UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
⌧
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009
(cid:133)
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
OR
Commission file number 001-09148
THE BRINK’S COMPANY
(Exact name of registrant as specified in its charter)
Virginia
(State or other jurisdiction of
incorporation or organization)
P.O. Box 18100,
1801 Bayberry Court
Richmond, Virginia
(Address of principal executive offices)
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
The Brink’s Company Common Stock, Par Value $1
Securities registered pursuant to Section 12(g) of the Act: None
54-1317776
(I.R.S. Employer
Identification No.)
23226-8100
(Zip Code)
(804) 289-9600
Name of each exchange on
which registered
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ⌧
No (cid:133)
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 (cid:133)
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 ⌧
No ⌧
No (cid:133)
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 (cid:133) No (cid:133)
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. ⌧
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 ⌧
Accelerated filer (cid:133)
Non-accelerated filer (cid:133)
Smaller reporting company (cid:133)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes (cid:133)
As of February 22, 2010, there were issued and outstanding 47,872,426 shares of common stock. The aggregate market value of shares of common
stock held by non-affiliates as of June 30, 2009, was $1,319,269,250.
No ⌧
Documents incorporated by reference: Part III incorporates information by reference from portions of the Registrant’s definitive 2010 Proxy Statement
to be filed pursuant to Regulation 14A.
THE BRINK’S COMPANY
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2009
TABLE OF CONTENTS
PART I
Page
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Business .....................................................................................................................................................................2
Risk Factors .............................................................................................................................................................10
Unresolved Staff Comments ....................................................................................................................................15
Properties .................................................................................................................................................................15
Legal Proceedings....................................................................................................................................................15
Submission of Matters to a Vote of Security Holders ..............................................................................................15
Executive Officers of the Registrant ........................................................................................................................16
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.............................................................................................................................17
Selected Financial Data............................................................................................................................................19
Management’s Discussion and Analysis of Financial Condition and Results of Operations ...................................20
Quantitative and Qualitative Disclosures about Market Risk...................................................................................63
Financial Statements and Supplementary Data ........................................................................................................65
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .................................109
Controls and Procedures ........................................................................................................................................109
Other Information ..................................................................................................................................................109
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Directors, Executive Officers and Corporate Governance .....................................................................................110
Executive Compensation........................................................................................................................................110
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...............110
Certain Relationships and Related Transactions, and Director Independence .......................................................110
Principal Accountant Fees and Services ................................................................................................................110
Item 15.
Exhibits and Financial Statement Schedules..........................................................................................................111
PART IV
1
PART I
ITEM 1. BUSINESS
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 logistics 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
logistics company in the U.S., and a market leader in many other countries. Our international network serves customers in more than 50
countries and employs approximately 59,400 people. Our operations include approximately 875 facilities and 10,500 vehicles. Our globally
recognized brand, global infrastructure, expertise in security and logistics and history and heritage are important competitive advantages.
Seventy-one percent (71%) of our $3 billion in revenues are from outside North America. Over the past several years, we have changed from a
conglomerate (with operations in the U.S. monitored home security, heavy-weight freight transportation, coal and other natural resource
industries) into a company focused solely on the security industry.
Financial information related to The Brink’s Company, our two reporting segments (International and North America) and amounts not
allocated to segments is included in the consolidated financial statements on pages 65-108. Management evaluates performance and allocates
resources to its segments based on operating profit or loss, excluding corporate allocations.
A significant portion of our business is conducted outside of the United States. Financial results are reported in U.S. dollars and are affected by
fluctuations in the relative value of foreign currencies. Our business is also subject to other risks customarily associated with operating in
foreign countries including changing labor and economic conditions, political instability, restrictions on repatriation of earnings and capital, as
well as nationalization, expropriation and other forms of restrictive government actions. The future effects of these risks cannot be predicted.
Additional information about risks associated with our foreign operations is provided on pages 10, 41 and 64.
We have significant liabilities associated with our retirement plans, a portion of which has been funded. These liabilities increased $465
million in 2008 primarily as a result of a significant decline in the value of the investments of these plans. The liabilities were $242 million
lower at the end of 2009, primarily as a result of a voluntary $150 million contribution we made to our primary U.S. retirement plan in 2009.
See pages 48-50 and 54-58 for more information on these liabilities. Additional risk factors are described on pages 10-14.
Available Information and Corporate Governance Documents
The following items are available free of charge on our website (www.brinkscompany.com) as soon as reasonably possible after filing or
furnishing them with the Securities and Exchange Commission:
• Annual reports on Form 10-K
• Quarterly reports on Form 10-Q
• Current reports on Form 8-K, and amendments to those reports
In addition, the following documents are also available free of charge on our website:
• Corporate governance policies
• Business Code of Ethics
•
The charters of the following Board Committees: Audit and Ethics, Compensation and Benefits, and Corporate Governance
and Nominating.
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.
2
General
Our 2009 segment operating profit was $213 million on revenues of $3.1 billion, resulting in a segment operating profit margin of 6.8%.
Revenue
(In millions)
Segme nt O pe rating Profit
(In m illions)
3500
3000
2500
2000
1500
1000
500
0
$3,164 $3,135
$2,735
$2,354
$2,113
$272
$223
$213
$184
$120
300
250
200
150
100
50
0
2005
2006
2007
2008
2009
2005
2006 2007
2008
2009
Our operations are located around the world and most of our revenues (71%) and segment operating profit (73%) are earned outside of North
America.
Revenue by Region
(In millions)
$79
$905
$894
$1,257
North America
Europe, Middle East, and Africa
Latin America
Asia Pacific
Segment Operating Profit
(In millions)
$56
$157
North America
International
3
International operations has three regions: Europe, Middle East, and Africa (“EMEA”); Latin America and Asia Pacific. On a combined
basis, international operations generated 2009 revenues of $2.2 billion (71% of total) and segment operating profit of $157 million (73% of
total).
Brink’s EMEA, which generated $1.3 billion or 40% of total 2009 revenues, operates 258 branches in 22 countries. Its largest
operations are in France, the Netherlands and Germany. In 2009, France accounted for $615 million or 49% of EMEA revenues
(20% of total).
Brink’s Latin America, which generated $905 million or 29% of total 2009 revenues, operates 217 branches in nine countries. Its
largest operations are in Venezuela, Brazil and Colombia. In 2009, Venezuela accounted for $376 million or 42% of Latin American
revenues (12% of total). Brazil accounted for $258 million or 28% of Latin American revenues (8% of total) in 2009.
Brink’s Asia-Pacific operates 97 branches in nine countries, and accounted for $79 million or 2% of total 2009 revenues.
North American operations include 181 branches in the U.S. and 52 branches in Canada. North American operations generated 2009 revenues
of $894 million (29% of total) and segment operating profit of $56 million (27% of total).
Brink’s also serves customers in countries in which we do not operate branches. Through our investments in unconsolidated equity affiliates as
well as our Global Services network, Brink’s operates in over 50 countries.
The largest eight Brink’s operations (U.S., France, Venezuela, Brazil, the Netherlands, Colombia, Canada and Germany) accounted for $2.5
billion or 79% of total 2009 revenues.
(In millions)
2009
% total % change
2008
% total % change
2007
% total % change
Revenues by region:
EMEA:
France
Other
Total
Latin America:
Venezuela (a)
Brazil
Other
Total
Asia Pacific
Total International
North America
$
615
642
1,257
376
258
271
905
79
2,241
894
Total Revenues
3,135
Amounts may not add due to rounding.
$
20
20
40
12
8
9
29
2
71
29
100
(12)
(3)
(7)
7
33
6
13
10
-
(4)
(1)
$
698
661
1,359
351
194
256
801
72
2,232
932
22
21
43
11
6
8
25
2
70
30
$
3,164
100
11
18
14
56
20
23
35
15
21
5
16
$
629
563
1,192
225
161
208
594
63
1,849
886
23
21
44
8
6
8
22
2
68
32
$
2,735
100
15
23
19
31
36
27
31
(7)
21
7
16
(a)
2009 Venezuela revenues were $138 million on an adjusted basis, or 5%, of Brink’s $2.9 billion consolidated adjusted revenues in 2009. Adjusted
revenues are not reported under U.S. GAAP, and present Venezuela revenues at the less-favorable parallel market currency exchange rate. The
adjustments are described in detail and are reconciled to our GAAP results on pages 39-40.
Geographic financial information related to revenues and long-lived assets is included in the consolidated financial statements on page 82.
Brink’s ownership interests in subsidiaries and affiliated companies ranged from 36% to 100% at December 31, 2009. In some instances, local
laws limit the extent of Brink’s ownership interest.
4
Services
Our primary services include:
• Cash-in-transit (“CIT”) armored car transportation
• Automated teller machine (“ATM”) replenishment and servicing
• Global Services – arranging secure long-distance transportation of valuables
• Cash Logistics – supply chain management of cash
• Guarding services, including airport security
Brink’s typically provides customized services under separate contracts designed to meet the distinct needs of customers. Contracts usually
cover an initial term of at least one year and range up to five years, depending on the service. The contracts generally remain in effect after the
initial term until canceled by either party.
Core Services (55% of total revenue in 2009)
CIT and ATM Services are core services we provide to customers throughout the world. Core services generated approximately $1.7
billion of revenues in 2009.
CIT We have been serving customers since 1859. Our success in CIT is driven by a combination of rigorous security
practices, high quality customer service, risk management expertise and logistics expertise. CIT services generally include
the secure transportation of:
•
•
•
cash between businesses and banks
cash, securities and other valuables between commercial banks, central banks, and investment banking and
brokerage firms
new currency, coins and precious metals for central banks
ATM Services We manage nearly 77,000 ATM units worldwide for banks and other cash dispensing operators. We
provide cash replenishment, monitoring and forecasting capabilities, deposit pick-up and processing services. Advanced
online tools deliver consolidated electronic reports for simplified reconciliation.
Value-Added Services (33% of total revenue in 2009)
Our core services, combined with our brand and global infrastructure, provide a substantial platform from which we offer additional
value-added services. Value-added services generated approximately $1.0 billion of revenues in 2009.
Global Services With operations spanning more than 50 countries, Brink’s is a leading global provider of secure long-
distance logistics for valuables including diamonds, jewelry, precious metals, securities, currency, high-tech devices,
electronics and pharmaceuticals. We typically employ a combination of armored car and secure air transportation to
leverage our extensive global network. Our specialized diamond and jewelry operation has offices in the major diamond
and jewelry centers of the world.
Cash Logistics Brink’s offers a fully integrated approach to managing the supply chain of cash, from point-of-sale
through transport, vaulting, bank deposit and related credit. Cash Logistics services include:
• money processing and cash management services
•
•
•
deploying and servicing “intelligent” safes and safe control devices, including our patented CompuSafe® service
integrated check and cash processing services (“Virtual Vault”)
check imaging services
Money processing services generally include counting, sorting and wrapping currency. Other currency 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 variety of advanced technology applications including online cash tracking, cash inventory management,
check imaging for real-time deposit processing, and a variety of other web-based information tools that enable banks and
other customers to reduce costs while improving service to their customers.
5
Brink’s CompuSafe® service offers customers an integrated, closed-loop system for preventing theft and managing cash.
We market CompuSafe® services to a variety of cash-intensive customers such as convenience stores, gas stations,
restaurants, retail chains and entertainment venues. Our service includes the installation of a specialized safe in the
customer’s facility. 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 transported to a secure location where contents are verified and
transferred for deposit. Our CompuSafe service system features currency recognition counterfeit detection technology,
multi-language touch screens and electronic interface between point-of-sale, back-office systems and external banks. Our
electronic reporting interface with external banks enables our CompuSafe service customers to receive same-day credit on
their cash balances, even if the cash remains on the customer’s premises.
Virtual Vault services combine CIT, Cash Logistics, vaulting and electronic reporting technologies to help banks expand
into new markets while minimizing investment in vaults and branch facilities. In addition to secure storage, we process
deposits, provide check imaging and reconciliation services, and electronically transmit debits and credits.
We believe the quality and scope of our cash processing and information systems differentiate our Cash Logistics services
from competitive offerings.
Payment Services We provide bill payment acceptance and processing services to utility companies and other billers.
Consumers can pay their bills at our payment locations or payment locations that we operate on behalf of billers and bank
customers.
Other Security Services (12% of total revenue in 2009)
Security and Guarding We protect airports, offices, warehouses, stores, and public venues with electronic surveillance,
access control, fire prevention and highly trained patrolling personnel. Other security services generated approximately
$0.4 billion of revenues in 2009.
Our guarding services are generally offered in European markets including France, Germany, Luxembourg and Greece. A
significant portion of this business involves long-term contracts related primarily to guarding services at airports.
Generally, other guarding contracts are for a one-year period, the majority of which are extended. Our security officers are
typically stationed at customer sites, and responsibilities include detecting and deterring specific security threats.
Growth Strategy
We are pursuing various growth strategies, which we categorize as follows:
• Organic Growth Strategy
1. Continue to develop and expand our portfolio of high-margin services (for example, Cash Logistics and Global Services)
2. Penetrate new geographies with strong growth potential for our existing service offerings
• Adjacency Growth Strategy – enter new security-related markets where we can create value for customers with our brand,
capabilities and other competitive advantages
• Acquisitions to supplement organic growth – acquire businesses that meet internal metrics for projected growth, profitability and
return on investment
Industry and Competition
Brink’s competes with large multinational, regional and smaller companies throughout the world. Our largest multinational competitors are
Group 4 Securicor plc (headquartered in the U.K.), Loomis AB, formerly a division of Securitas 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:
•
•
•
•
•
•
•
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 and information systems
proven operational excellence
high-quality insurance coverage and general financial strength
Our cost structure is generally competitive, although certain competitors may have lower costs due to a variety of factors including lower
wages, less costly employee benefits, or less stringent security and service standards.
6
Although Brink’s faces competitive pricing pressure in many markets, we resist competing on price alone. We believe our high levels of
service and security differentiate us from competitors.
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. Brink’s is self-insured for much of the liability related to potential losses of cash or valuables while such
items are in our possession. However, 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.
Revenues are generated from charges per service performed or based on the value of goods transported. As a result, revenues are affected by
the level of economic activity in various markets as well as the volume of business for specific customers. CIT 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 Logistics are typically longer. Costs are incurred when preparing to serve a new customer or to transition away from an
existing customer. Operating profit is generally stronger in the second half of the year, particularly in the fourth quarter, as economic activity is
typically stronger during this period.
As part of the spin-off of our former monitored home security business, Brink’s Home Security Holdings, Inc. (“BHS”), we agreed not to
compete with BHS in the United States, Canada and Puerto Rico with respect to certain activities related to BHS’s security system monitoring
and surveillance business until October 31, 2013.
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 expiring in 2011 and 2012 for certain coin sorting and counting machines. We also own patents
for safes, including our integrated CompuSafe® services which expire between 2015 and 2022. These patents provide important advantages to
Brink’s. However, Brink’s operations are not dependent on the existence of these patents.
We have agreed to license the Brink’s name. An example is a license to a distributor of security products (padlocks, door hardware, etc.)
offered for sale to consumers through major retail chains.
We entered into a Brand Licensing Agreement in connection with the spin-off of BHS. Under the agreement, BHS licenses the rights to use
certain trademarks, including trademarks that contain the word “Brink’s” in the United States, Canada and Puerto Rico. In exchange for these
rights, BHS has agreed to pay a licensing fee equal to 1.25% of its net revenues during the period after the spin-off until the expiration date of
the agreement. The license is terminable by BHS upon 30 days notice and will expire on October 31, 2011. Based on public statements by
Tyco International, Ltd. (“Tyco”), we expect that this license will be terminated prior to September 2010 in connection with the pending
acquisition of BHS by Tyco.
7
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. Our International operations are regulated to varying
degrees by the countries in which we operate.
Employee Relations
At December 31, 2009, our company had approximately 59,400 employees, including approximately 12,000 employees in North America (of
whom approximately 1,800 were classified as part-time employees) and approximately 47,400 employees outside North America. At
December 31, 2009, Brink’s was a party to 5 collective bargaining agreements in North America with various local unions covering
approximately 1,000 employees, almost all of whom are employees in Canada and members of unions affiliated with the Canadian Auto
Workers (Ontario). The agreements have various expiration dates in 2010. Outside of North America, approximately 62% of branch
employees are members of labor or employee organizations. We believe our employee relations are satisfactory.
ACQUISITIONS
Sebival
Brazilian CIT and payment processing business
On January 8, 2009, we acquired 100% of the capital stock and voting interests in Sebival-Seguranca Bancaria Industrial e de Valores Ltda.
and Setal Servicos Especializados, Tecnicos e Auxiliares Ltda. (“Sebival”) for approximately $47.6 million in cash. Both of the businesses
which comprise Sebival were controlled by the same owner and the acquisition expands our operations into the midwestern region of Brazil.
Brink’s Arya
Indian CIT and Global Services business
On September 1, 2009, we acquired additional shares of Brink’s Arya (“Arya”), increasing our ownership in Arya from 40% to 78%. The
consideration paid for the additional 38% interest was $22.2 million.
In connection with the acquisition of 38% of Arya’s shares, we also agreed to purchase the remaining 22% of the shares we do not currently
hold for approximately $12.8 million. This purchase is subject to the satisfaction of certain conditions which are expected to be met by
September 1, 2011. We consider Arya as 100% owned for accounting purposes and included the fixed purchase price in non-current liabilities.
Arya is a cash handling and secure logistics company based in Mumbai, India, and this acquisition expands our presence in one of the largest
cash services markets in Asia.
Other acquisitions
In the first quarter of 2009, we acquired a controlling interest in a Panama armored transportation operation, which was previously 49% owned.
In the first quarter of 2009, we also acquired 80% ownership of a secure logistics company based in Moscow, Russia. The relatively small
acquisition increases our presence in a region that has long-term growth potential.
In the third quarter of 2009, we acquired a majority stake in ICD Limited (“ICD”), a premium provider of commercial security services in the
Asia-Pacific region. ICD designs, installs, maintains and manages high-quality commercial security systems. With principal operations in
China, ICD also has offices in Hong Kong, India, Singapore and Australia. ICD employs approximately 200 people and had 2008 revenue of
$12 million.
See note 6 to the consolidated financial statements for more information.
8
DISCONTINUED OPERATIONS
Brink’s Home Security Holdings, Inc.
On October 31, 2008, we completed the 100% spin-off of BHS. BHS offered monitored security services in North America primarily for
owner-occupied, single-family residences. To a lesser extent, BHS offered security services for commercial and multi-family properties. BHS
typically installed and owned the on-site security systems and charged fees to monitor and service the systems.
In connection with the spin-off, we entered into certain agreements with BHS to define responsibility for obligations arising before and after
the spin-off, including obligations relating to liabilities of the businesses, employees, taxes and intellectual property. We entered into a Brand
Licensing Agreement with BHS. Under the agreement, BHS licenses the rights to use certain trademarks, including trademarks that contain the
word “Brink’s” in the United States, Canada and Puerto Rico. In exchange for these rights, BHS has agreed to pay a licensing fee equal to
1.25% of its net revenues during the period after the spin-off until the expiration date of the agreement. The license is terminable by BHS upon
30 days notice and will expire on October 31, 2011. Based on public statements by Tyco International, Ltd. (“Tyco”), we expect that this
license will be terminated prior to September 2010 in connection with the pending acquisition of BHS by Tyco.
We also entered into a Non-Compete Agreement with BHS, which will expire on October 31, 2013, pursuant to which we agreed not to
compete with BHS in the United States, Canada and Puerto Rico with respect to certain restricted activities specified in the Non-Compete
Agreement in which BHS currently is, or is currently planning to be, engaged.
We contributed $50 million in cash to BHS at the time of the spin-off and forgave all the existing intercompany debt owed by BHS to us and
our subsidiaries as of the distribution date.
Former Coal Business
We have significant liabilities related to retirement medical plans of our former coal operations, a portion of which have been funded. Some of
the obligations have not been funded. We expect to have ongoing expense and future cash outflow for these liabilities. See notes 3, 17 and 21
to the consolidated financial statements for more information.
9
ITEM 1A. RISK FACTORS
We are exposed to risk in the operation of our businesses. Some of these risks are common to all companies doing business in the industries in
which we operate and some are unique to our business. In addition, there are risks associated with investing in our common stock. These risk
factors should be considered carefully when evaluating the company and its businesses.
The weak economy is expected to have a negative impact on demand for our services.
Global economic conditions have deteriorated significantly, and demand for our services has been negatively impacted in regions where we
provide our services. For example, demand for our services is significantly affected by the amount of discretionary consumer and business
spending, which historically has displayed significant cyclicality. Further deterioration in general global economic conditions would have a
negative impact on our financial condition, results of operations and cash flows, although it is difficult to predict the extent and the length of
time the economic downturn will affect our business.
The inability to access capital or significant increases in the cost of capital could adversely affect our business.
Our ability to obtain adequate and cost effective financing depends on our credit ratings as well as the liquidity of financial markets. A negative
change in our ratings outlook or any downgrade in our current investment-grade credit ratings by our 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 short-term 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 have significant retirement obligations. Poor investment performance of retirement plan holdings 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. Our liabilities for these plans
increased significantly in 2008 primarily as a result of a decline in value of plan investments. To improve the funded status of The Brink’s
Company Pension-Retirement Plan, we made a voluntary $150 million cash and stock contribution in 2009. The funded status of the plan was
approximately 83% as of December 31, 2009. We expect that we will be required to make significant contributions to The Brink’s Company
Pension-Retirement Plan in the next several years. This could adversely affect our liquidity and our ability to use our resources to make
acquisitions and to otherwise grow our business. The net periodic costs of our retirement plans in 2009 were adversely affected by the
investment losses sustained in 2008 and we anticipate that costs in future years will continue to be affected as the unrecognized losses are
recognized into earnings. If these investments have additional losses, our future cash requirements and costs for these plans will be further
adversely affected.
We have significant operations outside the United States.
We currently operate in more than 50 countries. Approximately three-quarters of our revenue in 2009 came from operations outside the U.S.
We expect revenue outside the U.S. to continue to represent a significant portion of total revenue. 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;
varying permitting and licensing requirements in different jurisdictions;
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;
limitations on the repatriation of earnings;
10
•
•
fluctuations in equity, revenues and profits due to changes in foreign currency exchange rates, including measures taken by
governments to influence currency exchange rates; and
inflation levels exceeding that of the U.S.
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 cost 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. GAAP purposes.
We try to manage these risks by monitoring current and anticipated political and economic developments 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.
We operate in highly competitive industries.
We compete in industries that are subject to significant competition and pricing pressures. We face significant pricing pressures from
competitors in most markets. 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 could impact our customer base or
pricing structure and have an adverse effect on our business, financial condition, results of operations and cash flows.
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 armored carriers affects premium rates charged to us. We are self-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 order for us to
obtain and retain customers and to manage 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.
Restructuring charges may be required in the future.
There is a possibility we will take restructuring actions in one or more of our markets in the future to reduce expenses if a major customer is
lost or if recurring operating losses continue. 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 operating leases. These charges, if
required, could significantly affect results of operations and cash flows.
We depend heavily on the availability of fuel and the ability to pass higher fuel costs to customers.
Fuel prices have fluctuated significantly in recent years. In some periods, our operating profit has been adversely affected because we are not
able to immediately offset the full impact of higher fuel prices through increased prices or fuel surcharges. We do not have any long-term fuel
purchase contracts, and have not entered into any other hedging arrangements that protect against fuel price increases. A significant increase in
fuel costs and an inability to pass increases on to customers or a shortage of fuel could adversely affect our 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 operations
in Canada are subject to regulation by Canadian and provincial regulatory authorities. Our international operations are regulated to varying
degrees by the countries in which we operate.
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.
11
We have retained obligations from the sale of BAX Global.
In January 2006 we sold BAX Global. We retained some of the obligations related to these operations, primarily for taxes owed prior to the
date of sale and for any amounts paid related to one pending litigation matter for which we have accrued a loss reserve of $13 million. In
addition, we provided indemnification customary for these sorts of transactions. Future unfavorable developments related to these matters
could require us to record additional expenses or make cash payments in excess of recorded liabilities. The occurrence of these events could
have a material adverse affect on our financial condition, results of operations and cash flows.
We are subject to covenants for credit facilities.
We have credit facilities with financial covenants, including a limit on the ratio of debt to earnings before interest, taxes, depreciation, and
amortization, limits on the ability to pledge assets, limits on the use of proceeds of asset sales and minimum coverage of interest costs.
Although we believe none of these covenants are presently restrictive to operations, the ability to meet the financial 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
any 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 impact on our liquidity and cash flows.
Our growth strategy may not be successful.
One element of our growth strategy is to strengthen our brand portfolio and expand our geographic reach through selective acquisitions.
Acquisitions present risks of failing to achieve efficient and effective integration, strategic objectives and anticipated revenue improvements
and cost savings. There can be no assurance
•
•
•
that we will be able to acquire attractive businesses on favorable terms,
that all future acquisitions will be accretive to earnings,
or that future acquisitions will be rapidly and efficiently integrated into existing operations.
Our effective income tax rate could change.
We operate in more than 50 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 have certain environmental and other exposures related to our former coal operations.
We may incur future environmental and other liabilities that are presently unknown in connection with our former coal operations.
Our performance could be negatively impacted by the spin-off of BHS, which was completed in 2008.
In connection with the BHS spin-off, we received both a private letter ruling from the Internal Revenue Service (the “IRS”) and a favorable
opinion from Cravath, Swaine & Moore LLP that the spin-off qualifies for tax-free treatment under Section 355 of the Internal Revenue Code
of 1986, as amended. However, the IRS could subsequently determine that the spin-off should be treated as a taxable transaction. If the spin-
off fails to qualify for tax-free treatment, it could have a material adverse tax impact on us as well as on our shareholders. We also entered into
certain agreements with BHS that could potentially affect our ability to conduct our operations in the manner most advantageous to us until the
expiration of such agreements. We have agreed to license certain trademarks that contain the word “Brink’s” to BHS until October 31, 2011,
subject to earlier termination. We also have agreed not to compete with BHS in the United States, Canada and Puerto Rico with respect to
certain activities related to BHS’s security system monitoring and surveillance business until October 31, 2013.
12
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 (CO2)) 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
impacts of climate change and related regulation on our customers are highly uncertain and may adversely affect our operations.
Forward-Looking Statements
This document contains both historical and forward-looking information. Words such as “anticipates,” “estimates,” “expects,” “projects,”
“intends,” “plans,” “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 expected revenue growth and earnings for The Brink’s
Company, including organic revenue growth and segment operating profit margin in 2010, the anticipated termination of the BHS license, the
pursuit of growth through acquisitions in our core market and in other markets, the growth of our Cash Logistics services, our cost structure,
the seasonality of our operating profit, employee relations, significant liabilities and ongoing expenses and future cash outflows related to
retirement medical plans of former coal operations, customer demand for our services, expected non-segment income and expenses, potential
changes in foreign currency exchange rates, the anticipated effective tax rate for 2010 and our future tax position, expenses related to former
operations, expected trademark royalties from BHS, the impact of exchange rates, the anticipated effect of translating our Venezuelan
operations at the parallel market rate rather than the official rate and designating Venezuela as “highly inflationary” for accounting purposes,
projected contributions, expense and payouts for the U.S. retirement plans and the non-U.S. pension plans and the expected long-term rate of
return and funded status of the primary U.S. pension plan, expected future contributions to the UMWA plans, capital expenditures in 2010 and
future trends for capital expenditures, future depreciation and amortization, future payment of bonds issued by the Peninsula Ports Authority of
Virginia, the ability to meet liquidity needs, estimated contractual obligations for the next five years and beyond, contractual indemnities
associated with the sale of BAX Global and the spin-off of BHS, the outcome of pending litigation and the anticipated financial impact of the
disposition of these matters, future realization of deferred tax assets, the impairment of goodwill, future amortizations into net periodic pension
cost, estimated discount rates, the assumed inflation rate for a number of the Company’s benefit plans, the impact of accounting rule changes,
the likelihood of losses due to non-performance by parties to hedging instruments, the use of earnings from foreign subsidiaries and equity
affiliates, future recognition of unrecognized tax benefits and uncertain tax positions, minimum repayments of long-term debt and minimum
future lease payments, and expected future cash payments and expense levels for black lung obligations. Forward-looking information in this
document is subject to known and unknown risks, uncertainties, and contingencies, 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 the impact of the global
economic slowdown on our business opportunities, access to the capital and credit markets, the recent market volatility and its impact on the
demand for our services, the implementation of investments in technology and value-added services and cost reduction efforts and their impact
on revenue and profit growth, the ability to identify and execute further cost and operational improvements and efficiencies in our core
business, the willingness of our customers to absorb fuel surcharges and other future price increases, the actions of competitors, our ability to
identify strategic opportunities and integrate them successfully, acquisitions and dispositions made in the future, our ability to integrate recent
acquisitions, regulatory and labor issues and higher security threats, the impact of turnaround actions responding to current conditions in
Europe, the return to profitability of operations in jurisdictions where we have recorded valuation adjustments, the stability of the Venezuelan
economy and changes in Venezuelan policy regarding exchange rates, fluctuations in value of the Venezuelan bolivar fuerte, the effect of
translating our Venezuelan operations at the parallel market rate rather than the official rate and designating Venezuela as “highly inflationary”
for accounting purposes, 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, changes in insurance costs, risks customarily associated with
operating in foreign countries including changing labor and economic conditions, currency devaluations, safety and security issues, political
instability, restrictions on repatriation of earnings and capital, nationalization, expropriation and other forms of restrictive government actions,
costs associated with the purchase and implementation of cash processing and security equipment, the timing of the termination of the BHS
license, changes in the scope or method of remediation or monitoring of our former coal operations, the timing of the pass-through of certain
costs to third parties and the timing of approvals by governmental authorities relating to the disposal of the coal assets, changes to estimated
liabilities and assets in actuarial assumptions due to payments made, investment returns, annual actuarial revaluations, and periodic
revaluations of reclamation liabilities, the funding requirements, accounting treatment, investment performance and costs and expenses of our
retirement plans and other employee benefits, whether Company assets or retirement plan assets are used to pay benefits, projections regarding
the number of participants in and beneficiaries of our employee and retiree benefit plans, mandatory or voluntary retirement plan contributions,
13
black lung claims incidence, the number of dependents of mine workers for whom benefits are provided, actual retirement experience of the
former coal operation’s employees, actual medical and legal expenses relating to benefits, changes in inflation rates (including medical
inflation) and interest rates, changes in mortality and morbidity assumptions, discovery of new facts relating to civil suits, the addition of
claims or changes in relief sought by adverse parties, our cash, debt and tax position and growth needs, our demand for capital and the
availability and cost of such capital, the nature of our hedging relationships, changes in employee obligations, overall domestic and
international economic, political, social and business conditions, capital markets performance, the strength of the U.S. dollar relative to foreign
currencies, foreign currency exchange rates, changes in estimates and assumptions underlying our critical accounting policies, as more fully
described in the section “Application of Critical Accounting Policies” but including the likelihood that net deferred tax assets will be realized,
discount rates, expectations of future performance, the timing of deductibility of expenses, inflation, the promulgation and adoption of new
accounting standards and interpretations, including SFAS 166, now part of FASB ASC Topic 860, Transfers and Servicing, SFAS 167, now
part of FASB ASC Topic 810, Consolidation, ASU 2009-13, and ASU 2009-14, anticipated return on assets, inflation, seasonality, pricing and
other competitive industry factors, labor relations, new government regulations and interpretations of existing regulations, legislative
initiatives, judicial decisions, issuances of permits, variations in costs or expenses and the ability of counterparties to perform. 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.
14
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
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, 2009.
Region
U. S.
Canada
North America
EMEA
Latin America
Asia Pacific
International
Total
Leased
Facilities
Owned
Total
174
40
214
229
193
103
525
739
25
13
38
48
50
-
98
136
199
53
252
277
243
103
623
875
Leased
2,118
442
2,560
863
450
2
1,315
3,875
Vehicles
Owned
293
86
379
2,877
2,868
512
6,257
6,636
Total
2,411
528
2,939
3,740
3,318
514
7,572
10,511
During 2009, we installed approximately 2,800 units, net of dispositions, for our CompuSafe® service. This is a 37% increase in the installed
base since the end of 2008. Our installed base now stands at approximately 10,300 units. In 2009, revenues from our CompuSafe® service
represented approximately 7% of North America’s revenues.
ITEM 3. LEGAL PROCEEDINGS
We are involved in various lawsuits and claims in the ordinary course of business. We are not able to estimate the range of losses for some of
these matters. We have recorded accruals for losses that are considered probable and reasonably estimable. We do not believe that the ultimate
disposition of any of these matters will have a material adverse effect on our liquidity, financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
15
Executive Officers of the Registrant
The following is a list as of February 15, 2010, of the names and ages of the executive and other officers of The Brink’s Company indicating
the principal positions and offices held by each. There are no family relationships among any of the officers named.
Name
Executive Officers:
Michael T. Dan
Joseph W. Dziedzic
Frank T. Lennon
McAlister C. Marshall, II
Matthew A. P. Schumacher
Other Officers:
Jonathan A. Leon
Lisa M. Landry
Michael J. McCullough
Arthur E. Wheatley
Age
Positions and Offices Held
Held Since
59
41
68
40
51
43
44
39
67
President, Chief Executive Officer and Chairman of the Board
Vice President and Chief Financial Officer
Vice President and Chief Administrative Officer
Vice President and General Counsel
Controller
Treasurer
Vice President - Tax
Secretary
Vice President – Risk Management and Insurance
1998
2009
2005
2008
2001
2008
2009
2009
1988
Executive and other officers of The Brink’s Company are elected annually and serve at the pleasure of its board of directors.
Mr. Dan was elected President, Chief Executive Officer and Director of The Brink’s Company in February 1998 and was elected Chairman of
the Board effective January 1, 1999. He also serves as Chief Executive Officer of Brink’s, Incorporated, a position he has held since July 1993.
From August 1992 to July 1993 he served as President of North American operations of Brink’s, Incorporated and as Executive Vice President
of Brink’s, Incorporated from 1985 to 1992.
Mr. Dziedzic is the Vice President and Chief Financial Officer of The Brink’s Company. Mr. Dziedzic was hired on May 25, 2009 and
appointed to this position on August 1, 2009. Before joining The Brink’s Company, Mr. Dziedzic was Chief Financial Officer for GE Aviation
Services, a producer, seller and servicer of jet engines, turboprop and turbo shaft engines and related replacement parts, from March 2006 to
May 2009. Prior to this position, Mr. Dziedzic was Manager-Global Financial Planning & Analysis for GE Energy, a provider of products and
services related to energy production, distribution and management, from January 2003 to February 2006.
Mr. Lennon was appointed Vice President and Chief Administrative Officer in 2005. Prior to this position, he was the Vice President, Human
Resources and Administration of The Brink’s Company from 1990 through 2005.
Mr. Marshall was appointed Vice President and General Counsel of The Brink’s Company in September 2008 and also held the office of
Secretary from September 2008 to July 2009. Prior to joining The Brink’s Company, Mr. Marshall was the Vice President, General Counsel
and Secretary at Tredegar Corporation, a manufacturer of plastic films and aluminum extrusions, from October 2006 to September 2008. Prior
to this position, Mr. Marshall was the Assistant General Counsel and Secretary for The Brink’s Company from July 2006 to September 2006.
Prior to this position, Mr. Marshall was the Assistant General Counsel and Director-Corporate Governance and Compliance for The Brink’s
Company from July 2004 to July 2006. Prior to this position, Mr. Marshall was the Assistant General Counsel for The Brink’s Company from
July 2000 to July 2004.
Messrs. Schumacher and Wheatley have served in their present positions for more than the past five years.
Ms. Landry was appointed Vice President-Tax of The Brink’s Company on July 10, 2009. Prior to this position, Ms. Landry was Director of
Taxes and Chief Tax Counsel of The Brink’s Company from December 2006 to July 2009. Prior to this position, Ms. Landry was Senior Tax
Counsel of The Brink’s Company from March 2004 to December 2006.
Mr. Leon is the Treasurer of The Brink’s Company. Mr. Leon was hired in June 2008 and appointed to this position in July 2008. Before
joining The Brink’s Company, Mr. Leon was the Assistant Treasurer for Universal Corporation, a leaf tobacco merchant and processor, from
January 2007 to June 2008. Prior to this position, Mr. Leon was the Assistant Treasurer for The Brink’s Company from July 2005 to January
2007. Prior to this position, Mr. Leon had held various financial management positions with The Brink’s Company from February 1998 to July
2005.
Mr. McCullough was appointed Secretary of The Brink’s Company on July 10, 2009. Prior to this position, Mr. McCullough was Assistant
General Counsel and Director of Corporate Governance and Compliance of The Brink’s Company from October 2006 to July 2009, and served
as Assistant Secretary from July 2007 to July 2009. Prior to this position, Mr. McCullough had held various internal counsel positions with
The Brink’s Company from July 2003 to October 2006.
16
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock trades on the New York Stock Exchange under the symbol “BCO.” As of February 17, 2010, there were approximately
2,000 shareholders of record of common stock.
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:
1st
2009 Quarters
3rd
2nd
4th
1st
2008 Quarters
3rd
2nd
4th
Dividends declared per common share
Stock prices:
High
Low
$
$
0.1000
0.1000
0.1000
0.1000
32.36
20.73
31.28
25.79
30.66
25.00
26.89
22.23
$
$
0.1000
0.1000
0.1000
0.1000
70.11
49.04
74.61
65.23
71.48
57.68
61.32
18.19
We completed the spin-off of BHS on October 31, 2008. See note 16 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 on The Brink’s Company’s common stock relative
to the cumulative total returns of the S&P Midcap 400 index and the S&P Midcap 400 Commercial Services & Supplies Index. The graph
tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December
31, 2004, through December 31, 2009.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among The Brink's Company, The S&P Midcap 400 Index
And S&P Midcap 400 Commercial Services & Supplies Index
$250
$200
$150
$100
$50
$0
12/04
12/05
12/06
12/07
12/08
12/09
The Brink's Company
S&P Midcap 400
S&P Midcap 400 Commercial Services & Supplies
*$100 invested on 12/31/04 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2010 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.
Source – Research Data Group, Inc.
Comparison of Five-Year Cumulative Total Return Among
Brink’s Common Stock, the S&P MidCap 400 Index and
the S&P Midcap 400 Commercial Services & Supplies Index (1)
2004
2005
2006
2007
2008
2009
Years Ended December 31,
121.56
The Brink's Company
S&P Midcap 400 Index
112.55
S&P Midcap 400 Commercial Services & Supplies Index
103.86
Copyright © 2010, Standard & Poor's, a division of The McGraw-Hill Companies, Inc. All rights reserved.
(1) 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.
153.03
134.08
140.56
162.82
124.17
122.68
215.76
85.50
95.71
100.00
100.00
100.00
198.27
117.46
114.63
$
$
For the S&P Midcap 400 Index and the S&P Midcap 400 Commercial Services & Supplies Index, cumulative returns are measured on an annual basis for
the periods from December 31, 2004, through December 31, 2009, with the value of each index set to $100 on December 31, 2004. Total return assumes
reinvestment of dividends and the reinvestment of proceeds from the sale of the shares received related to the spin-off of our former monitored security
business on October 31, 2008. We chose the S&P Midcap 400 Index and the S&P Midcap 400 Commercial Services & Supplies Index because we are
included in these indices, which broadly measure the performance of mid-size companies in the United States market.
18
ITEM 6. SELECTED FINANCIAL DATA
Five Years in Review
(In millions, except per share amounts)
2009
2008
2007
2006
2005
Revenues and Income
Revenues
Segment operating profit
Non-segment (a)
Operating profit
Income attributable to Brink’s:
Income (loss) from continuing operations
Income from discontinued operations (b)
Cumulative effect of change in accounting principle (c)
Net income attributable to Brink’s
Financial Position
Property and equipment, net
Total assets
Long-term debt, less current maturities
Brink’s shareholders’ equity
Supplemental Information
Depreciation and amortization
Capital expenditures
Earnings (loss) per share attributable to Brink’s common shareholders
Basic:
Continuing operations
Discontinued operations (b)
Cumulative effect of change in accounting principle (c)
Net income
Diluted:
Continuing operations
Discontinued operations (b)
Cumulative effect of change in accounting principle (c)
Net income
Cash dividends
Weighted-average Shares
$
$
$
$
$
$
$
$
$
3,135.0
213.4
(46.6)
166.8
195.7
4.5
-
200.2
549.5
1,879.8
172.3
534.9
3,163.5
271.9
(43.4)
228.5
2,734.6
223.3
(62.3)
161.0
2,354.3
184.1
(73.4)
110.7
2,113.3
119.5
(82.0)
37.5
131.8
51.5
-
183.3
78.4
58.9
-
137.3
53.1
534.1
-
587.2
(3.3)
151.1
(5.4)
142.4
534.0
1,815.8
173.0
214.0
1,118.4
2,394.3
89.2
1,046.3
981.9
2,188.0
126.3
753.8
867.4
3,036.9
251.9
837.5
135.1
170.6
122.3
165.3
110.0
141.8
93.0
113.8
88.0
107.8
4.14
0.10
-
4.23
4.11
0.10
-
4.21
2.85
1.11
-
3.96
2.82
1.10
-
3.93
1.68
1.27
-
2.95
1.67
1.25
-
2.92
1.06
10.69
-
11.75
1.05
10.58
-
11.64
(0.06)
2.69
(0.10)
2.53
(0.06)
2.69
(0.10)
2.53
0.4000
0.4000
0.3625
0.2125
0.1000
47.2
47.5
46.3
46.7
46.5
47.0
50.0
50.5
56.3
56.3
Basic
Diluted
(a)
(b)
Includes amounts not allocated to segment results.
Income from discontinued operations reflects the operations and gains and losses, if any, on disposal of our former home security, and air freight
businesses, as well as the domestic cash handling operations in the United Kingdom. Expenses related to postretirement obligations are recorded as a
component of continuing operations after the respective disposal dates. Adjustments to contingent liabilities are recorded within discontinued operations.
(c) Our 2005 results of operations include a noncash after-tax charge of $5.4 million or $0.10 per diluted share to reflect the cumulative effect of a change in
accounting principle pursuant to the adoption of FIN 47, Accounting for Conditional Asset Retirement Obligations, which is now part of FASB ASC Topic
410, Asset Retirement and Environmental Obligations.
19
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE BRINK’S COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2009
TABLE OF CONTENTS
Page
OPERATIONS .................................................................................................................................................................... 21
RESULTS OF OPERATIONS
Consolidated Review ........................................................................................................................................................ 23
Segment Operating Results............................................................................................................................................... 26
Non-segment Income (Expense) ....................................................................................................................................... 32
Other Operating Income (Expense) .................................................................................................................................. 33
Nonoperating Income and Expense .................................................................................................................................. 34
Income Taxes.................................................................................................................................................................... 35
Noncontrolling Interests.................................................................................................................................................... 36
Income from Discontinued Operations ............................................................................................................................. 37
Summary of Selected Results and Outlook....................................................................................................................... 38
Adjusted Results – Reconciled to Amounts Reported under GAAP................................................................................. 39
Foreign Operations ........................................................................................................................................................... 41
LIQUIDITY AND CAPITAL RESOURCES
Overview........................................................................................................................................................................... 42
Summary Cash Flow Information ..................................................................................................................................... 42
Operating Activities .......................................................................................................................................................... 43
Investing Activities ........................................................................................................................................................... 43
Financing Activities .......................................................................................................................................................... 44
Capitalization.................................................................................................................................................................... 45
Off Balance Sheet Arrangements...................................................................................................................................... 47
Contractual Obligations .................................................................................................................................................... 48
Contingent Matters ........................................................................................................................................................... 51
APPLICATION OF CRITICAL ACCOUNTING POLICIES
Deferred Tax Asset Valuation Allowance ........................................................................................................................ 52
Goodwill, Other Intangible Assets and Property and Equipment Valuations ................................................................... 53
Retirement and Postemployment Benefit Obligations ...................................................................................................... 54
Foreign Currency Translation ........................................................................................................................................... 59
RECENT ACCOUNTING PRONOUNCEMENTS......................................................................................................... 60
20
OPERATIONS
The Brink’s Company
The Brink’s Company offers transportation and logistics management services for cash and valuables throughout the world. These services
include armored car transportation, automated teller machine (“ATM”) replenishment and servicing, currency deposit processing and cash
management services. Cash management services include cash logistics services (“Cash Logistics”), deploying and servicing safes and safe
control devices (e.g. our patented CompuSafe® service), coin sorting and wrapping, integrated check and cash processing services (“Virtual
Vault Services”), arranging secure transportation of valuables over long distances and around the world (“Global Services”), providing bill
payment acceptance and processing services to utility companies and other billers (“Payment Services”), and guarding services (including
airport security).
Overview of Results
2009 versus 2008
Our revenues and operating profit declined in 2009. Our segment margin declined in an environment that was extremely difficult for customers
in the banking, retail, and diamond and jewelry sectors. The operating profit decline was primarily due to a highly profitable monetary
conversion project in Venezuela in 2008, a $23 million repatriation charge and higher retirement expenses, partially offset by a $14 million
gain on an acquisition in India. The $23 million repatriation charge was the result of our decision to repatriate 76 million bolivar fuertes from
our Venezuelan operations at the parallel market rate. In addition, newly acquired businesses helped revenues and operating profit in 2009.
2008 versus 2007
Brink’s delivered strong full-year results, despite an extremely challenging business environment that worsened as the year progressed,
especially in the diamond and jewelry segment of our Global Services business. The biggest contributor to the revenue increase in 2008 was
$51 million related to the completed currency conversion project in Venezuela. Operating profit improved due primarily to the currency
conversion project in Venezuela and a gain from a sale of coal assets.
Outlook for 2010
We expect 2010 organic revenue growth in the low-to-mid single-digit percentage range from our 2009 revenue (Adjusted), and a segment
operating profit margin between 7.0% and 7.5%. We define organic revenue growth as revenue growth excluding changes in revenue for
newly acquired or disposed businesses, and changes in revenue due to changes in currency exchange rates. See page 38 for a summary of our
2010 Outlook.
General Overview
Management allocates resources to and makes operating decisions on a geographic basis. Our reportable segments include International and
North America operations. Our International segment includes three distinct regions: EMEA, Latin America and Asia Pacific. Our North
America segment includes operations in the U.S. and Canada.
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 and information systems
proven operational excellence
high-quality insurance coverage and general financial strength
We focus our time and resources on service quality, protecting and strengthening our brand, and addressing our risks. We are a premium
provider of services in most of the markets we serve. Our marketing and sales efforts are enhanced by the “Brink’s” brand, so we seek to
protect and build its value. Since our services focus on handling, transporting, protecting, and managing valuables, we strive to understand and
manage risk. Overlaying our approach is an understanding that we must be disciplined and patient enough to charge prices that reflect the
value provided, the risk assumed and the need for an adequate return for our investors.
Business environments around the world change constantly. We must adapt to changes in competitive landscapes, regional economies and
each customer’s level of business. We balance underlying business risk and the effects of changing demand on the utilization of our resources.
As a result, we operate largely on a decentralized basis so local management can react quickly to changes in the business environment.
21
We measure financial performance on a long-term basis. The key financial measures are:
• Return on capital
• Revenue and earnings growth
• Cash flow generation
These and similar measures are critical components of our incentive compensation plans and performance evaluations.
Because of our emphasis on managing risks while providing a high level of service, we focus our marketing and selling efforts on customers
who appreciate the value and breadth of our services, information and risk management capabilities, and financial strength.
In order to earn an adequate return on capital, we focus on the effective and efficient use of resources as well as appropriate pricing levels. 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. Due to our higher investment in people and processes, we generally charge higher prices
than competitors that do not provide the same level of service and risk management.
The industries we serve have been consolidating. As a result, the demands and expectations of customers in these industries have grown.
Customers are increasingly seeking suppliers, such as Brink’s, with broad geographic solutions, sophisticated outsourcing capabilities and
financial strength.
Operating results may vary from period to period. Since 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. As contracts
generally run for one or more years, costs are incurred to prepare to serve, or to transition away, from a customer. We also periodically incur
costs to reduce operations when volumes decline, including costs to reduce the number of employees and close or consolidate branch and
administrative facilities. In addition, safety and security costs can vary depending on performance, cost of insurance coverage, and changes in
crime rates (i.e., attacks and robberies).
Cash Logistics is a fully integrated solution that proactively manages the supply chain of cash from point-of-sale through bank deposit. The
process includes cashier balancing and reporting, deposit processing and consolidation, and electronic information exchange (including “same-
day” credit capabilities). Retail customers use Brink’s Cash Logistics services to count and reconcile coins and currency in a secure
environment, to prepare bank deposit information, and to replenish customer coins and currency in proper denominations.
Because Cash Logistics involves a higher level of service and more complex activities, customers are charged higher prices, which result in
higher margins. The ability to offer Cash Logistics to customers differentiates Brink’s from many of its competitors. Management is focused
on continuing to grow Cash Logistics revenue.
Brink’s revenues and related operating profit are generally higher in the second half of the year, particularly in the fourth quarter, because of
generally increased economic activity associated with the holiday season.
Former Operations
On October 31, 2008, we completed the tax-free spin-off of Brink’s Home Security Holdings, Inc. (“BHS”), a former monitored security
business in North America. On August 5, 2007, we sold our domestic cash handling operations in the United Kingdom. See “Discontinued
Operations” for a description of the transactions and see “Liquidity and Capital Resources” for a description of the effect of these dispositions
on our cash flow and financial position. We have reported the earnings and cash flows of these operations within discontinued operations for all
periods presented.
We have significant liabilities associated with our former operations, primarily related to retirement plans, which are partially funded by plan
trusts. These trusts sustained significant market losses during the second half of 2008.
Information about our liabilities related to former operations is contained in the following sections of this report:
Liquidity and Capital Resources – Contractual Obligations – on page 48
• Non-segment Income (Expense) on page 32
•
• Application of Critical Accounting Policies – on page 52
• Notes 3, 17 and 21 to the consolidated financial statements, which begin on page 83
22
RESULTS OF OPERATIONS
Consolidated Review
Years Ended December 31,
(In millions, except per share amounts)
Revenues
Segment operating profit:
International
North America
Total segment operating profit (b)
Non-segment operating profit (c)
Total operating profit
Income from continuing operations (d)
Net income (d)
Diluted earnings per share:
Continuing operations
Net income
Amounts may not add due to rounding.
GAAP
% Change
Adjusted (a)
% Change
2009
2008
2007
2009
2008
2009
2008
2007
2009
2008
$
3,135
3,164
2,735
(1)
16
$
2,897
2,990
2,616
(3)
14
157
57
213
(47)
167
196
200
215
57
272
(43)
229
132
183
153
70
223
(62)
161
78
137
(27)
(1)
(22)
7
(27)
48
9
41
(19)
22
(30)
42
68
34
118
57
175
(38)
137
66
71
166
57
223
(43)
180
107
158
126
70
196
(62)
134
66
125
(29)
(1)
(22)
(12)
(24)
(38)
(55)
32
(19)
14
(30)
34
62
27
$
4.11
4.21
2.82
3.93
1.67
2.92
46
7
69
35
$
1.39
1.48
2.29
3.39
1.40
2.66
(39)
(56)
64
27
(a) Adjusted financial information is contained on pages 39 - 40, including reconciliation to amounts reported under generally accepted accounting principles
in the United States (“GAAP”). Adjustments relate to the exchange rate used to translate operating results in Venezuela and transaction losses on
repatriated cash, an exclusion of an acquisition-related gain, and exclusion of a release of a U.S. tax valuation allowance.
(b) Total Segment operating profit is a non-GAAP measure. This table reconciles the measure to operating profit, a GAAP measure. We believe that our
disclosure of total Segment operating profit allows investors a way to assess the total operating performance of Brink’s excluding Non-segment income
(expenses). We provide our outlook of total Segment operating profit and Non-segment income (expense) for 2010 on page 38.
(c) Non-segment includes expenses related to corporate and former operations and other amounts not allocated to segment operating profit.
(d) Amounts reported in this table are attributable to Brink’s and exclude earnings related to noncontrolling ownership interests in consolidated subsidiaries.
Overview
Our revenues and operating profit were down in 2009 compared to 2008. A weak economy and the results from a highly profitable monetary
conversion project in Venezuela included in 2008 made the comparison difficult. Our income from continuing operations attributable to
Brink’s and our earnings per share in 2009 were higher than 2008 primarily as a result of a release of a deferred tax valuation allowance.
Revenues and operating profit in 2008 improved from 2007 primarily due to organic growth in Latin America, including a large currency
conversion project in Venezuela. Our income from continuing operations attributable to Brink’s and our earnings per share in 2008 were higher
than 2007 primarily for the same reason, as well as a gain on the sale of certain assets of our former coal operations and lower retirement plans
expense.
“Adjusted Results” are Non-GAAP Financial Measures
We provide an analysis of our results of operations below on both a GAAP and Adjusted basis. The Adjusted analysis excludes certain income
and expenses recorded under GAAP. The supplemental disclosures are intended to assist readers in understanding our performance without the
adjustments. The adjustments are described in detail and are reconciled to our GAAP results on pages 39-40. The adjustments relate to:
•
•
•
•
translating our Venezuelan results at a different rate of exchange,
currency exchange transaction losses on the repatriation of Venezuelan dividends,
a gain recognized upon acquiring a controlling interest in an operation in India, and
a release of a U.S. deferred tax asset valuation allowance.
23
Revenues
GAAP
2009 versus 2008
Revenues in 2009 were lower than 2008.
Adjusted
2009 versus 2008
Revenues in 2009 were lower than 2008.
Revenues in 2009 decreased 1% primarily due to unfavorable
changes in currency exchange rates ($146 million), mostly offset
by the net positive effect of businesses acquired in 2009, net of
dispositions ($97 million) and organic growth (see page 21 for our
definition of “organic”).
Revenues in 2009 decreased 3% primarily due to unfavorable
changes in currency exchange rates ($194 million), partially offset
by the net positive effect of businesses acquired and disposed in
2009 ($97 million).
Revenues increased 1% on an organic basis due mainly to higher
average selling prices (including the effects of inflation in several
Latin American countries), mostly offset by lower volumes in
Global Services operations and the loss of guarding contracts in
France.
Revenues remained flat on an organic basis compared to 2008.
Higher average selling prices (including the effects of inflation in
several Latin American countries), were mostly offset by lower
volumes in Global Services operations and the loss of guarding
contracts in France.
2008 versus 2007
Revenues in 2008 were higher than 2007.
2008 versus 2007
Revenues in 2008 were higher than 2007.
• Our revenues increased 16% in 2008 compared to 2007
mainly due to higher volumes, including $51 million in
incremental revenues from the conversion project in
Venezuela.
Favorable changes in currency exchange rates increased
revenues by 4% ($98 million) in 2008 over 2007.
•
• Our revenues increased 14% in 2008 compared to 2007
mainly due to higher volumes, including $25 million in
incremental revenues from the conversion project in
Venezuela.
Favorable changes in currency exchange rates increased
our revenues by 4% ($107 million) in 2008 over 2007.
•
Operating Profit
GAAP
2009 versus 2008
Operating profit decreased 27% due mainly to
•
•
•
•
the inclusion in 2008 results of profits from the
monetary conversion project in Venezuela that was
completed in 2008,
a $12 million increase in restructuring and severance
costs, primarily in Europe,
$6 million in accounting corrections in Belgium, and
higher non-segment expenses.
Adjusted
2009 versus 2008
Operating profit decreased 24% mainly due to
•
•
•
the inclusion in 2008 results of profits from the
monetary conversion project in Venezuela that was
completed in 2008,
a $12 million increase in restructuring and severance
costs, primarily in Europe, and
$6 million in accounting corrections in Belgium,
partially offset by lower non-segment expenses.
2008 versus 2007
Operating profit increased 42% due mainly to significant
operating profit from the conversion project in 2008 and lower
non-segment expenses, partially offset by lower results from our
North America segment.
2008 versus 2007
Operating profit increased 34% due mainly to lower non-segment
expenses and significant operating profit from the conversion
project in 2008, partially offset by lower results from our North
America segment.
24
Income from continuing operations and Net income, and related per share amounts
(attributable to Brink’s)
GAAP
2009 versus 2008
Income from continuing operations and net income (and related
per share amounts) was higher in 2009 compared to 2008
primarily as a result of a release of a deferred tax valuation
allowance, as more fully described on page 52, partially offset by
lower operating profits.
Adjusted
2009 versus 2008
Income from continuing operations and net income (and related
per share amounts) was lower in 2009 compared to 2008 primarily
as a result of lower operating profits.
2008 versus 2007
Income from continuing operations and net income (and related
per share amounts) was higher in 2008 compared to 2007
primarily as a result of a higher operating profits and a lower
effective income tax rate.
2008 versus 2007
Income from continuing operations and net income (and related
per share amounts) was higher in 2008 compared to 2007
primarily as a result of a higher operating profits and a lower
effective income tax rate.
25
Segment Operating Results
GAAP
(In millions)
Revenues:
EMEA
Latin America
Asia Pacific
International
North America
Revenues
Operating profit:
International
North America
Segment operating profit
Segment operating margin:
International
North America
Segment operating margin
Adjusted (b)
(In millions)
Revenues:
EMEA
Latin America
Asia Pacific
International
North America
Revenues
Operating profit:
International
North America
Segment operating profit
$
$
$
$
$
$
$
$
Segment Review
2009 versus 2008
Years Ended
December 31,
Percentage
Change
2008
Organic
Change
Acquisitions /
Dispositions
Currency
Change (a)
2009
Total
Organic
1,358.9
800.6
71.8
2,231.3
932.2
3,163.5
215.0
56.9
271.9
9.6%
6.1%
8.6%
(21.8)
74.7
(3.5)
49.4
(28.3)
21.1
(59.5)
-
(59.5)
3.3
80.4
11.6
95.3
1.5
96.8
8.8
0.1
8.9
(82.9)
(51.0)
(1.2)
(135.1)
(11.3)
(146.4)
1,257.5
904.7
78.7
2,240.9
894.1
3,135.0
(7.5)
(0.4)
(7.9)
156.8
56.6
213.4
(7)
13
10
-
(4)
(1)
(27)
(1)
(22)
(2)
9
(5)
2
(3)
1
(28)
-
(22)
7.0%
6.3%
6.8%
Years Ended
December 31,
Percentage
Change
2008
Organic
Change
Acquisitions /
Dispositions
Currency
Change (a)
2009
Total
Organic
1,358.9
627.2
71.8
2,057.9
932.2
2,990.1
166.2
56.9
223.1
(21.8)
57.7
(3.5)
32.4
(28.3)
4.1
(45.5)
-
(45.5)
3.3
80.4
11.6
95.3
1.5
96.8
8.8
0.1
8.9
(82.9)
(98.5)
(1.2)
(182.6)
(11.3)
(193.9)
(11.2)
(0.4)
(11.6)
(7)
6
10
(3)
(4)
(3)
(29)
(1)
(22)
(2)
9
(5)
2
(3)
-
(27)
-
(20)
1,257.5
666.8
78.7
2,003.0
894.1
2,897.1
118.3
56.6
174.9
5.9%
6.3%
6.0%
Segment operating margin:
International
North America
Segment operating margin
8.1%
6.1%
7.5%
(a) The “Currency Change” amount in the table is the summation of the monthly currency changes. The monthly currency change is equal to the Revenue or
Operating Profit for the month in local currency, on a country-by-country basis, multiplied by the difference in rates used to translate the current period
amounts to U.S. dollars versus the translation rates used in the year-ago month.
(b) Adjusted financial information is contained on pages 39 - 40, including reconciliation to amounts reported under generally accepted accounting principles
in the United States (“GAAP”). Adjustments relate to the exchange rate used to translate operating results in Venezuela and transaction losses on
repatriated cash, an exclusion of an acquisition-related gain, and exclusion of a release of a U.S. tax valuation allowance.
26
Total Segment Operating Profit
Segment Review
2009 versus 2008
GAAP
Segment operating profit decreased 22% in total and on an organic
basis due mainly to
Adjusted
Segment operating profit decreased 22%, and 20% on an organic
basis, mainly due to
•
•
•
the inclusion in 2008 results of profits from the
monetary conversion project in Venezuela that was
completed in 2008,
a $12 million increase in restructuring and severance
costs, primarily in Europe, and
$6 million in accounting corrections in Belgium.
•
•
•
the inclusion in 2008 results of profits from the
monetary conversion project in Venezuela that was
completed in 2008,
a $12 million increase in restructuring and severance
costs, primarily in Europe, and
$6 million in accounting corrections in Belgium.
International Segment
Total International
GAAP
Revenues in 2009 for our international segment were even with
2008 as
•
•
•
revenues in EMEA were 7% lower,
revenues in Latin America were 13% higher, and
revenues in Asia Pacific were 10% higher.
Adjusted
Revenues in 2009 for our international segment were 3% lower than
2008 as
•
•
•
revenues in EMEA were 7% lower,
revenues in Latin America were 6% higher, and
revenues in Asia Pacific were 10% higher.
Operating profit in our international segment was 27% lower than
2008 as we earned lower profits in EMEA and Latin America.
Operating profit in our international segment was 29% lower than
2008 as we earned lower profits in EMEA and Latin America.
Adjusted
The analysis of Adjusted results is the same as the analysis of our
GAAP results.
EMEA
GAAP
EMEA revenues were down 7% due mainly to
•
•
•
unfavorable currency impact ($83 million),
a loss of guarding contracts in France ($34 million), and
a sale of certain guarding operations in France
($5 million).
EMEA revenues were down 2% on an organic basis due to
•
•
the loss of guarding contracts in France ($34 million), and
continued pricing and volume pressure throughout region.
EMEA operating profit was down 65% due primarily to
•
higher severance costs (up $10 million) related to contract
losses and turnaround efforts,
•
accounting corrections in Belgium ($6 million), and
• Global Services being down across the region on weak
diamond and jewelry demand.
27
Latin America
GAAP
Revenue in Latin America increased 13% on
•
•
•
higher CIT volume,
inflation-based price increases, and
an acquisition in Brazil ($74 million).
Adjusted
Revenue in Latin America increased 6% on
•
•
•
higher CIT volume,
inflation-based price increases, and
an acquisition in Brazil ($74 million).
Revenue increased 9% on an organic basis on higher CIT volume
throughout the region including inflation-based price increases.
Revenue increased 9% on an organic basis on higher CIT volume
throughout the region including inflation-based price increases.
Operating profit decreased 13% as 2008 included results from
highly profitable monetary conversion project in Venezuela, and
higher foreign currency transaction losses in Venezuela ($8 million)
were partially offset by profit increased as a result of the Brazil
acquisition ($10 million).
Asia-Pacific
GAAP
Revenue in Asia Pacific increased 10% due mainly to third-quarter
acquisitions in India ($8 million) and China ($4 million).
Revenues on an organic basis and our operating profit were down
due to lower diamond and jewelry demand.
North American Segment
GAAP
Revenues in North America were down 4% on lower volume in CIT
and Global Services, partially offset by higher selling prices.
Operating profit in North America was flat with 2009 with revenue
declines offset by cost reductions.
Operating profit decreased 9% as 2008 included results from highly
profitable monetary conversion project in Venezuela, partially offset
by profit increased as a result of the Brazil acquisition ($10 million).
Adjusted
The analysis of Adjusted results is the same as the analysis of our
GAAP results.
Adjusted
The analysis of Adjusted results is the same as the analysis of our
GAAP results.
Outlook for 2010
We expect 2010 organic revenue growth to be in the low-to-mid single-digit percentage range from our $2.9 billion of 2009 Adjusted revenue,
and a segment operating profit margin to be between 7.0% and 7.5%. See page 38 for a summary of our 2010 Outlook.
28
GAAP
(In millions)
Revenues:
EMEA
Latin America
Asia Pacific
International
North America
$
1,191.5
594.2
62.6
1,848.3
886.3
Revenues
$
2,734.6
Operating profit:
International
North America
Segment operating profit
$
$
152.9
70.4
223.3
Segment operating margin:
International
North America
Segment operating margin
8.3%
7.9%
8.2%
Adjusted (b)
(In millions)
Revenues:
EMEA
Latin America
Asia Pacific
International
North America
Revenues
Operating profit:
International
North America
Segment operating profit
Segment operating margin:
International
North America
Segment operating margin
$
$
$
$
2007
1,191.5
475.1
62.6
1,729.2
886.3
2,615.5
125.7
70.4
196.1
7.3%
7.9%
7.5%
Segment Review
2008 versus 2007
Years Ended
December 31,
Percentage
Change
2007
Organic
Change
Acquisitions /
Dispositions
Currency
Change (a)
2008
As Reported Organic
78.4
186.4
8.0
272.8
40.5
313.3
57.2
(13.9)
43.3
11.7
1.0
-
12.7
4.6
17.3
0.8
0.3
1.1
77.3
19.0
1.2
97.5
0.8
98.3
4.1
0.1
4.2
14
35
15
21
5
16
41
(19)
22
7
31
13
15
5
11
37
(20)
19
1,358.9
800.6
71.8
2,231.3
932.2
3,163.5
215.0
56.9
271.9
9.6%
6.1%
8.6%
Years Ended
December 31,
Percentage
Change
Organic
Change
Acquisitions
Dispositions
Currency
Change (a)
2008
Total
Organic
78.4
123.0
8.0
209.4
40.5
249.9
35.7
(13.9)
21.8
11.7
1.0
-
12.7
4.6
17.3
0.8
0.3
1.1
77.3
28.1
1.2
106.6
0.8
107.4
4.0
0.1
4.1
14
32
15
19
5
14
32
(19)
14
7
26
13
12
5
10
28
(20)
11
1,358.9
627.2
71.8
2,057.9
932.2
2,990.1
166.2
56.9
223.1
8.1%
6.1%
7.5%
(a) The “Currency Change” amount in the table is the summation of the monthly currency changes. The monthly currency change is equal to the Revenue or
Operating Profit for the month in local currency, on a country-by-country basis, multiplied by the difference in rates used to translate the current period
amounts to U.S. dollars versus the translation rates used in the year-ago month.
(b) Adjusted financial information is contained on pages 39 - 40, including reconciliation to amounts reported under generally accepted accounting principles
in the United States (“GAAP”). Adjustments relate to the exchange rate used to translate operating results in Venezuela and transaction losses on
repatriated cash, an exclusion of an acquisition-related gain, and exclusion of a release of a U.S. tax valuation allowance.
29
Segment Review
2008 versus 2007
Total Segment Operating Profit
GAAP
Segment operating profit increased 19% on an organic basis due
mainly to significant operating profit from the conversion project in
Venezuela in the first half of 2008, partially offset by lower results
from our North America segment.
Adjusted
Segment operating profit increased 11% on an organic basis due
mainly to significant operating profit from the conversion project in
Venezuela in the first half of 2008, partially offset by lower results
from our North America segment.
International Segment
Total International
GAAP
Revenues in 2008 for our international segment increased 21% from
2007 as
•
•
•
revenues in EMEA were 14% higher,
revenues in Latin America were 35% higher, and
revenues in Asia Pacific were 15% higher.
Adjusted
Revenues in 2008 for our international segment increased 19% from
2007 as
•
•
•
revenues in EMEA were 14% higher,
revenues in Latin America were 32% higher, and
revenues in Asia Pacific were 15% higher.
Operating profit in our international segment was 41% higher than
in 2007 as we earned higher profits in EMEA and Latin America.
Operating profit in our international segment was 32% higher than
in 2007 as we earned higher profits in EMEA and Latin America.
Adjusted
The analysis of Adjusted results is the same as the analysis of our
GAAP results.
EMEA
GAAP
EMEA revenues were up 14% due mainly to
•
•
favorable currency impact ($77 million), and
organic revenue growth of 7%.
EMEA operating profit increased 6% due primarily to
•
•
•
•
favorable changes in currency exchange rates,
improved operating results in some countries despite
higher labor costs and the overall economic slowdown
caused by the global financial crisis,
strong performance of Global Services, and
lower security costs,
partially offset by
•
•
decreased volumes and
recessionary and competitive pricing pressures.
30
Latin America
GAAP
Revenue in Latin America increased 35% on
Adjusted
Revenue in Latin America increased 32% on
•
•
•
higher volumes across the region (including significant
volumes from the conversion project),
normal inflationary price increases, and
favorable changes in currency exchange rates.
•
•
•
higher volumes across the region (including significant
volumes from the conversion project),
normal inflationary price increases, and
favorable changes in currency exchange rates.
Revenue increased 31% on an organic basis on higher CIT volume
throughout region including the conversion project and inflation-
based price increases.
Revenue increased 26% on an organic basis on higher CIT volume
throughout region including the conversion project and inflation-
based price increases.
Operating profit increased 64% primarily due to the highly
profitable monetary conversion project in Venezuela, and solid
improvement in Brazil and Argentina.
Operating profit increased 57% primarily due to the highly
profitable monetary conversion project in Venezuela, and solid
improvement in Brazil and Argentina.
Asia-Pacific
GAAP
Revenues in Asia Pacific increased 15% and operating profit
improved 8% due to higher diamond and jewelry demand.
Adjusted
The analysis of Adjusted results is the same as the analysis of our
GAAP results.
North American Segment
GAAP
Revenues in North America increased 5% on higher CIT service
volumes. Operating profit in North America decreased 19% due to
Adjusted
The analysis of Adjusted results is the same as the analysis of our
GAAP results.
•
higher spending on labor, fuel, selling, general and
administrative expenses and employment-related legal
settlement expenses,
partially offset by
•
•
lower expense related to U.S. retirement plans and
a gain related to reductions in retirement benefit
obligations in Canada.
31
Non-segment Income (Expense) (a)
(In millions)
Corporate and former operations:
General and administrative
Strategic reviews and proxy matters
Retirement costs (primarily former operations)
Subtotal
Other amounts not allocated to segments:
Currency exchange transaction gains (losses)
Gains on acquiring control of equity method affiliates
Gains on sale of property and other assets
Royalty income:
Brand licensing fees from BHS
Other
Subtotal
2009
GAAP
2009
Adjusted
2008
GAAP and Adjusted
2007
GAAP and Adjusted
$
(38.1)
-
(19.3)
(57.4)
(22.3)
14.9
9.6
(b)
(c)
6.8
1.8
10.8
(38.1)
-
(19.3)
(57.4)
0.2
1.0
9.6
6.8
1.8
19.4
(48.8)
(4.8)
2.7
(50.9)
(8.4)
-
13.1
1.1
1.7
7.5
(43.4)
(49.7)
(3.6)
(11.2)
(64.5)
0.5
-
0.4
-
1.3
2.2
(62.3)
Non-segment income (expense)
(a)
(b)
(c) Relates primarily to acquisition of controlling interest of a CIT operation in India in the third quarter of 2009.
Includes corporate, former operations and other amounts not allocated to segment results.
Includes $22.5 million in the fourth quarter of 2009 related to Venezuela repatriation of dividends at the parallel rate.
(38.0)
(46.6)
$
2009 versus 2008
GAAP
Non-segment expenses were $3 million higher, mainly due to
higher retirement expenses ($22 million);
higher foreign exchange losses ($14 million), including
a $23 million repatriation charge;
lower gains on asset sales ($4 million);
•
•
•
mostly offset by
•
•
•
•
lower general and administrative expense ($11 million),
including lower bonus accruals ($6 million);
a gain on an acquisition in India ($14 million);
higher royalty income ($6 million); and
lower costs for strategic reviews and proxy matters ($5
million).
Adjusted
Non-segment expenses were $5 million lower, mainly due to
•
lower general and administrative expense ($11 million),
including lower bonus accruals ($6 million);
lower foreign exchange losses ($9 million);
higher royalty income ($6 million); and
lower costs for strategic reviews and proxy matters ($5
million)
partially offset by
•
•
•
•
•
higher retirement expenses ($22 million); and
lower gains on asset sales ($4 million).
Outlook for 2010
We believe that non-segment expenses will be approximately $56 million in 2010, or $9 million higher than 2009 primarily as a result of lower
royalty income ($4 million) and higher general and administrative expenses ($3 million). See page 38 for a summary of our 2010 Outlook.
Adjusted
The analysis of Adjusted non-segment expenses is the same as the
analysis of our GAAP non-segment expenses.
2008 versus 2007
GAAP
Non-segment expenses decreased 30% in 2008 from 2007 mainly
due to
•
•
lower retirement plan costs of $14 million and
higher gains on the sale of certain assets of our former
coal operations (up $13 million),
partially offset by
•
higher foreign currency transaction losses ($9 million).
The foreign currency losses primarily related to the
remeasurement of foreign currency-denominated intercompany
dividends.
32
Other Operating Income (Expense)
Other operating income (expense) includes segment and non-segment other operating income and expense.
(In millions)
Foreign currency transaction losses
Gain on acquiring control of an equity method affiliate
Gains on sales of property and other assets
Royalty income
Share in earnings of equity affiliates
Impairment losses
Other
Other operating income (expense)
Years Ended December 31,
2008
2009
2007
$
$
(41.4)
14.9
9.4
8.6
4.5
(2.7)
3.2
(3.5)
(18.1)
-
13.1
2.8
5.0
(1.9)
3.7
4.6
(9.5)
-
4.6
1.3
3.3
(2.5)
3.9
1.1
% change
2009
129
NM
(28)
200+
(10)
42
(14)
NM
2008
91
-
185
115
52
(24)
(5)
200+
2009 versus 2008
Other operating income (expense) was worse in 2009 primarily as a result of
•
•
higher foreign currency transaction losses, including the $23 million loss from repatriating 76 million bolivar fuertes held in
Venezuela at the parallel exchange rate;
lower gains on asset sales of $4 million;
partially offset by
•
•
gains that total $15 million primarily related to the acquisition of a controlling interest in India; and
royalty income from the licensing agreement with BHS was $6 million higher.
2008 versus 2007
Other operating income was better in 2008 compared to 2007 primarily as a result of
•
•
•
gains on sales of property and other assets, including a sale of coal assets to Massey Energy Company in 2008, that were in total $9
million higher;
royalty income mainly attributable to royalties from BHS was $2 million higher;
equity earnings were $2 million higher;
partially offset by
•
higher foreign currency transaction losses of $9 million in 2008, primarily related to the remeasurement of foreign currency-
denominated intercompany dividends.
33
Nonoperating Income and Expense
Interest Expense
(In millions)
Interest expense
Years Ended December 31,
2008
2009
2007
% change
2009
$
11.3
12.0
10.8
(6)
2008
11
Interest expense in 2009 decreased mainly due to lower average interest rates. Interest expense in 2008 was higher than in 2007 due to higher
average debt levels.
Interest and Other Income
(In millions)
Years Ended December 31,
2008
2009
2007
% change
2009
2008
Interest income
Other-than-temporary impairment of marketable securities
Other, net
Total
$
$
10.8
-
-
10.8
15.0
(7.1)
0.2
8.1
8.7
-
1.8
10.5
(28)
(100)
(100)
33
72
NM
(89)
(23)
In 2009, interest income decreased due to lower interest rates and lower average levels of cash and cash equivalents in certain countries. Our
results in 2008 included a $7.1 million other-than-temporary impairment loss on marketable securities.
Interest income was higher in 2008 than in 2007 primarily due to higher average levels of cash and cash equivalents.
34
Income Taxes
Summary Rate Reconciliation – GAAP
(In percentages)
U.S. federal tax rate
Increases (reductions) in taxes due to:
Adjustments to valuation allowances
Nondeductible repatriation charge
Nontaxable gain on India acquisition
Other
Income tax rate on continuing operations
Summary Rate Reconciliation – Adjusted (a)
(In percentages)
U.S. federal tax rate
Increases (reductions) in taxes due to:
Adjustments to valuation allowances
Other
Income tax rate on Adjusted continuing operations
(a) See pages 39-40 for a reconciliation of Adjusted results to GAAP.
2009
35.0%
(68.2)
4.7
(2.9)
(5.3)
(36.7%)
2009
35.0%
3.4
(1.7)
36.7%
Years Ended December 31,
2008
35.0 %
(6.1)
-
-
(5.3)
23.6 %
Years Ended December 31,
2008
35.0 %
(7.8)
(2.4)
24.8%
2007
35.0 %
4.0
-
-
(2.0)
37.0 %
2007
35.0 %
4.9
0.1
40.0 %
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
the nondeductible Venezuela repatriation charge
the nontaxable acquisition gains
timing of benefit recognition for uncertain tax positions
state income taxes
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.
Outlook
The effective income tax rate for 2010 is expected to be between 36% and 39%. This higher forecasted range reflects the designation of
Venezuela as highly inflationary for accounting purposes, effective January 1, 2010. This designation precludes the recognition of deferred tax
benefits that result from inflationary indexing of assets and liabilities. The higher forecasted 2010 rate is also due to the characterization of a
French business tax as an income tax based upon legislative changes, also effective January 1, 2010. Our effective tax rate may fluctuate
materially from these estimates due to changes in forecasted permanent book-tax differences, the expected geographical mix of earnings,
changes in valuation allowances or accruals for contingencies and other factors.
Continuing Operations
2009 Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in 2009 was lower than the 35% U.S. statutory tax rate due to $117.8 million in lower
tax expense primarily resulting from the reversal of a U.S. valuation allowance, $4.9 million in lower taxes due to the nontaxable India gain,
partially offset by $7.9 million in higher taxes due to the nondeductible Venezuela repatriation charge. (See Application of Critical Accounting
Policies—Deferred Tax Asset Valuation Allowance on page 52 for an explanation of a description of our accounting policy, assumptions used
and a sensitivity analysis).
35
2008 Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in 2008 was lower than the 35% U.S. statutory tax rate due to a net $13.6 million
decrease in our valuation allowance position in U.S. and non-U.S. jurisdictions as a result of our assessment of historical and future taxable
income in these jurisdictions. In addition, there was a $13.0 million decrease in the non-U.S. tax provision, primarily due to the geographical
mix of earnings in the foreign jurisdictions.
2007 Compared to U.S. Statutory Rate
The effective income tax rate on continuing operations in 2007 was higher than the 35% U.S. statutory tax rate primarily due to a $6.5 million
increase related to a net increase in the valuation allowance for non-U.S. deferred tax assets partly offset by a $2.3 million decrease in the
foreign tax provision primarily due to the geographical mix of earnings in the foreign jurisdictions.
Other
As of December 31, 2009, we have not recorded U.S. federal deferred income taxes on approximately $403 million of undistributed earnings of
foreign subsidiaries and equity affiliates in accordance with Accounting Principles Board Opinion 23, Accounting for Income Taxes – Special
Areas, as amended, which is now part of FASB ASC Topic 740, Income Taxes. We expect that these earnings will be permanently reinvested
in operations outside the U.S. It is not practical to compute the estimated deferred tax liability on these earnings.
Noncontrolling Interests
(In millions)
2009
Net income attributable to noncontrolling interests
$
31.7
Years Ended December 31,
2008
39.8
2007
22.8
% change
2009
2008
(20)
75
The decrease in net income attributable to noncontrolling interests in 2009 was primarily due to a decrease in the earnings of our Venezuelan
operations driven mainly by the absence of the 2008 profitable currency conversion project.
36
Income from Discontinued Operations
(In millions)
BHS:
2009
Years Ended December 31,
2008
Income from operations before tax (a)
Expense associated with the spin-off
$
United Kingdom domestic cash handling operations:
Gain on sale
Loss from operations before tax (b)
-
-
-
-
Adjustments to contingencies of former operations:
19.7
Gain from FBLET refunds (see note 21)
(13.2)
BAX Global indemnification (see note 21)
0.3
Other
6.8
Income from discontinued operations before income taxes
2.3
Provision for income taxes
Income from discontinued operations
4.5
(a) Revenues of BHS were $442.4 million in 2008 (partial year) and $484.4 million in 2007.
(b) Revenues of the United Kingdom domestic cash handling operations were $28.9 million in 2007 (partial year).
$
105.4
(13.0)
-
-
-
-
4.9
97.3
45.8
51.5
2007
112.9
-
1.5
(13.9)
-
-
(0.1)
100.4
41.5
58.9
BHS Spin-off
On October 31, 2008, we completed the 100% spin-off of BHS, our former monitored security business in North America. The spin-off of
BHS was in the form of a tax-free stock distribution to our shareholders of record as of the close of business on October 21, 2008. We
distributed one share of BHS common stock for every share of our common stock outstanding. We contributed $50 million in cash to BHS at
the time of the spin-off. We also forgave all the existing intercompany debt owed by BHS to us as of the distribution date. After the spin-off,
we reclassified BHS’ results of operations, including previously reported results and non-segment expenses directly related to the spin-off,
within discontinued operations.
United Kingdom Domestic Cash Handling Operations
During 2007, we sold Brink’s United Kingdom domestic cash handling operations for $2.2 million in cash and recognized a $1.5 million gain
on the sale. These operations recorded a $7.5 million impairment charge in 2007, primarily related to writing down leasehold improvements
and vehicles to estimated fair value due to the loss of customers. These operations have been reported as discontinued operations for all periods
presented.
Interest Expense
Interest expense included in discontinued operations was $0.3 million in 2008 and $0.6 million in 2007. Interest expense recorded in
discontinued operations includes only interest on third-party borrowings made directly by BHS and Brink’s United Kingdom domestic cash
handling operations.
Adjustments to Contingent Assets and Liabilities of Former Operations
Adjustments to contingent assets and liabilities related to former operations, including those related to reclamation matters, worker’s
compensation claims, and remaining legal contingencies are reported within discontinued operations.
37
Summary of Selected Results and Outlook
Below is a schedule to assist readers in locating the various estimates we have made about our future results. For each estimate, there is a
reference to another page in this document that contains a more detailed description of our expectation for the future.
(In millions)
Revenues :
GAAP
Adjusted
Organic Revenue Growth:
GAAP
Adjusted
Segment Operating Profit:
GAAP
Adjusted
Segment Operating Margin:
GAAP
Adjusted
Non-Segment – GAAP:
General and administrative
Retirement plans
Royalty income
Other
Non-Segment – GAAP
Effective income tax rate:
GAAP
Adjusted
Net income attributable to
noncontrolling interests:
GAAP
Adjusted
Capital expenditures
Depreciation and amortization
$
$
$
$
$
$
$
2007
Actual
2008
Actual
2,735
2,616
*
*
223
196
8.2%
7.5%
50
11
(1)
2
62
37%
40%
23
15
142
110
3,164
2,990
11%
10%
272
223
8.6%
7.5%
49
(3)
(3)
-
43
24%
25%
40
24
165
122
2009
Actual
3,135
2,897
1%
-
213
175
2010
Outlook
*
*
Reference
*
Low-to-mid single-digit
%
Page 28
*
*
6.8%
6.0%
7% - 7.5%
7% - 7.5%
Page 28
38
19
(9)
(1)
47
41
20
(5)
-
56
(37%)
37%
36% - 39%**
36% - 39%**
32
19
171
135
*
*
180 - 200
145 - 155
Page 32
Page 35
Page 43
Page 43
* Information not provided.
** The tax rate is expected to be higher in 2010 partially due to accounting for Venezuelan subsidiaries as operating in a highly inflationary
economy and due to the characterization of a French business tax as an income tax based upon legislative changes, both effective January 1,
2010. Also, the projected tax rates assume no change in judgment about deferred tax valuation allowances.
38
Adjusted Results – Reconciled to Amounts Reported under GAAP
Purpose of Adjusted Information
Adjusted results described in this filing are financial measures that are not required by, or presented in accordance with, U.S. generally
accepted accounting principles (“GAAP”). These adjusted results
a)
b)
c)
d)
reflect the impact of reporting results from Venezuela at the less favorable parallel market exchange rate,
exclude transaction losses on repatriated cash from Venezuela,
exclude an acquisition gain in India, and
exclude the tax valuation allowance release.
The purpose of the adjusted information is to provide users of financial information of The Brink’s Company an understanding of the effects of
each of the items described above. The adjusted 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, provide transparency to investors, and enable
period-to-period comparability of financial performance. Adjusted 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.
Explanation of Reconciling Items
The adjustments:
a.
Change from official rate to parallel rate translation in Venezuela
i. Reduce segment operating income - International to reflect the operating results had they been translated using the
parallel rate in effect at the time. Results from Venezuela in 2007, 2008 and most of 2009 were translated at the official
rate.
(In millions)
Years Ended December 31,
2008
2009
2007
Revenues
Operating profit
$
(237.9)
(43.0)
(173.4)
(48.8)
(119.1)
(27.2)
ii.
Increase segment operating income – International by $4.5 million in 2009. The adjustment reverses certain currency
exchange losses related to increases in cash held in U.S. dollars by the Venezuelan subsidiaries.
b. Venezuela currency loss. Decrease non-segment expense by $22.5 million for the loss that was recognized in 2009 related
to the repatriation of cash from Venezuela.
c. Acquisition gain. Decrease other operating income – non-segment by $13.9 million for the gain recorded in 2009 related
to an acquisition of a controlling interest in an Indian subsidiary.
d. Tax benefit. Decrease income tax benefit by $117.8 million in 2009 for the release of a valuation allowance related to
deferred tax assets in the U.S.
39
Adjusted Results – Reconciled to Amounts Reported Under GAAP (Continued)
(In millions) (except for per share amounts)
Revenues:
EMEA
Latin America
Asia Pacific
International
North America
Revenues
Operating profit:
International
North America
Segment operating profit
Non-segment
Operating profit
Income from continuing operations
Net income attributable to Brink’s
Amounts attributable to Brink’s:
Income from continuing operations
Diluted earnings per share – continuing operations
(In millions) (except for per share amounts)
Revenues:
EMEA
Latin America
Asia Pacific
International
North America
Revenues
Operating profit:
International
North America
Segment operating profit
Non-segment
Operating profit
Income from continuing operations
Net income attributable to Brink’s
Amounts attributable to Brink’s:
Income from continuing operations
Diluted earnings per share – continuing operations
See page 39 for explanation of footnotes.
2009
Reported
GAAP
Basis
Change to
Parallel
Rate (a)
Venezuela
Currency
Loss (b)
India
Acquisition
Gain (c)
Tax Benefit
(d)
Adjusted
Basis
$
1,257.5
904.7
78.7
2,240.9
894.1
3,135.0
156.8
56.6
213.4
(46.6)
166.8
227.4
200.2
-
(237.9)
-
(237.9)
-
(237.9)
(38.5)
-
(38.5)
-
(38.5)
(33.5)
(20.5)
-
-
-
-
-
-
-
-
-
22.5
22.5
22.5
22.5
-
-
-
-
-
-
-
-
-
(13.9)
(13.9)
-
-
-
-
-
-
-
-
-
-
-
(13.9)
(117.8)
(13.9)
(117.8)
1,257.5
666.8
78.7
2,003.0
894.1
2,897.1
118.3
56.6
174.9
(38.0)
136.9
84.7
70.5
195.7
4.11
(20.5)
(0.42)
22.5
0.47
(13.9)
(117.8)
(0.29)
(2.48)
66.0
1.39
$
$
$
$
$
$
Reported
GAAP
Basis
1,191.5
594.2
62.6
1,848.3
886.3
2,734.6
152.9
70.4
223.3
(62.3)
161.0
101.2
137.3
78.4
1.67
2007
Change to
Parallel
Rate (a)
-
(119.1)
-
(119.1)
-
(119.1)
(27.2)
-
(27.2)
-
(27.2)
(20.4)
(12.4)
(12.4)
(0.27)
Adjusted
Basis
1,191.5
475.1
62.6
1,729.2
886.3
2,615.5
125.7
70.4
196.1
(62.3)
133.8
80.8
124.9
66.0
1.40
2008
Reported
GAAP
Basis
Change to
Parallel
Rate (a)
Adjusted
Basis
1,358.9
627.2
71.8
2,057.9
932.2
2,990.1
166.2
56.9
223.1
(43.4)
179.7
130.5
158.2
106.7
2.29
-
(173.4)
-
(173.4)
-
(173.4)
(48.8)
-
(48.8)
-
(48.8)
(41.1)
(25.1)
$
1,358.9
800.6
71.8
2,231.3
932.2
$
3,163.5
215.0
56.9
271.9
(43.4)
228.5
171.6
183.3
$
$
$
$
$
131.8
2.82
(25.1)
(0.53)
40
Foreign Operations
We operate in more than 50 countries outside the U.S.
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 cannot be predicted.
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. Brink’s Venezuela is 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 page 59 for a description of our accounting methods and assumptions used to include
our Venezuelan operation 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 63. At December 31, 2009, no material foreign currency forward contracts were outstanding.
41
LIQUIDITY AND CAPITAL RESOURCES
Overview
Over the last three years, we have used cash generated from our continuing operations to
•
invest in the infrastructure of our business (new facilities, cash sorting and other equipment for our cash logistics operations,
armored trucks, CompuSafe® units, and customer-facing and back-office information technology) ($478 million),
• make voluntarily contributions to our primary U.S. pension plan ($105 million, including $92 million in 2009),
•
•
•
acquire businesses ($100 million including $75 million in BRIC (Brazil, Russia, India and China) countries in 2009),
repurchase shares of our stock ($66 million), and
pay dividends ($53 million).
In addition, we contributed $50 million to our home security business prior to the spin off of the business to our shareholders in 2008. During
the last three years, our net debt only increased $20 million primarily as a result of $794 million of cash provided by operations before
contributions to our U.S. pension plans.
Outlook
• We continue to consider acquisition opportunities in the secure transportation and cash logistics industry (our Organic Growth
Strategy) and in other security markets (our Adjacent Growth Strategy). We may use our cash from operations and borrowings
to fund the purchase of these acquisitions.
• We may be required to contribute cash to our U.S. pension plans in the future, and the amount of contributions may exceed the
amount of cash provided by our U.S. subsidiaries. We may choose to borrow cash in the U.S. rather than pay incremental taxes
to use cash held by certain of our international operations to fund these obligations.
• We began translating cash flows from our Venezuelan operations at the parallel rate rather than the official rate. As a result, our
cash flow amounts reported for these operations will be lower than the past, and our consolidated statements of cash flows in the
future will include smaller amounts related to these operations, which will affect the comparability of these statements in the
future.
Summary Cash Flow Information
(In millions)
Cash flows from operating activities
Continuing operations:
Before contributions to U.S. pension plan
Contributions to primary U.S. pension plan
Subtotal
Discontinued operations
Operating activities
Cash flows from investing activities
Capital expenditures
Acquisitions
Cash held by BHS at the spin-off date
Other
Discontinued operations
Investing activities
Years Ended December 31,
2008
2007
2009
$ change
2009
2008
$
264.1
(92.4)
171.7
23.5
195.2
(170.6)
(74.6)
-
4.1
-
(241.1)
254.4
-
254.4
172.7
427.1
(165.3)
(11.7)
(50.0)
17.9
(150.8)
(359.9)
275.0
(13.0)
262.0
191.7
453.7
(141.8)
(13.4)
-
13.2
(175.5)
(317.5)
$
9.7
(92.4)
(82.7)
(149.2)
(231.9)
(5.3)
(62.9)
50.0
(13.8)
150.8
118.8
(20.6)
13.0
(7.6)
(19.0)
(26.6)
(23.5)
1.7
(50.0)
4.7
24.7
(42.4)
(69.0)
Cash flows before financing activities
$
(45.9)
67.2
136.2
$
(113.1)
42
Operating Activities
Operating cash flows decreased by $231.9 million in 2009 as cash flows from both our continuing and discontinued operations were lower
compared to 2008. The decrease in operating cash flows from continuing operations was mainly due to the third-quarter 2009 contribution to
our primary U.S. pension plan, of which $92.4 million was made in cash. While not affecting our cash flow, we also contributed $57.6 million
in Brink’s stock to our pension, for a total contribution of $150 million to the plan. The pension contribution cash outflow was partially offset
by $43 million in income tax refunds, much of which were primarily the result of tax deductions associated with the cash and stock
contribution to the pension plan. Lower operating profit in 2009 also had a negative effect on cash flows from operations although we used
less cash for working capital needs.
The decrease in operating cash flows related to discontinued operations was primarily due to BHS’ cash flows in 2008 exceeding FBLET cash
refunds, the primary source of operating cash flows from discontinued operations in 2009.
Our operating cash flows decreased by $26.6 million in 2008 compared to 2007, primarily as a result of $22.8 million less cash provided by our
discontinued BHS operation, which only had ten months of operations in 2008, as well as expenses for professional and legal fees to spin off
the operation. In addition, our continuing operations (before voluntary contributions to our U.S. pension plan) provided $20.6 million less cash
from operations than the prior year. The decrease was primarily due to higher professional, legal and advisory fees for shareholder initiatives,
and higher cash usage for working capital needs, partially offset by higher segment operating profit. We voluntarily contributed $13 million to
our primary U.S. pension plan in 2007.
Investing Activities
Cash flows from investing activities used $118.8 million less cash in 2009 versus 2008 primarily due to the spin-off of BHS in 2008. BHS
used $150.8 million in 2008 primarily for the installation of home security equipment for customers, and we contributed $50 million to BHS at
the date of the spin-off. Our continuing operations used more cash for investing activities in 2009 compared to 2008 for business acquisitions
and higher capital expenditures, partially offset by proceeds from the sale of assets.
As discussed in note 6 to the consolidated financial statements, we acquired operations in Brazil ($47.6 million) and India ($22.2 million)
during 2009.
Proceeds from the disposition of assets in 2008 included the sale of certain coal assets for $10 million, and the total proceeds in 2008 were
approximately the same as 2007. Cash flows for acquisitions in 2008 were also approximately the same as 2007.
Capital expenditures and depreciation and amortization are as follows:
(In millions)
Capital expenditures:
International
North America
Capital expenditures
Depreciation and amortization:
International
North America
Depreciation and amortization
* Not provided.
Outlook
2010
*
*
180-200
*
*
145-155
$
$
$
$
Years Ended December 31,
2008
2007
2009
$ change
2009
2008
103.1
67.5
170.6
97.5
37.6
135.1
112.7
52.6
165.3
90.5
31.8
122.3
94.8
47.0
141.8
79.7
30.3
110.0
$
$
$
$
(9.6)
14.9
5.3
7.0
5.8
12.8
17.9
5.6
23.5
10.8
1.5
12.3
43
Capital expenditures in 2009 were slightly higher than the same period of 2008.
• Capital expenditures in 2009 were primarily for new cash processing and security equipment, armored vehicles, and information
technology.
• Higher capital expenditures in our North America segment were partially offset by a decrease in our International segment.
•
The increase in our North America segment was mainly due to higher expenditures for armored vehicles, as we elected to buy rather
than lease these vehicles, as well as increased spending on CompuSafe® units.
The decrease in Brink’s International capital expenditures from the prior-year period was due to lower spending overall, as well as
the impact of changes in currency exchange rates.
•
We had $23.5 million higher capital expenditures in 2008 versus 2007 primarily for new facilities, cash processing and security equipment,
armored vehicles, and information technology.
Capital expenditures have exceeded depreciation and amortization in the last several years and this trend is expected to continue in the next
several years as a result of growth in the infrastructure of our operations, including new branch facilities and leasehold improvements, growth
in CompuSafe® assets, technology investments, and investment in the safety and security of our operations.
Financing Activities
Summary of Financing Activities
(In millions)
2009
2008
2007
Years Ended December 31,
Cash provided (used) by financing activities
Borrowings and repayments:
Short-term debt
Long-term revolving credit facilities
Other long-term debt
Cash proceeds from sale-leaseback transactions
Repurchase shares of common stock of Brink’s
Dividends attributable to:
Shareholders of Brink’s
Noncontrolling interests in subsidiaries
Proceeds and tax benefits related to stock compensation and other
Discontinued operations, net
Cash flows from financing activities
$
$
(0.9)
(10.1)
(11.3)
13.6
(6.9)
(18.4)
(13.7)
1.1
-
(46.6)
(4.4)
93.5
(12.6)
-
(56.6)
(18.2)
(12.4)
11.1
-
0.4
(23.2)
(33.5)
(5.2)
-
(2.7)
(16.5)
(7.2)
18.0
(14.8)
(85.1)
During the first three months of 2009, we used $6.1 million to purchase 234,456 shares of our common stock at an average cost of $26.20 per
share. We also used $0.8 million in the first three months of 2009 to settle share purchases initiated in December 2008. We have made no
subsequent purchases in 2009. During 2008, we purchased 983,800 shares of our common stock at an average cost of $57.41 per share. The
2008 purchases were settled in 2008 ($55.7 million) and in January 2009 ($0.8 million). During 2007, we purchased 60,500 shares of common
stock at an average cost of $60.30 per share. The 2007 purchases were settled in 2007 ($2.7 million) and in January 2008 ($0.9 million).
Our operating liquidity needs are typically financed by short-term debt and the Revolving Facility, described below. In 2009, we reduced the
overall balance of our bank credit facilities through debt repayments.
Dividends
Our regular quarterly dividend was increased to an annual rate of 40 cents per share from 25 cents per share beginning with the dividend paid
in the second quarter of 2007. On January 21, 2010, the board declared a regular quarterly dividend of 10 cents per share payable on March 1,
2010. Future dividends are dependent on our earnings, financial condition, shareholder equity levels, cash flow and business requirements, as
determined by the board of directors.
44
Capitalization
We use a combination of debt, leases and equity to capitalize our operations. As described on page 48, we made a voluntary contribution of
$150 million to our primary U.S. pension plan in the third quarter of 2009, which included 2,260,738 shares of Brink’s common stock, which
was valued at $57.6 million at the date of the contribution.
As of December 31, 2009, debt as a percentage of capitalization (defined as total debt and shareholders’ equity) was 25% compared to 38% at
December 31, 2008. The decrease resulted from a higher level of shareholders’ equity which more than offset the increase in debt of $7
million. Equity increased in 2009 primarily as a result of other comprehensive income associated with the increased value of assets held by
retirement plans, the contribution of Brink’s common stock to the U.S. pension plan as well as the generation of $196 million in income from
continuing operations.
Summary of Debt, Equity and Other Liquidity Information
(In millions)
Debt:
Multi-currency revolving facilities
Revolving Facility
Letter of Credit Facility
Dominion Terminal Associates bonds
Capital leases
Other
Debt
Total equity
(a)
Amount available
under credit facilities
December 31,
2009
Outstanding Balance
December 31,
2009
2008
$ change (a)
$
$
28
302
9
-
-
-
339
$
$
$
6.5
98.0
-
43.2
32.8
15.1
195.6
595.8
5.3
106.8
-
43.2
18.1
15.2
188.6
305.3
$
$
$
1.2
(8.8)
-
-
14.7
(0.1)
7.0
290.5
In addition to cash borrowings and repayments, the change in the debt balance also includes changes in currency exchange rates and new capital lease
agreements.
Net Debt (Cash) and Reconciliation to GAAP Measures
(In millions)
2009
2008
$ change
December 31,
Short-term debt
Long-term debt
Debt
Less cash and cash equivalents
Net Debt (Cash) (a)
(a) Net Debt (Cash) is a non-GAAP measure. Net Debt (Cash) is equal to short-term debt plus the current and noncurrent portion of long-term debt (“Debt” in
7.2
181.4
188.6
(250.9)
(62.3)
7.2
188.4
195.6
(143.0)
52.6
-
7.0
7.0
107.9
114.9
$
$
the tables), less cash and cash equivalents.
Net Debt (Cash) is a supplemental financial measure that is not required by, or presented in accordance with GAAP. We use Net Debt (Cash)
as a measure of our financial leverage. We believe that investors also may find Net Debt (Cash) to be helpful in evaluating our financial
leverage. Net Debt (Cash) 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 (Cash), 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, 2009,
and December 31, 2008.
Net Debt (Cash) position changed primarily due to the decrease in the cash and cash equivalents balance. Items that affected cash
and cash equivalents during 2009 were:
• After-tax U.S. pension plan contribution ($62 million)
• Acquisitions net of cash acquired ($75 million)
• Venezuela repatriation and translation at less favorable parallel market rate ($45 million)
• Other net inflows, including FBLET refund, additional U.S. tax refunds and cash from operations, less foreign tax
payments
45
Debt
We have an unsecured $400 million revolving bank credit facility (the “Revolving Facility”) with a syndicate of banks. The Revolving
Facility’s interest rate is based on LIBOR plus a margin, prime rate, or competitive bid. The Revolving Facility allows us to borrow (or
otherwise satisfy credit needs) on a revolving basis over a five-year term ending in August 2011. As of December 31, 2009, $302.0 million
was available under the Revolving Facility. Amounts outstanding under the Revolving Facility as of December 31, 2009, were denominated
primarily in U.S. dollars and to a lesser extent in Canadian dollars.
The margin on LIBOR borrowings under the Revolving Facility which can range from 0.140% to 0.575%, depending on our credit rating, was
0.350% at December 31, 2009. When borrowings and letters of credit under the Revolving Facility are in excess of $200 million, the
applicable interest rate is increased by 0.100% or 0.125%. We also pay an annual facility fee on the Revolving Facility based on our credit
rating. The facility fee, which can range from 0.060% to 0.175%, was 0.100% at the end of 2009.
We have an unsecured $135 million letter of credit facility with a bank (the “Letter of Credit Facility”). The Letter of Credit Facility expires in
July 2011. As of December 31, 2009, $8.9 million was available under the Letter of Credit Facility. The Revolving Facility and the multi-
currency revolving credit facilities (described below) are also used for the issuance of letters of credit and bank guarantees.
We have two unsecured multi-currency revolving bank credit facilities with a total of $50.0 million in available credit, of which approximately
$27.9 million was available at December 31, 2009. Interest on these facilities is based on LIBOR plus a margin. The margin ranges from
0.14% to 2.5%. The two facilities expire in December 2011. We also have the ability to borrow from other banks under short-term
uncommitted agreements. Various foreign subsidiaries maintain other lines of credit and overdraft facilities with a number of banks.
The Revolving Facility, the Letter of Credit Facility and the two unsecured multi-currency revolving bank credit facilities contain subsidiary
guarantees and various financial and other covenants. The financial covenants, among other things, limit our total indebtedness, limit asset
sales, limit the use of proceeds from asset sales and provide for minimum coverage of interest costs. The credit agreements do not provide for
the acceleration of payments should our credit rating be reduced. If we were not to comply with the terms of our various loan 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 loan agreements. We were in compliance with all of these financial
covenants at December 31, 2009.
We have $43.2 million of bonds issued by the Peninsula Ports Authority of Virginia recorded as debt on our balance sheet. Although we are
not the primary obligor of the debt, we have guaranteed the debt and we believe that we will ultimately pay this obligation. The guarantee
originated as part of a former interest in Dominion Terminal Associates, a deep water coal terminal. We continue to pay interest on the debt.
The bonds bear a fixed interest rate of 6.0% and mature in 2033. The bonds may mature prior to 2033 upon the occurrence of specified events
such as the determination that the bonds are taxable or if we fail to abide by the terms of the guarantee.
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 12 months.
Equity
At December 31, 2009, we had 100 million shares of common stock authorized and 47.9 million shares issued and outstanding.
Share Purchases
On September 14, 2007, our board of directors authorized the purchase of up to $100 million of our outstanding common shares. The
repurchase authorization does not have an expiration date. Under the program, we used $56.3 million to purchase 883,800 shares of common
stock between December 5, 2007, and May 2, 2008, at an average price of $63.67 per share. We used an additional $3.9 million to purchase
160,500 shares of common stock in the fourth quarter of 2008, at an average price of $24.03 per share. In the first quarter of 2009, we used an
additional $6.1 million to purchase 234,456 shares of common stock at an average price of $26.20 per share. No shares were purchased in the
second, third or fourth quarters of 2009. As of December 31, 2009, we had $33.7 million under this program available to purchase shares.
46
Dividends
We paid regular quarterly dividends on our Common Stock during the last three years. On January 21, 2010, the board declared a regular
quarterly dividend of 10 cents per share payable on March 1, 2010. Future dividends are dependent on the earnings, financial condition,
shareholder equity levels, cash flow and business requirements of the Company, as determined by the board of directors.
Employee Benefits Trust
In September 2008, we terminated The Brink’s Company Employee Benefits Trust (the “Employee Benefits Trust”). Immediately prior to
termination, the shares held by the trust were distributed to us and the shares were retired. The purpose of the Employee Benefits Trust (prior to
termination) was to hold shares of our common stock to fund obligations under compensation and employee benefit programs that provided for
the issuance of stock. After the termination of the trust, newly issued shares are used to satisfy these programs.
Through 2007, shares of common stock were voted by the trustee in the same proportion as the shares of common stock voted by our
employees participating in our 401(k) plan. Our 401(k) plan divested all shares of our common stock in January 2008. After the 401(k) plan
divested all shares of Company common stock, shares of the trust were not voted in matters voted on by shareholders.
Preferred Stock
At December 31, 2009, we have the authority to issue up to 2.0 million shares of preferred stock, par value $10 per share.
Off Balance Sheet Arrangements
We have operating leases that are described in the notes to the consolidated financial statements. See note 14 for operating leases that have
residual value guarantees or other terms that cause the agreement to be considered a variable interest. We use operating leases to lower our
cost of financings. We believe that operating leases are an important component of our capital structure.
47
Contractual Obligations
The following table reflects our contractual obligations as of December 31, 2009.
(In millions)
2010
2011
2012
2013
2014
Estimated Payments Due by Period
Contractual obligations:
Long-term debt obligations
Capital lease obligations
Operating lease obligations
Purchase obligations:
Service contracts
Other
Other long-term liabilities reflected on the
Company’s balance sheet under GAAP:
Primary U.S. pension plan
Other retirement obligations:
UMWA plans
Black lung and other plans
Workers compensation
and other claims
Uncertain tax positions
Other
Total
$
2.3
13.8
79.2
9.6
1.8
-
-
6.3
25.4
8.0
1.9
148.3
$
106.3
6.0
62.7
5.4
0.4
-
-
6.0
12.6
-
13.7
213.1
1.5
3.5
48.7
0.3
0.2
1.2
2.5
31.4
-
0.2
1.0
1.9
24.9
-
0.2
Later
Years
43.3
5.1
46.2
-
0.5
Total
155.6
32.8
293.1
15.3
3.3
27.7
38.4
30.6
41.6
138.3
-
5.6
6.9
-
0.8
95.2
-
5.3
4.7
-
0.8
84.5
-
4.9
3.5
-
0.7
67.7
419.0
50.6
18.6
-
10.7
635.6
419.0
78.7
71.7
8.0
28.6
1,244.4
U.S. Retirement Plans
Pension Plans
Pension benefits provided to eligible U.S. employees were frozen on December 31, 2005, and are not provided to employees hired after 2005 or
to those covered by a collective bargaining agreement. On January 1, 2009, there were approximately 21,100 beneficiaries in the plans. In
2009, we contributed $150 million to the primary U.S. pension plan, which helped reduce the underfunded status of U.S. plans to $152 million.
We are not required to make additional contributions until 2012. The Contractual Obligations table above includes the required contributions
to comply with the minimum funding requirements of the Pension Protection Act of 2006 based on actuarial assumptions at the end of 2009.
We have elected the asset-smoothing basis of computing asset values for funding purposes to reduce the volatility of future required
contributions to the plans. The amount of these required contributions may vary as they are subject to potential changes in asset values,
discount rates on future obligations, assumed rates of return, and potential legislative action. We may elect to make voluntary contributions to
achieve certain threshold funding levels. Based on current assumptions, the underfunded status is expected to decline from 2010 through 2013
and become fully funded under GAAP in 2014.
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. On January 1, 2009, there were approximately 4,700 beneficiaries in the UMWA plans. In
2007, we began using the assets of the plans to fund the majority of the benefit payments required under our UMWA retirement medical plans.
Based on our funding assumptions as of December 31, 2009, we do not expect to make additional contributions to these plans until 2026.
We and certain current and former subsidiaries are jointly and severally liable for approximately $234 million of retirement obligations. We
have funded a significant portion of these obligations in the past. We have recognized the obligations, net of funded amounts in our financial
statements. We have indemnified BHS and the purchasers of BAX Global and natural resources assets for their contingent obligation.
48
Black Lung and other plans
Under the Federal Black Lung Benefits Act of 1972, Brink’s is also responsible for paying lifetime black lung benefits to miners and their
dependents for claims filed after June 30, 1973. The unfunded balance and cash payments related to black lung are expected to decline over
time due to mortality. On December 31, 2009, there were approximately 700 black lung beneficiaries in the plan.
We also have a plan that provides retirement health care benefits to certain eligible salaried employees. Benefits under this plan are not
indexed for inflation.
The Contractual Obligations table above includes payments projected to be paid with our corporate funds and does not include payments made
with retirement plan assets.
Underfunded (Overfunded) Status of U.S. Retirement Plans – Actual and Projected
(in millions)
U.S. pension plans
Beginning balance
Net periodic pension credit (a)
Payment from Brink’s
Benefit plan experience (gain) loss
Other
Ending underfunded (overfunded) balance
UMWA plans
Beginning balance
Net periodic postretirement cost (a)
Payment from Brink’s
Benefit plan experience gain
Ending underfunded balance
Actual
2009
329.2
(13.5)
(150.0)
(9.2)
(4.2)
152.3
207.5
3.2
(0.5)
(52.7)
157.5
$
$
$
$
Black lung and other plans
Beginning balance
Net periodic postretirement cost (a)
Payment from Brink’s
Benefit plan experience loss
Other
Ending unfunded balance
(a) Excludes amounts reclassified from accumulated other comprehensive income.
48.6
1.4
(7.6)
4.5
0.2
47.1
$
$
2010
2011
152.3
(20.3)
-
11.0
(1.6)
141.4
157.5
1.0
-
-
158.5
47.1
2.4
(6.3)
-
-
43.2
141.4
(17.7)
-
7.4
(1.7)
129.4
158.5
1.4
-
-
159.9
43.2
2.2
(6.0)
-
-
39.4
Projected
2012
129.4
(15.7)
(27.7)
3.0
(1.6)
87.4
159.9
1.9
-
-
161.8
39.4
2.1
(5.6)
-
-
35.9
2013
2014
87.4
(16.1)
(38.4)
(1.1)
(2.4)
29.4
161.8
2.4
-
-
164.2
35.9
1.9
(5.3)
-
-
32.5
29.4
(21.8)
(30.6)
-
(1.3)
(24.3)
164.2
3.0
-
-
167.2
32.5
1.8
(4.9)
-
-
29.4
49
Summary of Total Expenses Related to U.S. Retirement Liabilities
This table summarizes actual and projected expense (income) related to U.S. retirement liabilities. Most expenses are allocated to non-segment
results, with the balance allocated to North American operations. The market value of the investments used to pay benefits for our retirement
plans significantly declined in 2008. Expenses related to our U.S pension plans are expected to increase over the next few years as market
losses are amortized into earnings from other comprehensive income. See Application of Critical Accounting Policies—Retirement Benefit
Obligations on pages 54-58 for a description of our accounting policies, assumptions used, and various sensitivity analyses.
(in millions)
U.S. pension plans
UMWA plans
Black lung and other plans
Total
Amounts allocated to:
North American segment
Non-segment
Total
Actual
2009
(4.1)
19.9
2.9
18.7
(2.0)
20.7
18.7
$
$
$
$
2010
2011
Projected
2012
2013
2014
(0.7)
16.5
2.9
18.7
(0.8)
19.5
18.7
5.9
16.2
2.9
25.0
1.7
23.3
25.0
11.7
16.1
2.8
30.6
4.0
26.6
30.6
14.0
16.0
2.6
32.6
4.9
27.7
32.6
3.1
16.0
2.5
21.6
0.7
20.9
21.6
Summary of Total Payments from Brink’s to U.S. Plans and Payments from U.S. Plans to Participants
This table summarizes actual and estimated payments
•
•
from Brink’s to U.S. retirement plans, and
from the plans to participants.
(in millions)
Payments from Brink’s to U.S. Plans
U.S. pension plans
UMWA plans
Black lung and other plans (a)
Total
(a) These plans are not funded.
Payments from U.S. Plans to participants
U.S. pension plans
UMWA plans
Black lung and other plans
Total
Actual
2009
150.0
0.5
7.6
158.1
36.1
36.4
7.6
80.1
$
$
$
$
2010
2011
Projected
2012
2013
2014
-
-
6.3
6.3
40.3
36.4
6.3
83.0
-
-
6.0
6.0
42.0
37.2
6.0
85.2
27.7
-
5.6
33.3
43.6
37.6
5.6
86.8
38.4
-
5.3
43.7
46.2
38.0
5.3
89.5
30.6
-
4.9
35.5
47.0
37.6
4.9
89.5
The amounts in the tables above are based on a variety of estimates, including actuarial assumptions as of December 31, 2009. 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.
50
Contingent Matters
Income Tax
We are subject to tax examinations in various U.S. and foreign jurisdictions. We have approximately $19.0 million of unrecognized tax
benefits at December 31, 2009. The amount of the unrecognized tax benefits has been measured in accordance with FASB ASC Topic 740,
Income Taxes. The amount of tax benefits ultimately recognized for open tax periods at December 31, 2009, will depend on the final outcome
of the various issues that may arise during an examination, and the tax benefit recognized may be materially different from that amount as
measured under FASB ASC Topic 740.
Federal Black Lung Excise Tax (“FBLET”) refunds
In late 2008, Congress passed the Energy Improvement and Extension Act of 2008 which enabled taxpayers to file claims for FBLET refunds
for periods prior to those open under the statute of limitations previously applicable to us. In the second quarter of 2009, we received FBLET
refunds and recognized the majority of these refunds as a pretax gain of $19.7 million. The gain related to these refunds was recorded in
discontinued operations.
Former operations
BAX Global, a former business unit, is defending a claim related to the apparent diversion by a third party of goods being transported for a
customer. During 2009, BAX Global advised us that it is probable that it will be deemed liable for this claim. We have contractually
indemnified the purchaser of BAX Global for this contingency. Although it is possible that this claim ultimately may be decided in favor of
BAX Global, we have accrued €9 million ($13 million at December 31, 2009) related to this matter. We recognized the expense in
discontinued operations. We believe we have insurance coverage applicable to this matter and that it will be resolved without a material
adverse effect on our liquidity, financial position or results of operations.
Other
We are involved in various lawsuits and claims in the ordinary course of business. We are not able to estimate the range of losses for some of
these matters. We have recorded accruals for losses that are considered probable and reasonably estimable. We do not believe that the ultimate
disposition of any of these matters will have a material adverse effect on our liquidity, financial position or results of operations.
51
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 management used a different set of assumptions, estimates and judgments.
Deferred Tax Asset Valuation Allowance
Deferred tax assets result primarily from net operating losses 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.
Accounting Policies
We establish valuation allowances in accordance with 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 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
(In millions)
U.S.
Non-U.S.
Total
Application of Accounting Policies
U.S. Deferred Tax Assets
2009
9.8
35.6
45.4
$
$
December 31,
2008
151.0
32.6
183.6
Our deferred tax assets before valuation allowances increased significantly in 2008 primarily as a result of higher U.S. retirement obligations.
At the end of 2008, we expected that future taxable income of our U.S. operations would not have been sufficient to realize the entire benefit
from the future tax deductions associated with these obligations. We therefore concluded that approximately $145.5 million of U.S. federal and
state net deferred tax assets would not have been realized and provided a valuation allowance for these assets in other comprehensive income
(loss). Our deferred tax assets, before valuation allowances, decreased in 2009 as a result of an increase in retirement asset values from the
equity market improvement and our contribution to the primary U.S. pension plan. The likelihood of realizing additional amounts of the
remaining deferred tax assets improved due to improving market conditions, including credit markets. As a result, we revised our estimate of
the amount of U.S. valuation allowances needed and reversed $117.8 million in 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,
estimated required contributions to our U.S. retirement plans, and
interest rates on projected U.S. borrowings.
Had we used different assumptions, we might have made different conclusions about the need for valuation allowances. For example, in 2009
we might have concluded that we should not reverse any of the valuation allowance offsetting our U.S. deferred tax asset, or we might have
concluded that we should have reversed less than we did. Further, using different assumptions in 2008 we might have concluded that we did
not require a valuation allowance offsetting our U.S. deferred tax assets at the end of 2008. In either of these cases, our tax provision on
income from continuing operations could have been up to $117.8 million higher in 2009.
Non-U.S. Deferred Tax Assets
We changed our judgment about the need for valuation allowances for deferred tax assets in certain non-U.S. jurisdictions as a result of
improvements in operating results and an improved outlook about the future operating performance. As a result, we reversed $2.0 million of
valuation allowances in 2009 and $16.6 million of valuation allowances in 2008 through continuing operations.
52
Goodwill, Other Intangible Assets and Property and Equipment Valuations
Accounting Policies
At December 31, 2009, we had property and equipment of $549.5 million, goodwill of $213.7 million and other intangible assets of $69.4
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 Policies
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. We
estimate the fair value of each reporting unit using a discounted cash flow methodology. The fair value of each reporting unit is compared to
its carrying value to determine if impairment is indicated. Due to a history of profitability and cash flow generation along with expectations for
future cash flows, no impairment of goodwill has been identified.
Other Intangible Assets and Property and Equipment
We review long-lived assets besides goodwill 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.
We recognized a $7.5 million impairment charge in 2007 prior to selling a portion of our United Kingdom operation. We have had no other
significant impairments of property and equipment in the last three years.
53
Retirement and Postemployment Benefit Obligations
We provide benefits through defined benefit pension plans and retiree medical benefit plans and under statutory requirements (e.g., black lung
and workers’ compensation obligations).
Accounting Policy
We account for retirement and postemployment benefit obligations under FASB ASC Topic 715, Compensation – Retirement Benefits and
FASB ASC Topic 712, Compensation – Nonretirement Postemployment Benefits.
The primary benefits are accounted for as follows:
•
Pension obligations – FASB ASC Topic 715
• Other retiree obligations – FASB ASC Topic 715
• Workers’ compensation obligations – FASB ASC Topic 712
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.
54
Application of Accounting Policy
Discount Rate Assumptions for Plans Accounted under FASB ASC Topic 715
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.
The discount rate used to measure the present value of our benefit obligations was derived using the cash flow matching method. Under this
method, we compare the plans’ projected payment obligations by year with the corresponding yields on a hypothetical portfolio of high-quality
bonds with similar expected payment streams. 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.
We changed our method of estimating our discount rate for our U.S. plans in 2007. In 2007, an average of the discount rates calculated using
Mercer Yield Curve and the Citigroup Pension Discount Curve was selected and was rounded to the nearest tenth of a percentage point. In
2008, we simplified our method to use only the Mercer Yield Curve, rounded to the nearest tenth of a percentage point. The discount rate in
2008 determined using our new method would not have changed if we had used our prior method.
The discount rates for the U.S. pension plans, UMWA retiree medical plans and Black Lung obligations were:
Primary U.S. Plan
2008
2009
2007
UMWA Plans
2008
2009
2007
2009
Black Lung
2008
2007
Discount rate:
Retirement cost
Benefit obligation at year end
6.7%
5.9%
6.4%
6.2%
5.8%
6.4%
6.2%
5.9%
6.4%
6.2%
5.8%
6.4%
6.3%
5.4%
6.1%
6.3%
5.8%
6.1%
Sensitivity Analysis
The discount rate we select at year end affects the valuations of plan obligations at year end and 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, 2009, actual expenses for 2009 and
projected expenses for 2010 assuming we had used discount rates that were one percentage point lower or higher.
Plan Obligations at December 31, 2009
(In millions)
Primary U.S. pension plan
UMWA plans
Actual 2009 and Projected 2010 Expense (Income)
Hypothetical
4.9%
$
895.9
514.2
Actual
5.9%
790.7
465.5
Hypothetical
6.9%
697.8
424.7
(In millions, except percentages)
Years Ending December 31,
Primary U.S. pension plan
Discount rate assumption
Retirement cost (credit)
UMWA plans
Discount rate assumption
Retirement cost
Hypothetical sensitivity analysis
for discount rate assumption
1% higher
1% lower
2009
2009
Hypothetical sensitivity analysis
for discount rate assumption
1% higher
1% lower
2010
2010
Projected
2010
Actual
2009
$
6.7%
(5.7)
6.2%
19.9
5.7%
2.9
5.2%
21.1
7.7%
(14.0)
$
5.9%
(2.2)
7.2%
18.9
5.9%
16.5
4.9%
6.8
4.9%
17.7
6.9%
(12.1)
6.9%
15.4
55
Expected-Return-on-Assets Assumption for Plans Accounted under FASB ASC Topic 715
Our expected-return-on-assets assumption, which 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 and actuary 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 8.75% as the expected-return-on-assets assumption as of December 31, 2009
and 2008.
Over the last ten years, the annual returns of our primary U.S. pension plan have averaged, on a compounded basis, 3.4%, net of fees, while the
20-year compounded annual return averaged 9.0% and the 25-year compounded annual return averaged 9.1%.
Sensitivity Analysis
Effect of using different expected-rate-of-return assumptions. Our 2009 and projected 2010 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 2009 and 2010 expense would be as follows:
(In millions, except percentages)
Years Ending December 31,
Actual
2009
Hypothetical sensitivity analysis
for expected-return-on asset
assumption
1% lower
2009
1% higher
2009
Hypothetical sensitivity analysis
for expected-return-on asset
assumption
Projected
2010
1% lower
2010
1% higher
2010
Expected-return-on-asset assumption
8.8%
7.8%
Primary U.S. pension plan (a)
UMWA plans
$
(5.7)
19.9
1.3
22.5
(a) Expense includes continuing and discontinued operations.
9.8%
(12.7)
17.3
8.8%
7.8%
$
(2.2)
16.5
5.4
19.4
9.8%
(9.8)
13.6
Effect of improving or deteriorating actual future market returns. Our funded status at December 31, 2010, and our 2011 expense will be
different from currently projected amounts if our projected 2010 returns are better or worse than the 8.75% return we have assumed.
(In millions, except percentages)
Years Ending December 31,
Return on investments in 2010
Funded Status at December 31, 2010
Primary U.S. pension plan
UMWA plans
2011 Expense
Primary U.S. pension plan (a)
UMWA plans
(a) Expense includes continuing and discontinued operations.
Projected
8.8%
(122)
(159)
4
16
$
$
Hypothetical sensitivity analysis of 2010 asset return
better or worse than expected
Better
return
17.5%
(66)
(133)
2
12
Worse
return
0%
(178)
(184)
7
20
56
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)
Years Ending December 31,
Expense (Income)
Based on market-related value of assets
Actual
2009
Projected
2010
Projected
2011
Hypothetical (a)
2009
2010
2011
Primary U.S. pension plan
(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
(5.7)
(2.2)
14.0
18.7
39.0
4.5
$
$
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 credit to earnings from the expected return on assets to fluctuate more
than the similar credit using the accounting methodology of our defined-benefit pension plans.
57
Medical Inflation Assumption
We estimate the trend in health care 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 major postretirement plans, we have assumed a medical inflation rate of 7.5% for 2010, and we project this rate to
decline to 5% by 2016. The average annual increase for medical inflation in the plan for the last five years has been below 6%. If we assumed
that medical inflation rates were one percentage point higher in each future year, the plan obligation for the UMWA retiree medical benefit
plan would have been approximately $45.9 million higher at December 31, 2009, and the expense for 2009 would have been $2.4 million
higher. If we had assumed that the medical inflation rate would be one percentage point lower, the plan obligation would have been
approximately $39.3 million lower at December 31, 2009, and the related 2009 expenses would have been $2.0 million lower.
If we had projected medical inflation rates to ratably decline from 7.5% to 4.9% by 2025, instead of ratably declining to 5.0% by 2016 as we
estimated, the plan obligation for the UMWA retiree medical benefit plan would have been $43.3 million higher for 2009 and our expense
would be $5.2 million higher for 2010.
In addition, health care reform currently under consideration in the U.S. Congress could substantially change the health care and insurance
industries in the United States, which could increase our costs.
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
The valuations of all of these benefit plans are affected by the life expectancy of the participants. Accordingly, we rely on actuarial information
to predict the number and life expectancy of participants. We use the following mortality table for our major plans.
Plan
UMWA plans
Black Lung
Primary U.S. pension
Mortality table
RP-2000 Employee, Annuitant Healthy Blue Collar
RP-2000 Blue Collar
RP-2000 Combined Healthy Blue Collar
The number of participants by major plan in the past five years is as follows:
Plan
UMWA plans
Black Lung
U.S. pension
2009
4,700
700
21,100
2008
4,900
700
21,500
Number of participants
2007
5,000
800
22,500
2006
5,200
800
24,800
2005
5,400
800
23,800
Since we are no longer operating in the coal industry, we anticipate that the number of participants in the UMWA retirement medical plan and
the number of participants receiving benefits under black lung regulations will decline over time due to mortality. Since the U.S. pension plan
has been frozen, the number of its participants should also decline over time.
58
Foreign Currency Translation
The majority of our subsidiaries outside the U.S. conduct business in their local currencies. Our financials report results 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 or not. Economies with a three-year cumulative inflation rate of more than 100% are considered as
highly inflationary. At the end of 2009, we did not have any subsidiaries operating in highly inflationary economies.
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.
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. Non-monetary assets and liabilities do not fluctuate with changes in local currency
exchange rates to the dollar.
Application of Accounting Policy
Use of Parallel Market Exchange Rate to Convert Venezuelan Operations
Our Venezuelan operations, which are 61% owned by Brink’s, constitute a material portion of our overall consolidated operations. There are
two currency exchange rates which may be used to convert Venezuelan bolivar fuertes into other currencies: an official rate and a market
rate. The use of the official rate to convert cash held in bolivar fuertes into other currencies requires the approval of the Venezuelan
government’s currency control organization. The parallel market rate may be used to obtain U.S. dollars without the approval of the currency
control organization.
In December 2009, we repatriated dividends generated by our Venezuelan operations that had been unpaid over the last several years using the
parallel market exchange rate. We decided to repatriate our dividends using the parallel rate due to significant delays in receiving the needed
government approval to repatriate dividends at the official rate. We began translating our financial statements for our Venezuelan operations
using the parallel rate, effective December 21, 2009, the date of our decision, since we expect to pay future dividends using the parallel rate.
This is consistent with the guidance issued by the International Practices Task Force of the Center for Audit Quality (the “IPTF”) and U.S.
GAAP. This guidance provides that, in the absence of unusual circumstances, the rate used for dividend remittances should be used to translate
foreign financial statements.
We recognized foreign currency translation losses because we changed to the parallel rate for purposes of translating our Venezuelan financial
position. We recognized losses in our consolidated statement of comprehensive income (loss) in 2009 of
•
•
•
$85 million attributable to Brink’s
$54 million attributable to noncontrolling interests, and
$139 million in total.
We have provided a non-GAAP Adjusted earnings measure within our Management’s Discussion and Analysis that provides supplemental
analysis to assist readers understand the hypothetical effect on our financial results had we used the parallel rate to report our results in the past.
Venezuela Designated as Highly Inflationary Economy in 2010
Venezuela has had significant inflation in the last several years and, in December 2009, the three-year cumulative inflation rate exceeded
100%. As a result, beginning in 2010, we are designating Venezuela’s economy as highly inflationary, and we intend to consolidate our
Venezuelan results in 2010 using our accounting policy for subsidiaries operating in highly inflationary economies.
59
RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Standards
We adopted Statement of Financial Accounting Standard (“SFAS”) 168, The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162, effective for our quarter ended September 30, 2009.
SFAS 168 established the FASB Accounting Standards Codification (“Codification”) as the sole source of authoritative non-governmental
accounting principles to be applied in the preparation of financial statements in conformity with U.S. GAAP. Although SFAS 168 does not
change U.S. GAAP, the adoption of SFAS 168 impacted our financial statements since all future references to authoritative accounting
literature are now in accordance with SFAS 168, except for the following standards, which will remain authoritative until they are integrated
into the Codification: SFAS 164, Not-for-Profit Entities: Mergers and Acquisitions, SFAS 166, Accounting for Transfers of Financial
Assets, SFAS 167, Amendments to FASB Interpretation No. 46R and SFAS 168.
The Company adopted the accounting principles established by FASB Interpretation (“FIN”) 48, Accounting for Uncertainty in Income Taxes –
an interpretation of SFAS 109, which is now part of FASB Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, effective
January 1, 2007. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in
accordance with SFAS 109, Accounting for Income Taxes. It prescribes a recognition threshold and measurement attribute for financial
statement disclosure of tax positions taken or expected to be taken on a tax return. The adoption of this interpretation increased retained
earnings at January 1, 2007, by $7.0 million.
We adopted the accounting principles established by FSP FAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets,
which is now part of FASB ASC Topic 715, Compensation – Retirement Benefits, effective for us on December 31, 2009. This guidance
requires enhanced disclosures about plan assets in an employer’s defined benefit pension or other postretirement plans in order to provide users
of financial statements with an understanding of how investment allocation decisions are made, the major categories of plan assets, the inputs
and valuation techniques used to measure the fair value of plan assets, and significant concentrations of risk within plan assets.
We adopted the accounting principles established by SFAS 141(R), Business Combinations, which is now part of FASB ASC Topic 805,
Business Combinations, effective January 1, 2009. FASB ASC Topic 805 establishes requirements for an acquirer to record the assets
acquired, liabilities assumed, and any related noncontrolling interests related to the acquisition of a controlled subsidiary, measured at fair
value, as of the acquisition date. In 2008, we expensed all acquisition costs for transactions that were expected to close in 2009. In 2009, we
recognized gains related to the acquisition of controlling interests in equity affiliates – see note 6 to our consolidated financial statements. The
adoption of this new guidance did not otherwise have an effect on our historical financial statements, but does affect the way we account for
acquisitions after the effective date.
We adopted the accounting principles established by SFAS 160, Noncontrolling Interests in Consolidated Financial Statements an Amendment
of ARB No. 51, which is now part of FASB ASC Topic 810, Consolidation, effective January 1, 2009. FASB ASC Topic 810 establishes new
accounting and reporting standards for the noncontrolling interest, previously known as minority interest, in a subsidiary and for the
deconsolidation of a subsidiary. This statement clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as a separate component within equity in the consolidated financial statements. Additionally,
consolidated net income is to be reported with separate disclosure of the amounts attributable to the parent and to the noncontrolling interests.
We retroactively restated our consolidated balance sheets, consolidated statements of income, consolidated statement of shareholders’ equity,
consolidated statements of cash flows and consolidated statements of comprehensive income as required by FASB ASC Topic 810. The
adoption of this new guidance resulted in a $91.3 million reclassification of noncontrolling interests from other long-term liabilities to
shareholders’ equity on the December 31, 2008, consolidated balance sheet. Prior to the adoption of this new guidance, noncontrolling
interests were deductions from income in arriving at net income. Under FASB ASC Topic 810, noncontrolling interests are a deduction from
net income used to arrive at net income attributable to Brink’s.
We adopted the accounting principles established by SFAS 161, Disclosures about Derivative Instruments and Hedging Activities an
Amendment of SFAS 133, which is now part of FASB ASC Topic 815, Derivatives and Hedging, effective January 1, 2009. FASB ASC Topic
815 requires enhanced disclosures about an entity's derivative and hedging activities. The adoption of this new guidance had no impact on our
financial statements.
We adopted the accounting principles established by SFAS 165, Subsequent Events, which is now part of FASB ASC Topic 855, Subsequent
Events, effective for our quarter ended June 30, 2009. FASB ASC Topic 855 establishes general standards of accounting and disclosure of
events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This standard requires the
disclosure of the date through which an entity has evaluated subsequent events and the basis for selecting that date. The adoption of this new
guidance did not have a material effect on our financial statements.
60
We adopted the accounting principles established by FASB Staff Position ("FSP") EITF 03-6-1, Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities, which is now part of FASB ASC Topic 260, Earnings per Share, effective
January 1, 2009. FASB ASC Topic 260 affects entities that accrue cash dividends (whether paid or unpaid) on share-based payment awards
during the award’s service period for dividends that are nonforfeitable. The adoption of this new guidance did not have a material effect on our
financial statements.
We adopted the accounting principles established by FSP 157-2, Partial Deferral of the Effective Date of SFAS 157, which is now part of
FASB ASC Topic 820, Fair Value Measurements and Disclosures, effective January 1, 2009. This guidance delayed the effective date of
FASB ASC Topic 820 for all nonrecurring fair value measurements of nonfinancial assets and nonfinancial liabilities. The adoption of this
guidance did not have a material effect on our results of operations or financial position.
We adopted the accounting principles established by FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, which is now part of FASB ASC Topic
820, Fair Value Measurements and Disclosures, effective for our quarter ended June 30, 2009. FASB ASC Topic 820 provides guidance for
estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. FASB ASC Topic 820 also
provides guidance for identifying circumstances that indicate a transaction is not orderly and affirms that the objective of fair value
measurement in a market for an asset that is not active is the price that would be received in an orderly (i.e., not distressed) transaction on the
measurement date under current market conditions. If the market is determined to be not active, the entity must consider all available evidence
in determining whether an observable transaction is orderly. The adoption of this new guidance did not have a material effect on our results of
operations or financial position.
We adopted the accounting principles established by FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary
Impairments, which is now part of FASB ASC Topic 320, Investments – Debt and Equity Securities, effective for our quarter ended June 30,
2009. FASB ASC Topic 320 provides guidance on the recognition of other-than-temporary impairments of investments in debt securities and
provides new presentation and disclosure requirements for other-than-temporary impairments of investments in debt and equity securities. The
adoption of this new guidance did not have a material effect on our financial statements.
We adopted the accounting principles established by FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial
Instruments, which is now part of FASB ASC Topic 825, Financial Instruments, effective for our quarter ended June 30, 2009. FASB ASC
Topic 825 requires disclosures about the fair value of financial instruments in interim reporting periods whereas, previously, the disclosures
were required only in annual financial statements. The adoption of this new guidance resulted in the disclosure of the fair value of our
significant fixed-rate long-term debt and our marketable securities as of our interim reporting periods. This new guidance did not otherwise
have an effect on our financial statements.
We adopted the accounting principles established by FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business
Combination that Arise from Contingencies, which is now part of FASB ASC Topic 805, Business Combinations, effective for our quarter
ended June 30, 2009. This guidance is effective for each of our business combinations which were completed on or after January 1, 2009.
FASB ASC Topic 805 provides that contingent assets acquired or liabilities assumed in a business combination be recorded at fair value if the
acquisition-date fair value can be determined during the measurement period. If the acquisition-date fair value cannot be determined, such
items would be recognized at the acquisition date if they meet the recognition requirements of FASB ASC Topic 450, Contingencies. In
periods after the acquisition date, items not recognized as part of the acquisition but recognized subsequently would be reflected in that
subsequent period’s income. The adoption of this new guidance did not have a material effect on our financial statements.
In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, Measuring Liabilities at Fair Value, which was effective
for us on October 1, 2009. This ASU clarifies the application of certain valuation techniques in circumstances in which a quoted price in an
active market for the identical liability is not available. The adoption of this guidance did not have a material effect on our financial statements.
In September 2009, the FASB issued ASU 2009-12, Investments in Certain Entities That Calculate Net Asset Value per Share (or Its
Equivalent), which was effective for our year ending December 31, 2009. ASU 2009-12 allows investors to use net asset value as a practical
expedient to estimate the fair value of certain investments that do not have readily determinable fair values and sets forth disclosure
requirements for these investments. The adoption of this ASU helped us in applying the enhanced disclosure requirements established by FSP
FAS 132(R)-1. Otherwise, the adoption of this guidance did not have a material effect on our financial statements.
61
Standards Not Yet Adopted
In June 2009, the FASB issued SFAS 166, Accounting for Transfers of Financial Assets, now part of FASB ASC Topic 860, Transfers and
Servicing, which will be effective for us on January 1, 2010. SFAS 166 removes the concept of a qualifying special-purpose entity
(QSPE) from SFAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, and removes the
exception from applying FASB Interpretation 46R, Consolidation of Variable Interest Entities. This statement also clarifies the requirements
for isolation and limitations on portions of financial assets that are eligible for sale accounting. We do not expect a material effect from the
adoption of this standard on our financial statements.
In June 2009, the FASB issued SFAS 167, Amendments to FASB Interpretation No. 46R, now part of FASB ASC Topic 810, Consolidation,
which will be effective for us on January 1, 2010. SFAS 167 requires an analysis to determine whether a variable interest gives the entity a
controlling financial interest in a variable interest entity. This statement requires an ongoing reassessment and eliminates the quantitative
approach previously required for determining whether an entity is the primary beneficiary. We do not expect a material effect from the
adoption of this standard on our financial statements.
In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements, which will be effective for us on January 1,
2011. ASU 2009-13 establishes a selling price hierarchy for determining the selling price of a deliverable in a multiple-deliverable
arrangement. In addition, the revised guidance requires additional disclosures about the methods and assumptions used to evaluate multiple-
deliverable arrangements and to identify the significant deliverables within those arrangements. We are currently evaluating the potential
impact of the amended guidance on our financial statements.
In October 2009, the FASB issued ASU 2009-14, Certain Revenue Arrangements that Include Software Elements, which will be effective for
us on January 1, 2011. ASU 2009-14 amends ASC Topic 985 to exclude from its scope tangible products that contain both software and non-
software components that function together to deliver a product’s essential functionality. We are currently evaluating the potential impact of
the amended guidance on our financial statements.
62
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We operate in more than 50 countries. These operations expose us to a variety of market risks, including the effects of changes in interest rates,
commodity prices and foreign currency exchange rates. These financial and commodity exposures are monitored and managed by us as an
integral part of its overall risk management program.
We periodically use various derivative and non-derivative financial instruments, as discussed below, to hedge our interest rate, commodity
prices and foreign currency 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,
2009. 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 our Revolving Facility,
expose us to fluctuations in cash flows due to changes in the general level of interest rates. Fixed rate obligations, including our Dominion
Terminal Associates debt, are subject to fluctuations in fair values as a result of changes in interest rates.
Based on the contractual interest rates on the floating rate debt at December 31, 2009, a hypothetical 10% increase in rates would increase cash
outflows by approximately $0.1 million over a twelve-month period. In other words, our weighted average interest rate on our floating rate
instruments was 1.3% per annum at December 31, 2009. If that average rate were to increase by 0.1 percentage points to 1.4%, the cash
outflows associated with these instruments would increase by $0.1 million annually. The effect on the fair value of our Dominion Terminal
Associates debt for a hypothetical 10% decrease in the yield curve from year-end 2009 levels would result in a $3.4 million increase in the fair
value of this debt.
63
Foreign Currency Risk
We have exposure to the effects of foreign currency exchange rate fluctuations on the results of all of its foreign operations. Our foreign
operations generally use local currencies to conduct business but their results are reported in U.S. dollars.
We are exposed periodically to the foreign currency rate fluctuations that affect transactions not denominated in the functional currency of
domestic and foreign operations. To mitigate these exposures, we, from time to time, enter into foreign currency forward contracts. At
December 31, 2009, no material foreign currency forward contracts were outstanding. 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 year-end 2009 levels against all other currencies of
countries in which we have continuing operations are as follows:
(In millions)
Effect on Earnings:
Translation of 2009 earnings into U.S. dollars
Transaction gains (losses)
Effect on Other Comprehensive Income (Loss):
Translation of net assets of foreign subsidiaries
Hypothetical Effects
Increase/ (decrease)
$
(12.8)
0.1
(65.2)
The hypothetical foreign currency effects above detail the consolidated impact of a simultaneous change in the value of a large number of
foreign currencies relative to the U. S. dollar. The foreign currency exposure impact related to a change in an individual currency could be
significantly different.
Venezuela Designated as Highly Inflationary Economy in 2010
Venezuela has had significant inflation in the last several years and, in December 2009, the three-year cumulative inflation rate exceeded
100%. As a result, beginning in 2010, we are designating Venezuela’s economy as highly inflationary. Local-currency monetary assets and
liabilities will be remeasured into U.S. dollars each balance sheet date, with remeasurement adjustments and other transaction gains and losses
recognized in earnings. Net Venezuelan bolivar fuerte denominated monetary assets at December 31, 2009, were $35.7 million, and a
hypothetical 10% appreciation of the U.S. dollar against the Venezuelan bolivar fuerte after we begin accounting for these assets as highly
inflationary as of January 1, 2010, would result in a $3.6 million transaction loss, which is in addition to the amounts in the above table.
64
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
THE BRINK’S COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2009
TABLE OF CONTENTS
Page
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING ........... 66
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM..................................................... 67
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets ............................................................................................................................................ 69
Consolidated Statements of Income.................................................................................................................................. 70
Consolidated Statements of Comprehensive Income (Loss) ............................................................................................. 71
Consolidated Statements of Shareholders’ Equity ............................................................................................................ 72
Consolidated Statements of Cash Flows ........................................................................................................................... 73
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Summary of Significant Accounting Policies..................................................................................................... 74
Note 2 – Segment Information.......................................................................................................................................... 81
Note 3 – Retirement Benefits............................................................................................................................................ 83
Note 4 – Income Taxes ..................................................................................................................................................... 91
Note 5 – Property and Equipment..................................................................................................................................... 94
Note 6 – Acquisitions ....................................................................................................................................................... 94
Note 7 – Goodwill and Other Intangible Assets................................................................................................................ 96
Note 8 – Other Assets ....................................................................................................................................................... 97
Note 9 – Fair Value of Financial Instruments ................................................................................................................... 97
Note 10 – Accrued Liabilities ........................................................................................................................................... 98
Note 11 – Other Liabilities ............................................................................................................................................... 98
Note 12 – Long-Term Debt............................................................................................................................................... 98
Note 13 – Accounts Receivable ...................................................................................................................................... 100
Note 14 – Operating Leases ............................................................................................................................................ 100
Note 15 – Share-Based Compensation Plans .................................................................................................................. 101
Note 16 – Capital Stock .................................................................................................................................................. 104
Note 17 – Income from Discontinued Operations........................................................................................................... 105
Note 18 – Supplemental Cash Flow Information............................................................................................................ 106
Note 19 – Other Operating Income (Expense)................................................................................................................ 106
Note 20 – Interest and Other Nonoperating Income ....................................................................................................... 106
Note 21 – Other Commitments and Contingencies......................................................................................................... 107
Note 22 – Selected Quarterly Financial Data (unaudited)............................................................................................... 108
65
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rule 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable
assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those
systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2009. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal
Control – Integrated Framework.” Based on this assessment, our management believes that, as of December 31, 2009, our internal control over
financial reporting is effective based on those criteria.
KPMG LLP, the independent registered public accounting firm which audits our consolidated financial statements, has issued an attestation
report of our internal control over financial reporting. KPMG’s attestation report appears on page 67.
66
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
The Brink’s Company:
We have audited The Brink’s Company’s (the Company) internal control over financial reporting as of December 31, 2009, based on criteria
established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). 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 conducted our audit 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 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, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides
a reasonable basis for our opinion.
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.
In our opinion, The Brink’s Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2009, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated
balance sheets of The Brink’s Company and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of income,
comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2009, and
our report dated February 25, 2010 expressed an unqualified opinion on those consolidated financial statements.
Richmond, Virginia
February 25, 2010
67
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
The Brink’s Company:
We have audited the accompanying consolidated balance sheets of The Brink’s Company and subsidiaries (the Company) as of December 31,
2009 and 2008, and the related consolidated statements of income, comprehensive income (loss), shareholders’ equity, and cash flows for each
of the years in the three-year period ended December 31, 2009. 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, 2009 and 2008, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.
As disclosed in note 1 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting
Standards No. 141(R), Business Combinations (included in FASB ASC Topic 805, Business Combinations), effective January 1, 2009 and
Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements an Amendment of ARB
No. 51 (included in FASB ASC Topic 810, Consolidation), effective January 1, 2009.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), The Brink’s
Company’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 25,
2010 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Richmond, Virginia
February 25, 2010
68
THE BRINK’S COMPANY
and subsidiaries
Consolidated Balance Sheets
(In millions, except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable (net of allowance: 2009 – $7.1; 2008 – $6.8)
Prepaid expenses and other
Deferred income taxes
Total current assets
Property and equipment, net
Goodwill
Deferred income taxes
Other
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings
Current maturities of long-term debt
Accounts payable
Income taxes payable
Accrued liabilities
Total current liabilities
Long-term debt
Accrued pension costs
Retirement benefits other than pensions
Deferred income taxes
Other
Total liabilities
Commitments and contingent liabilities (notes 3, 4, 12, 14, 17 and 21)
Equity:
The Brink’s Company (“Brink’s”) shareholders’ equity:
Common stock, par value $1 per share:
Shares authorized: 100.0
Shares issued and outstanding: 2009 – 47.9; 2008 – 45.7
Capital in excess of par value
Retained earnings
Accumulated other comprehensive income (loss):
Benefit plan experience loss
Benefit plan prior service cost
Foreign currency translation
Unrealized gains on marketable securities
Accumulated other comprehensive loss
Total Brink’s shareholders’ equity
Noncontrolling interests
Total equity
December 31,
2009
2008
$
143.0
427.6
81.0
38.5
690.1
549.5
213.7
254.1
172.4
250.9
450.7
99.7
31.1
832.4
534.0
139.6
202.6
107.2
$
1,879.8
1,815.8
$
7.2
16.1
127.2
5.5
364.3
520.3
172.3
192.1
198.3
30.5
170.5
1,284.0
47.9
550.2
514.8
(517.1)
(3.4)
(60.7)
3.2
(578.0)
534.9
60.9
595.8
7.2
8.4
137.8
21.2
360.5
535.1
173.0
373.4
249.9
21.5
157.6
1,510.5
45.7
486.3
310.0
(603.7)
(4.5)
(20.4)
0.6
(628.0)
214.0
91.3
305.3
Total liabilities and shareholders’ equity
$
1,879.8
1,815.8
See accompanying notes to consolidated financial statements.
69
THE BRINK’S COMPANY
and subsidiaries
Consolidated Statements of Income
(In millions, except per share amounts)
Years Ended December 31,
2008
2009
2007
Revenues
$
3,135.0
3,163.5
2,734.6
Costs and Expenses:
Cost of revenues
Selling, general and administrative expenses
Total costs and expenses
Other operating income (expense)
Operating profit
Interest expense
Interest and other income
Income from continuing operations before income taxes
Provision for (benefit from) income taxes
Income from continuing operations
Income from discontinued operations, net of tax
Net income
Less net income attributable to noncontrolling interests
Net income attributable to Brink’s
Amounts attributable to Brink’s:
Income from continuing operations
Income from discontinued operations
Net income attributable to Brink’s
Earnings per share attributable to Brink’s common shareholders:
Basic:
Continuing operations
Discontinued operations
Net income
Diluted:
Continuing operations
Discontinued operations
Net income
Weighted-average shares
Basic
Diluted
See accompanying notes to consolidated financial statements.
2,534.5
430.2
2,964.7
(3.5)
2,505.1
434.5
2,939.6
4.6
2,194.9
379.8
2,574.7
1.1
166.8
(11.3)
10.8
166.3
(61.1)
227.4
4.5
231.9
(31.7)
200.2
195.7
4.5
200.2
4.14
0.10
4.23
4.11
0.10
4.21
47.2
47.5
$
$
$
$
$
228.5
(12.0)
8.1
224.6
53.0
171.6
51.5
223.1
(39.8)
183.3
131.8
51.5
183.3
2.85
1.11
3.96
2.82
1.10
3.93
46.3
46.7
161.0
(10.8)
10.5
160.7
59.5
101.2
58.9
160.1
(22.8)
137.3
78.4
58.9
137.3
1.68
1.27
2.95
1.67
1.25
2.92
46.5
47.0
70
THE BRINK’S COMPANY
and subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(In millions)
Net income
Other comprehensive income (loss):
Benefit plan experience:
Net experience gains (losses) arising during the year
Tax benefit (provision) related to net experience gains and losses arising during the year
Reclassification adjustment for amortization of prior net experience loss included in net income
Tax benefit related to reclassification adjustment
Benefit plan experience gain (loss), net of tax
Benefit plan prior service credit (cost):
Prior service credit from plan amendment during the year
Tax provision related to prior service credit from plan amendment during the year
Reclassification adjustment for amortization of prior service cost (credit) included in net income
Tax provision (benefit) related to reclassification adjustment
Benefit plan prior service credit, net of tax
Foreign currency:
Translation adjustments arising during the year
Tax benefit (provision) related to translation adjustments
Reclassification adjustment for dispositions of businesses
Foreign currency translation adjustments, net of tax
Marketable securities:
Unrealized net gains (losses) on marketable securities arising during the year
Tax benefit (provision) related to unrealized net gains and losses on marketable securities
Reclassification adjustment for net (gains) losses realized in net income
Tax provision (benefit) related to reclassification adjustment
Unrealized net gains (losses) on marketable securities, net of tax
Other comprehensive income (loss)
Comprehensive income (loss)
Amounts attributable to Brink’s:
Net income
Benefit plan experience
Benefit plan prior service credit
Foreign currency
Marketable securities
Other comprehensive income (loss)
Comprehensive income (loss) attributable to Brink’s
Amounts attributable to noncontrolling interests:
Net income
Foreign currency
Marketable securities
Other comprehensive income (loss)
Comprehensive income (loss) attributable to noncontrolling interests
Years Ended December 31,
2008
2007
2009
$
231.9
223.1
160.1
68.2
(0.3)
28.2
(9.5)
86.6
-
-
1.2
(0.1)
1.1
(92.4)
(0.7)
-
(93.1)
2.1
-
-
-
2.1
(3.3)
(501.2)
32.7
11.8
(0.7)
(457.4)
3.1
(0.5)
(0.3)
0.6
2.9
(47.0)
0.8
-
(46.2)
(7.2)
2.6
6.2
(2.2)
(0.6)
(501.3)
112.6
(40.8)
27.1
(8.9)
90.0
0.1
-
1.3
-
1.4
41.6
(0.1)
(0.1)
41.4
1.1
(0.4)
(1.4)
0.5
(0.2)
132.6
$
228.6
(278.2)
292.7
$
200.2
86.6
1.1
(40.3)
2.6
50.0
250.2
31.7
(52.8)
(0.5)
(53.3)
(21.6)
183.3
(457.4)
2.9
(43.9)
(0.6)
(499.0)
(315.7)
39.8
(2.3)
-
(2.3)
37.5
137.3
90.0
1.4
39.7
(0.2)
130.9
268.2
22.8
1.7
-
1.7
24.5
Comprehensive income (loss)
$
228.6
(278.2)
292.7
See accompanying notes to consolidated financial statements.
71
THE BRINK’S COMPANY
and subsidiaries
Consolidated Statements of Shareholders’ Equity
Years Ended December 31, 2009, 2008 and 2007
Shares
(a)
48.5
-
-
(0.1)
$
Common
Stock
48.5
-
-
(0.1)
Capital
in Excess
of Par
Value
414.7
-
-
(0.5)
Accumulated
Other
Comprehensive Noncontrolling
(In millions)
Balance as of December 31, 2006
Net income
Other comprehensive income
Shares repurchased (see note 16)
Dividends to:
Brink’s common shareholders ($0.3625 per share)
Noncontrolling interests
Share-based compensation:
Stock options and awards:
Compensation expense (b)
Consideration from exercise of stock options
Excess tax benefit of stock compensation
Other share-based benefit programs
Retire shares of common stock
Adoption of - Financial Accounting Standards Board
Interpretation 48 (see note 1)
Purchases of subsidiary shares from
noncontrolling interests
Balance as of December 31, 2007
Net income
Other comprehensive loss
Shares repurchased (see note 16)
Termination of Employee Benefits Trust
Dividends to:
Brink’s common shareholders ($0.40 per share)
Noncontrolling interests
Share-based compensation:
Stock options and awards:
Compensation expense (a)
Consideration from exercise of stock options
Excess tax benefit of stock compensation
Other share-based benefit programs
Retire shares of common stock
Spin-off of Brink’s Home Security Holdings, Inc.
(“BHS”) (see note 17)
Purchases of subsidiary shares from
noncontrolling interests
Balance as of December 31, 2008
Net income
Other comprehensive loss
Shares repurchased (see note 16)
Shares contributed to pension plan (see note 16)
Dividends to:
Brink’s common shareholders ($0.40 per share)
Noncontrolling interests
Share-based compensation:
Stock options and awards:
Compensation expense
Consideration from exercise of stock options
Excess tax benefit of stock compensation
Other share-based benefit programs
Adjustment to spin-off of BHS (see note 17)
Acquisitions of new subsidiaries (see note 6)
Balance as of December 31, 2009
(a)
-
-
-
-
-
-
-
-
-
48.4
-
-
(1.0)
(1.7)
-
-
-
0.1
-
0.1
(0.2)
-
-
45.7
-
-
(0.2)
2.3
-
-
-
0.1
-
-
-
-
47.9
$
-
-
-
-
-
-
-
-
-
48.4
-
-
(1.0)
(1.7)
-
-
-
0.1
-
0.1
(0.2)
-
-
45.7
-
-
(0.2)
2.3
-
-
-
0.1
-
-
-
-
47.9
Retained
Earnings
552.0
137.3
-
(3.0)
(16.5)
-
-
-
-
(0.3)
(0.7)
7.0
-
675.8
183.3
-
(45.7)
-
(18.2)
-
-
-
-
(0.3)
(16.0)
-
-
11.7
12.6
5.9
8.4
(0.2)
-
-
452.6
-
-
(9.8)
1.7
-
-
9.5
18.5
13.3
4.3
(3.8)
Loss
(261.4)
-
130.9
-
-
-
-
-
-
-
-
-
-
(130.5)
-
(499.0)
-
-
-
-
-
-
-
-
-
-
(468.9)
1.5
-
486.3
-
-
(2.5)
55.3
-
-
6.6
1.2
0.1
3.2
-
-
550.2
-
310.0
200.2
-
(3.4)
-
(18.4)
-
-
-
-
(0.4)
26.8
-
514.8
-
(628.0)
-
50.0
-
-
-
-
-
-
-
-
-
-
(578.0)
Interests
51.8
22.8
1.7
-
-
(7.2)
-
-
-
-
-
-
(0.9)
68.2
39.8
(2.3)
-
-
-
(12.4)
-
-
-
-
-
-
(2.0)
91.3
31.7
(53.3)
-
-
-
(13.7)
-
-
-
-
-
4.9
60.9
Total
805.6
160.1
132.6
(3.6)
(16.5)
(7.2)
11.7
12.6
5.9
8.1
(0.9)
7.0
(0.9)
1,114.5
223.1
(501.3)
(56.5)
-
(18.2)
(12.4)
9.5
18.6
13.3
4.1
(20.0)
(467.4)
(2.0)
305.3
231.9
(3.3)
(6.1)
57.6
(18.4)
(13.7)
6.6
1.3
0.1
2.8
26.8
4.9
595.8
Includes 1.7 million shares at December 31, 2007, held by The Brink’s Company Employee Benefits Trust that were not allocated to participants. The
trust was terminated in 2008 (see note 16).
Includes amounts classified as discontinued operations.
(b)
See accompanying notes to consolidated financial statements.
72
THE BRINK’S COMPANY
and subsidiaries
Consolidated Statements of Cash Flows
2009
Years Ended December 31,
2008
2007
(In millions)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Income from discontinued operations, net of tax
Depreciation and amortization
Stock compensation expense
Deferred income taxes
Gains:
Sales of property and other assets
Acquisitions of controlling interest of equity-method investments
Impairment charges:
Marketable securities
Long-lived assets
Retirement benefit funding (more) less than expense:
Pension
Other than pension
Other operating, net
Change in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable
Accounts payable, income taxes payable and accrued liabilities
Prepaid and other current assets
Other, net
Discontinued operations, net
Net cash provided by operating activities
Cash flows from investing activities:
Capital expenditures
Acquisitions
Marketable securities:
Purchases
Sales
Cash proceeds from sale of property, equipment and investments
Cash held by home security business at spin-off
Other, net
Discontinued operations, net
Net cash used by investing activities
Cash flows from financing activities:
Borrowings and repayments:
Short-term debt
Long-term revolving credit facilities
Other long-term debt:
Borrowings
Repayments
Cash proceeds from sale-leaseback transactions
Repurchase shares of common stock of Brink’s
Dividends to:
Shareholders of Brink’s
Noncontrolling interests in subsidiaries
Proceeds from exercise of stock options
Excess tax benefits associated with stock compensation
Minimum tax withholdings associated with stock compensation
Other, net
Discontinued operations, net
Net cash provided (used) by financing activities
Effect of exchange rate changes on cash
Cash and cash equivalents:
Increase (decrease)
Balance at beginning of year
Balance at end of year
See accompanying notes to consolidated financial statements.
$
231.9
(4.5)
135.1
6.6
(91.0)
(9.4)
(14.9)
-
2.7
(102.7)
15.3
4.3
8.9
(16.4)
3.5
2.3
23.5
195.2
(170.6)
(74.6)
(11.1)
4.7
10.5
-
-
-
(241.1)
(0.9)
(10.1)
0.6
(11.9)
13.6
(6.9)
(18.4)
(13.7)
1.3
0.3
(0.4)
(0.1)
-
(46.6)
(15.4)
223.1
(51.5)
122.3
7.8
(20.0)
(13.1)
-
7.1
1.9
(12.2)
(5.1)
5.0
(24.1)
40.8
(21.8)
(5.8)
172.7
427.1
(165.3)
(11.7)
(3.5)
2.5
16.9
(50.0)
2.0
(150.8)
(359.9)
(4.4)
93.5
-
(12.6)
-
(56.6)
(18.2)
(12.4)
16.2
12.5
(17.6)
-
-
0.4
(13.1)
54.5
196.4
250.9
160.1
(58.9)
110.0
10.1
9.9
(4.6)
-
-
2.5
(7.7)
1.1
6.2
0.3
28.8
(7.3)
11.5
191.7
453.7
(141.8)
(13.4)
(1.8)
1.3
14.0
-
(0.3)
(175.5)
(317.5)
(23.2)
(33.5)
6.9
(12.1)
-
(2.7)
(16.5)
(7.2)
12.6
5.8
(0.8)
0.4
(14.8)
(85.1)
8.1
59.2
137.2
196.4
(107.9)
250.9
143.0
$
73
THE BRINK’S COMPANY
and subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Summary of Significant Accounting Policies
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 logistics 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
logistics company in the U.S., and a market leader in many other countries.
Principles of Consolidation
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 (“equity affiliates”), unless we do
not sufficiently influence the management of the investee. Other investments are accounted for as cost-method investments or as available-
for-sale marketable securities. All significant intercompany accounts and transactions have been eliminated in consolidation.
Revenue Recognition
Brink’s. Revenue is recognized when services related to armored car transportation, ATM servicing, cash logistics, coin sorting and
wrapping and the secure 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. Customer contracts
generally are automatically extended after the initial contract period until either party terminates the agreement.
BHS (discontinued operation). Monitoring revenues were recognized monthly as services were provided pursuant to the terms of subscriber
contracts, which had contract prices that were fixed and determinable. BHS assessed the subscriber’s ability to meet the contract terms,
including payment terms, before entering into the contract. Generally, nonrefundable installation revenues and a portion of the related direct
costs of acquiring new subscribers (primarily sales commissions) were deferred and recognized over an estimated 15 year subscriber
relationship period. When an installation was identified for disconnection, any unamortized deferred revenues and deferred costs related to
that installation were recognized at that time.
Taxes collected from customers. Taxes collected from customers and remitted to governmental authorities are not included in revenues in the
consolidated statements of income.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, demand deposits and investments with original maturities of three months or less.
Marketable Securities
We have marketable securities held as of December 31, 2009 and 2008 designated as available-for-sale securities for purposes of FASB ASC
Topic 320, Investments – Debt and Equity Securities. Unrealized gains and losses on available-for-sale securities are generally reported in
accumulated other comprehensive income (loss) until realized. Declines in value judged to be other-than-temporary are reported in interest
and other income, net.
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.
74
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 lease term. Renewal periods are included in the lease term when the renewal is
determined to be reasonably assured.
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
Buildings
Building leasehold improvements
Vehicles
Capitalized software
Other machinery and equipment
Machinery and equipment leasehold improvements
Years
16 to 25
3 to 10
3 to 10
3 to 5
3 to 10
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 amortized over the lesser of the remaining life of the asset or, if applicable, the lease term.
BHS (discontinued operation) retained ownership of most security systems installed at subscriber locations. Costs for those systems were
capitalized and depreciated over the estimated lives of the assets. Costs capitalized as part of security systems included equipment and
materials used in the installation process, direct labor required to install the equipment at subscriber sites, and other costs associated with the
installation process. These other costs included the cost of vehicles used for installation purposes and the portion of telecommunication,
facilities and administrative costs incurred primarily at BHS’ branches that were associated with the installation process. Direct labor and
other costs represented approximately 70% of the amounts capitalized, while equipment and materials represented approximately 30% of
amounts capitalized. In addition to regular straight-line depreciation expense each period, BHS charged to expense the carrying value of
security systems estimated to be permanently disconnected based on each period’s actual disconnects and historical reconnection experience.
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. Intangible assets that are subject to amortization have, at December 31, 2009, remaining useful
lives ranging from 1 to 16 years and are amortized based on the pattern in which the economic benefits are used or on a straight-line basis.
Impairment of Long-Lived Assets
Goodwill is tested for impairment at least annually by comparing the carrying value of each reporting unit to its estimated fair value. We
base our estimates of fair value on projected future cash flows. We completed goodwill impairment tests during each of the last three years
with no impairment charges required.
Long-lived assets other than goodwill 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.
Long-lived assets held for sale are carried at the lower of carrying value or fair value less cost to sell. Fair values are determined based on
quoted market values, discounted cash flows or internal and external appraisals, as applicable.
75
Retirement Benefit Plans
We account for retirement benefit obligations under FASB ASC Topic 715, Compensation – Retirement Benefits. Prior to 2007, we selected
discount rates for our U.S. plan obligations after reviewing published long-term yield information for a small number of high-quality fixed-
income securities (e.g., Moody’s Aa bond yields) and yields for the broader range of long-term high-quality securities with maturities in line
with expected payments. We changed the method of estimating U.S. discount rates in 2007. As of December 31, 2007, we derived the
discount rates used to measure the present value of our benefit obligations using the cash flow matching method. Under this method, we
compared the plan’s projected payment obligations by year with the corresponding yields on the Citigroup Pension Discount Curve and the
Mercer Yield Curve. Each year’s projected cash flows were then discounted back to their present value at the measurement date and an
overall discount rate was determined for each curve; the average of the two discount rates was selected and rounded to the nearest tenth of a
percentage point. The effect of the change in estimate was to increase other comprehensive income in 2007 by $46.3 million. We revised the
method of estimating discount rates for U.S. plan obligations in 2008 to use only the Mercer Yield Curve. The discount rates selected in
2008 for U.S. plans would have been the same under the 2007 method. We use a similar approach to the 2008 method for U.S. plans to select
the discount rates for major non-U.S. plans. For other non-U.S. plans, discount rates are developed based on a bond index within the country
of domicile.
We select the expected long-term rate of return assumption for our U.S. pension plan and retiree medical plans using advice from an
investment advisor and an actuary. The selected rate considers plan asset allocation targets, expected overall investment manager
performance and long-term historical average compounded rates of return.
Benefit plan experience gains and losses are recognized in other comprehensive income (loss). Accumulated net benefit plan experience
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. Management periodically reviews recorded deferred tax assets to determine if it is more-likely-than-not that
they will be realized. If management determines it is not more-likely-than-not that a deferred tax asset will be realized, an offsetting
valuation allowance is recorded, reducing comprehensive income (loss) and the deferred tax asset in that period.
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.
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 or not. Economies with a three-year cumulative inflation rate of more than 100% are
considered as highly inflationary. At the end of 2009, we did not have any subsidiaries operating in 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.
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. Non-monetary assets and liabilities do not fluctuate with changes in local currency
exchange rates to the dollar.
Venezuela
We have operating subsidiaries in Venezuela. There are two currency exchange rates which may be used to convert Venezuelan bolivar
fuertes into other currencies: an official rate and a parallel market rate. The use of the official rate to convert cash held in bolivar fuertes into
other currencies requires the approval of the Venezuelan government’s currency control organization. The parallel market rate may be used
to obtain U.S. dollars without the approval of the currency control organization.
76
In December 2009, we repatriated dividends generated by our Venezuelan operations that had been unpaid over the last several years using
the parallel market exchange rate. We began translating our financial statements for our Venezuelan operations using the parallel rate,
effective December 21, 2009, the date of our decision, since we expect to pay future dividends using the parallel rate. This is consistent with
the guidance issued by the International Practices Task Force of the Center for Audit Quality (the “IPTF”) and U.S. GAAP. This guidance
provides that, in the absence of unusual circumstances, the rate used for dividend remittances should be used to translate foreign financial
statements.
Venezuela has had significant inflation in the last several years and, in December 2009, the three-year cumulative inflation rate exceeded
100%. As a result, beginning in 2010, we are designating Venezuela’s economy as highly inflationary, and we intend to consolidate our
Venezuelan results in 2010 using our accounting policy for subsidiaries operating in highly inflationary economies.
In determining whether Venezuela is a highly inflationary economy, we previously used the consumer price index ("CPI") which is based on
the inflation rates for the metropolitan area of Caracas, Venezuela. Beginning January 1, 2008, a national consumer price index ("NCPI")
was developed for the entire country of Venezuela. However, because inflation data is not available to compute a cumulative three-year
inflation rate for Venezuela using only NCPI, we use a blended NCPI and CPI rate to determine whether the three-year cumulative inflation
rate has exceeded 100%. At December 31, 2009, the blended three-year cumulative inflation rate was approximately 100.5%.
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”), our management has 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 used by
management are related to goodwill and other long-lived assets, pension and other retirement benefit assets and obligations, deferred tax
assets 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 categorize how we estimate fair value of financial instruments and our retirement plan
assets as follows:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets and liabilities.
The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable prices that are based on inputs not quoted on active markets, but are corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to
Level 3 inputs.
77
New Accounting Standards
Recently Adopted Accounting Standards
We adopted Statement of Financial Accounting Standard (“SFAS”) 168, The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162, effective for our quarter ended September 30, 2009.
SFAS 168 established the FASB Accounting Standards Codification (“Codification”) as the sole source of authoritative non-governmental
accounting principles to be applied in the preparation of financial statements in conformity with US GAAP. Although SFAS 168 does not
change US GAAP, the adoption of SFAS 168 impacted our financial statements since all future references to authoritative accounting
literature are now in accordance with SFAS 168, except for the following standards, which will remain authoritative until they are integrated
into the Codification: SFAS 164, Not-for-Profit Entities: Mergers and Acquisitions, SFAS 166, Accounting for Transfers of Financial
Assets, SFAS 167, Amendments to FASB Interpretation No. 46R and SFAS 168.
The Company adopted the accounting principles established by FASB Interpretation (“FIN”) 48, Accounting for Uncertainty in Income Taxes
– an interpretation of SFAS 109, which is now part of FASB Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, effective
January 1, 2007. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in
accordance with SFAS 109, Accounting for Income Taxes. It prescribes a recognition threshold and measurement attribute for financial
statement disclosure of tax positions taken or expected to be taken on a tax return. The adoption of this interpretation increased retained
earnings at January 1, 2007, by $7.0 million.
We adopted the accounting principles established by FSP FAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets,
which is now part of FASB ASC Topic 715, Compensation – Retirement Benefits, effective for us on December 31, 2009. This guidance
requires enhanced disclosures about plan assets in an employer’s defined benefit pension or other postretirement plans in order to provide
users of financial statements with an understanding of how investment allocation decisions are made, the major categories of plan assets, the
inputs and valuation techniques used to measure the fair value of plan assets, and significant concentrations of risk within plan assets.
We adopted the accounting principles established by SFAS 141(R), Business Combinations, which is now part of FASB ASC Topic 805,
Business Combinations, effective January 1, 2009. FASB ASC Topic 805 establishes requirements for an acquirer to record the assets
acquired, liabilities assumed, and any related noncontrolling interests related to the acquisition of a controlled subsidiary, measured at fair
value, as of the acquisition date. In 2008, we expensed all acquisition costs for transactions that were expected to close in 2009. In 2009, we
recognized gains related to the acquisition of controlling interests in equity affiliates – see note 6 to our consolidated financial statements.
The adoption of this new guidance did not otherwise have an effect on our historical financial statements, but does affect the way we account
for acquisitions after the effective date.
We adopted the accounting principles established by SFAS 160, Noncontrolling Interests in Consolidated Financial Statements an
Amendment of ARB No. 51, which is now part of FASB ASC Topic 810, Consolidation, effective January 1, 2009. FASB ASC Topic 810
establishes new accounting and reporting standards for the noncontrolling interest, previously known as minority interest, in a subsidiary and
for the deconsolidation of a subsidiary. This statement clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as a separate component within equity in the consolidated financial statements. Additionally,
consolidated net income is to be reported with separate disclosure of the amounts attributable to the parent and to the noncontrolling interests.
We retroactively restated our consolidated balance sheets, consolidated statements of income, consolidated statement of shareholders’ equity,
consolidated statements of cash flows and consolidated statements of comprehensive income as required by FASB ASC Topic 810. The
adoption of this new guidance resulted in a $91.3 million reclassification of noncontrolling interests from other long-term liabilities to
shareholders’ equity on the December 31, 2008, consolidated balance sheet. Prior to the adoption of this new guidance, noncontrolling
interests were deductions from income in arriving at net income. Under FASB ASC Topic 810, noncontrolling interests are a deduction from
net income used to arrive at net income attributable to Brink’s.
We adopted the accounting principles established by SFAS 161, Disclosures about Derivative Instruments and Hedging Activities an
Amendment of SFAS 133, which is now part of FASB ASC Topic 815, Derivatives and Hedging, effective January 1, 2009. FASB ASC
Topic 815 requires enhanced disclosures about an entity's derivative and hedging activities. The adoption of this new guidance had no impact
on our financial statements.
We adopted the accounting principles established by SFAS 165, Subsequent Events, which is now part of FASB ASC Topic 855, Subsequent
Events, effective for our quarter ended June 30, 2009. FASB ASC Topic 855 establishes general standards of accounting and disclosure of
events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This standard requires the
disclosure of the date through which an entity has evaluated subsequent events and the basis for selecting that date. The adoption of this new
guidance did not have a material effect on our financial statements.
78
We adopted the accounting principles established by FASB Staff Position ("FSP") EITF 03-6-1, Determining Whether Instruments Granted
in Share-Based Payment Transactions Are Participating Securities, which is now part of FASB ASC Topic 260, Earnings per Share,
effective January 1, 2009. FASB ASC Topic 260 affects entities that accrue cash dividends (whether paid or unpaid) on share-based payment
awards during the award’s service period for dividends that are nonforfeitable. The adoption of this new guidance did not have a material
effect on our financial statements.
We adopted the accounting principles established by FSP 157-2, Partial Deferral of the Effective Date of SFAS 157, which is now part of
FASB ASC Topic 820, Fair Value Measurements and Disclosures, effective January 1, 2009. This guidance delayed the effective date of
FASB ASC Topic 820 for all nonrecurring fair value measurements of nonfinancial assets and nonfinancial liabilities. The adoption of this
guidance did not have a material effect on our results of operations or financial position.
We adopted the accounting principles established by FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, which is now part of FASB ASC Topic
820, Fair Value Measurements and Disclosures, effective for our quarter ended June 30, 2009. FASB ASC Topic 820 provides guidance for
estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. FASB ASC Topic 820 also
provides guidance for identifying circumstances that indicate a transaction is not orderly and affirms that the objective of fair value
measurement in a market for an asset that is not active is the price that would be received in an orderly (i.e., not distressed) transaction on the
measurement date under current market conditions. If the market is determined to be not active, the entity must consider all available
evidence in determining whether an observable transaction is orderly. The adoption of this new guidance did not have a material effect on
our results of operations or financial position.
We adopted the accounting principles established by FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-
Temporary Impairments, which is now part of FASB ASC Topic 320, Investments – Debt and Equity Securities, effective for our quarter
ended June 30, 2009. FASB ASC Topic 320 provides guidance on the recognition of other-than-temporary impairments of investments in
debt securities and provides new presentation and disclosure requirements for other-than-temporary impairments of investments in debt and
equity securities. The adoption of this new guidance did not have a material effect on our financial statements.
We adopted the accounting principles established by FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial
Instruments, which is now part of FASB ASC Topic 825, Financial Instruments, effective for our quarter ended June 30, 2009. FASB ASC
Topic 825 requires disclosures about the fair value of financial instruments in interim reporting periods whereas, previously, the disclosures
were required only in annual financial statements. The adoption of this new guidance resulted in the disclosure of the fair value of our
significant fixed-rate long-term debt and our marketable securities as of our interim reporting periods. This new guidance did not otherwise
have an effect on our financial statements.
We adopted the accounting principles established by FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a
Business Combination that Arise from Contingencies, which is now part of FASB ASC Topic 805, Business Combinations, effective for our
quarter ended June 30, 2009. This guidance is effective for each of our business combinations which were completed on or after January 1,
2009. FASB ASC Topic 805 provides that contingent assets acquired or liabilities assumed in a business combination be recorded at fair
value if the acquisition-date fair value can be determined during the measurement period. If the acquisition-date fair value cannot be
determined, such items would be recognized at the acquisition date if they meet the recognition requirements of FASB ASC Topic 450,
Contingencies. In periods after the acquisition date, items not recognized as part of the acquisition but recognized subsequently would be
reflected in that subsequent period’s income. The adoption of this new guidance did not have a material effect on our financial statements.
In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, Measuring Liabilities at Fair Value, which was effective
for us on October 1, 2009. This ASU clarifies the application of certain valuation techniques in circumstances in which a quoted price in an
active market for the identical liability is not available. The adoption of this guidance did not have a material effect on our financial
statements.
In September 2009, the FASB issued ASU 2009-12, Investments in Certain Entities That Calculate Net Asset Value per Share (or Its
Equivalent), which was effective for our year ending December 31, 2009. ASU 2009-12 allows investors to use net asset value as a practical
expedient to estimate the fair value of certain investments that do not have readily determinable fair values and sets forth disclosure
requirements for these investments. The adoption of this ASU helped us in applying the enhanced disclosure requirements established by
FSP FAS 132(R)-1. Otherwise, the adoption of this guidance did not have a material effect on our financial statements.
79
Standards Not Yet Adopted
In June 2009, the FASB issued SFAS 166, Accounting for Transfers of Financial Assets, now part of FASB ASC Topic 860, Transfers and
Servicing, which will be effective for us on January 1, 2010. SFAS 166 removes the concept of a qualifying special-purpose entity
(QSPE) from SFAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, and removes the
exception from applying FASB Interpretation 46R, Consolidation of Variable Interest Entities. This statement also clarifies the requirements
for isolation and limitations on portions of financial assets that are eligible for sale accounting. We do not expect a material effect from the
adoption of this standard on our financial statements.
In June 2009, the FASB issued SFAS 167, Amendments to FASB Interpretation No. 46R, now part of FASB ASC Topic 810, Consolidation,
which will be effective for us on January 1, 2010. SFAS 167 requires an analysis to determine whether a variable interest gives the entity a
controlling financial interest in a variable interest entity. This statement requires an ongoing reassessment and eliminates the quantitative
approach previously required for determining whether an entity is the primary beneficiary. We do not expect a material effect from the
adoption of this standard on our financial statements.
In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements, which will be effective for us on January 1,
2011. ASU 2009-13 establishes a selling price hierarchy for determining the selling price of a deliverable in a multiple-deliverable
arrangement. In addition, the revised guidance requires additional disclosures about the methods and assumptions used to evaluate multiple-
deliverable arrangements and to identify the significant deliverables within those arrangements. We are currently evaluating the potential
impact of the amended guidance on our financial statements.
In October 2009, the FASB issued ASU 2009-14, Certain Revenue Arrangements that Include Software Elements, which will be effective for
us on January 1, 2011. ASU 2009-14 amends ASC Topic 985 to exclude from its scope tangible products that contain both software and non-
software components that function together to deliver a product’s essential functionality. We are currently evaluating the potential impact of
the amended guidance on our financial statements.
80
Note 2 – Segment Information
We identify our operating segments based on how resources are allocated and operating decisions are made. Management evaluates
performance and allocates resources based on operating profit or loss, excluding corporate allocations. We have four geographic operating
segments, and under the aggregation criteria set forth in FASB ASC 280, Segment Reporting, we have two reportable segments: International
and North America.
The primary services of the reportable segments include:
• Cash-in-transit (“CIT”) armored car transportation
• Automated teller machine (“ATM”) replenishment and servicing
• Global Services – arranging secure long-distance transportation of valuables
• Cash Logistics – supply chain management of cash; from point-of-sale through transport, vaulting and bank deposit
•
• Guarding services, including airport security
Payment Services – consumers pay utility and other bills at payment locations
Brink’s operates in more than 50 countries.
(In millions)
Business Segments
International
North America
Business segments
Non-segment
(In millions)
Business Segments
International
North America
Property and equipment
Amortization of intangible assets:
International
North America
(In millions)
Business Segments
International
North America
Business Segments
Non-segment
Discontinued operations
Revenues
Years Ended December 31,
Operating Profit (Loss)
Years Ended December 31,
2009
2008
2007
2009
2008
2007
$
2,240.9
894.1
3,135.0
-
$
3,135.0
2,231.3
932.2
3,163.5
-
3,163.5
$
1,848.3
886.3
2,734.6
-
2,734.6
$
156.8
56.6
213.4
(46.6)
166.8
215.0
56.9
271.9
(43.4)
228.5
152.9
70.4
223.3
(62.3)
161.0
Capital Expenditures
Years Ended December 31,
2008
2009
2007
Depreciation and Amortization
Years Ended December 31,
2008
2007
2009
$
$
103.1
67.5
170.6
-
-
170.6
112.7
52.6
165.3
-
-
165.3
94.8
47.0
141.8
-
-
141.8
$
$
88.5
36.6
125.1
9.0
1.0
135.1
85.7
31.0
116.7
4.8
0.8
122.3
75.3
29.7
105.0
4.4
0.6
110.0
Assets
December 31,
2008
1,289.1
341.9
1,631.0
184.8
-
1,815.8
2007
1,187.8
329.5
1,517.3
160.7
716.3
2,394.3
2009
1,265.5
335.4
1,600.9
278.9
-
1,879.8
$
$
81
(In millions)
Geographic
Non-U.S.:
France
Venezuela
Brazil
Other
Subtotal
United States
Long-Lived Assets (a)
December 31,
2008
2009
2007 (b)
2009
Revenues
Years Ended December 31,
2008
2007
$
$
167.2
33.2
96.5
372.8
669.7
162.9
832.6
167.0
75.0
29.0
280.2
551.2
143.5
694.7
180.8
61.3
32.7
296.2
571.0
797.4
1,368.4
$
$
615.2
376.1
257.6
1,154.5
2,403.4
731.6
3,135.0
697.7
350.9
193.5
1,158.8
2,400.9
762.6
3,163.5
628.8
224.9
160.8
978.4
1,992.9
741.7
2,734.6
(a) Long-lived assets include property and equipment, net; goodwill; other intangible assets, net; and deferred charges.
(b)
Includes $689.2 million in 2007 related to BHS, principally in the United States.
Revenues are recorded in the country where service is initiated or performed. No single customer represents more than 10% of total revenue.
(In millions)
Net assets outside the U.S.
Europe, Middle East and Africa
Latin America
Asia Pacific
Other
(In millions)
Investments in unconsolidated equity affiliates
International
Other
Share of earnings of unconsolidated equity affiliates
International
Other
2009
300.9
261.1
87.8
34.8
684.6
2009
10.2
-
10.2
4.5
-
4.5
$
$
$
$
$
$
December 31,
2008
365.0
258.5
26.6
30.1
680.2
December 31,
2008
13.1
-
13.1
4.7
0.3
5.0
2007
349.1
173.9
33.6
48.7
605.3
2007
12.6
4.7
17.3
3.0
0.3
3.3
Undistributed earnings of equity affiliates included in consolidated retained earnings approximated $5.4 million at December 31, 2009, $8.1
million at December 31, 2008, and $8.1 million at December 31, 2007.
82
Note 3 – Retirement Benefits
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.
Components of Net Periodic Pension Cost
(In millions)
Years Ended December 31,
Service cost
Interest cost on PBO
Return on assets - expected
Amortization of losses
Settlement loss
Net pension cost (credit)
2009
-
47.7
(61.2)
9.1
0.3
(4.1)
$
$
U.S. Plans
2008
-
45.9
(58.9)
1.6
-
(11.4)
2007
-
44.2
(53.5)
13.3
-
4.0
$
$
2009
6.1
12.2
(9.0)
3.5
-
12.8
Non-U.S. Plans
2008
9.7
12.8
(11.6)
3.7
-
14.6
2007
9.2
10.3
(10.0)
3.1
-
12.6
2009
6.1
59.9
(70.2)
12.6
0.3
8.7
$
$
Total
2008
9.7
58.7
(70.5)
5.3
-
3.2
2007
9.2
54.5
(63.5)
16.4
-
16.6
Obligations and Funded Status
Changes in the projected benefit obligation (“PBO”) and plan assets for our pension plans are as follows:
(In millions)
Years Ended December 31,
PBO at beginning of year
Service cost
Interest cost
Plan participant contributions
Plan settlements
Benefits paid
Actuarial (gains) losses
Foreign currency exchange effects
PBO at end of year
Fair value of plan assets at beginning of year
Return on assets – actual
Plan participant contributions
Employer contributions:
Primary U.S. Plan (a)
Other plans
Plan settlements
Benefits paid
Foreign currency effects
Fair value of plan assets at end of year
Funded status
Included in:
Noncurrent asset
Current liability, included in accrued liabilities
Noncurrent liability
Net pension liability
(a)
U.S. Plans
Non-U.S. Plans
Total
2009
2008
2009
2008
2009
2008
769.3
-
47.7
-
(3.5)
(36.1)
33.1
-
810.5
440.1
103.5
-
150.0
4.2
(3.5)
(36.1)
-
658.2
730.7
-
45.9
-
-
(35.0)
27.7
-
769.3
708.8
(235.6)
-
-
1.9
-
(35.0)
-
440.1
196.3
6.1
12.2
2.8
-
(8.9)
(0.6)
15.5
223.4
147.9
19.2
2.8
-
14.8
-
(8.9)
13.1
188.9
232.9
9.7
12.8
2.9
(0.6)
(8.0)
(26.6)
(26.8)
196.3
195.9
(33.3)
2.9
-
13.8
(0.6)
(8.0)
(22.8)
147.9
965.6
6.1
59.9
2.8
(3.5)
(45.0)
32.5
15.5
1,033.9
588.0
122.7
2.8
150.0
19.0
(3.5)
(45.0)
13.1
847.1
963.6
9.7
58.7
2.9
(0.6)
(43.0)
1.1
(26.8)
965.6
904.7
(268.9)
2.9
-
15.7
(0.6)
(43.0)
(22.8)
588.0
(152.3)
(329.2)
(34.5)
(48.4)
(186.8)
(377.6)
-
1.7
150.6
152.3
-
3.6
325.6
329.2
(8.2)
1.2
41.5
34.5
-
0.6
47.8
48.4
(8.2)
2.9
192.1
186.8
-
4.2
373.4
377.6
$
$
$
$
$
$
$
Comprised of $92.4 million of cash and $57.6 million of shares of Brink’s common stock.
83
Other Changes in Plan Assets and Benefit Recognized in Other Comprehensive Income
(In millions)
Years Ended December 31,
U.S. Plans
Non-U.S. Plans
Total
2009
2008
2009
2008
2009
2008
Benefit plan experience loss recognized in
accumulated other comprehensive income (loss):
Beginning of year
Net experience gains (losses) arising during the year
Reclassification adjustment for amortization of
experience loss included in net income
End of year
Benefit plan prior service cost recognized in
accumulated other comprehensive income (loss):
Beginning of year
Reclassification adjustment for amortization of
prior service cost included in net income
End of year
$
$
$
$
(385.7)
9.2
9.1
(367.4)
(65.1)
(322.2)
1.6
(385.7)
(30.2)
10.8
2.0
(17.4)
(13.9)
(18.3)
2.0
(30.2)
(415.9)
20.0
11.1
(384.8)
(79.0)
(340.5)
3.6
(415.9)
-
-
-
-
-
-
(10.4)
(12.1)
(10.4)
(12.1)
1.5
(8.9)
1.7
(10.4)
1.5
(8.9)
1.7
(10.4)
Approximately $21.7 million of experience loss and $1.6 million of prior service cost are expected to be amortized from accumulated other
comprehensive income (loss) into net periodic pension cost during 2010.
The net experience gains in 2009 were primarily due to the actual return on assets being higher than expected partially offset by the lower
discount rate of the U.S. plans. The net experience losses in 2008 were primarily due to the return on assets being lower than expected.
Information Comparing Plan Assets to Plan Obligations
Information comparing plan assets to plan obligations as of December 31, 2009 and 2008 are aggregated below. The 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.
(In millions)
December 31,
PBO
ABO
Fair value of plan assets
ABO Greater
Than Plan Assets
Plan Assets
Greater Than ABO
Total
2009
2008
2009
2008
2009
$
867.5
862.5
678.9
962.8
948.3
585.1
166.4
156.2
168.2
2.8
2.5
2.9
1,033.9
1,018.7
847.1
2008
965.6
950.8
588.0
Assumptions
The weighted-average assumptions used in determining the net pension cost and benefit obligations for our pension plans were as follows:
Discount rate:
Pension cost
Benefit obligation at year end
Expected return on assets – Pension cost
2009
6.6%
5.9%
8.8%
U.S. Plans
2008
2007
2009
Non-U.S. Plans
2008
6.4%
6.2%
8.8%
5.8%
6.4%
8.8%
6.2%
6.2%
5.8%
5.5%
6.2%
5.9%
2007
4.8%
5.5%
5.6%
Average rate of increase in salaries (a):
Pension cost
Benefit obligation at year end
(a) Salary scale assumptions are determined through historical experience and vary by age and industry. The U.S. plan benefits are frozen. Pension benefits
4.0%
3.1%
3.0%
4.0%
3.0%
3.0%
N/A
N/A
N/A
N/A
N/A
N/A
will not increase due to future salary increases.
The RP-2000 Combined Healthy Blue Collar mortality table and the RP-2000 Combined Healthy White Collar mortality table were used to
estimate the expected lives of participants in the U.S. pension plans. Expected lives of participants in non-U.S. pension plans were estimated
using mortality tables in the country of operation.
84
Cash Flows
Estimated Contributions from the Company into Plan Assets
Our policy is to fund at least the minimum actuarially determined amounts required by applicable regulations. Based on December 31, 2009,
data, assumptions and funding regulations, we are not required to make a contribution to the primary U.S. plan for the fiscal year 2010.
On August 20, 2009, we made a voluntary $150 million contribution to our primary U.S. retirement plan to improve the funded status of the
plan. The contribution was comprised of $92.4 million of cash and 2,260,738 newly issued shares of our common stock valued for purposes
of the contribution at $25.48 per share, or $57.6 million in the aggregate. Because we considered the contribution to be a significant event
for the plan, we remeasured our projected benefit obligation and plan assets related to our primary U.S. pension plan as of July 1, 2009. As
part of the remeasurement we changed the discount rate from 6.2% to 6.8%.
At the time we made the voluntary $150 million contribution we changed the method of valuing assets for funding purposes from the fair-
market-value basis to the asset-smoothing basis. We elected the asset-smoothing basis to reduce the volatility of future required contributions
to the plan.
We expect to contribute approximately $1.6 million to our nonqualified U.S. pension plan and $14.0 million to our non-U.S. pension plans in
2010.
Estimated Future Benefit Payments from Plan Assets to Beneficiaries
Our projected benefit payments at December 31, 2009, for each of the next five years and the aggregate five years thereafter are as follows:
(In millions)
U.S. Plans
Non-U.S. Plans
2010
2011
2012
2013
2014
2015 through 2019
Total
$
$
40.3
42.0
43.6
46.2
47.0
265.4
484.5
7.5
8.0
8.6
9.6
9.7
66.6
110.0
Total
47.8
50.0
52.2
55.8
56.7
332.0
594.5
Multi-employer Pension Plans
We contribute to multi-employer pension plans in a few of our non-U.S. subsidiaries. Multi-employer pension expense for continuing
operations was $2.1 million in 2009, $2.1 million in 2008 and $2.0 million in 2007.
Savings Plans
We sponsor various defined contribution plans to help eligible employees provide for retirement. We match 125% of up to 5% of our
employees’ eligible contributions to our U.S. 401(k) plan. Participants were formerly allowed to invest in Brink’s common stock, but in
January 2008, all Brink’s stock investments were reallocated to other investments. Our matching contribution expense is as follows:
(In millions)
Years Ended December 31,
U.S. 401(k)
Other Plans
Total
2009
13.4
3.4
16.8
$
$
2008
11.7
1.8
13.5
2007
11.8
1.1
12.9
85
Retirement Benefits Other than Pensions
Summary
We provide retirement health care benefits for eligible current and former U.S. and Canadian employees, including former employees of our
former U.S. coal operation. Retirement benefits related to our former 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)
Years Ended December 31,
UMWA plans
2008
2007
2009
Black lung and other plans
2008
2009
2007
$
Service cost
Interest cost on APBO
Return on assets – expected
Amortization of losses
Curtailment gain (a)
Net periodic postretirement cost
$
(a) In January 2008, Brink’s froze the Canadian retirement benefit plan.
-
31.3
(38.6)
7.9
-
0.6
-
31.2
(38.6)
11.4
-
4.0
-
25.8
(22.6)
16.7
-
19.9
$
$
-
2.8
-
0.1
-
2.9
0.1
3.0
-
0.3
(2.0)
1.4
0.2
3.6
-
0.6
-
4.4
2009
-
28.6
(22.6)
16.8
-
22.8
$
$
Total
2008
0.1
34.3
(38.6)
8.2
(2.0)
2.0
2007
0.2
34.8
(38.6)
12.0
-
8.4
Obligations and Funded Status
Changes in the APBO and plan assets related to retirement health care benefits are as follows:
(In millions)
Years Ended December 31,
APBO at beginning of year
Service cost
Interest cost
Plan amendments
Benefits paid
Medicare subsidy received
Actuarial (gain) loss, net
Foreign currency exchange effects and other
APBO at end of year
Fair value of plan assets at beginning of year
Employer contributions
Return on assets – actual
Benefits paid
Medicare subsidy received
Fair value of plan assets at end of year
Funded status
Included in:
Current, included in accrued liabilities
Noncurrent
Retirement benefits other than pension liability
UMWA plans
2009
2008
Black lung and other
plans
2009
2008
Total
2009
2008
483.6
-
25.8
-
(39.6)
3.2
(7.5)
-
465.5
276.1
-
67.8
(39.1)
3.2
308.0
509.3
-
31.3
-
(37.6)
3.2
(22.6)
-
483.6
460.3
-
(149.7)
(37.7)
3.2
276.1
48.6
-
2.8
-
(7.6)
-
4.5
(1.2)
47.1
-
7.6
-
(7.6)
-
-
61.3
0.1
3.1
(3.1)
(7.1)
-
(5.0)
(0.7)
48.6
-
7.1
-
(7.1)
-
-
532.2
-
28.6
-
(47.2)
3.2
(3.0)
(1.2)
512.6
276.1
7.6
67.8
(46.7)
3.2
308.0
570.6
0.1
34.4
(3.1)
(44.7)
3.2
(27.6)
(0.7)
532.2
460.3
7.1
(149.7)
(44.8)
3.2
276.1
(157.5)
(207.5)
(47.1)
(48.6)
(204.6)
(256.1)
-
157.5
157.5
-
207.5
207.5
6.3
40.8
47.1
6.2
42.4
48.6
6.3
198.3
204.6
6.2
249.9
256.1
$
$
$
$
$
$
$
86
Other Changes in Plan Assets and Benefit Recognized in Other Comprehensive Income
Changes in accumulated other comprehensive income (loss) of our retirement benefit plans other than pensions are as follows:
(In millions)
Years Ended December 31,
Benefit plan experience gain (loss) recognized in
accumulated other comprehensive income (loss):
Beginning of year
Net experience gains (losses) arising during the year
Reclassification adjustment for amortization of
experience losses included in net income
End of year
Benefit plan prior service credit recognized in
accumulated other comprehensive income (loss):
Beginning of year
Prior service credit from plan amendments
during the year
Reclassification adjustment for amortization or curtailment
recognition of prior service credit included in net income
End of year
$
$
$
$
UMWA plans
2009
2008
Black lung and other
plans
2009
2008
Total
2009
2008
(321.0)
52.7
(163.2)
(165.7)
16.7
(251.6)
7.9
(321.0)
$
$
(5.2)
(4.5)
0.4
(9.3)
(10.5)
5.0
0.3
(5.2)
$
$
(326.2)
48.2
(173.7)
(160.7)
17.1
(260.9)
8.2
(326.2)
-
-
-
-
-
-
-
-
$
2.9
1.8
$
2.9
-
(0.3)
2.6
3.1
(2.0)
2.9
$
-
(0.3)
2.6
$
1.8
3.1
(2.0)
2.9
We estimate that $16.3 million of experience loss and $0.3 million of prior service credit will be amortized from accumulated other
comprehensive income (loss) into net periodic postretirement cost during 2010.
We recognized net experience gains in 2009 associated with the UMWA obligations primarily related to the return on assets being higher
than expected and renegotiating a contract at a discount for the prescription drug coverage. The gains were partially offset by losses
primarily related to extending the time it takes to reach the ultimate health care cost rate of 5% from four to six years.
We recognized net experience losses in 2008 associated with the UMWA obligations primarily related to the return on assets being lower
than expected.
Assumptions
The accumulated postretirement benefit obligation (“APBO”) for each of the plans was determined using the unit credit method and an
assumed discount rate as follows:
Weighted-average discount rate:
Postretirement cost:
UMWA plans
Black lung
Weighted-average
Benefit obligation at year end:
UMWA plans
Black lung
Weighted-average
Expected return on assets
2009
2008
2007
6.2%
6.3%
6.2%
5.9%
5.4%
5.9%
8.8%
6.4%
6.1%
6.4%
6.2%
6.3%
6.2%
8.8%
5.8%
5.8%
5.8%
6.4%
6.1%
6.4%
8.8%
The RP-2000 Employee, Annuitant, Blue Collar and Combined Healthy Blue Collar mortality tables are primarily used to estimate expected
lives of participants.
Health Care Cost Trend Rates
For UMWA plans, the assumed health care cost trend rate used to compute the 2009 APBO is 7.5% for 2010, declining ratably to 5% in 2016
and thereafter (in 2008: 7.6% for 2009 declining ratably to 5% in 2013 and thereafter). For the black lung obligation, the assumed health care
cost trend rate used to compute the 2009 and 2008 APBO was 8.0%. Other plans in the U.S. provide for fixed-dollar value coverage for
eligible participants and, accordingly, are not adjusted for inflation.
87
The table below shows the estimated effects of a one percentage-point change in the assumed health care cost trend rates for each future year.
(In millions)
Higher (lower):
Service and interest cost in 2009
APBO at December 31, 2009
Effect of Change in Assumed Health Care Trend Rates
Increase 1%
Decrease 1%
$
2.4
46.8
(2.1)
(40.1)
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Medicare Act”) provides for a prescription drug benefit
under Medicare as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially
equivalent to Medicare prescription drug benefits. Because of the broadness of coverage provided under our plan, we believe that the plan
benefits are at least actuarially equivalent to the Medicare benefits. The estimated effect of the legislation has been recorded as a reduction to
the APBO, as permitted by FSP 106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement
and Modernization Act of 2003, included in FASB ASC Topic 715, Compensation – Retirement Benefits. The estimated value of the
projected federal subsidy assumes no changes in participation rates and assumes that the subsidy is received in the year after claims are paid.
The estimated reduction in per capita claim costs for participants over 65 years old was 8%.
Our net periodic postretirement costs were approximately $4.3 million lower in 2009, $5.5 million lower in 2008 and $5.7 million lower in
2007 due to the Medicare Act as a result of lower interest cost and amortization of losses. The estimated net present value of the subsidy,
reflected as a reduction to the APBO, was approximately $47 million at December 31, 2009, and $54 million at December 31, 2008.
Cash Flows
Estimated Contributions from the Company to Plan Assets
Based on the funded status and assumptions at December 31, 2009, we expect the Company to contribute cash to the plans to pay 2010
beneficiary payments for black lung and other plans. We do not expect to contribute cash to our UMWA plans since these plans have
sufficient amounts held in trust to pay for beneficiary payments for 2010. 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
Our projected benefit payments at December 31, 2009, for each of the next five years and the aggregate five years thereafter are as follows:
(In millions)
UMWA plans
Black lung and other plans
Subtotal
Before Medicare Subsidy
Medicare
Subsidy
Net Projected
Payments
2010
2011
2012
2013
2014
2015 through 2019
Total
$
$
39.2
40.2
40.7
41.2
40.9
195.7
397.9
Retirement Plan Assets
6.3
6.0
5.6
5.3
4.9
19.7
47.8
45.5
46.2
46.3
46.5
45.8
215.4
445.7
(2.8)
(3.0)
(3.1)
(3.2)
(3.3)
(17.2)
(32.6)
42.7
43.2
43.2
43.3
42.5
198.2
413.1
U.S. Plans
Assets of our U.S. plans are invested with an objective of positioning the plans to be fully funded by maximizing their 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 below. Our policy does not permit the
purchase of The Brink’s Company common stock if immediately after any such purchase the aggregate fair market value of the plan assets
invested in The Brink’s Company 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 monthly 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.
All of the investments of our U.S. retirement plans can be redeemed daily, except for the hedge fund of funds, which can be redeemed
quarterly, subject to any restrictions imposed by the underlying hedge funds.
The fair values of the investments of our U.S. pension plans have been estimated using the net asset value per share of the investments.
88
Below are the fair value measurements of the investments in our U.S. retirement plans as of December 31, 2009:
(In millions, except percentages)
U.S. Pension Plans
Cash, cash equivalents and receivables
Equity securities:
The Brink’s Company common stock (a)
U.S. large-cap (b)
U.S. small/mid-cap (b)
International (b)
Fixed-income securities:
Long duration (c)
High yield (d)
Emerging markets (e)
Other types of investments:
Hedge fund of funds (f)
Total
UMWA Plans
Equity securities:
U.S. large-cap (b)
U.S. small/mid-cap (b)
International (b)
Fixed-income securities:
Core fixed income (g)
High yield (d)
Emerging markets (e)
Other types of investments:
Hedge fund of funds (f)
Total
Quoted
Prices in
Active
Markets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total Fair
Value
%
Actual
%
Target
Allocation Allocation
$
6.7
33.2
189.7
51.6
75.5
137.8
51.5
24.9
-
570.9
115.7
29.9
48.6
34.7
26.7
12.4
$
$
-
268.0
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
87.3
87.3
-
-
-
-
-
-
40.0
40.0
6.7
33.2
189.7
51.6
75.5
137.8
51.5
24.9
87.3
658.2
115.7
29.9
48.6
34.7
26.7
12.4
40.0
308.0
1
5
29
8
11
21
8
4
-
-
30
8
12
23
8
4
13
100
15
100
37
10
16
11
9
4
13
100
37
9
14
13
8
4
15
100
(a) An independent fiduciary makes all investment decisions regarding these shares and, as a result, the investment is excluded from our target asset
allocation.
(b) These categories include actively managed 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.
(c) This category represents an actively managed mutual fund that seeks to duplicate the risk and return characteristics of a long-term fixed-income
securities portfolio with an approximate duration of 10 to 13 years by using a long duration bond portfolio, including interest-rate swap agreements and
Treasury futures contracts, for the purpose of managing the overall duration of this fund.
(d) 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.
(e) 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.
(f) This category represents an actively managed mutual fund that invests in different hedge-fund investments, with various strategies. The fund holds
approximately 40 separate hedge-fund investments. Strategies included (1) long-short equity, (2) event-driven and distressed-debt, (3) global macro, (4)
credit hedging, (5) multi-strategy, and (6) fixed-income arbitrage. Its investment objective is to seek to achieve an attractive risk-adjusted return with
moderate volatility and moderate directional market exposure over a full market cycle.
(g) This category represents an actively managed mutual fund that invests in funds with investments in mortgage backed securities, corporate bonds and
investment grade securities. The category seeks to provide returns and a risk profile of the Barclays Capital U.S. Aggregate Bond Index.
Non-U.S. Plans
The investments of our non-U.S. plans are managed by us or insurance companies depending on regulations or market practice of the country
where the assets are invested. Each plan’s investment manager makes investment decisions within the guidelines set by us or local
regulations. For plan assets that we manage, we evaluate performance by comparing the actual rate of return to the return on other similar
assets. Asset allocation strategies for our non-U.S. plans utilize a diversified portfolio of 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 our non-U.S. pension plans are
invested primarily using actively managed accounts. The weighted-average asset allocation targets are listed in the table below. Most of the
89
investments of our non-U.S. retirement plans can be redeemed at least monthly. The fair values of the investments of our non-U.S. pension
plans have been estimated using the net asset value per share of the investments.
Below are the fair value measurements of investments in our non-U.S. retirement plans as of December 31, 2009:
(In millions, except percentages)
Non-U.S. Pension Plans
Cash and cash equivalents
Equity securities:
U.S. equity funds (a)
Canadian equity funds (a)
European equity funds (a)
Asia-pacific equity funds (a)
Emerging markets(a)
Other non-U.S. equity funds (a)
Total equity securities
Fixed-income securities:
Global credit (b)
Canadian fixed-income funds (c)
European fixed-income funds (d)
High-yield (e)
Emerging markets (f)
Long-duration (g)
Total fixed-income securities
Other types of investments:
Convertible securities (h)
Other
Quoted
Prices in
Active Markets
(Level 1)
Significant
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total Fair
Value
%
Actual
Allocation
%
Target
Allocation
$
0.5
-
22.5
22.5
14.9
2.5
4.5
9.2
76.1
22.7
14.2
3.4
7.6
4.2
48.4
100.5
6.3
4.0
10.3
186.9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1.5
1.5
1.5
-
-
40
47
0.5
22.5
22.5
14.9
2.5
4.5
9.2
76.1
22.7
14.2
3.4
7.6
4.2
48.4
100.5
53
53
6.3
5.5
11.8
188.9
7
100
-
100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.5
Total other types of investments
Total
$
(a) These categories are comprised of equity index actively 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.
(b) This category represents investment-grade corporate bonds of U.S. and European issuers from diverse industries.
(c) This category seeks to achieve a return that exceeds the Scotia Capital Markets Universe Bond Index.
(d) This category is 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.
(e) 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.
(f) This category consists of a diversified portfolio of listed and unlisted debt securities issued by governments, financial institutions, companies or other
entities domiciled in emerging market countries.
(g) 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.
(h) This category invests in convertible securities of global issuers from diverse industries.
Changes in the plan assets measured at fair value using significant unobservable inputs (Level 3) for our retirement plans are as follows:
(In millions)
Beginning balance
Actual return on plan assets:
Relating to assets still held at the reporting date
Relating to assets sold during the period
Purchases, sales and settlements
Transfers in and/or out of Level 3
Ending balance
U.S. Pension Plans
Year Ended
December 31, 2009
UMWA Plans
Non-U.S. Pension Plans
-
3.5
-
83.8
-
87.3
-
1.8
-
38.2
-
40.0
3.3
(1.8)
-
-
-
1.5
$
$
90
Note 4 – Income Taxes
(In millions)
Income from continuing operations before income taxes
U.S.
Foreign
Income tax expense (benefit) from continuing operations
Current
U.S. federal
State
Foreign
Deferred
U.S. federal
State
Foreign
(In millions)
Comprehensive provision (benefit) for income taxes allocable to
Continuing operations
Discontinued operations
Other comprehensive income (loss)
Shareholders’ equity
2009
Years Ended December 31,
2008
2007
37.0
129.3
166.3
(29.1)
(0.8)
59.8
29.9
(72.3)
(8.1)
(10.6)
(91.0)
(61.1)
25.8
198.8
224.6
2.2
1.6
69.2
73.0
3.9
4.6
(28.5)
(20.0)
53.0
25.7
135.0
160.7
(4.3)
1.4
52.5
49.6
14.4
(0.9)
(3.6)
9.9
59.5
2009
Years Ended December 31,
2008
2007
(61.1)
2.3
10.6
(0.1)
(48.3)
53.0
45.8
(33.3)
(13.3)
52.2
59.5
41.5
49.7
(12.9)
137.8
$
$
$
$
$
$
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%.
(In millions)
U.S. federal tax rate
Increases (reductions) in taxes due to:
Foreign income taxes
Taxes on undistributed earnings of foreign affiliates
State income taxes, net
Medicare subsidy for retirement plans
Adjustments to valuation allowances
No ndeductible repatriation charge
Nontaxable India gain
Other
Actual income tax rate on continuing operations
Years Ended December 31,
2008
35.0 %
(5.8)
1.5
(0.5)
(0.8)
(6.1)
-
-
0.3
23.6%
2007
35.0 %
(1.4)
0.9
0.2
(1.2)
4.0
-
-
(0.5)
37.0%
2009
35.0 %
(3.5)
(1.1)
0.2
(0.9)
(68.2)
4.7
(2.9)
-
(36.7)%
91
Components of Deferred Tax Assets and Liabilities
December 31,
(In millions)
Deferred tax assets
Retirement benefits other than pensions
Pension liabilities
Workers’ compensation and other claims
Property and equipment, net
Other assets and liabilities
Net operating loss carryforwards
Alternative minimum and other tax credits
Subtotal
Valuation allowances
Total deferred tax assets
Deferred tax liabilities
Property and equipment, net
Other assets and miscellaneous
Deferred tax liabilities
Net deferred tax asset
Included in:
Current assets
Noncurrent assets
Current liabilities, included in accrued liabilities
Noncurrent liabilities
Net deferred tax asset
2009
81.9
70.2
37.0
1.4
70.0
47.3
28.5
336.3
(45.4)
290.9
6.0
24.4
30.4
260.5
38.5
254.1
(1.6)
(30.5)
260.5
$
$
$
$
2008
106.9
143.4
35.9
17.7
68.8
35.8
2.2
410.7
(183.6)
227.1
-
16.4
16.4
210.7
31.1
202.6
(1.5)
(21.5)
210.7
Valuation Allowances
Valuation allowances relate to deferred tax assets in various federal, state and non-U.S. jurisdictions. Based on our historical and expected
future taxable earnings, and a consideration of available tax-planning strategies, management believes 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, 2009.
(In millions)
Valuation allowances:
Beginning of year
Expiring tax credits
Acquisitions and dispositions
Changes in judgment about deferred tax assets (a)
Other changes in deferred tax assets, charged to:
Income from continuing operations
Income from discontinued operations
Other comprehensive income (loss) (b)
$
2009
183.6
(0.7)
0.3
(119.8)
Years Ended December 31,
2008
56.0
(0.7)
(0.1)
(11.0)
2007
54.3
(0.9)
(0.8)
2.7
7.1
1.7
(28.3)
1.5
45.4
(2.2)
-
148.2
(6.6)
183.6
(1.1)
-
(3.7)
5.5
56.0
Foreign currency exchange effects
End of year
(a) Changes in judgment about valuation allowances are based on a recognition threshold of “more-likely-than-not.”Amounts are based on beginning-of-
$
year balances of deferred tax assets that could potentially be realized in future years. Amounts are recognized in income from continuing operations. In
2009, includes $117.8 million related to U.S federal and state income taxes.
In 2008, includes $145.5 million related to U.S. retirement plans’ net experience losses incurred in 2008 that were not deemed to be more likely than not
of being realized. In 2009, includes a $25.4 million reversal related to net experience gains of U.S. retirement plans recognized in 2009.
(b)
92
Undistributed Foreign Earnings
As of December 31, 2009, we have not recorded U.S. federal deferred income taxes on approximately $403 million of undistributed earnings
of foreign subsidiaries and equity affiliates. It is expected that these earnings will be permanently reinvested in operations outside the U.S. It
is not practical to compute the estimated deferred tax liability on these earnings.
Net Operating Losses
The gross amount of the net operating loss carryforwards as of December 31, 2009, was $260.0 million. The tax benefit of net operating loss
carryforwards, before valuation allowances, as of December 31, 2009, was $47.3 million, and expires as follows:
(In millions)
Federal
State
Foreign
Year of expiration:
2010-2014
2015-2019
2020 and thereafter
Unlimited
$
$
-
-
-
-
-
0.7
0.5
7.9
-
9.1
4.4
0.7
-
33.1
38.2
Total
5.1
1.2
7.9
33.1
47.3
Uncertain Tax Positions
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(In millions)
Uncertain tax positions:
Beginning of year
Increases related to prior-year tax positions
Decreases related to prior-year tax positions
Increases related to current-year tax positions
Settlements
Effect of the expiration of statutes of limitation
Effect of BHS spin off
End of year
2009
Years Ended December 31,
2008
2007
$
$
19.3
1.0
(1.0)
1.3
(0.4)
(1.2)
-
19.0
25.5
0.1
(0.6)
2.6
(1.3)
(2.0)
(5.0)
19.3
17.3
0.8
(1.6)
10.5
(0.2)
(1.3)
-
25.5
Included in the balance of unrecognized tax benefits at December 31, 2009, are potential benefits of approximately $15.4 million that, if
recognized, will reduce the effective tax rate on income from continuing operations. Also included in the balance of unrecognized tax
benefits at December 31, 2009, are benefits of approximately $1.4 million that, if recognized, will reduce the effective tax rate on income
from discontinued operations.
We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. Interest and penalties included in
income tax expense amounted to $0.9 million in both 2009 and 2008 and $1.0 million in 2007. We had accrued penalties and interest of $2.8
million at December 31, 2009, and $2.2 million at December 31, 2008.
We file income tax returns in the U.S. federal, and various state and foreign jurisdictions. With a few exceptions, as of December 31, 2009,
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 2006.
However, it is reasonably possible that unrecognized tax benefits for previously amended tax returns in the amount of $6.4 million will be
recognized by the end of 2010. Additionally, due to statute of limitations expirations and audit settlements, it is reasonably possible that
approximately $1.6 million of currently remaining unrecognized tax positions, each of which are individually insignificant, may be
recognized by the end of 2010.
93
Note 5 – Property and Equipment
The following table presents our property and equipment that is classified as held and used:
(In millions)
December 31,
2009
2008
$
Land
Buildings
Leasehold improvements
Vehicles
Capitalized software (a)
Other machinery and equipment
32.4
178.9
181.8
297.2
109.0
535.0
1,334.3
(784.8)
Accumulated depreciation and amortization
Property and equipment, net
549.5
(a) Amortization of capitalized software costs included in continuing operations was $13.6 million in 2009, $14.2 million in 2008 and $14.1 million in 2007.
33.4
193.5
168.9
263.4
105.5
491.2
1,255.9
(721.9)
534.0
$
Note 6 – Acquisitions
We acquired security operations in various countries over the last three years. We accounted for the 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 income include the results of operations for each acquired
entity from the date of acquisition.
Sebival
Brazilian CIT and payment processing business
On January 8, 2009, we acquired 100% of the capital stock and voting interests in Sebival-Seguranca Bancaria Industrial e de Valores Ltda.
and Setal Servicos Especializados, Tecnicos e Auxiliares Ltda. (“Sebival”) for approximately $47.6 million in cash. Both of the businesses
which comprise Sebival were controlled by the same owner and the acquisition expands our operations into the midwestern region of Brazil.
Acquisition-related costs were $0.8 million and were included in selling, general and administrative expenses in our consolidated statement of
income for the year ended December 31, 2008.
The estimated fair values for the assets purchased and liabilities assumed as of the date of the acquisition is in the following table. The
determination of estimated fair value required management to make significant estimates and assumptions.
(In millions)
Estimated Fair
Value at
January 8, 2009
Accounts receivable
Other current assets
Property and equipment, net
Identifiable intangible assets
Goodwill (a)
Other noncurrent assets
Current liabilities
Noncurrent liabilities
Total net assets acquired
(a) Consists of intangible assets that do not qualify for separate recognition, combined with synergies expected from integrating Sebival’s operations into our
existing Brazilian operations. All of the goodwill has been assigned to the Latin America reporting unit and is expected to be deductible for tax purposes.
6.3
4.9
5.3
19.2
24.4
1.1
(11.1)
(2.5)
47.6
$
$
94
Brink’s Arya
Indian CIT and Global Services business
On September 1, 2009, we acquired additional shares of Brink’s Arya (“Arya”) increasing our ownership in Arya from 40% to 78%. Arya is a
cash handling and secure logistics company based in Mumbai, India, and this acquisition expands our presence in one of the largest cash
services markets in Asia. The consideration paid for the additional 38% interest was approximately $22.2 million. We recognized a gain of
$13.9 million on the conversion from the equity method of accounting to consolidation. The gain represents the difference between the fair
value and the book value of our previously held 40% investment as of the acquisition date and was included in other operating income of
non-segment income (expense).
In connection with the acquisition of 38% of Arya’s shares, we also agreed to purchase the remaining 22% of the shares we do not currently
hold for approximately $12.8 million. This purchase is subject to the satisfaction of certain conditions which are expected to be met by
September 1, 2011. We accounted for Arya as 100% owned and included the fixed purchase price in noncurrent liabilities.
We have provisionally estimated fair values for the assets purchased and liabilities assumed as of the date of the acquisition. 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 valuation work required to allocate the purchase price, as a result, the allocation of the
purchase price may change in the future.
(In millions)
Total purchase consideration:
Cash paid for 38% of shares
Fair value of previously held 40% noncontrolling interest
Liability to purchase remaining 22% of shares
Fair value of purchase consideration
Estimated Fair
Value at
September 1, 2009
$
$
22.2
20.0
12.8
55.0
Accounts receivable
Other current assets
Property and equipment, net
Identifiable intangible assets
Goodwill (a)
Current liabilities
Noncurrent liabilities
Total net assets acquired
(a) Consists of intangible assets that do not qualify for separate recognition along with expected benefits from combining Arya into Brink’s operations. All of
3.2
10.1
2.5
26.6
23.9
(2.0)
(9.3)
55.0
$
$
the goodwill has been assigned to the Asia-Pacific reporting unit and is not expected to be deductible for tax purposes.
Actual results of Sebival and Arya included in our consolidated financial statements from the dates of acquisition as well as pro forma
revenue and earnings are as follows:
(In millions)
Revenue
Net income attributable to Brink’s
Actual results for the year ended December 31, 2009 (a)
Sebival
$
Arya
Pro forma results of The Brink’s Company (b)
Year ended December 31, 2009
Year ended December 31, 2008
(a) Actual results of Sebival and Arya included in our 2009 consolidated results of operations from the dates of acquisition.
(b) Pro forma results of The Brink’s Company, assuming the Sebival and Arya acquisitions occurred on January 1, 2008. Pro forma net income attributable
3,147.3
3,257.8
186.8
188.0
$
74.4
8.0
8.0
-
to Brink’s does not include a gain on acquiring a controlling interest in Arya.
95
Other acquisitions
In the first quarter of 2009, we acquired a controlling interest in a Panama armored transportation operation, which was previously 49%
owned. We recognized a gain of $0.5 million related to the step-up in basis of our previous ownership in this company and a gain of $0.5
million related to the bargain purchase of the remaining 51% interest. The total pretax gain resulting from this transaction of $1.0 million
was recognized in our consolidated statements of income in other operating income (expense) of our International segment.
In the first quarter of 2009, we also acquired 80% ownership of a secure logistics company based in Moscow, Russia. The relatively small
acquisition increases our presence in a region that has long-term growth potential.
On September 4, 2009, we acquired a majority stake in ICD Limited (“ICD”), a premium provider of commercial security services in the
Asia-Pacific region. ICD designs, installs, maintains and manages high-quality commercial security systems. With principal operations in
China, ICD also has offices in Hong Kong, India, Singapore and Australia. ICD employs approximately 200 people and had 2008 revenue of
$12 million.
Note 7 – Goodwill and Other Intangible Assets
Goodwill
Goodwill resulted from acquiring businesses. The changes in the carrying amount of goodwill for the years ended December 31, 2009 and
2008 are as follows:
(In millions)
Goodwill:
Beginning of year
Acquisitions (see note 6)
Adjustments (a)
Foreign currency exchange effects
End of year
(a)
Years Ended December 31,
2009
139.6
58.2
(0.2)
16.1
213.7
$
$
2008
141.3
8.1
1.8
(11.6)
139.6
Includes purchase accounting adjustment occurring in the year following the acquisition and adjustments to valuation allowances for deferred tax assets.
Other Intangible Assets
(In millions)
Finite-lived intangible assets
Accumulated amortization
Intangible assets, net
2009
98.6
(29.2)
69.4
$
$
December 31,
2008
39.2
(18.1)
21.1
As discussed in note 6, we made several acquisitions in 2009, as a result of which our intangible assets significantly increased.
Our other intangible assets are included in other assets on the balance sheet (see note 8) and consist primarily of customer lists, customer
relationships, covenants not to compete, trademarks and other identifiable intangibles.
Based on identified intangible assets recorded as of December 31, 2009, and assuming that the underlying assets will not be impaired in the
future, our estimated aggregate amortization expense for each of the five succeeding years is as follows:
(In millions)
2010
Amortization expense
$
9.9
2011
10.1
2012
9.0
2013
5.3
2014
3.8
96
Note 8 – Other Assets
(In millions)
December 31,
2009
2008
$
Intangible assets, net (see note 7)
Investment in unconsolidated entities:
Cost method
Equity method
Marketable securities (a)
Other
Other assets
(a) We recorded an other-than-temporary impairment of $7.1 million on our marketable securities in 2008, primarily due to the length of time and severity
23.4
13.1
20.1
29.5
107.2
23.4
10.2
22.7
46.7
172.4
69.4
21.1
$
of the decrease in fair value below cost.
Note 9 – Fair Value of Financial Instruments
Investments in Available-for-sale Securities
We have available-for-sale securities that are carried at fair value in the financial statements. For all of these investments, fair value was
estimated based on quoted prices (Level 1).
(In millions)
December 31, 2009
Mutual funds
Non-U.S. debt securities
Equity securities
Marketable securities
December 31, 2008
Mutual funds
Equity securities
Marketable securities
(a) Cost adjusted for impairment on mutual funds in 2008.
(b) There were no marketable securities in an unrealized loss position longer than a year.
19.2
-
19.2
$
$
Cost (a)
Gross Unrealized
Gains
Gross Unrealized
Losses (b)
Fair Value
$
$
15.0
3.7
0.2
18.9
2.6
-
1.8
4.4
-
0.9
0.9
-
(0.6)
-
(0.6)
-
-
-
17.6
3.1
2.0
22.7
19.2
0.9
20.1
Fixed-Rate Debt
Fair value of our obligation related to the fixed-rate Dominion Terminal Associates (“DTA”) bonds at December 31, 2009, is based on quoted
prices. At December 31, 2008, the fair value of these bonds was estimated by discounting the future cash flows using rates for similar debt at
the valuation date.
The fair value and carrying value of our DTA bonds are as follows:
(In millions)
DTA bonds
December 31,
2009
December 31,
2008
Fair Value
Carrying Value
Fair Value
Carrying Value
$
42.7
43.2
44.5
43.2
Other Financial Instruments
Other financial instruments not measured at fair value on a recurring basis include cash and cash equivalents, short-term fixed rate deposits,
accounts receivable, floating rate debt, accounts payable and accrued liabilities. The financial statement carrying amounts of these items
approximate the fair value due to their short-term nature.
97
Note 10 – Accrued Liabilities
(In millions)
Payroll and other employee liabilities
Taxes, except income taxes
Workers’ compensation and other claims
Retirement benefits (see note 3)
Other
Accrued liabilities
Note 11 – Other Liabilities
(In millions)
Workers’ compensation and other claims
Other
Other liabilities
Note 12 – Long-Term Debt
(In millions)
Bank credit facilities:
Revolving Facility (year-end weighted average interest
rate of 0.6% in 2009 and 1.6% in 2008)
Other non-U.S. dollar-denominated facilities (year-end weighted
average interest rate of 4.4 % in 2009 and 5.2% in 2008)
Dominion Terminal Associates 6.0% bonds, due 2033
Capital leases (average rates: 5.3% in 2009 and 7.5% in 2008)
Total long-term debt
Included in:
Current liabilities
Noncurrent liabilities
Total long-term debt
2009
135.0
81.7
25.4
9.2
113.0
364.3
2009
46.3
124.2
170.5
December 31,
December 31,
2008
141.0
83.7
23.2
10.4
102.2
360.5
2008
49.0
108.6
157.6
December 31,
2009
2008
98.0
14.4
43.2
32.8
188.4
16.1
172.3
188.4
106.8
13.3
43.2
18.1
181.4
8.4
173.0
181.4
$
$
$
$
$
$
$
$
We have an unsecured $400 million revolving bank credit facility (the “Revolving Facility”) with a syndicate of banks. The Revolving
Facility’s interest rate is based on LIBOR plus a margin, prime rate, or competitive bid. The Revolving Facility allows us to borrow (or
otherwise satisfy credit needs) on a revolving basis over a five-year term ending in August 2011. As of December 31, 2009, $302.0 million
was available under the Revolving Facility. Amounts outstanding under the Revolving Facility as of December 31, 2009, were denominated
primarily in U.S. dollars and to a lesser extent in Canadian dollars.
The margin on LIBOR borrowings under the Revolving Facility which can range from 0.140% to 0.575%, depending on our credit rating,
was 0.350% at December 31, 2009. When borrowings and letters of credit under the Revolving Facility are in excess of $200 million, the
applicable interest rate is increased by 0.100% or 0.125%. We also pay an annual facility fee on the Revolving Facility based on our credit
rating. The facility fee, which can range from 0.060% to 0.175%, was 0.100% at the end of 2009.
We have an unsecured $135 million letter of credit facility with a bank (the “Letter of Credit Facility”). The Letter of Credit Facility expires
in July 2011. As of December 31, 2009, $8.9 million was available under the Letter of Credit Facility. The Revolving Facility and the multi-
currency revolving credit facilities (described below) are also used for the issuance of letters of credit and bank guarantees.
98
We have two unsecured multi-currency revolving bank credit facilities with a total of $50.0 million in available credit, of which
approximately $27.9 million was available at December 31, 2009. Interest on these facilities is based on LIBOR plus a margin. The margin
ranges from 0.14% to 2.5%. The two facilities expire in December 2011. We also have the ability to borrow from other banks under short-
term uncommitted agreements. Various foreign subsidiaries maintain other lines of credit and overdraft facilities with a number of banks.
Minimum repayments of long-term debt are as follows:
(In millions)
2010
2011
2012
2013
2014
Later years
Total
Capital leases
Other long-term debt
$
$
13.8
6.0
3.5
2.5
1.9
5.1
32.8
2.3
106.3
1.5
1.2
1.0
43.3
155.6
Total
16.1
112.3
5.0
3.7
2.9
48.4
188.4
The Revolving Facility, the Letter of Credit Facility and the two unsecured multi-currency revolving bank credit facilities contain subsidiary
guarantees and various financial and other covenants. The financial covenants, among other things, limit our total indebtedness, limit asset
sales, limit the use of proceeds from asset sales and provide for minimum coverage of interest costs. The credit agreements do not provide
for the acceleration of payments should our credit rating be reduced. If we were not to comply with the terms of our various loan 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 loan agreements. We were in compliance with all of these
financial covenants at December 31, 2009.
We have $43.2 million of bonds issued by the Peninsula Ports Authority of Virginia recorded as debt on our balance sheet. Although we are
not the primary obligor of the debt, we have guaranteed the debt and we believe that we will ultimately pay this obligation. The guarantee
originated as part of a former interest in Dominion Terminal Associates, a deep water coal terminal. We continue to pay interest on the debt.
The bonds bear a fixed interest rate of 6.0% and mature in 2033. The bonds may mature prior to 2033 upon the occurrence of specified
events such as the determination that the bonds are taxable or if we fail to abide by the terms of the guarantee.
At December 31, 2009, we had undrawn unsecured letters of credit and guarantees totaling $156.4 million, including $126.1 million issued
under the Letter of Credit Facility, and $15.6 million issued under the multi-currency revolving bank credit facilities. These letters of credit
primarily support our obligations under various self-insurance programs and credit facilities.
Capital Leases
Property under capital leases is included in property and equipment as follows:
(In millions)
Asset class:
Buildings
Vehicles
Machinery and equipment
Less: accumulated amortization
Total
$
$
2009
15.2
37.4
11.4
64.0
(23.1)
40.9
December 31,
2008
12.9
34.1
7.2
54.2
(29.1)
25.1
99
Note 13 – Accounts Receivable
(In millions)
Trade
Other
Allowance for doubtful accounts
Accounts receivable, net
(In millions)
Allowance for doubtful accounts:
Beginning of year
Provision for uncollectible accounts receivable:
Continuing operations
Discontinued operations
Write offs less recoveries
Charge to other accounts
Spin-off of BHS (see note 17)
Foreign currency exchange effects
End of year
Note 14 – Operating Leases
2009
390.9
43.8
434.7
(7.1)
427.6
2009
6.8
1.2
-
(1.2)
-
-
0.3
7.1
$
$
$
$
December 31,
2008
426.1
31.4
457.5
(6.8)
450.7
Years Ended December 31,
2008
10.8
3.2
8.7
(10.4)
0.4
(4.5)
(1.4)
6.8
2007
11.6
(0.1)
11.0
(12.6)
0.4
-
0.5
10.8
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, 2009, future minimum lease payments under noncancellable operating leases with initial or remaining lease terms in
excess of one year are included below.
(In millions)
2010
2011
2012
2013
2014
Later years
Facilities
Vehicles
Other
$
$
48.0
39.5
32.1
20.8
17.6
40.2
198.2
25.8
19.1
13.9
9.7
6.8
4.9
80.2
5.4
4.1
2.7
0.9
0.5
1.1
14.7
Total
79.2
62.7
48.7
31.4
24.9
46.2
293.1
In North America, most vehicles that were added to the fleet prior to March 1, 2009, were obtained pursuant to operating leases that had
residual value guarantees. Our maximum residual value guarantee was $50.1 million at December 31, 2009. If we continue to renew the
leases and pay the lease payments for the vehicles that have been included in the above table, this residual value guarantee will reduce to zero
at the end of the final renewal period. Vehicles added to the fleet between March 1, 2009 and December 31, 2009, were either purchased or
were financed under capital lease.
We also have a maximum residual value guarantee of $4.9 million on another operating lease.
Net rent expense included in continuing operations amounted to $101.4 million in 2009, $97.2 million in 2008 and $87.3 million in 2007.
100
Note 15 – Share-Based Compensation Plans
We have share-based compensation plans to retain employees and nonemployee directors and to more closely align their interests with those
of our shareholders.
The 2005 Equity Incentive Plan (the “2005 Plan”) permits grants of stock options, restricted stock, stock appreciation rights, performance
stock and other share-based awards to employees. Only stock options and restricted stock units have been granted under the plan to date.
There are also outstanding stock options granted to employees under a prior stock incentive plan, the 1988 Stock Option Plan (the “1988
Plan”).
We provide share-based awards to directors through the Non-Employee Directors’ Equity Plan (the “Directors’ Plan”). In 2008 and 2009, we
granted deferred stock units under the Directors’ Plan. There are also outstanding stock options granted to directors under a prior plan, the
Non-Employee Directors’ Stock Option Plan (the “Prior Directors’ Plan”). Options were granted to directors in 2007 under the Prior
Directors’ Plan.
There are 3.0 million shares underlying share-based plans that are authorized, but not yet granted.
General Terms
Options are granted at a price not less than the average quoted market price on the date of grant. Options granted to employees have a
maximum term of six years. All grants of options and restricted stock units to employees under the 2005 Plan either vest over three years
from the date of grant or at the end of the third year. Options and restricted stock units granted under the 2005 Plan continue to vest if an
employee retires. Compensation cost related to options and restricted stock is recognized from the grant date to the lesser of the retirement
eligible date or the stated vesting date.
Deferred stock units granted under the Directors’ Plan vest in full one year from the date of grant or upon termination of service. Under the
Prior Directors’ Plan, options granted had a maximum term of ten years and vested in full at the end of six months. Compensation cost is
recognized in its entirety at the grant date.
If a change in control were to occur (as defined in the plan documents), certain awards will become immediately vested.
Spin-Off of BHS (see note 17)
Upon completion of the BHS spin-off on October 31, 2008, 118,500 options that had been granted in the third quarter of 2008 to employees
of BHS were canceled.
For employees remaining with Brink’s on October 31, 2008, the number of options and the exercise prices were adjusted to reflect the effect
of the spin-off of BHS. For options granted in 2008, 420,104 options were adjusted to 771,867 options. Additionally, the exercise prices for
these options were adjusted from $64.15 and $69.11 per share to $34.92 and $37.62 per share, respectively.
101
Option Activity
The table below summarizes the activity in all plans for options of our common stock.
Shares
(in thousands)
Weighted- Average
Exercise Price Per Share
Weighed-Average
Remaining Contractual
Term (in years)
Aggregate
Intrinsic Value
(in millions)
Outstanding at December 31, 2006
Granted
Exercised
Forfeited or expired
Outstanding at December 31, 2007
Granted
Exercised
Forfeited or expired
Cancelled awards (a)
Adjustment due to spin-off (a)
Outstanding at December 31, 2008
Granted
Exercised
Forfeited or expired
$
2,130
636
(489)
(31)
2,246
541
(559)
(35)
(389)
1,518
3,322
289
(79)
(97)
Outstanding at December 31, 2009
3,435
$
36.77
63.60
25.78
50.63
46.57
64.24
33.34
53.54
58.32
-
28.95
27.59
16.50
34.08
28.98
Of the above, as of December 31, 2009:
2,428
Exercisable
Expected to vest in future periods (b)
974
(a) Related to BHS employees and directors. See note 17.
(b) The number of options expected to vest takes into account an estimate of expected forfeitures.
27.41
32.80
$
$
3.3
2.7
4.6
$
$
$
5.4
5.4
-
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 31, 2009, was $24.34 per share. The total intrinsic value of options exercised was $0.9 million
($11.62 per share) in 2009, $19.7 million ($35.24 per share) in 2008, and $17.8 million ($36.42 per share) in 2007. The total fair value of
options vested was $6.7 million for 2009, $9.9 million for 2008 and $7.9 million for 2007.
There were 1.8 million shares of exercisable options with a weighted-average exercise price of $24.52 per share at December 31, 2008, and
1.1 million shares of exercisable options with a weighted-average exercise price of $35.50 per share at December 31, 2007.
Method and Assumptions Used to Estimate Fair Value of Options
The fair value of each stock option grant is estimated at the time of grant using the Black-Scholes option-pricing model. The fair value of
options that vest entirely at the end of a fixed period, generally three years, is estimated using a single option approach and, the fair value of
options that vest ratably over three years is estimated using a multiple-option approach. If a different option-pricing model had been used,
results may have been different.
102
The fair value of options granted during the three years ended December 31, 2009, was calculated using the following estimated weighted-
average assumptions.
Options Granted
Number of shares underlying options, in thousands
Weighted-average exercise price per share
$
Assumptions used to estimate fair value:
Expected dividend yield (a):
Weighted-average
Expected volatility (b):
Weighted-average
Range
Risk-free interest rate (c):
Weighted-average
Range
Expected term in years (d):
Weighted-average
Range
Weighted-average fair value estimates at grant date:
In millions
2009
289
27.59
Years Ended December 31,
2008
541
64.24
2007
636
63.60
1.4%
0.6%
0.6%
36%
35%-39%
1.8%
0.9%-2.4%
3.8
1.9-5.3
26%
26%-27%
2.8%
2.0%-3.1%
3.6
2.1-5.4
27%
26%-31%
4.9%
4.9%-5.0%
3.8
2.1-6.1
10.7
16.84
Fair value per share
(a) The expected dividend yield is the calculated yield on Brink’s common stock at the time of the grant.
(b) The expected volatility was estimated after reviewing the historical volatility of our stock using daily close prices.
(c) The risk-free interest rate was based on yields on U.S. Treasury debt at the time of the grant.
(d) The expected term of the options was based on historical option exercise data, option expiration and post-vesting cancellation behavior.
$
$
2.1
7.24
7.8
14.39
Nonvested Share Activity
(in thousands of shares, except per share amounts)
Balance as of January 1, 2008
Granted
Cancelled awards due to BHS spin off
Adjustment due to spin-off of BHS
Balance as of December 31, 2008
2005
Plan
-
30.3
-
25.3
55.6
Number of shares
Directors’
Plan
-
13.0
(4.7)
7.0
15.3
$
Total
-
43.3
(4.7)
32.3
70.9
Weighted-Average
Grant-Date
Fair Value (a)
-
66.27
63.22
-
36.27
Granted
Cancelled awards
Vested
Balance as of December 31, 2009
(a) Fair value is measured at the date of grant based on the average of the high and low per share quoted sales price of Brink’s common stock, adjusted for a
178.4
(1.3)
(18.5)
214.2
201.1
(1.3)
(33.8)
236.9
22.7
-
(15.3)
22.7
26.90
26.80
35.71
28.45
$
discount on units that do not receive or accrue dividends.
As of December 31, 2009, $4.0 million of total unrecognized compensation cost related to previously granted stock options and nonvested
shares is expected to be recognized over a weighted-average period of 1.5 years.
Other Share-Based Compensation
We have a deferred compensation plan that allows participants to defer a portion of their compensation into common stock units. Units may
be redeemed by employees as equal number of shares of Brink’s common stock. Employee accounts held 787,719 units at December 31,
2009, and 679,681 units at December 31, 2008.
We have a stock accumulation plan for our non-employee directors denominated in Brink’s common stock units. Directors’ accounts held
59,332 units at December 31, 2009, and 67,993 units at December 31, 2008.
103
Note 16 – Capital Stock
Common Stock
At December 31, 2009, we had 100 million shares of common stock authorized and 47.9 million shares issued and outstanding.
Share Purchases
On September 14, 2007, our board of directors authorized the purchase of up to $100 million of our outstanding common shares. The
repurchase authorization does not have an expiration date. Under the program, we used $56.3 million to purchase 883,800 shares of common
stock between December 5, 2007, and May 2, 2008, at an average price of $63.67 per share. We used an additional $3.9 million to purchase
160,500 shares of common stock in the fourth quarter of 2008, at an average price of $24.03 per share. In the first quarter of 2009, we used
an additional $6.1 million to purchase 234,456 shares of common stock at an average price of $26.20 per share. No shares were purchased in
the remainder of 2009. As of December 31, 2009, we had $33.7 million under this program available to purchase shares.
Shares Contributed to U.S. Pension Plan
On August 20, 2009, we made a voluntary $150 million contribution to our primary U.S. retirement plan. The contribution was comprised of
$92.4 million of cash and 2,260,738 newly issued shares of our common stock valued for purposes of the contribution at $25.48 per share, or
$57.6 million in the aggregate.
Dividends
We paid regular quarterly dividends on our common stock during the last three years. On January 21, 2010, the board declared a regular
quarterly dividend of 10 cents per share payable on March 1, 2010. Future dividends are dependent on the earnings, financial condition,
shareholder equity levels, cash flow and business requirements, as determined by the board of directors.
Employee Benefits Trust
In September 2008, we terminated The Brink’s Company Employee Benefits Trust (the “Employee Benefits Trust”). Immediately prior to
termination, the shares held by the trust were distributed to us and the shares were retired. The purpose of the Employee Benefits Trust (prior
to termination) was to hold shares of our common stock to fund obligations under compensation and employee benefit programs that
provided for the issuance of stock. After the termination of the trust, newly issued shares are used to satisfy these programs.
Through 2007, shares of common stock were voted by the trustee in the same proportion as the shares of common stock voted by our
employees participating in our 401(k) plan. Our 401(k) plan divested all shares of our common stock in January 2008. After the 401(k) plan
divested all shares of our common stock, shares of the trust were not voted in matters voted on by shareholders.
Preferred Stock
At December 31, 2009, we have the authority to issue up to 2.0 million shares of preferred stock, par value $10 per share.
Shares Used to Calculate Earnings per Share
(In millions)
Weighted-average shares
Basic (a)
Effect of dilutive stock awards
Diluted
2009
47.2
0.3
47.5
Years Ended December 31,
2008
46.3
0.4
46.7
2007
46.5
0.5
47.0
Antidilutive stock awards excluded from denominator
(a) We have deferred compensation plans for directors and certain of our employees. 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 units
credited to employees and directors under the deferred compensation plans. Accordingly, included in basic shares are weighted-average units of 0.8
million in 2009, 0.7 million in 2008 and 1.0 million in 2007.
2.5
0.7
0.4
Shares of our common stock held by the Employee Benefits Trust in 2007 that were not allocated to participants under our various benefit
plans were excluded from earnings per share calculations since they were treated as treasury shares for the calculation of earnings per share.
The Employee Benefits Trust held 1.7 million unallocated shares at December 31, 2007. As discussed above, the trust was terminated in
September 2008.
104
2009
Years Ended December 31,
2008
Note 17 – Income from Discontinued Operations
(In millions)
Brink’s Home Security Holdings, Inc. (“BHS”):
Income from operations before tax (a)
Expense associated with the spin-off
United Kingdom domestic cash handling operations:
Gain on sale
Loss from operations before tax (b)
$
-
-
-
-
Adjustments to contingencies of former operations:
19.7
Gain from FBLET refunds (see note 21)
(13.2)
BAX Global indemnification (see note 21)
0.3
Other
6.8
Income from discontinued operations before income taxes
2.3
Provision for income taxes
Income from discontinued operations
4.5
(a) Revenues of BHS were $442.4 million in 2008 (partial year) and $484.4 million in 2007.
(b) Revenues of the United Kingdom domestic cash handling operations were $28.9 million in 2007.
$
105.4
(13.0)
-
-
-
-
4.9
97.3
45.8
51.5
2007
112.9
-
1.5
(13.9)
-
-
(0.1)
100.4
41.5
58.9
BHS Spin-off
On October 31, 2008, we distributed all of our interest in BHS to our shareholders of record as of the close of business on October 21, 2008,
in a tax-free distribution. We distributed one share of BHS common stock for every share of our common stock outstanding. We contributed
$50 million in cash to BHS at the time of the spin-off. We also forgave all the existing intercompany debt owed by BHS to us as of the
distribution date.
BHS offered monitored security services in North America primarily for owner-occupied, single-family residences. To a lesser extent, BHS
offered security services for commercial and multi-family properties. BHS typically installed and owned the on-site security systems and
charged fees to monitor and service the systems.
In connection with the spin-off, we entered into a Tax Matters Agreement with BHS which provides a basis for the preparation and filing of
tax returns for pre-spin and post-spin operations of BHS in 2008. As authorized by the Tax Matters Agreement, we made certain elections
related to BHS’ operations for our U.S. federal and state 2008 consolidated tax returns in 2009. These elections have the effect of decreasing
the net deferred tax assets allocated to BHS at the time of the spin-off. As a result, we increased the amount of our current income tax
receivable during 2009 by $26.8 million, with an offsetting increase in retained earnings to adjust the amount of the spin-off distribution.
After the spin-off, we reclassified BHS’ results of operations, including previously reported results and non-segment income (expense)
directly related to the spin-off, within discontinued operations.
United Kingdom Domestic Cash Handling Operations
During 2007, we sold Brink’s United Kingdom domestic cash handling operations for $2.2 million in cash and recognized a $1.5 million gain
on the sale. These operations recorded a $7.5 million impairment charge in 2007, primarily related to writing down leasehold improvements
and vehicles to estimated fair value due to the loss of customers. These operations have been reported as discontinued operations for all
periods presented.
Interest Expense
Interest expense included in discontinued operations was $0.3 million in 2008 and $0.6 million in 2007. Interest expense recorded in
discontinued operations includes only interest on third-party borrowings made directly by BHS, and Brink’s United Kingdom domestic cash
handling operations.
105
Note 18 – Supplemental Cash Flow Information
(In millions)
Cash paid for:
Interest
Income taxes, net
2009
10.3
12.6
$
Years Ended December 31,
2008
12.1
69.2
2007
10.1
65.5
On August 20, 2009, we issued 2,260,738 shares of our common stock as part of our voluntary contribution to our primary U.S. retirement
plan. The value of our stock contribution was at $25.48 per share, or $57.6 million in the aggregate.
Note 19 – Other Operating Income (Expense)
(In millions)
Foreign currency transaction losses
Gain on acquiring control of equity method affiliates
Gains on sales of property and other assets
Royalty income
Share in earnings of equity affiliates
Impairment losses
Other
Other operating income (expense)
Note 20 – Interest and Other Nonoperating Income
(In millions)
Interest income
Other-than-temporary impairment of marketable securities
Other, net
Total
2009
Years Ended December 31,
2008
2007
$
$
$
$
(41.4)
14.9
9.4
8.6
4.5
(2.7)
3.2
(3.5)
2009
10.8
-
-
10.8
(18.1)
-
13.1
2.8
5.0
(1.9)
3.7
4.6
Years Ended December 31,
2008
15.0
(7.1)
0.2
8.1
(9.5)
-
4.6
1.3
3.3
(2.5)
3.9
1.1
2007
8.7
-
1.8
10.5
In 2008, we recognized a $7.1 million other-than-temporary impairment loss on marketable securities. We concluded the impairment of the
securities was not temporary based on the length of time and the degree to which the fair value had been below the securities’ $26.3 million
cost basis.
106
Note 21 – Other Commitments and Contingencies
Federal Black Lung Excise Tax (“FBLET”) refunds
In late 2008, Congress passed the Energy Improvement and Extension Act of 2008 which enabled taxpayers to file claims for FBLET refunds
for periods prior to those open under the statute of limitations previously applicable to us. In the second quarter of 2009, we received FBLET
refunds and recognized the majority of these refunds as a pretax gain of $19.7 million. The gain related to these refunds was recorded in
discontinued operations.
Former operations
BAX Global, a former business unit, is defending a claim related to the apparent diversion by a third party of goods being transported for a
customer. During 2009, BAX Global advised us that it is probable that it will be deemed liable for this claim. We have contractually
indemnified the purchaser of BAX Global for this contingency. Although it is possible that this claim ultimately may be decided in favor of
BAX Global, we have accrued €9 million ($13 million at December 31, 2009) related to this matter. We recognized the expense in
discontinued operations. We believe we have insurance coverage applicable to this matter and that it will be resolved without a material
adverse effect on our liquidity, financial position or results of operations.
Other
We are involved in various lawsuits and claims in the ordinary course of business. We are not able to estimate the range of losses for some of
these matters. We have recorded accruals for losses that are considered probable and reasonably estimable. We do not believe that the
ultimate disposition of any of these matters will have a material adverse effect on our liquidity, financial position or results of operations.
Purchase Obligations
At December 31, 2009, we had noncancellable commitments for $18.6 million in equipment purchases, and information technology and other
services.
107
Note 22 – Selected Quarterly Financial Data (unaudited)
(In millions, except per share amounts)
Revenues
Segment operating profit
Operating profit
Amounts attributable to Brink’s:
Income (loss) from:
Continuing operations
Discontinued operations
Net income attributable to Brink’s
Depreciation and amortization
Capital expenditures
Earnings (loss) per share attributable to Brink’s
common shareholders:
Basic:
Continuing operations
Discontinued operations
Net income
Diluted:
Continuing operations
Discontinued operations
Net income
1st
732.5
52.4
41.7
22.2
0.8
23.0
30.7
29.5
0.48
0.02
0.50
0.48
0.02
0.49
$
$
$
$
$
$
$
$
2009 Quarters
3rd
2nd
751.9
28.9
26.7
801.8
61.7
60.9
16.0
4.3
20.3
32.8
45.0
0.35
0.09
0.44
0.34
0.09
0.44
33.4
1.0
34.4
33.7
38.0
0.70
0.02
0.72
0.70
0.02
0.72
4th
848.8
70.4
37.5
124.1
(1.6)
122.5
37.9
58.1
2.54
(0.03)
2.51
2.53
(0.03)
2.50
$
$
$
$
$
$
$
$
1st
792.8
82.0
66.5
32.9
17.2
50.1
29.8
31.5
0.71
0.37
1.08
0.70
0.37
1.07
2008 Quarters
3rd
2nd
797.8
52.6
42.8
813.4
68.1
49.8
30.7
18.0
48.7
31.3
38.9
0.66
0.39
1.06
0.66
0.39
1.05
29.5
18.5
48.0
31.5
49.0
0.64
0.40
1.04
0.64
0.39
1.03
4th
759.5
69.2
69.4
38.7
(2.2)
36.5
29.7
45.9
0.83
(0.04)
0.79
0.83
(0.04)
0.78
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.
In the second quarter of 2009, we recognized approximately $20 million in pretax gains from FBLET refunds which were partially offset by a
$13 million charge for a contingent liability related to our former BAX operations. Both amounts were reported as part of discontinued
operations.
Results in the third quarter of 2009 included a $14 million gain related to the acquisition of a controlling interest in an equity affiliate.
Fourth-quarter 2009 results included a $118 million tax benefit related to the release of the U.S. tax valuation allowance and a $23 million
pretax loss from the repatriation of cash from our Venezuelan operations.
In the fourth quarter of 2008, we completed the spin-off of our former home security business, BHS. After the spin-off, we reclassified BHS’
results of operations, including previously reported results and non-segment expenses directly related to the spin-off, within discontinued
operations.
Results in the fourth quarter of 2008 included a pretax gain of $12 million on the sale of certain assets of our former coal operations.
108
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, we carried out an evaluation, with the participation of our
management, including our Chief Executive Officer and Vice President and Chief Financial Officer, of the effectiveness of our disclosure
controls and procedures (as defined under Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by
this report. Based upon that evaluation, our Chief Executive Officer and Vice President and Chief Financial Officer concluded that our
disclosure controls and procedures are effective in ensuring that information required to be disclosed by us in the reports that we file or
submit under the Securities Exchange Act of 1934, 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 our Chief Executive
Officer and Vice President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
There has been no change in our internal control over financial reporting during the quarter ended December 31, 2009, that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Reference is made to pages 66 and 67 for Management’s Annual Report on Internal Control over Financial Reporting and the Attestation
Report of the Registered Public Accounting Firm.
ITEM 9B. OTHER INFORMATION
Not applicable.
109
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
We have adopted a Business 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 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 Business 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.brinkscompany.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 14, 2009. 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, 2009.
ITEM 11. EXECUTIVE COMPENSATION
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, 2009.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
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, 2009.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
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, 2009.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
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, 2009.
110
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
1.
All financial statements – see pages 69 – 108.
2.
3.
Financial statement schedules – not applicable.
Exhibits – see exhibit index.
Undertaking
For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of
1933, the undersigned Registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into Registrant’s
Registration Statements on Form S-8 Nos. 2-64258, 33-2039, 33-21393, 33-23333, 33-69040, 33-53565, 333-02219, 333-78631, 333-78633,
333-70758, 333-70772, 333-70766, 333-70762 and 333-146673. Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
111
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 February 25, 2010.
By
The Brink’s Company
(Registrant)
/s/ M. T. Dan
(Michael T. Dan,
Chairman, 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 February 25, 2010.
Signature
/s/ M. T. Dan
Michael T. Dan
/s/ J.W. Dziedzic
Joseph W. Dziedzic
/s/ M. A. P. Schumacher
Matthew A.P. Schumacher
*
Roger G. Ackerman
*
Betty C. Alewine
*
Marc C. Breslawsky
*
Paul G. Boynton
*
Michael J. Herling
*
Thomas R. Hudson Jr.
*
Murray D. Martin
*
Thomas C. Schievelbein
*
Robert J. Strang
*
Ronald L. Turner
Title
Director, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
Vice President
and Chief Financial Officer
(Principal Financial Officer)
Controller
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
* By:
/s/ M. T. Dan
Michael T. Dan, Attorney-in-Fact
112
Exhibit Index
Each exhibit listed as a previously filed document is hereby incorporated by reference to such document.
Exhibit
Number
2(i)
3(i)
3(ii)
10(a)*
10(b)*
Description
Shareholders’ Agreement, dated as of January 10, 1997, between Brink’s Security International, Inc., and Valores
Tamanaco, C.A. Exhibit 10(w) to the Registrant’s Annual Report on Form 10-K for the year ended December 31,
1998.
Amended and Restated Articles of Incorporation of the Registrant. Exhibit 3(i) to the Registrant’s Current Report
on Form 8-K filed November 20, 2007.
Amended and Restated Bylaws of the Registrant. Exhibit 3(ii) to the Registrant’s Current Report on Form 8-K
filed February 22, 2010.
Key Employees Incentive Plan, as amended and restated as of November 16, 2007. Exhibit 10(a) to the
Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 (the “2007 Form 10-K”)
Key Employees’ Deferred Compensation Program, as amended and restated as of November 13, 2008. Exhibit
10(b) to the Registrant’s Annual report on Form 10-K for the year ended December 31, 2008 (the “2008 Form 10-
K”)
10(c)*
(i)
Pension Equalization Plan as amended and restated, effective as of October 22, 2008. Exhibit 10.2 to the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 (the “Third
Quarter 2008 Form 10-Q”)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
Amended and Restated Trust Agreement, dated December 1, 1997, between the Registrant and Chase
Manhattan Bank, as Trustee (the “Trust Agreement”). Exhibit 10(e)(ii) to the Registrant’s Annual Report
on Form 10-K for the year ended December 31, 1997 (the “1997 Form 10-K”).
Amendment No. 1 to Trust Agreement, dated as of August 18, 1999. Exhibit 10(c)(iii) to the Registrant’s
Annual Report on Form 10-K for the year ended December 31, 1999 (the “1999 Form 10-K”).
Amendment No. 2 to Trust Agreement, dated as of July 26, 2001. Exhibit 10(c)(iv) to the Registrant’s
Annual Report on Form 10-K for the year ended December 31, 2002 (the “2002 Form 10-K”).
Amendment No. 3 to Trust Agreement, dated as of September 18, 2002. Exhibit 10(c)(v) to the 2002
Form 10-K.
Amendment No. 4 to Trust Agreement, dated as of September 22, 2003. Exhibit 10.1 to the Registrant’s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 (the “Third Quarter 2003 Form
10-Q”).
Amendment No. 5 to Trust Agreement, dated as of September 20, 2004. Exhibit 10.1 to the Registrant’s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2004.
Amendment No. 6 to Trust Agreement, dated as of November 22, 2004. Exhibit 99.4 to the Registrant’s
Current Report on Form 8-K filed November 22, 2004.
10(d)*
Executive Salary Continuation Plan. Exhibit 10(e) to the Registrant’s Annual Report on Form 10-K for the year
ended December 31, 1991 (the “1991 Form 10-K”).
10(e)*
1988 Stock Option Plan, as amended and restated as of January 14, 2000. Exhibit 10(f) to the 1999 Form 10-K.
10(f)*
2005 Equity Incentive Plan, as amended and restated as of February 19, 2010.
113
10(g)*
(i)
Form of Option Agreement for options granted under 2005 Equity Incentive Plan. Exhibit 99 to the
Registrant’s Current Report on Form 8-K filed July 13, 2005.
(ii)
Form of Restricted Stock Units Award Agreement for restricted stock units granted under 2005 Equity
Incentive Plan. Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed July 13, 2009.
10(h)*
Management Performance Improvement Plan, as amended and restated as of February 19, 2010.
10(i)*
Change in Control Agreement dated as of February 25, 2010, between the Registrant and Frank T. Lennon. Exhibit
10.3 to the Registrant’s Current Report on Form 8-K filed February 25, 2010.
10(j)*
(i)
Form of severance agreement between the Registrant and Frank T. Lennon. Exhibit 10(o)(ii) to the 1997
Form 10-K.
(ii)
Form of Amendment No. 1 to severance agreement. Exhibit 10(j)(ii) to the 2008 Form 10-K.
10(k)*
(i)
Employment Agreement dated as of May 4, 1998, among the Registrant, Brink’s, Incorporated and
Michael T. Dan. Exhibit 10(a) to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998 (the “Third Quarter 1998 Form 10-Q”).
(ii)
(iii)
(iv)
(v)
Amendment No. 1 to Employment Agreement among the Registrant, Brink’s, Incorporated and Michael
T. Dan. Exhibit 10 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30,
2002.
Amendment No. 2 to Employment Agreement among the Registrant, Brink’s, Incorporated and Michael
T. Dan. Exhibit 10 to the Registrant’s Current Report on Form 8-K filed March 10, 2006.
Amendment No. 3 to Employment Agreement among the Registrant, Brink’s, Incorporated and Michael
T. Dan. Exhibit 10(k)(iv) to the 2008 Form 10-K.
Amendment No. 4 to Employment Agreement among the Registrant, Brink’s, Incorporated and Michael
T. Dan. Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed May 13, 2009.
10(l)*
Change in Control Agreement dated as of February 25, 2010, between the Registrant and Michael T. Dan. Exhibit
10.1 to the Registrant’s Current Report on Form 8-K filed February 25, 2010.
10(m)*
(i)
Change in Control Agreement dated as of April 7, 2008, between the Registrant and Michael J. Cazer.
Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed May 5, 2008.
(ii)
Amendment No. 1 to Change in Control Agreement between the Registrant and Michael J. Cazer.
Exhibit 10(m)(ii) to the 2008 Form 10-K.
10(n)*
(i)
Severance Agreement dated as of April 7, 2008, between the Registrant and Michael J. Cazer. Exhibit
10.4 to the Registrant’s Current Report on Form 8-K filed May 5, 2008.
(ii)
Amendment No. 1 to Severance Agreement between the Registrant and Michael J. Cazer. Exhibit
10(n)(ii) to the 2008 Form 10-K.
10(o)*
(i)
Restricted Stock Unit Award Agreement, dated as of April 7, 2008, between the Registrant and Michael
J. Cazer. Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed May 5, 2008.
(ii)
Restricted Stock Unit Award Agreement, dated as of April 7, 2008, between the Registrant and Michael
J. Cazer. Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed May 5, 2008.
10(p)*
Change in Control Agreement dated as of February 25, 2010, between the Registrant and Joseph W. Dziedzic.
Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed February 25, 2010.
114
10(q)*
10(r)*
10(s)*
10(t)*
Change in Control Agreement dated as of February 25, 2010, between the Registrant and McAlister C. Marshall, II.
Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed February 25, 2010.
Restricted Stock Unit Award Agreement, dated as of September 15, 2008, between the Registrant and McAlister C.
Marshall, II. Exhibit 10(q) to the 2008 Form 10-K.
Change in Control Agreement dated as of February 25, 2010, between the Registrant and Matthew A.P.
Schumacher. Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed February 25, 2010.
Form of Indemnification Agreement entered into by the Registrant with its directors and officers. Exhibit 10(l) to
the 1991 Form 10-K.
10(u)*
(i)
Retirement Plan for Non-Employee Directors, as amended. Exhibit 10(g) to the Registrant’s Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994 (the “Third Quarter 1994 Form 10-Q”).
(ii)
Form of letter agreement dated as of September 16, 1994, between the Registrant and its Non-Employee
Directors pursuant to Retirement Plan for Non-Employee Directors. Exhibit 10(h) to the Third Quarter
1994 Form 10-Q.
10(v)*
10(w)*
10(x)*
Non-Employee Directors’ Stock Option Plan, as amended and restated as of July 8, 2005. Exhibit 10.2 to the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.
Directors’ Stock Accumulation Plan, as amended and restated as of September 12, 2008. Exhibit 10.1 to the Third
Quarter 2008 Form 10-Q.
Non-Employee Directors’ Equity Plan. Annex B to the Proxy Statement for the Registrant’s 2008 Annual Meeting
of Shareholders.
10(y)*
(i)
Form of Award Agreement for deferred stock units granted in 2008 under the Non-Employee Directors’
Equity Plan. Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June
30, 2008 (the “Second Quarter 2008 Form 10-Q”).
(ii)
Form of Award Agreement for deferred stock units granted in 2009 under the Non-Employee Directors
Equity Plan. Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June
30, 2009 (the “Second Quarter 2009 Form 10-Q”).
10(z)*
Plan for Deferral of Directors’ Fees, as amended and restated as of November 14, 2008. Exhibit 10(y) to the 2008
Form 10-K.
10(aa)
(i)
Trust Agreement for The Brink’s Company Employee Welfare Benefit Trust. Exhibit 10(t) to the 1999
Form 10-K.
(ii)
(iii)
First Amendment of The Brink’s Company Employee Welfare Benefit Trust, dated as of November 1,
2001. Exhibit 10(t)(ii) to the 2007 Form 10-K.
Second Amendment of The Brink’s Company Employee Welfare Benefit Trust, dated as of September
30, 2003. Exhibit 10(t)(iii) to the 2007 Form 10-K.
10(bb)
(i)
$43,160,000 Bond Purchase Agreement, dated September 17, 2003, among the Peninsula Ports Authority
of Virginia, Dominion Terminal Associates, Pittston Coal Terminal Corporation and the Registrant.
Exhibit 10.1 to the Second Quarter 2009 Form 10-Q.
(ii)
Loan Agreement between the Peninsula Ports Authority of Virginia and Dominion Terminal Associates,
dated September 1, 2003. Exhibit 10.2(ii) to the Third Quarter 2003 Form 10-Q.
115
(iii)
(iv)
(v)
(vi)
Indenture and Trust between the Peninsula Ports Authority of Virginia and Wachovia Bank, National
Association (“Wachovia”), as trustee, dated September 1, 2003. Exhibit 10.2(iii) to the Third Quarter
2003 Form 10-Q.
Parent Company Guaranty Agreement, dated September 1, 2003, made by the Registrant for the benefit
of Wachovia. Exhibit 10.2(iv) to the Third Quarter 2003 Form 10-Q.
Continuing Disclosure Undertaking between the Registrant and Wachovia, dated September 24, 2003.
Exhibit 10.2(v) to the Third Quarter 2003 Form 10-Q.
Coal Terminal Revenue Refunding Bond (Dominion Terminal Associates Project – Brink’s Issue) Series
2003. Exhibit 10.2(vi) to the Third Quarter 2003 Form 10-Q.
10(cc)
$135,000,000 Letter of Credit Agreement, dated as of July 23, 2008 with an effective date of August 13, 2008,
among the Registrant, certain of the Registrant’s subsidiaries and ABN AMRO Bank N.V. Exhibit 10.2 to Second
Quarter 2009 Form 10-Q.
10(dd)
(i)
Credit Agreement, dated July 13, 2005, among the Registrant, certain of its subsidiaries and ABN AMRO
Bank N.V. Exhibit 10.3 to Second Quarter 2009 Form 10-Q.
(ii)
(iii)
First Amendment to Credit Agreement, entered into as of December 22, 2006, by and among the
Registrant, Brink’s, Incorporated and ABN AMRO Bank N.V. Exhibit 10.2 to the Registrant’s Current
Report on Form 8-K filed December 22, 2006.
Second Amendment to Credit Agreement, entered into as of March 24, 2008, by and among the
Registrant, Brink’s, Incorporated and ABN AMRO Bank N.V. Exhibit 10(cc)(iii) to the 2008 Form 10-
K.
$400,000,000 Credit Agreement among the Registrant, as Parent Borrower, the Subsidiary Borrowers referred to
therein, certain of Parent Borrower’s Subsidiaries, as Guarantors, Various Lenders, Bank of Tokyo-Mitsubishi UFJ
Trust Company, as Documentation Agent, Bank of America, N.A. and JPMorgan Chase Bank, N.A., as
Syndication Agents, and Wachovia Bank, National Association, as Administrative Agent, an Issuing Lender and
Swingline Lender, dated as of August 11, 2006. Exhibit 10.4 to Second Quarter 2009 Form 10-Q.
Stock Purchase Agreement, dated as of November 15, 2005, by and among BAX Holding Company, BAX Global
Inc., The Brink’s Company and Deutsche Bahn AG. Exhibit 2.1 to the Registrant’s Current Report on Form 8-K
filed November 16, 2005.
Separation and Distribution Agreement between the Registrant and Brink’s Home Security Holdings, Inc. dated as
of October 31, 2008. Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed November 5, 2008.
Brand Licensing Agreement between Brink’s Network, Incorporated and Brink’s Home Security Holdings, Inc.
dated as of October 31, 2008. Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed November 5,
2008.
Tax Matters Agreement between the Registrant and Brink’s Home Security Holdings, Inc. dated as of October 31,
2008. Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed November 5, 2008.
Non-Competition and Non-Solicitation Agreement between the Registrant and Brink’s Home Security Holdings,
Inc. dated as of October 31, 2008. Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed November 5,
2008.
Employee Matters Agreement between the Registrant and Brink’s Home Security Holdings, Inc. dated as of
October 31, 2008. Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed November 5, 2008.
Registration Rights Agreement between the Registrant and Evercore Trust Company, N.A. dated as of August 20,
2009. Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed August 20, 2009.
116
10(ee)
10(ff)
10(gg)
10(hh)
10(ii)
10(jj)
10(kk)
10(ll)
21
23
24
31
32
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
Powers of Attorney.
Rule 13a-14(a)/15d-14(a) Certifications.
Section 1350 Certifications.
99(a)*
Excerpt from Pension-Retirement Plan relating to preservation of assets of the Pension-Retirement Plan upon a
change in control. Exhibit 99(a) to the 2008 Form 10-K.
*Management contract or compensatory plan or arrangement.
117