Brink's Reports Fourth-Quarter Results

RICHMOND, Va., Feb. 5, 2015 /PRNewswire/ -- The Brink's Company (NYSE: BCO), a global leader in security-related services, today reported fourth-quarter earnings.

Fourth-Quarter Highlights

• Revenue down 12% on currency translation;19% organic growth
• GAAP EPS loss ($.52); includes pension settlement ($.72) and reorganization and restructuring charges ($.31) 
• Non-GAAP EPS $.69; operating profit down 13%, up 51% excluding currency
• Reporting format now includes two operating units:
  • Largest 5 Markets: Profit up 6% on U.S. improvement, Brazil profits decline
  • Global Markets: Profit down 23% on negative currency, primarily in Venezuela
  • Non-GAAP operating margin 7.3% (negative 2.7% on GAAP basis)
• Negative currency impact vs year-ago quarter: $301 million on revenue ($229 million related to Venezuela); $48 million on operating profit ($36 million related to Venezuela)

Tom Schievelbein, chairman, president and chief executive officer, said: "We are encouraged by our fourth-quarter earnings, especially given the substantial currency headwinds we're facing.  We are particularly pleased with the improvement in the U.S., where revenue grew 7% versus the year-ago quarter. 

"Full-year non-GAAP earnings were $1.49 per share, which includes a far more favorable currency exchange rate for Venezuela in the first quarter compared to the rest of 2014.  On an adjusted basis, which assumes the devalued rate of 50 bolivars per U.S. dollar for the entire year, full-year non-GAAP earnings were $1.20 per share. 

1

"Looking ahead, our 2015 and 2016 operating margin rate targets have not changed.  However, our 2015 revenue guidance has been reduced from $3.8 billion to $3.4 billion due to currency declines and dispositions.  As a result, we now expect 2015 non-GAAP earnings to be between $1.55 and $1.75 per share, and our 2016 targeted earnings range is now $2.00 to $2.40 per share.  I'm confident that our aggressive cost reduction and productivity initiatives will enable us to achieve these targets."

Brink's now uses operating margin (instead of segment margin) as a primary measure of performance.  Operating margin includes all corporate expenses related to managing global operations (see "Corporate Items" on page 6).  Management will provide additional details on segment reporting changes and its outlook for 2015 and 2016 on today's conference call, which begins at 11:00 a.m. Eastern Time.   

Reorganization and Restructuring: $45-$50 Million Savings Expected in 2015 
Brink's announced a restructuring plan that will eliminate approximately 1,700 positions from its global workforce of about 64,000 employees.  The headcount reductions, which are underway, are expected to be substantially completed in the first quarter.  These actions are expected to generate cost savings of $30 million to $35 million in 2015. 

The expected 2015 cost savings of $30 million to $35 million announced today are in addition to previously disclosed expected savings of $15 million related to organizational changes that were announced in December of 2014 (see "Recent Events" on page 6).  As a result of these actions, the company incurred charges totaling $22 million ($.31 per share) against fourth-quarter GAAP earnings.

2

 

3

4

5

Corporate Items
Fourth-quarter corporate items totaled $28 million, down from $31 million in the year-ago quarter.  Full-year costs related to corporate items totaled $111 million, down from $114 million in 2013.  Corporate items now include former non-segment costs as well as regional management costs that had previously been absorbed by the former regional segments.     

Capital Expenditures and Capital Leases
Full-year capital expenditures and capital lease additions were $148 million compared to $178 million in 2013.  In 2015, these expenditures are expected to total $160 million to $170 million.

Primary U.S. Pension Plan
As part of a pension de-risking strategy, approximately 4,300 participants were paid about $150 million of plan assets under a lump sum buy-out offer.  Fourth-quarter GAAP results include a non-cash settlement charge of $56 million ($.72 per share) related to the lump sum buy-out offer.  No further payments to the U.S. primary pension plan are required based on current actuarial assumptions. 

Income Taxes
On a GAAP basis, the fourth-quarter tax benefit was $3 million (effective rate of 10%) versus tax expense of $20 million (effective rate of 38%) in the year-ago quarter. For the full year, tax expense was $37 million on a pre-tax loss (effective rate of negative 75%) due primarily to the significant Venezuela remeasurement write-down, which is non-deductible.  The full-year 2013 GAAP effective rate of 35% was unfavorably affected by tax expense resulting from repatriation, partially offset by a tax benefit from the mix of earnings.  On a non-GAAP basis, the full-year rate for 2014 was 38.5% versus 34.2% in 2013 due in large part to higher Venezuela earnings in 2013.

Recent Events   
On December 23, Brink's announced that it had completed its exit of the cash handling market in the Netherlands due to the previously disclosed loss of its largest customer.  Results from the Netherlands operations for the fourth quarter of 2014 and all prior periods are reported as discontinued operations.  In 2014, the Netherlands operations generated approximately $126 million of revenue.

On December 2, Brink's announced organizational changes designed to accelerate the execution of its strategy and ensure the achievement of 2015 and 2016 financial targets.  The organizational changes included the consolidation of four geographic units into two operating units (Largest Five Markets and Global Markets).  Most of the senior roles and structures within the four former geographic segments were eliminated, resulting in an expected cost savings of $15 million in 2015.  The company also announced that its country-based support functions (IT, HR, finance, legal, procurement, security and project management) are being centralized. 

6

Conference Call
Brink's will host a conference call on February 5 at 11:00 a.m. Eastern Time to review fourth-quarter results.  Interested parties can listen by calling (888)349-0094 (in the U.S.) or (412) 902-0124 (international) Participants should call in at least five minutes prior to the start of the call.  Participants can pre-register at http://dpregister.com/10059226 to receive a direct dial-in number for the call.  The call also will be accessible via live webcast at www.Brinks.com.  A replay of the call will be available through February 20, 2015, at (877) 344-7529 (in the U.S.) or (412) 317-0088 (international).  The conference number is 10059226.  A webcast replay will also be available at www.Brinks.com.

About The Brink's Company
The Brink's Company (NYSE: BCO) is the world's premier provider of secure transportation and cash management services.  For more information, please visit The Brink's Company website at www.Brinks.com or call 804-289-9709.

7

Forward-Looking Statements

This release contains forward-looking information. Words such as "anticipate," "assume," "estimate," "expect," "target" "project," "predict," "intend," "plan," "believe," "potential," "may," "should" and similar expressions may identify forward-looking information. Forward-looking information in this report includes, but is not limited to: expected cost savings in 2015, 2015 non-GAAP outlook, including revenue, margin rate and earnings per share, 2015 capital expenditures, future payments to the company's pension plans, 2016 margin rate and earnings per share. Forward-looking information in this document is subject to known and unknown risks, uncertainties and contingencies, which are difficult to predict or 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 in our largest five markets;
• our ability to identify and execute further cost and operational improvements and efficiencies in our core businesses;
• continuing market volatility and commodity price fluctuations and their impact on the demand for our services;
• our ability to maintain or improve volumes at favorable pricing levels and increase cost and productivity efficiencies, particularly in the United States and Mexico;
• investments in information technology and adjacent businesses and their impact on revenue and profit growth;
• our ability to develop and implement solutions for our customers and gain market acceptance of those solutions;
• our ability to maintain an effective IT infrastructure and safeguard confidential information;
• risks customarily associated with operating in foreign countries including changing labor and economic conditions, currency restrictions and devaluations, safety and security issues, political instability, restrictions on repatriation of earnings and capital, nationalization, expropriation and other forms of restrictive government actions;
• the strength of the U.S. dollar relative to foreign currencies and foreign currency exchange rates;
• the stability of the Venezuelan economy, changes in Venezuelan policy regarding foreign-owned businesses;
• regulatory and labor issues in many of our global operations, including negotiations with organized labor and the possibility of work stoppages;
• our ability to integrate successfully recently acquired companies and improve their operating profit margins;
• costs related to dispositions and market exits;
• our ability to identify evaluate and pursue acquisitions and other strategic opportunities including those in the home security industry and emerging markets;
• the willingness of our customers to absorb fuel surcharges and other future price increases;
• our ability to obtain necessary information technology and other services at favorable pricing levels from third party service providers;
• variations in costs or expenses and performance delays of any public or private sector supplier, service provider or customer;
• our ability to obtain appropriate insurance coverage, positions taken by insurers with respect to claims made and the financial condition of insurers, safety and security performance, our loss experience, and changes in insurance costs;
• security threats worldwide and losses of customer valuables;
• costs associated with the purchase and implementation of cash processing and security equipment;
• employee and environmental liabilities in connection with our former coal operations, black lung claims incidence;
• the impact of the Patient Protection and Affordable Care Act on black lung liability and the Company's ongoing operations;
• changes to estimated liabilities and assets in actuarial assumptions due to payments made, investment returns, interest rates and annual actuarial revaluations, the funding requirements, accounting treatment, investment performance and costs and expenses of our pension plans, the VEBA and other employee benefits, mandatory or voluntary pension plan contributions;
• the nature of our hedging relationships;
• changes in estimates and assumptions underlying our critical accounting policies;
• our ability to realize deferred tax assets;
• the outcome of pending and future claims, litigation, and administrative proceedings;
• public perception of the Company's business and reputation;
• access to the capital and credit markets;
• seasonality, pricing and other competitive industry factors; and
• the promulgation and adoption of new accounting standards and interpretations, new government regulations and interpretation of existing regulations.

8

This list of risks, uncertainties and contingencies is not intended to be exhaustive. Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found under "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the period ended December 31, 2013, and in our other public filings with the Securities and Exchange Commission. The forward-looking 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.

Amounts are preliminary and subject to annual audit.  The preliminary information in this release is subject to audit.  Final amounts will be reported in the Company's Annual Report on Form 10-K.  Brink's is in the process of completing annual procedures and controls including an impairment test of goodwill based on Brink's new organization structure, which could result in impairment expense.  Impairment expense, if any, would be recognized in the fourth quarter of 2014 and is not expected to be allocated to segment results, nor included in non-GAAP earnings measures.

9

10

11

12

13

FX devaluation in Venezuela  The rate we use to remeasure operations in Venezuela declined 16% in February 2013 (from 5.3 to 6.3 bolivars to the U.S. dollar) and 88% in March 2014 (from 6.3 to 50 bolivars to the U.S. dollar).  Expenses related to remeasured net monetary assets were $13.4 million in the first quarter of 2013 and $121.6 million in 2014.  In addition, 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, which excess is recognized in earnings as the asset is consumed resulting in incremental expense until the excess bases is depleted.   Higher expenses related to nonmonetary assets were $0.5 million in the first quarter of 2013, $0.2 million in the second quarter of 2013, $0.2 million in the third quarter of 2013, $0.3 million in the fourth quarter of 2013, $1.4 million in the first quarter of 2014, $9.5 million in the second quarter of 2014, $5.4 million in the third quarter of 2014, and $4.8 million in the fourth quarter of 2014.  Expenses related to these Venezuelan devaluations have not been allocated to segment results.

2014 Reorganization and Restructuring  Brink's reorganized and restructured its business in December 2014, eliminating management positions in its former Latin America and EMEA regions and is beginning to implement a plan to reduce the cost structure of various country operations by eliminating approximately 1,700 positions.  Severance costs of $21.8 million associated with these actions were recognized in the fourth quarter of 2014. These amounts have not been allocated to segment results.

Acquisitions and dispositions  Gains and losses related to acquisitions and dispositions that have not been allocated to segment results are described below:

• Brink's sold an equity investment in a CIT business in Peru and recognized a $44.3 million gain in the fourth quarter of 2014. Other divestiture gains were $0.6 million. Both the gains and the equity earnings related to our former investment in Peru recognized in prior periods are not allocated to segment results.
• Adjustments to the 2010 business acquisition gain for Mexico are not allocated to segment results ($1.1 million favorable adjustment in the first quarter of 2013, $2.2 million unfavorable adjustment in the fourth quarter of 2013 and $0.7 million favorable adjustment in the third quarter of 2014).
• Adjustments to the purchase price of the January 2013 acquisition of Rede Trel in Brazil are not allocated to segment results ($1.7 million of favorable adjustments in the third and fourth quarters of 2013).
• The $0.9 million fourth quarter 2013 impairment of an intangible asset acquired in the 2009 India acquisition is not allocated to segment results.
• A $2.6 million unfavorable tax adjustment in fourth quarter 2013 related to the 2010 Belgium disposition is not allocated to segment results.

Mexican settlement losses  Employee benefit settlement losses in Mexico have not been allocated to segment results. 

U.S. retirement plans  Brink's retirement plan benefits in the U.S. are frozen and the related expenses have not been allocated to segment results.  Brink's primary U.S. pension plan settled a portion of its obligation in the fourth quarter of 2014 under a lump sum buy-out offer.  Approximately 4,300 terminated participants were paid about $150 million of plan assets under this offer in lieu of receiving their pension benefit.  A $56 million settlement loss was recognized as a result of the settlement.

Share-based compensation adjustment  Accounting adjustments related to share-based compensation have not been allocated to segment results ($4.2 million expense in the second quarter of 2014 and a $1.8 million benefit in the third quarter of 2014).  The accounting adjustments revise the accounting for share-based compensation from fixed to variable fair value accounting as defined in ASC Topic 718, Stock Compensation.

14

The Brink's Company and subsidiaries
Non-GAAP Results Reconciled to GAAP (Unaudited)
 (In millions, except for per share amounts)

Non-GAAP results described in this press release are financial measures that are not required by or presented in accordance with U.S. generally accepted accounting principles ("GAAP").  The purpose of the Non-GAAP results is to report financial information excluding income and expenses that have not been allocated to segments (except for Corporate items which include salaries and other costs to manage the global business and to perform activities required by public companies).  Non-GAAP results also adjust the quarterly Non-GAAP tax rates so that the Non-GAAP tax rate in each of the quarters is equal to the full-year Non-GAAP tax rate.  The full-year Non-GAAP tax rate in both years excludes certain pretax and tax income and expense amounts.  Amounts reported for prior periods have been updated in this report to present information consistently for all periods presented.

Adjusted Non-GAAP results report historical financial information assuming that our Venezuelan operations have been remeasured using a rate of 50 bolivars to the U.S. dollar.

The Non-GAAP information provides information to assist comparability and estimates of future performance.  Brink's believes these measures are helpful in assessing operations and estimating future results and enable period-to-period comparability of financial performance.  In addition, Brink's believes the measures will help investors assess the ongoing operations.  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. The consolidated Non-GAAP EPS for 2015 and 2016 are not reconciled to GAAP because we are unable to quantify certain amounts that would be required to be included in the GAAP measure without unreasonable effort.

15

16

Discounted cash flows at plan discount rates are supplemental financial measures that are not required by, or presented in accordance with GAAP.  The purpose of the discounted cash flows at plan discount rate is to present our retirement obligations after giving effect to the benefit of earning a return on plan assets.  We believe this measure is helpful in assessing the present value of future funding requirements of the company in order to meet plan benefit obligations.  Discounted cash flows at plan discount rates should not be considered as an alternative to the funded status of the U.S. retirement plans at December 31, 2014, as determined in accordance with GAAP and should be read in conjunction with our consolidated balance sheets.

17

18

19

20

Contact:
Investor Relations
804.289.9709

SOURCE The Brink's Company

Related Links

http://www.brinks.com