Mexico City and lease the property back for
two
years. The transaction did not qualify for sale-leaseback accounting due to continuing involvement with the property. Therefore, proceeds received were recorded as a financing liability. The transaction qualified for sale recognition in the fourth quarter of 2017 and, as a result, the non-recourse financing liability was removed.
|
102
|
December 31,
|
||||||
|
(In millions)
|
2017
|
2016
|
||||
|
Debt:
|
||||||
|
Short-term borrowings
|
||||||
|
Uncommitted credit facilities (year-end weighted-average interest rate of 1.7% in 2016)
|
$
|
—
|
|
108.3
|
|
|
|
Restricted cash borrowings (year-end weighted-average interest rate of 0.0% in 2017 and 0.5% in 2016)
(a)
|
27.0
|
|
22.3
|
|
||
|
Other (year-end weighted-average interest rate of 8.9% in 2017 and 8.1% in 2016)
|
18.2
|
|
32.2
|
|
||
|
Total short-term borrowings
|
$
|
45.2
|
|
162.8
|
|
|
|
Long-term debt
|
||||||
|
Bank credit facilities:
|
||||||
|
Term loan A (year-end effective interest rate of 3.3% in 2017 )
|
||||||
|
less unamortized issuance cost of $2.3 million in 2017
|
$
|
491.4
|
|
—
|
|
|
|
Senior unsecured notes (year-end effective interest rate of 4.6% in 2017 )
|
||||||
|
less unamortized issuance cost of $8.8 million in 2017
|
591.2
|
|
—
|
|
||
|
Revolving Facility (year-end weighted average interest rate of 1.8% in 2016)
|
—
|
|
55.8
|
|
||
|
Private Placement Notes (Series A effective interest rate of 4.6%, Series B effective interest
|
|
|
||||
|
rate of 5.2%), less unamortized debt costs of $0.1 million in 2016
|
—
|
|
85.6
|
|
||
|
Term loan (year-end effective interest rate of 2.5% in 2016)
|
||||||
|
less unamortized debt costs of $0.2 million in 2016
|
—
|
|
65.6
|
|
||
|
Other primarily non-U.S. dollar-denominated facilities (year-end weighted-
|
|
|
||||
|
average interest rate of 4.4% in 2017 and 6.9% in 2016)
|
12.0
|
|
6.4
|
|
||
|
Capital leases (year-end weighted-average interest rate of 5.0% in 2017 and 4.2% in 2016)
|
96.9
|
|
67.0
|
|
||
|
Total long-term debt
|
$
|
1,191.5
|
|
280.4
|
|
|
|
Total Debt
|
$
|
1,236.7
|
|
443.2
|
|
|
|
Included in:
|
|
|
||||
|
Current liabilities
|
$
|
97.1
|
|
195.6
|
|
|
|
Noncurrent liabilities
|
1,139.6
|
|
247.6
|
|
||
|
Total debt
|
$
|
1,236.7
|
|
443.2
|
|
|
|
(a)
|
These
2017
and
2016
amounts are for short-term borrowings related to cash borrowed under lending arrangements used in the process of managing customer cash supply chains, which is currently classified as restricted cash and not available for general corporate purposes. See Note 19 for more details.
|
Short-Term Borrowings
Uncommitted Credit Facilities
In October 2016, we entered into a
$100 million
uncommitted credit facility. Borrowings under this facility had a maximum maturity of not more than
thirty
days. Interest on this facility was generally based on LIBOR plus a margin of
1.00%
. In September 2017, we paid off the outstanding balance and the facility was terminated.
In February 2016, we entered into a
$24 million
uncommitted credit facility with an initial expiration date in
February 2017
. The facility was amended in
February 2017
, which extended the expiration date to February 2018. Interest on this facility was based on LIBOR plus a margin of
1.00%
. In October 2017, we paid off the outstanding balance and the facility was terminated.
Unsecured Term Loan Facility
In
August 2017
, we entered into a
364
-day senior unsecured delayed draw term loan facility in an aggregate principal amount of up to
$100 million
. Interest on this facility was based on LIBOR plus a margin which ranges from
1.000%
to
1.875%
depending on either our credit rating or leverage ratio as defined within this facility. In October 2017, we paid off the outstanding balance of
$85 million
and the facility was terminated.
103
Senior Secured Credit Facility
In
October 2017
, we entered into a new senior secured credit facility (the “Senior Secured Credit Facility”) with Wells Fargo Bank, National Association, as administrative agent, consisting of a
$1 billion
Revolving Credit Facility and a
$500 million
Term Loan Facility. Loans under the Revolving Credit Facility mature
five
years after the closing date (
October 17, 2022
) and loans under the Term Loan Facility amortize
five
percent annually and mature
five
years after the closing date. Interest rates for the Senior Secured Credit Facility are based on LIBOR plus a margin or an alternate base rate plus a margin. The Revolving Credit Facility allows us to borrow money or issue letters of credit (or otherwise satisfy credit needs) on a revolving basis over the term of the facility. As of
December 31, 2017
,
$1 billion
was available under the Revolving Credit Facility. The obligations under the Senior Secured Credit Facility are secured by a first-priority lien on all or substantially all of the assets of the Company and certain of its domestic subsidiaries, including a first-priority lien on equity interests of certain of the Company’s direct and indirect subsidiaries. The Company and certain of its domestic subsidiaries also guarantee the obligations under the Senior Secured Credit Facility.
The margin on both LIBOR and alternate base rate borrowings under the Senior Secured Credit Facility is based on the Company’s consolidated net leverage ratio. The margin on LIBOR borrowings, which can range from
1.25%
to
2.50%
, was
1.75%
at December 31, 2017. The margin on alternate base rate borrowings, which can range from
0.25%
to
1.50%
, was
0.75%
as of
December 31, 2017
. We also pay an annual commitment fee on unused portion the Revolving Credit Facility based on the Company’s consolidated net leverage ratio. The commitment fee, which can range from
0.15%
to
0.40%
, was
0.25%
as of
December 31, 2017
.
Senior Unsecured Notes
In
October 2017
, we issued at par
ten
-year senior unsecured notes (the "Senior Notes") in the aggregate principal amount of
$600 million
. The Senior Notes will mature on
October 15, 2027
, bearing an annual interest rate of
4.625%
. The Senior Notes are general unsecured obligations guaranteed by certain of the Company’s existing and future U.S. subsidiaries, which are also guarantors under the Senior Secured Credit Facility.
The Senior Notes have not been and will not be registered under the Securities Act of 1933 (the “Securities Act”) or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The notes were offered in the United States only to persons reasonably believed to be qualified institutional buyers in reliance on the exception from registration set forth in Rule 144A under the Securities Act and outside the United States to non-U.S. persons pursuant to Regulation S under the Securities Act.
The aggregate proceeds from the Senior Secured Credit Facility and the Senior Notes were used in part to repay the prior Revolving Facility (described below), the prior term loan, certain other indebtedness and certain fees and expenses related to the closing of the transactions. Remaining net proceeds are expected to be used for working capital needs, capital expenditures, acquisitions and other general corporate purposes.
Revolving Facility
We had a
$525 million
unsecured multi-currency revolving bank credit facility (the “Revolving Facility”) that was scheduled to mature in
March 2020
. The Revolving Facility’s interest rate was based on LIBOR plus a margin or an alternate base rate plus a margin. The Revolving Facility allowed us to borrow loans or issue letters of credit (or otherwise satisfy credit needs) on a revolving basis over the term of the facility. In October 2017, we paid off the outstanding balance and the facility was terminated.
Private Placement Notes
In September 2017, we paid off our private placement notes for
$86 million
, which included
$7 million
in prepayment penalties.
Term Loan
We entered into a
$75 million
unsecured term loan in
March 2015
. Interest on this loan was based on LIBOR plus a margin of
1.75%
. In October 2017, we paid off the term loan for
$64 million
, which included
$2 million
in prepayment penalties.
Other Facilities
Various foreign subsidiaries maintain other lines of credit and overdraft facilities with a number of banks.
Letter of Credit Facilities
We have a
$10 million
unsecured multi-currency revolving bank credit facility, which can be used solely for the issuance of letters of credit and bank guarantees. As of
December 31, 2017
, we had undrawn letters of credit and guarantees of
$5 million
issued under this facility. This
$10 million
facility expires in
March 2019
.
We have a
$40 million
uncommitted letter of credit facility that expires in
May 2018
. As of
December 31, 2017
,
$11 million
was utilized. We have
two
unsecured letter of credit facilities totaling
$94 million
, of which approximately
$38 million
was available at
December 31, 2017
. At
December 31, 2017
, we had undrawn letters of credit and guarantees of
$56 million
issued under these letter of credit facilities. The
$40 million
facility expires in
December 2018
and a
$54 million
facility expires in
December 2019
. The Senior Secured Credit Facility is also available for issuance of letters of credit and bank guarantees.
104
Minimum repayments of long-term debt are as follows:
|
(In millions)
|
Capital leases
|
Other long-term debt
|
Total
|
||||||
|
2018
|
$
|
22.6
|
|
29.3
|
|
51.9
|
|
||
|
2019
|
18.4
|
|
27.7
|
|
46.1
|
|
|||
|
2020
|
16.7
|
|
26.5
|
|
43.2
|
|
|||
|
2021
|
15.0
|
|
25.2
|
|
40.2
|
|
|||
|
2022
|
12.8
|
|
393.9
|
|
406.7
|
|
|||
|
Later years
|
11.4
|
|
603.1
|
|
614.5
|
|
|||
|
Total
|
$
|
96.9
|
|
1,105.7
|
|
1,202.6
|
|
||
The Senior Secured Credit facility, Senior Unsecured Notes, the unsecured multi-currency revolving bank credit facilities, the letter of credit facilities contain various financial and other covenants. The financial covenants, among other things, limit our ability to provide liens, restrict fundamental changes, limit transactions with affiliates and unrestricted subsidiaries, restrict changes to our fiscal year and to organizational documents, limit asset dispositions, limit the use of proceeds from asset sales, limit sale and leaseback transactions, limit investments, limit the ability to incur debt, restrict certain payments to shareholders, limit negative pledges, limit the ability to change the nature of our business, provide for a maximum consolidated net leverage ratio and provide for minimum coverage of interest costs. If we were not to comply with the terms of our various financing agreements, the repayment terms could be accelerated and the commitments could be withdrawn. An acceleration of the repayment terms under one agreement could trigger the acceleration of the repayment terms under the other financing agreements. We were in compliance with all financial covenants at
December 31, 2017
.
Capital Leases
Property and equipment acquired under capital leases are included in property and equipment as follows:
|
December 31,
|
||||||
|
(In millions)
|
2017
|
2016
|
||||
|
Asset class:
|
|
|
||||
|
Buildings
|
$
|
2.2
|
|
2.0
|
|
|
|
Vehicles
|
175.7
|
|
131.8
|
|
||
|
Machinery and equipment
|
1.5
|
|
1.4
|
|
||
|
|
179.4
|
|
135.2
|
|
||
|
Less: accumulated amortization
|
(76.4
|
)
|
(63.5
|
)
|
||
|
Total
|
$
|
103.0
|
|
71.7
|
|
|
105
|
December 31,
|
||||||
|
(In millions)
|
2017
|
2016
|
||||
|
Trade
|
$
|
605.7
|
|
485.9
|
|
|
|
Other
|
47.8
|
|
23.5
|
|
||
|
Total accounts receivable
|
653.5
|
|
509.4
|
|
||
|
Allowance for doubtful accounts
|
(11.2
|
)
|
(8.3
|
)
|
||
|
Accounts receivable, net
|
$
|
642.3
|
|
501.1
|
|
|
|
Years Ended December 31,
|
|||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
||||||
|
Allowance for doubtful accounts:
|
|
|
|
||||||
|
Beginning of year
|
$
|
8.3
|
|
9.1
|
|
10.0
|
|
||
|
Provision for uncollectible accounts receivable:
|
|
|
|
|
|
|
|||
|
Continuing operations
|
5.0
|
|
2.8
|
|
2.9
|
|
|||
|
Discontinued operations
|
—
|
|
—
|
|
(0.2
|
)
|
|||
|
Write offs less recoveries
|
(1.0
|
)
|
(3.0
|
)
|
(0.9
|
)
|
|||
|
Foreign currency exchange effects
|
(1.1
|
)
|
(0.6
|
)
|
(2.7
|
)
|
|||
|
End of year
|
$
|
11.2
|
|
8.3
|
|
9.1
|
|
||
We lease facilities, vehicles, computers and other equipment under long-term operating and capital leases with varying terms. Most of the operating leases contain renewal and/or purchase options. We expect that in the normal course of business, the majority of operating leases will be renewed or replaced by other leases.
As of
December 31, 2017
, future minimum lease payments under noncancellable operating leases with initial or remaining lease terms in excess of one year are included below.
|
(In millions)
|
Facilities
|
Vehicles
|
Other
|
Total
|
||||||||
|
2018
|
$
|
55.6
|
|
17.6
|
|
18.6
|
|
91.8
|
|
|||
|
2019
|
48.0
|
|
17.3
|
|
19.5
|
|
84.8
|
|
||||
|
2020
|
40.3
|
|
16.7
|
|
12.8
|
|
69.8
|
|
||||
|
2021
|
28.9
|
|
12.1
|
|
3.8
|
|
44.8
|
|
||||
|
2022
|
25.0
|
|
11.1
|
|
0.6
|
|
36.7
|
|
||||
|
Later years
|
93.4
|
|
0.1
|
|
—
|
|
93.5
|
|
||||
|
|
$
|
291.2
|
|
74.9
|
|
55.3
|
|
421.4
|
|
|||
The cost related to operating leases is recognized as rental expense. Net rent expense included in continuing operations amounted to
$106.0 million
in
2017
,
$96.0 million
in
2016
and
$92.5 million
in
2015
.
106
We have share-based compensation plans to attract and retain employees and nonemployee directors and to more closely align their interests with those of our shareholders.
We have granted share-based awards to employees under the 2005 Equity Incentive Plan ("2005 Plan"), the 2013 Equity Incentive Plan ("2013 Plan") and the 2017 Equity Incentive Plan (the "2017 Plan"). These plans permit grants of restricted stock, restricted stock units, performance stock, performance units, stock appreciation rights, stock options, as well as other share-based awards to eligible employees. The 2013 Plan and the 2017 Plan also permit cash awards to eligible employees. The 2017 Plan became effective May 2017. No further grants of awards will be made under the 2005 Plan or the 2013 Plan, although awards under these prior plans remain outstanding.
We have granted deferred stock units to directors under the 2017 Plan. Share-based awards were previously granted to directors and remain outstanding under the Non-Employee Director's Equity Plan and the Directors’ Stock Accumulation Plan, which has expired.
There are
6.5 million
shares underlying share-based plans that are authorized, but not yet granted. Outstanding awards at
December 31, 2017
, include performance share units, market share units, restricted stock units, deferred stock units, performance-based stock options, time-based stock options and certain awards that will be settled in cash.
Compensation Expense
Compensation expense is measured using the fair-value-based method. For awards considered equity grants, compensation expense is recognized from the grant date to the earlier of the retirement-eligible date or the vesting date. For awards considered liability awards, compensation cost is based on the change in the fair value of the instrument for each reporting period and the percentage of the requisite service that has been rendered. Compensation cost associated with liability awards was not significant in the last three years.
Compensation expenses are classified as selling, general and administrative expenses in the consolidated statements of operations.
Compensation expenses for the last
three years
and the amount of unrecognized expense for awards outstanding at
December 31, 2017
, were as follows:
|
Compensation Expense
|
Unrecognized Expense for Nonvested Awards at
|
Weighted-average No. of Years Unrecognized Expense to be Recognized
|
|||||||||||||
|
Years Ended December 31,
|
Dec 31, 2017
|
||||||||||||||
|
(in millions except years)
|
2017
|
2016
|
2015
|
||||||||||||
|
Performance Share Units
|
$
|
9.5
|
|
4.1
|
|
8.1
|
|
$
|
14.2
|
|
1.9
|
||||
|
Market Share Units
|
0.3
|
|
0.1
|
|
2.3
|
|
—
|
|
0.2
|
||||||
|
Restricted Stock Units
|
4.7
|
|
3.8
|
|
3.2
|
|
4.5
|
|
1.5
|
||||||
|
Deferred Stock Units and fees paid in stock
|
1.0
|
|
0.9
|
|
0.5
|
|
0.2
|
|
0.3
|
||||||
|
Performance-based Options
|
2.2
|
|
0.6
|
|
—
|
|
4.3
|
|
1.9
|
||||||
|
Options
|
—
|
|
—
|
|
—
|
|
0.1
|
|
2.8
|
||||||
|
Share-based payment expense
|
17.7
|
|
9.5
|
|
14.1
|
|
|
|
|||||||
|
Income tax benefit
|
(3.4
|
)
|
(3.0
|
)
|
(4.6
|
)
|
|
|
|||||||
|
Share-based payment expense, net of tax
|
$
|
14.3
|
|
6.5
|
|
9.5
|
|
|
|
||||||
107
Fair Value of Distributed or Exercised Awards
The fair value of shares distributed or options exercised in the last
three years
is as follows:
|
Fair Value of Shares Distributed or Exercised
(a)
|
|||||||||
|
Years Ended December 31,
|
|||||||||
|
(in millions)
|
2017
|
2016
|
2015
|
||||||
|
Performance Share Units
(b)
|
$
|
13.3
|
|
8.2
|
|
—
|
|
||
|
Market Share Units
(b)
|
4.3
|
|
2.7
|
|
—
|
|
|||
|
Restricted Stock Units
|
7.3
|
|
4.1
|
|
5.3
|
|
|||
|
Deferred Stock Units and fees paid in stock
|
2.7
|
|
1.9
|
|
0.2
|
|
|||
|
Options
(a)
|
2.0
|
|
5.3
|
|
1.1
|
|
|||
|
Total
|
$
|
29.6
|
|
22.2
|
|
6.6
|
|
||
|
(a)
|
Intrinsic value for Options.
|
|
(b)
|
No Performance Share Units or Market Share Units had vested as of December 31, 2015.
|
Restricted Stock Units (“RSUs”)
We granted RSUs to senior executives and select employees in the last
three years
that contain only a service condition. RSUs are paid out in shares of Brink’s stock when the awards vest. For RSUs granted during the last three years, the units generally vest ratably in
three
equal annual installments. We measure the fair value of RSUs based on the price of Brink’s stock at the grant date, adjusted for a discount for dividends not received or accrued during the vesting period. The weighted-average fair value per share at grant date was
$55.85
in
2017
,
$29.06
in
2016
and
$27.09
in
2015
. The weighted-average discount was approximately
2%
in
2017
and
3%
in
2016
and
2015
.
The following table summarizes RSU activity during
2017
:
|
Shares
(in thousands)
|
Weighted-Average Grant Date Fair Value Per Share
|
|||||
|
Nonvested balance as of December 31, 2016
|
296.5
|
|
$
|
27.84
|
|
|
|
Activity from January 1 to December 31, 2017:
|
|
|
|
|||
|
Granted
|
111.4
|
|
55.85
|
|
||
|
Forfeited
|
(23.3
|
)
|
29.96
|
|
||
|
Vested
|
(118.8
|
)
|
26.92
|
|
||
|
Nonvested balance as of December 31, 2017
|
265.8
|
|
$
|
39.80
|
|
|
Performance Share Units (“PSUs”)
Prior to 2016, we granted PSUs which contained a performance condition, a market condition and a service condition ("Prior PSUs"). In 2016 and in 2017, we granted Internal Metric PSUs ("IM PSUs") and Total Shareholder Return PSUs ("TSR PSUs").
IM PSUs contain a performance condition as well as a service condition. We measure the fair value of these PSUs based on the price of Brink’s stock at the grant date, adjusted for a discount for dividends not received or accrued during the vesting period. For the IM PSUs granted in 2017, the performance period is from January 1, 2017 to December 31, 2019. For the majority of the IM PSUs granted in 2016, the performance period is from January 1, 2016 to December 31, 2017, with an additional year of service required. Other IM PSUs granted in 2016 have a performance period from July 1, 2016 to June 30, 2017, with an additional
two
years of service required.
TSR PSUs contain a market condition as well as a service condition. We measure the fair value of TSR PSUs as well as Prior PSUs at the grant date using a Monte Carlo simulation model.
Prior PSUs and IM PSUs granted to senior executives and select employees in
2017
,
2016
and
2015
typically vest at the end of
three years
and are paid out in shares of Brink’s stock. For Prior PSUs and IM PSUs with a performance period greater than one year, the number of shares paid out ranges from
0%
to
200%
of an employee’s award, depending on the achievement of pre-established financial goals over the performance period, which can be
three years
or
two
years depending on the underlying award. Shares are not paid out if the financial results do not meet a pre-established threshold level of performance. For the IM PSUs granted in 2016 that have a
one year
performance period, the number of shares that will be paid out is either
0%
or
100%
, depending on the achievement of the specified performance goal.
For Prior PSUs, the number of shares paid out is also affected by Brink’s total shareholder return relative to the total return of a pre-established stock index over the performance period. The number of shares paid out is increased by 25% if Brink’s total shareholder return is at or above the 75th percentile of the index’s total return. The number of shares paid out is reduced by 25% if Brink’s performance is at or below the 25th percentile. The number of shares is not adjusted if Brink’s performance is between the 25th and 75th percentile.
108
TSR PSUs granted to senior executives typically vest at the end of
three years
and are paid out in shares of Brink’s stock. The number of shares paid out ranges from
0%
to
150%
of an employee’s award, depending on Brink's relative TSR rank among a selected peer group.
Changes to Performance Goals for the 2013, 2014 and 2015 Prior PSU Grants.
The performance goals for the 2013, 2014 and 2015 Prior PSU grants were based on consolidated operating profit over the performance period, which were adjusted for various items including corporate items, acquisition and dispositions, unusual or infrequently occurring events and foreign currency. In 2014, the Compensation and Benefits Committee of the Board of Directors approved a second performance goal for the Prior PSU awards granted in 2013 and 2014 to reflect the change in currency exchange rate used to report the results of Venezuela because the rate had changed significantly. Additionally, in February 2016, the Compensation and Benefits Committee of the Board of Directors modified the terms of performance share units originally awarded or granted in 2013, 2014 and 2015 to reflect the impact of removing Venezuela operations from the Company’s segment results beginning in 2015. For each of the affected performance share units, consolidated results for 2015 and each subsequent year within the respective performance period was adjusted to reflect Venezuela results at the amount originally projected in the applicable performance target.
After the conclusion of each performance period, the payout will be equal to the lower of the calculated payout under the adjusted performance goals and the original performance goals. Approximately
100
employees who received Prior PSUs in 2013, 2014 and 2015 were affected by the change. No incremental compensation cost associated with the modifications was recognized as the additional goals were expected to be more difficult to achieve and, in accordance with FASB ASC Topic 718,
Compensation - Stock Compensation
, we continued to recognize expense as calculated using the original performance goals.
The following table summarizes all PSU activity during
2017
:
|
Shares
(in thousands) |
Weighted-Average Grant Date Fair Value Per Share
|
|||||
|
Nonvested balance as of December 31, 2016
|
603.2
|
|
$
|
28.02
|
|
|
|
Activity from January 1 to December 31, 2017:
|
|
|
|
|||
|
Granted
|
220.9
|
|
54.31
|
|
||
|
Forfeited
|
(18.7
|
)
|
33.08
|
|
||
|
Vested
(a)
|
(134.2
|
)
|
24.39
|
|
||
|
Nonvested balance as of December 31, 2017
|
671.2
|
|
$
|
37.26
|
|
|
|
(a)
|
The vested PSUs presented are based on the target amount of the award. In accordance with the terms of the underlying award agreements or plan provisions, the actual shares earned and distributed for the performance period ended December 31, 2016 were
252.0
.
|
Market Share Units (“MSUs”)
Prior to 2016, we granted MSUs, which contain a market condition as well as a service condition. We measure the fair value of MSUs using a Monte Carlo simulation model.
MSUs are paid out in shares of Brink’s stock when an award vests. MSUs reward the achievement of the appreciation of Brink’s stock over the performance period (generally
three
years) at a rate of
0%
to
150%
of the initial target number of shares awarded. The multiplier to the initial target number of MSUs awarded is calculated as the ratio of the price of Brink’s stock at the end of the performance period divided by the price of Brink’s stock at the beginning of the performance period.
If the price of Brink’s stock at the end of the performance period is less than
50%
of the initial price, no payout for MSUs will occur.
The following table summarizes all MSU activity during
2017
:
|
Shares
(in thousands) |
Weighted-Average Grant Date Fair Value Per Share
|
|||||
|
Nonvested balance as of December 31, 2016
|
141.7
|
|
$
|
27.02
|
|
|
|
Activity from January 1 to December 31, 2017:
|
|
|
|
|||
|
Granted
|
—
|
|
—
|
|
||
|
Forfeited
|
—
|
|
—
|
|
||
|
Vested
(a)
|
(67.5
|
)
|
23.34
|
|
||
|
Nonvested balance as of December 31, 2017
|
74.2
|
|
$
|
30.37
|
|
|
|
(a)
|
The vested MSUs presented are based on the target amount of the award. In accordance with the terms of the underlying award agreements of plan provisions, the actual shares earned and distributed for the performance period ended December 31, 2016 were
81.8
. No additional compensation expense was required to be recognized for the additional shares distributed, as the market condition was included in the
$23.34
grant date fair value.
|
109
The following table provides the terms and weighted-average assumptions used in the Monte Carlo simulation model for those PSUs containing a market condition and for the MSU's:
|
Terms and Assumptions Used to Estimate Fair Value
|
2017 TSR PSUs
|
2016 TSR PSUs
|
2015 Prior PSUs
|
2015 MSUs
|
||||||||
|
Terms of awards:
|
||||||||||||
|
Performance period
|
Jan. 1, 2017 to
|
Jan. 1, 2016 to
|
Jan. 1, 2015 to
|
Jan. 1, 2015 to
|
||||||||
|
|
Dec. 31, 2019
|
Dec. 31, 2018
|
Dec. 31, 2017
|
Dec. 31, 2017
|
||||||||
|
Weighted-average assumptions used to estimate fair value:
|
|
|
|
|
|
|
||||||
|
Expected dividend yield
(a)
|
0.8
|
%
|
1.4
|
%
|
1.5
|
%
|
1.5
|
%
|
||||
|
Expected stock price volatility
(b)
|
30.6
|
%
|
29.1
|
%
|
30.0
|
%
|
30.0
|
%
|
||||
|
Risk-free interest rate
(c)
|
1.4
|
%
|
0.8
|
%
|
1.0
|
%
|
1.0
|
%
|
||||
|
Contractual term in years
|
2.9
|
|
2.7
|
|
2.8
|
|
2.8
|
|
||||
|
Weighted-average fair value estimates at grant date:
|
||||||||||||
|
In millions
|
$
|
2.0
|
|
2.3
|
|
5.8
|
|
3.3
|
|
|||
|
Fair value per share
|
$
|
67.81
|
|
31.64
|
|
29.10
|
|
30.37
|
|
|||
|
(a)
|
TSR is determined assuming that dividends are reinvested. The stock price projection in the Monte Carlo simulation model assumed a
0%
dividend yield, which is mathematically equivalent to reinvesting dividends over the performance period. For the valuation of the TSR PSU and the TSR component of the Prior PSU awards, because the holders of the awards have no rights to any dividend paid during the vesting period, we applied a dividend yield in the Monte Carlo simulation model to reduce the projected stock price as of the grant date. Similar methodology was applied to the valuation of the MSU awards because the holders of the awards have no rights to any dividend during the vesting period.
|
|
(b)
|
The expected stock price volatility was calculated on the grant date for the most recent term equivalent to the contractual term in years.
|
|
(c)
|
The risk-free interest rate on each date of grant is the rate for a zero-coupon U.S. Treasury bill that was commensurate with the grant date contractual term.
|
Options
In 2017 and 2016, we granted performance-based stock options that have a service condition as well as a market condition. In addition, some of the awards granted in 2016 contain a non-financial performance condition. We measure the fair value of these awards at the grant date using a Monte Carlo simulation model.
No
performance-based options were granted prior to 2016.
In 2017 and prior to 2013, we granted time-based vesting stock options to select senior executives and employees and to directors. We measure the fair value of these awards at the grant date using the Black-Scholes-Merton option pricing model.
When vested, options entitle the holder to purchase a specified number of shares of Brink’s stock at a price set at the date the options were granted. The option price for Brink’s options was equal to the market price of Brink’s stock on the award date. All options granted to employees have a maximum term of
six years
and options previously granted to directors had a maximum term of
ten years
.
Performance-Based Option Activity
The table below summarizes the activity associated with grants of performance-based options:
|
Shares
(in thousands)
|
Weighted- Average
Exercise Price Per Share
|
Weighted-Average Grant Date Fair Value Per Share
|
Weighted- Average
Remaining Contractual
Term (in years)
|
Aggregate Intrinsic Value
(a)
(in millions)
|
||||||||||||
|
Outstanding at December 31, 2016
|
580.9
|
|
$
|
30.33
|
|
$
|
6.01
|
|
|
|
|
|||||
|
Granted
|
298.9
|
|
52.75
|
|
11.97
|
|
||||||||||
|
Forfeited or expired
|
—
|
|
—
|
|
—
|
|
|
|
|
|||||||
|
Exercised
|
—
|
|
—
|
|
—
|
|
|
|
|
|||||||
|
Outstanding at December 31, 2017
|
879.8
|
|
$
|
37.95
|
|
$
|
8.04
|
|
4.7
|
$
|
35.9
|
|
||||
|
Of the above, as of December 31, 2017:
|
|
|
|
|
|
|
|
|||||||||
|
Exercisable
|
—
|
|
$
|
—
|
|
0
|
$
|
—
|
|
|||||||
|
Expected to vest in future periods
(b)
|
879.7
|
|
$
|
37.95
|
|
4.7
|
$
|
35.9
|
|
|||||||
|
(a)
|
The intrinsic value of a stock option is the difference between the market price of the shares underlying the option and the exercise price of the option. The market price at December 29, 2017 was
$78.70
.
|
|
(b)
|
The number of options expected to vest takes into account an estimate of expected forfeitures. We currently have applied a
0%
expected forfeiture rate to these options.
|
110
The following table provides the term of the performance period and the weighted-average assumptions used in the Monte Carlo simulation model for the performance-based options:
|
Terms and Assumptions Used to Estimate Fair Value of Performance-Based Options Granted
|
2017
|
2016
|
|||||
|
Terms of awards:
|
|||||||
|
Performance period for achieving stock price hurdles
|
Three years from
|
Three years from
|
|||||
|
|
grant date
|
grant date
|
|||||
|
Assumptions used to estimate fair value:
|
|||||||
|
Expected dividend yield
(a)
|
0.8
|
%
|
1.3
|
%
|
|||
|
Expected stock price volatility
(b)
|
29.3
|
%
|
30.9
|
%
|
|||
|
Risk-free interest rate
(c)
|
1.8
|
%
|
1.1
|
%
|
|||
|
Expected term in years
(d)
|
4.5
|
|
4.5
|
|
|||
|
Weighted-average fair value estimates at grant date:
|
|||||||
|
In millions
|
$
|
3.6
|
|
$
|
3.5
|
|
|
|
Fair value per share
|
$
|
11.97
|
|
$
|
6.01
|
|
|
|
(a)
|
Since the holders of the awards have no rights to any dividend paid during the vesting period, we applied a dividend yield in the Monte Carlo simulation model. At each grant date, the dividend yield was calculated based on the most recent annualized dividend payment of
$0.40
and Brink's stock price at the date of grant.
|
|
(b)
|
The expected stock price volatility was calculated on each grant date for the most recent
4.5
year term.
|
|
(c)
|
The risk-free interest rate on each grant date is the rate for a zero-coupon U.S. Treasury bill that was commensurate with the expected life of
4.5
years.
|
|
(d)
|
Because we did not have historical exercise behavior for instruments with premiums, we assumed that the exercise of vested options occurred at the mid-point between the
three
-year vesting date and the
six
-year contractual term. In the Monte Carlo simulation, at each iteration of forecasted Brink's stock prices, the option was assumed to be exercised at the mid-point of
4.5
years if the stock price hurdle had been achieved. When the hurdle is achieved, the exercise price was then subtracted from the projected stock price, and discounted back to the grant date. In situations where the projected price had not met the hurdle, no value was attributed.
|
Time-based Vesting Option Activity
The table below summarizes the activity associated with grants of time-based vesting options:
|
Shares
(in thousands)
|
Weighted- Average
Exercise Price Per Share
|
Weighted-Average Grant Date Fair Value Per Share
|
Weighted- Average
Remaining Contractual
Term (in years)
|
Aggregate Intrinsic Value
(a)
(in millions)
|
||||||||||||
|
Outstanding at December 31, 2016
|
121.5
|
|
$
|
28.80
|
|
$
|
5.90
|
|
|
|
|
|||||
|
Granted
|
2.7
|
|
84.65
|
|
21.09
|
|
||||||||||
|
Forfeited or expired
|
—
|
|
—
|
|
—
|
|
|
|
|
|||||||
|
Exercised
|
(83.6
|
)
|
31.62
|
|
5.06
|
|
|
|
|
|||||||
|
Outstanding at December 31, 2017
(b)
|
40.6
|
|
$
|
26.74
|
|
$
|
8.66
|
|
0.9
|
$
|
2.1
|
|
||||
|
Of the above, as of December 31, 2017:
|
|
|
|
|
|
|
|
|||||||||
|
Exercisable
|
37.9
|
|
$
|
22.57
|
|
0.5
|
$
|
1.5
|
|
|||||||
|
Expected to vest in future periods
(c)
|
1.9
|
|
$
|
84.65
|
|
5.8
|
$
|
—
|
|
|||||||
|
(a)
|
The intrinsic value of a stock option is the difference between the market price of the shares underlying the option and the exercise price of the option. The market price at December 29, 2017 was
$78.70
.
|
|
(b)
|
There were
0.1 million
shares of exercisable options with a weighted-average exercise price of
$28.80
per share at
December 31, 2016
and
0.7 million
shares of exercisable options with a weighted-average exercise price of
$26.01
per share at
December 31, 2015
.
|
|
(c)
|
The number of options expected to vest takes into account an estimate of expected forfeitures.
|
111
The following table provides the weighted-average assumptions used in the Black-Scholes-Merton option pricing model for the time-based vesting options granted in 2017:
|
Assumptions Used to Estimate Fair Value of Time-Based Options
|
2017
|
||
|
Assumptions used to estimate fair value:
|
|||
|
Expected dividend yield
(a)
|
0.7
|
%
|
|
|
Expected stock price volatility
(b)
|
28.9
|
%
|
|
|
Risk-free interest rate
(c)
|
1.7
|
%
|
|
|
Expected term in years
(d)
|
4.5
|
|
|
|
Weighted-average fair value estimates at grant date:
|
|||
|
In millions
|
$
|
0.1
|
|
|
Fair value per share
|
$
|
21.09
|
|
|
(a)
|
The expected dividend yield is the calculated annual yield on Brink's stock at the time of the grant.
|
|
(b)
|
The expected stock price volatility was calculated at time of the grant after reviewing the historic volatility of our stock using daily close prices.
|
|
(c)
|
The risk-free interest rate the grant date was the rate for a zero-coupon U.S. Treasury bill that was commensurate with the expected life of
4.5
years.
|
|
(d)
|
The expected term of the options was based on historical exercise, expiration and post-cancellation behavior.
|
Deferred Stock Units (“DSUs”)
We granted DSUs to our independent directors in 2017 and prior years. We measure the fair value of DSUs at the grant date, based on the price of Brink's stock, and, if applicable, adjusted for a discount for dividends not received or accrued during the vesting period.
In 2017, 2016 and 2015, our independent directors received grants of DSUs that vest and will be paid out in shares of Brink's stock on the first anniversary of the grant date, provided that the director has not elected to defer the distribution of shares until a later date. DSUs are forfeited if a director leaves before the vesting date. However, in connection with the retirement of
two
directors in January 2016, our Board of Directors waived the
one
-year vesting provision for those DSUs granted in 2015. The impact of this modification was recorded in the first quarter of 2016 and was not significant.
DSUs granted prior to 2015, in general, will be paid out in shares of stock following separation from service.
The following table summarizes all DSU activity during
2017
:
|
Shares
(in thousands)
|
Weighted-Average Grant-Date Fair Value
|
|||||
|
Nonvested balance as of December 31, 2016
|
29.7
|
|
$
|
29.41
|
|
|
|
Activity from January 1 to December 31, 2017:
|
||||||
|
Granted
|
12.7
|
|
60.80
|
|
||
|
Forfeited
|
(5.5
|
)
|
39.65
|
|
||
|
Vested
|
(26.0
|
)
|
29.42
|
|
||
|
Nonvested balance as of December 31, 2017
|
10.9
|
|
$
|
60.80
|
|
|
The weighted-average grant-date fair value estimate per share for DSUs granted was
$60.80
in
2017
,
$29.41
in
2016
and
$32.79
in
2015
.
Other Share-Based Compensation
We have a deferred compensation plan that allows participants to defer a portion of their compensation into stock units. Units may be redeemed by employees for an equal number of shares of Brink’s stock. Employee accounts held
145,720
units at
December 31, 2017
, and
234,426
units at
December 31, 2016
.
We have a stock accumulation plan for our non-employee directors that, prior to 2014, provided for awards of stock units. Additionally, some fees paid to our directors are in the form of stock and may be deferred for distribution to a later date. Directors’ accounts held
15,895
units at
December 31, 2017
, and
34,200
units at
December 31, 2016
.
112
Common Stock
At
December 31, 2017
, we had
100 million
shares of common stock authorized and
50.5 million
shares issued and outstanding.
Dividends
We paid regular quarterly dividends on our common stock during the last three years. On
January 15, 2018
, the Board declared a regular quarterly dividend of
15 cents
per share payable on
March 1, 2018
. The payment of future dividends is at the discretion of the Board of Directors and is dependent on our future earnings, financial condition, shareholder equity levels, cash flow, business requirements and other factors.
Preferred Stock
At
December 31, 2017
, we had the authority to issue up to
2.0 million
shares of preferred stock with a par value of
$10
per share.
Share Repurchase Program
In May 2017, our board of directors authorized a
$200 million
share repurchase program which will expire on December 31, 2019. We are not obligated to repurchase any specific dollar amount or number of shares and, at December 31, 2017,
$200 million
remains available under this program. The timing and volume of share repurchases may be executed at the discretion of management on an opportunistic basis, or pursuant to trading plans or other arrangements. Share repurchases under the program may be made in the open market, in privately negotiated transactions, or otherwise.
Shares Used to Calculate Earnings per Share
|
Years Ended December 31,
|
||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
|||||
|
Weighted-average shares
|
|
|
|
|||||
|
Basic
(a)
|
50.7
|
|
50.0
|
|
49.3
|
|
||
|
Effect of dilutive stock awards
|
1.1
|
|
0.6
|
|
—
|
|
||
|
Diluted
(a)
|
51.8
|
|
50.6
|
|
49.3
|
|
||
|
Antidilutive stock awards excluded from denominator
|
0.1
|
|
0.1
|
|
1.7
|
|
||
|
(a)
|
We have deferred compensation plans for directors and certain of our employees. Some amounts owed to participants are denominated in common stock units. Each unit represents one share of common stock. The number of shares used to calculate basic earnings per share includes the weighted-average common stock units credited to employees and directors under the deferred compensation plans. Additionally, nonvested units are also included in the computation of basic weighted-average shares when the requisite service period has been completed. Accordingly, basic and diluted shares include weighted-average units of
0.3 million
in
2017
,
0.5 million
in
2016
and
0.5 million
in
2015
.
|
113
|
Years Ended December 31,
|
|||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
||||||
|
Cash paid for:
|
|
|
|
||||||
|
Interest
|
$
|
27.1
|
|
20.1
|
|
18.6
|
|
||
|
Income taxes, net
|
83.8
|
|
64.3
|
|
45.4
|
|
|||
Argentina Debt Security Transactions
We have elected in the past and could continue in the future to repatriate cash from Brink's Argentina using different means to convert Argentine pesos into U.S. dollars. In 2017, cash outflows from the purchase of debt securities totaled
$37.1 million
and cash inflows from the sale of these securities totaled
$36.9 million
. In 2016, cash outflows from the purchase of debt securities totaled
$2.1 million
and cash inflows from the sale of these securities totaled
$2.0 million
. In 2015, cash outflows from the purchase of debt securities totaled
$25.8 million
and cash inflows from the sale of these securities totaled
$18.7 million
. The net cash flows from these transactions are treated as operating cash flows as the debt securities are purchased specifically for resale and are generally sold within a short period of time from the date of purchase.
Mexico Real Estate Transaction
Brink's Mexico entered into a transaction in 2015 to sell its headquarters building in Mexico City and lease the property back for
two
years. The transaction did not qualify for sale-leaseback accounting in 2015 due to continuing involvement with the property and the transaction proceeds of
$14.5 million
were reported as cash inflows from financing activities in 2015.
Non-cash Investing and Financing Activities
We acquired armored vehicles, CompuSafe
®
units and other equipment under capital lease arrangements in the last three years including
$51.7 million
in
2017
,
$29.4 million
in
2016
and
$18.9 million
in
2015
. In the fourth quarter of 2017, we paid
$90.9 million
in scheduled installments on the Maco Transportadora acquisition that was completed in the third quarter of 2017. These payments are reported as cash outflows from financing activities as the payments were made more than three months after the acquisition date.
Cash Supply Chain Services
In France, we offer services to certain of our customers where we manage some or all of their cash supply chains. Providing this service requires our French subsidiary to take temporary title to the cash received from the management of our customers' cash supply chains until the cash is returned to the customers. As part of this service offering, we have entered into lending arrangements with some of our customers. Cash borrowed under these lending arrangements is used in the process of managing these customers' cash supply chains. The cash for which we have temporary title and the cash borrowed under these customer lending arrangements is restricted and cannot be used for any other purpose other than to service our customers who participate in this service offering.
At
December 31, 2017
, we held
$112.6 million
of restricted cash (
$27.0 million
represented short-term borrowings,
$74.7 million
represented restricted cash held for customers and
$10.9 million
represented accrued liabilities). At
December 31, 2016
, we held
$55.5 million
of restricted cash (
$22.3 million
represented short-term borrowings and
$33.2 million
represented restricted cash held for customers).
114
|
Years Ended December 31,
|
|||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
||||||
|
Foreign currency items:
|
|
|
|
||||||
|
Transaction gains (losses)
(a)
|
$
|
(9.2
|
)
|
1.4
|
|
(26.8
|
)
|
||
|
Foreign currency derivative instrument gains (losses)
|
0.8
|
|
(2.4
|
)
|
2.9
|
|
|||
|
Gains (losses) on sale of property and equity investment
(b)
|
9.2
|
|
(1.3
|
)
|
0.9
|
|
|||
|
Argentina conversion losses
|
—
|
|
(0.1
|
)
|
(7.1
|
)
|
|||
|
Impairment losses
(c)
|
(3.4
|
)
|
(20.6
|
)
|
(37.2
|
)
|
|||
|
Share in earnings (losses) of equity affiliates
|
0.4
|
|
(1.5
|
)
|
0.5
|
|
|||
|
Royalty income
|
1.9
|
|
2.6
|
|
2.1
|
|
|||
|
Gains (losses) on business acquisitions and dispositions
|
0.6
|
|
0.1
|
|
(6.3
|
)
|
|||
|
Other
|
3.0
|
|
1.7
|
|
1.6
|
|
|||
|
Other operating income (expense)
|
$
|
3.3
|
|
(20.1
|
)
|
(69.4
|
)
|
||
|
(a)
|
Includes losses from devaluations in Venezuela of
$9.1 million
in
2017
,
$4.8 million
in
2016
, and
$18.1 million
in
2015
.
|
|
(b)
|
Includes an
$8.4 million
gain in 2017 related to the sale of real estate in Mexico.
|
|
(c)
|
Includes
$13.6
million of impairment losses in 2016 related to the 2016 Reorganization and Restructuring and
$35.3 million
of impairment losses in 2015 related to property and equipment in Venezuela.
|
|
Years Ended December 31,
|
|||||||||
|
(In millions)
|
2017
|
2016
|
2015
|
||||||
|
Interest income
|
$
|
4.1
|
|
2.6
|
|
3.3
|
|
||
|
Gain on available-for-sale securities
|
1.5
|
|
0.5
|
|
1.1
|
|
|||
|
Foreign currency transaction losses
|
(7.6
|
)
|
—
|
|
—
|
|
|||
|
Derivative instruments
|
1.1
|
|
(0.6
|
)
|
(0.5
|
)
|
|||
|
Retirement benefit cost other than service cost
|
(47.8
|
)
|
(40.3
|
)
|
(39.8
|
)
|
|||
|
Prepayment penalties
(a)
|
(8.3
|
)
|
—
|
|
—
|
|
|||
|
Interest on Brazil tax claim
(b)
|
(1.6
|
)
|
—
|
|
—
|
|
|||
|
Other
|
(1.6
|
)
|
(1.3
|
)
|
(0.5
|
)
|
|||
|
Total
|
$
|
(60.2
|
)
|
(39.1
|
)
|
(36.4
|
)
|
||
|
(a)
|
Penalties upon prepayment of Private Placement notes in September 2017 and a term loan in October 2017.
|
|
(b)
|
Related to an unfavorable court ruling in 2017 on a non-income tax claim in Brazil. The court ruled that Brink's must pay interest accruing from the initial claim filing in 1994 to the current date. The principal amount of the claim was approximately
$1 million
and was recognized in selling, general and administrative expenses in 2017.
|
115
During the fourth quarter of 2015, we became aware of an investigation initiated by COFECE (the Mexican antitrust agency) related to potential anti-competitive practices among competitors in the cash logistics industry in Mexico (the industry in which Brink’s Mexican subsidiary, SERPAPROSA, is active). The investigation was completed during the fourth quarter of 2017 and we no longer believe that an administrative claim or proceeding arising from this investigation could result in a material loss to the Company.
In addition, we are involved in various other lawsuits and claims in the ordinary course of business. We are not able to estimate the loss or range of losses for some of these matters. We have recorded accruals for losses that are considered probable and reasonably estimable. Except as otherwise noted, we do not believe that it is reasonably possible the ultimate disposition of any of the lawsuits currently pending against the Company could have a material adverse effect on our liquidity, financial position or results of operations.
At
December 31, 2017
, we had noncancellable commitments for
$32.1 million
in equipment purchases, and information technology and other services.
116
2016 Reorganization and Restructuring
In the fourth quarter of 2016, management implemented restructuring actions across our global business operations and our corporate functions. As a result of these actions, we recognized
$18.1 million
in related 2016 costs. We recognized an additional
$17.3 million
in 2017 under this restructuring for additional costs related to severance, asset-related adjustments, a benefit program termination and lease terminations. Severance actions are expected to reduce our global workforce by
800
to
900
positions and result in approximately
$20 million
in annualized cost savings when this restructuring is finalized. We expect to incur additional costs between
$10
and
$12 million
in future periods, primarily severance costs.
The following table summarizes the costs incurred, payments and utilization, and foreign currency exchange effects of the 2016 Reorganization and Restructuring:
|
(In millions)
|
Asset Related Adjustments
|
Severance Costs
|
Lease Terminations
|
Benefit Program Termination
|
Total
|
||||||||||
|
|
|||||||||||||||
|
Balance as of January 1, 2016
|
$
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||
|
Expense (benefit)
|
16.3
|
|
7.2
|
|
0.7
|
|
(6.1
|
)
|
18.1
|
|
|||||
|
Payments and utilization
|
(16.3
|
)
|
(0.2
|
)
|
(0.1
|
)
|
6.1
|
|
(10.5
|
)
|
|||||
|
Balance as of December 31, 2016
|
$
|
—
|
|
7.0
|
|
0.6
|
|
—
|
|
7.6
|
|
||||
|
Expense (benefit)
|
4.1
|
|
10.4
|
|
0.6
|
|
2.2
|
|
17.3
|
|
|||||
|
Payments and utilization
|
(4.1
|
)
|
(16.0
|
)
|
(0.8
|
)
|
(2.2
|
)
|
(23.1
|
)
|
|||||
|
Foreign currency exchange effects
|
—
|
|
0.2
|
|
—
|
|
—
|
|
0.2
|
|
|||||
|
Balance as of December 31, 2017
|
$
|
—
|
|
1.6
|
|
0.4
|
|
—
|
|
2.0
|
|
||||
Executive Leadership and Board of Directors Restructuring
In the fourth quarter of 2015, we recognized
$1.8 million
in costs related to Executive Leadership and Board of Directors restructuring actions, which were announced in January 2016. We also recognized an additional
$4.3 million
in charges, primarily severance costs, in 2016.
2015 Reorganization and Restructuring
Brink's initiated a global restructuring of its business in the third quarter of 2015. We recognized
$11.6 million
in 2015 costs related to employee severance, contract terminations and property impairment. We recognized an additional
$6.5 million
in 2016 related to this restructuring for additional severance costs, contract terminations and lease terminations. The 2015 Reorganization and Restructuring reduced the global workforce by approximately
1,100
positions and resulted in approximately
$20 million
in 2016 savings. The actions under this program were substantially completed by the end of 2016, with cumulative pretax charges of approximately
$18 million
.
2014 Reorganization and Restructuring
In the fourth quarter of 2014, we announced a reorganization and restructuring of Brink’s global organization to provide for a more streamlined and centralized organization. As part of this program, we reduced our total workforce by approximately
1,700
positions. The restructuring saved annual direct costs of approximately
$50 million
in 2015 compared to 2014, excluding charges for severance, lease termination and accelerated depreciation. We recorded total pretax charges of
$21.8 million
in 2014 and an additional
$1.9 million
of pretax charges in 2015 related to the 2014 Reorganization and Restructuring. The actions under this program were substantially completed by the end of 2015 with cumulative pretax charges of approximately
$24 million
, primarily severance costs.
Other Restructurings
Management routinely implements restructuring actions in targeted sections of our business. As a result of these actions, we recognized related severance costs of
$4.6 million
in
2017
. The majority of these restructuring actions were completed in 2017. The completed restructuring actions reduced our workforce by approximately
300
positions, which will result in
$4 million
in annualized cost savings. For the remaining restructuring actions, we expect to incur additional costs less than
$1 million
in future periods. These estimates will be updated as management targets additional sections of our business.
117
|
2017 Quarters
|
2016 Quarters
|
||||||||||||||||||||||||
|
(In millions, except for per share amounts)
|
1
st
|
|
2
nd
|
|
3
rd
|
|
4
th
|
|
1
st
|
|
2
nd
|
|
3
rd
|
|
4
th
|
|
|||||||||
|
Revenues
|
$
|
788.4
|
|
805.9
|
|
849.5
|
|
903.2
|
|
$
|
721.8
|
|
739.5
|
|
755.8
|
|
803.5
|
|
|||||||
|
Operating profit
|
70.9
|
|
48.3
|
|
66.4
|
|
88.3
|
|
23.5
|
|
32.2
|
|
59.7
|
|
69.1
|
|
|||||||||
|
Amounts attributable to Brink’s:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Income (loss) from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Continuing operations
|
$
|
34.7
|
|
14.3
|
|
19.9
|
|
(52.0
|
)
|
$
|
(3.1
|
)
|
0.3
|
|
24.5
|
|
14.5
|
|
|||||||
|
Discontinued operations
|
—
|
|
(0.1
|
)
|
—
|
|
(0.1
|
)
|
—
|
|
—
|
|
—
|
|
(1.7
|
)
|
|||||||||
|
Net income (loss) attributable to Brink’s
|
$
|
34.7
|
|
14.2
|
|
19.9
|
|
(52.1
|
)
|
$
|
(3.1
|
)
|
0.3
|
|
24.5
|
|
12.8
|
|
|||||||
|
Depreciation and amortization
|
$
|
33.9
|
|
34.6
|
|
37.9
|
|
40.2
|
|
$
|
32.2
|
|
32.9
|
|
32.4
|
|
34.1
|
|
|||||||
|
Capital expenditures
|
27.8
|
|
43.3
|
|
46.3
|
|
57.1
|
|
20.8
|
|
24.2
|
|
27.4
|
|
39.8
|
|
|||||||||
|
Earnings (loss) per share attributable to Brink’s common shareholders:
|
|||||||||||||||||||||||||
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Continuing operations
|
$
|
0.69
|
|
0.28
|
|
0.39
|
|
(1.02
|
)
|
$
|
(0.06
|
)
|
0.01
|
|
0.49
|
|
0.29
|
|
|||||||
|
Discontinued operations
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(0.03
|
)
|
|||||||||
|
Net income (loss)
|
$
|
0.69
|
|
0.28
|
|
0.39
|
|
(1.03
|
)
|
$
|
(0.06
|
)
|
0.01
|
|
0.49
|
|
0.25
|
|
|||||||
|
Diluted
|
|||||||||||||||||||||||||
|
Continuing operations
|
$
|
0.67
|
|
0.28
|
|
0.38
|
|
(1.02
|
)
|
$
|
(0.06
|
)
|
0.01
|
|
0.48
|
|
0.28
|
|
|||||||
|
Discontinued operations
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(0.03
|
)
|
|||||||||
|
Net income (loss)
|
$
|
0.67
|
|
0.28
|
|
0.38
|
|
(1.03
|
)
|
$
|
(0.06
|
)
|
0.01
|
|
0.48
|
|
0.25
|
|
|||||||
Earnings per share
. Earnings per share amounts for each quarter are required to be computed independently. As a result, their sum may not equal the annual earnings per share.
Significant pretax items in a quarter.
Second quarter of 2017
We recognized an
$8.1 million
remeasurement loss due to the significant Venezuela currency devaluation that occurred in that quarter.
Third quarter of 2017
The Private Placement notes were paid off early in September 2017 resulting in a
$6.5 million
prepayment penalty.
Fourth quarter of 2017
We incurred an
$11.1 million
loss related to the theft of an international gold shipment in December 2017. We also recognized a net gain on the sale of real estate in Mexico (
$7.8 million
, net of statutory employee benefit).
First quarter of 2016
We decided to exit operations in the Republic of Ireland and, as a result, we recognized
$4.2 million
in severance costs and another
$1.7 million
in operating and other exit costs. In addition, we recognized
$3.2 million
in charges related to the Executive Leadership and Board of Directors restructuring. We also recognized a
$2.8 million
net currency remeasurement loss when the Venezuelan government announced that they would replace the SIMADI exchange mechanism with the DICOM exchange mechanism.
Second quarter of 2016
We decided to exit operations in Northern Ireland and recognized another
$4.5 million
in exit-related charges related to our Ireland businesses. We also recognized a
$2.0 million
loss related to the sale of corporate assets.
Fourth quarter of 2016
Management implemented restructuring actions across our global operations and our corporate functions. As a result of these actions, we recognized asset-related adjustments of
$16.3 million
, severance costs of
$7.2 million
, lease restructuring charges of
$0.7 million
, partially offset by a
$6.1 million
benefit related to the termination of a benefit program.
Significant aftertax items in a quarter.
In the fourth quarter of 2017, we recognized
$92 million
in tax expense as a result of the U.S. Tax Cuts and Jobs Act, which was enacted into law in December 2017. In the fourth quarter of 2016, we recognized a
$14.7 million
valuation allowance on U.S. deferred tax assets.
In
January 2018
, we announced an agreement to purchase Rodoban Transportes Aereos e Terrestres Ltda., Rodoban Servicos e Sistemas de Seguranca Ltda., and Rodoban Seguranca e Transporte de Valores Ltda. (together "Rodoban") in Brazil for approximately
$145 million
, subject to post-closing adjustments and foreign exchange translation. Rodoban provides cash-in-transit, money processing and ATM services and generates annual revenues of approximately
$80 million
. The acquisition is subject to customary closing conditions including approval by the Brazilian antitrust authority and is expected to close in the second quarter of 2018.
118
Not applicable.
(a) Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), that are intended to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
We carried out an evaluation, under the supervision, and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2017 based upon the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“the COSO framework”). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2017 due to the material weaknesses in internal control over financial reporting, as described below.
Notwithstanding the material weaknesses in our internal control over financial reporting, we have concluded that the consolidated financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America. Additionally, the material weaknesses did not result in any restatements of our consolidated financial statements or disclosures for any prior period.
(b) Management's Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) promulgated under the Exchange Act as a process, designed by, or under the supervision of the Company’s principal executive and principal financial officers and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions and disposition of assets; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures are made only in accordance with management and Board authorizations; and providing reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with policies or procedures may deteriorate.
Management, with the participation of the Company’s principal executive and principal financial officers, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2017 based on the framework and criteria established in
Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on the foregoing, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2017 due to the material weaknesses described below.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that a reasonable possibility exists that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis.
Discussion of Material Weaknesses
Management has identified material weaknesses in its internal control over financial reporting related to the areas described below.
Control Activities
We have identified design and operating effectiveness deficiencies in the principles associated with the control activities component of the COSO framework in our U.S. business operations unit. Specifically, these control deficiencies constitute a material weakness in the aggregate, relating to: (i) deploying control activities through policies that establish what is expected and procedures that put policies into action and (ii) selecting
119
and developing control activities and information technology that contribute to the mitigation of risks and support achievement of objectives. The U.S. business operations unit’s internal controls over information technology systems were not adequately designed and did not operate effectively. Specifically: (i) user access controls did not restrict users’ access privileges commensurate with their assigned authority and responsibility and (ii) terminated employees’ access privileges were not removed in a timely manner. As a result of these deficiencies, the related process-level manual and automated application controls that rely on information from the affected information technology systems were also ineffective.
Monitoring Activities
We have identified design and operating effectiveness deficiencies in the principles associated with the monitoring component of the COSO framework. Specifically, these control deficiencies constitute a material weakness relating to selecting, developing, and performing ongoing evaluation to ascertain whether the components of internal controls are present and functioning.
Our internal control over financial reporting as of December 31, 2017, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report, which follows below.
(c) Changes in Internal Controls over Financial Reporting
Except for the identification of the material weaknesses described above, there were no changes during the quarter ended December 31, 2017 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
(d) Remediation Activities
Our remediation efforts are ongoing and we will continue our initiatives to implement and document policies, procedures, and internal controls. Remediation of the identified material weaknesses and strengthening our internal control environment will require a substantial effort throughout 2018 and beyond, as necessary. We will test the ongoing operating effectiveness of the new and existing controls in future periods. The material weaknesses cannot be considered completely remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
As we remediate the material weaknesses and continue to monitor the effectiveness of our internal control over financial reporting in the affected areas, we have and will continue to perform additional procedures prescribed by management, including the use of manual mitigating control procedures and employing any additional tools and resources deemed necessary, to ensure that our consolidated financial statements are fairly stated in all material respects. The following remediation activities highlight our commitment to remediating our identified material weaknesses.
Control Activities
The U.S. business operations unit has identified and begun to implement several enhancements to its internal controls including (i) identification of each deficiency and related remediation actions to ensure that only properly approved common access permissions are documented and granted; (ii) elimination of application segregation of duty deficiencies; (iii) development of documented procedures for managers to use in the periodic review of their employees access permissions; and (iv) evaluation of the common process for timely notification of terminated employees for access removal. U.S. business operations unit management will also redesign controls related to analytics to emphasize document precision and retention. This is an incremental improvement to other remediation activity related to internal controls over information technology systems. In addition, the U.S. business operations unit management will redesign the reconciliation control of data between the originating application and the updated application.
Monitoring Activities
We are in the process of hiring a manager whose primary responsibility will be to design and test controls for the U.S. business operation unit. In addition, the manager of each control owner will be trained on the specific performance requirements of the control and will monitor each control owner’s performance.
Management believes that these efforts will effectively remediate the material weaknesses identified in the 2017 audit. However, the material weaknesses in our internal control over financial reporting will not be considered remediated until the new controls are fully implemented, in operation for a sufficient period of time, and tested and concluded by management to be designed and operating effectively. In addition, as the Company continues to evaluate and work to improve its internal control over financial reporting within the area of general information technology controls, management may take additional measures to address control deficiencies or modify the remediation plan described above. Management will test, evaluate, and audit the implementation of these new processes and internal controls during 2018 to determine whether they are designed and operating effectively to provide reasonable assurance that they will prevent or detect a material error in the Company’s financial statements. The management team will perform validation procedures similar to those performed at year end to obtain assurance that the financial statement balances are accurate and complete.
Management is working towards having these remediation efforts completed by the time we issue our December 31, 2018 financial statements. Management is committed to continuous improvement of our internal control over financial reporting and will continue to diligently review our
120
financial reporting controls and procedures to ensure that our financial position, results of operations and cash flows continue to be accurately stated.
The management team was able to obtain assurance that the financial statement balances were accurate and complete through validation procedures. As a result of these procedures, we believe that the consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2017 fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP. Additionally, these material weaknesses did not result in any adjustments or restatements of the Company's audited and unaudited consolidated financial statements or disclosures for any prior period previously reported by the Company.
121
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of The Brink’s Company
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of The Brink’s Company and subsidiaries (the “Company”) as of December 31, 2017, based on criteria established in
Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2017, based on criteria established in
Internal Control - Integrated Framework (2013)
issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2017, of the Company and our report dated
March 1, 2018
, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management's assessment:
Control activities
: design and operating effectiveness control deficiencies constituting a material weaknesses in the aggregate, relating to: (i) deploying control activities through policies that establish what is expected and procedures that put policies into action and (ii) selecting and developing control activities and information technology that contribute to the mitigation of risks and support achievement of objectives. The U.S. business operations unit’s internal controls over information technology systems were not adequately designed and did not operate effectively. Specifically: (i) user access controls did not restrict users’ access privileges commensurate with their assigned authority and responsibility and (ii) terminated employees’ access privileges were not removed in a timely manner. As a result of these deficiencies, the related process-level manual and automated application controls that rely on information from the affected information technology systems were also ineffective. These deficiencies also affected the corporate accounts and Canadian business operations unit as they share a common enterprise performance management software platform with the U.S. business operations unit.
122
Monitoring activities
: design and operating effectiveness control deficiencies constituting a material weakness in the aggregate, relating to selecting, developing, and performing ongoing evaluation to ascertain whether the components of internal controls are present and functioning.
These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2017, of the Company, and this report does not affect our report on such financial statements.
/s/ DELOITTE & TOUCHE LLP
Richmond, Virginia
March 1, 2018
123
Not applicable.
124
|
|
We have adopted a Code of Ethics that applies to all of the directors, officers and employees (including the Chief Executive Officer, Chief Financial Officer and Controller) and have posted the Code of Ethics on our website. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K relating to amendments to or waivers from any provision of the Code of Ethics applicable to the Chief Executive Officer, Chief Financial Officer or Controller by posting this information on the website. The internet address is
www.brinks.com
.
Our Chief Executive Officer is required to make, and he has made, an annual certification to the New York Stock Exchange (“NYSE”) stating that he was not aware of any violation by us of the corporate governance listing standards of the NYSE. Our Chief Executive Officer made his annual certification to that effect to the NYSE as of May 11, 2017. In addition, we are filing, as exhibits to this Annual Report on Form 10-K, the certification of our principal executive officer and principal financial officer required under sections 906 and 302 of the Sarbanes-Oxley Act of 2002 to be filed with the Securities and Exchange Commission regarding the quality of our public disclosure.
The information regarding executive officers is included in this report following Item 4, under the caption “Executive Officers of the Registrant.” Other information required by Item 10 is incorporated by reference to our definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after
December 31, 2017
.
The information required by Item 11 is incorporated by reference to our definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after
December 31, 2017
.
The information required by Item 12 is incorporated by reference to our definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after
December 31, 2017
.
The information required by Item 13 is incorporated by reference to our definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after
December 31, 2017
.
The information required by Item 14 is incorporated by reference to our definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after
December 31, 2017
.
125
|
|
|
(a)
|
1.
|
All financial statements – see pages 60–118.
|
|
|
2.
|
Financial statement schedules – not applicable.
|
|
|
3.
|
Exhibits – see exhibit index.
|
None.
126
Exhibit Index
Each exhibit listed as a previously filed document is hereby incorporated by reference to such document.
|
Exhibit
Number
|
Description
|
|
|
|
|
|
|
3.1
|
||
|
|
|
|
|
3.2
|
||
|
4.1
|
||
|
|
|
|
|
10.1*
|
||
|
|
|
|
|
10.2*
|
||
|
10.3*
|
||
|
10.4*
|
||
|
|
|
|
|
10.5*
|
||
|
|
|
|
|
10.6*
|
||
|
|
|
|
|
10.7*
|
||
|
|
|
|
|
10.8*
|
||
|
|
|
|
|
10.9*
|
||
|
10.10*
|
||
|
|
|
|
|
10.11*
|
||
|
|
|
|
|
10.12*
|
||
|
10.13*
|
||
|
10.14*
|
||
127
|
|
|
|
|
10.15*
|
||
|
|
|
|
|
10.16*
|
||
|
10.17*
|
||
|
10.18*
|
||
|
10.19*
|
||
|
|
|
|
|
10.20*
|
||
|
|
|
|
|
10.21*
|
||
|
|
|
|
|
10.22*
|
||
|
|
|
|
|
10.23*
|
||
|
10.24*
|
||
|
10.25*
|
||
|
10.26*
|
||
|
10.27*
|
||
|
10.28*
|
||
|
|
|
|
|
10.29*
|
Form of Indemnification Agreement entered into by the Registrant with its directors and officers. Exhibit 10(l) to the 1991 Form 10-K.
|
|
|
|
|
|
|
10.30*
|
||
|
|
||
|
10.31*
|
||
|
|
|
|
|
10.32*
|
||
|
|
|
|
128
|
10.33*
|
||
|
10.34*
|
||
|
10.35*
|
||
|
10.36*
|
||
|
|
|
|
|
10.37*
|
||
|
|
|
|
|
10.38*
|
||
|
|
|
|
|
10.39*
|
||
|
|
|
|
|
10.40*
|
||
|
|
|
|
|
10.41
|
||
|
|
|
|
|
10.42
|
|
|
|
10.43
|
||
|
|
|
|
|
10.44
|
||
|
|
|
|
|
10.45
|
||
|
10.46
|
||
|
10.47
|
||
|
|
|
|
|
21
|
||
|
|
|
|
|
23.1
|
||
|
|
|
|
|
23.2
|
||
|
24
|
||
129
|
|
|
|
|
31.1
|
||
|
31.2
|
||
|
|
|
|
|
32.1
|
||
|
32.2
|
||
|
|
|
|
|
99.1*
|
||
|
99.2*
|
||
|
99.3*
|
||
|
|
|
|
|
101
|
Interactive Data File (Annual Report on Form 10-K, for the year ended December 31, 2017, furnished in XBRL (eXtensible Business Reporting Language)).
Attached as Exhibit 101 to this report are the following documents formatted in XBRL: (i) the Consolidated Balance Sheets at December 31, 2017, and December 31, 2016, (ii) the Consolidated Statements of Operations for the years ended December 31, 2017, 2016 and 2015, (iii) the Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2017, 2016 and 2014, (iv) the Consolidated Statements of Equity for the years ended December 31, 2017, 2016 and 2015, (v) the Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015, and (vi) the Notes to Consolidated Financial Statements, tagged as blocks of text. Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections. |
|
*Management contract or compensatory plan or arrangement.
130
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on
March 1, 2018
.
|
|
|
The Brink’s Company
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
By
|
/s/ Douglas A. Pertz
|
|
|
|
Douglas A. Pertz
|
|
|
|
(President and
|
|
|
|
Chief Executive Officer)
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated, on
March 1, 2018
.
|
Signature
|
Title
|
|
|
|
|
/s/ Douglas A. Pertz
|
Director, President
and Chief Executive Officer
(Principal Executive Officer)
|
|
Douglas A. Pertz
|
|
|
/s/ Ronald J. Domanico
|
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
|
|
Ronald J. Domanico
|
|
|
/s/ Thomas R. Colan
|
Controller
(Principal Accounting Officer)
|
|
Thomas R. Colan
|
|
|
|
|
|
*
|
Director
|
|
Paul G. Boynton
|
|
|
|
|
|
*
|
Director
|
|
Ian D. Clough
|
|
|
*
|
Director
|
|
Susan E. Docherty
|
|
|
|
|
|
*
|
Director
|
|
Reginald D. Hedgebeth
|
|
|
*
|
Director
|
|
Dan R. Henry
|
|
|
|
|
|
*
|
Director
|
|
Michael J. Herling
|
|
|
|
|
|
*
|
Director
|
|
George I. Stoeckert
|
|
|
* By:
|
|
/s/ Douglas A. Pertz
|
|
|
|
Douglas A. Pertz, Attorney-in-Fact
|
131
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Mine Safety DisclosuresPart IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial DataItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataNote 1 - Summary Of Significant Accounting PoliciesNote 2 - Segment InformationNote 3 - Retirement BenefitsNote 4 - Income TaxesNote 5 - Property and EquipmentNote 6 - AcquisitionsNote 7 - Goodwill and Other Intangible AssetsNote 8 - Prepaid Expenses and OtherNote 9 - Other AssetsNote 10 - Accumulated Other Comprehensive Income (loss)Note 11 - Fair Value Of Financial InstrumentsNote 12 - Accrued LiabilitiesNote 13 - Other LiabilitiesNote 14 - DebtNote 15 - Accounts ReceivableNote 16 - Operating LeasesNote 17 - Share-based Compensation PlansNote 18 - Capital StockNote 19 - Supplemental Cash Flow InformationNote 20 - Other Operating Income (expense)Note 21 - Interest and Other Nonoperating Income (expense)Note 22 - Other Commitments and ContingenciesNote 23 - Reorganization and RestructuringNote 24 - Selected Quarterly Financial Data (unaudited)Note 25 - Subsequent EventItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accountant Fees and ServicesPart IVItem 15. Exhibits and Financial Statement SchedulesItem 16. Form 10-k Summary