10-Q 1 bco0930201510-q.htm 10-Q 10-Q


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ý  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

¨  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 001-09148
 
THE BRINK’S COMPANY
 
 
(Exact name of registrant as specified in its charter)
 
Virginia
 
54-1317776
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
1801 Bayberry Court, Richmond, Virginia 23226-8100
(Address of principal executive offices) (Zip Code)
(804) 289-9600
(Registrant's telephone number, including area code)
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  ý No  ¨
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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes  ý  No  ¨
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.
(Check one):  Large Accelerated Filer  ý  Accelerated Filer  ¨  Non-Accelerated Filer  ¨  Smaller Reporting Company  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  ¨  No  ý
As of October 27, 2015, 48,885,749 shares of $1 par value common stock were outstanding.

1



Part I - Financial Information
Item 1.  Financial Statements
THE BRINK’S COMPANY
and subsidiaries

Consolidated Balance Sheets
(Unaudited)
(In millions)
September 30, 2015
 
December 31, 2014
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
176.1

 
176.2

Accounts receivable, net
508.0

 
530.5

Prepaid expenses and other
130.1

 
129.0

Deferred income taxes
58.5

 
71.9

Total current assets
872.7

 
907.6

 
 
 
 
Property and equipment, net
542.0

 
669.5

Goodwill
190.9

 
215.7

Other intangibles
29.8

 
39.8

Deferred income taxes
275.0

 
289.5

Other
66.7

 
70.1

 
 
 
 
Total assets
$
1,977.1

 
2,192.2

 
 
 
 
LIABILITIES AND EQUITY
 

 
 

 
 
 
 
Current liabilities:
 

 
 

Short-term borrowings
$
47.4

 
59.4

Current maturities of long-term debt
37.0

 
34.1

Accounts payable
143.2

 
168.6

Accrued liabilities
418.1

 
466.3

Total current liabilities
645.7

 
728.4

 
 
 
 
Long-term debt
395.6

 
373.3

Accrued pension costs
188.3

 
219.0

Retirement benefits other than pensions
250.2

 
257.1

Deferred income taxes
9.1

 
10.8

Other
111.6

 
129.8

Total liabilities
1,600.5

 
1,718.4

 
 
 
 
Contingent liabilities (notes 3, 4 and 11)


 


 
 
 
 
Equity:
 

 
 

The Brink's Company ("Brink's") shareholders:
 

 
 

Common stock
48.9

 
48.6

Capital in excess of par value
594.3

 
584.5

Retained earnings
569.9

 
592.9

Accumulated other comprehensive loss
(848.1
)
 
(792.0
)
Brink’s shareholders
365.0

 
434.0

 
 
 
 
Noncontrolling interests
11.6

 
39.8

 
 
 
 
Total equity
376.6

 
473.8

 
 
 
 
Total liabilities and equity
$
1,977.1

 
2,192.2

 
 
 
 
See accompanying notes to consolidated financial statements.

2



THE BRINK’S COMPANY
and subsidiaries
 
Consolidated Statements of Income (Loss)
(Unaudited)
 
Three Months 
 Ended September 30,
 
Nine Months 
 Ended September 30,
(In millions, except for per share amounts)
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
Revenues
$
759.2

 
872.5

 
2,295.6

 
2,681.1

 
 
 
 
 
 
 
 
Costs and expenses:
 
 
 
 
 
 
 
Cost of revenues
616.4

 
726.6

 
1,866.4

 
2,205.2

Selling, general and administrative expenses
111.1

 
130.6

 
343.4

 
401.9

Total costs and expenses
727.5

 
857.2

 
2,209.8

 
2,607.1

Other operating income (expense)
(6.4
)
 
45.9

 
(62.2
)
 
(77.8
)
 
 
 
 
 
 
 
 
Operating profit (loss)
25.3

 
61.2

 
23.6

 
(3.8
)
 
 
 
 
 
 
 
 
Interest expense
(4.8
)
 
(6.6
)
 
(14.4
)
 
(18.3
)
Interest and other income
0.9

 
0.4

 
1.7

 
1.0

Income (loss) from continuing operations before tax
21.4

 
55.0

 
10.9

 
(21.1
)
Provision for income taxes
14.1

 
26.8

 
37.2

 
39.6

 
 
 
 
 
 
 
 
Income (loss) from continuing operations
7.3

 
28.2

 
(26.3
)
 
(60.7
)
 
 
 
 
 
 
 
 
Loss from discontinued operations, net of tax
(0.1
)
 
(8.6
)
 
(2.4
)
 
(7.4
)
 
 
 
 
 
 
 
 
Net income (loss)
7.2

 
19.6

 
(28.7
)
 
(68.1
)
Less net loss attributable to noncontrolling interests
(0.4
)
 
(0.6
)
 
(20.4
)
 
(31.4
)
 
 
 
 
 
 
 
 
Net income (loss) attributable to Brink’s
7.6

 
20.2

 
(8.3
)
 
(36.7
)
 
 
 
 
 
 
 
 
Amounts attributable to Brink’s
 
 
 
 
 
 
 
Continuing operations
7.7

 
28.8

 
(5.9
)
 
(29.3
)
Discontinued operations
(0.1
)
 
(8.6
)
 
(2.4
)
 
(7.4
)
 
 
 
 
 
 
 
 
Net income (loss) attributable to Brink’s
$
7.6

 
20.2

 
(8.3
)
 
(36.7
)
 
 
 
 
 
 
 
 
Earnings (loss) per share attributable to Brink’s common shareholders(a):
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
Continuing operations
$
0.16

 
0.59

 
(0.12
)
 
(0.60
)
Discontinued operations

 
(0.17
)
 
(0.05
)
 
(0.15
)
Net income (loss)
$
0.16

 
0.41

 
(0.17
)
 
(0.75
)
 
 
 
 
 
 
 
 
Diluted:
 
 
 
 
 
 
 
Continuing operations
$
0.16

 
0.58

 
(0.12
)
 
(0.60
)
Discontinued operations

 
(0.17
)
 
(0.05
)
 
(0.15
)
Net income (loss)
$
0.15

 
0.41

 
(0.17
)
 
(0.75
)
 
 
 
 
 
 
 
 
Weighted-average shares
 
 
 
 
 
 
 
Basic
49.4

 
49.1

 
49.3

 
49.0

Diluted
49.9

 
49.4

 
49.3

 
49.0

 
 
 
 
 
 
 
 
Cash dividends paid per common share
$
0.10

 
0.10

 
0.30

 
0.30

(a)   Amounts may not add due to rounding.
See accompanying notes to consolidated financial statements.


3



THE BRINK’S COMPANY
and subsidiaries
 
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
 
Three Months 
 Ended September 30,
 
Nine Months 
 Ended September 30,
(In millions)
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
Net income (loss)
$
7.2

 
19.6

 
(28.7
)
 
(68.1
)
 
 
 
 
 
 
 
 
Benefit plan adjustments:
 

 
 

 
 
 
 
Benefit plan experience gains
14.0

 
9.4

 
41.6

 
29.0

Benefit plan prior service cost
(0.4
)
 
(0.4
)
 
(3.9
)
 
(1.3
)
Deferred profit sharing
(0.1
)
 
(0.1
)
 
0.1

 
(0.1
)
Total benefit plan adjustments
13.5

 
8.9

 
37.8

 
27.6

 
 
 
 
 
 
 
 
Foreign currency translation adjustments
(39.8
)
 
(50.4
)
 
(83.3
)
 
(46.3
)
Unrealized net losses on available-for-sale securities
(0.4
)
 
(0.3
)
 
(0.5
)
 
(0.4
)
Losses on cash flow hedges
(0.4
)
 
(0.1
)
 

 
(0.1
)
Other comprehensive loss before tax
(27.1
)
 
(41.9
)
 
(46.0
)
 
(19.2
)
Provision for income taxes
4.5

 
3.3

 
13.0

 
10.3

 
 
 
 
 
 
 
 
Other comprehensive loss
(31.6
)
 
(45.2
)
 
(59.0
)
 
(29.5
)
 
 
 
 
 
 
 
 
Comprehensive loss
(24.4
)
 
(25.6
)
 
(87.7
)
 
(97.6
)
Less comprehensive loss attributable to noncontrolling interests
(2.7
)
 
(2.7
)
 
(23.6
)
 
(33.1
)
 
 
 
 
 
 
 
 
Comprehensive loss attributable to Brink's
$
(21.7
)
 
(22.9
)
 
(64.1
)
 
(64.5
)
See accompanying notes to consolidated financial statements.


4



THE BRINK’S COMPANY
and subsidiaries
 
Consolidated Statement of Equity

Nine Months ended September 30, 2015
(Unaudited)
 
Attributable to Brink’s
 
 
 
 
(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

 

 

 
(8.3
)
 

 
(20.4
)
 
(28.7
)
Other comprehensive loss

 

 

 

 
(55.8
)
 
(3.2
)
 
(59.0
)
Dividends to:
 

 
 

 
 

 
 

 
 

 
 

 
 

Brink’s common shareholders ($0.30 per share)

 

 

 
(14.6
)
 

 

 
(14.6
)
Noncontrolling interests

 

 

 

 

 
(5.1
)
 
(5.1
)
Share-based compensation:
 

 
 

 
 

 
 

 
 

 
 

 
 

Stock awards and options:
 

 
 

 
 

 
 

 
 

 
 

 
 

Compensation expense

 

 
11.0

 

 

 

 
11.0

Consideration from exercise of stock options
0.2

 
0.2

 
3.5

 

 

 

 
3.7

Reduction in excess tax benefit of stock compensation

 

 
(1.7
)
 

 

 

 
(1.7
)
Other share-based benefit programs
0.1

 
0.1

 
(1.5
)
 
(0.1
)
 

 

 
(1.5
)
Redeeming the interests of noncontrolling shareholders

 

 
(1.5
)
 

 
(0.3
)
 
0.5

 
(1.3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of September 30, 2015
48.9

 
$
48.9

 
594.3

 
569.9

 
(848.1
)
 
11.6

 
376.6

See accompanying notes to consolidated financial statements
 

5



THE BRINK’S COMPANY
and subsidiaries

Consolidated Statements of Cash Flows
(Unaudited)
 
Nine Months 
 Ended September 30,
(In millions)
2015
 
2014
Cash flows from operating activities:
 
 
 
Net loss
$
(28.7
)
 
(68.1
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Loss from discontinued operations, net of tax
2.4

 
7.4

Depreciation and amortization
106.3

 
122.5

Share-based compensation expense
11.0

 
16.2

Deferred income taxes
(6.7
)
 
(11.4
)
Realized gains:
 
 
 
Sales of available-for-sale securities
(0.3
)
 
(0.3
)
Sales of property and other assets
(0.6
)
 
(45.5
)
Venezuela impairment
35.3

 

Other impairment losses
1.5

 
1.2

Retirement benefit funding (more) less than expense:
 
 
 
Pension
6.3

 
(80.5
)
Other than pension
7.2

 
2.0

Loss on Venezuela currency devaluation
18.1

 
121.6

Other operating
3.3

 
3.8

Changes in operating assets and liabilities, net of effects of acquisitions:
 
 
 
Accounts receivable and income taxes receivable
(58.9
)
 
(84.3
)
Accounts payable, income taxes payable and accrued liabilities
1.0

 
73.0

Customer obligations
5.1

 
17.1

Prepaid and other current assets
(8.3
)
 
(4.1
)
Other
(1.2
)
 
(5.1
)
Discontinued operations
(2.0
)
 
7.0

Net cash provided by operating activities
90.8

 
72.5

 
 
 
 
Cash flows from investing activities:
 

 
 

Capital expenditures
(61.2
)
 
(82.4
)
Available-for-sale securities:
 
 
 
Purchases
(19.0
)
 

Sales
13.3

 
0.7

Cash proceeds from sale of property, equipment and investments
0.8

 
62.6

Other
0.4

 
(5.0
)
Discontinued operations
1.9

 
(6.1
)
Net cash used by investing activities
(63.8
)
 
(30.2
)
 
 
 
 
Cash flows from financing activities:
 

 
 

Borrowings (repayments) of debt:
 

 
 

Short-term debt
(1.2
)
 
(0.5
)
Long-term revolving credit facilities
(29.3
)
 
126.0

Other long-term debt:
 

 
 

Borrowings
82.4

 
6.7

Repayments
(33.3
)
 
(73.2
)
Payments for redemption of redeemable noncontrolling interests
(0.2
)
 

Debt financing costs
(2.0
)
 

Dividends to:
 

 
 

Shareholders of Brink’s
(14.6
)
 
(14.5
)
Noncontrolling interests in subsidiaries
(5.1
)
 
(8.7
)
Proceeds from exercise of stock options
3.7

 
0.4

Minimum tax withholdings associated with share-based compensation
(1.7
)
 
(1.2
)
Other
0.9

 
(0.9
)
Net cash (used) provided by financing activities
(0.4
)
 
34.1

Effect of exchange rate changes on cash
(26.7
)
 
(108.9
)
Cash and cash equivalents:
 

 
 

Increase (decrease)
(0.1
)
 
(32.5
)
Balance at beginning of period
176.2

 
255.5

Balance at end of period
$
176.1

 
223.0

See accompanying notes to consolidated financial statements

6



THE BRINK’S COMPANY
and subsidiaries

Notes to Consolidated Financial Statements
(Unaudited)

Note 1 - Basis of presentation

Effective December 2014, The Brink’s Company (along with its subsidiaries, “Brink’s” or “we”) has nine operating segments:
Each of the five countries within Largest 5 Markets (U.S., France, Mexico, Brazil and Canada)
Each of the three regions within Global Markets (Latin America, EMEA and Asia)
Payment Services

Our unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting and applicable quarterly reporting regulations of the Securities and Exchange Commission (the “SEC”).  Accordingly, the unaudited consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.  These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes in our Annual Report on Form 10-K for the year ended December 31, 2014.

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 these estimates.  The most significant estimates are related to goodwill and other long-lived assets, pension and other retirement benefit obligations, legal contingencies, business divestitures, foreign currency translation and deferred tax assets.

The consolidated financial statements include the accounts of Brink’s and the subsidiaries it controls.  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.  Our interest in 20% to 50% owned companies that are not controlled are accounted for using the equity method, provided we sufficiently influence the management of the investee.  Other investments are accounted for as cost-method investments or as available-for-sale.  All significant intercompany accounts and transactions have been eliminated in consolidation.

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 an officially reported 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.

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.  Non-monetary 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.

Brink’s Venezuela accounted for $52.0 million or 2% of total Brink’s revenues in the nine months ended September 30, 2015 and $178.7 million or 7% of total Brink’s revenues in the nine months ended September 30, 2014.

Since 2003, the Venezuelan government has controlled the exchange of local currency into other currencies, including the U.S. dollar.  During this period, the Venezuelan government 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 existed for different industries and purposes.  The government has not approved all requests to convert bolivars to other currencies.

Late in 2013, the government added an official exchange process, known as SICAD, for travel and certain other purposes, made available at government discretion.  The published rate for this process in 2014 ranged from 10 to 12 bolivars to the U.S. dollar.  We were only able to obtain dollars once using the SICAD process.

7




In March 2014, the government initiated another exchange mechanism known as SICAD II.  Conversions under this mechanism were also subject to specific eligibility requirements.  Transactions were reported in a range of 49 to 52 bolivars to the U.S. dollar.  From March 2014 through December 31, 2014, we received approval to obtain a total of $1.2 million (at a weighted average exchange rate of 51 bolivars to the dollar) through the SICAD II mechanism.

In February 2015, the government replaced the SICAD II process with a new process, known locally as SIMADI.  The rates published since mid-February 2015 have ranged from 170 to 200 bolivars to the U.S. dollar. To date, we have received only minimal U.S. dollars through this exchange mechanism.

As a result of the restrictions on currency exchange, our Venezuelan operations have in the past been unable to obtain sufficient U.S. dollars to purchase certain imported supplies and fixed assets.  Consequently, our Venezuelan operations have occasionally purchased more expensive, bolivar-denominated supplies and fixed assets.  Furthermore, there is a risk that the new SIMADI process will be discontinued or not accessible when needed in the future, which may prevent our Venezuelan operations from obtaining U.S. dollars to operate the business and to repatriate dividends. The Venezuelan government has implemented additional restrictions that limit price increases and workforce reductions, which may further restrict our ability to effectively operate the business. These restrictions could hamper our ability to maintain control over our investment in our Venezuelan operations. We continue to monitor whether consolidating our Venezuelan operations remains appropriate.

Remeasurement rates during 2014.  Through March 23, 2014, we used the official rate of 6.3 bolivars to the U.S. dollar to remeasure our bolivar-denominated monetary assets and liabilities into U.S. dollars and to translate our revenue and expenses.  Effective March 24, 2014, we began to use the exchange rate published for the SICAD II process to remeasure bolivar-denominated monetary assets and liabilities and to translate our revenue and expenses.  We recognized a $121.6 million net remeasurement loss in the first nine months of 2014 when we changed from the official rate of 6.3 to the SICAD II exchange rate, which averaged approximately 50 since opening on March 24, 2014 until implementation of the SIMADI process in February 2015.  The after-tax effect of this loss attributable to noncontrolling interests was $39.7 million in the first nine months of 2014.

Remeasurement rates during 2015.  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, we began to use the exchange rate published for the SIMADI process to remeasure bolivar-denominated monetary assets and liabilities and to translate our revenue and expenses.  The SIMADI rate at September 30, 2015 was 200 bolivars to the dollar. As a result, we recognized an $18.1 million net remeasurement loss in the first nine months of 2015.  The after-tax effect of this loss attributable to noncontrolling interests was $5.7 million.

Remeasuring our Venezuelan results using the SIMADI rate has had the following effects on our reported results:
Brink’s Venezuela became a much smaller component of Brink’s consolidated revenues and operating profit.
Brink’s Venezuela’s profit margin percentage declined as the historical U.S. dollar nonmonetary assets were not remeasured to a lower U.S. dollar basis but instead retained a historical higher basis which was used for depreciation and other expense attribution. Our nonmonetary assets were $13.0 million at September 30, 2015, and $55.0 million at December 31, 2014.
Our investment in our Venezuelan operations on an equity-method basis declined.  Our investment was $21.2 million at September 30, 2015, which included $17.4 million in net payables to other Brink's affiliates and $59.6 million at December 31, 2014, which included $17.6 million in net payables to other Brink's affiliates.
Our bolivar-denominated net monetary assets included in our consolidated balance sheets declined.  Our bolivar-denominated net monetary assets were $3.1 million (including $6.0 million of cash and cash equivalents) at September 30, 2015 and $23.5 million (including $12.6 million of cash and cash equivalents) at December 31, 2014.
Accumulated other comprehensive losses attributable to Brink’s shareholders related to Brink’s Venezuela were $112.2 million at September 30, 2015 and $113.0 million at December 31, 2014.


8



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. Our consideration of these strategic options is ongoing and, during the second quarter of 2015, required us to perform an impairment review of the carrying values of our Venezuelan long-lived assets in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("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 $34.5 million impairment charge in the second quarter of 2015. We recognized an additional $0.8 million in impairment charges in the third quarter of 2015. After these impairment charges, the carrying value of the long-lived assets of our Venezuelan operations is $3.7 million at September 30, 2015.  We have not reclassified any of the $112.2 million of accumulated other comprehensive losses attributable to Brink’s shareholders related to Brink’s Venezuela into earnings.

Argentina
We use the official exchange rate to translate the Brink's Argentina balance sheet and income statement. At September 30, 2015, the official exchange rate was 9.4 local pesos to the U.S. dollar.

The government in Argentina has periodically imposed limits on the exchange of local pesos into U.S. dollars. As a result, we have elected in the past and expect to continue in the future to repatriate cash from Argentina using markets to convert Argentine pesos into U.S. dollars at rates approximately 30% to 40% less favorable than the rates at which we translated the financial statements of our subsidiary in Argentina. See note 10 Supplemental cash flow information for more information. In the third quarter of 2015 and the first nine months of 2015, we recognized $2.3 million in losses from converting local pesos into U.S. dollars. We also recognized similar losses from repatriating cash from Argentina in the prior year ($0.9 million in the third quarter of 2014 and $2.8 million in the first nine months of 2014). These conversion losses are classified in the income statement as other operating income (expense). At September 30, 2015, we had cash and short term investments denominated in pesos of $24.6 million.

New Accounting Standards
In April 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-03, Simplifying the Presentation of Debt Issuance Costs, which will become effective for us on January 1, 2016.  Under ASU 2015-3, certain debt issuance costs currently reported as assets will be reclassified and shown as direct adjustments to the reported debt liability.  The adoption of this guidance will not have a material effect on our financial statements. 
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. The new standard can be applied retrospectively to each reporting period presented or retrospectively with the cumulative effect of the change recognized at the date of the initial application in retained earnings. We are assessing the potential impact of this new standard on financial reporting and have not yet selected a transition method.




9



Note 2 - Segment information

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)
Check and cash processing services for banking customers (“Virtual Vault 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 Latin America and Brink’s Money™ general purpose reloadable prepaid cards and payroll cards in the U.S.
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 operating profit or loss, excluding income and expenses not allocated to segments.

We have nine operating segments:
Each of the five countries within Largest 5 Markets (U.S., France, Mexico, Brazil and Canada)
Each of the three regions within Global Markets (Latin America, EMEA and Asia)
Payment Services

When reviewing segment operating results for the first quarter of 2015, the CODM determined that it was no longer useful to include the operations of Venezuela in the evaluation of the results for the Global Markets – Latin America segment. Accordingly, the Company changed the composition of its reportable segments effective January 1, 2015 to exclude the Venezuela business.  The Venezuela operations are now reported as part of other items not allocated to segments for all periods presented. This change in the Company’s segment composition and segment performance measure provides the CODM with information to effectively assess segment performance and to make resource and allocation decisions. In addition, the removal of Venezuela from the Latin America segment provides our investors with an understanding of segment results that aligns with management’s view of the business, which is consistent with FASB ASC Topic 280, Segment Reporting.

We believe that Brink’s has significant competitive advantages including:
brand name recognition
reputation for a high level of service and security
risk management and logistics expertise
global infrastructure and customer base
proprietary cash processing
proven operational excellence
high-quality insurance coverage and general financial strength.

10



 
Revenues
 
Operating Profit (Loss)
 
Three Months Ended September 30,
 
Three Months Ended September 30,
(In millions)
2015
 
2014
 
2015
 
2014
Reportable Segments:
 
 
 
 
 
 
 
U.S.
$
182.6

 
181.6

 
$
1.4

 
3.9

France
110.8

 
132.7

 
13.7

 
16.7

Mexico
80.4

 
95.1

 
3.4

 
(0.4
)
Brazil
63.6

 
95.8

 
3.7

 
4.8

Canada
37.9

 
46.0

 
3.6

 
4.0

Largest 5 Markets
475.3

 
551.2

 
25.8

 
29.0

Latin America
91.7

 
95.4

 
17.6

 
10.7

EMEA
111.5

 
139.1

 
9.4

 
15.5

Asia
39.7

 
36.3

 
7.1

 
6.2

Global Markets
242.9

 
270.8

 
34.1

 
32.4

Payment Services
21.7

 
25.4

 
(2.0
)
 
(2.4
)
Total reportable segments
739.9

 
847.4

 
57.9

 
59.0

 
 
 
 
 
 
 
 
Reconciling Items:
 

 
 

 
 

 
 

Corporate expenses:
 

 
 

 
 

 
 

General, administrative and other expenses

 

 
(15.5
)
 
(37.4
)
Foreign currency transaction losses

 

 
(5.1
)
 
(0.5
)
Reconciliation of segment policies to GAAP

 

 
(0.3
)
 
(0.3
)
Other items not allocated to segments:
 

 
 

 
 

 
 

FX devaluation in Venezuela

 

 
(3.8
)
 
(4.8
)
Venezuela operations
19.3

 
25.1

 
3.8

 
2.5

Venezuela impairment

 

 
(0.8
)
 

2014 Reorganization and Restructuring

 

 
(0.9
)
 

2015 Reorganization and Restructuring

 

 
(2.0
)
 

Mexican settlement losses

 

 
(1.5
)
 
(2.3
)
U.S. retirement plans

 

 
(6.5
)
 
(3.7
)
Acquisitions and dispositions

 

 

 
46.9

Share-based compensation adj.

 

 

 
1.8

Total
$
759.2

 
872.5

 
$
25.3

 
61.2


11



 
Revenues
 
Operating Profit (Loss)
 
Nine Months Ended September 30,
 
Nine Months Ended September 30,
(In millions)
2015
 
2014
 
2015
 
2014
Reportable Segments:
 
 
 
 
 
 
 
U.S.
$
550.3

 
537.7

 
$
16.1

 
11.1

France
323.9

 
394.6

 
24.5

 
28.2

Mexico
251.2

 
293.4

 
15.8

 
2.4

Brazil
205.1

 
273.7

 
11.9

 
19.9

Canada
116.3

 
135.7

 
7.7

 
8.7

Largest 5 Markets
1,446.8

 
1,635.1

 
76.0

 
70.3

Latin America
273.7

 
279.1

 
53.3

 
32.2

EMEA
339.5

 
413.5

 
26.7

 
36.7

Asia
117.0

 
103.3

 
19.5

 
16.5

Global Markets
730.2

 
795.9

 
99.5

 
85.4

Payment Services
66.6

 
71.4

 
(5.2
)
 
(2.9
)
Total reportable segments
2,243.6

 
2,502.4

 
170.3

 
152.8

 
 
 
 
 
 
 
 
Reconciling Items:
 
 
 
 
 
 
 
Corporate expenses:
 
 
 
 
 
 
 
General, administrative and other expenses

 

 
(58.4
)
 
(90.3
)
Foreign currency transaction losses

 

 
(8.8
)
 
(0.8
)
Reconciliation of segment policies to GAAP

 

 
5.1

 
3.9

Other items not allocated to segments:
 
 
 
 
 
 
 
FX devaluation in Venezuela

 

 
(30.4
)
 
(137.9
)
Venezuela operations
52.0

 
178.7

 
7.9

 
38.8

Venezuela impairment

 

 
(35.3
)
 

2014 Reorganization and Restructuring

 

 
(1.2
)
 

2015 Reorganization and Restructuring

 

 
(2.0
)
 

Mexican settlement losses

 

 
(3.9
)
 
(4.0
)
U.S. retirement plans

 

 
(20.0
)
 
(13.3
)
Acquisitions and dispositions

 

 
0.3

 
49.4

Share-based compensation adj.

 

 

 
(2.4
)
Total
$
2,295.6

 
2,681.1

 
$
23.6

 
(3.8
)


FX devaluation in Venezuela The rate we use to remeasure operations in Venezuela declined significantly in February 2015 (from 52 to 170 bolivars to the U.S. dollar) and in March 2014 (from 6.3 to 50 bolivars to the U.S. dollar).  These currency devaluations resulted in losses from the remeasurement of bolivar-denominated net monetary assets.  Nonmonetary assets were not remeasured to a lower basis when the currency devalued.  Instead, under highly inflationary accounting rules, these assets retained their higher historical bases and the excess is recognized in earnings as the asset is consumed, resulting in incremental expense until the excess basis is depleted.  Expenses related to these Venezuelan devaluations have not been allocated to segment results.

Venezuela operations We have excluded from our segment results all of our Venezuela operating results, including foreign exchange devaluation discussed separately above, due to management’s inability to allocate, generate or redeploy resources in-country or globally.  In light of these unique circumstances, the Venezuela business is largely independent of the rest of our global operations.  As a result, the CODM, the Company’s Chief Executive Officer, 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

Venezuela impairment In the second quarter of 2015, we recognized a $34.5 million impairment of the Venezuela property, plant and equipment. In the third quarter of 2015, we recognized additional impairment charges of $0.8 million.  These charges have not been allocated to segment results.


12



2014 Reorganization and 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. Additional charges related to severance and lease terminations of $1.2 million were recognized in the first nine months of 2015. These amounts have not been allocated to segment results.

2015 Reorganization and Restructuring Brink's initiated an additional restructuring of its business in the third quarter of 2015. We recognized $2.0 million in third quarter 2015 costs related to contract terminations, employee severance and property impairment associated with the restructuring. We expect to recognize between $8 and $12 million of additional restructuring costs. The 2015 Reorganization and Restructuring is expected to reduce the global workforce by approximately 1,000 to 1200 positions and is projected to result in $25 to $35 million in 2016 cost savings. These amounts have not been allocated to segment results.

Mexican settlement losses Employee termination costs in Mexico are accounted for as retirement benefits under FASB ASC Topic 715, Compensation — Retirement Benefits. Settlement charges related to these termination benefits have not been allocated to segment results.

U.S. retirement plans Costs related to our frozen U.S. retirement plans have not been allocated to segment results.

Acquisitions and dispositions Brink’s sold an equity investment in a CIT business in Peru in September 2014 and recognized a $44.3 million gain in the third quarter of 2014. Other third quarter 2014 divestiture gains were $0.6 million. A favorable adjustment to the purchase price of a third quarter 2014 business acquisition in EMEA was recognized in the second quarter of 2015. The divestiture gains, equity earnings from the Peru investment and the purchase price adjustment have not been allocated to segment results.

Share-based compensation adjustment Accounting adjustments related to share-based compensation in the second quarter of 2014 ($4.2 million expense) and the third quarter of 2014 ($1.8 million benefit) have not been allocated to segment results. The accounting adjustments revised the accounting for certain share-based awards from fixed to variable fair value accounting as noted in FASB ASC Topic 718, Stock Compensation. As of July 11, 2014, all outstanding equity awards had met the conditions for a grant date as defined in FASB ASC Topic 718 and have since been accounted for as fixed share-based compensation expense.


13



Note 3 - Retirement benefits

Pension plans

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.

The components of net periodic pension cost for our pension plans were as follows:
 
U.S. Plans
 
Non-U.S. Plans
 
Total
(In millions)
2015
 
2014
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$

 

 
2.6

 
3.1

 
2.6

 
3.1

Interest cost on projected benefit obligation
9.0

 
11.3

 
2.9

 
4.5

 
11.9

 
15.8

Return on assets – expected
(13.6
)
 
(16.2
)
 
(2.4
)
 
(3.7
)
 
(16.0
)
 
(19.9
)
Amortization of losses
7.7

 
7.0

 
1.1

 
0.6

 
8.8

 
7.6

Amortization of prior service cost

 

 

 
0.2

 

 
0.2

Settlement loss

 

 
1.5

 
2.4

 
1.5

 
2.4

Net periodic pension cost
$
3.1

 
2.1

 
5.7

 
7.1

 
8.8

 
9.2

 
 
 
 
 
 
 
 
 
 
 
 
Included in:
 

 
 

 
 

 
 

 
 

 
 

Continuing operations
$
3.1

 
2.1

 
5.7

 
6.6

 
8.8

 
8.7

Discontinued operations

 

 

 
0.5

 

 
0.5

Net periodic pension cost
$
3.1

 
2.1

 
5.7

 
7.1

 
8.8

 
9.2

 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$

 

 
8.1

 
9.8

 
8.1

 
9.8

Interest cost on projected benefit obligation
27.0

 
34.0

 
9.1

 
14.9

 
36.1

 
48.9

Return on assets – expected
(40.9
)
 
(47.8
)
 
(7.2
)
 
(11.3
)
 
(48.1
)
 
(59.1
)
Amortization of losses
23.2

 
21.2

 
3.6

 
1.7

 
26.8

 
22.9

Amortization of prior service cost

 

 
0.2

 
0.6

 
0.2

 
0.6

Settlement loss

 

 
4.9

 
4.2

 
4.9

 
4.2

Net periodic pension cost
$
9.3

 
7.4

 
18.7

 
19.9

 
28.0

 
27.3

 
 
 
 
 
 
 
 
 
 
 
 
Included in:
 

 
 

 
 

 
 

 
 

 
 

Continuing operations
$
9.3

 
7.4

 
17.6

 
18.5

 
26.9

 
25.9

Discontinued operations

 

 
1.1

 
1.4

 
1.1

 
1.4

Net periodic pension cost
$
9.3

 
7.4

 
18.7

 
19.9

 
28.0

 
27.3

We made cash contributions totaling $87.2 million to the primary U.S. pension plan in 2014.  Based on current assumptions, as described in our Annual Report on Form 10-K for the year ended December 31, 2014, we do not expect to make any additional contributions to the primary U.S. pension plan in the future.

Retirement benefits other than pensions
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.

14



The components of net periodic postretirement cost related to retirement benefits other than pensions were as follows:
 
UMWA Plans
 
Black Lung and Other Plans
 
Total
(In millions)
2015
 
2014
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$

 

 

 

 

 

Interest cost on accumulated postretirement benefit obligations
4.2

 
4.4

 
0.7

 
0.6

 
4.9

 
5.0

Return on assets – expected
(5.1
)
 
(5.6
)
 

 

 
(5.1
)
 
(5.6
)
Amortization of losses
3.7

 
2.9

 
0.8

 
0.2

 
4.5

 
3.1

Amortization of prior service (credit) cost
(1.1
)
 
(1.2
)
 
0.5

 
0.4

 
(0.6
)
 
(0.8
)
Net periodic postretirement cost
$
1.7

 
0.5

 
2.0

 
1.2

 
3.7

 
1.7

 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service cost
$

 

 
0.1

 
0.1

 
0.1

 
0.1

Interest cost on accumulated postretirement benefit obligations
12.9

 
13.6

 
2.1

 
1.6

 
15.0

 
15.2

Return on assets – expected
(15.4
)
 
(16.8
)
 

 

 
(15.4
)
 
(16.8
)
Amortization of losses
11.7

 
9.5

 
2.3

 
0.5

 
14.0

 
10.0

Amortization of prior service (credit) cost
(3.4
)
 
(3.5
)
 
1.4

 
1.3

 
(2.0
)
 
(2.2
)
Net periodic postretirement cost
$
5.8

 
2.8

 
5.9

 
3.5

 
11.7

 
6.3


15



Note 4 - Income taxes

Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Continuing operations
 
 
 
 
 
 
 
Provision for income taxes (in millions)
$
14.1

 
26.8

 
37.2

 
39.6

Effective tax rate
65.9
%
 
48.7
%
 
341.3
%
 
(187.7
%)

2015 Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in the first nine months of 2015 was greater than the 35% U.S. statutory tax rate primarily due to the significant nondeductible expenses resulting from the currency devaluation in Venezuela in the first quarter and from the Venezuela impairment recorded in the second quarter. 
Excluding these nondeductible expenses, our effective tax rate on continuing operations in the first nine months is 48%.  The rate is higher than 35% primarily due to cross border payments, nondeductible expenses in Mexico and the characterization of a French business tax as an income tax, partially offset by the geographical mix of earnings.

2014 Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in the first nine months of 2014 was negative and less than the 35% U.S. statutory tax rate primarily due to the significant nondeductible expenses resulting from the currency devaluation in Venezuela in the first quarter.  These nondeductible expenses caused our earnings before tax in the period to be negative. 

Excluding the Venezuela nondeductible expenses, our effective tax rate on continuing operations in the first nine months was 42%. The rate was higher than 35% primarily due to third-quarter tax expense for a divestiture of an equity-method investment in Peru, combined with higher tax expense resulting from cross border payments, nondeductible expenses in Mexico and the characterization of a French business tax as an income tax, partially offset by lower taxes resulting from the geographical mix of earnings.


16



Note 5 - Accumulated other comprehensive income (loss)

Other comprehensive income (loss), including the amounts reclassified from accumulated other comprehensive income (loss) into earnings, was as follows:
 
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)
Three months ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amounts attributable to Brink's:
 
 
 
 
 
 
 
 
 
Benefit plan adjustments
$
(1.1
)
 
0.2

 
14.4

 
(4.9
)
 
8.6

Foreign currency translation adjustments
(37.3
)
 

 

 

 
(37.3
)
Unrealized gains (losses) on available-for-sale securities
(0.2
)
 
0.1

 
(0.2
)
 
0.1

 
(0.2
)
Gains (losses) on cash flow hedges
1.8

 

 
(2.2
)
 

 
(0.4
)
 
(36.8
)
 
0.3

 
12.0

 
(4.8
)
 
(29.3
)
 
 
 
 
 
 
 
 
 
 
Amounts attributable to noncontrolling interests:
 

 
 

 
 

 
 

 
 

Benefit plan adjustments

 

 
0.2

 

 
0.2

Foreign currency translation adjustments
(2.5
)
 

 

 

 
(2.5
)
 
(2.5
)
 

 
0.2

 

 
(2.3
)
 
 
 
 
 
 
 
 
 
 
Total
 

 
 

 
 

 
 

 
 

Benefit plan adjustments(a)
(1.1
)
 
0.2

 
14.6

 
(4.9
)
 
8.8

Foreign currency translation adjustments
(39.8
)
 

 

 

 
(39.8
)
Unrealized gains (losses) on available-for-sale securities(b)
(0.2
)
 
0.1

 
(0.2
)
 
0.1

 
(0.2
)
Gains (losses) on cash flow hedges(c)
1.8

 

 
(2.2
)
 

 
(0.4
)
 
$
(39.3
)
 
0.3

 
12.2

 
(4.8
)
 
(31.6
)
 
 
 
 
 
 
 
 
 
 
Three months ended September 30, 2014
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
Amounts attributable to Brink's:
 

 
 

 
 

 
 

 
 

Benefit plan adjustments
$
(3.6
)
 
0.5

 
12.4

 
(3.8
)
 
5.5

Foreign currency translation adjustments
(48.1
)
 

 
(0.1
)
 

 
(48.2
)
Unrealized gains (losses) on available-for-sale securities
0.1

 
(0.1
)
 
(0.4
)
 
0.1

 
(0.3
)
Gains (losses) on cash flow hedges
1.4

 

 
(1.5
)
 

 
(0.1
)
 
(50.2
)
 
0.4

 
10.4

 
(3.7
)
 
(43.1
)
 
 
 
 
 
 
 
 
 
 
Amounts attributable to noncontrolling interests:
 

 
 

 
 

 
 

 
 

Benefit plan adjustments

 

 
0.1

 

 
0.1

Foreign currency translation adjustments
(2.2
)
 

 

 

 
(2.2
)
 
(2.2
)
 

 
0.1

 

 
(2.1
)
 
 
 
 
 
 
 
 
 
 
Total
 

 
 

 
 

 
 

 
 

Benefit plan adjustments(a)
(3.6
)
 
0.5

 
12.5

 
(3.8
)
 
5.6

Foreign currency translation adjustments
(50.3
)
 

 
(0.1
)
 

 
(50.4
)
Unrealized gains (losses) on available-for-sale securities(b)
0.1

 
(0.1
)
 
(0.4
)
 
0.1

 
(0.3
)
Gains (losses) on cash flow hedges(c)
1.4

 

 
(1.5
)
 

 
(0.1
)
 
$
(52.4
)
 
0.4

 
10.5

 
(3.7
)
 
(45.2
)




17



 
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)
Nine months ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amounts attributable to Brink's:
 
 
 
 
 
 
 
 
 
Benefit plan adjustments
$
(6.8
)
 
1.7

 
44.2

 
(14.9
)
 
24.2

Foreign currency translation adjustments
(79.7
)
 

 

 

 
(79.7
)
Unrealized gains (losses) on available-for-sale securities
(0.2
)
 
0.1

 
(0.3
)
 
0.1

 
(0.3
)
Gains (losses) on cash flow hedges
3.7

 

 
(3.7
)
 

 

 
(83.0
)
 
1.8

 
40.2

 
(14.8
)
 
(55.8
)
 
 
 
 
 
 
 
 
 
 
Amounts attributable to noncontrolling interests:
 

 
 

 
 

 
 

 
 

Benefit plan adjustments

 

 
0.4

 

 
0.4

Foreign currency translation adjustments
(3.6
)